The Ford Motors Strategies w2ty

CASE ANALYSIS ON FORD MOTOR COMPANY Name: Ajay Prabhakar Letha Madonna ID: 220020 Subject: Business Policy Subject Code: MGT_4950_WB_58_01_2014_10 Date of Submission: 28-10-2013

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The Ford Motor Company Brief Profile The Ford Motor Company is an American multinational automaker headquartered in Dearborn, Michigan, a suburb of Detroit. It was founded by Henry Ford and incorporated on June 16, 1903. The company sells automobiles and commercial vehicles under the Ford brand and luxury cars under the Lincoln brand. In the past it has also produced heavy trucks, tractors and automotive components. Ford owns small stakes in Mazda of Japan and Aston Martin of the United Kingdom. It is listed on the New York Stock Exchange and is controlled by the Ford family, although they have minority ownership. Ford Motor Company was founded in 1903 by Henry Ford in Detroit, MI. Not only did Ford revolutionize the development of the automobile as a product, he is also the visionary behind the idea of mass production. Ford's ability to make automobiles affordable for the masses is cited as a driving force behind both the automobile industry and the creation of a middle class in America. Ford introduced methods for large-scale manufacturing of cars and large-scale management of an industrial workforce using elaborately engineered manufacturing sequences typified by moving assembly lines; by 1914 these methods were known around the world as Fordism. Ford's former UK subsidiaries Jaguar and Land Rover, acquired in 1989 and 2000 respectively, were sold to Tata Motors in March 2008. Ford owned the Swedish automaker Volvo from 1999 to 2010. In 2011, Ford discontinued the Mercury brand, under which it had marketed entry-level luxury cars in the United States, Canada, Mexico, and the Middle East since 1938.

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Ford is the second-largest U.S.-based automaker and the fifth-largest in the world based on 2010 vehicle sales. At the end of 2010, Ford was the fifth largest automaker in Europe. Ford is the eighth-ranked overall American-based company in the 2010 Fortune 500 list, based on global revenues in 2009 of $118.3 billion. In 2008, Ford produced 5.532 million automobiles and employed about 213,000 employees at around 90 plants and facilities worldwide. History Henry Ford's first attempt at a car company under his own name was the Henry Ford Company on November 3, 1901, which became the Cadillac Motor Company on August 22, 1902, after Ford left with the rights to his name. The Ford Motor Company was launched in a converted factory in 1903 with $28,000 in cash from twelve investors, most notably John and Horace Dodge (who would later found their own car company). During its early years, the company produced just a few cars a day at its factory on Mack Avenue in Detroit, Michigan. Groups of two or three men worked on each car, assembling it from parts made mostly by supplier companies contracting for Ford. Within a decade the company would lead the world in the expansion and refinement of the assembly line concept; and Ford soon brought much of the part production in-house in a vertical integration that seemed a better path for the era. Henry Ford was 39 years old when he founded the Ford Motor Company, which would go on to become one of the world's largest and most profitable companies, as well as being one to survive the Great Depression. As one of the largest family-controlled companies in the world, the Ford Motor Company has been in continuous family control for over 100 years.

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After the first modern automobile was already created in the year 1886 by German inventor Carl Benz (Benz Patent-Motorwagen), more efficient production methods were needed to make the automobile affordable for the middle-class; which Ford contributed to, for instance by introducing the first moving assembly line in 1913. In 1908 Ford introduced the first engine with a removable cylinder head, in the Model T. In 1930, Ford introduced the Model A, the first car with safety glass in the windshield. Ford launched the first low priced V8 engine powered car in 1932. Ford offered the Lifeguard safety package from 1956, which included such innovations as a standard deep-dish steering wheel, optional front, and, for the first time in a car, rear seatbelts, and an optional padded dash. Ford introduced child-proof door locks into its products in 1957, and in the same year offered the first retractable hardtop on a mass-produced six-seater car. The Ford Mustang was introduced in 1964. In 1965 Ford introduced the seat belt reminder light. With the 1980s, Ford introduced several highly successful vehicles around the world. During the 1980s, Ford began using the advertising slogan, "Have you driven a Ford, lately?" to introduce new customers to their brand and make their vehicles appear more modern. In 1990 and 1994 respectively, Ford also acquired Jaguar Cars and Aston Martin. During the mid- to late 1990s, Ford continued to sell large numbers of vehicles, in a booming American economy with a soaring stock market and low fuel prices. With the dawn of the new century, legacy healthcare costs, higher fuel prices, and a faltering economy led to falling market shares, declining sales, and diminished profit margins.

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Most of the corporate profits came from financing consumer automobile loans through Ford Motor Credit Company. Mission and Vision Statement One Ford Mission and Vision Ford Motor Company is a worldwide leader in automotive and automotive-related products and services as well as in newer industries such as aerospace, communications and financial services. Our mission is to improve continually our products and services to meet our customers’ needs, allowing us to prosper as a business and to provide a reasonable return for our stockholders, the owners of our business. ONE Ford expands on the company’s four-point business plan for achieving success globally. It encourages focus, teamwork and a single global approach, aligning employee efforts toward a common definition of success and optimizing their collective strengths worldwide. The elements of ONE Ford are: One Team People working together as a lean, global enterprise for automotive leadership, as measured by: 

Customer, Employee, Dealer, Investor, Supplier, Union/Council, and Community Satisfaction

One Plan 

Aggressively restructure to operate profitably at the current demand and

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changing model mix Accelerate development of new products our customers want and value Finance our plan and improve our balance sheet Work together effectively as one team 5

One Goal 

An exciting viable Ford delivering profitable growth for all.

Values How do the company accomplish the mission is as important as the mission itself. Fundamental to success for the company are these basic values: 

People: Our people are the source of our strength. They provide our corporate intelligence and determine our reputation and vitality. Involvement and teamwork are our

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core human values. Products: Our products are the end result of our efforts, and they should be the best in

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serving our customers worldwide. As our products are viewed, so are we viewed. Profits: Profits are the ultimate measure of how efficiently we provide customers with

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the best products for their needs. Profits are required to survive and grow. Guiding Principles Quality comes first: To achieve customer satisfaction the quality of our products and

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services must be our number one priority. Customers are the focus of everything we do. Our work must be done with our

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customers in mind, providing better products and services than our competition. Continuous improvement is essential to our success. We must strive for excellence in everything we do: in our products, in their safety and value, and in our services, our

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human relations, our competitiveness and our profitability Employee involvement is our way of life. We are a team. We must treat each other with

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trust and respect. Dealers and suppliers are our partners. The Company must maintain mutually beneficial relationships with dealers, suppliers and our other business associates.

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Integrity is never compromised. The conduct of our Company worldwide must be pursued in a manner that is socially responsible and commands respect for its integrity and for its positive contributions to society. Our doors are open to men and women alike without discrimination and without regard to ethnic origin or personal beliefs.

SWOT Matrix

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Strengths and Weaknesses Within the past year, Ford’s reputation has been plagued by extensive recalls. “When you have three, four or five recalls, it creates doubts about the vehicles,” said automotive analyst Greg Salchow. Beyond this main internal issue, Ford has also endured external problems like the falling economy and the Sept. 11 attacks, forcing them to make internal changes to make up for slumping sales. Here we have provided a list of internal strengths and weaknesses, organized by public or major issue that focus on what the company has done internally, either as a result of external issues or as common procedure. Strengths 8

Community Relations Ford has made numerous efforts to target the surrounding community. A breast cancer awareness campaign was created in which celebrities are enlisted to tell how breast cancer has affected them. The company takes strides to protect the environment demonstrated by the development of an electric vehicle and efforts to increase fuel efficiency. Since the Sept. 11 attacks on America, Ford and its employees have made extensive donations and held fundraisers and events by Ford in response. Employee Relations Ford provides incentives for employees to work at high quality levels. For example, the “Thumbie” award is given to employees who demonstrate a high personal commitment to their customers and community. Higher wages are also characteristic of the company. Hourly workers typically have wages from $19-$26 an hour, while skilled trade workers make $21-$30 an hour. For the last 20 years, Ford has issued no involuntary layoffs or dismissals of salaried employees, although this year may be an exception. The company also created a Family Service and Learning Center program for Ford workers, family and retirees, offering health classes, after-school tutoring and trips for seniors. Investor Relations Ford maintains a high level of communication with its investors and potential investors. The company accurately and honestly reports earnings and losses in ways easily accessible by the public via company Web site, mailings, and print materials by request.

Weaknesses 9

Investor Relations As a result of the recessing economy, investors are worried about slumping sales and profits, a possible dividend cut, a cash position that has fallen to $4 billion from $15 in a year, and now, the possibility of a credit downgrade. The Ford Board of Directors cut dividends on class B and common stock for the first time in a decade. Due to increasing expenditures from recalls and severance packages shareholders aren’t getting as big of a return on their investments in the company. Employee Relations Ford is using a “voluntary separation program” to lay off employees, and plans amount to the elimination of about 10 percent of Ford’s salaried workforce in North America (4,000-5,000 workers). According to workers at Ford’s world headquarters in Dearborn, Michigan, no one knew anything about the job cuts until an announcement was made on the radio, although people had been expecting layoffs. A plan to cut all overtime, excluding plants mandated by union contracts or plants producing a highly popular product, has also been enforced. At the end of Sept 2001, three Ford assembly plants were working scheduled overtime. Last year, and into spring 2001, ten plants were working scheduled overtime. Customer Relations Ford has recalled almost two million vehicles in 2001, with the Firestone tire recalls alone costing the company more than $3 billion. Because such safety precautions are necessary,

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customers currently have little confidence in Ford products. The company notifies owners of recalls via first-class mail, but this will not protect customers with unsafe vehicles from harm. Listed in the annual report are a number of ways Ford targets their customers. The company provides a Customer Insight Center to train employees to respond to the needs of customers, interact with customers at race events, and talk with customers “face-to-face at auto shows and at dealerships.” Ford does nothing else to show their customers how important they really are. Opportunities and Threats Opportunities Since the terrorist attacks on Sept. 11, patriotism has surged through the United States. Many consumers will seek American products, benefiting companies such as Ford. In an effort to stimulate buyers to combat decreasing sales, Ford implemented a zero percent financing plan through Oct. 2001 with their “Ford Drives America” campaign. Investors will be encouraged by this plan’s opportunity to increase profits and revenue, leading to greater investor trust in the company. The attacks also gave Ford the chance to show their commitment to America by donating millions of dollars towards relief efforts. In addition, both investors and customers will have more confidence in the company because of the new CEO William Clay Ford. For the company’s publics, a new face in higher management could mean changes within the company on all levels. Bill Ford has plans to invest more time in improving and restructuring relationships inside and out of the company. His leadership provides the company with an opportunity to implement new ideas, leading to increased stability and confidence within the company.

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Threats With the knowledge of the safety issues surrounding Firestone tires on Ford Explorers, consumers have been scared to purchase Ford vehicles. Customers have become critical of Ford’s aging products and instead are buying cars and trucks made by foreign competitors, as well as those of General Motors. The recession and the war discourage people from investing in the luxury of new cars, thus Ford’s appeal has lessened significantly, threatening the entire company. Current layoffs due to lower production levels will continue to raise concerns among employees about their job security. Layoffs are also eminent because of the loss of revenue due to Firestone tire recalls and recalls on millions of other vehicles, lawsuits surrounding the cases, and the recession. Like most companies facing a challenging market, Ford will have a tough time pleasing investors. Also, Ford’s publics currently question the overall reputation of the company, especially concerning safety issues, which can devalue Ford stock. The increase of global market presence from other automobile companies will cause Ford to lose market share in the automobile industry.

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M

EFE Matrix

Ratios 13

IFE Matrix

BCG Matrix 14

IE Matrix

SPACE Matrix

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Grand Strategy Matrix

QSPM 16

Financial Position In 2010, Ford earned a net profit of $6.6 billion and reduced its debt from $33.6 billion to $14.5 billion lowering interest payments by $1 billion following its 2009 net profit of $2.7 billion. In the U.S., the F-Series was the best-selling vehicle for 2010. Ford sold 528,349 FSeries trucks during the year, a 27.7% increase over 2009, out of a total sales of 1.9 million vehicles, or every one out of four vehicles Ford sold. Trucks sales s for a big slice of Ford's profits, according to USA Today. Ford’s realignment also included the sale of its wholly owned subsidiary, Hertz Rent-a-Car to a private equity group for $15 billion in cash and debt acquisition. The sale was completed on December 22, 2005. A 50–50 t venture with Mahindra & Mahindra of India, called Mahindra Ford India, Limited (MIFL), ended with Ford buying out Mahindra's remaining stake in the company in 2005. Ford had previously upped its stake to 72% in 1998. Year over year, Ford Motor Co. has seen net income shrink from $20.2B USD to $5.7B USD despite relatively flat revenues. A contributing factor has been the increase in percentage of sales devoted to cost of goods sold, SGA expenses and income tax expenses. 17

Annual Sales Sales numbers Calendar Year

US sales

1999

4,163,369

2000

4,202,820

2001

3,971,364

2002

3,623,709

2003

3,483,719

2004

3,331,676

2005

3,153,875

2006

2,901,090

2007

2,507,366

2008

1,988,376

2009

1,620,888

2010

1,935,462

2011

2,143,101

Marketing and Distribution The organization of Ford is using Differentiated Strategy in their businesses. This strategy is to targets two or more segments by developing marketing mix for each segment. Ford Motor Company designed to appeal to many different types of consumers and to satisfy many different needs in the form of economy cars, sports cars, luxury cars, station wagons, vans, trucks, and so on. Now the latest cars that the company produce is FORD FIESTA, this car are focus on young people and ladies. 18

Segmentation variables Segmentation variables used by FORD Motor Company are Geographic segmentation, Demographic segmentation, Psychographic segmentation and Behavioral segmentation. Ford automobile is mainly segmented to the United Kingdom automobile market industry but it also segmented to others country like Malaysia, Indonesia and so on to various basis which are the parts of above mentioned factors. The latest model FORD FIESTA is using Demographic Variables which is age, gender and income. It is because this model is focus for young people, ladies and average income consumer. In the other hand, FORD FIESTA also uses behaviorist variables with the benefit for safety and fuel efficiency.

Market Segment Profiles FORD Motor Company profile offers a comprehensive analysis for the organization; it is business segments, and competitors. It used to analyze the business and marketing strategies adopted by the company, and to gain a competitive edge in the market industry. This profile also evaluates the strengths of the company and the opportunities present in the market. It is also involves analysis of the company at three levels - segments, organizational structure and ownership composition. Beside this, both business and geographic segments are analyzed along with their recent financial performance. It further discusses the major subsidiaries of the company and the recent merger & acquisitions. Most of the consumer for FORD Motor Company may choose our product because the organization has the needs of the consumers. Evaluate Relevant Market Segment 19

The FORD organization is selling FORD FEISTA for a reasonable price. It is because this product has the necessary that are good for the consumers such as save fuel. This product is increasing the sale potential for the company. It also determines the market industry that the Ford Motor Company is segment to the right position for the product that the consumers are likely to buy this automobile for their daily use. Target Markets FORD Motor Company designed as the new model FORD FIESTA is target to young people and ladies. The young people that the organization focuses on 18-25years old which are teenagers and ladies with average income can affordable to purchase the cars. And this kind of model is suitable for those unmarried people because this car only have 5 seats that are not for a big size family. Therefore, this automobile size is average so it is suitable for those consumers that like middle size car. Industry Factors and Competitors FORD view environmental forces as uncontrollable and maintain ive and reactive to the environment. In the automobile market, FORD is facing many competitors like TOYOTA, HONDA and NISSAN. Competitors are affecting the FORD Company by reducing the sales rate. In this situation, FORD is producing a new model car which is FORD FIESTA this season of car is focus to attract young people and ladies. Not only that but FORD Motor Company also focused on creating a strong business plan that produce great products that contribute to this new generation. As part of organization plan, the company may continue to press forward to globalize automobiles platforms that can be adapted to meet specific regional needs. Flexible

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manufacturing capabilities allow us to bring products to market with greater speed and efficiency than ever before. The marketers define the FORD companies as an oligopoly competition in the market structure because in the market there are many substitutes available but only one company offerings for another. Product, Promotion, Pricing and Distribution Strategies Product Strategies The Ford classified the brand names of midsize cars, elegant and generous by research techniques. Ford uses blue oval that Ford branding which determines price and value. The Ford oval is proud and historic symbol for Ford Motor Company and one of the most recognized trademarks in the world. Promotion strategies Ford has use difference promotional strategies to maintain their marketing edge over the competitors. Ford is the one of the top 20th of the highest media spend companies list. During the recession, the Ford starting to cut cost to reduce their promotional budget and cancelled all the promotion advertising. Ford organized a lot of campaigns and tied up with the long lasting sponsorships and regular to conducted sport events. The ments and logos with attractive strap line, amazing designs and ment are giving edge over competitor’s activities. Ford promotional strategy have classifications 2 type of promotion such as above the line promotion and below the line promotion. Pricing Strategies

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Ford has implemented their own pricing strategies which are more demand or market based pricing oriented. Ford has use new strategies call “Blue Tag” is expanding from its large car to the small car range. The price reductions are between 6%-15% on the Ford Fiesta. The Ford Motor Company is setting two types of price which is price skimming and penetration pricing in the market industry. Distribution Strategies For the marketing channel selection, Ford Motor Company uses the channel of producers, dealers and consumers. Vehicles that are manufactured at Ford factories are distributed to dealers through road or train transportation. Consumers can buy the cars directly at the dealer’s show room.

Conclusion Limitation The Ford product is expensive and only available for higher income people. The design of car is not creative enough when compared to other competitor car models. Recommendation Ford is successful when it sells cars. Therefore, appealing to our customers and potential customers is the most important factor in reaching the short-term goal of selling more cars. As a result, investors will see a greater return—which makes them happy. Employees will feel more secure in their jobs, because Ford’s productivity will increase. In order to reach these goals:

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Objective: To establish a positive reputation of safety, honesty, and customer service in the eyes of all publics for Ford within the next six months while increasing earnings by 25 cents per share by the fourth quarter of 2002. Strategy: To create the “Changing the Face of Ford” campaign to replace Ford’s current damaged reputation with a new, positive image. Identify William Clay Ford as the new face emphasizing change within the company while maintaining the company’s founding ideals. Tactics: 

Ford will establish a t team with of Firestone and an independent research firm to reevaluate the manufacturing process to ensure that only safe vehicles leave the plants.

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Conduct surveys and focus groups with several thousand Ford owners to determine customer satisfaction and concerns.

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Promote hotlines and online help services to answer questions regarding recalls and changes within the company.

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When the research is complete, hold a nationally televised forum in Detroit. This forum, facilitated by the new CEO, will unveil the research and answer any questions or concerns.

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Create two series of commercials, one featuring the new CEO in association with the “Changing the Face of Ford” campaign, and the other emphasizing the patriotic spirit of the country, promoting cars that are red, white, and blue.

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Renovate the Ford.com Web site to make it -friendly, enticing and direct. Include all components of the “Changing the Face of Ford” campaign, as well as a “Ford Yearbook,” introducing the changes in high-level management.

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Institute a policy that features a free car wash and a free American flag to any Ford owner who returns to their dealership for a check up.

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Assign Ford officials to /visit the victims and their families to accept responsibility for the faulty vehicles, and offer condolences and compensation. Conclusion Ford Motor Company is considered one of the largest automobile makers throughout the

world. This multinational and multimillion dollar company has expanded its production of truck, cars globally and is considered one of the largest financial contributors in marketing vehicles like Ford, Mercury, Lincoln, etc. This automaker is transforming some of the truck manufacture plants to make smaller and fuel efficient vehicles. This s the consumer high demand for smaller and better fuel efficient cars. In 2010 Ford financial gains was very profitable something Ford did not anticipated to happened that soon. This success is credited to Fords strong new products and for the many investments this automaker has made on making improvement in the United States and in all of their global operations. Ford has gain global recognition by staying focus to its product and by delivering to the customer a full range of vehicles with outstanding fuel economy. Technology has not remained standstill with this automobile maker. They continue to develop new affordable automobiles with new advance technology that has captivated the suppliers, dealers, shareholders, employees and the communities. References: 24

Banham, R. (2002). The Ford century: Ford Motor Company and the innovations that shaped the world. San Diego, Calif: Tehabi Books. Geyer, G. (2011). Ford Motor Company: The greatest corporate turnaround in U.S. history. S.l.: Gerhard Geyer. Hoffman, B. G. (2012). American icon: Alan Mulally and the fight to save Ford Motor Company. New York: Crown Business. Kreipke, R. C. (2008). Ford Motor Company, the first 100 years: A chronological picture history of Ford Motor Company over the first century. Evansville, IN: M.T. Pub. Co., Inc. Langworth, R. M., & Consumer guide (1987). The complete history of Ford Motor Company. New York: Beekman House.

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