Business Level Strategies: Ford Motor Company - Report Example

Ford Motor Company Ford Motor Company Recent global financial crisis has created lot of problems in American business sector and major automotive companies struggled for survival. Ford was one among the worst affected automobile manufacturer which did everything possible to escape from the danger of total destruction. Faced with an overwhelmingly complex situation, Alan Mulally has been brought in as Ford Motor Companys new president and CEO. Mulally’s task of rejuvenating Ford Company was a daunting task and he needs support from not only from the employees of the Ford Company, but also experts of the major consulting firms. This paper assumes that Mulally asked for the advice from a consulting firm in which I am working and the consulting firm ask me to assist Mulally. Fords business-level strategy In my opinion, Ford should restructure its business level strategies thoroughly in order to counter the threats from the competitors. Ford should give more to cost leadership, differentiation and focus. Currently Ford is facing stiff challenges from competitors like Toyota, BMW, Benz, Honda etc. These competitors are offering better quality vehicles for cheaper prices. American customers are not much patriotic while purchasing a product. Irrespective of the country of origin, American consumers always look for better quality products for cheaper prices. If ford can develop new products which are priced lower than the competing products, without compromising the quality they can achieve cost leadership. Ford should attempts to gain a competitive advantage primarily by reducing its economic costs below its competitors. In order to reduce cost, Ford should improve its technology, process efficiencies and they should be able to source out cheaper materials. The second business level strategy Ford can test is the differentiation strategy. Product differentiation is a business level strategy in which firms attempt to create and exploit differences between their products and those offered by competitors (Hooley et al,2004, p.1). Product differentiation will become handful if the customers perceive the difference handy. Ford should try to make products which should be perceived as unique in the market in order to fix a premium price for it. It is impossible for a manufacturer to fix higher prices for his product if it is similar to the competing products. On the other hand, unique features will help the product manufacturer to fix premium prices for his products as the customers will be keen on spending more on products with numerous features. Focus strategy is the third one Ford can test. Using this strategy, Ford can focus on certain customer segments or market. For example, India and China are emerging markets for the midsized sedans. The economic growth in these countries is tremendous and most of the international companies are now targeting these countries for marketing their products. Ford can make cars suitable for the Indian and Chinese markets and using innovative marketing strategies they can conquer these markets. Value-chain activities of Ford Value chain analysis will help an organization to identify the key activities within the firm which can create value and competitive advantage for the organisation. Procurement, technology development, human resource management, and infrastructure development etc are the four major elements of value chain activities (Tutor2u, n. d).Ford has to concentrate more on these elements in order to become a leader in the car manufacturing industry. Globalization has opened up the global market and it is possible to procure materials from anywhere in the world. Ford should realize the materials which are costly in America might be cheaper in India or China like countries and too much dependence on resources from America alone may not help them to reduce the manufacturing costs of vehicles. Automobile industry is undergoing drastic changes now as far as technological developments are concerned. Zero emission vehicles and fuel efficient vehicles are encouraged not only in America, but in all over the world. In fact President Obama has recently announced a package to encourage the use of environment friendly cars. “Barack Obama has an Electric Car Dream, to fill our roads with 1 million electric cars by 2015, a mere 5 years later with a $2.4 Billion Stimulus Plan” (Environmentally Friendly Cars - Barack Obama And His $2.4 Billion Electric Car Stimulus Plan, 2010). Ford should try to capitalize on the above proposal by Obama. They should develop cheaper technologies to make environmental friendly cars. Human resource management is another area which can be improved in Ford Company. Skilled and efficient workforce or professionals are essential for the growth of an organization. Even though, business needs many other resources, manpower is the one which controls all other resources. Recruitment and retention strategies should be thoroughly revised. If Ford can obtain the services of employees who are well trained for their profession, who understand that their performance will determine remuneration and career advancements, they will perform to their absolute best. Five forces of competition Supplier power, barriers to entry, threat from substitute products, buyer power and rivalry are the five forces of competition according to Michael Porter. The last three elements; substitute products, buyer power and rivalry are more prominent in the case of Ford than the first two elements. Competitors are introducing new vehicles with advanced features and designs virtually every year nowadays. Because of the excess options or substitute products available, the bargaining power of the buyers is more. Rivalry between automotive companies is at its all time best. Barriers to entry are decreased because of globalization and the supplier power neither increased nor decreased. Under such circumstances, Ford can think of expanding its business to overseas countries. Even though America and European countries faced severe problems because of recession, most of the Asian countries escaped for it and Ford can target the Asian region more. Competitor analysis GM, Toyota, BMW, Honda, etc are some of the major competitors of ford. But some of these competitors have some serious problems to rectify now. Toyota forced to call back over 8 million vehicles from the market because of accelerator pedal problems. “Toyota Motor Sales (TMS), U.S.A., Inc., announced that it intends to conduct a voluntary safety recall involving approximately 373,000 2000-2004 Model Year Toyota Avalons sold in the United States”. (Toyota Announces Intent to Voluntarily Recall Certain Toyota Avalons to Replace Steering Column Bracket, 2010) Apart from Avalon, RAV4, Corolla, Matrix, Camry, Highlander, Tundra, and Sequoia etc are some other problematic Toyota models sold in USA. GM on the other hand facing serious financial problems and they are struggling to survive in the American market. Greg Schneider (2005) written on Washington Post that General Motors suffered $1.1 billion dollar loss during the first three months of the 2005 (Schneider, 2005). In short, most of the competitors of Ford have some kind of problems at present which can be exploited by Ford to establish their brand in global market. Competitor behavior As mentioned earlier, major competitors like GM and Toyota have some kind of problems now and they are more focused on rectifying these problems. Because of these problems they may not be able to involve effectively in the market. They are more focused on correcting the problems rather than competing. GM has already reduced the prices of their vehicles while Toyota is more focused on correcting the problems rather than reducing the prices of their models. Both GM and Toyota are trying to exploit the international market more than the American market which will create an open space for Ford in America. Strategic leadership Strategic leadership is meant for large organizations like Ford which have thousands of employees at work. Strategic leaders process the information quickly and take decisions instantly compared to other type of leaderships. Their decisions will affect more people and resources because of the wide spread capabilities of the organization. Strategic leaders often develop plans for the future of the organization rather than concentrating heavily on the immediate goals. Since the recession is almost disappeared, Mulalley can concentrate more on future aspects of the organization as a strategic leader. References 1. Environmentally Friendly Cars - Barack Obama And His $2.4 Billion Electric Car Stimulus Plan. Retrieved from http://cngcar.org/environmentally-friendly-cars-barack-obama-and-his-24-billion-electric-car-stimulus-plan/ 2. Hooley, Saunders and Piercy. (2004). Product differentiation. ‘Marketing Strategy and Competitive Positioning’, 3rd Ed., Prenhall, 2004. Retrieved from http://www.sm.au.edu/uploadfiles/1184016243_Differentiation.pdf 3. Schneider, G. (2005). Industry Giant Falling Behind: GM Reports $1.1 Billion Loss. Washington Post (Wednesday, April 20, 2005; Page A01). Retrieved from http://www.washingtonpost.com/wp-dyn/articles/A2396-2005Apr19.html 4. Tutor2u. (n. d). E-business strategy - virtual value chain. Retrieved from http://tutor2u.net/ebusiness/ebusiness-strategy-business-models.html 5. Toyota Announces Intent to Voluntarily Recall Certain Toyota Avalons to Replace Steering Column Bracket. (2010). Retrieved from http://pressroom.toyota.com/pr/tms/toyota/toyota-consumer-safety-advisory-102572.aspx Read More