Ford Develops a Strategy for Competitive Advantage - Case Study Example

?Case 2.2: Ford Develops a Strategy for Competitive Advantage Case Summary The case discusses the trajectory of Ford Corporation right after the global recession of 2008. Ford implemented a new plan called “The Way Forward.” This plan involved a long term strategic change as well as short term moves to stabilize the finances of Ford Corporation. The plan created a series of moves and tactics that reduce the costs of the company, while at the same time preparing a path that would ensure medium and long term growth by emphasizing in emerging economies. Key Marketing Issues Lower sales – Since the company lost nearly a quarter of its sales in 2008 the firm has to achieve continuous growth for several years just to recover the ground it lost in 2008. Global products – the organization wants to shift its company to emphasize in economical compact cars that will be accepted by customers worldwide Marketing campaign standardization – The firm seeks to make universal commercials, but factors such as culture can affect the buying decisions in customers from different parts of the world. Customer retention rate: The organization seeks to expand into other international markets and obtain similar customer loyalty as in its domestic market. Personal Case Analysis It is my opinion that The Way Forward strategy was a success because the company eliminated waste that was draining the resources of the company. By shutting down its least profitable plants the cost structure of the organization was reduced. Ford is the most powerful automaker in America. The reputation of the company improved when Ford did not take money from the governmental bailout package. The Ford Figa was an incredible product that increased the sales volume of Ford in India by more than three times. Other cheap model like the Figa must be designed to further exploit many emerging economies. Case Questions (1-3) Introduction questions Ford Corporation is one of the Big Three automakers in the United States of America. The company has historically achieved tremendous sales growth and profit for decades. The firm in the late 1990’s was considered the most profitable companies in America. This all changed in 2008 when Ford as well as thousands of companies in the United States and abroad faced the global recession. The car industry was devastated during this recession. General Motors and Chrysler nearly went bankrupt prior to the governmental auto bailout. In January 2009 the Obama administration injected $24.9 billion of the $700 billion bailout money in the dying U.S automobile industry (Amadeo). Ford Motors was the lone company that did not take the government handouts, but the firm suffered dearly losing over 23% of its sales between 2008 and 2009. 1. During the 2008 global recession Ford Motors decided to implement a new strategy called “The Way Forward” in order to boost the firm’s sales and restructure the company. The organization knew that the only way to stay profitable during recessionary times is to decrease costs in order to offset the effect of lower sales numbers. The organization realized that this could only be achieved by decreasing both fixed and variable costs. Fixed costs refers to costs that recurring each month whose amount are fixed such as building rents, managerial salaries, and business loans. Variable costs are periodic costs that vary in step with the output or the sales revenues of the company (Businessdictionary). An example of variable costs is direct labor. The Way Forward strategy included cost cutting initiatives such as closing down 16 factories and downsizing Ford’s workforce by 30,000 employees. The plan included a philosophical change in the managerial approach in order to focus more on the customer by designing cars that served their needs. The company realized that in a bad economy people are looking for gas savings. Despite the fact the company lost nearly 23% of its revenues, certain brands that were targeted as part of The Way Forward initiative had higher sales figure. The Ford Focus is one of those brands. The firm’s marketing and advertising efforts made the Ford Focus one of the most attractive brands for female buyers. A feature campaign of the Fusion that targeted women was the Fusion Studio. The Fusion studio was a pop up store that provided women with services such as a beauty store, physical training, and music while at the same time educating the customers about the advantages of owning a Ford Fusion. Crossover vehicles were also an area of emphasis in The Way Forward plan. Overall The Way Forward Strategy was effective at the turning the company around by eliminating waste, unprofitable business units, lowering costs across the entire enterprise, attracting new customers, and embarking on a new path to serve the new needs of its clientele. 2. Ford began a transformation that linked its domestic strategy with its global strategy. The firm realized that standardization can have huge benefits such as access to economies of scale and the ability to prepare marketing campaigns that can be used to increase the demand of Ford vehicles worldwide. A vehicle that has been showcased by the company in recent years as a global brand is the Ford Fiesta. Ford focused on three qualities in the production of the Ford Fiesta which were: quality, design, and comfort. The new focus of the company is to create new cars models that will be accepted worldwide. Two emerging economies that are both members of the BRICS are India and China (Wordpress). The Ford Figa, a four door hatchback, has been extremely popular in both these countries helping Ford achieve high levels of growth in these key Asian markets. In India the Figo helped Ford tripled its sales. India is the second most populated country behind China (CultureGrams). 3. One of the strategies the firm used effectively in the past was to sell luxury cars in developed countries due to the fact that the monetary margin per unit of luxury cars is much higher than compact cars. Europe was one of those markets that Ford targeted for this type of product. The company has wisely decided as part of its The Way Forward initiative to downside the luxury car division of the company. One of the moves that show the firm’s commitment to this new strategy was the divesture of Volvo. The firm should not completely leave the luxury market since in the United States luxury SUV, pickups, and sedan are very popular among car buyers. The best move for the company is to keep the luxury product line in maturity product life cycle stage as long as possible and to make the pertinent moves once the product reaches the declining stage. Conclusion Ford Motors has changed its strategic path due to adverse economic conditions that destroyed the ability of the firm to maintain sales growth. The recession hurt a lot people and businesses, but companies such as Ford have redefined themselves. The Way Forward plan worked very well because it stabilized the firm finances in a manner that it ensured the success of the company for many decades to come. Ford has always been at the forefront of innovation in the automobile industry. The introduction of global products started with the Fiesta and the firm plans on continuing this strategy to penetrate many markets simultaneously with a homogenous product. The company must continue to introduce low price compact cars in order to increase its market share in emerging markets such as the BRCIS which includes Brazil, Russia, China, India, and South Africa. Work Cited Page Amadeo, K. 11 January 2012. “The Auto Industry Bailout.” 15 January 2012. Businessdictionary.com. 2012. “Variable Cost.” 15 January 2012. CultureGrams. 2012. India. 15 January 2012. Wordpress.com. 15 April 2011. “BRCIS Summit: multipolarity for unity.” 15 January 2012. Read More