Professional Documents
Culture Documents
Profitability Ratios
Based on the results(See Appendix 1), the recession has really taken its
toll on Ford motors. The general decline in nits profitability ratios suggest
that the company has not been performing well in recent times. In actual
fact, the company's financial conditions began to decline since 2005
which was even before the recession. The negative earnings per share
(EPS), profit margin, return on assets raises an alarm. The low profitability
is also responsible for the low fixed and total assets turnover ratios.
Return on equity however shows a slight improvement which can also be
a result of the recent re-engineering process by the company.
Liquidity Ratios
The company's Current ratio is low but not alarming (see financial
statement in Appendix 1), the general expectation is for current assets to
cover current liabilities at company's quick ratio of 1.26 is quite good as it
suggests that the company will be able to meet its urgent current
liabilities as they fall due even without having to dispose of inventories.
Inventory turnover appears to have been steady within the same range
over the last 5 years and receivables turnover poses no problem. The
company is relatively liquid despite its low profitability
Solvency Ratios
1 http://www.conceptcarz.com/view/makeHistory/50,17272/Ford_History.aspx
Accessed 11 November, 2009
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The company's low profitability(See Apendix 1) also poses a problem in
the Times interest earned as there is a possibility that the company might
not be able to generate enough profits to meet up with repayment of
interests on loans. This could be an issue as failure to repay interest
and/or capital leaves the company vulnerable to bankruptcy procedure by
its creditors. The trend over the last 3 years also shows a serious decline
in some years. The company also appears to be highly geared from the
other solvency ratios and this goes further to confirm initial worries.
Operating expenses and other expenses are on the high side and there is
need to try and achieve a reduction to improve profitability. The company
should conduct an intensive process audit to identify and eradicate
unnecessary processes. This will help to reduce labour hour and eliminate
wastage during production.
Prior to the economic crisis of 2007, Ford has become one of the most
globalized of the automakers with research and design facilities as well as
manufacturers and marketing operations around the world (Albaum et al,
2004;p).With its advantages in low costing, high volume, and availability
of parts for service, it was able to rapidly expand its market (Leontiades
2000; p22-23).
Economic Environment
2
Doole and Lowe (2008) emphasizes how important it is for Global
managers to understand the economic development in countries where it
wants to expand to and how they impact on the overall strategy of the
Firm (Doole &Lowe, 2008;pp 12-13). This knowledge is important at a
world level in terms of the world trading infrastructure such as world
institutions and trade agreements developed to foster international trade,
at a regional level in terms of regional trade integration and at a
country/market level (Doole &Lowe, 2008; pp 12-13).
b) Technological Challenges
2 www.kpmg.com/.../Momentum-KPMG-Auto-Executive-Survey-2009.pdf
[accessed 19 October, 2009
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Going Global
3 http://www.deloitte.com/dtt/article/0,1002,sid%3D26675%26cid%3D88472,00.html
4 http://www.deloitte.com/assets/Dcom-SouthAfrica/Local
%20Assets/Documents/ZA_Industries_Manufacturing_yearbook.pdf accessed 6
November, 2009
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Ford’s marketing-seeking strategy in foreign locations was as a result of
the company’s goal to expand sales, which it derived from the mass
production rationale ( Studer-Noguez,2002, p50).
Ford also preferred exporting cars and parts from the parent company to
foreign markets to manufacturing abroad, so as to avoid such investment
risks as political changes, different work cultures, and currency
adjustments. Ford was also willing to open small assembly plants, as they
did not have major cost disadvantages owing to the labour-intensive
character of assembly (Doz ,1980:75).
STAKEHOLDER OR SHAREHOLDERS?
Due to the effects of Globalization, there has been an increased need for
firms to incorporate the concerns and needs of stakeholder groups within
the organization’s strategic outlook or otherwise risk losing societal
legitimacy (Werther&Chandler, 2006; pp25-54).
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community and society and thus benefit their reputation and brand”.
While, Hopkins (2001) views CSR as “concern with treating the
stakeholders of the firm ethically or in a responsible manner ‘Ethically or
responsible’ means treating stakeholders in a manner deemed
acceptable” (p. 17).
6
http://extranet.isnie.org/uploads/isnie2009/polishchuk.doc
[accessed 4 November, 2009]
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The recent past has reinforced two fundamental beliefs. The first is that
the business of business is precisely to maximize its shareholder value by
increasing its intrinsic value. The second is that maximizing value involves
managing both performance in the short term and the company's long-
term health (Dobbs, 2005).
Ford Motor has long held the view that to be successful it also needs to be
environmentally and socially responsible (Sustainability Report, 2009).
This vision of sustainability was further emphasised by Bill Ford in 2005.
Mr Ford identified that sustainability was going to be a long term strategic
priority and there was a clear business case for reducing resource use and
developing innovative "green" and safer products and technologies.
8 https://www.mckinseyquarterly.com/ghost.aspx?
ID=/Corporate_Finance/Valuation/Managing_value_and_performance_1595#
[accessed 26 October, 2009]
9 http://www.article13.com/A13_ContentList.asp?strAction=GetPublication&PNID=1336
[accessed 10 November. 2009]
10 www.ford.com/go/sustainability
[accessed 6 November, 2009]
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Recommended Strategic Priorities
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enough to respond to the different and unknown effects of globalization. The
automobile industry is survival of the fittest and most innovative. Ford also needs to
optimize its supply chain to align the interests of all the firms in its supply chain with
its own. Because each player make the most out of its own interests, and therefore
optimizes the supply chain’s performance.
The second priority concerns product innovation. The product plan should be
broadened even beyond the Electric/Hybrid cars. The simple fact is that Ford, with its
high-cost infrastructure, burdensome union contracts, and short-sighted focus on
pushing gas-guzzling SUVs, is on the verge of losing its fresh ideas which Henry Ford
was known for. More nimble competitors from China, Japan—even South Korea—are
eating Ford's lunch in emerging markets and in the United States. The bottom line is
that car buyers, wherever they live, now want a reliable, low-cost, fuel-efficient
vehicle and they don't care where it's made. That's why the Japanese companies
sales in the United States keeps rising while Ford—the home team—saw U.S. sales
decline.
Ford's turnaround must also include pushing more of its IT, manufacturing, and
support operations into other markets that promise big growth. Beyond India, there
is Eastern Europe, Africa and China. Also centralizing help-desk operations in
countries where they want to set up production wouldn't just make economic sense;
it would be a smart marketing move. Consumers are more likely to buy a car the
company is indigenous. Ford's extensive operations in Canada are part of the reason
it has great brand loyalty there and that’s why Canadians don't see Ford as a
"foreign" automaker, even though it is (Stugner- Noguez, 2002).
BIBLIOGRAPHY
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Polishchuk, L.(2009) Corporate Social Responsibility vs. Government Regulation:
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