Ramon V.

Del Rosario College of Business

De La Salle University

Ford Motor Company

In partial fulfilment of the requirements for

Strategic Management (BUS835M)

Submitted to:
Dr. Philip E. Juico

Submitted by:
Group 6
Lim, Cyril Jade
Rodriguez, Maryan Jenice
Siapno, Peter John
3rd Term, S.Y. 2015 - 2016
July 12, 2016

Summary of the Case

In April 1994, Ford Motor Company announced to become a single global entity to
ensure success in the next 20 years. Ford planned to merge its North American and
European vehicles business namely Ford Automotive Operations (FAO). This was
designed to unify product development, manufacturing, marketing and sales operations,
as well as eliminate costs in duplication of design, engineering and development.
In 1996, Fords European operations incurred losses of $291 million due to the intensely
competitive European market and shift to cars at the lower end of the market.
By mid-1998, Ford had made substantial progress on restructuring, redesigning and/or
reducing costs in certain processes as reflected in improved profitability.
In April 1999, Ford unveiled a 1 billion agreed bid for UK-based Kwik-Fit, Europes top repair
chain. In addition, they launched a bid for the Royal Automobile Club (RAC) roadside recovery
business. The company also went into insurance by forming a joint venture with Norwich Union
and came up with Ford Insure. Ford also joined the Keswick familys Jardine Motors Group in a
joint-venture retailing business. In the same year, Ford had a new Premier Automotive Group
which brought together the companys four luxury brands (Jaguar, Aston Martin, Volvo and
Lincoln) into a single organization.
In 2000, Fords total company sales increased and established a company record of $170
billion. The company was ranked second in the US market and ranked fifth in the European
market. During the year, Ford purchased the Land Rover business from the BMW Group and AB
Volvos worldwide passenger car business (Volvo Car). Ford also achieved an additional $500
million in total cost reductions in worldwide operations.
In April 2001, Ford reported a 41% slump in profits caused partly by concerns in America over
the safety of its Explorer sports utility vehicle after being linked to more than 170 deaths and
500 injuries in the U.S. In the same period, both Ford and General Motors were under pressure

from increased competition and rising unemployment. The company spent money settling
lawsuits related to the accidents.
In January 2002, Ford announced a new series of incentives to offer $2,500 rebates in response
to the move by GM to offer $2,002 rebates. In addition, the company executed cost cutting
measures to main investment in research and development.
In 2004, Fords market share fell to a new low of 58.5% while Japanese brands reached a new
high of 30.6% and Korean brands climbed to 4.1%. Both Ford and GM attempted to streamline
their operations by closing plants and consolidating manufacturing lines but continued to invest
heavily in new assembly plants and equipment for both manufacturing and product technology.
In 2005, Fords North American operations had been struggling against fierce competition from
Asian Manufacturers, and high labour and raw materials cost. In addition, waves of job cuts had
devastated cities and Detroit -- Ford and GMs home town -- was regarded as the poorest big
US city.
Towards the end of 2006, Ford confirmed plans to cut between 25,000 and 30,000 jobs in North
America and would close 14 factories by 2012 to cut losses. The Ford restructuring, namely
Way Forward, was the second large scale retrenchment since 2002, when 35,000 jobs were
cut.

Rank in the Automobile Industry in 2014

Statement of the Problem

How can Ford Motor Company become the worlds leading manufacturer of automotive
products and services?
Objectives
1. To be able to increase market share and revenue across all regions.
2. To be able to improve results at all automotive operations.
3. To be able to improve product quality and customer satisfaction.
4. To be able to continue delivering exciting new products.
5. To be able to reduce overall costs at all levels.
6. To be able to become competitive in the aggressive automobile industry.
Mission and Vision Statement

Fords vision was to become the worlds leading consumer company for automotive
products and services. In mission terms, it regarded itself as a global family with a proud

heritage passionately committed to providing personal mobility for people around the
word.
Areas of Consideration
Threats, Opportunities, Weaknesses, Strengths
Strengths

Strong brand image

In the automobile industry, Ford is a well-known global company with a strong
brand image that contributes to its product attractiveness and customer loyalty.

Wide range of products targeting all customer classes

Acquisition of Premiere Automotive Group by having the four luxury brands:
Jaguar, Aston Martin, Volvo and Lincoln, Ford is able to maintain its market
share.

Global supply chain

Ford has a global supply chain located in various countries that supports its
operations around the world.

Weaknesses

High cost structure

Fords business operations require high labour and high raw materials cost as
compared to Asian car manufacturers.

Limited network of production facilities

Fords network is very limited especially when compared to its competitors
expansive global network and they also had to further close down various
facilities.

Low quality of car products

Fords Explorer sport utility vehicle was linked to to more than 170 deaths and
500 injuries in the U.S. which resulted to product recalls which made the
company lose its customers.
Opportunities

Growth through product development

Ford can innovate and introduce more products to satisfy the concerns of its
customers.

Strategic partnership and joint ventures

Ford is able to form strong alliances with different companies to further increase
its resources such as Kwik-Fit, Royal Automobile Club (RAC), Norwich Union,
and Jardine Motors Group.

Cutting of jobs and closing of factories

Fords move on firing employees and closing down of factories contributes to
having a negative company image.

Threats

Intensely competitive market

Ford continue to struggle given the intense global competition in the automobile
industry.

Consumer expectations and preferences

Consumers nowadays have varying preferences and demand more innovative
and developed vehicles.

Fluctuating oil prices

Instability in oil prices threatens the sales performance of Ford products. If oil
prices continue to stay high, the global economy can suffer recession which can
result to a negative impact in the automobile industry.

Lawsuits related to accidents

Ford had to spend millions caused by safety of its Explorer sport utility vehicle
after being linked a number of accidents and injuries.

Porters Five Forces

Alternative Course of Actions

ACA1: Migration of costs to low-cost countries
Most of Ford manufacturing sites are located mostly in North America and European
countries. Ford may decide to migrate some of its manufacturing sites from these highcost countries to low-cost countries (LCCs), like China, India, Thailand, and Philippines.
A recent research from Bain & Company found that such moves are netting
manufacturers in Europe and North America cost savings of 20% to 60%. Though it
would entail huge capital expenditure (and humongous retirement and separation pay),
this long-term strategy of transferring costs to LCCs will eventually show up on the
Fords future earnings statements.
When Ford shift costs from LCCs, it may have upper hand to build new markets in the
host country. It may increase its presence in that country as it will provide deeper
knowledge of the market and helped it build connections that will enable it to thrive
there.
In addition, with improved capabilities and highly educated labor available in LCCs, Ford
can target more complex activities, such as engineering, procurement, high valueadded manufacturing and R&D, for migration. However, Ford should also consider the
new risks they face entail considering this opportunity. Such risks outside their control
includes the likes of the Asian economic crisis of the late 1990s or the acts of terrorism
in Southeast Asian countries.

ACA 2: Divestiture of Premier Automotive Group (PAG) to improve its R&D on

higher demand vehicles
Premier Automotive Group (PAG) was an organizational division within the Ford Motor
Company to oversee the business operations of Ford's high-end automotive marques,
which includes Lincoln, Aston Martin, Mercury, Volvo, Jaguar and Land Rover.

Though this strategy, would lose its market share and revenue on high-margin, low
volume luxury cars, the additional free cash they would receive as a result of sale would
be used for the improvement of Fords research and development (R&D) department.
In a market saturated with competition, Ford, in order to be relevant, should increase its
investment towards new innovative technologies as it will benefit the company in its
future for profitability growth.

Gains from increased investment in research and

development will focus on catering the ever-changing societal concerns/attitudes

leading to less pressure from customer bargaining power, particularly on emerging
markets like China and India, Europes and Japans preference of diesel motors and
mini-cars, respectively.
A Cisco report focused on the automobile buying and driving experience showed that
information and technology are crucial throughout the car experience of consumers.
From the car purchasing experiences to service maintenance, consumers are using
more advanced communication technologies (such as mobile, text, telephone, websites,
embedded communications devices) to engage with manufactures and car dealerships.
In addition, report disclosed that consumers are eager to see more transportation
changes in customization, safety, time, and cost savings
Also, R&D may include the development of technological capabilities leading towards
renewable resources to run engines and meeting the stricter government regulations
regarding emissions standards.
ACA 3: Forming alliance with an Asian automotive maker
A strategic alliance occurs when two or more organizations join together to pursue
mutual benefits. It is a cooperation or collaboration which aims for a synergy where
each partner hopes that the benefits from the alliance will be greater than those from
individual efforts.

This strategy permits Ford to pursue an opportunity more quickly which allows Ford to
penetrate the Asian market more easily. This also provides economic advantage by
reducing the costs and risks by distributing them with its partner. Lastly, it creates
create a competitive advantage by the pooling of resources and skills.
However, this strategy may also imposes risks. Implementing and managing a strategic
alliance may be difficult because each alliance partner has a different way of operating.
Though, at start, the alliance requires agreement on vision and goals, but due to
cultural differences and practices, it is more probable than that it may lead to
disagreements down the road on everything from financing to business direction.

Decision Criteria
ACA
1

ACA
2

ACA
3

To be able to increase market share and revenue across all

regions

To be able to improve results at all automotive operations

To be able to improve product quality and customer

satisfaction

To be able to continue delivering exciting new products

To be able to reduce overall costs at all levels

2.6

1.6

1.8

Recommendation
Using the decision criteria, we recommend the ACA 3, since the divestiture of Premier
Automotive Group (PAG) to improve its R&D on higher demand vehicles will help the
achievement of its goal to be a leader in the automotive industry.
Ford Motor Company should also consider its global design strategy which is think global, act
global strategy to migrate to think local, act local strategy. Now, the company involves the
development and production of standardized models with country-specific modifications limited
primarily to what is required to meet local country emission and standards. However, if they will
adapt the think local, act local strategy, they can offer mass customization production that will fit
to the local customers.

Implementation
In order for the abovementioned recommendation to be feasible and to achieve the Fords the below table will be used as a guide.
This proposed action plan will be implemented in a span of five years. Each objective will be subject to monitoring and evaluation.

Monitoring Tools
In line with the achievement of Fords mission, the proposed balanced scorecard will be used as a monitoring tool.