Expanding an MNC - Ford Motor Company - Assignment Example

? Expanding an MNC Ford motor company (FMC) is trying to expand business in China. This report will try to throw some light on Chinese Automobile market scenario. Organization culture is an essential element to build a strong company. This study will try to evaluate organizational culture of Ford motor. The report will analyze different market entry models (Exporting, Foreign Direct Investment, Licensing, and Joint Venture). One of the major purposes of this report is to define a suitable market entry strategy for FMC. Political risk factors will be discussed in the later part of the study. Finally this study will focus on future business strategy for ford to expand their business in China. Table of Contents The Ford Motor Company 4 Organizational Culture of Ford Motor 4 Environmental Scanning 5 Political 5 Economical 5 Social 5 Technological 6 Environmental 6 Legal 6 Entry Strategy 6 Political Risk 7 Implementation Strategy 7 References 9 The Ford Motor Company Ford motor company (FMC) is an iconic automobile manufacturer in the world. The company is headquartered in Dearborn, Michigan, USA. It was founded in 1903 by Henry Ford, Horace E. Dodge and John F. Dodge. FMC was the most sold automobile brand across the world before World War II. Large scale car manufacturing concept was introduced by Ford motors in the year of 1914. Organizational Culture of Ford Motor Proper understanding of leadership skill and management is required to build a successful organization. Top management of the company believes in creating a sustainable environment for all. Ford has set a target to reduce 30 % CO2 emission from car within next eight years. The company tries to operate with a small but efficient workforce. They discontinued more than seven thousand underperforming employees in 2008. This is an example of strong leadership quality in terms of ability to take hard decisions. FMC has always tried to design product in a unique way. They use state of art technology to manufacture automobiles. Organizational culture of Ford can be described in three words- practical, innovative and one that believes in sustainable development (Seligman, n.d.) Environmental Scanning FMC is trying to enter Chinese automobile market. They need to analyze macro environment (considering political, economical, social, technological, legal, environmental condition of a particular country) before planning an entry strategy. Political Communist party is the ruling party in the country. Government has strong control over print media and electronic media. Political condition of the country is stable due to absence of any major opposition party. China has joined world trade organization (WTO) in 2001. The country has become more open in terms foreign investment after Joining WTO. It takes only thirty seven days to start a new business in china. This type of political condition will help FMC to grow their business in the country. Economical Chinese government has direct control over the financial institutes of the country. Government regulates Foreign Direct Investment (FDI) policy. Chinese government has cut down corporate tax rate last year. Ford has the opportunity to save huge amount of money due to low corporate tax policy of Chinese government (Viswanadham, & Balaji, n.d.). Social Literacy rate in china is more than 90% and most of the educated people are aware of international brands. Many international organizations have entered China in recent years. They have created employment opportunities for Chinese people. Disposable income of a customer has increased due to rapid industrialization. Technological China is global leader in terms of technological development. Major achievements in the field of science and technology are, building the first atomic reactor, and hydrogen bombs, discovery of the Daqing Oilfield, synthesis of crystalline insulin, electronic collider, nuclear power stations etc. Government is trying to develop automobile industry with the help of foreign companies. This condition also supports the market entry decision of Ford motors. Environmental Government has taken many steps to control pollution level of the country. They are taking help of different NGOs to protect nature. Ford is trying to decrease CO2 emission rate in their car and they need to maintain same policy in China. Legal Labor regulation law is the matter of concern for any foreign company to start operation in china. Local Labor union and labor bureau are two major labor organizations. Dismissing an underperforming employee may need prior permission from them. Entry Strategy There are four types of global expansion strategy available in for any company. 1- Exporting- Companies can sell their product in foreign country. 2-Foreign Direct Investment (FDI) - Different company can get ownership in foreign country by investing large sum of money. 3- Licensing- Companies can use trademark or patent of other organization in foreign market. 4- Joint Venture (JV) - Organizations can enter in foreign market with the help of partnership with a domestic player of that country. In the JV model ownership ratio will be decided according to capital invested by two companies. Car manufacturing requires investing huge capital. Ford Motors is already applying FDI model to expand business in China. Chinese automobile market is dominated by foreign players like Toyota, General Motors, Hyundai, Volkswagen and others. Exporting and Licensing model is not widely used by any automobile companies to expand business overseas. JV can also be applied to expand business due to presence of local players. Changan Ford Mazda is an example of this kind of JV where ford has partnered with Changan automobiles of china. Chairman, President and Country Vice President decide business strategy for Ford Motor (Yan, & Wills, 2011). FMC will use the same organizational structure in China. Political Risk Political stability is high in china. Communist party has strong control over Chinese people. Chinese government is helping foreign companies to expand business in the country. Government demands certain contributions (like corporate social responsibility, contributing to the growth of the economy etc) from foreign companies. Ford motor needs to establish sustainable development program (like child education, computer training program for youth etc) for Chinese people. Ford needs to create employment opportunities for young Chinese people. In this way they can create a positive image in the mind of Chinese government (Fogel, 2010). Implementation Strategy Ford has the reputation for manufacturing sports utility vehicle (SUV). FMC has recently launched three new models of SUV in China. Demand for SUVs has increased by 20% within few years in China. Ford motor is trying to manufacture fuel efficient cars for Chinese customers. They have already invested more than 3 billion dollars in the Chinese market. The company is currently using Joint Venture model to expand their business in china. They are trying to adopt with Chinese culture and they need to do more market research on purchase behavior of Chinese consumer. FMC has a long term plan to capture Chinese automobile market and for this reason they are designing different business strategy with respect to market demand. References Fogel, G. K., (2010) Business Environment in China: Economic, Political, And Cultural Factors. Retrieved from http://www.usi.edu/business/mbea/2010/fogel-2010.pdf Seligman, J., (No Date). Building a Systems Thinking Culture at Ford Motor Company. Retrieved from http://www.appliedsystemsthinking.com/supporting_documents/Leveraging_Ford.pdf Viswanadham, N, & Balaji, K., (No Date). Foreign Direct Investment or Outsourcing: A Supply Chain Decision Model. Retrieved from http://www.isb.edu/faculty/Working_Papers_pdfs/Foreign_Direct_Investment_or_Outsourcing.pdf Yan, F, & Wills, K., (2011). Ford, Mazda get approval to break-up 3-way China JV-pape. Reuters. Retrieved from http://www.reuters.com/article/2010/08/11/ford-mazda-china-idUSTOE67A03820100811 Read More