This is an assignment of a case analysis for Ford Motor Company. First and foremost, we need to understand and research on Ford Motor Company and its existing vision, mission, objectives and strategies are identified. Then, the vision and mission statements for Ford Motor Company are developed. Other important factors that we have analyzed are to identify the organization’s external opportunities and threats.
A CASE STUDY ON FORD MOTOR COMPANY - 2009 Strategic Management Group Assignment A CASE STUDY ON FORD MOTOR COMPANY - 2009 ACKNOWLEDGEMENT A CASE STUDY ON FORD MOTOR COMPANY - 2009 We would like to express our gratitude to …………… for the useful comments, remarks and engagement through the learning process of this topic Furthermore, we would like to thank all team member work together Also, we would like to thank the classmates in this case study, who have supported us throughout entire process, both by keeping us harmonious and helping us putting pieces together We will be grateful forever for your help All team members A CASE STUDY ON FORD MOTOR COMPANY - 2009 ABSTRACT This is an assignment of a case analysis for Ford Motor Company First and foremost, we need to understand and research on Ford Motor Company and its existing vision, mission, objectives and strategies are identified Then, the vision and mission statements for Ford Motor Company are developed Other important factors that we have analyzed are to identify the organization’s external opportunities and threats Three major competitors of Ford are GM, Chrysler AG and Toyota which have been analyzed with Competitive Profile Matrix (CPM) These companies are global extension The External Factor Evaluation (EFE) Matrix is constructed to illustrate the external factors for Ford Company The organization’s internal strengths and weaknesses are identified in order to construct an Internal Factor Evaluation (IFE) Matrix The SWOT matrix, SPACE Matrix and Grand Strategy Matrix are prepared to analyze and evaluate the organization’s current situation and strategies to be adopted for the portfolios Besides, the QSPM is constructed to evaluate the pros and cons for the alternative strategies In addition, specific strategies and long-term objectives are recommended These included the costs for each projected year Our recommendations are compared to the actual strategies that have been planned by the company Meanwhile, we have specified how our recommendations can be implemented and the results we expected Lastly, we have recommended specific annual objectives and policies as well as the procedures for strategy review and evaluation for Ford A CASE STUDY ON FORD MOTOR COMPANY - 2009 LIST OF TABLE LIST OF FIGURES A CASE STUDY ON FORD MOTOR COMPANY - 2009 TABLE OF CONTENT THE FORD MOTOR COMPANY BACK GROUND: Ford Motor Company was founded in 1903 by Henry Ford in Detroit, MI Not only did Ford revolutionize the development of the automobile as a product, he is also the visionary behind the idea of mass production Ford's ability to make automobiles affordable for the masses is cited as a driving force behind both the automobile industry and the creation of a middle class in America Name Ford Motor Company Logo Type Public company Found June 16, ed 1903 (110 years ago) Found Henry Ford er(s) Indust ries Automotive served A CASE STUDY ON FORD MOTOR COMPANY - 2009 Geogr aphic Worldwide areas served Headq Dearborn, uarter Michigan, U.S s Curre nt Alan R Mulally CEO Produ Automobiles cts Automotive parts Bayerische Motoren Werke AG, Chrysler Group LLC, Daimler AG, General Motors Company, Honda Main Motor Company, Comp etitors Nissan Motor, Tata Motors, Ltd., Toyota Motor Corporation, Volkswagen AG and many other automotive companies William Clay Ford, Jr Executive Alan Mulally President and CEO The Management: Michael E Bannister, Exec, V.P Chairman/CEO, Ford Credit John Fleming, Lewis W.K Booth, Exec V.P & Exec V.P & Chief Financial Officer Chairman/CEO Ford of Europe Mark Fields, Exec V.P & President, The Americas John G Parker, Exec V.P Asia Pacific & Affrica A CASE STUDY ON FORD MOTOR COMPANY - 2009 Figure 1: The Ford's Management IDENTIFY THE FIRM’S EXISTING VISION, MISSION, OBJECTIVES, AND STRATEGIES: ONE FORD MISSION: ONE TEAM People working together as a lean, global enterprise for automotive leadership, as measured by: Customer, Employee, Dealer, Investor, Supplier, Union/Council, and Community Satisfaction ONE PLAN • Aggressively restructure to operate profitably at the current demand and changing model mix • Accelerate development of new products our customers want and value • Finance our plan and improve our balance sheet A CASE STUDY ON FORD MOTOR COMPANY - 2009 • Work together effectively as one team ONE GOAL • An exciting viable Ford delivering profitable growth for all Figure 2: Ford’s Vision – Mission A CASE STUDY ON FORD MOTOR COMPANY - 2009 VISION: To become the world's leading consumer company for automotive products and services MISSION: We are a global family with a pround heritage passionately committed to providing personal mobility for people around the word We anticipate consumer need and diliver outstanding products and services that improve people’s lives VALUES: Our business is driven by our consumer forcus, creativity, resourcefulness, and entrepreneurial spirit We are an inspired, diverse team We respect and value everyone’s contribution The health and safety of our people are paramount We are a leader in environmental responsibility Our intergrity is never compromised and we make a positive contribution to society We constantly strive to improve in everything we Guided by these values, we provide superior returns to our shareholders OBJECTIVES: Ford identified three goals that needed to be accomplished: • Return the company to profitability, • Achieve a competitive share price and dividend, and • Restore the brand identity to its previously-held position With clear direction from the magement board, Ford identified six objectives that must be met to achieve the three goals: A CASE STUDY ON FORD MOTOR COMPANY - 2009 • Build cash reserves of $15 billion (ultimately $23 billion) to allow the company to weather the storm and make targeted investments in long-term viability, • Temporarily eliminate dividends to guarantee that all available cash is directed at assuring the future of the company, • Limit production to market demand to eliminate expenses associated with manufacturing models that are inventoried because they can’t be sold, • Downsize operations to production requirement levels to adjust production costs to market demand, • Eliminate management silos to increase effectiveness by eliminating redundancy and encouraging the collaborative use of resources, and • Sell off non-ford brands to focus attention on ford products STRATEGIES: • Utilizing their advance technology • Building of smaller vehicle • Cost reduction • Market expansion through joint venture and strategic alliance Ford’s business strategy is embodied in our ONE Ford plan ONE Ford expands on our Company’s four-point business plan for achieving success globally The four-point business plan consists of the following: • Aggressively restructure to operate profitably at the current demand and changing model mix • Accelerate development of new products our customers want and value • Finance our plan and improve our balance sheet • Work together effectively as one team 10 A CASE STUDY ON FORD MOTOR COMPANY - 2009 0.15 0.45 Increasing mortgage rates Total 5.45 Table 7: Ford’s Quantitative Strategic Planning Matrix 0.45 3.8 Higher scores indicate more attractive strategies, considering all the relevant external and internal factors that could affect the strategic decisions Market development amd product development is being considerd by Ford The sum of total attractiveness scores of 5.54 versus 3.8 that the analysis indicates Ford should make the strategy of market development 8.5 Advantages and Disadvantages of Alternative Strategies Advantages • Timely acquisition of capital makes Ford more financially sound than the other Big Three carmakers • Have a global market presence, with worldwide brand recognition and a particularly strong presence in Europe • Is perceived to be a thoroughly “American” brand, which helps Ford among certain groups of consumers • The Ford F-series pickup remains the most respected commercial truck available; despite demand shifts, profitability on this line should remain high • Ford has recognized the importance of small, fuel efficient vehicles and is • actively transitioning into this market The ‘One Ford’ vision has the chance to generate significant margin increases for Ford’s smaller line of vehicles Of particular importance is the Ford Fiesta, which was recently released in Europe and China and is slated for an early 27 A CASE STUDY ON FORD MOTOR COMPANY - 2009 2010 release in North America The ‘One Ford’ vision appears to be a coherent strategy for Ford to adopt given its changed role within the industry Disadvantages • The automotive market is highly competitive with large fixed costs In addition, the market demands continual long term planning and research and • development While Ford is readjusting production, truck sales are falling rapidly and Ford may not be able to shift production quickly enough to meet changing demand RECOMMEND SPECIFIC STRATEGIES AND LONG-TERM OBJECTIVES The following strategic recommendations are designed to address short term and long term problems facing the company We believe that Ford faces three distinct challenges: - The need to minimize cash burn and bring costs down as quickly as possible in order to stay afloat in this difficult economy Losses must be brought under control by the third quarter of 2009 or the company will face extremely difficult choices regarding its future - The bailout of General Motors and Chrysler has placed Ford in a strategically difficult position While Ford is currently in a much better financial position than GM or Chrysler, government funding of these competitors generates significant risk A highly managed bankruptcy—such as the one being proposed for GM— may lead to a significant GM cost advantage, thereby mitigating all of the progress Ford has made in recent years In addition, any bankruptcy or liquidation could seriously disrupt Ford’s supply chain 28 A CASE STUDY ON FORD MOTOR COMPANY - 2009 - Ford must execute the ‘One Ford’ vision and continue to differentiate itself from its competitors even as the economic crisis unfolds The failure of ‘One Ford’ or the Ford Fiesta model would be disastrous for the company In recent years, Ford has redeveloped a coherent corporate strategy Ford has avoided the need for government funding because of its timely financing and strategic pro-activeness It is critical, however, to continue these positive trends with the end goal being global profitability and recapturing market share Ford should not lose sight of the bigger picture while attempting to capitalize on GM and Chrysler’s current weakness Recommend Specific Strategies 9.1 • Ford should continue attempts to sell off the Volvo brand The funds from this sale should provide Ford with increased flexibility during the coming year as well as contribute to existing strategic goals • The bailout of General Motors and Chrysler has placed Ford in a strategically difficult position While Ford is currently in a much better financial position than GM or Chrysler, government funding of these competitors generates significant risk A highly managed bankruptcy—such as the one being proposed for GM— may lead to a significant GM cost advantage, thereby mitigating all of the progress Ford has made in recent years In addition, any bankruptcy or liquidation could seriously disrupt Ford’s supply chain • Ford should prepare extensive plans for how to deal with bankruptcy of a major competitor, such as the Liquidation of Chrysler and/or Bankruptcy of GM Such bankruptcies pose a great deal of risk to Ford, including but not limited to: the 29 A CASE STUDY ON FORD MOTOR COMPANY - 2009 possibility that the government may chose a winner, the potential for GM to emerge from bankruptcy with a significant cost advantage, and supply chain disruption resulting from bankruptcies of mutual suppliers While we believe that any liquidation of Chrysler should be viewed as a strategic opportunity, we remain deeply concerned about how the future of GM may impact Ford In the short term, we believe that Ford should continue to capitalize on its competitors’ instability and steal market share • The bankruptcy or liquidation of either of these competitors would reverberate throughout Ford’s supply chain While we not doubt that the government will attempt to mitigate the impact of any Big Three failure on the industry suppliers, we fear that the sudden exit of many suppliers is inevitable The risk of a complete industry failure resulting from such extensive supply line disruption is non-zero, and thus must be treated with the utmost seriousness • In recent years, Ford has redeveloped a coherent corporate strategy Ford has avoided the need for government funding because of its timely financing and strategic proactiveness It is critical, however, to continue these positive trends with the end goal being global profitability and recapturing market share Ford should not lose sight of the bigger picture while attempting to capitalize on GM and Chrysler’s current weakness • Continued differentiation through the creation of defining style and feature set exclusive to Ford vehicles is also a positive step in the long run 30 A CASE STUDY ON FORD MOTOR COMPANY - 2009 • We recommend that, wherever possible, Ford should shift production from the United States and the Euro Zone to Mexico, Brazil and Eastern Europe where have lower labor and production costs • We recommend that Ford exploit current opportunities in China and apply capital to ramp up its sales and market share In the long run, Ford must also focus on expanding its share in India We not, however, recommend that Ford invest significant capital in the Indian market at this time Recommend long-term objective 9.2 • We believe it is critical that Ford continue to prepare and execute longer term growth strategies Ford’s viability hinges on its ability to successfully differentiate itself from its competitors, both through price and quality • We recognize management was under significant pressure to affect change, Ford should never again stake so much of its future on one line of vehicles • Meet these challenges head on, with best-in-class vehicles that lead in quality, fuel efficiency, safety, smart design and value • We applaud Ford for its investment in fuel efficient technologies and its recent development of the Ford Fusion hybrid Although Ford is a late arrival to the growing hybrid market, the company has succeeded in delivering a vehicle which is instantly competitive because of its quality and price While Ford is still at a disadvantage compared to Toyota in this subsector, it has launched a lineup of vehicles that has a chance to redefine the competitive landscape 31 A CASE STUDY ON FORD MOTOR COMPANY - 2009 • Offer advanced fuel-saving technologies across a full line of vehicles as well as a variety of electrified vehicles • Develop vehicles that communicate with each other and the world around them to improve safety and reduce traffic congestion 9.3 • Success in the automobile industry begins with great products • The strength of our business will enable us to keep investing for this future growth • Improve the productivity and innovative Eco Boost engine by continuous R&D Project Costs Projected cost of investment for next years (in million) Area 2010 2011 Invest in Mexico 512 640 Invest in Brazil 281 351 Invest in Eastern 685 856 Europe Invest in India 560 700 Invest in China (Asisa) 3,136 3,920 Total investment 5,174 6,468 Table 8: Ford’s Project Costs 2012 800 439 1,070 875 4,900 8,084 We should invest large amount in first year based on region and reinvest the accumulated earning for the next years Average investment capital increase 25% per year 9.4 Comparison of Strategies: We believe there is no reason for Ford to continue producing the majority of its vehicles within two regions with extremely high labor costs: the United States and the Euro Zone 32 A CASE STUDY ON FORD MOTOR COMPANY - 2009 Figure 5: Vehicle Produced by Region, Ford 2007 – Source: Data from OICA As can be seen in Figure 4, the United States and the EU Zone account for the overwhelming majority of production In 2007, based on the statistic of Ford Company, the number of vehicle produced at the United States’s region coming up to over 2.000.000 units and the EU Zone produced more over than 2.400.000 units We believe that Ford should attempt in the long run to shift much of this production to Mexico, Eastern Europe and China (Asia), which offer the necessary geographic proximity while having far lower labor and production costs This is the most priority strategy for the Ford Company to cut down the cost leadership strategy to bring more the benefit and income When the price is low cost, that more attractive reasons to the customer This strategy should take place slowly over several years in order to minimize the negative public relations and branding effects which may result In particular, Ford must be wary of losing its perception as a thoroughly ‘American’ vehicle The closure of nonperforming 33 A CASE STUDY ON FORD MOTOR COMPANY - 2009 plants within North America from 2006-2008 has set the stage for any future growth to take place in Mexico In Europe, we believe that this reallocation can occur more quickly and in a much more extensive manner because there is less risk of a consumer backlash In 2007, Ford invested $88 million to acquire a car manufacturing plant owned by the Romanian government and has also announced plans to invest some $3 billion in manufacturing facilities in Mexico We hope that these are the first steps in a broader shift in production towards lower cost locales Based on the above statistics, the Chinese automobile market has experienced consistent growth in the past ten years, and 2008 industry sales surpassed the United States for the first time with nearly ten million vehicles sold Ford currently holds agreements with Chang’an Automotive of China; through their joint venture Chang’an Ford the companies manufacture the Ford Focus, Fiesta, and Mondeo lines In 2008, this joint venture sold approximately 204,000 vehicles As a result of a recent stimulus package passed by the government, Chinese demand for vehicles is expected to rise by nearly 20% in the year 2009 China is the only major market in which sales growth, let alone growth of this magnitude, is expected Yet Ford currently holds only a meager two percentage points of market share in China However, India is a much smaller market, with industry sales holding steady at two million over the past two years After twelve years within the Indian market, Ford has little progress to show Unlike China, Ford would need to make a significant capital investment into the Indian market if it wished to ramp up production Monthly sales only recently exceeded 2000 units, and Ford only has dealerships in 78 Indian cities Given the current economic uncertainties, we not believe that Ford should invest significant capital in the 34 A CASE STUDY ON FORD MOTOR COMPANY - 2009 Indian market at this time Once the global economy has stabilized, however, we believe Ford should revisit this question and seek to expand its operations in India 10 IMPLEMENTATION OF RECOMMENDED STRATEGIES We should invest large amount in the first year based on region and reinvest the accumulated earning for the next years We should invest region by region and the costs are different for each of the region This is because the cost is an investment planned based on the region’s population and their popularity for cars or trucks For the first year, we invest 512 million in Mexico region followed by 281 million in Brazil, 685 million in Eastern Europe, 560 million in India and billion in China The investment would be used to develop new plantations, build plant, develop car supply network, increase car specialized service stations, and advertise widely to create consumer awareness on car products Ford should continue its aggressive push to close and idle factories, with an emphasis on those factories within the United States and the Euro Zone In addition to executing these previously announced closures, we strongly believe that Ford must restructure its supply chain more quickly than previously anticipated Ford currently has approximately 1,600 suppliers, and intends to reduce this number by 750 Current instability within the market, particularly the potential bankruptcy of a competitor, heightens the importance of this reduction and leads us to recommend deeper cuts in the number of suppliers Ford contracts with Ford must examine all of its suppliers and identify those which are critical to the supply chain These companies should be prioritized above all others in the distribution of contracts 35 A CASE STUDY ON FORD MOTOR COMPANY - 2009 10.1 Result Expected Ford has big plans for India, China and the region As part of their better plan for the region they are investing in additional capacity, expanding their dealer networks and further developing their supply chain Industry sales in the region increased from 24.5 million units in 2009 to an estimated 30.7 million units in 2010 By 2013, at least 80 percent of the vehicles sold under the Ford brand globally will be built off 13 core platforms By bringing suppliers into the development process earlier they can ultimately generate a healthier and more efficient supply chain This process also leads to lower development cost and greater economies of scale for their suppliers, and ultimately a higher quality and more economical vehicle for consumers Ford is listening more closely to our customers, dealers and suppliers Their One Ford plan says to adapt and to localize It has made us a better company around the world The facility will begin building the next-generation Ford Focus in 2012 for Thailand and other markets in the Asia-Pacific region The highly flexible plant will be capable of building a diverse range of vehicles in the future and will follow Ford’s global model of sustainability initiatives and environmentally responsible processes and systems Globally, they are committed to delivering a full lineup of Ford brand vehicles with bestin-class quality, fuel efficiency, safety and smart technology that customers want and value 10.2 Projected Financial Statements: 36 A CASE STUDY ON FORD MOTOR COMPANY - 2009 Forecast Statement of Income (in thousand) PERIOD ENDING 31 Dec, 2011 31 Dec.,2012 Total Revenue 118,308,000 154,212,200 Mexico 11,707,000 12,877,700 Brazil 6,425,000 7,067,500 Eastern Europe 15,663,000 17,229,300 India 12,805,000 16,646,500 China 71,708,000 100,391,200 Cost of Revenue 100,016,000 120,019,200 Gross Profit 18,292,000 34,193,000 Operating Expense Research Development 1,500,000 Selling General and Administrative 13,258,000 15,909,600 Non Recurring 1,030,000 1,081,500 Others 0 Total Operating Expense 14,288,000 18,491,100 Operating Income or Loss 4,004,000 15,701,900 Income from Continuing Operations Total Other Income/Expense Net 5,840,000 8,176,000 Earnings Before Interest and Taxes 9,844,000 23,877,900 Interest Expense 6,828,000 17,192,088 Income Before Tax 3,016,000 6,685,812 Income Tax Expense 69,000 167,145 Minority Interest (245,000) (269,500) Net Income From Continuing Operations 2,702,000 6,249,167 Non-recuring Events Discontinued Operations 5,000 5,200 Extraordinary Items 0 Effect of Accounting Changes 0 Other Items 0 Net Income 2,707,000 6,254,367 Perferred Stock and Other Adjustment 0 Table 9: Forecast Statement of Income 203,080,080 14,165,470 7,774,250 18,952,230 21,640,450 140,547,680 144,023,040 59,057,040 10.3 31 Dec, 2010 1,700,000 19,091,520 1,135,575 21,927,095 37,129,945 11,446,400 48,576,345 34,974,968 13,601,377 340,034 (296,450) 12,964,893 5,200 0 12,970,093 Timetable for Action: Date Year 2010 January March April Agenda Manufacturing plant in China, India Manufacturing plant in Eastern Europe Manufacturing plant in Barzil and Mexico 37 A CASE STUDY ON FORD MOTOR COMPANY - 2009 May July September November December Year 2011 January April July October November December Year 2012 January March April July October December Improve customer service Tailor specific features to regional markets Look for specific government programs supporting car purchases Press releases and future hype Inventory control and organization of firm’s resources Tailoring specific marketing campaigns to different regions Use Global pricing - One price around the world Acquire facilitators (Financial institutions, Insurance companies) Warranty services and financing Special event scheduling, Promotion timing, event planning Inventory control and organization of firm’s resources Low cost means lower price for customers Develop sevice supply network Quality control facilities Crucial testing Secure manufacturing plants Strict Recruiting & Hiring Process Inventory control and organization of firm’s resources RECOMMENDED SPECIFIC ANNUAL OBJECTIVES AND POLICIES 11 Annual objectives There are several objectives Ford Motor Company Ford's consistant plan includes building new products that customers want However, their main goal is to build an exciting Ford that will deliver profitable growth for all • Continue to develop and introduce new models of cars which are safety, fuel efficient, low production cost The current objective of Ford is to introduce its new Fiesta, Edge, and F-series, while continuing 'One Ford' strategy 38 A CASE STUDY ON FORD MOTOR COMPANY - 2009 • Improve biofuel energy quality, electronic car and utilize the production • Advertise continuously to create brand awareness and retain requirement for fuel economy • Continuing Cost control program Policies • Encourage employees to use Ford vehicles as the first step of internal marketing the healthier environment • Promote all advertising materials in green and ensure the materials used in the management are environmental friendly • 12 Ensure employees working in good and safe environment all the time RECOMMENDED PROCEDURES FOR STRATEGY REVIEW AND EVALUATION Review and evaluation helps the firm to ensure the strategies are implemented and carried out appropriately resulting to the desired outcomes For Ford, the evaluation will be done through review over the sales figures The analysis will be done by the managers and later reviewed by department managers Interviews and presentations will be conducted by the 39 A CASE STUDY ON FORD MOTOR COMPANY - 2009 department managers presenting the current evaluation of the strategies to the department heads The sales report and presentation would be the evaluation tool for the department heads to judge the result of strategies A good strategy implementation would result to a good evaluation as the forecasted sales achieved and objectives fulfilled from time to time 40 A CASE STUDY ON FORD MOTOR COMPANY - 2009 REFERENCE Website: - Data from OICA, Located at: http://oica.net/wp-content/uploads/ford.pdf - Data from: European Automobiles Manufacturers Association (ACEA), http://www.acea.be/index.php/news/news_detail/new_vehicle_registrations_by_ma nufacturer/ - Financial Analysis of Ford Company: http://www.bloomberg.com/quote/F:US - Ford Motor Company: http://en.wikipedia.org/wiki/Ford_Motor_Company - Ford Equity Research Report, 3/27/2009 Accessed through Thompson One - Ford Motor Company Press Release: http://media.ford.com/article_display.cfm? article_id=28019 - Ford Company http://manonamission.blogspot.com/2005/04/fords-f-mission-statement.html - Official Global Ford Coporate Information: http://corporate.ford.com/? utm_source=3birds&utm_medium=Web&utm_campaign=GERMAINFORD_Ger main+Ford+June+2013 - Strategic Transformation of Ford Motor Company: http://deepblue.lib.umich.edu/bitstream/handle/2027.42/48792/FMFinal_121306.p df?sequence=1 - SWOT Analysis of Ford: http://www.strategicmanagementinsight.com/swotanalyses/ford-swot-analysis.html - Shel Holtz, www.socialmediatoday.com/shelholtz/838001/ford-s-vision-one-social 41 ... strategy review and evaluation for Ford A CASE STUDY ON FORD MOTOR COMPANY - 2009 LIST OF TABLE LIST OF FIGURES A CASE STUDY ON FORD MOTOR COMPANY - 2009 TABLE OF CONTENT THE FORD MOTOR COMPANY. .. Motors Company, Honda Main Motor Company, Comp etitors Nissan Motor, Tata Motors, Ltd., Toyota Motor Corporation, Volkswagen AG and many other automotive companies William Clay Ford, Jr Executive Alan... manufacturing, their brand value as an American company is a recognizable strength Ford Motor Credit Company is a wholly owned subsidiary of the Ford Motor E Company that operates both nationally