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Ford Motor Company

Strategic Fit With the


Industry Environment
Assessment

05/10/2015
To: Terri Bell, Vice President of Strategy

From: Kelly Monegan


CC: Dr. Vincent DeFazio

Executive Summary
This summary addresses the modifications to the strategic frame
based on an analysis of the fit of Fords strategy with its industry
environment. It also includes an analysis of Fords competition and strategic
position, identifies concerns and opportunities regarding suppliers,
customers and competitors. This analysis will enable Ford to evaluate its
structure and management systems and how they affect strategic
positioning. Such as how strategies are applied to product lines and market
segments.

Business Strategy
Fords business strategy is simple, its the One Ford vision that
consists of One Team, One Plan and One Goal. The goals and objectives
all relate to assuring a desired future state. The goals put forth by Fords CEO
are limited and clear. The goals provide a high-level focus for the entire
company, not individual pieces.
Fords business strategy validates the strategic frame because their
frames geographical strategy is that it competes globally and the vertical

scope is products that can be purchased by dealerships, vehicle financing


and their vertically integrated supply chain system. Clearly indicating that
each business sector has an impact on the entire organization.
When CEO Alan Mulally was hired in 2006 he had three objectives.
They were: to return the company to profitability, achieve a competitive
share price and dividend, and restore the brand identity to its previously-held
position. Mulally and his executive staff used One Ford to implement Fords
generic corporate strategy, product scope, and the value chain. They are as
follows:

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 cant 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.
(Henderson, R., 2013)
Competitive Analysis

Below are Fords PEST factors and (Porter's 5-Forces Model). Both show
how factors and forces impact Ford and the automotive industry.

Political: Ford did not use government bailout money unlike Chrysler
and General Motors, instead theyve taken the position to weather the
economic downturns on their own. This can be used as an opportunity
because they can say, We didnt need a bailout, because we are
better positioned As a negative, this year is end of contract with the
UAW. This can result in possible strikes, plant closures and a slowdown

in production.
Economic: The economic downturn has made Ford become more
efficient and start using QOS (Quality Operating Systems) to develop,
measure and continuously improve processes. This is an opportunity to
eliminate defects and limit warranty spending. As a concern, oil prices
keep fluctuating, theres political unrest in the Middle East, worldwide
economic uncertainty and unemployment can be a huge problem for

Fords ability to sustain market share and profits.


Sociocultural: Ford has taken a leadership role in advancing vehicle 2
vehicle (V2V) technology. V2V technology has the potential to decrease
accidents, ease traffic congestion and contribute to more efficient
driving patterns. This is a diversification competitive advantage that

Ford has gained by changing their product scope.


Technological: Ford has begun production of the C-MAX Energi Plug-In
Hybrid. Its a performance car with a state-of-the-art lithium-ion battery
and an electric motor with a gasoline engine. This is also a
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diversification competitive advantage that Ford has utilized by


changing their product scope.

Competitive forces (Porter's 5-Forces Model)


Threat of New Entry: Low. A new entrant must have a lot of cash to
mass produce and computer with an established distribution system

and compete with R & D.


Power of Suppliers: Medium. There are too many suppliers that are

needed to manufacture a vehicle to have much power.


Power of Buyers: High. Ford has to meet customer expectations and

trends or theyll lose business to competitors.


Threat of Substitute: High. Too many other modes of transportation

available and competition is high.


Intensity of Rivalry: High. Competitors have the same goals of
producing high quality profitable vehicles that meet customer
expectations. (Grant, R. M., & Jordan, J., 2012)

I think the greatest treat is the outcome of the contract that will expire
in September, 2015. The impact is considerably high. The employee
compensation can become a strength or an issue depending on how it
impacts Fords workforce, suppliers, manufacturing facilities and
competition.
Higher wages mean less profits unless the higher costs are passed
onto consumers. Lower wages or a strike will impact the local economies
in each labor market. A strike could close suppliers doors and local

businesses would be affected because people wouldnt be going out for


lunch or after dinner to restaurants and stores.
How Ford treats their executives/salary employees verses hourly
employees is a double edged sword and the impact could hinder their
reputation, product quality and the future health of the company.
Fortunately, Fiat Chrysler Automobiles and General Motors are all in
negotiations at the same time. The outcome of the negotiations could be
beneficial to implants such as Toyota, Kia and Nissan.
The good news is that Ford is in the best strategic position because
since 2007, their value chain has been reacting to the challenges of today.
Knowing that there will be new challenges to confront tomorrow and in the
following days. Their strategic orientation focuses on managing todays
problems, anticipating future events and planning to successfully address
them as they arise.
Ive personally negotiated 2 local contracts, walked a picket line once and
worked thru six national contracts. Ive seen the impact they cause such as;
wage freezes, changes in benefits, plant closures, new facilities, transfer of
operations, logistics, new vehicle launches, engineering changes,
outsourcing and the impact of all of the small pieces that no one really thinks
about that affect the whole.
Some other observations that I think will be Key to Fords strategy,
dubbed One Ford, is the consolidation of the Ford product portfolio. I think
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Ford is now focusing on Technological and Economic Strategies by


limiting products that can be built and sold around the world and creating
economies of scale.
An example is the Ford Focus. Its being marketed worldwide. By doing
this, Ford can can make up for the lower margins made on vehicles like the
Focus, which have traditionally been a drag on the companys balance
sheet, according to Fords Chief Financial Officer Lewis Booth. (Eisenstein, P.,
2011)

The Strategic Position and Direction of Ford


When comparing Fords competition, I believe they have the most
sustainable corporate strategy. Because theyve anticipated emerging trends
and challenges and have prepared to meet them. Examples below show
percentages of profits and how Fords business segments are integrated and
aligned for their geographical strategy of competing globally and their
vertical scope of products.
FORD MOTOR COMPANY SEGMENTS

Ford
Ford
Ford
Ford
Ford

Credit
North America
South America
Europe
Asia Pacific/Africa

%
Profit
6.46
58.95
4.45
20.35
3.11
7

Ford PAG

6.68

Ford operates through two business sectors: Automotive and Financial


Services. The Automotive sector operates through four business segments:
North America, South America, Europe and Asia Pacific Africa.

North America segment is engaged in the sale of Ford and


Lincoln brand vehicles, service parts and accessories in North

America.
South America segment is engaged in the sale of Ford brand
vehicles and related service parts and accessories in South

America.
Europe segment is engaged in the sale of Ford brand vehicles
and related service parts and accessories in Europe, Turkey and

Russia.
Asia Pacific /Africa segment includes primarily the sale of Ford
brand vehicles and related service parts and accessories in the
Asia Pacific region and South Africa.

The Financial Services sector operates through two segments: Ford


Credit and Other Financial Services.

Ford Credit segment provides vehicle related financing, leasing,


and insurance through the company's wholly owned subsidiary

Ford Motor Credit Co. LLC.


Other Financial Services segment includes a variety of
businesses, including holding companies and real estate.
(money.cnn.com)

Fords Buyer's Purchase Criteria and Basis of Competition (Key


Success Factors).

Product Innovation
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Brand Image
Personalized Customer Involvement
Clever Advertising

Because Rivalry becomes more volatile and unpredictable as the


diversity of competitors increases in terms of visions, strategic intents,
objectives, strategies, resources, and countries of origin, (Thompson, A.,
Peteraf, M., Gamble, J., Strictland, A. J., 2013) Ford uses their key success
factors as tools to maintain their business strategies, market share and
profits.

Conclusion
Ford should always consider repositioning their resources and
capabilities (product scope, vertical scope, or geographical scope) in
anticipation of changes in industry structural factors or competitive forces.
Since no one can accurately predict the future, its best for Ford to continue
with their One Ford vision because it positions them best for future
challenges.
Also, by using QOS, within their organizational structure and
management system, Ford has continued to find ways to reduce costs by
outsourcing activities and or collaborating with suppliers and other
manufacturers.

References:
Eisenstein, P., (2011, May 6) With New Strategy, Ford Aims at the Top,
Referenced from: http://www.nbcnews.com/id/43391595/ns/businessthe_driver_seat/t/new-strategy-ford-aims-top/#.VU-tAflViko

Henderson, R., (2013, March 13) Lessons in Strategy from Ford Motor
Company. Referenced from:

http://www.alliance1.org/magazine/issue2-

2013/lessons-strategy-ford-motor-company
http://money.cnn.com/quote/profile/profile.html?symb=F
Grant, R. M., & Jordan, J. (2012). Foundations of strategy. West Sussex, UK:
Wiley & Sons.
http://corporate.ford.com/microsites/sustainability-report-2013-14/blueprintstrategy.html
Thompson, A., Peteraf, M., Gamble, J., Strictland, A. J., (2013) Crafting &
Executing Strategy: The Quest for Competitive Advantage: Concepts and
Cases Referenced from:
http://w3.salemstate.edu/~edesmarais/courses/470general/semesters/Archiv
ed%20semesters/Fall%202010/3.%20Evaluating%20a%20Company%27s
%20External%20Environment.pdf

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