Strategic Transformation of Ford Motor Company - Assignment Example

Strategic Management Table of Contents Introduction 2 Task 1 3 Porter’s Five Forces Model 3 Bargaining Power of Suppliers 3 Bargaining Power of Buyers 4 Threats of Substitute Products 4 Threats of New Entrants 5 Rivalry among Competitors 5 Porter’s Generic Strategies 6 Cost Leadership Strategy 6 Differentiation Strategy 7 Focus Strategy 7 Task 2 8 Concept of Core Competencies 8 Recommendations to Ford Motors for Building on its Core Capabilities 9 Conclusion 11 References 12 Bibliography 16 Introduction The term ’strategic management’ in the broader sense is defined as the process that comprises analysis made by the top management with regard to setting objectives, creating strategic vision, developing strategies, executing along with implementing strategies in keeping with the altering business environmental context (The Institute of Chartered Accountants of India, n.d.). The paper intends to prepare a detailed critical analysis of Ford Motor Company based on different strategies taken by it in recent 3-5 years. The assessment will also encompass Porter’s five forces analysis and Porter’s generic strategies analysis in relation to Ford Motors. Ford Motors is a leading global automaker company based in the United States. In recent years, through sustained strategic direction and leadership, the company has positioned itself among the world’s leading companies in the automobile industry. Task 1 Porter’s Five Forces Model Porter’s five forces model consists of elements such as bargaining power of buyers, bargaining power of suppliers, threat of substitute products, threats of new entrants and competitive rivalry within an industry. The five forces are illustrated accordingly. Bargaining Power of Suppliers Bargaining power of suppliers in relation to industry context can be examined by assessing certain determinants such as labour, services and raw materials among others (Karagiannopoulos & et. al., 2005). The power of the suppliers depends on the efficiency as well as the inefficiency of the market forces (Purdue University, 2010). With regard to Ford Motors, the bargaining power of suppliers in the industry is quite high. It has emerged as a major threat for the automaker companies globally in cent years. However, Ford has been able to devise prudent strategies to significantly mitigate the threat of supplier power. For many parts suppliers, Ford is a key organisation to obtain sustained contracts in the long run. Thus, any discontinuation in the requirements of Ford might be quite difficult for the supplier companies to deal with. Ford has trimmed down its number of suppliers from 3300 to around 1600 in the past decade as a part of its strategy to solidify relationship with suppliers and improve its grip on the suppliers bargaining power (Dornbach-Bender & et. al., 2009). Bargaining Power of Buyers Bargaining power of buyers signifies the impact that the customers provide on the profitability of a business organization. The buyers in the market have more powers when certain specified conditions meet such as an industry has a number of companies delivering the products thus facilitating the buyers with varied choices in terms of companies and products (Purdue University, 2010). The bargaining power of buyers is inversely proportional from that of the suppliers (Luxinnovation G.I.E., 2008). In relation to Ford, buyers’ bargaining power is quite low. As Ford as a company does not require bearing any costs generated due to the requirement of providing concessions to the consumers owing to the fact that retail dealers handle such circumstances. ‘Diseconomies of scale’ is a key factor facilitating to eliminate buyer power in the automobile industry (Dornbach-Bender & et. al., 2009). Threats of Substitute Products The products of one organization are different from the products of the other organization. Substitute products are those which can meet the demands of the customers similar to the actual product. Moreover, if in any industry there are quite close substitute products available then it can create a major threat for an existing established company (Purdue University, 2010; Grundy, 2006). In the context of automobile industry, the threat of substitutes is quite low because there is generally no precise substitute of automobile or high-class vehicles as rendered by Ford. Ford has focused on providing fuel-efficient vehicles to its customers to eradicate any threat of substitutes as in recent years due to the increase in cost of fuel such vehicles are high in demand (Dornbach-Bender & et. al., 2009). Thus, this kind of strategies of Ford is quite imperative to strengthen its position in the market. Threats of New Entrants The threat of new entrants is referred as the opportunity for a new organization to spring up into a market. New organizations provide tough competition for the existing organizations in the market (Purdue University, 2010). In relation to Ford, it is recognised that entry barrier for any new company is significantly high as there are considerable fixed costs associated with commencement of manufacturing operations of vehicles. Moreover, existing companies’ brand names and the dealership based model prevalent in the industry create major obstacles for the new entrants. Ford itself has faced certain difficulties to enter in the emerging markets of China as well as India. In the main operational markets of Europe and the US, Ford is likely to face threat of entrants from existing established manufacturers which might aim at penetrating those markets to increase their economies of scale and sustainability (Dornbach-Bender & et. al., 2009). Rivalry among Competitors Competition is ever-increasing in the business market in recent times in almost every sector. Every company, whether small or big, tends to create competition in the market by manufacturing better quality of products to satisfy its customers (Purdue University, 2010). In the automobile industry, rivalry among the competitors such as Ford, Toyota, General Motors, Nissan and Chrysler among others have increased in recent years. These companies have been able to deliver superior quality of products with affordable prices. In the earlier times, Ford used to focus majorly on Sports Utility Vehicle segment as well as trucks which at times hampered their earnings from smaller vehicles. Thus, Ford needs to reconsider this strategic initiative to maintain its position. Contextually, through its ‘One Ford’ strategic development the company has increased its competitiveness in the European market (Dornbach-Bender & et. al., 2009). Porter’s Generic Strategies Porter’s generic strategies comprise three types of strategies such as cost leadership strategy, differentiation strategy and focus strategy. Cost Leadership Strategy Cost leadership strategy appeals for producers bearing low prices in a given industry, without compromising with the quality. The companies employing this strategy trade their products at an average industrial cost for earning profits than its competitors. At times, the prices are set less than the standard industry based price for attaining market share (Pioneer Institute of Professional Studies, 2012). Differentiation Strategy Differentiation strategy focuses on product or service development that proposes distinctive attributes which are taken into consideration by the customers for using the existing product or switching for other products of the competitors. By offering a unique product to the customers with increased price in the market, a company tries to cover up the additional costs incurred while launching the product (Pioneer Institute of Professional Studies, 2012). Focus Strategy The focus strategy concentrates on the constricted segments. Through this strategy, companies attempt at aiming to target at a narrow segment of customers which is generally less vulnerable from threats associated with competition (Pioneer Institute of Professional Studies, 2012). Ford Motors pursues cost leadership strategy among the generic strategies of Porter which aimed at providing customers low cost option related to high quality reliable vehicles. Reliability and innovation in vehicles have been the major aspects that have facilitated Ford to attain cost leadership strategy (Lowy & Hood, n.d.). Task 2 Concept of Core Competencies The concept of core competencies for a business organisation is related to certain aspects such as initiative and creativity, cooperation or teamwork, judgment, reliability and commitment to safety among others. The future strategies of companies such as Ford Motors are certainly enhanced through its application of different core competencies among them team work deserved special mention in the related context. In relation to teamwork, it can be viewed that the company emphasizes on one team, one plan and one goal aim as their mission. It provides importance by working collectively as a team to attain significant amount of customer satisfaction by enhancing productivity. In this regard, it can be mentioned that the company operates according to the demand of the customers and executes their plans by altering the models of the car in a seasonal basis as per the preferences of the customers. The goal of the company is to look for profitable growth by providing greater customer satisfaction through their products. The vehicles manufacturing in recent times have been focused towards ensuring fuel efficiency and environmental friendly innovative models (Ford Motor Company, 2011). In the context related to sales in the United Kingdom market, it has been observed that sales have increased and as a consequence market share has also increased in 2012 as compared to 2011 in the UK. According to the figure provided by Society of Motor Manufacturers (SMMT), it can be viewed that the sales of cars in July’ 2012 was 9.3% higher as compared in 2011 in the same month, which replicates an increase in productivity and in the performance of the company as a team in the market of UK (Ford Motor Company, 2012). The operations of the company depend on the maintenance of strong relationship between the dealers, stakeholders as well as the customers to recognize their demands and implement them according to the requirements. Moreover, in this connection, it can be stated that with effective relationships among the concerned parties it is possible for the company to enhance sales through development and innovation (Ford Motor Company, 2012). With regard to other aspects of core competencies, creativity plays an important role. In the related context, it can be mentioned that Ford Motors provides different variety of cars according to market demands to satisfy the needs of the customers. Moreover, in the market of the UK it can be observed that Ford Motors has launched Ford 1.0 litre EcoBoost engine which won International Engine of the Year award conferred by the magazine named Engine Technology International. The introduction such high-tech small engines of three cylinder depicts the creativity of the Ford in recent 3-5 years, which has been a key core competency of the company (Ford Motor Company, 2012). Recommendations to Ford Motors for Building on its Core Capabilities There are certain recommendations that can be provided to Ford Motors for enhancing sales and productivity. It is required for the company to move its strategy of production lines from the United States and Euro Zone to places such as Eastern Europe and Mexico. In order to acquire increased share in the market in the future years, it is necessary for the company to aim at expansion of its business units in the emerging countries such as India to enhance its business operations and the company should look to invest more capital in the market of India (Dornbach-Bender & et. al., 2009). Other recommendations that are required to be followed by Ford for the development of strategies entail focusing on innovation of eco-friendly vehicles as it has become one of the most demanded consumer vehicles. It is advisable to inject the system of mobility which would enhance the quality of product and technical assistance resulting in greater productivity and sales for the company thus fulfilling the demands of the customers at large. It would also assist in improved designing of the products as well as development of infrastructure (Gearen & et. al., 2006). Sustained emphasis on ‘One Team’ strategy could enable the company to accomplish set goals which would facilitate its growth in the business operations. Through effective team work, it is possible to enhance productivity and profitability. Continued focus on employee development programs can also aid Ford to build on its core competencies. The programs can be aimed towards encouraging employees to assume leadership responsibilities by brining in innovative ideas for the betterment of the company (Ford Motor Company, 2012). Through leadership skill development, it is possible for the company to enhance its strategies drastically as managers are required to be tactful in the implementation of the strategy to enhance growth and to achieve profitability in the market by providing better quality of products to satisfy its customers in the market (Ford Motor Company, 2012). Conclusion From the above discussion, it can be comprehended that strategic management is one of the important aspects in the development of business process of an organization such as Ford Motors which is one of the leading automakers globally. The company focuses on providing an efficient outlook in its operations for enhancing sales through effective production system, team work, and leadership skill development of the managers to stand out as a leader in the global market scenario. In order to sustain its development in future, Ford Motors needs to ensure continued focus on its strengths in terms of core capabilities such as innovation and teamwork which can stand them in good position in the global market. References Dornbach-Bender, R. & et. al., 2009. Strategic Report for Ford Motor Company. Strategic Recommendations. [Online] Available at: http://economics-files.pomona.edu/jlikens/SeniorSeminars/oasis/reports/F.pdf [Accessed December 28, 2012]. Ford Motor Company, 2011. 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Ford Motor Company, 2012. Sustainability 2011/12. Leadership Development. [Online] Available at: http://corporate.ford.com/doc/sr11-people.pdf [Accessed December 28, 2012]. Gearen, J. & et. al., 2006. Strategic Transformation of Ford Motor Company. Innovation. [Online] Available at: http://deepblue.lib.umich.edu/bitstream/2027.42/48792/1/FMFinal_121306.pdf [Accessed December 28, 2012]. Grundy, T., 2006. Strategic Change. Rethinking and Reinventing Michael Porter’s Five Forces Model. [Online] Available at: http://mis.postech.ac.kr/class/MEIE780_AdvMIS/2012%20paper/Part4%20(Pack8)/Strategic%20Management%20of%20Technological%20Innovation/8-7)%20Rethinking%20and%20reinventing%20Michael%20Porter's%20five%20forces%20model.pdf [Accessed December 28, 2012]. Karagiannopoulos, G. D. & et. al., 2005. Fathoming Porter’s Five Forces Model in the Internet Era. Emerald Group Publishing Limited. Vol. 7, No. 6, pp. 66-76. Luxinnovation G.I.E., 2008. The National Agency for Innovation and Research in Luxembourg Porter’s 5 Forces Analysis. [Online] Available at: http://www.innovation.public.lu/en/ir-entreprise/techniques-gestion-innovation/outils-gestion-strategique/080905-5-forces-Porter-eng-2.pdf [Accessed December 28, 2012]. Lowy, A. & Hood, P., No Date. The Power of 2x2 Matrix. Generic Strategy Matrix. [Online] Available at: http://www.2x2matrix.com/downloads/genericstrategy.pdf [Accessed December 28, 2012]. Purdue University, 2010. Industry Analysis: The Five Forces. Purdue Extension. [Online] Available at: http://www.extension.purdue.edu/extmedia/ec/ec-722.pdf [Accessed December 28, 2012]. Pioneer Institute of Professional Studies, 2012. Porter's Generic Strategies. Cost Leadership Strategy. 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