Business-Level and Corporate-Level Strategies for Ford Company - Case Study Example

Business-Level and Corporate-Level Strategies for Ford Company School: The company to be reviewed for this paper is the Ford Motor Company. The Ford Motor Company is a major player in the car manufacturing industry, and due to its instrumental role in the industry, the company has adopted a wide array of the business and corporate models (NPR, 2006). The models of the Ford Motor Company have revolutionized the motor industry, making it a top industry player – both nationally and globally. The motor production businesses of the company started in 1919, and it focused on the mass-production of vehicles for the general public. More recently, the company launched a line of financing its vehicles, which works like the company’s subsidiaries. Due to the diversified nature of the business of the company, its operational areas can be grouped under different segments: financial services and automotive (NPR, 2006). Analysis of the best business-level strategies of the Ford Motor Company The business-level strategies of the Ford Motor company include the activities and the programs implemented, towards the provision of value to the customers and also to cultivate competitive advantage, following the exploitation of core area of competency (Koontz & Wihrich, 2008). The most important business-level strategies of the company include the launch of many subsidiaries at its different focal markets. Some of these subsidiaries include Ford Asia Pacific Africa, Ford Europe, Ford North America and Ford South America. The subsidiary tasked with the role of financing the sale of the company’s vehicles is the Ford Motor credit Company. The effectiveness of the company’s business-level strategies was evidenced from its financial success all through the period of the global financial crisis. Some of the actions that evidenced the effectiveness of the company’s business-level strategy include that in 2011, it registered overall sales of about 5,695,000 units. The company’s performance evidenced the company’s ability to adapt to the volatile financial situation experienced during the crisis (Koontz & Wihrich, 2008). The most significant business-level strategy employed by the company, which guaranteed its performance, is that of cost leadership (Koontz & Wihrich, 2008). Many references of the Ford motor company report that it has received credit for the production of vehicles that are acceptable to its customer population, as well as standardized in all areas. This standardization of vehicles has been matched with its cost-reduction efforts, which were aimed at guaranteeing that the company remained the leader of the industry. For example, the minimization of costs has touched on the reduction of the overhead costs of vehicle production, which helped to reduce the overall prices of the company’s vehicles (Koontz & Wihrich, 2008). Another vital strategy is product differentiation, where the company has continually strived to provide their customers with cars that are unique from those of their competitors. For example, through the launch of the financial services division, the company guaranteed an offering which is not available from many of its rivals. Towards the realization of product differentiation, the company has remained a major player in the areas of product innovation, image management and in their use of advanced technological systems. For example, product differentiation was evidenced through the use of sustainable production materials, including rice hulls, soy-bean and recycled cotton (Ford News Center, 2014). The business-level strategy which is most significant to the long-term success of the Ford Company is that of product differentiation, which is characterized by its unique service propositions as well as product innovation at its production facilities. This strategy is most likely, the most important one for Ford Motor Company, because it is helping the company to reduce its costs of production and also improving its carbon footprint impact rating. More importantly, the strategy is improving the company’s struggle for the dwindling resources of vehicle production, many of whose supply is under the threat of exhaustion (Eyraud, et al., 2011). Globally, there are also going-green initiatives, which are promoting long-term business to the company’s that are promising better fuel consumption and a reduction in the environmental impact caused by products – down and upstream of the supply chain (Eyraud, et al., 2011). Some of the innovative strategies used by the Ford Motor Company to position it well in the industry – both in the short and the long-term – include the production of the F-series power train. The innovative power train guarantees the reduction of carbon dioxide production by 15 percent and the improvement of fuel economy by 20 percent, when compared to similar V8 systems (Ford News Center, 2014). Through the differentiated consumption of production materials, and also their innovation towards offering better fuel economy to their consumers, the company is likely to gain more credibility among its consumers both in the short as well as the long term. Analysis of the best Corporate-level strategies of the Ford Motor Company The Ford Motor Company has adopted a wide array of corporate-level strategies, including that of increasing sales through the operation of company outlets at the different operational zones. Other corporate-level strategies include those of accelerating the development of innovative products that offer value to their customers, the discontinuation of the Mercury brand in 2011, the ownership of a stake in Mazda and the increment of the funds channeled towards research and development, to foster the development of new products (Ford Motor Company, 2014). Among the different corporate-level strategies adopted by the company, the development of innovative products is the most important strategy for the long-term success of the company. The production of innovative products for the company’s customers is highly significant and timely, mainly because it has come during an era of resource crisis as well as an increase in consumer awareness. For example, following the recent cases of oil supply shortages, crises and increases in prices, customers are continually looking for ways of reducing their consumption of fuel. This offers them a cost-reduction opportunity during this time of increasing financial pressure. Through the corporate-level strategy of developing highly powerful, yet low-consuming engines, the company has offered its premium customers, more cost effective vehicles, when compared to their competitors. For example, the Ford Motor reported that the development of its F-series power train guarantees a reduction of 20 percent for CO2, while at the same time improving fuel economy by 15 percent for their V8 engines, when compared to those of their competitors. This corporate-level strategy is highly timely, noting that it offers the customer committed to environmental protection, the opportunity to reduce their carbon footprint, while still maintaining the power of their vehicles (Eyraud, et al., 2011). This corporate-level strategy also features the company’s shift to the usage of sustainable materials during the production of their vehicles, which guarantees that the production capacity of the company will remain sustainable in the long term (Ford Motor Company, 2014). This corporate outlook is absolutely essential, noting that the resources used for the production of vehicles in the past are continually getting exhausted, which is likely to restrain the productivity of different vehicle makers. For example, the company has been investing in the replacement of polypropylene with rice hulls, which offers a wide array of advantages to the company (Ford News Center, 2014). The first advantage is that it helps in reducing the costs of producing their vehicles, particularly the F-150 truck; the strategy is improving the company’s green-business credibility, and the change is guaranteed continued productivity, irrespective of the fact that the traditional resource is expensive and under the threat of exhaustion (Ford Motor Company, 2014). Analysis of the Competitive environment to determine the most significant competitor for the company From the 1950s to 2008, the big players in the vehicle production industry, including Ford Motors, Chrysler and General Motors remained the dominant industry players. However, in 2008 the three lost their dominance, by over 40 percent of the US market share to Toyota motors, which made the Japanese company the major player in the industry (Klier, 2009). The huge loss of market share among the three companies, which had dominated the US market for over 50 years resulted from the innovative adoption of the hybrid drive train employed for the Toyota Prius. Starting from 2008, the Toyota Motor Company took away industry leadership from General Motors, which had remained the dominant player of the three companies, for more than 77 years (Klier, 2009). The major changes taking place during the past years have contributed to the highly competition and a market outlook that disadvantage Ford Motors along with GM and Chrysler. These changes include the adoption of government regulations on emission levels and vehicle safety, the entry of foreign vehicle makers in the US and the global market, the huge shift in the quality standards for vehicle production and the adoption of a different vehicle production system (Klier, 2009). This exploration of the competitive environment of the US market as well as the global market which is relatively similar, it is clear that the most significant competitor for Ford Motors is Toyota Motors. A comparison of the strategies of Toyota Motors and Ford Motors shows that Toyota is utilizing its dominance of the Japanese and North American markets; it is also continuing a take-over of the South American and Asian markets. On the other hand, Ford is struggling to restore its place in the US market, through the adoption of Toyota’s hybrid technology (Wernle, 2013). Toyota has channeled its market dominance to its three main brands, including Toyota and Lexus, and is upgrading them to meet the increasing pressure to reduce CO2 emissions. Due to its specialization in the production of large vehicles, Ford is reorganizing its vehicles to reduce its high fuel and material consumption, due to changes in oil prices and legislation (Wernle, 2013). The Ford Company has resolved to short-term cost minimization, by focusing on the production of more economic models, including Ford Focus and Ford Mondeo. Toyota has kept the economical consumption of their engines their sale proposal, while Ford is working on shifting to the production of more economical engines also. Toyota is the dominant player in the hybrid vehicle market, and Ford is working on the development of its own hybrid drive train, while taking advantage of the lease of the one owned by Toyota (Wernle, 2013). Taking note of the advantaged position of Toyota motors in the industry, both in the US as well as globally, the strategies and the strategic position of Toyota are more likely to favor its long-term performance, unlike Ford Motors, which is focusing on the short-term reduction of costs. For example, from the hybrid technology of Toyota, the lease by ford is among its expense areas, but for Toyota it is a new line of revenues (Wernle, 2013). Further, noting that Toyota is the dominant player in the modern drive train technology, Ford Motors is less likely to out-compete Toyota’s dominance in the US as well as the global market. However, taking note that Ford is in the process of developing its own hybrid technology, it is likely that Toyota will not maintain its dominance in the long term (Hitt, Ireland & Loskisson, 2010, p. 145). Assuming that the car manufacturing industry was a slow-cycle market, where competitive advantage areas are sustainable and shielded from imitation, Toyota motor’s dominance of the industry would be guaranteed, both in the short and in the long term. However, assuming that US as well as the global industry is a fast-cycle market, where competitive advantages like the hybrid technology are not sustainable and shielded from imitation, the dominance of Toyota would be very much likely to be overturned by Ford Motors (Hitt, Ireland & Loskisson, 2010, p. 145). References Eyraud, L, Wane, A, Zhang, C, & Clements, B. (2011). Who’s Going Green and Why? Trends and Determinants of Green Investment. IMF Working paper, WP/11/296, 3-6. Ford Motor Company. (2014). Our Strategy: Sustainability 2011/12. Ford Motor Company. Retrieved from: http://corporate.ford.com/microsites/sustainability-report-2011-12/blueprint-strategy Ford News Center. (2014). Built Ford Green: Sustainable Materials Make America’s Best- Selling Truck Environmentally Friendly and Tough. Ford Motor Company. Retrieved from: http://corporate.ford.com/news-center/press-releases-detail/built-ford-green- sustainable-materials-make-americas Hitt, M., Ireland, D., & Loskisson, R. (2010). Strategic Management: Concepts: Competitiveness and Globalization. Mason, OH: South-Western Publishers. Klier, T. (2009). From tail fins to hybrids: How Detroit lost its dominance of the U.S. auto market. Economic Perspectives, 2Q/2009, 2-5. Koontz, H., & Wihrich, H. (2008). Essentials of Management: An international Perspective ( Seventh Edition). New York: The McGraw-Hill Company. NPR. (2006). A Timeline of Ford Motor Company. NPR. Retrieved from: http://www.npr.org/templates/story/story.php?storyId=5168769 Wernle, B. (2013). Toyota still reigns, but Ford is flexing its muscles. AutoNews. Retrieved from: http://www.autonews.com/article/20130701/OEM05/307019995/toyota-still-reigns- but-ford-is-flexing-its-muscles Read More