Strategic Management - Essay Example

Analyse Ford’s culture from when Alan Mullaly took over in 2006 and evaluate his approach to managing cultural change. Before Alan Mullay took over in 2006, the culture at Ford had been characterised by hierarchy and bureaucracy. The Ford family had a controlling stake of 40 % and they had a direct interest in the operations of the company. As such, they established a culture that was suitable to their interests in the company. This resulted in bureaucracy where decision making became the preserve of top and influential management in the company.

However, Mullay realised that this culture was problematic and had contributed to the problems that were experienced by the company prior to joining it. Mullay brought about various measures that were designed to make sweeping changes to the overall culture of the organization. For instance, he encouraged executives to get feedback from the customers so that they can work towards satisfying the needs of the major shareholders. He also inculcated a sense of responsibility and ownership among the employees and he encouraged managers to accept their mistakes, share ideas as well as to cooperate among divisions.

Sharing of information and ideas did not exist in the company before Mullay joined it in 2006. For the first time, information was shared across divisions. Previously sensitive information was not shared among the subordinates. He also tried to bring a culture of honesty where all the employees were encouraged to be truthful in their operations. He also tried to secure the cooperation of the labour union (United Auto Workers) to improve the operations of the company. These changes proposed by Mullay to be made to the culture of Ford Motor Company revolutionised the culture of the whole company.

Each sector of the company was affected in one way or the other but for the betterment of the firm’s overall performance. This was very important to change the culture of the company since it influences the behaviour of the people working there. Critically evaluate the performance of Ford (during/in) 2006. Explain why the performance measure, or frameworks, you selected are appropriate. Compared to the losses the company had made before 2006, in can be noted that its performance slightly improved after these raft changes were made by Mullay.

For instance, in the first quarter of 2007, the company made a loss of $282 million compared to $1.4 billion loss during the same period the previous year. A reduction in the losses indicated that the performance of the company had significantly approved. This was only possible after implementing cost cutting measures in the company. Excessive costs in the operations of the organization can negatively impact on its profitability. Through lowering operational costs, the company can be in a better position to achieve economies of scale in the long run.

This is advantageous to its operations. Mullay realised that the company operated numerous divisions that functioned independent of each other and the company also wasted a lot on manufacturing different components of the cars of which some items could be universalised. In order to cut costs, it was imperative to downsize the divisions of the company and to focus on core functions of the company. Essentially, “cost leadership” is a form of competitive advantage that can be utilised by the firm in its operations.

This is advantageous in that the company reduces the costs it incurs in its operations while focusing on its core business. This also entails that the company will be in a position to offer quality products at low cost. The company can also manage to attract a lot of customers while retaining its reputation in the industry. In order measure performance of a company that has implemented changes in its operations, there are different control measures that can be used. The amount of revenue generated can be compared with previous periods in order to ascertain if there has been any major change.

In this particular case, there have been some notable changes as a result of the fact that the amount of losses significantly declined compared to similar periods before. This meant that the company was on a positive recovery path. This framework is appropriate as a result of the fact that the company’s performance can be made through analysing its revenue generated. Conduct a Porters Five Forces analysis for the US car industry in 2006. Discuss your implication for your analysis for Ford.

Barriers to entry The automotive industry is capital intensive which means that it is not easy for other actors to penetrate it. Competition is mainly among the existing players since other new entrants often find it challenging to establish business in this industry which demands a lot of start-up capital. Substitutes There are quite a lot of substitutes such as vehicles offered by other actors apart from Ford. The consumers can easily switch the brand whenever they discover something that does not appeal to their interests.

There are different types of cars of which the customers can choose from. Some cars are low cost and fuel efficient and these of late have been attractive to the customers who switched to such brands. This affected Ford Motor Company in its operations. Bargaining powers of buyers The buyers have the bargaining powers in the automotive industry. For instance, the customers have switched from the trademark vehicles offered by Ford such as Trucks and SUVs since these are fuel guzzlers. Due to increasing prises of gasoline, the customers have decided to switch to other low cost vehicles.

Bargaining powers of suppliers The suppliers have bargaining powers if they can control the prices of the materials used in manufacturing automobiles. In this case, it can be seen that the suppliers have the bargaining powers since Ford Company sources the materials it use from different suppliers. Rivalry among competitors Competition in the automobile industry is intense. There are various actors in this sector of which some of them are established. For instead, in North America where Ford Company also operates, the following manufacturers of cars also operate there.

These include General Motors, Toyota, Daimler Chrysler, Honda as well as Nissan. This entails that competition is intense and the customers can easily switch to other brands once they discover the other brand to be unsatisfactory to their needs. When competition is intense, it may not be easy for new comers to successfully penetrate the market.