Professional Documents
Culture Documents
0 INTRODUCTION
Ford Motor Company was initiated in 1903 by Henry Ford who was passionate
with engineering and mechanics. Ford's first leap into the world of automotive
mechanics was in 1899 when he founded the Detroit Automobile Company. The
failure of Detroit Automobile Company led to the foundation of Ford Motor
Company on June 16. 1903.
Ford operates in two segments: Automotive and Financing. Products
offered include: Ford, Mercury, Lincoln, Volvo and Jaguar. The company is led by
CEO William Ford Jr. and employs over 246,000 people. It is headquartered in
Dearbon, Michigan and has a 13.8 percent market share of the auto industry as
of February 2009, as compared to 17.5 percent in 2007. The firms major
competitor in the United States is General Motors and Toyota.
Ford manufactures and distributes automobiles across six continents. The
company operates about 108 plants globally and produces such models as Ford,
Lincoln, Mazda, Mercury and Volvo. It has sold its Jaguar, Land Rover, and Aston
Martin businesses.
The company developed and implemented assembly line production by
the release of the Model T in 1909, and produced planes and vehicles for the
Allies in World War II. Ford has operated internationally since 1904, when it
opened a branch in Canada to gain access to Commonwealth markets. For the
first half of the 21st Century, Ford remained the dominant car manufacturer
within the market it had effectively created.
However, in 2006, Ford posted its biggest operating loss to date $12.6
billion. This coincided with continued decline in market share, with the majority
of these losses being captured by Toyota and General Motors. From 1997 to
2007, Fords United States market share plummeted from 25% to 15%. In 2006,
Alan Mulally was hired as CEO and took over a company at the precipice of
failure. Mulally announced a new restructuring plan in 2006 entitled The Way
Forward, designed to better align capacity to demand. At its core, this plan
involved the closure of seven assembly plants and strategic reorientation
towards One Ford. Championed by Mulally, this strategy focuses on creating a
standard Ford personality which is seen and felt within every automobile
produced by the company.
new
way
of
manufacturing
called
mass
production,
2005
3.17
2006
-9.58
2007
7.70
2008
-15.18
2009
-19.12
-29.85
N/A
N/A
N/A
N/A
-41.96
N/A
N/A
N/A
N/A
-39.31
N/A
N/A
N/A
N/A
The overall growth performance of the company does not handled easy. The
company suffers a huge decline of growth over the period of 2008-2009, and still
struggling after that, with a raise of minimum growth and suffer quite
considerable loss.
For the Fords growth ratio, the company plummeted to a declining rate, from
7.7% growth in revenue during the year 2007 to the loss of 15% in 2008 and
further loss in 19% over the year 2009. The severe loss may due to the global
recession of 2007-2009 that hit this United Stated-based automobile company.
Profitability Ratio
Margins %
of Sales
Revenue
COGS
Gross
Margin
SG&A
Operating
Margin
Net Int Inc
2005
2006
2007
2008
2009
100
81.85
100
92.97
100
83.07
100
88.17
100
84.54
18.15
13.92
7.03
11.98
16.93
12.28
11.83
14.65
15.46
11.21
4.23
-3.10
-4.95
-4.45
4.66
-6.83
-2.82
-7.02
-2.39
4.94
& Other
EBT
Margin
1.13
-9.40
-2.17
-9.85
2.56
For the profitability ratio, the company shows a stable yet fluctuate numbers on
the Earning before Tax Margin (EBT Margin).
25
20
15
10
5
0
2005
-5
2006
2007
2008
2009
2010
2011
2012
2013
2014
-10
-15
Gross Margin
Operating Margin
EBT Margin
From the graph depicted above in contrast between Gross Margin, Operating
Margin and EBT Margin, we see a mirroring pattern between them, fluctuates and
rises with mirroring image. We conclude that although the company suffer most
severe loss, the is no clear gap between this margin, and thus predicted that the
company is mostly stable, in performance alone and not economically.
Profitability
Tax Rate %
Net Margin %
Asset
Turnover
Return on
Asset %
Financial
Leverage
Return on
Equity %
Return on
Invested
Capital
Interest
Coverage
2005
N/A
1.14
0.63
2006
N/A
-7.88
0.58
2007
N/A
-1.58
0.62
2008
N/A
-10.03
0.59
2009
2.28
2.30
0.57
0.72
-4.60
-0.98
-5.90
1.32
20.80
N/A
49.62
N/A
N/A
13.96
-265.76
-251.78
N/A
N/A
4.33
-2.96
2.58
N/A
N/A
N/A
N/A
N/A
N/A
N/A
While most of the data are not available for analysis, the companys asset
turnover shown a little decline from 2007 to 2009, due to the problem of global
recession and its impact on entrepreneurship on US soil. Problems of foreclosure,
inflation and production problems may reduce the number of people buying
automobiles or using Fords services, thus reducing the profit that the asset can
generate.
As you can also see, the Return on Asset has also fluctuates during the period of
global recession, from a loss of 0.9% declining to a loss of 5.9%, and finally gain
by 1.32% during the period of 2007-2008-2009 respectively. With the loss
suffered from the previous two years (2007-2008), and the inactive state of the
assets, it is thought that the company incur a loss to the investor and the
stakeholder of the company during the period.
Financial Health
Balance Sheet Item
Total Current Asset
(%)
Total Assets (%)
Total Current
Liabilities (%)
Total Liabilities (%)
Total Stockholders
Equity
2005
2006
2007
2008
74.27
100
65.64
100
35.55
95.19
28.80
101.24
27.49
97.98
50.76
107.93
26.06
104.01
4.81
-1.24
2.02
-7.93
-4.01
63.80
100
2009
67.62
100
77.05
100
From the table above, we can observe the method of financing does the Ford
Company hold true. The main method of financing used by the company mostly
came from liabilities, such as loans. Since the company mainly operates on
liabilities, it is easily influenced by the condition of the market, reflected by the
amount of financing in 2007-2009 period, where they maxed out their financing
not only to cover for the operation of the company, but the equity of the
shareholders.
Liquidity / Financial
Health
Current Ratio
Quick Ratio
Debt/Equity
2005
2.09
1.64
11.91
2006
2.28
2.13
N/A
2007
2008
2.32
2.19
24.92
2009
1.33
1.25
N/A
2.96
2.85
N/A
The liquidity ratio of the company is surprisingly stable for a company that
fluctuates on the earning. Mainly due to the nature of the business as a producer
of American automobile, the company may have numbers of assets available to
be liquefied to cover for the short-term obligation.
Source: http://financials.morningstar.com/ratios/r.html?t=F
5
Know and have passion for our business and our customers
6
others
Communicate clearly, concisely and candidly
Delivery results
Goals
Nonfinancial Goals
Retain spot as global market leader with over 100 plants and 280
000 employees worldwide
Sustain probability and rank 1 US auto company
Enter and increase manufacturing in India to lower plant cost
Build efficiency through better logistics, distribution and control
Succeed at all implementation factors
Build awareness and increase sales of all Ford Hybrid automobiles
7
Financial Goal
Current Strategy
Fords business strategy is embodied in the One Ford plan, which was adopted in
2007 and has guided the company ever since. One Ford expands on the
companys four-point business plan for achieving success globally. The four-point
business plan consists of the following:
I.
II.
III.
IV.
Building on this plan, One Ford encourages focus, teamwork and a single
global approach, aligning employee efforts toward a common definition of
success. It emphasizes the importance of working together as one team to
achieve automotive leadership, which is measured by the satisfaction of all
customers, employees and essential business partners, such as the dealers,
investors, suppliers, unions/councils and the communities in which the company
operate. Ford has defined a set of behaviours that are expected of all employees
to support the One Ford plan.
The goal of One Ford is to create an exciting and viable company delivering
profitable growth for all. They are focused on building:
Great Products, a full family of vehicles small, medium and large; cars,
utilities and trucks with best-in-class quality, fuel efficiency, safety and
smart design;
Strong Business, based on a balanced portfolio of products and global
presence; and
Better World, accomplished through our sustainability strategy.
The company aims to have profitable growth across geographies and product
types.
One Ford has been implemented through the consistent use of processes at
the highest levels of the company for risk assessment, strategy development,
business planning and performance review.
The financial turnaround has been based largely on the companys ability to
deliver high-quality, innovative and desirable products everywhere it operates, in
both mature and rapidly growing markets. Ford had aligned their product
development, manufacturing and marketing organizations worldwide to deliver
the right products to the right markets as efficiently as possible.
In all vehicles and regions, Fords global vehicles showcase its commitment
to sustainability. Technologies like EcoBoost, direct injection of gasoline or
diesel fuel, six-speed transmissions, and hybrid and plug-in hybrid powertrains
deliver choice to drivers everywhere.
Ford is continuing to implement the One Ford plan. But it also Go Further
to deliver ingenious products, make them available to everyone, and serve each
other, our customers and our communities. Go Further is Fords d global brand
promise and their approach as it accelerates ahead.
Current Policy
Ford company policies
1. Human Rights
This is the basic working conditions and corporate responsibility, which forms the
foundation for work within the operations and Ford supply chain. This code
articulates our commitments on key human and labor rights issues.
2. Diversity
This policy are about to increase the diversity in work force. In Ford, all
opportunity are equal in all aspect in business. Provide a broad work
environment in which different ideas, perspectives and beliefs are respected.
Threats
1. The auto manufacturing industry has been crushed of late by the global
credit lines
5. Consumers are concerned about voided Warranties if the Big Three go out
of business
11
6. Many banks are not making car loan which has been detrimental to auto
firms.
12
Weigh
t
Ratin
g
Weighte
d Score
0.08
0.32
0.08
0.24
0.07
0.14
0.08
0.24
0.07
0.21
0.08
0.32
0.09
0.27
0.10
0.4
0.08
0.24
0.09
0.18
0.09
0.09
1.00
2
2
0.18
0.18
2.92
Opportunities
1. Further concession regarding labour costs
13
4. Individual brands have been enjoying the benefits of the good reputation
that they have through the quality makes and services
5. Providing the consumer more variety of car and commercial vehicle
6. Quality to ensure Ford to be more complete and must be consistently
monitored with permit standard
7. Good relation with the employees
8. Safety and better work environment
9. Competitive wages that are assert to recruits a qualified and skilled
employee in all its functions
10.ONE Ford approach
11.Always develops cars on standardized procedure and invested heavily in
alternate fuel source
12.ECOnetic initiative
Weaknesses
1. Brand image was harmed and cause a large cost
2. Lack of design phase and innovative design structures on their new paddle
of cars
3. Management is missing focus on some lines performance
4. Does not have an effective cost management system
5. Ford will manufacture the standard cars which are not able to cope up with
current
market automobile.
6. Has a small market share therefore the sale will decline the sales
Weigh
t
Ratin
g
Weighte
d score
0.04
0.12
0.02
0.05
3
4
0.06
0.20
15
0.04
0.12
0.04
0.16
0.05
0.15
0.11
0.10
0.05
3
3
3
0.33
0.30
0.15
0.03
0.12
0.06
0.06
3
4
0.18
0.24
0.03
0.04
1
2
0.03
0.08
0.10
0.10
0.07
0.07
0.05
0.10
0.06
0.12
1.00
2.63
Strengths
1. The brand is wellknown
in
automobile
industry
and
global
markets
2. Huge marketing and
advertising
3. Greater amount of
customer loyalty
4. Individual brands have
been
enjoying
the
benefits of the good
reputation that they have
through
the
quality
makes and services
5.
Providing
the
consumer more variety of
car
and
commercial
vehicle
6. Quality to ensure Ford
to be more complete and
must
be
consistently
monitored with permit
standard
7. Good relation with the
employees
8. Safety and better work
environment
9. Competitive wages
that are assert to recruits
a qualified and skilled
employee
in
all
its
functions
10. ONE Ford approach
11. Always develops cars
on
standardized
procedure and invested
heavily in alternate fuel
source
12. ECOnetic initiative
Weaknesses
1. Brand image was
harmed and cause a
large cost
2. Lack of design phase
and innovative design
structures on their new
paddle of cars
3.
Management
is
missing focus on some
lines performance
4. Does not have an
effective
cost
management system
5. Ford will manufacture
the standard cars which
are not able to cope up
with current
market automobile.
6. Has a small market
share therefore the sale
will decline the sales
Opportunities
S-O Strategies
W-O Strategies
1. Further concessions
from the United Auto
Workers regarding labour
costs,
in
times
of
hardship
1.
Expand
into
S.
American and European
countries
by
offering
better incentives and
financing (S1, S4, O3, O4
1. Improve operations by
being more lean and
cutting back excessive
executive spending (W3,
W4, W5, O1)
16
O5),
2. Produce more fuel
efficient
and
smaller
models
and
promote
them
with
lower
financing options (S1, S3,
S4, O2, O3, O5)
S-T Strategies
W-T Strategies
1. Improve promotion on 1. Since dealers are not
selected lower priced
models with zero or very
low rate financing to
younger
generation
through Internet using
Facebook, Twitter, and
other
networking
channels (S2, S3, S4, S6,
T1, T4, T6)
2. Offer Free extended
warranty for additional 2
years to gain customer
loyalty and brand image
(S4, S5, T1)
17
18
FP
Conservative
Aggressive
7
6
5
4
3
2
1
CP
IP
-7
-6
-5
-4
-3
-2
-1
-1
-2
-3
-4
-5
-6
-7
Defensive
Competitive
SP
Financial Position (FP)
Return on Investment
Leverage
Liquidity
Working Capital
Cash Flow
1
1
1
1
1
-2
-3
-2
-3
-2
-2.4
-5
-3
-2
-4
-5
-3.8
4
2
4
3
3
3.2
Medium
1.0
Low
0.5
0.0
High +20
Stars
Question Marks
II
Industry
Sales
Growth
Rate
Percent
(percent)
Medium
0
Cash Cows
Dogs
III
IV
Low -20
% of Market Share
18.8
16.9
13.8 (RMSP=0.73)
10.9
10.6
8.0
4.1
3.3
2.4
1.9
0.7
Average
2.0 to 2.99
II
Weak
1.0 to 1.99
III
IV
VI
High
3.0 to
3.99
The EFE
Total
Weighted
Score
Ford Motor
Company
Medium
2.0 to
2.99
VII
VIII
Low
1.0 to
1.99
21
IX
Quadrant II
Strong
Competitive
Position
Quadrant III
1.
2.
3.
4.
5.
6.
7.
Market development
Market penetration
Product development
Forward integration
Backward integration
Horizontal integration
Related diversification
22
Quadrant IV
into other
more
continent
different car
models to
automotiv
cater
e market
distinct
as to
global
increase
preferences
the
market
share
value
Key Factors
Weight
AS
TAS
AS
TAS
0.08
0.24
0.32
0.08
0.24
0.16
0.07
0.14
0.28
0.08
0.07
0.28
0.21
0.08
0.32
0.24
Opportunities
1
carmaker's sustainability
Light vehicle production exceeded the
production of cars and trucks in North
America and Europe by an estimated
16 percent and 14 percent,
respectively
The Big Three began offering lowered
interest rates or zero percent
23
improve brand/sales
Threats
1
0.27
0.36
0.10
0.20
0.40
0.08
0.09
0.09
0.09
plummeted
Unemployment rates exceed 10
percent in many areas in the United
0.09
out of business
Many banks are just not making car
loans
TOTAL
Strengths
1.00
2
3
4
1.69
1.97
0.04
0.16
0.16
0.02
0.05
3
4
0.06
0.20
4
4
0.08
0.20
0.04
0.12
0.12
0.04
0.16
0.12
0.05
0.10
0.15
0.11
0.10
1
1
0.11
0.10
1
1
0.11
0.10
recruits
skilled
0.05
0.10
0.20
0.03
0.12
0.09
7
8
9
qualified
and
large cost
Lack of design phase and innovative
design structures on their new paddle
of cars
Management is missing focus on some
lines performance
Does not have an
management system
Ford will manufacture the standard
effective
cost
0.06
0.06
3
4
0.18
0.24
3
4
0.18
0.24
0.03
0.12
0.09
0.04
0.16
0.12
0.10
0.20
0.30
0.07
0.14
0.14
0.05
0.15
0.05
0.06
0.18
0.24
1.00
2.60
2.69
4.29
4.66
Strategic Recommendations
The following strategic recommendations are designed to address short run and
long run problems faced by the company. Fords management seems to be on
the right track, but recent progress is uncertain and could easily decadent as the
current market and industry conditions was not in the good condition. Thus, the
strategic recommendation would be as follows according to the QSPM analysis.
1 Market share expansion
25
Product differentiation
Regional product differentiation is necessary for Ford to ensure that
products are suitably geared towards distinct global preferences. As we
recognize management was under substantial pressure to affect change,
Ford should never again stake so much of its future on one line of vehicles.
The Ford Fiesta World Car will determine the future of Ford, and while
early reactions and sales are positive Ford should create a high end
equivalent to the Fiesta to capitalize on similar cost savings measures.
Ford has joined the growing hybrid market by introducing Ford
Fusion which is a hybrid model car. Although being late in joining to the
growing hybrid market, Ford has succeeded in manufacturing a vehicle
that compete with the existed hybrid cars as it has similar quality and
price if to be compared with the competitors such as Toyota and Honda.
Despite being still at a disadvantage compared to Toyota in this market, it
has launched a new lineup of vehicles that has an opportunity to redefine
27
8.0 IMPLEMENTATION
For
the
implementation
part
of
the
Ford
Company,
there
are
several
the
company
to
grab
customers
loyalty
to
stay
with
them.
The
28
have enough raw material and huge plant site that can produce more and even
faster than other countries.
29
6. Press release.
On the press release, the Ford Company may have to create the good word of
mouth to attract more customers to use Ford products. A good press not only
attract, but can bring a huge impact to customers by bring the new technology
into Fords products such as implementation the hybrid into Ford product.
30
9. Facilitators acquire.
The Ford Company cannot moving forward successfully without the help from the
financial institutions and the insurance companies. Both of the institutions and
the companies helps in term of giving the choice to customers, best rate of
financing and even the best kind of protection package that suit to the
customers needed. It actually brings back to the company because it increasing
their products sales.
interest and as a result put the company, shareholder and stakeholder at risk. It
is extremely important that these managers work with some code of ethic, which
is enforceable by law to protect stakeholder interest.
The Ford motor company was founded June 16, 1903, when Henry ford and
11 others signed the company articles of incorporation. Their first sale was a
month after they commenced operation. Fords moving assembly line proved
tremendously efficient and this increased the production levels, which outwitted
that of their competitors and making the vehicles more affordable. Henry Ford
competitive strategy focused on the production of cars for the masses, and after
19 years, ford motor company was a force to reckon with in the car industry.
1925 saw the acquisition of Lincoln motor company thus moving into a different
competitor group more luxurious segment, ford motors also created the mercury
division,
Companies are investing enormous amount in make sure that managers
and directors work in the best interest of their shareholders, beyond this fact
they are also expected to the decision that are strategic and beneficial , both in
the short and long term. Currently some managers take decision that seek their
own interest and as a result put the company, shareholder and stakeholder at
risk. It is extremely important that these managers work with some code of ethic,
which is enforceable by law to protect stakeholder interest.
Some macro environmental factor and globalization have driven companies
to pursue growth strategies such as integrating both vertically and horizontally.
Clearly is important to spell out the role of the board, evaluate the logic behind
their corporate strategy evaluate their performance against industry benchmarks
and guidelines. Some general board duties are to ensure that the company
survives continuously, profitable. Maximizes shareholders interest , also the
board must ensure control, be entrepreneurial as they decide the corporate
strategy, define the purpose and scope of business activities they should be
sensitive to short term issue as they plan long term. The board also must
evaluate the performance of the chief executive against goals and strategies,
they should also nominate key personal, structure remuneration, and also ensure
that the company is effectively managed and not to run it.
As a result of the various corporate scandal internationally, Investors
currently focus on two key areas, the reliability of audited account and the factor
32
that drive corporate strategy its effect on their wealth. The element of corporate
governance and area of accountability are to set and review purpose. Strategy,
communicate this to shareholders and to conduct current and future activities in
compliance with legislature, also to give true financial position of the company.
Ford growth and global strategy has been by horizontal integration and in
becoming a global player competing within different competitor groups. Ford
motors are faced with challenges of managing their current financial crisis, which
has caused the sale of Aston martin and force them to shut down their factories
in North America and made 45,000 workers redundant.
An extensive analysis of fords corporate strategy and logic behind the
strategy will be evaluated to determine its effectiveness and whether or not have
really worked in the interest of shareholders, or their strategies were merely
short term and not strategic. It is important to analyse and define the problems
they are facing, explore option available and recommend strategic options that
are suitable, acceptable and feasible.
Ford Motor has achieved its globalization strategy largely through
horizontal
integration
with
acquisitions
and
forward
integration.
Their
33
Balanced Scorecard
Area of Objectives
Measure or Target
Time
expectation
Primary
Responsibilit
1 year
y
Front line
Gross margin
2 years
Finance
On-time deliveries
1 year
Operation
Employee retention
1 year
Human
Customers
Returning
score
customer
-market share
-customer
retention
percentage
-time
taken
to
fulfil
customer requests
Financial
-improve profitability
-operating income
-cost
reduction
in
some areas
-return on investment
Process
-deliver
products
on
time
-defect rates
Learning and Growth
-foster
an
enjoyable
Resource
workplace
-employee
education
10.0 CONCLUSION
34
Ford Motor Company has been the King of innovations in the automobile industry.
Ford R&D and their all-time proven invention of interchangeable parts in moving
assembly lines resulted in phenomenal global expansion for them. They ruled the
global automobile markets of the world. In fact some of the most prestigious
motor brands of the world have been owned by Ford Motor Company.
Ford had witnessed the best times in terms of revenues and profitability
and enjoy a large customer base until today. However, some mistakes such as
Ford 2000 initiative caused permanent damages for which Ford Motor Company
is still paying the price and in this context they completely went the wrong way
and hence could not survive Japanese competitors that were quick to grab Fords
own home market in USA.
As presented earlier in terms of mapping with Michael Porters five forces
theory, Ford Motor Company was critically hit by new entrants in the market.
They indulged deep into debt financing due to financial crisis and hence have
today become largely debt financed company. The highest debt/equity is in 2005
with 11.91%. They had sell Jaguar and Land Rover companies to Tata Motors to
build some cash which, however are peanuts because bad times are continuing.
Moreover, they havent paid dividends for past two years and hence are losing
shareholder confidence.
They have not able to manage their cash flows and have lost substantial
cash in 2008 and rapidly closing extra plant capacities and laying off people to
downsize as per their current market standing. The lowest EBT Margin is in 2008
with -9.85%. Their Net Margin in 2008 is -10.03% and Return on asset in 2008 is
-5.90%.
We strongly recommend the company to implement the strategy that we
have presented in this analysis. Ford Motor Company should take corrective
action as soon as possible to avoid from losing market share to Chrysler LLC who
holds 10.9% of market share in the United States in February 2009.
35
11.0 REFERENCES
Bateman, T. S., Snell, S., A., (2009); Management: Leading and Collaborating in
the Competitive World, Eighth Edition. McGraw-Hill/Irwin: New York, NY.
Fred R. David. (2013). Strategic Management: Concepts and Cases, Fourteenth
Edition. Pearson Education Limited: United Kingdom
Ford Motor Company. (2008). Ford Motor Company - Press Release - As customers
rebuild from hurricane Ike, Ford Motor Credit offers financial relief. Retrieved Oct.
1,
2008,
from
http://media.ford.com/newsroom/release_display.cfm?
release=29045
Ford Motor Company: Cars, Trucks, SUVs, Hybrids, Parts-Ford. (2008). Letter from
Alan
R.
Mulally.
Retrieved
October
3rd,
2008
from
http://www.ford.com/microsites/sustainability-report-2007-08/overview-lettermulally
36