Ford Motor Company was created in 1902 by Henry Ford with only 12 investors and $28,000 in cash. The first car was sold in July 1903 and by October 1903, Ford was making a profit. Two to three men worked on each car with parts being supplied by outside firms for the Model T created in 1908. 15 million Model T’s were sold between 1908 and 1927 when production ended. To keep employee morale up, Ford paid his workers $5 per day and reduced the work day from nine hours to eight hours. In 1927, Ford began selling the Model A. Even with the Great Depression, over five million Model A’s were sold. Over the next two decades, Ford’s sales grew, causing the largest IPO in history up to 1956. However, in 2005, Ford’s bonds were downgraded to junk, and many economic factors such as rising health-care costs and gas prices negatively affected the company. A deal was reached with the United Auto Workers allowing Ford to avoid a government takeover. As of 2015, Ford is the second-largest U.S. automaker and the fifth-largest automaker in the world based on sales. Global market share grew 7.6 percent in Q2 of 2015, 12 of 16 planned product launches have been completed, and pre-tax profit and net income are up $2.9 billion and $1.9 billion.
Key Issue(s) in the Case
Even with the positive net income and the global market share growth, at the time this case was written (February 2015), Ford shareholders were displeased with the decline in sales. “Ford reported a 1.9 percent decline in sales in the United States to 180,383 units” (David & David, 2017, p 530). These sales consist of:
· Cars falling 8.1 percent
· Utility vehicles falling 2.3 percent
· Trucks increasing 4 percent
To make the shareholders pleased, a 3-year strategic plan for sales growth must be created for Ford’s new CEO Mr. Mark Fields.
Identify and Evaluate the Organizations Existing Vision, Mission, Objectives, and Strategies
Ford’s vision is not explicitly defined. Because of this, the company relies on its mission statement to define the direction of the company. The mission statement outlines four important components: One Ford, One team, One plan, and One goal (Ford, 2018). As one Ford, the company commits to align employee efforts towards a common definition of success (Ford, 2018). As one team, the company shows that all stakeholders will work together to achieve automotive leadership as measured through customer satisfaction, satisfaction of employees, and business partners like dealers, suppliers, communities, and investors (Ford, 2018). One plan means that the company is committed to aggressively restructure to make profits under the current market conditions (Ford, 2018). Under one goal, Ford is committed to creating an exciting and profitable company delivering growth to all (David & David, 2017). This mission statement covers the interests of all stakeholders by committing to make sure they are all satisfied. It also shows that the company understands that the automotive company is changing and therefore commits to constantly restructuring in order to make profits under new conditions. The mission also shows unity within the company.
The company currently has a range of objectives based on sales, safety, research and innovation, and sustainability. The main objective is to be the world’s most trusted mobility company (Ford, 2018). In sales, the company has an objective to increase its global sales and has set a target of 9.4 million vehicles by 2020 (Ford, 2018). In research and innovation, the company wants to be a leader in integrating new technologies and is working towards increased mobility through better vehicle safety, electrification, in-car connectivity, and self-driven autonomous vehicles (Ford, 2018). The company has invested in research and innovation through the Palo Alto Research and Innovation Center. On sustainability, the company is committed to reducing greenhouse gas emissions and making better fuel consuming vehicles (SEC, 2018). It is also investing on recycling and reusing materials from obsolete cars.
The company has different strategies in place. For example, it is focused on busing recycling centers near its factories so as to facilitate the recycling and reuse of materials. The company also has a research and innovation center in Silicon Valley that spearheads its innovations and thus makes sure it does not miss new trends and technologies (Ford, 2019). One of the new innovations is creating higher engine outputs with smaller displacements which will greatly improve fuel economy and emissions (David & David, 2017). Another innovation is improving safety by adding Blind Spot Monitoring, lane alerts, and parking assist. This center also comes with better ways of achieving sustainability.
To increase global sales, the company makes use of cost leadership strategy by providing high quality vehicles at mainstream prices. “In 2014, Ford launched more vehicles than ever before in a single calendar year, including a new Mustang and F-150” (David & David, 2017). Ford is also currently engaged in its largest manufacturing expansion by increasing capacity in six U.S. plants and opening two plants in Asia and one each in South America and Europe. To increase trust among all stakeholders, the company constantly engages them to prioritize their issues.
Propose and Defend Specific Recommendations for the Company
Using forecasting tools such as the MIS technique, External Factor Evaluation (EFE) Matrix and the Competitive Profile Matrix (CPM), Ford Motor Company can gather, analyze and determine the major factors contributing to the declining sales. According to David & David (2017), in today’s market, as gasoline prices have risen above $4.00 per gallon in the United States since the September 2010 low of $2.70 per gallon, fuel economy has consistently been the number one reason for purchases of hybrid automobiles in the United States. Therefore, where most attention has been put into efficiency of producibility and establishing a lean culture, the attention must now turn to innovation to increase sales. As Talay, Calantone & Voorhees (2014) states, Ford Motor Company is proposing to spend billions on autonomy, electrification, and new mobility services. Ford also announced plans to invest $1 billion over five years in artificial intelligence, pour $4.5 billion into 13 new electrified vehicles by 2021, and acquire or partner with services such as on-demand shuttles and bicycle-sharing programs. Realizing investments in research and development for such innovations is risky, it also comes with huge reward potential, especially when the market and economy is increasing the pace from a steady walk to a full sprint regarding new technology. Hughes-Cromwick (2011) recognize that, based on the ﬁndings of extensive research and data mining, automotive manufacturers must develop a structured product development program that allows for continual and steady new product introductions; otherwise, even momentary setbacks can have a damaging impact on a ﬁrm’s ability to survive in the automotive marketplace.
Industry Analysis: Competitors, Products, Selling Techniques, and Market Conditions
Competition in the automotive industry is based mostly around price, reliability, utility, and fuel efficiency. About 75 percent of all revenue is put into raw materials purchases so changes in the price of steel, aluminum, and other raw materials substantially affects the industry. The second-largest expense, wages, have now been reduced by labor unions. Additionally, there are high barriers to entry, discouraging new companies from entering the market. Globalization by this top group of manufacturers gives companies a competitive edge when new products are introduced into existing markets or when the manufacturers enter international markets.
The chart below, found on page 527 of the textbook, lists the top automotive manufacturers of 2014 (David & David, 2017). The data in this chart was collected in 2014, two months prior to February 2015 where Ford saw many areas of sales decline that sparked the development of this three-year strategic plan. Based on the data listed below, Ford must work hard to compete with Honda, Chevrolet, GM, and especially Toyota (top seller) in these next three years in order to be profitable and successful within this highly competitive market.
Based on the information in the chart, found on page 529 of the textbook (David & David, 2017), the top four selling model types in the industry are: crossover vehicles, mid-size/full size vehicles, compact vehicles, and pickup trucks. Examples of Ford vehicles that fall into each of these model types (with competitor products listed in parentheses):
· Crossover vehicle: Ford Flex (Toyota Venza, Dodge Journey)
· Mid-size/full-size vehicles: Ford Fusion, Ford Taurus (Chevrolet Malibu, Dodge Charger, Toyota Camry; Chevrolet Impala)
· Compact vehicles: Ford Focus (Chevrolet Cruze, Toyota Corolla)
· Pickup vehicles: Ford F-150 (GMC Sierra, Chevrolet Silverado, Toyota Tundra, Dodge Ram)
Ford brand vehicles that fall into these four model types should be the primary focus of sales in this three-year strategic plan since these model types are the best-selling in the industry. Comparing the features (mainly price, fuel efficiency, utility, and reliability) and sales of the top competitors for each model type against the Ford brand models can help Ford in improving their models and even in creating new models for release in the next three years.
To attempt to gain market dominance, turnover of products, style, vehicle preferences, and option stimulation must be achieved. In 2002, the company employed 350,321 people and had sales of $163,420,000 (Thompson, 2007). One of Ford’s strategies was to reduce the weight of the F-150 from a steel frame to aluminum. Doing this reduced the weight of the truck and helped the performance that comes with a 2.7-liter V6 EcoBoost engine, giving it the same power as a V8 (David & David, 2017). In early 2015, two new engines were started: the 2.0-liter and the 2.3-liter EcoBoost engines. The 2.0-liter engine will be featured in the Ford Edge; the 2.3-liter engine will be in the Ford Mustang, Ford Explorer, and Lincoln MKC. These changes have reaped awards: Ford’s revamping of the F-150 resulted in being selected as the 2018 Motor Trend Truck of the Year (Motor Trend, 2018).
China is putting pressure on the U.S., European, and Japanese automakers as the Chinese-based companies are being formed quickly. Europe’s economy is stabilizing; however, Ford has experienced difficulties in Europe with pretax losses in 2012 and 2013. 2014 was expecting eight percent growth in sales in Europe, but this would still result in a pretax loss for the year. South America also had a 14 percent decline in automobile sales during this period. Fuel prices are expected to stay below $3 per gallon for 2015. Vehicles are expected to come with “power sockets, OnStar, XM radio, and built in Wi-Fi hotspots” which are added profits for automakers (David & David, 2017, p 530). Self-driving cars are expected to be created by 2017, saving $1.3 trillion annually in the U.S. Additionally, over $500 billion can be saved in productivity by people working while commuting as the driver can take their mind off the road with these vehicles. 22 million vehicles were recalled in 2013 in the U.S. and billion-dollar penalties resulted in 2014. Lower interest rates and easier access to loans has increased both new and used car sales. Wages around the world are minimizing, making manufacturing facilities in the U.S. and Mexico more attractive as it will shrink shipping costs and increases control over operations. Ford planned to invest $6 billion in the U.S. over the next 3 years.
Conducting Case Analysis
When conducting this case analysis, our team decided on Ford Motor Company and then got to work once a leader was chosen and delegated tasks as discussed below.
Assigning Roles and Tasks
The first task was deciding on a company. Hailey gave input as to a first and second choice and others agreed with the first choice, Ford Motor Company. Next, a leader was chosen. Christopher and Mark were unable to be a leader, Jenny was impartial on leading, and Hailey took on the position of leader. Finally, Hailey assigned parts for the first part of the assignment based on the order of responses to the forum post.
Calendar of Events
|7 – Read case analysis – All||8 – Pick team leader – Hailey||9 – Pick company – Ford Motor Company|
Assign tasks – Hailey
Vision, mission, objectives, strategies – Christopher; Recommendations – Mark; Competitors and products – Jenny; Sales and Market conditions – Luis; Action plan – Hailey
|10 – Work on assigned task – All||11 – Assigned tasks due by midnight MT – All||12 – Put tasks into document – Hailey|
Upload document by 7pm MT – Hailey
|13 – Have document corrections/|
approval made by 7pm MT – Hailey
|21 – Read and start Part 2 – All|
Make changes to part 1 based on instructor feedback – All
|22 – Step 1 – Done in Part 1; Step 2,9 – Christopher; Step 3,4,5 – Jenny; Step 6,7 – Luis; Step 8 – Mark; Step 10,11,12 – Hailey||23 – Work on assigned task – All||24 – Christopher, Jenny and Luis – Have task submitted by noon MT for Mark and Hailey to use in their tasks||25 – Work on assigned task – Mark and Hailey||26 – Submit tasks by noon MT – Mark and Hailey|
Put tasks into document – Hailey
Upload document by 7pm MT – Hailey
|27 – Have document corrections/|
approval made by 7pm MT – Hailey
|11 – Read and start Part 3 – All|
Make changes to part 2 based on instructor feedback – All
|12 – Work on assigned task – All||13 – Work on assigned task – All||14 – Work on assigned task – All||15 – Have all tasks submitted by midnight MT – All||16 – Put tasks into document – Hailey|
Upload document by 7pm MT – Hailey
|17 – Have document corrections/|
approval made by 7pm MT – Hailey
David, F. R., & David, F. R. (2017). Strategic Management: A Competitive Advantage Approach, Concepts and Cases (Sixteenth ed.). Boston: Prentice Hall.
Ford (2018). Ford Motor Company 2017 Annual Report
Ford (2019). Strategy and governance. Retrieved on March 12, 2019 from https://corporate.ford.com/microsites/sustainability-report-2017-18/strategy- governance/index.html
Hughes-Cromwick, Ellen. (2011). Ford Motor Company’s Global Electrification Strategy. Business Economics, 46(3), 167. https://doi-org.lopes.idm.oclc.org/10.1057/be.2011.10
Motor Trend (2018). Ford F-150 is the 2018 Motor Trend Truck of the Year. (2018, March 05). Retrieved from https://www.motortrend.com/news/ford-f-150-2018-truck-of-the-year/
SEC (2018). Form 10k: Ford Motor Company. Retrieved on March 12, 2019 from https://corporate.ford.com/microsites/sustainability-report-2017-18/doc/sr17-2017-form-10-k.pdf
Talay, M. B., Calantone, R. J., & Voorhees, C. M. (2014). Coevolutionary Dynamics of Automotive Competition: Product Innovation, Change, and Marketplace Survival. Journal of Product Innovation Management, 31(1), 61–78. https://doi-org.lopes.idm.oclc.org/10.1111/jpim.12080
Thompson, S. J. (2007). Improving the performance of Six Sigma; A case study of the Six Sigma at Ford Motor Company. The University of Bedfordshire. Retrieved March 11, 2019, from https://uobrep.openrepository.com/uobrep/bitstream/10547/134955/1/thompson.pdf