Strategy Management essay
Ford Motor Company has been known for the outstanding “Model T” and the innovations that allowed assembling cars at low cost and high reliability. The company represented the first dominant design which set a standard for other auto manufacturers to imitate.
In accordance with the information presented in the case study, the structure of the auto industry was barely changed between 1990 and 2008: the financial indexes of the largest automakers that included Ford were similar. But the markets haven’t remained static and the major demand was demonstrated by the growing markets of the following regions: Asia, Eastern Europe and Latin America. The threat of the new entrants from these local markets has been significantly increased as well. It is stated in the case study that the rise of new markets and the search of the low production costs has led to the shifts in global distribution. But at the same time the producers from Germany, Japan and the US (including Ford) have managed to keep their leadership position despite the high costs of production because of the power of production agglomeration effects.
The analysis of the Ford’s Case study shows the major emphasis in the growth strategy that proved to be most successful for Ford’s up to 2009 was made on internalization and aggressive globalization. It meant the global market presence, entrance to the new markets with a focus on localization of cars with customized features suitable for the expectations of the local customers of a country.
Worldwide outsourcing, just-in-time scheduling, shifting manufacturing to lower cost locations and collaborations are known as the cost reduction strategies that were adopted by Ford in the previous years. Integration and outsourcing of materials, components and services helped to achieve lower costs and increased flexibility. According to the discussed case, at the end of 1990s Ford spun off the component manufacturing business to Visteon. The relationships with suppliers have changed to the US model of contract-based relationships. The leading suppliers have managed to receive the increasing responsibility of technological development.
It could be mentioned that the acquisitions mergers, joint ventures, and alliances (such as Ford and Mazda; Ford and Volvo; Ford and Land Rover, indicated in the case study) played a significant part in the success of this company because obviously this cooperation allowed Ford to be more financially sound than its closest competitors for a long time.
In addition, it is known that the sharing of the costs through the participation in alliances that involved joint technology and product development helped Ford to gain the competitive advantages. According to the information obtained from the case study, the cost of the new product development serves as the largest driver of mergers and acquisitions in the auto industry. The sharing of these costs has resulted in the increased collaboration and joint ventures of Ford with other auto manufacturers. The collaboration included joint venture plants, technology alliances, component supply agreements and joint marketing agreements. The idea was to share systems in areas that customers can’t feel, and differentiate the brands in areas they can. Overall, as it is stated in the case, the auto industry has consolidated through various mergers and acquisitions.
The important trends that have significantly influenced Ford’s competitive position were the design convergence and the major technological development – the introduction of hybrid cars. But, according to the case study Ford adopted this trend and planned to introduce electric commercial vans in 2010 and electric automobiles in 2011. Therefore, it becomes clear that Ford Motor Company apparently pays substantial attention to technological affordances, new developments and innovation in order to improve its market position (in accordance with Porter’s Five Forces theory (1980).
As for the value chain introduced by Michael Porter (1980), it is important to analyze the relatively recent activities of the company and the way they influenced Ford’s competitive position. One of the Ford’s strategic losses was the choice to concentrate the attention on centralization. The absolute centralization in the globalization strategies was made the key element of the company’s strategy. The centralization policy which has resulted in the cost cutting but at the same time has led to the losses of the company on its key markets. In the recent years Ford’s management was concentrated on cutting costs and reduction of excess capacities. The primary strategies as the components of the value chain include inbound logistics, production, outbound logistics, marketing and sales. Ford Motor Company aims to design these strategies to reduce the extra costs and excess capacities and spread the costs across all models produced by the company. According to the case study, these strategies include improvement of the supplier relationships and establishment of the new business partnerships.
Another crucial aspect of the company’s value chain is the strategic relationship with to suppliers. The operational framework of Ford has been completely decentralized and it allowed Ford’s suppliers and partners to operate as independent centers that are responsible for managing local risks.
It could be recommended to Ford to make an emphasis on aggressive restructuring that would allow company to operate profitably at the current demand and changing model mix. The company should pay attention to the acceleration of new products’ development. It is also important to take continue its internalization growth strategy that aims to provide an access to the growing markers, exploiting scale economies in purchasing, technology and new product development.
