Strategic

Management
Project

FORD

COMPANY

Submitted by:
Group5
Cao Dang Khoa 295886
Nguyen Trieu Phuc Hai- 295902
Tran
Nguyen
Khoa
Hung295922

Submitted to

MOTOR

THOMAS BRADLEY

PAGE 1

Executive Summary
Ford Motor Company faces many strategic challenges during these volatile economic
times. In the next month and a half, two of its major competitors may be forced to file
for bankruptcy or liquidate assets. As of this writing, Ford is the most financially sound
American car manufacturer and possesses enough cash on hand to continue operations
through fiscal year 2009, provided there are no further dramatic deteriorations in the
market. Analysts believe that the company will not need to seek government funding
unless car sales for 2010 are below 12 million. While Ford, like all major car companies
at this time, faces serious challenges, we assert that opportunities exist during any time of
crisis. We believe that Ford can, with our help, break even in fiscal year 2010 barring
further macroeconomic deterioration.
This report makes the following recommendations to Ford Motor Company:
1) Ford should continue attempts to sell off the Volvo brand. The funds from this sale
Should provide Ford with increased flexibility during the coming year as well as
contribute to existing strategic goals.
2) Ford should extensively prepare for the bankruptcy of Chrysler and/or General
Motors. Such bankruptcies pose a great deal of risk to Ford, including but not
Limited to: the possibility that the government may chose a winner, the potential for
GM to emerge from bankruptcy with a significant cost advantage, and supply chain

PAGE 2

Disruption resulting from bankruptcies of mutual suppliers. While we believe that

Any liquidation of Chrysler should be viewed as a strategic opportunity, we remain
Deeply concerned about how the future of GM may impact Ford. In the short term,
We believe that Ford should continue to capitalize on its competitors instability and
Steal market share.
3) We have faith in managements One Ford strategy and believe that the Ford Fiesta is
poised for success in North America, if marketed correctly and executed properly.
Continued differentiation through the creation of defining style and feature set exclusive
to Ford vehicles is also a positive step in the long run.
4) We recommend that, wherever possible, Ford should shift production from the
United States and the Euro Zone to Mexico and Eastern Europe.
5) We recommend that Ford exploit current opportunities in China and apply capital to
ramp up its sales and market share. In the long run, Ford must also focus on expanding its
share in India. We do not, however, recommend that Ford invest significant capital in the
Indian market at this time.
We believe that these recommendations are in line with the Ford philosophy and are in
touch with its history as a family owned company. Industry circumstances are rapidly
changing, and Fords optimal next steps cannot be fully expounded upon until specific
information regarding GM and Chryslers future is announced. We look forward to the
opportunity to provide continued support for Ford Motor Company as the situation with

PAGE 3

Chrysler and General Motors develops, and believe that this report sets forward the
optimal strategy for the company at this juncture in time.
Introduction
The Company name: Ford Motor Company
Ford Motor Company was founded in 1903 by Henry Ford and has continuously
remained under family ownership since this time. For the first half of the 21 st Century,
Ford remained the dominant car manufacturer within the market it had effectively
created.
The Company mission is:

Being a global family with a proud heritage passionately committed to providing

personal mobility for people around the world.

Anticipating consumer need and deliver outstanding products and services that
improve people's lives.1

Mission Evaluation: Ford only focuses on customer, market and concern for public image
Company vision is: to become the world's leading Consumer Company for automotive
products and services.2

1,2.

Ford Motor Company Sustainable Growth Strategies. The Basic Values that define
Ford Motor Company as an industry leader. Vadim Kotelnikov. Retrieved from
http://www.1000ventures.com/business_guide/cs_sg_ford.html
3,4
Blueprint Strategy. Ford Sustainability 2011/12. Retrieved from
http://corporate.ford.com/microsites/sustainability-report-2011-12/blueprint-strategy

PAGE 4

Vision Evaluation: The vision statement is quite well organized as it highlights the
products and offerings made by the company. It also highlights that the company is
growth oriented and wants to be the leading company in the automotive industry.
Company objectives are:
3

The goal of ONE Ford is to create an exciting and viable company with profitable

growth for all. The output of ONE Ford is:

Great Products, defined as those that are high quality, green, safe and smart.

Strong Business, based on a balanced portfolio of products and global presence;

and

Better World, accomplished through our sustainability strategy.3

Company strategies are:

4

Our Fords business strategy is embodied in our ONE Ford plan. ONE Ford expands on

our Companys four-point business plan for achieving success globally. The four-point
business plan consists of the following:

Aggressively restructure to operate profitably at the current demand and changing

model mix

Accelerate development of new products our customers want and value

3,4

Blueprint Strategy. Ford Sustainability 2011/12. Retrieved from

http://corporate.ford.com/microsites/sustainability-report-2011-12/blueprint-strategy

PAGE 5

Finance our plan and improve our balance sheet

Work together effectively as one team4

Company Products and Services are:

Ford Motor Company (Ford) is a worldwide producer and distributor of auto. It produces
and deliveries cars and vehicle components. Ford, along with its subordinates and
associates, manufactures cars, trucks, SUVs (Sport Utility Vehicles) and numerous other
products and provides services to automotive consumers over 6 continents. Ford, FordLincoln and Lincoln are the wholly-owned brand names of the company. Ford runs
distribution centers and warehouses, engineering, research and growth facilities, sales
offices and manufacturing facilities in North America, South America, Europe and Asia
Pacific and African region. The company also conducts automobile rental and hiring
activities, auto funding and other related financing activities. Ford intends to establish
new products and services to satisfy with the modifying requirement of its clients. In line
with this, some of the new supplying about the company are MKC, Mustang and F-150,
with which, the company will introduce the new 2.3L I4 EcoBoost and 2.7L V6 EcoBoost
engines.
Products/Services
Products:

PAGE 6

Passenger Cars
Trucks
Buses
Vans
Sport Utility Vehicles
Vehicle Accessories
Aftersales Vehicle Parts and Products
Services:
Maintenance and Vehicle Repair Services
Retail Financing
Wholesale Financing
Third-party Claim Management Services
The Competition is the following:
Ford faces both domestic and international competitions, which greatly influences its
motor operational planning. The Top Competitors of Ford Motor Company are: General
Motors Company, Toyota Motor Corporation, Chrysler Group LLC, and Honda Motor
Co., Ltd. Domestically, Ford faces competition mainly from General Motors and Toyota
while internationally its main competitors are from China and Japan. Competitors'

PAGE 7

lowering their cost and raising their quality forces Ford to do the same to stay
competitive in the markets.

The current market condition

Ford is known for building the everyday mans car focusing on reliability and quality.
Ford is now a leader in innovation in the automobile industry right next to the BMW.
Energy efficient efforts, future safety features and technology advancements are all what
makes Ford. However, the cars are not all that have made Ford into the global enterprise
it is today. Its constant effort into driving community through the Ford Motor Company
Fund and Community Services is only one way Ford displays its involvement and values
for a safe and healthy environment for the community to live in. Because Ford holds
these values high in its corporate strategy, its research and advancement in safety and
energy saving features are genuine and dependable. Ford has been a leader in the auto
industry, however, over the past few decades has continued to lose market share to

PAGE 8

foreign competition. The current weak U.S. economy combined with rising fuel prices
and increased political pressures regarding global warming, presents several challenges to
Ford Co. Ford has many successful markets all over the world such as U.S, Canada, and
Mexico. The markets really help the company receive profit in many years, but it is time
for FORD to have new markets. China will become a new market that FORD wants to
invest in because China really is a biggest auto market all over the world and some
analysts also think that China will become the markets fastest developing for years to
come.
Recommendations by our group of modified vision and mission statements for the Ford
Motor Company:
Ford may combine both mission and vision are one statement such as:
Our vision is to become the world's leading consumer manufacturing company for
automotive products and services. To achieve this, we the company and all our employees
are dedicated to provide all our customers and the community with safe innovative
products and services of world class standards. Through our engineering excellence, high
quality and the use of our constantly upgrading technology, we limit the harm that we
cause to the environment while delivering superior value to our customers. Our close knit
working environment allows our employees, community and business partner to share in
our success, while achieving a substantial return on our shareholders investment.

PAGE 9

Strengths, Weaknesses, Opportunities, Threats (SWOT) Matrix:

STRENGTH
1.
2.
3.
4.
5.
6.
7.

Powerful in US market
ECOnetic initiative
Sound financial performance
ONE Ford approach
Considerably growth in China
Strong brand recognition
Running in globally

OPPORTUNITIES
1. Positive attitude towards green
2.
3.
4.
5.
6.

vehicles
Increasing fuel prices
New emission standards
Strategic partnerships
Ford has the distinct opportunity
China, a vibrant market for

WEAKNESS
1. High cost structure
2. Unprofitable Europe operations
3. Low contact business to AsiaPacific
4. Ford does not provide financial
THREATS
1. Decreasing fuel prices
2. Rising material prices
3. Intense competition
4. Fluctuating exchange rates
5. Strict standard of CO emission

automobile industry.
7. Cooperation with the British
Petroleum

PAGE 10

Strengths
1

Powerful in US market. Ford is the second largest automotive in US market,

having a great reputation in the home market and great commercial vehicle sales.

ECOnetic initiative. It is an effort to improve existing engines instead of new

hybrid engines to producing highly fuel-efficient engines. The Ford Fiesta is the
result of this initiative, currently the lowest emitting mass-produced car in Europe
and Ford Focus ECOnetic that has better fuel consumption than the Toyota Prius.

Sound financial performance. Ford was the first US car company to get
investment status back and also was the only company that didnt need the
government bailout. Compare to other competitors, the firms profit margin is
high with the highest liquidity ratio.

ONE Ford approach. Ford has decided to produce single, streamlined global
lineup of its models. The carmaker is now focusing on designing and engineering
the car that match different regional and. This considerably decreases costs for
Ford and drives record profitability.

Considerably growth in China. Although not the strongest competitor in the

China, but Ford has experienced the significant growth in the largest automobile
market in the world for the 2012. Opening of research and engineering Centre in
China

PAGE 11

One Fords most potent advantage is that they are one of the worlds best known
brands which have been in the business for 100 years. Strong brand recognition as

an affordable and safe vehicle Worlds largest living roof in Michigan

Operate throughout the 6 continents with 108 plants globally.

Weaknesses
1

High cost structure. Ford still has a high cost structure, compared to other
automobile makers although One Ford initiative led to substantial cost reduction.
Fords costs are boosted by its generous employee compensation and pension
plans.

Unprofitable Europe operations. In 2012, Ford lost $1.75 billion in Europe and
plans to experience losses in the region until 2015.
Low contact business to Asia-Pacific: Only 15.82% of Fords volume was derived
from Asia-Pacific sales in 2011, the fastest growing segment of their business
(7.52% growth from 2010 to 2011)

Ford does not provide financial incentive to dealers Organizations morale,

decreased due to payroll reduction

Opportunities
1

Positive attitude towards green vehicles. Customer are aware of that cars release
large quantities of CO2 and negatively affect the environment. Ford has
developed an electrification strategy to reduce the carbon dioxide (CO2) released
from its vehicle and make them more efficient.

PAGE 12

Increasing fuel prices. Fords strong emphasis on engineering fuel-efficient

vehicles (Ford Fiesta and Ford Focus ECOnetic) with flexible fuel and hybrid
engines will resolve the increasing fuel prices problem.

New emission standards. Ford position in the automobile industry would be

affected by a new wave of stricter regulations on vehicle emission standards. Ford
invests a lot of money to produce fuel-efficient engines and earned success with
Ford Fiesta and Ford Focus ECOnetic models.

Strategic partnerships. Ford has great experience in creating strategic partnerships

with other automobile companies. All companies are more likely to enter into
such partnerships to drive R&D costs down, approach new markets and gain some
new skills because of current competitive pressure.

Ford has the distinct opportunity to have cleaner engine emissions, alignment with
their corporate responsibilities

China, a vibrant market for automobile industry. Demand of fuel-efficient cars

Cooperation with the British Petroleum to develop hydrogen power. High

expectations of customer.

Threats
1

Decreasing fuel prices. This would negatively affect Ford as its focus on compact
fuel-efficient hybrid and flexible fuel cars that are less attractive when some

PAGE 13

analysts forecast that future fuel prices will drop because of the extraction of shale
gas
2

Rising material prices. Rising prices for raw metals will raise the costs of
automobile companies and result in squeezed profits for the companies.

Intense competition. Ford faces more intense competition from other competitors,
especially in small car type with hybrid engines.

Fluctuating exchange rates. Most of largest automobile companies, may be

adversely affected by fluctuating exchange rates when it earns more than half of
its profits outside the US and the profits may also be lower because of
appreciating dollar against other currencies.

Strict standard of CO emission result in increasing the manufacturing cost to

produce the engines. New entrants i.e.: Honda, Toyota and Nissan result in tough
competition.

Lack of desired vehicles available in the dealers lot and car financing sector facing
financial problem because of increasing mortgage rates. Toyota is selling vehicles
through E-commerce (Gazoo.com).

PAGE 14

EFE MATRIX:
Key External Factors

Weight

Rating

W. Score

Producing Fuel Efficient Cars

0.15

.45

More product driven, customer focused and

0.15

0.60

Aggressively enter in the Asian Market

0.10

0.30

Initiate Manufacturing in Low Cost Countries

0.10

.20

European Market expected to be more profitable

0.10

.30

Rising Fuel Prices Worldwide

0.10

.10

Rising Interest Rate

0.05

.10

OPPORTUNITIES

efficient

THREATS

PAGE 15

Raw Material Cost increasing Continuously

0.05

.10

Labor Cost Increase in USA

0.05

.15

Competition Rises all Over the World

0.07

.14

Toyota Market Share Increase in USA

0.08

.16

Total

1.00

2.6

Ford can take advantage of the sector of the market who wants to go Green by
producing green marketing addressing solutions such as hybrid cars. Also, availability of
low cost and personalized advertising allows Ford the opportunity to get its message out
to the right potential consumers quickly and effectively. But the threats are, employees
have trouble making the sale happen. Employees dont have the ability to get consumers
to commit. Its all well and good to bring people into each dealership, but Ford needs
people capable of getting employees to sign on the dotted line. Also, Lay Offs the
necessity of this occurrence in a tough economy presents the possibility of lawsuits from
former employees. Besides, Ford did not have public trust while other companies like
GM and Toyota are gaining.

IFE MATRIX:
Key Internal Factors

Weight

Rating

W. Score

PAGE 16

STRENGTH

Affordability due to Brand Name

0.10

0.30

Good Market Share in Europe

0.10

0.30

Producing Hybrid Car since 2007

0.10

0.40

Several Name of Brands

0.15

0.60

Targeting all classes Customers

0.15

0.45

Support Racing Teams including Formula 1 and etc.

0.05

0.15

Continue Decline in Market Share

0.10

0.20

Downsizing

0.10

0.10

Weak Financial Position

0.10

0.20

Closing more than 10 manufacturing units in

0.05

0.10

WEAKNESS

NUSA

PAGE 17

Total

1.00

2.8

As seen in the Matrix, Ford is a well-known American Brand the legacy of Henry Ford
lives on through his cars and production line. Ford is an iconic brand known around the
world may be used to its advantage. It has developed and maintained a reputation for
safe vehicles as well as offering a desirable mix of benefits and pay will help Ford attract
quality employees that help grow the company.
But Ford has more liability than assets, if not managed correctly, Ford could end up with
a huge amount of profit lost if, for example, the people at headquarters completely
misjudge the potential popularity of the new Mustang. This could result in the necessity
of huge discounts to allow dealers to bring in the newer models. These discounts may
result in a loss for the dealers and or Ford.
Besides, rise in price of consumer products such as gas. If cost of fuel rises substantially,
a portion of Fords market sharetrucksis lowered as consumers no longer desire to
drive big vehicles that use a large amount of gas

CPM MATRIX:
Ford
Critical Success

Weights

Ratings

Factors
Hybrid/Fuel Efficient

G.M

Weighted

Ratings

Score
0.15

0.45

Toyota

Weighted

Ratings

Score
3

0.45

Weighted
Score

2
PAGE 18

0.30

Vehicles
Product Quality

0.15

0.6

0.45

0.30

Price Competitiveness

0.2

0.4

0.2

0.80

Management

0.05

0.1

0.15

0.15

Financial Position

0.1

0.2

0.3

0.30

Customer Loyalty

0.1

0.3

0.3

0.40

Global Expansion

0.1

0.2

0.3

0.30

Market Share

0.15

0.3

0.6

0.30

Total

2.55

2.75

0.30

As seen in the Matrix, Ford owns its position through Hybrid/Fuel Efficient Vehicles and
Price Competitiveness. But since the quality is not stable, customers loyalty did not seem
to take place. And that leads to the lower market share as well as the financial positions,
not to mention its liability more than assets while Toyota remains its good quality
products and GM focus on its price competition.
Competitors Analysis
The major competitors of Ford Motor are domestic companies like Damiler Chrysler &
General Motors and foreign companies like Toyota Motor & Honda Motor.
DaimlerChrysler
DaimlerChrysler (DCX) was formed in 1998 in a merger of two of the automotive
industrys oldest and most prestigious manufacturers: Daimler-Benz AG and the Chrysler
Corporation. This so-called merger of equals was the culmination of a long
complicated family history that in some sense follows the history of the automobile itself.
Because of this prestigioushistory, DaimlerChrysler enjoys a strong reputation on both
sides of the Atlantic.

PAGE 19

Today, DaimlerChrysler employs a total of 384,723 people in 17 countries. Their

products are sold in over 200 countries. DaimlerChrysler is the fourth largest vehicle
producer in the world in terms of units sold behind GM, Ford, and Toyota. In 2004,
DaimlerChrysler sold 4,000,700 passenger vehicles and 712,200 commercial vehicles.
The company is structured into three main automotive groups: the Mercedes Car Group,
the Chrysler Group, and the Commercial Vehicles Division. These groups are
parents to a total of 12 different brands, including Mercedes-Benz, Dodge, Chrysler, Jeep,
the luxury car Maybach, and the compact environmentally friendly smart car. In all,
DaimlerChrysler produces approximately 126 vehicle models.
DaimlerChrysler has been marginally successful inthe United States where the Chrysler
Group has recently been the strongest of Detroits Big 3. In fact, during the third-quarter
of 2005, Chrysler was the only Big 3 company to earn a profit ($379 million for the
quarter). This came in spite of a 21% drop in third-quarter earnings by DaimlerChrysler
worldwide due to increasing taxes. However, during this same period, DaimlerChrysler
increased operating profit by 38%. Analysts have attributed this odd result to increasing
demand for Chrysler and Mercedes products. This increased demand is evidenced in the
U.S. market where the Chrysler Group produces four ofthe 20 top selling passenger
vehicle models: the Dodge Ram, the Dodge Caravan, the Jeep Grand Cherokee, and the
Jeep Liberty. As a result of this improved third-quarter performance, Chryslers U.S.
market share has risen to 13.3%. More broadly, the popularity of DaimlerChrysler models
can be seen in the steady rise in revenue over the past three years. From 2002 to
2004,revenue has increased 22.6% from $157 billion to $192 billion.

PAGE 20

Because demand for DaimlerChrysler products has remained relatively stable in the face
of increasing oil prices, their future looks relatively bright. Growth in demand for
passenger vehicles is expected to further slow in North America, Western Europe, and
Japan. Therefore, DaimlerChryslers future depends upon successful marketing in
emerging markets across the globe.

DaimlerChrysler SWOT analysis 2013

Strengths
1. High

Weaknesses
above

1. Due to high fleet sales there is also

industry average. In US, over 1

seen a non-preference by customers

million sales per annum.

for few of the models of Chrysler.

2. Strong

Fleet

brand

American

Sales

recall

way

in

North

marketsMotorcycle

market share in Asia.

3. Reputation for V-8 Hemi engines.

2. Management problems have been a

concern.
3. Limited market share owing to
increasing competition.

4. Domination in minivan market.

5. Strong customer focus and a strong
employee base of over 50,000.

Opportunities

Threats

PAGE 21

1. Change in the management for

better.

other associates in the Company.

2. It may also assist it for selling its

cars in new geographical markets.
3. Increasing
vehicles

1. Decreasing confidence of dealers &

demand
where

for

Chrysler

2. Strong

reliance

on

the

North

American market.

green
has

presence.

Source: http://www.mbaskool.com/brandguide/automobiles/4684-chrysler.html
General Motors
After its organization in 1908, General Motors (GM) proceeded to acquire seven
companies by the end of 1909. Today, the companys brand names include manyof the
beginning acquisitions including Buick, Cadillac, Chevrolet, GMC, Oldsmobile, and
Pontiac, as well as newer acquisitions and creations including Holden, Hummer, Opel,
Saab, Saturn, and Vauxhall. GM is the largest automobile manufacturer in the world,
selling nearly nine million cars in 2004, which equated to a 14.5% global market share.
As of the end of 2004, GM reduced its projected earnings for 2005 by over 50% from
previous projections, which reflects its low expectations for the company in the near
future. Investors have also lost faith in the future of GM; the current stock price is selling

PAGE 22

at a fraction of the book value. GMs debt has been steadily downgraded and stood at
BBB- as of the end of 2004 according to Standard & Poors ratings.
According to their Letter to Stockholders, GMs mainproblems consist of global
overcapacity falling prices rapidly escalating healthcare costs unstable fuel
prices [and] increasing competition. GMs debt ratio illustrates that their overall debt
nearly equals their assets; their current ratio shows that they have more liabilities than
assets in the upcoming year; and the return on sales and equity are very low in
comparison to industry standards. Each of the five ratios places GM among the worst
three out of the ten sampled companies. While these ratios in no way provide a complete
measure of a company, they do illustrate that GM is currently struggling to keep up with
its competitors.
GMs main problem is their failure to remain cost-competitive in the global market. To
address this, GM has reworked deals with both American and European unions which
will reduce its cost of labor. To increase revenues, GM is focusing on increasing
marketshare in growing countries such as India and China. They are also offering more
hybrids to increase their fuel efficient offerings, which is a fast growing market in
America and has been one of the main ways that foreign manufacturers have increased
their market share in GMs primary markets.
It will take some time for GM to become profitable again. In the first three quarters of
2005, GM has seen losses continue to grow well past $1 Billion and their credit rating has
been reduced to junk status. However, GM still has the largest market share inthe world
and the capabilityto become successful again. If GM can reign in escalating costs and

PAGE 23

offer cost-competitive products, the automobile giant will be in position to once again
assert its dominance of the market.

General Motors SWOT analysis 2013

Strengths

Weaknesses

1. Global presence

1. High cost structure

2. New vision and strategy

2. Brand dilution

3. Strong brand portfolio

3. Bureaucratic culture

4. Strong presence in China

4. Car recalls

5. Knowledge of home market

6. 4 well performing brands

Opportunities
1. Positive attitude towards green
vehicles
2. Increasing fuel prices
3. Changing customer needs
4. Growth through acquisitions

Threats
1. Fluctuating fuel prices
2. New emission standards
3. Rising raw material prices
4. Intense competition
5. Exchange rates

PAGE 24

Source: www.strategicmanagementinsight.com/swot-analyses/general-motors-swotanalysis.html
Toyota
Toyota was established as a public company in Japan in1937. It entered the U.S. market
in 1957, but only became successful with the introductions of the Corona in 1965 and the
Corolla in 1968. By 1970, Toyota was the worlds fourth-largest carmaker and by 1975
had displaced Volkswagen as the U.S.s #1 auto importer. Toyota began auto production
in the U.S. in 1984 through a joint venture with GM, and launched the successful Lexus
line in the U.S. in 1989. Since then, Toyota has continued to grow steadily, becoming the
third largest global automotive manufacturer as of 2003, with sales last year of 7.4
million vehicles. Unlike many other large auto manufacturers, Toyota carries only 4
brands: Toyota, Hino, Scion, and Lexus; it also has a majority interest in Daihatsu.
Known for their quality and reliability, Toyota cars and light trucks such as the Camry
(Best-selling passenger car in America, 2004), Corolla, Lexus LS330, Prius (Motor
Trends Car of the Year, 2004), Tundra (Motor Trends Truck of the Year, 2000), Tacoma
(Motor Trends Truck of the Year, 2005), 4Runner, and Lexus RX300 (Motor Trends
SUV of the Year, 1999) have been extremely successful both in the U.S. and abroad.
In the last few years, Toyota has been able to ride out the automotive storm, continuing
to post impressive results despite the troubles that other companies haveseen. In 2003, net
income jumped almost 55%, reaching US$10.8B. And in 2004, both revenue and net
profit increased slightly. Currently, Toyota holds a 6% profit margin, dramatically higher
than any of the Big 3.

PAGE 25

Toyotas success is based largely on its forward-thinking, innovative management style

and its rigorous standards of quality. The Toyota Production System is a much-studied
strategy of design and manufacturing which emphasizes streamlining and elimination of
waste giving rise to the just-in-time and lean manufacturing movements and
continuouserror-checking and improvement. In addition, Toyota has repeatedly been
ahead of the trend in investing in new technologies. Instead of focusing on reducing labor
costs, Toyota has increasingly automated their production facilities. And with the release
of the Prius in 1997, Toyota introduced the first mainstream hybrid vehicle, cashing in on
the demand for fuel economy and reduced environmental impact. Like the Prius, the
Scion line successfully identified and addressed a new consumer sector, a plan thatToyota
will continue to follow. These strategies combine to give Toyota a significant sustainable
competitive advantage.
The results of all this are clear: in 2005, Toyota won a record-breaking 10 segment
awards in J.D. Power and Associates Initial Quality Study, with Lexus carrying top
honors for five years straight. And while 75% of Toyotas current market is in Japan and
North America, it aims to reach markets in 140 countries and regions in the future. With
new assembly facilities in Thailand, Indonesia, South Africa and Argentina, Toyota has
more than 60 manufacturing facilities in 26 countries. This allows production in
geographic proximity to Toyotas future target markets like Asia and South America.
With expansion underway, operations going well, innovative infrastructure and mindset,
and well-targeted high quality products, Toyota is excellently positioned for future
growth and success.

PAGE 26

Toyota SWOT analysis 2013

Strengths

Weaknesses

1. Innovative culture

1. Large recalls

2. Brand reputation valued at $30 billion

2. Weak

3. Industry leader in production and

presence

in

the

emerging

markets

sales
4. Strong brand portfolio
5. The

leader

in

green

cars

development

Opportunities
1. Positive attitude towards green
vehicles
2. Increasing fuel prices
3. Changing customer needs
4. Growth through acquisitions

Threats
1. Fluctuating fuel prices
2. New emission standards
3. Rising raw material prices
4. Intense competition
5. Natural disasters
6. Appreciating yen exchange rate

PAGE 27

Source: http://www.strategicmanagementinsight.com/swot-analyses/toyota-swotanalysis.html
Honda
Honda Motor Co. (HMC) was established by SoichiroHonda in 1946. It originally began
producing motorcycles in the mid 20th century and began manufacturing automobiles
(the Honda Civic) in 1972. After the original Civics inception, Honda produced many
variants of this highly successful vehicle, such as the four-door sedan, wagons,
hatchback, coupe, and more recently the hybrid. Honda currently has two automotive
brands (Honda and Acura) and it produces over 20 other vehicle models, such as the
Accord, Element, Insight, Odyssey Minivan, Pilot SUV, and Ridgeline Truck, in addition
to producing motorcycles and power products.
Since Honda began producing automobiles it has beena leader in producing fuel efficient
and low emissions vehicles. In 1977 and 1983, Civic models ranked first in U.S. fueleconomy tests. Honda has also introduced hybrid vehicles such as the Insight, Civic, and
Accord, in 1999, 2002, and 2004, respectively, with the 2006 Insight being the most fuel
efficient car of 2006.
Currently, Honda ranks sixth in sales within the automotive industry. They have overseas
plants in over 12 countries including the U.K., Italy, Brazil, Taiwan, Indonesia, Malaysia,
Thailand, Nigeria, U.S., and Canada. Honda has been increasing their production
capacity worldwide in response to their steady growth in total sales over the last few
years. From 2002 to 2003, Honda increased sales by 95,000 units, and from 2003 to
2004, sales increased by 259,000 units. With this growth in sales Honda has seen a
PAGE 28

commensurate increase in its revenues. In China, they saw approximately a 50% increase
in sales from the fiscal years of 2003 to2004, and they expect sales to keep increasing.
In the future, Honda has stated thatthey will keep improving the fuel efficiency of all
their vehicles. They will continue to expand their production capacity in Asia, due tothe
expected increases in demand in those regions. In the U.S., they plan on launching new
models targeted to younger people to create a new base of loyal customers. Given
Hondas past record on delivering high quality and fuel efficient vehicles, their strong
position in the current market, their strategic direction for the next few years, and the
rising costs of fuel worldwide, it is evident that Honda will have a strong presence in the
automotive market in the future.

Honda SWOT analysis 2013

Strengths

Weaknesses

1.Diversified product portfolio

1.Product recalls

2.Huge investments in R&D

2.Weak position in Europe automotive

3.Strong brand image

4.Motorcycle market share in Asia

market
3.Decreasing sales

PAGE 29

Opportunities

Threats

1.Increasing fuel prices

1.Intense competition

2.Positive outlook for global motorcycle

2.Decreasing fuel prices

industry
3.Growing

3. Rising raw material prices

global

demand

for

4. Natural disasters

environmentally friendly vehicles

5. Strong yen
4. Growth through acquisitions

Source: http://www.strategicmanagementinsight.com/swot-analyses/honda-swotanalysis.html

Where is our product in the life cycle?

Ford products were in the decline stage in the life cycle because the company had
experienced serious financial problems. Fords turnaround plan aimed to cut $5 billion in
costs by the end of 2008 by slashing 10,000 white-collar workers and offering buyouts to
all of its 75,000 unionized employees. The loss, including restructuring costs, was Fords

PAGE 30

largest quarterly loss since the first quarter of 1992, when the company lost $6.7 billion
due mainly to an accounting change.5

Strategic management text and cases. Is one Ford really working? Page 721. Retrieved

from https://www.b1digital.com/fileserver/ebook/dev/sm/Marketing%20Mistakes%20and
%20Successes.pdf

PAGE 31

What kind of strategy Ford Motor company have?

Ford through its ONE Ford Plan has tried to implement its growth and renewal strategies.
Growth strategy-Accelerate development of new products to suit customers want and
value; Finance plans and improve balance sheet; and work together effectively as one
team, leveraging the companys global assets are some of the major steps taken by the
company in recent years.

Concentration- Ford has delivered consumer friendly, highly fuel efficient and

innovative vehicles, most of the time and concentrated on quality over quantity.
Vertical integration The ford motor credit company provides
automobile loans in support of its parent company. The company offers consumer
loans and leases to car buyers, as well as business loans and lines of credit to
dealerships

selling

Ford

Motor

Company

products.

The

firm

also

issues, commercial paper and other debt instruments on Ford's behalf. In this way
the company has achieved dual objectives, it has become its own suppliers as well
as distributors, thus achieving forward and backward vertical integration at the

same time.
Horizontal integration- Fords competitors are themselves some of the oldest
automobile companies, like Chrysler and general motors. Hence any kind of
collaboration was simply not possible as these companies know it better to resolve

the crisis by other means possible.

Diversification- Ford has combined with Aston Martin, a sports car manufacturer,
a company which is different but related. Hence a related diversification can be
seen here.

PAGE 32

Stability strategy- Since its inception, one of the most remarkable achievements of ford
has been its constant focus on the production of highly fuel efficient vehicles. Fords
global vehicles showcase their commitment to fuel efficiency. Technologies like
EcoBoost, direct injection of gasoline or diesel fuel, six-speed transmissions, and
hybrid and plug-in hybrid powertrains are some of the innovations in this regard. [5]
Renewal strategy- To maintain status quo ford has come up with some solutions.
Retrenchment- Owing to its financial deficits, the company discontinued its production of
luxury vehicle under mercury brand in 2008.

What kind do Ford Motor Company need now?

The company should try to expand sales in the Middle East.

There is a lot of scope for ford to take advantage of the growing needs of public
transports, utility vehicles as well as other vehicles that may find their use in some
other industries. For example, manufacturing buses and trucks in India and

African nations, oil tankers for oil producing countries, etc.

The company in order to gain public favor in Asia and China and to gain profits in
recession hit Europe may try to reduce its cost structure for these countries as a
short term plan

PAGE 33

The company may risk its sales in the US to cover the subsidy given in third
world countries, but given the large size of potential customers in the target

countries, possibility of profits in long term cant be ruled out.

the production of cheaper motor vehicles in masses for mass sales rather than the
making of luxury cars is a good option because this will offer a large market and
there is safety in the numbers because of the large market share presented

SPACE MATRIX

FINANCIAL STRENGTHS (FS)

ENVIRONMENTAL
STABILITY (ES)

PAGE 34

Return on Asset (ROA)

Rate of Inflation

-4

Leverage

Technological Changes

-3

Net Income

Price
Elasticity
Demand

Net Asset

Competitive Pressure

Return on Equity

Barrier to entry into the -2

Market

Financial Strengths (FS)

1.4

Environmental
(ES)

COMPETITIVE ADVANTAGE (CA)

of -3

-6

Stability -3.6

INDUSTRY STRENGTH
(IS)

Market Share

-3

Growth Potential

Product Quality

-2

Financial Stability

Customer Loyalty

-2

Ease of entry into the 6

market

Technological know-how

-1

Resources Utilization

Control over suppliers & distributors

-2

Profit Potential

Competitive Advantage (CA)

-2

Industry Strength (IS)

4.2

X- Axis: CA+ IS = (-2.0) + 4.2 2.2

YA
x
is
PAGE 35

0
+1

+2+5 +3+6+4

-2

-1
-2
-3

-4
-5
-6

:
E
S
+
F
S
=
(3.
6
)
+
1.
4

(
2.
2
)

ConservativeAggressive

PAGE 36

Defensive

Competitive

From SPACE Matrix above, it is known that Ford Company are in Quadrant 4, the
Competitive position. In this position, the right strategy for Ford Company is:
diversification of products and that reproduce the type and model of product development
is also a good market by developing products concentrate on Eco friendly car. Ford
company implement strategies needed to enhance the purchasing power of consumers
and seeking strategies to attract consumers from a rival company.

BCG Matrix
Relative market share
High

Low

Industry Grow rates

PAGE 37

Low
Star

Question marks

As
Trucks
Cars

SUVs

Cash Cows

ElectricDogs
car

shown in the Matrix, Cars cause high relative market share and high market growth.
Electric cars play the most desirable market segment as well as low market growth,
which made Ford somehow did not perform well. Trucks and SUVs, are growing big
because of the fact that theyre new that attract customers attention, but since theyre
improving, they are the parts that have low market shares.

Grand strategy Matrix

RapidMarket
Growth

QuadrantII

QuadrantI
PAGE 38

Weak
Competitive
Position

Strong
Competiti
ve

QuadrantIV
QuadrantIII

SlowMarketGrowth

Evaluation:

Ford falls in the second quadrant of the grand strategy matrix as its facing huge losses and its
competitive position has also been affected by new entrants in the automotive industry so it has
weak competitive position and the market growth is rapid. Increasing consumers expectations
had made the environment more competitive as on one hand it had provided a room for
innovations, but due to continuous rising prices of raw material and gas prices and also the
currency rate fluctuation, it has been difficult for the firms to manufacture new models
frequently.

PAGE 39

As far as this current scenario is concerned appropriate strategies would be:

Mark
et
P
e
n
et
r
at
i
o
n
:
Apply market penetration strategies globally.
A) sponsor events related to sports, entertainment etc.
B) Partnership with a television channel that will display ads of the Ford Motors in
different intervals.
C) Developing of Ford's Blog.

Prod
u

PAGE 40

ct
D
e
v
el
o
p
m
e
n
t:
A) Production of fuel efficient cars.
B) Production of Hybrid energy vehicles.

Hori
z
o
n
ta
l
I
n
te

PAGE 41

g
r
at
i
o
n
:
Alliance with the competitors can be helpful to achieve competitive advantage by
combining the distinctive competencies of both the firms.

QSPM

1.Apply
market
2. Production 3. Allian
penetration
fuel the comp
strategies globally of
efficient cars.
Key Factors

Weight

AS

TAS

AS

External

PAGE 42

TAS

AS

Opportunities
1. Producing Fuel Efficient Cars

0.15

0.30

0.45

2. More product driven, customer focused

and efficient
0.15

0.45

0.60

3. Aggressively enter in the Asian Market

0.10

0.30

0.40

0.10

0.30

0.40

5. European Market expected to be more

profitable
0.10

0.30

0.40

4.Initiate Manufacturing in Low Cost

Countries

Threats

1.Rising Fuel Prices Worldwide

0.05

0.15

0.20

2 Rising Interest Rate.

0.05

0.05

0.10

0.05

0.20

0.15

4. Labor Cost Increase in USA

0.05

0.10

0.15

5. Competition Rises all Over the World

0.07

0.28

0.14

6. Toyota Market Share Increase in USA

0.08

0.32

0.24

1. Affordability due to Brand Name

0.10

0.20

0.30

2.Good Market Share in Europe

0.10

0.40

0.30

3. Raw Material
Continuously

Cost

increasing

Internal
Strengths

PAGE 43

3. Producing Hybrid Car since 2007

0.10

0.40

0.30

4. Several Name of Brands

0.15

0.60

0.45

5. Targeting all classes Customers

0.15

0.30

0.60

6. Support Racing
Formula 1 and etc

0.05

0.20

0.15

0.10

0.20

0.40

0.10

0.10

0.20

3.Closing more than 10 manufacturing

units in NUSA
0.05

0.05

0.10

4. Weak Financial Position

0.10

0.20

0.20

Total

Teams

including

Weaknesses
1. Continue Decline in Market Share
2. Downsizing

5.40

6.23

Strategic recommendations
Ford motor is the only one in the US auto motor industry who tried to sustain its
leadership and its market position with effective strategies to match the market
requirements and needs. It updated its products with latest technology gadgets and
equipped its products with the latest ones. After conducting the in depth analysis of the

PAGE 44

companys success factors, revamped processes and other operational strategies as well as
the study of case study, our group came to the following recommendations for the Ford
Motors that can help the company to leverage its market position and sustain
profitability:

Short term:

- Minimize excess capital, try to reduce debts, cut inventories and reduce days of sales
receivables.
- Sell off undeforming assets to increase cash while weathering storm

Long term:

- Continue to improve factory flexibility. Continued investment in hybrid technology, R

& D will position Ford better to compete with close competitor such as Honda and
Toyota.
- Adopt more aggressive version to current restructuring and cost improvement.
- Continue high level of product development into alternative fuel technology. Emerging
markets purchasing synergies.
IMPLEMENTATION:
1. RESEARCH:
Before designing a new model, the Ford motors should conduct a market research and
survey to understand the customer preferences. Since the company is still under huge

PAGE 45

debts and has to come up again, it has to keep an eye on the market trends and needs
because one wrong step can lead it to the deepest pit which the company is scared of.
Instead of changing the models each year, they should bring out the quality and
performance at the existing projects by improving the production operations of the
company. The company should focus more on the designs of its products and come up
with more diverse and efficient models.
2. INNOVATION:
Japanese car makers are already providing small car and catering to the needs of the
people in the segment. Fords main competitors in this market are Toyota, Honda and
others. Who are offering products that are priced lower, carrying nice features and their
performance is not under rated in any way. The C-car platforms at Ford require
engineering the products that are innovative to gain the attraction of a large number of
potential buyers.
3. GREEN VEHICLES:
Due to the increased emphasis by the government of the US and other countries in
the production of eco-friendly cars and other vehicles, it has become extremely very
important for every car maker to introduce the cars which are more fuel efficient and
emit less smoke without causing harm to the environment. The Japanese Car maker,
Honda, has introduced a new car called Honda Civic GX as a green car. The car has
won the title of the greenest car of 2011 from the American Council for an EnergyEfficient Economy. Though Ford has also taken initiative of producing environmental
friendly cars with the production of Ford Fiesta SFE (ranked at # 7 in the ACEE list),

PAGE 46

it is desirable that the company should introduce more eco-friendly cars in order to
gain competitive advantage on this front as well.
4. MARKETING:
Today it is an era of marketing. Only those who market them-self well is likely to succeed
in this competitive market. Ford has won the marketer of the year award by highlighting
the features of the product instead of the tech gadgets installed in it. The Fords products
are better than before with the newly devised strategies and promoted and marketed well
by Mr. Farley, VP global marketing and sales. The sales are up 17% double the industry
wide gain of 8.4%. We suggest that the company should continue with the current
marketing strategies and the other promotional channels it is already into. They should
also engage in aggressive marketing and promotional activities to attract the customers
about the newly introduced products. Savvy marketing and re-defined focus can be a
good sign for this iconic company. The company should link up with the TV sponsorships
and engage in the public relations activities to attract the general public about how
concerned the company is towards the social issues.
5. PRICE:
The Fords small world cars are intended to sell in the developing markets and the other
markets around the globe. These markets are highly price sensitive. The customers want
excellent features, quality performance in the affordable prices, which is why there are
various regional competitors in these markets to compete with the Ford with their
products priced low.

PAGE 47

We suggest Ford motors to produce the cars which are better not only in the domains of
features, performance, and fuel efficiency but also in the pricing of the car. The small cars
concept can achieve its goals only if the cars are priced low with all the existing features
of their products.
Recommendations on goals and policies
The following strategic recommendations are designed to address short run and long run
problems facing the company. We believe that Ford faces three distinct challenges:
1) The need to minimize cash burn and bring costs down as quickly as possible in order
to stay afloat in this difficult economy. Losses must be brought under control by 3Q 2009
or the company will face extremely difficult choices regarding its future.
2) The bailout of General Motors and Chrysler has placed Ford in a strategically
Difficult position. While Ford is currently in a much better financial position than
GM or Chrysler, government funding of these competitors generates significant risk.
A highly managed bankruptcysuch as the one being proposed for GMmay lead
To a significant GM cost advantage, thereby mitigating all of the progress Ford has
Made in recent years. In addition, any bankruptcy or liquidation could seriously
Disrupt Fords supply chain.
3) Ford must execute the One Ford vision and continue to differentiate itself from its
competitors even as the economic crisis unfolds. The failure of One Ford or the

PAGE 48

Ford Fiesta model would be disastrous for the company. In recent years, Ford has
Redeveloped a coherent corporate strategy. Ford has avoided the need for government
funding because of its timely financing and strategic pro-activeness. It is critical,
however, to continue these positive trends with the end goal being global profitability and
recapturing market share. Ford should not lose sight of the bigger picture while
attempting to capitalize on GM and Chryslers current weakness.
Recommendations on procedures for strategy review and evaluation
What follows is a list of specific steps we believe the company should evaluate. We
believe that Fords singular focus should be to take the necessary steps to allow short
term survival while ensuring profitability is reached by 2010-2011. We believe that
Fords management is on the right track, but recent progress is tentative and could easily
degenerate given current market and industry conditions.
Divest Volvo
In order to be truly effective, the Volvo brand should have been more fully incorporated
into Fords organizational structure and strategically differentiated from Fords other
lines. Volvo has an excellent reputation, and targets upper middle class consumers
looking for an ultra-safe luxury vehicle at a price point below Mercedes and BMW. Thus,
Volvo had the potential to serve within Fords premium line of vehicles, existing at a
price point comparable to Lincoln. As it stands right now, however, Volvo does not fit
into the One Ford strategy being pursued by the company and its losses continue
unabated. Given current economic conditions, we believe that the sale of Volvo should be

PAGE 49

a high priority of Ford. If completed, this sale should bring in at least an additional five
billion dollars worth of capital, which could either be kept as cash on hand or be used to
buy back debt in a manner similar to the April 2009 restructuring. In addition to pursuing
all available offers, we encourage Ford to specifically target Volvo Group, the Swedish
parent company which sold Volvo Cars to Ford in 1999. Volvo Group continues to
manufacture trucks, busses, construction equipment, and boats within Sweden.
Ford, through the Volvo Cars subsidiary, accounts for 15,000 jobs in Sweden, and in
December 2008 the Swedish government issued a $3.5 billion bailout of Volvo Cars and
Saab. Thus, a precedent already exists for government intervention. We believe that Ford
should leverage this and pressure the Swedish government to support the repurchase of
Volvo Cars by Volvo Group. It is possible that the government would be willing to
provide significant support for the deal, especially if the alternative is an extensive
downsizing of Volvo Cars. While Volvo Group is not the most likely buyer at this time, it
represents the least long term strategic risk to Ford because it poses much less of a threat
to Fords major markets than a sale to a low cost Chinese car manufacturer would.
Volvos worldwide presence and brand reputation make it an attractive target for a car
company seeking entry into the U.S. and the Euro Zone. There are a number of car
companies desperate to gain such access, and two commonly rumored buyers of Volvo
Cars are Chinese carmakers Greely Automotive and Chery Automotive. We believe that
the market value of these companies$435 million and $3.5 billion respectivelymakes
such an acquisition unlikely, however. Changan Motorswhich operates Fords Chinese
joint venture Changan Fordhas also been discussed as a potential buyer. Should any of

PAGE 50

these firms be able to procure the necessary funds, Ford should not hesitate to execute the
sale of Volvo. While the use of Volvo as a beachhead for another low-cost competitor
would be unfortunate, the fiduciary benefits in these uncertain economic times are
undeniable and outweigh these concerns.
Factory and Supply Chain Management
Ford should continue its aggressive push to close and idle factories, with an emphasis on
those factories within the United States and the Euro Zone. In addition to executing these
previously announced closures, we strongly believe that Ford must restructure its supply
chain more quickly than previously anticipated. Ford currently has approximately 1,600
suppliers, and intends to reduce this number by 750. Current instability within the market,
particularly the potential bankruptcy of a competitor, heightens the importance of this
reduction and leads us to recommend deeper cuts in the number of suppliers Ford
contracts with. Ford must examine all of its suppliers and identify those which are critical
to the supply chain. These companies should be prioritized above all others in the
distribution of contracts.
Of particular importance is Visteon, with whom Ford conducted approximately four
billion dollars worth of business in 2008.
Initially vertically integrated within Ford, this subsidiary has faced difficult times since
being spun off in 2000. Visteon was nearly forced to declare bankruptcy in 2005, because
Ford purchased several nonperforming production centers from the company (thesecalled ACH plants which Ford has now nearly wound down). A disruption in production
at Visteon, or other suppliers, is the Greatest short term threat posed at this time.
PAGE 51

Visteons UK subsidiary has already filed for bankruptcy, and the company does not
currently have enough cash on hand to last through the year. Visteon has secured waivers
from the SEC to continue operations through May 30th, but we believe bankruptcy is
imminent after this date unless the government extends an additional line of credit to
parts manufacturers. We strongly urge Ford management to make extensive preparations
for Visteons failure. Viable alternative suppliers should be identified in case bankruptcy
seriously undermines Visteons ability to fulfil contractual obligations.
We are prepared to step in and undergo a complete evaluation of all 1,600
Suppliers and present recommendations for specific reallocations of contracts. With
access to Fords proprietary data and through an evaluation of the sources of these
companies contracts, we can ensure supply chain stability for Ford even in the direst of
circumstances.
Prepare for Liquidation of Chrysler and/or Bankruptcy of GM
Ford should prepare extensive plans for how to deal with bankruptcy of a major
competitor. As of this writing, Chrysler has until April 30 th to reach terms to be purchased
by Fiat or the government has stated it will withhold further capital infusions, effectively
forcing liquidation. The Fiat deal is predicated on Chryslers ability to gain major
concessions from debt holders and the Union of Auto Workers. As the smallest of the Big
Three, the company with the least government investment, and the least flexible debt
situation, a liquidation of Chrysler seems likely to us at Oasis Consulting. We believe that
the government may view this as the least harmful solution to the long term problems
facing American car manufacturers. It would also ratchet up pressure on GM, which
PAGE 52

employs many more American workers and has much greater government investment at
this time.
GM has until June 1st to prove financial solvency or it will be forced into bankruptcy
Proceedings. As with Chrysler, the company must reach agreements with the UAW to cut
labor and legacy costs and work with their creditors to restructure long term debt
obligations. Of the two, the latter is more difficult. In order to achieve the necessary
restructuring, it is estimated that 90% of GM creditors would have to accept debt
conversion of approximately ten cents on the dollar, with the balance given in GM stock.
Government debt has less priority in bankruptcy proceedings than traditional debt,
therefore it is in the governments interest to avoid bankruptcy proceedings. Because the
fate of Chrysler will have such a great impact on the future of General Motors, we do not
believe it is appropriate to predict the fate of GM at this juncture. Regardless of whether
GM does file for bankruptcy or not, Ford must ensure that GM in not explicitly or
implicitly made into a national champion. Part of Fords strategy moving forward must be
to extensively lobby both Congress and the American people. We believe Ford can
demonstrate how providing too favorable conditions to GM will undermine the only
healthy American manufacturerFordand cause long term damage to the American
auto industry. In the event of a GM bankruptcy, the most likely scenario being suggested
is a quick process whereby GM is divided into healthy and unhealthy assets. The good
GM would then emerge while the bad GM would be wound down. This plan represents
an extraordinary amount of risk for Ford, because it would allow GM to significantly
lower its cost structure and undercut Ford in the medium run. If this specific scenario

PAGE 53

does take place, we believe Ford may be forced to restructure under similar conditions or
risk losing market share in the long run.
Until a decision regarding GMs future is reached, Ford should continue extensively
Marketing its vehicles to exploit the competitive advantage which has been created in
GMs dubious future. We specifically recommend taking advantage of the unease among
consumers regarding the legitimacy of competitors warrantees. Small increases in U.S.
market share have already been seen, and increased market share during this weak
economy is a critical step towards lowering average total costs per vehicle. The
bankruptcy or liquidation of either of these competitors would reverberate throughout
Fords supply chain. While we do not doubt that the government will attempt to mitigate
the impact of any Big Three failure of the industry suppliers, we fear that the sudden exit
of many suppliers is inevitable. The risk of a complete industry failure resulting from
such extensive supply line disruption is non-zero, and thus must be treated with the
utmost seriousness.
Product Differentiation
In addition to the short term recommendations highlighted above, we believe it is critical
that Ford continue to prepare and execute long term growth strategies. Fords viability
hinges on its ability to successfully differentiate itself from its competitors, both through
price and quality. We believe that the One Ford vision currently being pursued is a
sound and cogent strategy, but it does have its risks. First and foremost, we are concerned
that the One Ford strategy may be over-pursued. Regional product differentiation is
necessary to ensure that products are sufficiently geared towards disparate global
PAGE 54

preferences. Secondly, while we recognize management was under significant pressure to

effect change, Ford should never again stake, so much of its future on one line of
vehicles.
The Ford Fiesta World Car will determine the future of Ford, and while early reactions
and sales are positive Ford should create a high end equivalent to the Fiesta to capitalize
on similar cost saving measures.
We applaud Ford for its investment in fuel efficient technologies and its recent
development of the Ford Fusion hybrid. Although Ford is a late arrival to the growing
hybrid market, the company has succeeded in delivering a vehicle which is instantly
competitive because of its quality and price. While Ford is still at a disadvantage
compared to Toyota in this subsector, it has launched a lineup of vehicles that has a
chance to redefine the competitive landscape. Based on recent reviews, we believe that
Ford has significantly improved vehicle design processes and factory quality control.
This bodes extremely well for Fords long term success.
Shift Production to Mexico and Eastern Europe
We believe there is no reason for Ford to continue producing the majority of its vehicles
within two regions with extremely high labor costs: the United States and the Euro Zone.
As can be seen in Chart Eight, the United States and the EU Zone account for the
overwhelming majority of production. We believe that Ford should attempt in the long
run to shift much of this production to Mexico and Eastern Europe, which offer the
necessary geographic proximity while having far lower labor and production costs.

PAGE 55

This strategy should take place slowly over several years in order to minimize the
negative public relations and branding effects which may result. In particular, Ford must
be wary of losing its perception as a thoroughly American vehicle. The closure of
nonperforming plants within North America from 2006-2008 has set the stage for any
future growth to take place in Mexico. In Europe, we believe that this reallocation can
occur more quickly and in a much more extensive manner because there is less risk of a
consumer backlash. In 2007, Ford invested $88 million to acquire a car manufacturing
plant owned by the Romanian government and has also announced plans to invest some
$3 billion in manufacturing facilities in Mexico. We hope that these are the first steps in a
broader shift in production towards lower cost locales.
Expand Market Share in China and India
The Chinese automobile market has experienced consistent growth in the past ten years,
and 2008 industry sales surpassed the United States for the first time with nearly ten
million vehicles sold. Ford currently holds agreements with Changan Automotive of
China; through their joint venture Changan Ford the companies manufacture the Ford
Focus, Fiesta, and Mondeo lines. In 2008, this joint venture sold approximately 204,000
vehicles. As a result of a recent stimulus package passed by the government, Chinese
demand for vehicles is expected to rise by nearly 20% in the year 2009. China is the only
major market in which sales growth, let alone growth of this magnitude, is expected. Yet
Ford currently holds only a meager two percentage points of market share in China. The
Ford Fiesta is already experiencing strong sales in China, and we believe that this vehicle

PAGE 56

is the key to enhancing Fords market share. We believe that sales of the sedan and
hatchback Fiesta models combined should surpass the100, 000 unit mark and
significantly boost Fords overall 2009 China sales. Given the economic incentives
provided by the Chinese government and GMs ongoing difficulties, we believe now is the
opportune time for Ford to do a full push to steal market share in China and establish
itself as the dominant American brand. While there is inherent risk to this strategy, we
believe that a narrow window of opportunity exists for the company to overcome its poor
start in the Chinese market. India is a much smaller market, with industry sales holding
steady at two million over the past two years. After twelve years within the Indian
market, Ford has little progress to show. Unlike China, Ford would need to make a
significant capital investment in the Indian market if it wished to ramp up production.
Monthly sales only recently exceeded 2000 units, and Ford only has dealerships in 78
Indian cities. Given the current economic uncertainties, we do not believe that Ford
should invest significant capital in the Indian market at this time. Once the global
economy has stabilized, however, we believe Ford should revisit this question and seek to
expand its operations in India.

Financial Analysis
Overview
Ford is one of the largest automobile manufacturers in the world, with a current market
cap of approximately $10.16 billion. The past five years have been particularly unkind to
shareholders of American automakers, however, and the equity valuation of both General
Motors and Ford Motor has fallen precipitously. Whereas Ford stock traded above $14.00

PAGE 57

per share in February of 2005, it closed at $4.00 on April 17th, 2009. Ford experienced
record losses in 2008, burning through cash on hand at an unprecedented rate. Ford will
likely post continued losses through the 2009 fiscal year, and even optimistic estimates
predict that the company will not return to the black until 2011.
Profitability and Growth
For financial year 2008, Ford reported a net income loss of 14.57 billion dollars ($6.41
per share). The Volvo brand, which Ford is rumored to be shopping, lost $736 million in
the fourth quarter for a total yearly loss of $1.5 billion. South America and Europe were
two bright spots on the balance sheet, but the fact remains that unless Ford can stop the
hemorrhaging in North America it will not survive. The fundamental issue which Ford
must address is its inability to manufacture small vehicles in the United States that can be
sold for a profit.
Ford has engaged in a strategic downsizing since 2004 within the United States, ceding
Market share to rivals GM and Toyota. Ford management recognizes that the company
still does not properly align with current demand, and has divested from many factories
in the past five years. Currently, Ford (under the brands Ford, Lincoln, Mercury, and
Volvo) maintains about 15% of the U.S. domestic market share. In 2008, 13.2 million
vehicles were sold overall in the United States; estimates for 2009 are far bleaker, with
predictions typically ranging from 9 million to 12 million. From January-March 2009,
sales were down 38.3% from the same time frame in the previous year.

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In 2008, the company sold approximately 5.4 million vehicles through over 13,000
dealerships worldwide. Fords market share in Europe is currently 10%, with an
estimated 1.67 million sales. Strategically important countries within the region include
Turkey and Russia, where Ford has achieved above average market penetration. Ford
market share in Canada and Mexico hovers near 12%, while the market penetration in
China and India remains extremely low (1.9% and 1.4% respectively, compared to 12%
and 10% for General Motors).
Liquidity and Solvency
Barring a further deterioration in financial conditions, current estimates predict that Ford
will remain solvent through 2009. The company entered 2009 with approximately fifteen
billion dollars in cash on hand, and drew an additional ten billion dollars from its revolver
in February. Credit Suisse estimates predict Ford will burn through 7 to 8 billion in cash
in 2009; unless automobile sales deteriorate further, solvency should not be an issue for
Ford in 2009.
In late 2008, GM and Chrysler began negotiations with the government to act as a lender
of last resort to prevent the sudden bankruptcy of the two companies. On December 19 th,
2008, the automotive bailout was approved by President Bush and extended $17.4 billion
worth of loans to the two automakers. Further loans were requested and approved in the
first quarter of 2009, however this money has come with stricter restrictions designed to
force the companies to demonstrate long term viability. On March 30th, GM CEO Rick
Wagoner was forced to resign as a stipulation attached to this additional short term
financing provided by the U.S. government. Should Ford be forced to seek additional

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credit in 2009, an occurrence that we consider unlikely, it would likely be able to petition
for and receive government loans.
We believe that Fords recent repurchase of debt (announced April 6th, 2009) was a very
productive step towards ensuring long term financial security. This $9.9 billion debt
reduction was achieved in $2.4 billion in cash and the issuance of an estimated 468
million shares of common stock. This restructuring at less than half of par significantly
improves Fords balance sheet, and represents an estimated interest saving of 500 million
in 2009 alone. 7.0.
Financial Ratio Analysis (January 2008)

Growth Rates %

Ford

Industry

SP-500

Sales (Qtr vs year ago qtr)

9.40

9.40

9.00

Net Income (YTD vs YTD)

NA

111.80

15.40

Net Income (Qtr vs year ago qtr)

51.00

616.60

0.90

Sales (5-Year Annual Avg.)

1.23

6.84

13.05

NA

8.54

19.88

NA

18.86

10.03

NA

10.8

22.9

Net Income (5-Year Annual

Avg.)
Dividends (5-Year Annual Avg.)
Price Ratios
Current P/E Ratio

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P/E Ratio 5-Year High

NA

8.4

22.7

P/E Ratio 5-Year Low

NA

2.8

6.7

Price/Sales Ratio

0.08

0.60

2.49

Price/Book Value

NA

1.50

3.53

Price/Cash Flow Ratio

NA

5.90

10.40

Gross Margin

NA

19.2

33.7

Pre-Tax Margin

-2.2

7.2

17.5

Net Profit Margin

-1.4

3.9

12.4

5Yr Gross Margin (5-Year Avg.)

48.5

20.7

33.4

-1.5

5.6

16.6

-1.0

3.6

11.5

Debt/Equity Ratio

NA

NA

NA

Current Ratio

NA

NA

NA

Quick Ratio

NA

NA

NA

Interest Coverage

NA

NA

NA

Leverage Ratio

NA

NA

NA

Book Value/Share

NA

NA

NA

Profit Margins

5Yr

PreTax

Margin

(5-Year

Avg.)
5Yr Net Profit Margin (5-Year
Avg.)
Financial Condition

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Investment Returns %
Return On Equity

NA

NA

NA

Return On Assets

NA

NA

NA

Return On Capital

NA

NA

NA

Return On Equity (5-Year Avg.)

NA

NA

NA

Return On Assets (5-Year Avg.)

NA

NA

NA

Return On Capital (5-Year Avg.)

NA

NA

NA

Income/Employee

NA

NA

NA

Revenue/Employee

NA

NA

NA

Receivable Turnover

NA

NA

NA

Inventory Turnover

NA

NA

NA

Asset Turnover

NA

NA

NA

Management Efficiency

Adapted from www.moneycentral.msn.com

Date

Avg. P/E

Price/Sales

Price/Book

Net Profit Margin

(%)

12/07

-6.00

0.08

NA

-1.6

12/06

-1.10

0.09

-4.09

-7.9

12/05

11.90

0.09

1.07

0.9

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12/04

9.10

0.18

1.54

1.8

12/03

30.50

0.18

2.51

0.4

Date

Book

Value/ Debt/Equit

ROE

ROA

Interest

Share

(%)

(%)

Coverage

12/07

NA

0.00

NA

NA

NA

12/06

-$1.84

-49.65

364.5

-4.5

NA

12/05

$7.21

11.40

12.2

0.6

-0.2

12/04

$9.52

9.31

18.3

1.1

0.3

12/03

$6.36

15.44

5.5

0.2

NA

www.moneycentral.msn.com

Net Worth Analysis (January 2007 in millions)

1. Stockholders Equity + Goodwill = -3,469 + 5,839

$2,370

2. Net income x 5 = $-12,613 x 5=

$ NA

3. Share price = $6.85/EPS -2.88 =$NA x Net Income $-12,613=

$ NA

4. Number of Shares Outstanding x Share Price = 2,110x $6.85 =

$ 14,453

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Method Average

$8,412

Conclusion
The PESTEL, Porter five forces and SWOT analysis seek to explicate the effect
of competitive forces and the macro-environment in the automotive industry (Wit &
Meyer 2010). It is critical for the strategies used not only effect change for customers and
environmentalists, but also effect positive changes in the profitability of the business
(Ahlstrom & Bruton 2009). Ford has fail to balance the three paradoxes: market vs.
resources in financing its operations, Ford is more resource driven than market driven;
leadership style with managed control, exemplified by its CEO; and the paradox of
globalization and localization, Ford is more global than local by developing brands fit
for America and the world to address competition.
These analytical methods have been used to evaluate the position of Ford automakers in
the US and International markets. In spite of Ford being on a brink to bankruptcy, it
embraced new management in the leadership of its CEO Alan Mulally who devised new
strategies that inspired the ONE Ford campaign, resonating the message of team spirit
among the employees, suppliers, dealers, and customers; which in turn forging their
loyalty. In addition, he inspired a leadership style that inspired success of the automobile
giant, innovation, synergy, and product differentiation for the overseas market. The
company has been under financial distress for quite some time as it has faced huge
bottom line losses in the past. Moreover, the automobile sector doesnt seem to be

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promising as has been detailed in the current and future issues. Hence, in such
circumstances, the investors in equity have lost their interest in the company equities.
Moreover, the company has not paid cash dividends in 2007, 2008 and 2009 as reported
by CNN Money.
Hence, the company had to bend towards debt financing to run their operating expenses.
In fact, the sale of Jaguar and Land Rover again has been used to generate cash to run
operations. The company has not invested in new ventures for a long time and has been
busy closing manufacturing units and firing people. Hence, the company will not be stuck
with large amount of mortgaged assets as such. Hence, overall by choice or by
circumstances, the company has been bent towards debt financing. Consequently, the
company accrued profits, which has enabled them to gain competitive advantage in the
industry.

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