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  • Level: GCSE
  • Subject: Maths
  • Word count: 4026

Ford Motor Company

Extracts from this document...


Value Based Strategy                Ford Motor Company


Title                                        Page

EXECUTIVE SUMMARY                        i

Contents                        ii

1        BACKGROUND                        1

1.1        Ford Motor Company                        1

1.2        Motor Industry                        1

2        CURRENT POSITION                        2

2.1        Competitive Position                        2

2.2        Current Strategy                        3

2.3        Metrics                        5

3        STRATEGIC OPTIONS                        6

3.1        Options & Evaluation of Options                        6

3.2        Preferred Options                         10

4        LIMITATIONS                        11

5        REFERENCES                        12



1.1        Ford Motor Company

Ford was the pioneer of the motor vehicle. The Ford Model T earned inventor Henry Ford a place in history and with it the foundation on which he, along with 11 others, based the Ford Motor Company. Today, Ford Motor Company is a family of automotive brands consisting of: Ford, Lincoln, Mercury, Mazda, Jaguar, Land Rover, Aston Martin, and Volvo, employing 350,321 (Yahoo Finance) workers in more than 200 countries.

1.2        Motor Industry

The American oligopoly in the motor industry, consisting of Ford, General Motors and Chrysler, has suffered from poor financial results recently. As reported by www.guardian.co.uk (16/06/03), “the big three US car-makers are wrestling with the combined effects of over-capacity, growing competition from Europe (such as BMW) and Japan (such as Toyota), huge pension and health care costs, and a damaging increase in incentives to get customers into the showrooms and the prospects of slumping sales”.

A real sign that the car industry was in the midst of major change came when www.reuters.com (25/01/04) reported that Toyota had overtaken Ford as the world’s second-biggest automobile manufacturer. The Japanese firm’s strategy of focusing on quality, efficient manufacturing and targeting new markets (such as the fast-growing Asian market) paid off with their market capitalisation, at $120bn, coming to more than the combined totals of the “big three”.

The main value driver for the motor industry is platforms, or production lines. The Japanese

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2.2.2 Improve efficiency of remaining production plants

Ford carried out a business review of their five major assembly plants, before implementing a reorganisation program in order to improve efficiency and flexibility within the plants. This concluded that ‘Genk would remain the main factory for Mondeo cars’; the other plants in Europe could ‘produce B (Fiesta Size) and C (Focus size) cars’ but one plant would become a ‘flex plant’ which would be able to switch production between models depending upon changes in demand. Ford is thus addressing its value driver cars per platform, by introducing multi-car production lines (modelled on Toyota’s operations). For example the ‘Jaguar X-400, Ford’s proposed MPV and the new Mondeo will be produced from the same CDW 132 platform’ European Business Review Year: 2003 Volume: 15 Number: 2 Page: 77 – 86). This will improve economies of scale; reduce fixed costs and enables Ford to respond more quickly to shifts in customer demand. Ford has stated that ‘its internal productivity data show a 15.8% improvement from 1999 to 2002, to 19.7 hours per vehicle’ (‘Business Week’, 3860, 50’)

2.2.3 Reduce internal costs

Ford has carried out a drive to drastically cut fixed costs. 2000 workers were made redundant in mainland Europe, part of the aim to reduce the workforce by 10%. Several production plants have been closed and Mazda will now produce ‘Fiesta clones at its Valencia plant in Spain’. Plus they have looked at removing the upper and middle management’s annual bonuses to further reduce fixed costs.

In terms of reducing variable costs the company aim to reduce raw material costs between 2001 and 2004 by ‘10% from their 2000 figure of $18 billion and spending on tools by $1.2 billion a year over this period’ (European Business Review Year: 2003 Volume: 15 Number: 2 Page: 77 – 86).

2.2.4        Reduce project research and development time costs

Ford has been hit particularly hard by not addressing this problem.

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The practical problems of the investigation were:

  • News articles regarding the Ford Motor Company may contain reporting bias.
  • Current strategy is derived from newspaper reports and company statements. These are bound to be misleading and will not cover every aspect of the company’s strategy, parts of which will probably be secret.
  • Certain business laws and legislations would make it hard to implement some of the strategic options that are available to Ford.

All these factors have had an effect in the way that this investigation was carried out, and are responsible for the way in which the report has been documented and reported.



Can Ford Fix This Flat?’, ‘Business Week’, 3860, 50

‘Detroit Tries It the Japanese Way’, Business Week, 26/01/04,3867, 76)

‘Ford Feels the Pressure’, ‘Strategic Direction’, 2003, 19(1), 9-12

‘Big Three Car Bosses Fight for Pole Position’, ‘Strategic Direction’, 2003, 19(11), 10-13

‘Restructuring Ford Europe’, ‘European Business Review’ Year: 2003 Volume: 15 Number: 2 Page: 77 – 86

‘PEDAL TO THE METAL; Enough is enough -- Detroit is filling showrooms with new cars to beat back foreign rivals’ ‘Business Week. New York’: Jan 12, 2004. , Iss. 3865; pg. 30

Financial Resources

DataStream (Aston University Library)

Internet Resources

www.guardian.co.uk, 16/06/03, ‘Ford goes in for refit after 100 years’

www.reuters.com, 25/01/04, ‘Toyota overtakes Ford as No.2 car maker’

http://finance.yahoo.com/, Yahoo Finance

http://www.autointell-news.com/News-2002/January-2002/January-2002-3/January-16-02-p4.htm - Ford Motor Company Announces Revitalisation Plans

http://www.detnews.com/2002/autosinsider/0209/25/a01-596413.htm - Truby (2002), Ford Dealer Program Under Fire, Detroit News

http://www.susanto.id.au/papers/JITFORD.asp - Susanto (2003), Just In Time Ford

http://www.forbes.com/reuters/newswire/2004/03/02/rtr1282302.html - Ford's Scheele sees deflationary price environment

http://www.forbes.com/2003/12/15/cx_dl_1215feat.html - Lienhert (2004), The Rising Chinese Car Market

Other sources

Faulkner, Bowman. (1995) ‘The Essence of Competitive Strategy’, Prentice-Hall

Barker (2001) ‘Determining Value’, Prentice-Hall

Banham (2002) ‘The Ford Century’, Tehabi

Group D6                05/05/2007

...read more.

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