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Ford Motor Company

Strategic Fit of the Firm


Assessment

05/03/2015
To: Terri Bell, Vice President of Strategy
From: Kelly Monegan
CC: Dr. Vincent DeFazio

Strategic Fit of the Firm Assessment

Executive Summary
This strategic Fit Assessment will address modifications to the Strategic
Frame as a result of an in-depth analysis of Ford Motor Companys business
strategy. It will analyze the following key strategic elements and an
evaluation of concerns and opportunities about Fords strategic fit and their
key strategic elements.

Goals & Values: to have a global presence having competitively priced

vehicles that are innovative and different from competition.


Resources & Capabilities: Fords use of innovation and collaboration to

remain different from their competition.


Organizational Structure & Management Systems: One Ford and
Aligned Business Framework called (ABF)

This report will act as a preliminary report regarding Fords internal


environment, issues about how the strategies are applied to products and
market segments that were identified in the Strategic Frame report.

Business Strategy
Ford uses Cost Leadership and Diversification (a hybrid) as their business
strategy. The source of Fords strategy comes from their organizational
capabilities. Ford is a global automobile manufacturer that has production, R
& D, stamping, assembly and distribution facilities in North and South
America, Asia Pacific, Europe, Africa and the Middle East. Fords
internal/external environment, resources and capabilities are all
interconnected and used in a program called One Ford as a way to give
them a global competitive advantage. One advantage from using One Ford

Strategic Fit of the Firm Assessment

was the implementation of product standardization. Product standardization


reduces Fords manufacturing and material costs below their competitors.
Ford also uses an Aligned Business Framework called (ABF). ABF is a
strategic purchasing model between Ford and its suppliers. ABF was
established in 2005 to increase future collaboration, phased-in upfront
payment of development and engineering costs, sourcing and data
transparency.
Fords One Ford program was implemented globally to help the
company operate more efficiently and obtain economies of scale. An
example is, from the internal information gathering from the One Ford
program it was decided that the Ford Focus would be sold globally without
product differentiation. Since the Ford Focus appeals to global markets, the
cost savings in standardization gives them a (lower cost) competitive
advantage in the automobile market.
Another way Ford uses One Ford is in their Value Chain system. By
examining Fords Value chain system, which is made up of Product Planning
and Design, Raw Material Extraction, Logistics and Transportation, Supplier
Parts Manufacturing, Stamping and Assembly, Sales, Service, and End of Life
(vehicle trade-in), it is apparent that this is Fords primary competitive
advantage.
Michael Porter explained that, by exploring different activities, and most
crucially, the linkages between them it is possible to gain a sense of the
organizations main capabilities (Grant, R. M., & Jordan, J., 2012).
Ford has two major categories of business activities within their value
chain: primary activities and support activities. Fords primary activities are
material handling and warehousing, stamping, production and assembly to
make the final product, communication and pricing. Support activities are
purchasing of raw materials, supplies and corporate assets, technological
inputs, human resource management and labor/employee union relations.
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Strategic Fit of the Firm Assessment

Ford analyzes and measures their value chain by using internal cost
analysis, internal differentiation analysis and vertical linkage analysis. I
suspect the preferred measure is the vertical linkage analysis (Ford calls it
materiality analysis which prioritizes the most significant issues in their
value chain) because its the costs among external suppliers and value
evaluated and delivered to customers using surveys and repeat purchasing
data.
Customers reported that they most valued vehicle safety and human
rights affecting communities, investors and consumers where Ford has
production, stamping and assembly facilities.(corporate.ford.com, 2014) The
materiality analysis is used as a guide to understand how they can satisfy
customers, cover costs and realize profit.
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. Its very obvious that
they all interconnect.
An example would be that in 2012 2013, financial issues had been at the
highest level of importance to Ford and external stakeholders per materiality
analyses. But due to Fords strong and consistent improvements in financial
performance and the implementation of programs such as One Ford, ABF
and new technology called EcoBoost the financial issues are no longer the
highest concerns. (corporate.ford.com, 2014)

The Strategic Fit with the Goals and Values of the Firm
Fords goals are defined in a four point business plan. They are as follows:

Aggressively restructure to operate profitably at the current demand


and changing model mix
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Strategic Fit of the Firm Assessment

Accelerate development of new products our customers want and

value
Finance our plan and improve our balance sheet
Work together effectively as one team (corporate.ford.com, 2014)
Fords goals, strategy and business plan all establish direction, create

unity and empower members of the organization to achieve its goals. The
One Ford program is mandatory for all employees to follow. The success
of the program can be seen and felt threw increased sales and profit
sharing. Last year the average hourly employee earned a bonus of
$6,900. For the year 2014, Ford reported global earnings of $3.2 billion.
(Priddle, A., 2015).
Fords values consist of high-quality, fuel-efficient products that make
customers lives better (corporate.ford.com, 2014). I like that Ford values
high quality first because if they build high quality products, it should
increase sales, and please shareholders and stockholders.
By evaluating Fords Sustainability Report, I can understand that
Corporate Social Responsibility (CSR), is very important to them because
it aligns with their business strategies of low cost and differentiation
competitive advantages. By having high quality vehicles and rewarding
employees for their successes, it balances stakeholder and stockholder
needs. Since CSR creates a competitive advantage for firms, which leads
to greater market share, CSR can differentiate a company from its
competitors by engendering consumers and employee goodwill
(McWilliams & Siegel, 2001).

Cost Leadership
Value Chain
Resources
JIT Systems
Inbound Logistics

Capabilities
Quality, Standardization, Distribution, "One Ford"
Operations Management, Scheduling, Order Entry and Stock
keeping
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Strategic Fit of the Firm Assessment


Product Planning
Raw Material
Extraction
Supplier Parts
Manufacturing
Stamping and
Assembly
Sales
Service
End of Life
Diversification
Resources
Collaboration
Technology

Research and Development, Engineering, Design


Steel, Glass and Plastic contracts
Collaboration, ABF
Quality Control, Production Control, Engineering
Marketing, Dealer Support, Ford Credit
Warranties, Customization, Lease and Purchase Programs,
Service Agreements, Parts Sales
Dealer Trade-in, scrap
Capabilities
Update Software such as Azure, Implement New Technology
Wi-Fi, Audio-Systems, Navigation Systems, Fuel Efficiency, EcoFriendly

The Strategic Fit with the Resources and Capabilities of the Firm
The chart below is from the perspective of the competitive strategy,
identifying resources and capabilities that are most aligned with the Cost
Leadership and Diversification Strategies.
Ford can use the value chain approach to identify sources of
profitability and internal costs. An example would be to determine the
portion of the total cost of the product attributable to each value creating
process. A way to examine using differentiation under the value chain
approach would be to identify processes attributed to Fords products verses
its competition. Emphasizing customer values. (http://www.imanet.org)
Ford leverages its resources and capabilities by utilizing programs such as
One Ford and ABF. By striving for product excellence, constant innovation
and engaging employees to convey diverse perspectives, Ford can Go
Further by working together as one team, leveraging skills across the globe,
valuing, including and respecting each other and, in doing so, achieving
profitable growth for all. (corporate.ford.com, 2014)
Ford can most likely sustain their competitive advantage by continuous
improvement, collaboration, their value chain and diversification. Giving

Strategic Fit of the Firm Assessment

coherence to projects to allocate resources and Go Further with their


strategies.
I think there are some issues about the fit of some resources and
capabilities in regards to sustaining their competitive advantage. An example
is a failed partnership with Japanese auto parts supplier, Fujikura Ltd. (Young,
A., 2013)
In 2013 Ford sued Fujikura Ltd. for conspiring to fix the price of electrical
components. Ford said an international cartel of auto parts suppliers forced
the maker of the F-Series pickup truck and the Focus sedan to pay
substantially higher prices for wire harnesses than it would have paid absent
the conspiratorial conduct. (Young, A., 2013)
This type of supplier ethics goes against Fords ABF (Aligned Business
Framework) program which is their strategic purchasing business model that
was launched in 2005. Its a business model between Ford and their
suppliers. The agreement was established to increase future collaboration,
phased-in upfront payment of development, engineering costs, sourcing and
data transparency.
Hopefully the publicity of the lawsuit will prevent future suppliers from
this type of unethical practice. But as profits shrink with more competition
and new entrants this may happen again.
Another issue is how long can existing resources support a larger volume
of business? This is an unknown but I can go from past working experience
and say this, Theres no way to predict how long something will be
sustainable because things always change. New competition, natural
disasters and depletion of resources happens.
A way Ford may be able to sustain their competitive advantage is with an
ongoing value chain analysis. By gathering data, evaluating and
communicating information, the analysis can help managers and give
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Strategic Fit of the Firm Assessment

direction for future programs and decisions to help maintain competitive


advantages.

Organizational Structure & Management Systems


Ford used to use a functional strategy called Total Quality Management
(TQM) to improve product quality. (TQM) focused on improving the quality of
an organizations products and stressed that all organizational value-chain
activities should be directed toward this goal. TQM was good but need to be
improved.
In 2010, Ford realized that TQM had too much waste and switched to
Quality Operating System or (QOS). QOS identifies and corrects problems
within the manufacturing facilities and reduces waste. Ford has also
implemented Six Sigma and QOS in each plant. All plant management,
engineers, production specialists, skilled trades are required to be trained in
Six Sigma and QOS.
To make the process work even better, Ford is working with Wayne
State University in Detroit to aid all UAW Ford reps in becoming Six Sigma
Black Belts. (Scheid, J., 2011) Since Six Sigma's inception, Ford has saved
about $1 billion in waste elimination globally. Year-over-year savings
worldwide was $359 million last year. Moreover, customer satisfaction has
risen five percentage points (Smith, K., 2015) Based on the savings, I think
its safe to say Six Sigma has been successful.
Preliminary Findings and Conclusions
Porter suggests that organizations should re-evaluate their value chain
and concentrate on the operations that they can do best. Other processes
should be out-sourced to specialists. I am in agreement with this especially
since there are experts and Tier 1 suppliers that need to be involved for the
value chain to stay competitive.

Strategic Fit of the Firm Assessment

Six Sigma and One Ford appear to be what is driving the success of
Ford Motor Company. Some threats would be complacency and lack of effort.
From my working experience it seems that everyone is all on-board in the
beginning of new processes but without effectively engaging, managing and
or rewarding team members for their efforts I can see where this system may
become weak and the advantages that were once present faltering.
A strength is engaging the Union Leadership at Wayne University to
train them in the Six Sigma and have the Union to work jointly with
management to make Ford a high quality automotive manufacturer that
makes fuel efficient products and makes customers lives better.
Hello Kelly,
Your assessment of Ford analyzes and synthesizes the fit of the firm and strategic
elements, and argues issues and explains them. It addresses the current allocation
of resources and key capabilities to functions and the value chain, and addresses
current management systems in support of the capabilities that execute the
strategy.
Your writing is both scholarly and business professional. Both indicative of your
expertise communicating at the executive level.
Dr. DeFazio
#1 Strategy-Goal Fit - Distinguished
#2 Strategy-Resources & Capabilities Fit - Distinguished
#3 Structure & Systems Fit with Capabilities - Distinguished
#4 Ethical Issues - Distinguished
#5 Strategic Issues Firms Capabilities, Structures, & Systems Distinguished
#6 Communications Distinguished

Reference:

Priddle, A., (2015) Ford workers to get $6,900 in profit-sharing checks, Referenced
from:

Strategic Fit of the Firm Assessment


http://supplychain.unglobalcompact.org/site/article/50http://www.freep.com/story/m
oney/cars/ford/2015/01/29/ford-fourth-quarter-earnings-profit-sharing/22513967/
http://corporate.ford.com/microsites/sustainability-report-2013-14/blueprintvalue.html
http://www.imanet.org/docs/defaultsource/thought_leadership/management_control
_systems/value_chain_analysis_for_assessing_competitive_advantage.pdf?sfvrsn=2
Scheid, J., (2011) TQM and Ford Motor Company, Referenced from:
http://www.brighthubpm.com/methods-strategies/72279-tqm-and-ford-motorcompany/
Smith, K., (2015) Six Sigma at Ford Revisited, Retrieved from:
http://www.qualitydigest.com/june03/articles/02_article.shtml

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