STRATEGIES FORMULATED BY FORD INDIA (1995 -2021)

Figure: Strategies formulated (1996-2021)

JOINT VENTURE (1995)

Ford has started its Indian journey by signing a 50-50 joint-venture (JV) partnership
with Mahindra (Mahindra Ford India Ltd) in the mid-90s. Then Ford was the second largest
automotive company in the world. Modified European Escort, launched in late 1996, was the
first offering of JV in India. It used to come to India in completely-knocked-down (CKD)
form, and later was assembled at Mahindra’s Nashik plant. JV and CKD operation was
presumed as a low-risk way to enter and explore the newly opened Indian market, post
liberalization of the economy in the early 90s.

EXPORT ORIENTATION (1998)

By March 1998, Ford had increased its stake to 72%, changed its name to Ford India
Private Limited, and then increased its stake further. As a next strategic step, Ford will build
a new plant in Malaimalai Nagar, Chengalpet district, 35 km from Madras (now Chennai),
with an annual production capacity of INR 1 million, which in the future he can expand to
250,000 units. We decided to build a factory. The first car to leave the factory was the Icon.
The Ikon is based on the European Fiesta Mark IV hatchback, designed and engineered in
Germany and the UK specifically for India. At first localization he was 70%, gradually he
increased to 90%. Ford India has also started exporting Ikon CKD kits without engines to
South Africa, Brazil and Mexico. Initially he 1.8 liter diesel engine, 1.3 liter and he 1.6 liter
petrol engine were imported from England, South Africa and Spain.

And by 2002, 65% of India's car exports were Ford Ikon. Export-oriented factories to some
extent de-risked product performance in the local market and enhanced cost synergies
through economies of scale. Several other manufacturers have also started their
manufacturing operations in India using the Export Lead Works template. Hyundai Kia, GM,
Nissan Renault Alliance, Volkswagen.

Localization has become an important means of keeping costs down for Ford and Indian
automakers due to the structure of import tariffs and the development of foreign exchange
(which can be a disadvantage today). Therefore, from 2002, they started sourcing gasoline
engines and gearboxes from Hindustan Motors Halol factory in Gujarat.

With Ikon's success, Ford continued this strategy of choosing European cars, modifying them
in small European R&D facilities, and launching them in India. Similarly, the Fiesta Gen-1
was Ford's next breakthrough in India. However, the diesel engine and transmission were
imported and the petrol engine was assembled by his Hindustan engine for the Fiesta Gen-1
at the Halol factory.

Ford, on the other hand, launched the Belgian-made Mondeo in 2001, but it was unsuccessful
due to its high price. 2004 saw the launch of two new Ford India products. Global Everest
(called Endeavor in India), a true blue SUV and a Fusion (first crossover) were launched via
his CKD route, the former being a blockbuster (at the time). A complete disappointment as
later it is overpriced.

In 2005, Mahindra sold the remaining stake in the company, ending the partnership for
good.Media reports indicated that Mahindra gained a lot of insight and was later used to
develop the Scorpio. I learned manufacturing practices.In fact, in 2002 the Scorpio borrowed
certain parts from a Ford Escort parts box. In return, Ford got to know the Indian market to
expand its dealer network.
HIGH VOLUME GAME (2009)

Without a hatchback model in the portfolio, Ford’s presence was limited to 35% of
the total Indian PV market size, then. With the turn of the decade, Toyota (with Etios twins)
and Honda (with Brio and Amaze) too has had similar plans. Tried and tested strategy came
to rescue – European Fiesta mark V platform was re-used to build Indian Figo gen-1. 1.4L
TDCi diesel engine won the heart of Indian buyers again.

Over 80% of Figo gen-1 sold were with a diesel heart. Suddenly Ford’s volume jumped multi
fold, due to competitive pricing, but the poor petrol engine was a laggard and limited its
overall volume potential. Though 2013 facelift failed to bring sustainability to the nameplate,
and volumes dipped thereon.

‘ONE FORD’ STARTEGY (2011)

In 2011, Ford launched the all-new Fiesta gen-2 (India). This is the result of Ford's
then-global CEO Alan Murally's highly publicized strategic direction. The intention was to
manufacture a global product with very high backend cost synergies and sell it in multiple
markets around the world.

The Indian-spec Fiesta gen-1 was demoted and renamed 'Classic'. The Fiesta gen-2 did not
sell well. Only 8,300 specimens found homes inhabited by Indian families. But the "One
Ford" strategy wasn't all bad. As its next product, the Ecosport, developed in Brazil for the
global market, has launched a whole new segment in India - the sub 4m monocoque
crossover (SUV). The first crossover to go below 4 meters was Premier Auto Limited's
(PAL) Rio (badged Chinese Zotai T200) in 2009. A CKD kit made in China was imported
and assembled at PAL's Pune factory.

DEEP LOCALIZATION AND ALL NEW MANUFACTURING PLANT

In 2011, to gain a foothold in the Indian market, Ford decided to go deep localization,
benchmarking market leader Multi's most profitable products, the Swift and Dzire. To this
end, Ford built a completely new plant in his Sanand Gujarat with an annual capacity of
240,000 units and a total investment of $1 billion. The plant was to become the world's hub
for small car manufacturing. Well, the product performance results announced in 2015 were
so dire that Ford had to shut down all his operations in India by 2021.

LOCAL PARTNERSHIP (2016)

Under an initiative called the Emerging Market Operating Model (EMOM), Ford cut
manufacturing costs by 40 percent and is developing more vehicles locally as it moves away
from its “One Ford” plan, which restricted its ability to be cost-competitive and agile in a
fast-growing market.

As part of EMOM, Ford is deepening ties with Mahindra to build passenger vehicles in India,
which could also involve sales in other emerging markets. Over the past two decades, Ford
has invested $2 billion in India, which has become a major growth area for car
manufacturers. Car sales rose 8 percent to 3.3 million last year and India is set to become the
world’s third-largest market by 2020 with sales of over 5 million cars, according to
consultant IHS Markit.

But global car companies have mostly struggled to woo India’s cost-conscious buyers and are
now under pressure from investors to focus on profitable markets and technologies like
electric and autonomous vehicles.

The success of India’s top carmaker Maruti Suzuki, a unit of Suzuki Motor Corp which sells
one in every two cars in the country, has been built on having a wide range of products, low
prices, a vast dealership network and an autonomous local team that can quickly react to
market changes.

Its nearest competitor is Hyundai Motor Co with a 17 percent market share, which has had
better success than some of its American and European rivals like General Motors, Fiat
Chrysler and Volkswagen AG.

Ford is at a considerable distance from the leaders in the market, but sold more than 90,000
vehicles in the last fiscal year and exported twice the number. Two years ago, Ford’s annual
sales in India were less than 80,000 and it exported about 110,000 vehicles, industry data
showed.
Ford’s local market strategy gives greater autonomy to the local management team, and will
contribute to a global restructuring plan to save $11 billion over the next few years by cutting
costs, forming partnerships and investing in new technologies.

The strategy already seems to be giving Ford a cautious beginning to better sales in India.
Ford India made a profit of 5.26 billion rupees ($72 million) in the fiscal year that ended on
March 31 compared with a loss of 5.21 billion rupees a year ago, according to a regulatory
filing.

In contrast, General Motors decided to cut its losses and stopped selling cars in India last year
while Volkswagen took a backseat, handing over strategy for the country to its sister-
company Skoda.

Ford has developed a low-cost dealership format which is smaller in size and has fewer cars
on display. It costs half of the 50-60 million rupees Ford usually spends on things like
showroom inventory, spare parts and the sales force when setting up a dealership.

It has opened more than 100 such dealerships, especially in smaller towns and cities to further
its reach, Mehrotra said. It would earlier cost Ford about three times the amount a domestic
carmaker would spend on a product upgrade because Ford India needs to pay a fee, or
royalty, to the parent, said a source aware of the changes.

Under EMOM, Ford India developed more products in-house, making it more responsive to
market changes and reducing the royalty fee, which boosted its profits.

RETRENCHMENT STRATEGY (2021)

The Ford Motor decided to retrench from India and transfer operations to Mahindra &
Mahindra along with its assets. It’s not exactly a liquidation strategy as it still holds 49% of
the business along with voting rights.

The retrenchment strategy has its challenges especially when the market a company is
retrenching from is a lucrative and growing market. The organization is losing out on an
opportunity to be part of such a market.
Retrenchment from a market might give the global brand name bad press and can affect the
global business. Companies might also receive bad publicity due to the firing of people or
mass layoffs as part of its retrenchment strategy.

SUGGESTIONS

Ford is facing several challenges in its domestic market in the US. Sourcing new leadership
to drive the transformation will ensure its longevity. The Global Aggregation strategy will
give it a competitive edge in the automotive industry. There are large opportunities available
in the electric car market and Ford should exploit these. The political scene in the US is very
uncertain and Ford needs to look at improving its foreign presence to maintain its revenue.
Opportunities also exist in the recreational market for SUV's and Ford with the
implementation of the Global Aggregation strategy will be well poised to dominate this
market. The current political tensions and uncertainty around China will have a negative
impact on Ford's ambition to grow its market share in that region. However, the Indian
subcontinent is one of the fastest-growing markets in the developing nations. Ford can seek
strategic partnerships with local manufacturers such as Mahindra to expand its footprint.