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STRATEGIC AUDIT FOR THE FORD CORPORATION

Marketing

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2007

SEPT. 18, 2005

Ford Motor Company

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1. Introduction Nowadays, it is easy for us to see brands like Sony, McDonalds, Nike, or Calvin Klein in the nearest malls, shopping centers, or across the sidewalk in our neighborhoods. Interestingly, for most of us that have become those brands fans should not be worry if we have to travel abroad since the brands have evolved from local to global brands and are available anywhere in the world. In contrast, there are some brands that we used to know very well but suddenly they disappear or are eliminated in their respective markets. Brands like Puma in sport shoes industry, Fiat in automobiles or USA.net in free email services are examples of slowing down and thus worst brands in the world. These conditions, while they are natural and common within todays fierce competition, are the results of effectiveness of marketing plan including the incurred marketing strategy. Therefore, in business, it is common to find out companies that loose their market share and no longer have their dominance in their industry. At one occasion, these companies were predicted to last forever and help shape the future. Then, reality became very different from general predictions. British Motorcycle Industry, for instance, was historically known to be the creator of the firsts motorcycles and pioneer in motorcycle industry. During the golden age, people think that the industry would grow forever and generate unlimited innovations for the global markets. However, in the beginning of the 20th century, the industry simply loses their existence. Concerning the rise and fall of a company, this paper will elaborate a `Strategic Audit` for the Ford Corporation. The audit composes of eight sections such as current company

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performance, external and internal environment analysis, strategic alternatives and implementation.

2. Current Situation 2.1. Current performance There are various factors contributors to the current downtrend of the Ford Motor Company such as the high employees benefits and pension costs, the increasing costs of fuels, and the decreasing business of manufacturing, and competitors better competitive advantages, to name a few . However, the most recognized performance is inefficiency. It is said that Fords factories in North America are operating at only 86% capacity compared to 107% of their competition, Toyota Motor Corp. Management of Ford Motor Company stated that the downsizing program is crucial to address the excess capacity (Jani, 2002). In addition, Ford Motor Company also experiences declining sales in its main market, North America. In 2005, the company sold 3.4 millions of vehicles but a year later the sales declined into 3 millions of sold vehicles. In terms of revenue, in 2005, the company generated $153.5 billions and declined into $143.3 billions in 2006. The declining performance is due to the lose market share in SUV and small truck lines, which have taken most of the companys investment and resulted in minimum returns (Ford Motor Company, 2007a).

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2.2.

Strategic Posture 2.2.1. Objectives

The company has one main objective, which is to focus on automotive business. However, this objective is considerably general since managements can justify their actions to expand into other business as long as it relates to automotive. One obvious action is to provide financial services that contribute about 10.5 percent of the companys revenue, previously represent 13 percent of revenue in 2005 (Ford Motor Company, 2007a).

2.2.2.

Strategies

Realizing the fierce competition in automotive industry, the company develops some anticipation actions to deal with the possible declining sales in North America market. In order to address market trends, the company decides to rely on four key principles/strategies as following: Conduct restructuring in order to help Ford Motor Company to earn profits even in markets that sell lower volumes of vehicles Improve product development and eliminating any complexity/difficulties in manufacturing Generating and maintaining enough liquidity to finance the two most priority Encouraging teamwork and accountability throughout the companys operation

(Ford Motor Company, 2007a).

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3. Strategic Managers 3.1. Board of Directors Ford Company is considerably a fat organization, composing of 12 persons in Board of Directors and more than twenty executives. One similar characteristic that Fords board of directors has is their background in which at top level, most of directors have vast experience in financial and retail services. This fact highlights that Ford has problems and managing their fund as justified in their strategies (see section 2.2.3) and it also explains why the company also serve financial service in addition to their core business in automotive manufacturing. John R. H. Bond (65 years old) previously served as non-executive chairman at HSBC; Stephen G. Butler (59) used to be Chief Executive Officer at KPMG, LLP; Irvine O. Hockaday, Jr. used to be Chief Executive Officer, Hallmark Cards, Inc., and many others (Ford Motor Company, 2007a).

3.2.

Top Managements In addition to board of directors, the company also has vast top managements, composing

of Executive Officers Group and a number of Vice Presidents. According to 2006 Annual Report, we see that the companys top managements structure are distributed into regional group in which each region (North America, Europe etc) has one Group Vice President to address each market needs. Fransisco N Codina, for instance, becomes the Group Vice President at North America. Meanwhile, John Flemming is the Group Vice President at Europe (Ford Motor Company, 2007a). In addition to regional model, the company also has some top managements each is responsible for particular brand. John G. Parker, for example, is the Group Vice President for

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Mazda; Lewis K Booth is Executive Vice President for Ford luxury lines: Volvo, Jaguar, and Land Rover (Ford Motor Company, 2007a).

4. External Environment (EFAS table is in Excel format) 5. Internal Environment (IFAS table is in Excel format) 6. Analysis of Strategic Factors (SFAS table is in Excel format)

7. Strategic Alternatives & Recommended Strategy: Economics of Scale According to several resources, Fords general strategy is to meet a single goal, economics of scale. Within the strategy, the company strives for producing vehicles in the most efficient cost structure and in the most timely manner and sell as many as they can.

Pros Fords production and pricing strategy are mostly directed to achieve faster and cheaper ways to build cars for market demands. It helps the company to build affordable vehicles for customers The strategy helps the company finds the production time cycle from 36 to 24 months and reducing platforms from 24 to 16. Therefore, the strategy increases time-efficiency (Smith, 1996). Cons Customers are segmented. Therefore, developing affordable price is not heavily true since customers would think there is a sacrifice to build cheap cars like security, accessories etc.

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7.1.

Recommended Strategy Despite being known as efficient producer of cheaper cars in the historical days, there are

considerable developments within Fords strategic directions today. For instance, the company is now also aiming to be the market leader in the luxury car segment. The Luxury division is established in 1999 to coordinate their luxury brands like Jaguar, land Rover, Volvo and Lincoln. Managers of the company believed that by coordinating these brands, the company is in the right position to become a major force in the luxury segment (Banks, 2001). Although, the company has successfully made brand extension for their luxury cars segments, still there are several recommendations to the Ford Motor Company to help increase the companys conditions. Change of Leadership According to some automotive analysts, Ford requires a new style of leadership. Besides providing means to escape the old image, a change of leadership will also send a good message toward stakeholders, especially within these hard times (the declining market share in some key markets) Design a New Market Image The company is known as producer of high quality and luxury cars with premium prices. The current image is about stability and elegance. It is about a legacy that is maintained and hoped to provide customers with the same amount of satisfaction. This image is losing to futuristic and younger designs of cars that offer both quality and distinction. Ford needs to find it new and better programs to demonstrate the new product image. Introduce Hybrid Cars: Maintaining Fords Brand Name

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Currently, there are many kind hybrid cars from various brands such as Toyota, Honda and many others. Some examples of famous hybrid cars include the Toyota Prius, Honda Civic Hybrid (HCH), and the Honda Insight. Where are Fords cars? Although hybrid cars would not saleable within the next one year, still Ford should develop its prototype to tell customers they cope with the trend.

8. Implementation Table 1 No 1 Implementation Plan Activities Customer Gathering (Product Presentation and Retention 3 Program) Visiting Universities (Looking for talents and conducting research agreement) 4 5 Press Release Website Updates 30,000 20,000 40,000 Budgets (USD) 2,000,000 Time Schedule (2008) Detroit Motor Show Tokyo Motor Show Frankfurt Motor Show MIT; March 2007 Texas University; July 2007 Harvard University; Sept 2007

Stanford University; Dec 2007 monthly Any time

9. Evaluation & Control Table 2 No 1 2 Evaluation and Control Plan Communication Activities Customer Gathering (Product Presentation and Retention Program) Visiting Universities (Looking for talents and conducting research Measure for Evaluation/Control The number of Audiences at the Customer Gathering (minimum 500 people per seminar-day) Participants/Audience Feedbacks

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agreement) 3 4 Press Release Website Updates

on product improvement Post-seminar Sales Record/Achievement News Distributed into Media Web sites updated once a changes/new activities occur

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Reference:

Banks, Cliff. (2001). Special Dealership are Part of Fords Luxury Strategy. Retrieved September 17, 2007 from http://wardsdealer.com/ar/auto_special_dealerships_part/index.html Cadrain, Diane. (2002) State Programs offer Alternative to Layoffs. Retrieved September 18, 2007 from http://www.stateline.org/live/ViewPage.action? siteNodeId=136&languageId=1&contentId=14794 Carty, Sharon Silke. (2005). GM, Ford Try to Alter Pricing Strategy. Retrieved September 17, 2007 from http://www.usatoday.com/money/autos/search Ford Motor Company. (2006). Retrieved September 17, 2007 from http://en.wikipedia.org/wiki/Ford_Motor_Company Hoffman, Bryce G. (2005). Slumping Ford Picks Employee Brains. Retrieved September 18, 2007 from http://www.detnews.com/2005/autosinsider/0510/25/C01-359823.htm Jani, Pranav. Sustar, Lee. (2002). Ford Makes Worker Pay. Retrieved September 17, 2007 from http://www.socialistworker.org/2002-1/390/390_12_FordLayoffs.shtml Kotler, Philip. (2002). Marketing Management. New Jersey: Prentice Hall Inc. International Labor Organization. (2006). Labor Market Trends and Globalization Impact on Them. Retrieved September 17, 2007 from http://www.itcilo.it/english/actrav/telearn/global/ilo/seura/mains.htm Ford Motor Company. (2007a). 2006 Annual Report.

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---. (2007b). GLOBAL MANUFACTURING STRATEGY GIVES FORD COMPETITIVE ADVANTAGE. Retrieved September 18, 2007 from http://media.ford.com/article_display.cfm?article_id=13633 ---. (2006). Partners and Suppliers. Retrieved September 18, 2007 from http://www.ford.com/en/company/about/partnersAndSuppliers.htm Smith, David C. (1996). How Fords new Brand Strategy Works. Retrieved September 18, 2007 from http://wardsautoworld.com/ar/search Tierney, Christine. (2005). Ford Pays Workers to Sell Cars. Retrieved September 18, 2007 from www.detnews.com/2005/autosinsider/ 0506/17/C01-218739.htm Work Sharing Unemployment Insurance Program. 2005, EDD Fact Sheet -State of California

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