Ford Motor Company SWOT Analysis

"Ford Motor Company is a global company with two core businesses: Automotive and Financial Services. The Automotive

business consists of the design, development , manufacture, sale and service of cars, trucks and service parts. In 2003, the

Company organized its Automotive business as two primary segments, Americas and International. The Americas

segment includes primarily the sale of Ford, Lincoln and Mercury brand vehicles and related service parts in North

America and Ford- brand vehicles and related service parts in South America. The International seg ment includes the sale

of Ford-brand vehicles and related service parts outside of North and South America and the sale of Premier Automotive

Group brand vehicl es and related service parts throughout the world" (Yahoo Finance).

Ford's chairman and CEO, Bill Ford has a simple strategy, "Our vision for the fu ture is simple: We want to build great

products, a strong business, and a better world." Ford's vision is, "To become the world's leading consumer company for a

utomotive products and services" (Ford.com).

Ford has been focusing on cutting costs to increase margins more than its compet itors. In 1997, Ford cut $1 billion in

costs as a result of work suggestions and using standardized parts for different Ford models. As a result of using standa

rdized parts, Ford was able to decrease the number of inventory parts, which dec reased the chance of inventory parts not

in stock. This meant the assembly plant would be shut down less for out of stock parts, saving Ford money (Stevenson 54

8).

Ford has used reverse engineering in the development of their products. The Taur us is one example of this tactic. Ford

examined the close competitors of the Tau rus to see which parts on each car were the best of the group. Ford then designe

d the same parts as well or even better than the competitions. Since the Taurus had the best parts when compared with its

competitors, the Taurus was viewed as the best-in-class car. This tactic allowed Ford to "leapfrog" ahead of the compe

tition in the family sedan category (Stevenson 130).

Ford has been an innovator in the auto industry when it comes to technology. "Fo rd Motor Company has aggressively

adopted videoconferencing and computer-assiste d design and manufacturing technologies." These innovations have led

Ford to sta ying successful and efficient in the auto industry. Another technology innovatio n is the "use an online

computer network to share ideas, create the actual desig ns, integrate the designs for the various parts and components, and

build and te st prototypes via computer simulations" (Thompson and Strickland 157). Ford has recently added Voice over

IP phones to help control costs. Ford paid SBC $100 mi llion to install and manage a network of 50,000 VoIP phones.

"The immediate bene fit is going to be efficiencies in cost and operations related to moves, adds an d changes"

(Pappalardo 14). Ford is hoping that VoIP phones will become a long t erm cost saver and help the company save their

profit margins. "Ford Motor Co's state-of-the-art F-150 truck-assembly facility, expected to be operational by su mmer and

running at full capacity by year's end, is a body shop and final stagin g area where trucks are assembled and prepped

before being shipped to dealers. I t's also Ford's first completely wireless assembly factory." The factory utilize s a flexible

body shop, automated-materials-replenishment system, "self-adjustin g platforms at each bay station, and software-driven

systems that monitor mainte nance for tooling, conveyers, robots, and other machines. The wireless infrastru cture Ford is

deploying for parts replenishment and vehicle tracking comes from WhereNet Corp Inventory replenishment is driven by

Ford's Auto Call, part of its synchronous material-replenishment trigger system, with assistance from about 5 8 antennas

around the compound" (InformationWeek 26). This wireless technology w ill allow Ford to be more effective and efficient

in all operations of manufactu ring vehicles at this facility.

Bill Ford said, "We've made solid progress in the last two and a half years and we're building momentum. We're not going

to let up on our efforts to raise our q uality, lower our costs, or improve on the fundamentals of our business, and we' ll

continue the biggest product roll-out in our company's history" (Company News ). Ford has been introducing new

products to the market which include the all-ne w Ford Mustang, Ford GT, Ford Five Hundred, Ford Freestyle, and the

redesigned F -Series Super Duty; the all-new Mercury Montego and Mercury Mariner; the all-new Ford Escape Hybrid -

the world's only hybrid SUV; the redesigned Ford Focus in Europe and Asia; the Land Rover LR3; the Volvo S40 and

V50; and the long wheelba se Jaguar XJ" (Company News).

The first quarter of 2004 was a great quarter for Ford Motor Company. Ford repor ted earning of $1.9 billion. This was

"twice as much as the company had told Wal l Street to expect and far more than historical rival General Motors, which

made only $ 1.3 billion." Ford's management says that "Rather than relying on windfa ll profits from a couple of hot-

selling models that might cool off later, the co mpany showed a mastery of the myriad small but important details that

bolster th e bottom line. It reduced overheads, cut product expenditures and slashed warran ty costs. At the same time, it

boosted revenues by targeting incentives and incr easing the mix of high-profit vehicles, such as sports utility vehicles

(SUVs) w ith four-wheel-drive packages" (Taylor 10).

"Behind the earnings hoopla, something even more interesting is beginning to eme rge: Bill Ford's strategy for the

company. It is uncharacteristically audacious and sweet in its apparent simplicity. Ford wants to make more money selling

fewe r cars. In Detroit that makes him a virtual heretic and threatens to turn accept ed industry practice on its head. This is

a business where the fixed costs are s o enormous that bosses like DaimlerChrysler's Juergen Schrempp have staked their

company's future on selling more cars, whatever the immediate impact on profits . Pushing fewer cars out of the factory

also means accepting lower market share, blasphemous to some ears, particularly since Ford has been losing share since 1

995. And prioritizing profits might also threaten brand loyalty, a fragile commo dity. Customers who shop elsewhere

because Ford's prices are a few dollars highe r could be lost forever" (Taylor 10).

Bill Ford is taking a very new outlook on the automobile industry. While economi es of scale always determined if an

automobile was successful or not, Bill Ford wants to make money by selling fewer cars. This viewpoint is an unbelievable

sta nce from the CEO of an automobile manufacturer.

Ford has been struggling to maintain consistent sales numbers. Its first quarter numbers were twice what was expected, but

the rest of the quarters have been la gging. Ford hopes that the release of the many different new vehicles will revit alize

Ford. The financial numbers will turn out decent for the year due to the m oney made on the financing side. Some critics

say that the financing side of For d is what makes the money. Ford counters with saying that they must sell vehicle s

before the financing side can make the money.

Some recommendations are needed for Ford to maximize profits. Ford needs to capi talize on all the new vehicles coming

on to the market. Aggressive advertising c ampaigns might entice consumers to go to a Ford dealer and look at the new

produ cts. The only way Ford can make money from theses new vehicles is to sell a lot of them. Costs need to be

reasonable for the appropriate class of vehicles.

Along with selling all the new vehicles, Ford must make sure that the new vehicl es are what the consumer wants. The

consumer won't buy the car if he or she does n't like its appearance, performance, and price. If Ford can meet these three

ne eds better than its competitors can, Ford will gain market share. Extensive test ing is needed before a new vehicle is

launched onto the market. If Ford has not done enough testing and surveys of potential customers, sales might lag causing

Ford not to get much return on its investment.

Ford needs to stop using reverse engineering on the development of their automob iles. If reverse engineering is used, then

Ford is behind its competitors. Ford must stay on the cutting edge for developing new ideas. Stealing its competitor' s

ideas does not make Ford first to the market with a new concept. Ford appears that it wants to be seen as an innovator.

This is seen with the first wireless t ruck manufacturer facility and using VoIP phones. Ford needs to find ways to cut costs

while maintaining or improving efficiency. To be viewed as an innovator, Ford must continue to be the pacesetter for

anything new related to the auto man ufacturer sector.

An advantage for releasing new products by Ford would be the potential profit ma king opportunity. Humans have a

natural tendency to be competitive. This competi tive nature carries over to automobiles. One person will usually want a

better c ar or truck than his or her neighbor. If a new car or truck is released on the m arket, the neighbor with the new car

or truck that very few others have will hav e bragging rights. This explains why brand new vehicle sales are very large

imme diately after the release date. People want what others don't have. Ford is play ing this game. Releasing several new

cars and trucks will hopefully entice the m asses to purchase a new automobile. The down side of this is the cost to create

the new vehicle. Millions and even billions of dollars are put into designing, d eveloping, testing, and producing a new

vehicle. In order to make a profit on th e specific car or truck, thousands of that type of vehicle must be sold in order to

cover the development costs. If that number of sales is not met, the car or truck was not a success. Ford would not make a

profit on it and would end up los ing money on the project.

There are many advantages for Ford to be an innovator in its industry. Costs can usually be saved in the long run. The

publicity of the new innovation will help sales. Newer efficient ways of running the company can be found. The major

disa dvantage of innovation is the initial cost of the innovation. Savings in the lon g run might be large, but the costs to

switch from the old way of doing somethin g to a new way are usually a sizeable amount. If the innovation doesn't work,

th e company will lose lots of money. They would lose the initial investment to swi tch and create new costs to switch

back to the old way of doing something.

SWOT Analysis: Strengths: 1)Ranked as number 2 automaker in US. 2) P ositive brand image and high brand equity in consumers mind. 3) Apart from automaker FORD also operates two service businesses: ( 1) Ford motor credit company and (2) Genuineparts and M otor craft. 4) C onsistent technology innovation. 5) P roduct diversity: Jaguar, Volvo, Mercury, Lincoln, Mazda, Land Rover. 6) T heproduction of hybrid energy vehicles. 7) Development of hydrogenp ower with Brit ishPetroleum (BP).

W eaknesses: 1)N egative net income in the year 2006. 2) Decrease in sales and revenues and increase in o p erating expenses. 3) Brand image distortion due to sales to rental cars agencies. 4) Lack of Gas efficient cars of FORD and GM on dealers lots that consumers desire. 5) H uge Loss faced byN orthA merican division. & this division is expected to beprofitable after 3 years. In that 3 year t ime s pan any competitor can cater and gain market share of N orthAmerican division.

6) Late in entering the market of southA sia i.e.C hina, India, etc which canp rove to be a huge market. 7) N o growth and showing losses in market share.

Opportunity: 1) Can improve operations inN orth America to cater the market. 2) C an target hugepotential market of southA sia. 3) C an shift its operation inC hina to gain the advantage of low costproduction. 4) Ford's focus on hybrid electric vehicles could hel p in turning around its operations worldwide. 5) A cquisitions from major competitors. 6) Forward integration (can cut the cost of distributors and their incentives ) & backward integration (can cut the cost of raw material ).

Threats: 1)Rising Gas & fuel cost. 2) Increasing interest rates. 3) Distributors concerns of manufacturers and change of manufacturers to ease down the problems of rising costs of health care pension and labor costs. 4) W eak US dollar. 5) Decline of home construction have has effected the demand for trucks sales. 6) C o2 emission standards for l ight and heavy vehicles have become stricter in US. 7) Increased manufacturers cost to p roduce engines. 8) Low organizational morale. 9) Tough competition from other motor vehicle companies like Toyota, etc 10 ) Threats of substitutes 11) Change in foreign exchange rates.