Strategic Analysis of Ford Motor Company - Case Study Example

Personal Application Executive Summary The prime intention of this essay is to conduct a strategic analysis of Ford Motor Company. In order to conduct this strategic analysis of Ford, various aspects have been discussed that also plays a crucial role to determine the strategic competitiveness of the company at large. In this context, the major aspects include elaborating the fundamental issues facing by the automotive industry in the current phenomenon, examining the strategies adopted by Ford for gaining competitive advantages and understanding various strategic frameworks that determine the competitiveness of the company overall. It would be vital to mention in this similar context that this strategic analysis of the company, with the incorporation of the above discussed significant aspects, would prove effective to determine its global opportunity in future. Introduction According to Rotharmel (2013), strategy is fundamentally described as a set of realized as well as planned actions, based on which, an organization accomplishes its predetermined business targets. As per the observations made by Rotharmel (2013), firms often adopt and execute effective strategies with the intention of reaping several desired benefits. These benefits can be measured in terms of raising profitability along with market share and most vitally, accomplishing superior competitive position over chief business market competitors (Rotharmel, 2013). With this concern, the essay intends to conduct a rigorous strategic analysis of Ford Motor Company, emphasizing important aspects in the form of personal application program. These aspects include Industry Life Cycle, competitive strategies adopted by Ford, and Porter’s Five Forces among others in this essay. Strategic Issues Facing Automobile Industry Wherein Ford Exists Ford is an American multinational automobile manufacturing company, which produces a unique and excellent range of small cars to lavish brands. Based on my personal thoughts, the various strategic issues faced by the automobile industry, wherein Ford exists include increased level of business market competition, gaining momentum of digitization and raising concerns about safety requirements as well as controlled environmental commitments among others (IBM Corporation, 2004). By using the Morningstar database, focusing mainly on stocks and investments made, the performance of Ford for the past 5 years has been presented and compared in the form of the following tabular representation. Source: (MarketWatch Inc., 2014) As per my personal opinion on the above presented data, it can be affirmed that the performance of Ford, in terms of stock, during the last five years has been quite impressive, increasing marginally over the years. Also, Ford can be identified to have made marginal investments during the previous five years, accelerating the organization towards the successful attainment of a superior competitive position as compared to its chief business market contenders in the global automotive industry. Fords’ Strategy for Competitive Advantage According to my observation, Ford has adopted certain effective strategies like cost leadership along with differentiation strategy in order to attain a better competitive position in the industry, where the company performs its varied operational functions. In terms of cost-leadership strategy, it can be apparently observed that Ford remained much focused on lessening production related costs by cutting down excessive expenses, involved within its business operations. The company strongly believed that it can accomplish better competitive positioning as compared to others by implementing this particular strategy (Slideshare Inc., 2014). On the other hand, from the perspective of differentiation strategy, Ford emphasized developing the features of its broad assortment of product ranges, with a strong belief that this would attract the customers by way of differentiating the brand from that of its rivals, resulting in gaining higher competitive advantage. Justifiably, Ford has developed the features of one of its car models i.e. ‘Ford Focus Titanium’ by enhancing its power, steering as well as control systems and introducing attractive cockpit designing among other modifications in its engineering (Prezi Inc., 2014). According to my opinion, Ford might change or improve the aforementioned strategies that it adopted, promoting innovation, developing ‘Customer Relationship Management’ (CRM) procedure and fostering product diversity among others. An Analysis of Automobile Industry Based On Various Strategy Frameworks In this section, the strategic frameworks of Porter’s Five Forces and Industry Life Cycle have been used with the expectations that these models will certainly aid in obtaining a better understanding about the current position of global automobile industry and likewise provide an understanding of Ford’s strategic competencies. Correspondingly, these strategic frameworks have been discussed in the following. Porter’s Five Forces Internal rivalry. An extreme level of business market competition seems to persist within the automobile industry due to the presence of certain major players like Toyota, Nissan and General Motors among others and its inclination towards an oligopoly market structure (Bender & et. al., 2009) Suppliers’ bargaining power. Bargaining power of suppliers in the automotive industry is observed at a much high, degree as limited number of suppliers are engaged in the process who possess the ability to deliver quality assured services to the leading brands like Ford (Bender & et. al., 2009) Buyers’ bargaining power. Bargaining power of buyers is generally low or limited in the automobile industry due to the reason that the buyers lack the opportunity to negotiate prices while purchasing any car (Bender & et. al., 2009) Entry barriers. Entry and exit barriers, further influencing threat to new entrants in the industry is identified quite high in the automobile industry as the factors like bearing fixed costs substantially and correspondingly, requiring massive investments, hinder the new players to penetrate the market (Bender & et. al., 2009) Substitutes. From a critical perspective, substitution effects are observed as low in the global automobile industry, as various transportation modes such as bus, train or rented cars are easily available for the buyers at minimum opportunity cost, while on the other hand it can also be attributed as moderate when comparing values of the substitutes to automotive products (Bender & et. al., 2009) Industry Life Cycle Growth. The automobile industry has already surpassed this stage, wherein several automobile manufacturers are found spread in worldwide business market segments advocating the fact in favor (Parnell, 2003) Maturity. The global automobile industry is viewed to exist in this particular phase of maturity currently, which is rapidly growing in terms of innovation and technology upgradation in product development (Parnell, 2003) Decline. From an overall perspective, it can be asserted that the automobile industry has yet not undergone this specific stage as the available automobile manufacturers have been able to keep pace-up with other similar brands of the competitors adopting strategies like product innovation (Parnell, 2003) Based on the above discussed industry factors, the strategic framework of SWOT analysis have further been applied in this section to understand the competitive position of Ford within the automobile industry. This has been presented in the form of the following tabular illustration. Strengths Weaknesses Strong brand name Worldwide market presence Pioneer in technological innovation High amount of debts Minimum of no diversification in the competitive field Little market penetration Opportunities Threats Growing markets for electric as well as hybrid cars Collaboration with newly emerging market entrants Penetration in newly developed nations Augmenting business market competition Wider accessibility of substitute products Low customer service network Source: (Bender & et. al., 2009) Analysis of Ford’s Strengths and Weaknesses Applying the ‘Resource Based View of the Firm Model’, the strengths of Ford can be determined as its strong manufacturing capability, robust borrowing capacity for performing various operational functions and possess vast level of intellectual or property resources. On the other hand, the weaknesses of the company can be determined as inflexible manufacturing procedure, shortened lead times and ineffective management of supply chain. Specially mentioning, the strategic competitiveness of Ford can also be assessed by taking into concern the strategic framework of value chain analysis. According to this framework, it can be asserted that Ford possesses a standardized value chain procedure deliberated towards utilizing state-of-the-art equipment as well as machinery and forming strategic alliances with several dealers along with suppliers (Slideshare Inc., 2014). Activities of Ford on the Internet In its strategic development programs, Ford can be observed to conduct several activities making use of the internet medium for attracting customers, raising product sales and ultimately, attaining maximum profitability among others. In this similar context, the company provides its brief overview on its company website, so that the customers along with its other stakeholder groups are aware about what and how the products are being served by the company. Apart from these, the company also advertises its wide array of product ranges paying due attention towards its new car models, so that the sales of new cars can be boosted along with customer awareness towards the brand (Ford Motor Company, 2014). It is strongly believed in this regard that the company might reap certain benefits in terms of opportunities obtained by conducting activities online with greater efficiency. In this regard, the opportunities can be identified in terms of raising demands for electric as well as hybrid cars and complying with the customers’ requirements among others. International Business of Ford Evidence obtainable from the current phenomenon apparently indicates that Ford is much inclined towards conducting its international business by way of boosted global presence in the respective industry. One of such evidence in this regard can be illustrated as its competitive attitude towards global ranking, being positioned as the second biggest automobile manufacturer in the entire US and fifth in the global business market segments as on 2010. This particular evidence suggests that the company has the opportunity to capture the interests of the global consumers in purchasing its wide product ranges and complying with their respective preferences as well as requirements. This would certainly assist the company towards attaining maximum profitability and gaining superior competitive positioning over its chief market competitors (Slideshare Inc., 2014). Vertical or Horizontal Integration Strategy of Ford Ford has adopted and has been executing a vertical integration strategy for the purpose of attaining its predetermined business targets. In this regard, the company can be observed to have used this strategy in the form of lessening inputs and raising outputs, making substantial capital investments owing to which, the company has further been able to improve its productivity level through effective utilization of the aforementioned strategy (Council for Economic Education, 2014). In its recent endeavors, Ford has been engaged in strategic alliance with one of the foremost Japanese automakers, Mazda Motor Corporation. The prime intention of Ford behind implementing this strategic alliance has further been identified as concentrated to sell products in the Japanese business markets and also export the same to other Asia-Pacific nations (Kang & Sakai, 2000). Ford’s Environment for Encouraging and Enabling the Implementation of Innovation Ford’s commitment towards developing its vehicles line-up procedure eventually sets up an environment for encouraging as well as enabling the implementation of innovation within the organization. It is vital to mention in this similar context that the company’s concern over customer-focused technology, introducing head-turning style and making exceptional fuel economy, significantly aids in promoting greater level of innovation within its varied operational procedures and departments (Ford Motor Company, 2014). Ford’s Policies Regarding Ethical Behavior Ford is much committed towards conducting its business transparently and impartially. With this motive, the company has introduced certain policies concerning the ethical behaviors of its Directors and other key personnel associated with the organization. One of such policies can be apparently observed as formulating codes for its Directors that look after various critical aspects like confidentiality, corporate opportunities and conflicts of interests (Ford Motor Company, 2004). Therefore, it can be affirmed that these policies might be improved through enactment of various other related legislations and lawful regulations. Notably, the policy relating to corporate governance, formulated by the company, tends to foster the effective functioning of the Audit Committee members, ultimately complying with the renowned Sarbanes-Oxley Act (Ford Motor Company, 2014). Conclusion Based on the above strategic analysis of Ford, it can be apparently observed that Ford possesses extreme level of resources that would certainly aid the company towards attaining a superior competitive position, as compared to others in future. Amongst these resources, the policy relating to corporate governance would certainly aid the company to preserve investors’ trust and gain their confidence as well. To be mentioned from a broader perspective, this will eventually assist the company to perform its international business in an effective manner. Moreover, the policy might also prove to be quiet beneficial for the company to maintain its dominant position in the respective industry for a longer period. References Bender, R. D., 2009. Competitive Analysis. Strategic Report for Ford Motor Company, pp. 3-28. Council for Economic Education, 2014. Introduction. Lessons. [Online] Available at: http://www.econedlink.org/lessons/index.php?lid=676&type=student [Accessed May 31, 2014]. Ford Motor Company, 2014. Our Company. Corporate. [Online] Available at: http://corporate.ford.com/our-company [Accessed May 31, 2014]. Ford Motor Company, 2014. Innovation. Corporate. [Online] Available at: http://corporate.ford.com/innovation [Accessed May 31, 2014]. Ford Motor Company, 2014. Corporate Governance. Our Company. [Online] Available at: http://corporate.ford.com/our-company/governance-hub/governance-policy-803p [Accessed May 31, 2014]. Ford Motor Company, 2004. Directors Code of Ethics. Document. [Online] Available at: http://corporate.ford.com/doc/directors_code_of_ethics.pdf [Accessed May 31, 2014]. IBM Corporation, 2004. Introduction. Challenges for the Automotive Industry in an On Demand Environment, pp. 1-26. Kang, N. H. & Sakai, K., 2000. Introduction. International Strategic Alliances, pp. 2-48. MarketWatch Inc., 2014. Annual Financials for Ford Motor Co. Investing. [Online] Available at: http://www.marketwatch.com/investing/stock/f/financials/balance-sheet [Accessed May 31, 2014]. Prezi Inc., 2014. ‘High-End’ Ford Focus Shows New Strategy Is America Ready. Ford’s New Strategy. [Online] Available at: http://prezi.com/lyypf80esdiq/fords-new-strategy/ [Accessed May 31, 2013]. Parnell, J. A., 2003. Strategic Management: Theory and Practice. Dreamtech Press. Rotharmel, F. T., 2013. Strategic Management: Concepts. New York, NY: McGraw-Hill Companies, Inc. Slideshare Inc., 2014. Ford’s Competitive Advantage. Case Study on Ford Motors. [Online] Available at: http://www.slideshare.net/invincy/case-study-on-ford-motors [Accessed May 31, 2014]. Slideshare Inc., 2014. Resources Based View and Value Chain Analysis. Ford Motor Company. [Online] Available at: http://www.slideshare.net/luchunjin/introduction-of-ford-case [Accessed May 31, 2014]. Read More