Ford - Analysis and Implementation PDF

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Nicholas Nerys BPL 5100 Group Presentation – Ford Motor Company V)

Analysis of Company Strategies A. Corporate Level Strategies -Corporate Level Strategies: On a corporate level, Ford plans to focus extensively on sustainability and research to make more efficient cars with lower emission to meet the Global Emission Standards. It also plans to invest more in strong controls and internal corporate governance. On a corporate level, Ford also plans to cut over 1,400 jobs due to increased automation and to begin focusing more on SUV's, pick-up trucks, and MUV's over sedans. This is a larger part of Ford's strategy to make their organization leaner. EXAMPLE: On October 3, 2017, Ford CEO Jim Hackett, along with key members of the management team, has delivered an update on the company's forward strategy, including increasing investment in electric vehicles (EVs) and sport utility vehicles (SUVs). The new strategy is exhaustive in scope, but keeps the company grounded in its role as a vehicle producer. Ford is taking alternative approaches in some areas, although it is largely on the same trajectory as other automakers. The forward strategy includes a significant amount of cost cutting, a shift in capital investment from ICE vehicles to battery electric vehicle (EV) development, and changes to improve and speed up vehicle development. While Ford will continue to identify itself as a mobility company, Hackett also has brought back the fact that Ford builds automobiles to the forefront of the strategy. He said, "The myth of not being in the car business is gone." Hackett believes the future will be one in which people still want and need Ford cars and trucks and commercial vehicles, and the company will not "retreat" from that business. Ford will also look to partnerships in "software and services that further the development of the system itself, but give us a role in monetizing new business models", Hackett said. Hackett identified the five "principles" the company needs to act on. These are: preparing for disruption by ensuring fundamental business fitness; recognizing that Ford will be in the vehicle business, moving both people and goods; Ford vehicles will be "smart and connected"; Ford's new smart, connected vehicles will "thrive in a new transportation operating system"; and Ford will evolve to capitalize on new business opportunities within the new transportation operating system.

Factiva – HIS Global Insight Daily Analysis – Stephanie Brinley – October 5, 2017 – Ford CEO outlines new vision for future, plans increased EV and SUV investment - https://global-factiva-com.remote.baruch.cuny.edu/ga/default.aspx

B. Business Level Strategies (Cost Leadership) - Business Level Strategies: On a business level, Ford does fall under Porter's generic strategy. Porter's Generic Strategy points out that companies, organizations, and firms can gain a competitive edge by pursuing two broad strategies or one of the two or a combination of two strategies. The first is differentiation through cost and the second is differentiation through product or service differentiation.

Competitive Advantage through Cost Leadership and Cost Focus Internationally (in Asia Pacific and emerging markets ) Ford plans to use Cost Focus as its business strategy. This is a competitive strategy which competes by using aggressive discounts that increase sales and helps the organization acquire new customers. When a business launches a product or a service at a discounted rate or a low price and then increases it or removes the discount over a period of time as the product or the service market saturation increases. Traditionally, e-commerce companies use price or cost strategies. Marriott implements this by offering highly competitive rates in the hotel industry. They do this by reducing costs and improving efficiency so that the value can be passed down to consumers. Competitive Advantage through Differentiation and Differentiation Focus Domestically (in the United States, Europe and North America) Ford plans to use differentiation as its business strategy. This is a strategy where organizations gain competitive advantage by differentiating themselves through their core offerings or products and services and the unique value that they being to their clients or customers rather than competing with prices cuts and discounts. A typical example of a non-price strategy would be to follow a product differentiation strategy instead of a price differentiation strategy. Product differentiation plays a major role in strategy. By clearly communicating the value you add to a customer's life, and by being realistic and accurate in defining that core competency or core values curve of that the product brings to the customer's table. Selling the product would be far more easier as it no longer needs to compete purely through its marketing strategy but it can also compete through product differentiation. The decision making process of a consumer depends on the quality, price, and accessibility of a firm's products or services. Price isn't the only factor. There are other factors and areas where the firm could add more value and that is where differentiation comes into play. Disruption is also a byproduct of differentiation. -Aside from manufacturing, Ford has also invested heavily in its future as a mobility provider. In August 2016, the company announced that it plans to release a commercially available fleet of driverless vehicles by 2021. This was reiterated in March 2017, when the company added plans for autonomous cars for consumers by 2031. The company claims it will begin offering a fleet of SAE Level Four driverless vehicles, defined as vehicles that do not require any driver input but which can only operate in certain driving environments like urban areas. BMI Research - https://bmo-bmiresearchcom.remote.baruch.cuny.edu/article/view? article=1303897&service=4&active_pillar=Strategic%20Content

C. Functional Level Strategies –word of mouth, social media, women speaking about confidence, marketing, advertising, materials management, HR, information systems - Functional Level Strategies: On a functional level, Ford plans to have a combination of fixed and a variable costs pay for most of its employees. The company plans to maintain 90% as a fixed pay component and 10 % as variable or incentivized pay. As mentioned before, they do plan to be a leaner organization. The organization also plans to focus more on employee satisfaction and move towards a company that is driven by learning and research. -EXAMPLE: In the short term, Ford is going after material costs first, looking to cut the growth of automotive material costs by 50%, an effort supported by bringing purchasing and product development functions under one leader. Hackett also targets saving about USD4 billion in product engineering costs in five years, while still "investing in emerging technologies and developing the cars, trucks, SUVs [sport utility vehicles] and commercial vehicles that our customers are crazy about". Along with the product engineering cost efficiencies, Hackett said that the plan included a USD10 billion reduction in material costs. Reductions will be from increasing use of common parts and reducing order combinations, also reducing the number of prototypes needed for product development, saving cost and time. In additions to these near-term efforts to reset revenue and reduce costs, Hackett is redesigning the company's business operations, noting that results from these efforts will not show up until well over a year, but "when they come, they stick for

a long term". Hackett expects these changes to also deliver a compound effect on improving profits over time. An example of this, Hackett said, was the costintensive development of the F-Series, which resulted in a lighter truck, higher market share at improved average transaction price, and economy improvement that made the truck corporate average fuel economy (CAFE) positive ‒ the company's "most positive CAFE contributor in the US". For the next-generation F-Series, Hackett indicated that 90% of manufacturing equipment will be reused and it will remain positive for CAFE. In terms of product complexity, Hackett's presentation indicated that Ford will reduce the orderable combinations in the next-generation Focus from 360 to 26; in the Escape from 2,302 to 228; in the Fusion from 35,000 to 96; and in the Explorer from 1,168 to 67. Along with the reduced complexity, Ford is planning to reduce new-vehicle development time by 20%, in part by using more virtual tools such as HoloLens (see United States: 22 September 2017: Forduses Microsoft HoloLens “mixed-reality” technology to speed development), and will reduce product change-over time by 25%, again through increased use of virtual manufacturing tools. There is a focus on improving business "fitness" that will lower costs, release capital, and finance growth. One of the layers of these elements is an increase in partnerships as the company strives to improve emerging-market performance. Capital is being reallocated from cars to trucks and SUVs, "where we can win in the future".

Factiva – HIS Global Insight Daily Analysis – Stephanie Brinley – October 5, 2017 – Ford CEO outlines new vision for future, plans increased EV and SUV investment - https://global-factiva-com.remote.baruch.cuny.edu/ga/default.aspx

D. Global Strategies -Global Strategies: While Ford’s biggest market continues to be the United States, Ford set up production plants in Mexico, Canada, United States, India, Thailand, Portugal, United Kingdom, France, China, Germany, Taiwan, South Africa , Russia, Turkey, Romania, Vietnam, Argentina, Venezuela & Spain. This not only expanded ford's global foot print, but it made Ford the fifth largest automobile manufacturer in the world. Ford's Global Strategies gave it the following competitive advantages: -Financial Advantages: Significantly lower Fixed Costs & Variable Costs allowing the firm to reach the break-even point quickly, ensuring that the factory or the manufacturing unit would be profitable, allowing the company to see its return on investment faster than it would in its parent country (US). -Low Labor Costs: A through assessment of the labor market in the host country, on how it looks right now and how it will look like in the next decade factoring in increased competition, inflation, labor unions, demand for skilled and unskilled workers, policies, and the country's immigration laws will show that outsourcing costs are cheaper primarily because of the low labor costs.

-Taxation laws: In the host country, taxes generally prove to be more favorable than the parent (US) country. The advantage of an international subsidiary is that it'll lower the costs significantly from a manufacturing point of view and it would allow the parent company to save a lot of money on excises, customs, and import and export duties. Outsourcing often used a wholly owned international subsidiary in order to save on costs through an area of business called cost centers. -EXAMPLE: Ford has announced it will move all small car production to Mexico from 2018 in order to make way for other models at its plants in the US, including two new models yet to be officially named. This is in line with the strategy of producing lower-margin small models in lower cost countries and larger highermargin models in the US. This strategy includes investing in a production line for a new SuperDuty truck in Kentucky. - Ford is doubling down on its efforts to expand in India through an alliance with domestic manufacturer Mahindra & Mahindra. - The One Ford strategy, first developed by former CEO Alan Mulally, and now driven by current CEO Mark Fields, involves restructuring the company's global businesses to operate profitably based on demand trends and by adapting an appropriate model mix. In loss-making markets such as South America, the company has already achieved noticeable operating results, despite challenging market conditions due to slower GDP growth and sluggish regional sales volumes. In Europe, Ford followed through with its decision to close selected manufacturing facilities within the region. Ford is also well positioned for growth by strengthening its presence in the sport utility vehicle (SUV) and light truck segment, while expanding in profitable markets such as North America and Asia Pacific. Ford intends to tap the growing SUV segment with new model launches, including the new Ford Explorer. SUVs have traditionally been Ford's strength, and it has been one of the best-selling SUV brands in the US with popular models such as the Ford Escape, Edge, Explorer and Expedition.

BMI Research - https://bmo-bmiresearchcom.remote.baruch.cuny.edu/article/view? article=1303897&service=4&active_pillar=Strategic%20Content

VI)

Implementation Systems A. Organization Structure – org chart, workforce -Organization Structure: Ford is re-arranging its organizational structure to become a leaner organization with increased inter-departmental collaboration and seamless communication, instead of working in silos. The other major shift in Ford's organizational structure is the fact that it is giving its senior management more power in decision making and plans to spend more on top tier talent in its senior management.

-EXAMPLE: Ford Motor Co. said Tuesday (October 24) that four top executives will voluntarily depart by the end of the year, a substantial change in top management as Chief Executive Jim Hackett aims to make the Dearborn, Mich.based carmaker more competitive in a rapidly changing industry. The heads of global marketing, quality and human resources are retiring after long careers, while the head of global strategy, who joined Ford in 2015 under previous CEO Mark Fields, has elected to leave the company. The changes come just weeks after Hackett laid out a plan to cut $14 billion in costs over the next five years while offering a blueprint for a portfolio of new smart vehicles and transportation services. “As we develop our strategy to become the most trusted mobility company, designing smart vehicles for a smart world, we will continue to reshape the organization to deliver the most value for our customers and all of our stakeholders,” said Hackett. “The changes we are announcing today will further align resources and improve efficiencies throughout our global markets and operations. At the same time, I want to recognize the truly significant contributions of the senior leaders departing from Ford and thank them for their many years of service.” Factiva – Forbes.com – Top Ford Execs Leaving As Hackett Reshapes Thr Automaker For The Future – Joann Muller - https://global-factivacom.remote.baruch.cuny.edu/ga/default.aspx A firm’s organizational structure defines the configuration of organizational components and their system of interaction. In Ford’s case, the organizational structure directly relates to the global automotive industry condition. The international scope of Ford’s operations also determines the key organizational structure components needed to withstand competition and market risks. In this regard, Ford’s position as the second biggest U.S.-based automobile manufacturer is an indication of its organizational structure’s effectiveness in supporting the firm for continuing business growth and high performance. A firm’s organizational structure defines the configuration of organizational components and their system of interaction. In Ford’s case, the organizational structure directly relates to the global automotive industry condition. The international scope of Ford’s operations also determines the key organizational structure components needed to withstand competition and market risks. In this regard, Ford’s position as the structure’s effectiveness in supporting the firm second biggest U.S.-based automobile manufacturer is an indication of its organizational for continuing business growth and high performance. Corporate Hierarchy. Ford has a traditional corporate hierarchy in its organizational structure. For example, Executive Vice Presidents report to CEO Mark Fields. Middle managers report to these executive VPs. This characteristic of Ford’s organizational structure supports traditional business management approaches that aim for effective top-down control. Regional Geographic Divisions. Ford has large geographic divisions in its organizational structure. Typically, global companies divide their operations into several regions per continent or subcontinent. However, Ford’s organizational s tructure is divided into only three regional geographic divisions that cover all its markets around the world. A potential effect of this feature of the organizational structure is the relative ease of integration of business strategies. Ford’s main regional geographic divisions are (a) The Americas, (b) Europe,

Middle East, and Africa, and (c) Asia Pacific. An executive VP heads each division. Global Functional Groups. Ford Motor Company’s organizational structure also has functional groups, each of which represents a specific business function. A Vice President heads each of these groups. The main functional groups in Ford’s organizational structure are as follows:  Global Manufacturing and Labor Affairs  Global Marketing, Sales and Service  Human Resources and Corporate Services  Quality and New Model Launch  Global Product Development  Government and Community Relations  Global Purchasing  Communications  Finance  Legal  Accounting

Ford Motor Company’s Organizational Structure Advantages & Disadvantages The corporate hierarchy in Ford’s organizational structure has the advantage of ensuring global direction and control. Also, the global functional groups maintain such hierarchy through functional support, such as HR management to maintain Ford’s workforce. On the other hand, the large regional geographic divisions have the advantage of easily implementing integrated policies and strategies throughout Ford’s organizational structure. However, these large regional geographic divisions also simplify the company’s approach to its markets. In this simplification, Ford’s organizational structure has the disadvantage or risk of disregarding the significant unique conditions or needs of national markets.

References     

Child, J. (1972). Organizational structure, environment and performance: The role of strategic choice. Sociology, 6(1), 1-22. Ford Motor Company (2015). Governance and Management Structures. Ford Motor Company Form 10-K, 2014. Markides, C. C., & Williamson, P. J. (1996). Corporate diversification and organizational structure: A resource-based view. Academy of Management journal, 39(2), 340367. Martin, R., Muuls, M., de Preux, L. B., & Wagner, U. J. (2012). Anatomy of a paradox: Management practices, organizational structure and energy efficiency. Journal of Environmental Economics and Management, 63(2), 208-223.

B. Financial Control Systems – rev and EPS 3 yr price stock chart, roe, credit rating -Financial Control System: Ford's financial controls involve maintaining low costs through their Global Strategy and by lowering the cost of procurement, vendors,

and their supply chain. They also plan to invest more on compliance after the recent emissions scandal with Volkswagen. For accurate financial reporting, Ford is also revamping its IT team to comply with the Sarbanes-Oxley 404 compliance standards Section 404.A.1.1 – Disclose security safeguards to independent auditors. Section 404.A.2 – Disclose security breaches to independent auditors. Section 404.B – Disclose failures of security safeguards to independent auditors. To disclose accounting and balance sheets publicly just like firms listed on the stock markets, as required by the Securities and Exchange Commission.

C. Strategic (Non-Financial) Control Systems – low cost strategy, input controls (supply chain, personnel control), process controls (efficiency, safety, controls), output controls (product quality, environmental control, regulation control, sustainability, social programs -Strategic (Non-Financial) Control Systems: On a stra...