Business strategic management report of Ford Company - Assignment Example

? Business strategic management report -Ford Company Table of Contents Table of Contents 2 Executive Summary 3 PEST Analysis 4Political Factors: 4 Economic Factors: 4 Societal Factors: 5 Technological Factors: 5 Industry Analysis 6 Opportunities: 6 Threats: 6 Industry Competition: 7 Competitor Analysis: 7 Internal Environment 8 Resources: 8 Capabilities: 9 Core Competency: 9 Business Level Strategy 10 Corporate level Strategy 10 Ford Strategy for next Five years 11 Executive Summary Ford is one of the most renowned automobile giant in the automobile industry. Since its inception, Ford has proved to be one of the most technologically advance and competent automobile manufacturing companies in the market. It holds second position in the U.S automobile sector, having a good market reputation and millions of satisfied customers. It has the legacy of providing cost effective cars along with the rapid technological change, proving to be the smartest among its competitors in the industry. Recent developments by Ford include the invasion of electrical cars in enormous amount in to the U.S consumer market. (Gomes, Donnelley & Collis, 2010) reports that the great recession of 2008 affected the automobile sector badly as the sales dropped down tremendously. The big guns in the industry were financially disturbed by the recession as loss reached new paramounts. Till the June of 2009, Ford was the only company left of Detroit’s “Big Three” which didn’t faced bankruptcy. General Motor and Chrysler were bankrupt and their borrowings from the financial sector increased. Ford was able to survive due to some active decisions made by the financial officer and the operational management team. However Ford faced a loss of $14.7 billion in 2008. The major cause of this downfall was the elimination of stockholders which pushed the company to this tragic fall. This report has examined all the chief causes of the catastrophic scenario prevailed in the automobile sector. What sort of political, economic, social and technological barriers were there in the industry and how companies indulged those? Determining the industry as a whole, what are the opportunities, threats and most important competitors of Ford; how they have challenged company’s repute and what steps should have taken by Ford. Also discussing the core competencies of the company, how do they actively utilize their resources, capabilities and what are its core competencies. Exploratron of the business level strategy; with the corporate level strategy plus making strategic plan of the company for the next five years are the major parts of this research work. PEST Analysis PEST Analysis is a vital tool for analyzing the market position of a firm. Political, economic, societal and technological factors are discussed for understanding the standing of a company. Applying this tool to Ford presents the following picture: Political Factors: Ford along with other automobile companies was in turmoil due to the bad economic scenario of the country. After the Presidential elections of 2008, Obama Government started operating on January 1st, 2009 and encouraged people to purchase new cars and old ones were scrapped. The enforcement of this order was a beginning of a new sun for the automobile sector as people had to purchase new cars. The old cars were scrapped and this political decision thus really helped Ford too. The first quarter of 2009 brought good news for the company as Ford only had $1.4 billion loss in that tenure. These were promising figures because last year Ford faced mammoth loss of $14.7 billion. Hence the political decision of newly established government was appreciated among the automobile industry (Gomes, Donnelley & Collis, 2010). Economic Factors: Ford was the survivors of bankruptcy so they had to utilize their finances very carefully. The economic factors suggested that now revival of the economy will start very soon. The Chief Financial officer of Ford estimated that breakeven would be achieved in 2011. The economic and financial planning of CFO was to attain long term success rather than short time stability. He formulated such economic and operational strategies that helped Ford to sustain its position in the market. Invasion of small cars rather than larger cars was one of the essential steps in this regard as people now had less amount of spending on cars. Major reduction in cost was done so that people would buy easily plus fuel efficient cars were brought in to attract the masses. Societal Factors: The boom of Global warming campaign was reaching huge success in the society. Automobile sector was one of the biggest reasons of global warming as due to fuel emission, ozone layer is damaged and the environment gets polluted. Various campaigns regarding abandon automobile sector were also going on. Ford was able to read the long term circumstances of this movement sooner and they came up with electrical cars which had no fuel emission. This not only provided that it would be pollution free but also it will be eco-friendly. Electric cars trend increased in 2009-10 which was a plus point for Ford as they had developed bulk of electrical cars. Thus due to elegant strategy and farsightedness; Ford was able to overcome society by making innovational change in the market (Gomes, Donnelley & Collis, 2010). Technological Factors: Technological edge has been the factor of Ford’s supremacy in the automobile sector. By the inception of Electric cars, having a strong electrical department was the name of the game. Fortunately Ford had developed a well organized, state of the art electrical technological plant which was superlative among the other competitors. They were foremost pioneers of the electric cars in the market and had good sales after bringing this novelty into the consumer market. Massive technological advancement, progress and development had brought satisfactory results for the company which became the backbone of bringing company into a strong position in the market yet again (Hiraide & Chakraborty, 2012). Industry Analysis The industrial review is essential for determining the position of a company. For the industrial analysis; opportunities, threats, industry competition and competitor analysis are the basis which facilitate in a better understanding. The industrial analysis of Ford is given below: Opportunities: (Gomes, Donnelley & Collis, 2010) illustrate that since Ford is the only survivor from the Bankruptcy and also was able to regain considerable amount of money in the first quarter of 2009 which is a big financial opportunity. Ford also has magnificent electric car producing technological plant. Making dominance among the electrical car industry can be achieved easily as bringing electric cars more into the market. The price strategy has been a successful approach and reason of earning good revenues in the start of 2009. By selling electric cars at fewer prices, minimizing profits and capturing market in the first place is verily the best tactic played by the company. It has also shocked its fellow competitors like General Motors and Chrysler. Threats: Emergence of new companies in this period is a big threat for the company. Up bringing electric cars at minimal prices can damage company’s market positioning. Recession always has brought some major changes in the market so Ford has to dynamically examine the market scenario prevailing in this whole time. Electric cars seem promising in the current scenario; electricity shortage in the long run may disturb this sector too, making Ford responsible for incepting these cars into the market. Contingency planning regarding this matter must be done at first place to avoid any unpleasant future circumstances. Competitor’s role in this whole matter will be an interesting interrogation to check the standing of the company (Hiraide & Chakraborty, 2012). Industry Competition: Ford has been competing in the industry for quite a long time and the position of the company has always remained a threat to its competitors. The industrial competition still depicts that General Motor is the winner of U.S consumer market as it has strong roots in the market than any other firm. General Motors is the largest producer of cars every year so does it gross profits are. Chrysler position is very strong and powerful; it has also got a good market share. Ford is famous for its elegance, class and versatility. The competition in the industry has gone to the next level after 2009; electric cars are making headlines in the market which has brought companies to revise their traditional fuel consumption engines. Better electric managing firm is governing among the industry and after the bankruptcy of General Motors and Chrysler, the picture seems pretty clear that Ford is only left in the field to enjoy fruits. Ford manages production of electric cars like no other firm and its advancement in technology is the reason behind winning industry competition (Gomes, Donnelley & Collis, 2010). Competitor Analysis: The major competitors of Ford are in a huge chaos after the economic recession 2008. Recession has almost broken the backbone of many firms. Ford was able to save in this tremendous downfall by making an essential backup plan. Competitors of Ford include General Motors, Toyota, Chrysler and Volkswagen. Toyota and Volkswagen along with Ford were able to get away from bankruptcy, others two felled into it. Throughout than, Ford has been able to fly solo in the market as two of the Detroit’s Big three were bankrupt and Ford stood firm in the time destruction. There is no doubt that General Motor ruled over the U.S automobile market over a century and was the most loved and promised car manufacturing firm in the industry but recession broken it into pieces. Stocks of the company fallen and the company came into disastrous position. Chrysler was also unable to face the music of recession and was fallen. As a competitor, these companies had neck to neck competition and ultimately General Motors was the winner every year but their competition in the market was an exciting experience for the analysts and car lovers. Internal Environment To scrutinize the internal environment of Ford, following factors must be addressed for better understanding and analysis. Resources, capabilities and core competencies are the essential features of the internal environment. Resources: Ford had numerable resources which it actively utilized. Automobile companies also realized that playing alone in the industry would be quite a difficult task, so worldwide outsourcing took place. Ford also had collaborations with certain companies for producing spare parts. Technological resource sharing was also done. This was a major step taken and this work reached peaks after the recession period. Mergers and acquisitions of certain firms also took place, thus allowing utilization of resources in a better way. Ford also strategized and shifting of plants to lower cost location was done (Hiraide & Chakraborty, 2012). Resource allocation and then utilizing it in a way which would lead to positive outcomes requires good strategic management. In Europe, not even a single plant of automobile industry was closed due to recession. This was because of the bail-outs and also an enormous help from the Government. Canada, South Korea, Russia and Brazil governments supported the industry in the tenure of turmoil and allocated financial resources to the companies so that they would stand firm in the recession time. Ford was able to stand on its own feet by making good utilization of resources. They previously had electric car setup but were not in a bulk production phase. After examining the market position; Ford took a bold step and introduced electric cars on a larger scale. This not only saved their expenses on the traditional car production but also brought affirmative financial results (Gomes, Donnelley & Collis, 2010). Capabilities: The capability of Ford to produce electric cars at a colossal amount showed immense potential among the industry. The adoption of Just in time concept really enhanced the firm business strategy and brought it into a unique position. Their systems were hence more refined and up to the mark. Wastage of time and resources were eliminating by the adoption of this process. Virtual prototyping and modular designing was also the capability of Ford which distinguish it from other firms in the market (Gomes, Donnelley & Collis, 2010). Collaboration with other firms did not depict the shortcoming of the firm but it was a step to improve and reform their systems in a productive way. Core Competency: The current situation explains that Ford has core competency in electric cars. They are producing such elegant electric cars which no other is producing till now. The price of Ford cars is also low which is shocking for its competing firms in the market. General Motors and Chrysler were even shocked to see such low prices of a newly invaded technology. Ford is trying to grab more customers and create a strong bonding of customer loyalty likewise General Motors. Core competency of Ford also lies in just in time process and eco-friendly car manufacturing plant. Goal of ford is to achieve long term stability rather than short run privilege. Business Level Strategy The term business level strategy has various dimensions and aspects. Primarily it deals with the cost leadership tactic which along with porter’s five forces, obtaining cost advantage, reducing risks, minimizing cost and increasing profitability. Ford has been able to grasp the essence of business level strategy as they adopted an entirely new plan for their upcoming endeavors. The Chief financial officer of Ford was the main mastermind behind the manufacturing of business level strategy. It focused that how to reduce costs and make full capitalization of the current resources. It started to watch over by minimizing unnecessary costs, floated some ideas into the market to check customer’s response and incepted electric cars in the market after critical assessment. The average net margin of companies from 1990-2008 was almost 1.1% but after the recession, tables were turned over, so in order to sustain and retain their position in the market, business level strategy of Ford made the difference (Gomes, Donnelley & Collis, 2010). Corporate level Strategy Ford’s corporate level strategy discusses that in which direction its financial position would be in the long run. Interdepartmental processing and relationship management of firm internal affairs are examined. This is the core strategy of Ford business operations and stands as the backbone of firm (Hiraide & Chakraborty, 2012). Ford started to diverse its operations in a new direction as per the new corporate level strategy. Also reducing the focus on traditional car development was shifted. This was a bold step taken by the firm as this may lead to serious consequences. The corporate strategy of Ford also discusses that in which directions firm will go in cooperation with other companies. The technological sharing done with its fellow mutual beneficial alliances in kept as a company’s official document and cannot be portrayed or presented in the general public as per secrecy act. The corporate strategy of Ford however has showed promising results and survival of the company in great recession is one of the primary examples to show the strength of it (Gomes, Donnelley & Collis, 2010). Ford Strategy for next Five years Strategy formulation elegance is engraved in Ford’s researchers and analysts approach. They have learned to sustain in the market with respect and dignity even in the hard times; thus presenting that they know how to sail the ship in commotion. The strategy of Ford for the next five years demonstrates to reach market leadership by deploying more electric cars into the consumer market. Creating a new sector into the automobile sector and winning the race through cost leadership. The focus of manufacturing has been changed from private transport to public transports as usage of it is even more (Gomes, Donnelley & Collis, 2010). Introducing small cars instead of large cars, as the trend of large cars is now comatose into the consumer market. The preference of people is small cars now. Eco-friendly environment creation and getting a place in the good books of masses is an adopted strategy for the next five years. Technological advancement and growth sustainability by researching on better ways to save energy and making a change in the times of energy crisis is the futuristic approach of Ford. Long term sustainability and admiration among the population by producing state of the art automobiles is the core future strategy formulated by Ford. References Gomes, E., Donnelley, T., & Collis, C. (2010). Mergers and acquisitions as strategic methods of business development in the global automobile industry: an analysis of five cases. London: Edwin Mellen Pr Hiraide, N., & Chakraborty, K. (2012). “Surviving the Global Recession and the Demand for Auto Industry in The US–A Case for Ford Motor Company”. International Journal of Economics and Finance, 4(5). Read More