Essay: Ford Motors

Executive Summary
This report presents a brief analysis about the internal environment of Ford Motors which impart strategic nature of the organization. Organization structure of Ford Motor is mechanistic which resist in large changes in the hierarchy and makes difficulty for the innovation. It faced huge challenges from the Japanese and German auto maker’s hence financial performance is not growing rapidly. In the end of the report, few strategies are also suggested.
Introduction
Ford was founded in 1903 by Henry Ford. Ford Motors are the manufacturers around the globe and is considered one of the top Multi National Enterprises. Company has many subsidiaries such as Ford, Mazda, Lincoln, Mercury, and Volvo, which specializes producing small cars, sport utility vehicles, luxury vehicles, tractors and trucks. Its business segment also includes car financing, renting, leasing and many other operations. Company operates in diverse geographies of 122 countries and expanding its wings rapidly. Ford Motors was strongly hit by 2008 crisis and was on the verge of bankruptcy. Ford Motors has it’s headquarter in Dearborn, Michigan, USA.
VISION AND MISSION
Company summarizes their goals and objectives in vision and mission statements. These statements drive the company’ growth strategy and future prospect. Vision statement is the source of inspiration and motivation and Mission statement is more about the present level of performance. From the website of Ford Motor, Vision statement is ‘Delivering Profitable Growth for All’.
Source: Adszilla org
Company has recently (2013) changed its strategy which is reflected in their mission statement: One Team. One Plan. One Goal. Brief about the mission statement.
One Team: In Ford Motors people working together as a global enterprise for automotive leadership. It accounts these people as: Customer, Employee, Investor, Dealer, Union/Council, Supplier, and Community.
One Plan: Restructuring to operate profitably at the current demand and changing model mix;
‘ Accelerate development of new products whichever customers want and value;
‘ Finance the plans and improve balance sheet;
One Goal: It is similar to their vision statement about the delivering profitable growth for all.
VALUE SYSTEM AND GUIDING PRINCIPLES
From The Psychology DNA of Capitalism, value system is the combined morals, ethics, standards, preferences, belief systems and world views that define an individual, group or culture. Ford Motors, business is driven by the innovation, creativity, consumer focus, resourcefulness, and entrepreneurial spirit. Respect for the individual’s contribution inspires the team and company as a whole.
The health and safety of people are paramount along with the environmental responsibility. Integrity is never compromised and we make a positive contribution to society.
Ford Motors define these three basic values which are paramount for the success and growth of the company.
‘ People: People are the source strength and courage. They provide every need for the vision and mission of the company.
‘ Products: Products are the end result of everyone’s efforts. Ultimate goal of products is serve the customers worldwide.
‘ Profits: Profits are the ultimate measure of how efficiently we provide customers with the best products for their needs. Profits are required to survive and grow.
Guiding Principles:
Ford Motors has mainly six guiding principles which helped the company to grow over the period of the time. Brief description about the guiding principles is given below.
‘ Quality comes first: To achieve customer satisfaction the quality of products and services must be highest priority.
‘ Customers are the focus of everything: Every work done by the company keeps customers in mind, providing better products and services than competitors.
‘ Continuous improvement is essential to success: Ford Motors strives for excellence for the products, safety and value, competitiveness, services, human relations and profitability.
‘ Employee involvement is the way of life. Ford Motors believe in one team with mutual trust and respect.
‘ Dealers and suppliers are their partners: Ford Motors maintain mutually beneficial relationships with dealers, suppliers and other business associates.
‘ Integrity is never compromised. Ford Motors strives for the socially responsible and commands respect for its integrity and for its positive contributions to society.
Management Structure
Currently, William C. Ford, Jr. is Executive chairman and Mark Fields is Chief Executive Officer. As per data of 2013, Ford Motors employed 181,000 people. The Board of directors is elected by and responsible to the shareholders. Their duty is to monitor the performance of the CEO and senior management to guarantee shareholder interests are being served. Country operations are headed by country CEO/MD/VP e.g. Nigel Harris is VP of India Ford Motors. Ford Motors follows vertical hierarchy and trying to restructure over the period of time to make the organization more innovative.
Ford being the global company exhibits mechanistic structure. Based on the divisional classification, under the CEO:
‘ Chief Operating Officer (COO)
‘ Chie Technical Officer (CTO)
‘ Chief Financial Officer (CFO)
‘ Vice President (VP)
In general Vice Presidents deals with – Procurement, Legal, Manufacturing, HR, Quality and labour affairs.
The executive vice presidents handle operations related to – Europe, Middle East and Africa, The Americas, Lincoln etc.
The Chief Operating Officer handles – Global automotive operations.
The Chief Technical Officer handle – Engineering and global product development along with Sustainability, environmental, safety engineering
The Chief Finance officer deals controller and treasurer.
Human Resource
Human Resource of Ford Motor focuses to maximize employee performance in service of their employer’s strategic objectives. HR professional partner with teams to build a skilled and motivated team. HR aims towards building of the Ford Motors along the line of the vision and mission. Over the years Ford Motor’s HR is trying to restructure the organization with mentoring and coaching to the employees. HR at Ford Motor’s also responsible for the various training for the staff members.
Brand Equity
Business Knowledge Center defines Brand equity is an intangible asset that depends on associations made by the consumer. Three perspectives from which to view brand equity:-
In terms of Finance, Ford Motor generates billions of dollars revenue every year (revenue of 2013 was US $ 147 billion). To the shareholders, it provides dividend to encourage and benefit them for their contribution. In North and South American countries, Ford has been the most reliable brand with vast business and so many models in the car segment. Its luxury brand like Lincoln and Mazda have been world class in luxury segment. Over the years, it has created brands like Jaguar ‘ Land Rover which later on sold to Indian Conglomerate Tata Sons.
Business Strategy
Wikibooks defines Business strategies as the art, science, and craft of formulating, implementing and evaluating cross-functional decisions that will enable an organization to achieve its long-term objectives.
Simplest model for the analysis of an industry can be done based on the Porter’s 5 forces model.
1. Porter’s 5 forces model analysis for the Ford Motor:
‘ Current rivalry- Ford faces major competition from: General Motors, Toyota, Chrysler, Honda, and Nissan. Ford faced huge challenge is small car segments. Ford has managed to remain competitive in Europe despite heavy threat from the BMW and Audi by designing cars which appeal to European tastes and by increasing the quality ratings of its vehicles.
‘ Bargaining power of Suppliers – At present, Ford wields noteworthy purchasing control over its parts suppliers. In the recent years Ford has tried to lessen the quantity of suppliers it contracts with.
‘ Bargaining power of buyers – The merchant not the car organization bears the expenses of the concessions. Merchants ordinarily fund their buys through Ford Credit. Generally speaking, diseconomies of scale adequately dispose of purchaser power in retail circumstances.
‘ Threat of new entrants – There are critical boundaries to entrance for the car industry due to competitiveness. Considerable altered expenses, the impact of brand names upon deals, and the dealership display all ruin new participants. New technology of Electric Vehicles may be massive challenge in future. If we consider Tesla Motors, Fisker Karma which is taking the market share rapidly may impact on growth and profitability of Ford Motors in coming years.
‘ Threat of substitutes – As oil supplies lessen and fuel costs climb .This has given an extra catalyst to Ford give exceedingly fuel effective vehicles to the purchaser. In year 2014-2015, oil prices sharply deepen from the $100+ to less than $50 per barrel will have positive effect on whole car industry and Ford Motor which makes heavy trucks and cars
2. SWOT Analysis
Strengths
‘ Strong position in US market. Ford is the second largest automaker in US; Ford has great reputation in its home market and strong commercial vehicle sales that generate maximum revenue more than 50% revenue
‘ Significant growth in China. Ford, although not the strongest player in the China has experienced the significant growth in the largest automotive market in the world for the 2012. It grew its sales by 46%, according to Ford press release in 2013.
‘ ECOnetic initiative. Ford’s ECOnetic initiative is an effort to produce highly fuel-efficient engines by improving existing engines rather than new hybrid engines. The result of this initiative is the Ford Fiesta, currently the lowest emitting mass-produced car in Europe and Ford Focus ECOnetic that has better fuel consumption than Toyota Prius. Ford EcoBoost is another initiative to increase fuel efficiency.
‘ Sound financial performance. Ford was the only big US car company that didn’t need the government bailout and was the first to get investment status back. The firm’s profit margin is high compared to competitors with the highest liquidity ratio.
Weaknesses
‘ High cost structure. Although ‘One Ford’ (mission) initiative led to substantial cost reduction, Ford still has a high cost structure, compared to other automobiles manufacturers.
‘ Unprofitable Europe operations. In 2012, Ford lost $1.75 billion in Europe and plans to experience losses in the region until 2015.
Opportunities
‘ Positive attitude towards ‘green’ vehicles. Ford has developed electrification strategy to reduce the carbon dioxide (CO2) emissions from its vehicle and make them more efficient. It introduced EV such as Fusion variants.
‘ Strategic partnerships. Ford has great experience in creating strategic alliances and partnerships with other automotive companies. Due to current competitive pressure, all companies are more likely to enter into such partnerships to drive R&D costs down, access new markets and gain some new skills.
‘ New emission standards. A new wave for stricter regulations on vehicle emission standards would positively affect Ford position in automotive industry.
‘ Increasing fuel prices. Ford’s strong emphasis on engineering fuel-efficient vehicles (Ford Focus) with flexible fuel and in build hybrid engines will pay off due to increasing fuel prices in the world.
Threats
‘ Rising raw material prices. Rising prices for raw metals will lift the costs for auto manufacturers and result in squeezed profits for the companies. This threat is all across the world in auto industry.
‘ Decreasing fuel prices. Some analysts forecast that future fuel prices will drop due to extraction of shale gas. This would negatively affect Ford as it focus on compact fuel-efficient hybrid and flexible fuel cars that are less attractive when the fuel price is low.
‘ Fluctuating exchange rates. Ford, including largest automotive companies, may negatively be affected by fluctuating exchange rates as it earns more than half of its profits outside the US. The profits may be lower due appreciating dollar against other currencies.
‘ Intense competition. Auto industry has intense competition from each other manufacturers.
Performance over the Years
Ford has generated large revenue and net income before tax over the year except the recession time. Ford Motor’s profitability has been questioned many time because of financial parameters over the year. If we see from the below graph of Revenue and EBIT, Ford Motor’s revenue and EBIT haven’t shown significant growth. Also, trend line is declining over the years
Source: Data from Bloomberg Terminal
Further Challenges and Strategy
Auto manufacturers are facing tough time from environment, Government policies, Oil prices, international policies etc. Ford Motor was almost bankrupt in 2008. Global financial crisis left marks on the automobile industry. Recent shutdown of Detroit (Auto manufacturing hub) has extreme bad impact on confidence of auto manufacturer. Few strategies that Ford should focus on for upper and line bottom line growth.
‘ Company should focus on public transport system where it has minimum presence.
‘ In African market, where Toyota is so popular, it should leverage its brand.
‘ Vertical integration for the low cost of car/truck/tractor.
‘ R&D for futuristic vehicles as Kia motors do.
References
1. http://galleryhip.com/ford-headquarters.html, 21/1/2015
2. http://obrreview.com/wp-content/uploads/2012/03/international_growth.jpg, 21/1/2015
3. Portfolio Project: Ford Motor Company Researchomatic .Retrieved 2 , 2012, from http://www.researchomatic.com/Portfolio-Project-Ford-Motor-Company-114410.html
4. Ford Motors Company Researchomatic .Retrieved 10 , 2011, from http://www.researchomatic.com/Ford-Motors-Company-83636.html
5. Annual Report; https://corporate.ford.com/investors/reports-and-filings/monthly-reports.html#/2014, 21/1/2015
6. http://www.adszilla.org/page/view/vision-mission.html
7. http://epub.wu.ac.at/3795/1/Ford__WU-CaseSeries.pdf
8. http://www.slideshare.net/Harsh_BITS/report-on-ford-motor-company-pom
9. A Report on Ford Motor Company, Birla Institute of Technology & Science, (2012-2013)
10. https://in.finance.yahoo.com/echarts?s=F#symbol=F;range=1d
11. http://www.huffingtonpost.com/said-elias-dawlabani/the-psychosocial-dna-of-capitalism_b_3882188.html?ir=India
12. http://en.wikibooks.org/wiki/Business_Strategy