Acknowledgement Thank you to Mahendran Sharma, the Ex-Sales Executive (Mac 2011) of Sales and Marketing division of Ford Motors Sdn Bhd U.S. for taking time out from his busy schedule and spend the time with us for this interview.
1.0I ntroduction 1.0 Background Of Company Ford Motor Company is known as the primary automobile manufacturing expert in the western world. During Ford's early years, the company was virtually indistinguishable from its founder. Fordism as it came to be known a system of mass production which combined the principles of scientific management with new manufacturing techniques, such as the assembly line created more than fantastic profits for his company but it literally revolutionized industry on a global scale within twenty years of its implementation (2002). It expanded its operations worldwide specifically in Europe, Asia Pacific, Central and South America, the Caribbean, Africa and the Middle East.
During the earlier times, the firms activities outside U.S. mainly focus on sales and distributions. With the constant changes and economic integration of various nations, Ford manufactures and distributes automobiles in 200 markets across six continents and maintains 108 plants worldwide (2006). Traditionally, Ford's international operations were a source of strength that allowed the company to maintain its position as the second largest auto maker in the world and to respond to GM's competitive moves (2002). Today, Ford still maintains its competitive advantage among other automobile manufacturing companies by sustaining the needs and creating innovations on the automobile industry.
The companys overseas operations are situated on the specific areas wherein Ford and its management maintain a corporate jurisdiction. For instance, the regions along the European continent do business in their own ways but still under the general supervision of the main office. There are also corporate websites designed to serve specific locations. Fords branches worldwide are composed of a head and a line of board of directors connected to the main responsibility
2.0 I nterview Results 2.1 Companys direction: Vision, mission statement and objectives 2.1.1 Vision Ford Motor Company wants to become the world's leading Consumer Company for automotive products and services.
2.1.2 Mission ONE FORD MISSION (for FORD MALAYSIA & FORD MOTORS): ONE TEAM People working together as a lean, global enterprise for automotive leadership, as measured by: Customer, Employee, Dealer, Investor, Supplier, Union/Council, and Community Satisfaction ONE PLAN Aggressively restructure to operate profitably at the current demand and changing model mix Accelerate development of new products our customers want and value Finance our plan and improve our balance sheet Work together effectively as one team ONE GOAL An exciting viable Ford delivering profitable growth for all.
2.1.3 Values Our business is driven by our consumer focus, creativity, resourcefulness, and entrepreneurial spirit.
We are an inspired, diverse team. We respect and value everyone's contribution. The health and safety of our people are paramount.
We are a leader in environmental responsibility. Our integrity is never compromised and we make a positive contribution to society.
We constantly strive to improve in everything we do. Guided by these values, we provide superior returns to our shareholders. 2.2 Assessment of the external environment of the company The External Analysis examines opportunities and threats that exist in the environment. Both opportunities and threats exist independently in Ford. 2.2.1 Competitiveness of the industry Using Porters Five Forces Analysis a) Competitive Rivalry Competition is extremely fierce in this industry. The biggest players in the industry by volume are; General Motors, followed by Ford, DaimlerChrysler and Toyota in terms .This order is changeable depending on the actions taken by companies in attracting consumers. Different companies are providing different incentives to attract customers to purchasing their own vehicles. Ford in the past was very successful due to their advantages relating to volume and scale and it was anticipated that they would become the biggest player in the industry taking the place of GM. However, due to the actions taken by their arch rival, GM, Ford continues to remain in second place Ford experienced adverse publicity due to the tire scandal and also the poor marketing of baby Jag while GM introduced incentives such as GM military offer. The demand for cars although remains high, has been declining since the 1990s. A large number of companies are fighting to cater for the existing demand. Due to the sleek design and price incentives provided by Japanese manufacturers, US car sales declined by 14% in October 2010; causing Ford and GM to lose market shares while Toyota and Honda gained.
b) Barriers to Entry There are distinctive barriers to entry in the automotive industry. The main 10 firms operating in the automotive industry have great power in terms of reputation, finances, experience, technology and existing large product portfolios. It would be highly difficult for a new company to compete with the above. The existing companies within the industry are joining forces, which at times do have detrimental effects for new comers to the market and for some existing companies. For an instance, the situation of Rover in the UK. In the past, the profitable components of Rover were purchased by BMW and Ford, and Rover was left producing poor quality and old vehicles, which consequently led to its bankruptcy in April, 2005. Due to the environmental and technological factors mentioned previously, car firms must heavily invest in research and development. New comers to the industry may find it difficult to compete with the investments made by existing large firms. It is anticipated that the ways of being able to overcome the barriers to entry in this industry would be to enter the market with vehicles that consume other forms of energy and vehicles that are environmentally friendly. As mentioned previously, Chinese cars are entering the industry. It is believed that they were able to overcome the barriers to entry due to the prices of their vehicles. Through cheap labor and components, Chinese firms are able to produce cars at a lower cost than the American manufacturers.
c) Threat of Substitute Although the public are becoming increasingly aware of global warming and therefore choosing other forms of transport such as trains, busses and bicycles, it can still be said that cars and other private vehicles are viewed as a necessity especially for those who do not live in city centers. It is therefore believed that no real threat of substitutes exist today. In the future, if cars that use other forms of energy apart from diesel and petrol are introduced to the market, they may pose problems for the current manufacturers in the industry.
d) Buyer Power The buyer power is greatly affected by inflation and interest rates which are further affected by the fluctuations in fuel prices. However, buyer power remains high for the industry, which also confirms the competitive rivalry within the industry. The competition is high in the industry, with similar products that have minority differences. Car manufacturers are providing other incentives to attract the buyers to their brands. For instance, Ford is providing free upgrades worth up to 2000 for their customers in the UK. Consumer preferences determine the type of car sold. With rising interest and inflation rates, consumers are interested in vehicles that are cheaper to run in the long term. Firms are using fierce marketing techniques in order to attract consumers to their products. Extra benefits, price incentives and add-ons are some examples of these marketing activities
e) Supplier Power Supplier power has a certain affect on the firms in this industry but remains relatively low. Suppliers provide certain components necessary for the production of vehicles and also spare parts for future repairs. However, in order to benefit from economies of scale, firms are reducing the number of their suppliers and increasing their orders on their existing suppliers. Due to such actions taken by car manufacturing firms, the competition among the suppliers is also increasing. Suppliers are reducing the prices of the components and provide other financial incentives. Such competition benefits both the car firms and the suppliers. Car firms benefit due to being able to obtain cheaper parts and also trough economies of scale through the large orders which they place. Suppliers benefit through attracting large and long term contracts with car manufacturers.
2.2.2 Factors that drive industry change a) Political Factors The September 11th terrorist attack which had occurred in the US reduced the sales of automobiles in the US, and specifically Fords sales by 10% . The economic recession in Argentina in 2002 adversely affected car sales in Argentina, production volume fell from 57,200 units to 31,000 units. The Iraqi war affected Ford adversely as their US sales declined by 7%. The war has had a similar affect on other firms operating in the industry also. The United Nations World Forum for Harmonization of Vehicle regulations introduced a global technical regulation in 2004 regarding door locks for vehicle safety, which manufacturers must abide by.
b) Economic Factors Rising petrol prices make it more expensive for consumers to drive petrol fuelled cars which consequently means that consumers are inclined to change their cars which operate using diesel. Fords SUVs (Sport Utility Vehicle) sales declined due to rising gasoline prices, in turn their share prices also declined The rise in the demand for Japanese cars which consume less petrol than most American cars has meant that automobile manufacturers have needed to reduce their prices in order to sell their vehicles and to maintain their market shares.
c) Social Factors Cars are viewed as a status symbol. The brand choice of a car influences the way a person is perceived by the public. The demand for luxury cars are on the increase in the EU. Ford entered the luxury cars market in the EU with Cadillac in September, 2004. Smaller, city cars are also in demand in the EU to facilitate access in busy city centers, to allow for easier parking and also due to their lower consumption of petrol Although the Japanese cars are a success in the US, the public in the US demonstrate a hostile approach towards them. Since the Japanese cars entered the US market, the American companies such as Ford and GM have been losing market share. Women drivers and cars for women attract many stereotypical viewpoints. Ford has stated that a man cannot be expected to design a car for a woman, since a man will not fully understand their needs and wants. For this reason we have women designers to design cars for women. This provides Ford with a competitive edge in attracting women drivers to purchase their cars.
d) Technological Factors Technological advancements are vital for those in the automotive industry for several reasons. Primarily, research and development is necessary to attract new buyers, and firms cannot afford to be laggards. Secondly, firms need to be aware of new technologies for their production lines; this reduces man power and therefore reduces the costs of building vehicles. Japanese firms owe their success and profitability to technological pioneering. Ford are said to be pioneers in force-controlled robots for their transmission assemblies allowing them to have a competitive edge and to reduce costs incurred per vehicle. According to environmental studies, petrol in the world is anticipated to finish within the next 50 years Firms in the automotive industry must develop cars that use other means of energy in order to survive in the future. Verespej, states that it is necessary for manufacturers to develop their supply chains further to ensure a quicker delivery of custom made cars. He further states that this can be achieved with more efficient production lines with technological advancements. Technological factors further affect the automotive industry in terms of the reputation of individual firms. Chrysler, Toyota and Ford have had to recall cars for expensive repairs in the past, which has had negative affects on their reputations. Ford has recently been involved in a tire scandal costing $2bn, Chrysler recalled cars due to faulty locks and Toyota in November had to recall cars due to corrosion of car parts. Technology is necessary to ensure the quality of finished vehicles.
e) Environmental Factors Hurricanes in the US have caused the oil prices to fluctuate. Due to global warming and the carbon dioxide gasses emitted from vehicles the public may seek public transport in an attempt to protect the environment. Petrol is anticipated to finish within the next 50 years. Legal Factors Car manufacturers are increasingly reducing their numbers of employees due to technology replacing man power. However, pressure from Trade Unions in the US and the EU make it difficult for car firms to dismiss employees. For this reason individual firms such as Ford and GM are attempting to make deals with trade unions in order to protect themselves. The European Commission has changed the rules regarding car distribution, to allow the dealers to have more freedom to compete across the EU.
2.2.2 Companys market position Using the Space Matrix FINANCIAL STRENGTHS (FS) ENVIRONMENTAL STABILITY (ES) Return on Asset (ROA) 1 Rate of Inflation -4 Leverage 1 Technological Changes -3 Net Income 2 Price Elasticity of Demand -3 Net Asset 2 Competitive Pressure -6 Return on Equity 1 Barrier to entry into the Market -2 Financial Strengths (FS) 1.4 Environmental Stability (ES) - 3.6
COMPETITIVE ADVANTAGE (CA) INDUSTRY STRENGTH (IS) Market Share -3 Growth Potential 5 Product Quality -2 Financial Stability 3 Customer Loyalty -2 Ease of entry into the market 6 Technological know-how -1 Resources Utilization 3 Control over supplier & Distributors -2 Profit Potential 4 Competitive Advantage (CA) -2 Industry Strength (IS) 4.2
X-axis: -2 + 4.2 = 2.2 Y-axis: 1.4+ -3.6 =- 2.2
Comparing the internal and external (IE) Matrix
From the Space Matrix Method Analysis, it can be proven that Ford Motors is in the average/medium position in the automobile market. Even in the US Market, Ford encountered lowered share price but maintained its share price in range from year 2006 till 2011. Thursday, December 01, 2011
Thursday, December 01, 2011 SALES YTD SALES % MARKET SHARE Nov 2011 Nov 2010 % Chg 2011 2010 % Chg Nov 2011 Nov 2010 YTD 2011 YTD 2010 Ford Motor Company 166,441 146,956 13.3 1,933,654 1,741,343 11.0 16.7 16.8 16.8 16.7 Total Cars 48,322 52,985 -8.8 667,286 632,060 5.6 4.9 6.1 5.8 6.1
Domestic Truck 118,119 93,971 25.7 1,266,368 1,109,283 14.2 11.9 10.8 11.0 10.6 Import Truck ... ... ... ... ... ... ... ... ... ... Source: www.motorintelligence.com 2.2.4 Key factors for competitive success Ford believes that their stable management team, their strong supplier and dealer relationships, the positive acceptance of our products by customers, and our full pipeline of new products allow them to compete effectively in the global vehicle markets while they reduce their debt.
2.3 Assessment of the internal environment of the company The Internal Analysis of strengths and weaknesses focuses on internal factors that give an organization certain advantages and disadvantages in meeting the needs of its target market. This analysis is based resources and capabilities of Ford itself. 2.3.1 Resources and capabilities of Ford Throughout 2010 Ford continued market share growth in the car sector with high-quality, fuel- efficient offerings bringing bold designs, multiple convenience technologies, comprehensive safety features and engaging driving dynamics. With small cars like Fiesta and Focus in the U.S. and globally, Ford is transforming its product portfolio for a high-tech, fuel efficient future. Fords commitment to outstanding fuel economy, head-turning style and customer- focused technology is displayed throughout our lineup of utility vehicles. Explorers Terrain Management System means drivers can adjust to road conditions with the twist of a knob. And fuel economy for each product is either segment leading or among the leaders. The reinvention of a proud nameplate and the introduction of cutting-edge technology highlight Fords world-class utility vehicles with reinvention with game-changing fuel efficiency, safety, technology, capability and quality. Ford Work Solutions is a collection of affordable technologies that provide truck customers connectivity, flexibility, visibility and security to better run their business. It features an in-dash computer that provides full high-speed Internet and wireless accessories that include a printer; Tool Link, an asset tracking system for customers to maintain real-time inventory of tools and equipment in the vehicle; Crew Chief, a telematics and diagnostics system to inform fleet managers of their fleets locations and maintenance needs; and Cable Lock, a security system to secure large tools or equipment in the cargo area. MyLincoln Touch driver connect technology (pictured above) redefines the drivers interface with the vehicle, matching modern consumer electronic screens and controls that have become the standard for ease of use and graphic displays. The technology organizes functions and settings with minimal menu layering for quick access, and includes two 4.2-inch configurable LCD screens and an 8-inch touch screen, plus five- way steering wheel controls. Available on the 2011 Lincoln MKX. World-class quality and a laser-sharp focus on customer safety continue to make Ford a leader with U.S. consumers. Ford satisfaction scores are among the highest in the industry beating most full-line carmakers. Ford also has the most top U.S. safety ratings of any automaker ever. Ford continues to pioneer the next frontier of safety with innovations like inflatable seat belts and curve control, both of which debuted on the new Explorer pioneering the next frontier of safety Smart, compelling technologies work in harmony to help deliver vehicles that customers want and value. Two signature Ford technologies include SYNC and SYNC with MyFord Touch. As Ford continues to deliver on its promise of making fuel economy affordable for millions, it will soon put on the road its fourth vehicle delivering 40 mpg or more in 2011 more than any other full-line automaker. Ford is offering new and revamped engines across its lineup for 2011. Since the successful launch of the 3.5-liter EcoBoost V6 in 2009, Ford is on track with plans to spread the technology around the globe.
2.3.2 SWOT analysis of the company Strengths Ford Motors has strong customers loyalty The diversifications of Ford Motors are wide in terms of the types of vehicles produced. This allows them to target wider scope of customers. Total Sales have remained strong which is over 150 billion USD. Holds European marker shares Operates in 6 different continents Had been called the Hybrid Mariner in 2007 Ford Motors Targets all income classes. It was supportive towards the United States government. Ford Motors had been ranked in Fortune 500
Weakness It had implemented in efficient marketing in the United States. It had closed 14 manufacturing factories in North America. They also have a weak organization structure. (Whites are given priority be in the top management) They provide limited warranty period which is of 30000 miles while competitors provides 100000 miles It had been reported that in the end of 2009 they had losses as much as 14 Billon USD. They are operating with USD 154 Billion debt in 2009 Ford Motors had cut 30000 jobs in their factories worldwide. They also have a very poor operation declaration.
Opportunities Ford is American Company, results in Customers trustworthiness Progressive in technology Forces Customers to return to dealer for services European division Expected to become more profitable Sluggish global economy (lower prices of fuel) Customers desires for hybrid and fuel efficient vehicles By 2011 electronics are expected to account for 40% of an average vehicle value China as vibrant market
Threats Money devalues against many major currencies GM and Toyota offers great discounts than ford Most Americans prefer foreign brands United Auto Workers (Powerful union) Competing in US automobile market New Toyota manufacturing plants all over High Inventory cost Global recession
2.3.3 Cost structure of the company This automotive sector's revenue is generated primarily by sales of vehicles, parts and accessories to Fords dealers and distributors. Vehicles Ford produce generally are subject to firm orders from their customers. The vehicles generally are deemed sold, and revenue recognized, when produced and shipped or delivered to their customers. Ford Motor Companys November U.S. retail sales increased 20 percent versus a year ago. Total sales were 166,865, up 13 percent. They estimated its retail market share has averaged 15 percent in the last three months its highest retail share in five years. Ford brand retail sales were higher for most products, with double-digit gains posted by Fiesta, Fusion, Escape, Explorer, F-Series, Econoline and Ranger. Due to hike up of gasoline prices year by year, consumers continue to value fuel economy no matter what size or kind of vehicle best meets their needs. This is an advantage to Ford because most of their products deliver best-in-class fuel economy and provide customers an opportunity to choose what best works for them EcoBoost technology or electrified vehicles. In North America, the Ford plans to build 675,000 vehicles in the first quarter of 2012, up 3 percent (18,000 vehicles) compared with first quarter 2011. Ford plans to build 674,000 vehicles in the fourth quarter of 2011, an increase of 14,000 vehicles from the previous forecast. The industry sales rate has exceeded 13 million in each of the last three months as stated in the annual report. And Ford believes and is ready to meet that demand with high-quality, fuel- efficient cars, utilities and trucks to support stronger levels in 2012. This could be realized in the table below;
Our worldwide net income attributable to Ford Motor Company was $6.6 billion or $1.66 per share of Common and Class B Stock in 2010, an improvement of $3.9 billion from net income attributable to Ford Motor Company of $2.7 billion or $0.86 per share of Common and Class B Stock in 2009. Results by business sector are shown below (in millions):
As discussed in more detail in "Liquidity and Capital Resources" below, during 2010 Ford generated positive automotive operating-related cash flow of $4.4 billion. This contributed to their ability to reduce automotive debt by $14.5 billion in 2010, from a total of $33.6 billion at the end of 2009 to $19.1 billion at the end of 2010. Even with their substantial debt reduction actions in 2010, shown in the table below, Ford were able to maintain a significant level of automotive gross cash (i.e., cash and cash equivalents and marketable securities) and ended 2010 with Automotive gross cash exceeding total Automotive debt by $1.4 billion, also as shown in the table below (in billions):
Ford believes that their stable management team, their strong supplier and dealer relationships, the positive acceptance of our products by customers, and our full pipeline of new products allow them to compete effectively in the global vehicle markets while we reduce our debt.
2.4 Companys Strategy Ford remains firm in their belief that they continued focus on executing their One Ford plan which is known to be the right strategy to achieve their objectives. Despite the external economic environment in recent years, we have made significant progress in transforming our business.
2.4.1 Generic Strategy A Focused Differentiation Strategy is the choice of Ford Motors. They have been improving their vehicles by innovation and differentiating providing their customers the best product and specification a vehicle could have. They are committed to introducing new products that consumers want and value, and are receiving very positive reactions from consumers, media, and independent evaluators in response to the products they have introduced in recent years. Ford plan to build on this strength in 2011. Their global product strategy is to serve key geographic markets with a complete family of small, medium and large, cars, utilities and trucks that have best-in-class design and quality, are environmentally responsible, and contain high-value safety and smart feature content. The result of this strategy is a fullline of vehicles that: Have bold, emotive exterior designs Are great to drive Are great to sit in (with the comfort and convenience of a second home on wheels and exceptional quietness) Provide fuel economy as a reason to buy Are unmistakably a Ford or Lincoln in look, sound and feel Provide exceptional value Ford is committed to delivering the freshest showroom in all regions with benchmark efficiency. Developing products their customers want and value demands consistent focus on the four pillars of our global product strategy Drive Quality, Drive Green, Drive Safe, and Drive Smart.
2.4.2 Complementing Strategy and Competing In I nternational Markets Building upon demonstrated strategy to democratize globally their technology investments, SYNC and MyFord Touch were launched in Europe in the Focus and C-MAX. These migrations continue a history of global feature rollouts that includes Blind Spot Information System, ambient lighting, intelligent entry with push button start, and active park assist. Leveraging key new technologies across the four strategy pillars in multiple regions on global programs drives tremendous scale and efficiency savings that can be re-invested allowing Ford to have the freshest showroom in the industry.
In 2010, Ford launched 24 new or redesigned vehicles in key markets around the world, including: for North America the redesigned Ford Explorer, Edge, the new Fiesta and the redesigned Lincoln MKX and the MKZ Hybrid; for Europe, the redesigned Ford C-MAX and new Grand C-MAX; and for India, the new Ford Figo. In 2011, they had a number of additional global product launches. Their product strategy ensures a single global product cycle plan, simultaneously delivering global product programs across regions, with clearly defined product "DNA" while efficiently leveraging Ford global resources. This approach leads to a reduced number of vehicle platforms and parts, as well as simplified vehicle ordering from the customer's perspective. For example, they have reduced the number of global nameplates from 97 in 2006 to 59 in 2008 to 38 in 2010, with further reductions planned. The numbers of vehicle platforms were reduced from 27 in 2007 to 13 in 2014, with production on strategic core platforms increasing from 29% in 2007 to at least 80% in 2013 and beyond. Ford will have common small and medium-sized Ford vehicles in North America, South America, Europe and Asia Pacific Africa by 2013. This will include Fiesta- and Focus-sized small cars and utilities, Fusion- and Mondeo-sized midsize cars and utilities, compact pick-ups, and commercial vans. For example, in 2012, Ford expects to produce more than two million vehicles annually from global C platform (Focus-sized) and, by 2015, two million vehicles annually from global B platform (Fiesta-sized).
2.4.3 Diversification Ford also is leading the way in leveraging the growing consumer trend of smartphone apps with an innovative approach to control the applications through SYNC. Their AppLink application programming interface brings popular apps such as Pandora internet radio, Stitcher "smart" radio and the Twitter client OpenBeak into the vehicle. These technologies not only provide greater connectivity to vehicle occupants, but importantly also help mitigate driver distraction risks by using the safer means of voice commands to control functions and programs. Source :Ford Motor Company | 2010 Annual Report
3.0 Discussions Problems associated by Ford Motors. Minor Major Transmission failure Incurred huge costs from its planned series of job cuts and plant closures. Cracked rare panel Ford is cutting 30,000 jobs and closing 14 plants by 2012 to reduce its costs. Key wont turn in the ignition High Fuel Consumption vehicle brands Ford Focus problems Decrease in sales from the past few years Manufacturing faults (rare cases) Developed strategies to solve those problems Continue R&D for hybrid automobile, pure battery electric motors Open new production facility in eastern Europe and china Focus on social marketing that will cause more support from the Govt. Restructure to reduce cost of labor and raw material Focus development on cutting edge. Fuel efficient automobiles They should focus on more customer oriented approach rather than other E.E.O, should encourage black people and position them in top management Should offer at least 100,000 miles warranty on all new vehicles 4.0 Conclusion & Recommendations
Despite current difficult economic conditions and uncertainties in the automobile industry, Ford continues to have a good return on investment. As one of the world's largest auto and truck manufacturers, Ford is continually looking for new ways to streamline its operations. Ford has set goals to increase vehicle production, while reducing costs and development time for new vehicles. Besides that the macro environment in which Ford Malaysia and Ford Motor Company operates in is changeable and highly competitive, which was further depicted by the Porters five forces analysis. The micro environmental analysis indicated that Ford remains robust, however, must ensure that their weaknesses are over come and that they are prepared for the threats that are anticipated to face them in the future.
5.0 References 1. Excerpt from interview session with Mahendran Sharma, taken place at Bandar Bukit Puchong on 11.December.2011 between 10am~1pm 2. The Wall Street J ournal - http://online.wsj.com/mdc/public/page/2_3022- autosales.html#autosalesE 3. http://media.ford.com/article_display.cfm?article_id=33520 4. http://www.ford.net.my/fiesta/ 5. http://www.iaob.org/pdfs/FordspecTS2nd_December%202007.pdf