STRATEGIC AUDIT FOR THE FORD CORPORATION

2007

Ford Motor Company Page 1

1. Introduction

Nowadays, it is easy for us to see brands like Sony, McDonald’s, Nike, or Calvin Klein in

the nearest malls, shopping centers, or across the sidewalk in our neighborhoods. Interestingly,

for most of us that have become those brands’ fans should not be worry if we have to travel

abroad since the brands have evolved from local to global brands and are available anywhere in

the world.

In contrast, there are some brands that we used to know very well but suddenly they

disappear or are eliminated in their respective markets. Brands like Puma in sport shoes industry,

Fiat in automobiles or USA.net in free email services are examples of slowing down and thus

worst brands in the world. These conditions, while they are natural and common within today’s

fierce competition, are the results of effectiveness of marketing plan including the incurred

marketing strategy.

Therefore, in business, it is common to find out companies that loose their market share

and no longer have their dominance in their industry. At one occasion, these companies were

predicted to last forever and help shape the future. Then, reality became very different from

general predictions.

British Motorcycle Industry, for instance, was historically known to be the creator of the

first’s motorcycles and pioneer in motorcycle industry. During the golden age, people think that

the industry would grow forever and generate unlimited innovations for the global markets.

However, in the beginning of the 20th century, the industry simply loses their existence.

Concerning the rise and fall of a company, this paper will elaborate a `Strategic Audit`

for the Ford Corporation. The audit composes of eight sections such as current company

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performance, external and internal environment analysis, strategic alternatives and

implementation.

2. Current Situation

2.1. Current performance

There are various factors contributors to the current downtrend of the Ford Motor

Company such as the high employees’ benefits and pension costs, the increasing costs of fuels,

and the decreasing business of manufacturing, and competitors’ better competitive advantages, to

name a few .

However, the most recognized performance is inefficiency. It is said that Ford’s factories

in North America are operating at only 86% capacity compared to 107% of their competition,

Toyota Motor Corp. Management of Ford Motor Company stated that the downsizing program

is crucial to address the excess capacity (Jani, 2002).

In addition, Ford Motor Company also experiences declining sales in its main market,

North America. In 2005, the company sold 3.4 millions of vehicles but a year later the sales

declined into 3 millions of sold vehicles. In terms of revenue, in 2005, the company generated

$153.5 billions and declined into $143.3 billions in 2006. The declining performance is due to

the lose market share in SUV and small truck lines, which have taken most of the company’s

investment and resulted in minimum returns (Ford Motor Company, 2007a).

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2.2. Strategic Posture

2.2.1. Objectives

The company has one main objective, which is to focus on automotive business.

However, this objective is considerably general since managements can justify their actions to

expand into other business as long as it relates to automotive. One obvious action is to provide

financial services that contribute about 10.5 percent of the company’s revenue, previously

represent 13 percent of revenue in 2005 (Ford Motor Company, 2007a).

2.2.2. Strategies

Realizing the fierce competition in automotive industry, the company develops some

anticipation actions to deal with the possible declining sales in North America market. In order

to address market trends, the company decides to rely on four key principles/strategies as

following:

Conduct restructuring in order to help Ford Motor Company to earn profits even in

markets that sell lower volumes of vehicles

Improve product development and eliminating any complexity/difficulties in

manufacturing

Generating and maintaining enough liquidity to finance the two most priority

Encouraging teamwork and accountability throughout the company’s operation

(Ford Motor Company, 2007a).

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3. Strategic Managers

3.1. Board of Directors

Ford Company is considerably a fat organization, composing of 12 persons in Board of

Directors and more than twenty executives. One similar characteristic that Ford’s board of

directors has is their background in which at top level, most of directors have vast experience in

financial and retail services. This fact highlights that Ford has problems and managing their fund

as justified in their strategies (see section 2.2.3) and it also explains why the company also serve

financial service in addition to their core business in automotive manufacturing.

John R. H. Bond (65 years old) previously served as non-executive chairman at HSBC;

Stephen G. Butler (59) used to be Chief Executive Officer at KPMG, LLP; Irvine O. Hockaday,

Jr. used to be Chief Executive Officer, Hallmark Cards, Inc., and many others (Ford Motor

Company, 2007a).

3.2. Top Managements

In addition to board of directors, the company also has vast top managements, composing

of Executive Officers Group and a number of Vice Presidents. According to 2006 Annual

Report, we see that the company’s top managements’ structure are distributed into regional

group in which each region (North America, Europe etc) has one Group Vice President to

address each market needs. Fransisco N Codina, for instance, becomes the Group Vice President

at North America. Meanwhile, John Flemming is the Group Vice President at Europe (Ford

Motor Company, 2007a).

In addition to regional model, the company also has some top managements each is

responsible for particular brand. John G. Parker, for example, is the Group Vice President for

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Mazda; Lewis K Booth is Executive Vice President for Ford’ luxury lines: Volvo, Jaguar, and

Land Rover (Ford Motor Company, 2007a).

4. External Environment (EFAS table is in Excel format)

5. Internal Environment (IFAS table is in Excel format)

6. Analysis of Strategic Factors (SFAS table is in Excel format)

7. Strategic Alternatives & Recommended Strategy: Economics of Scale

According to several resources, Ford’s general strategy is to meet a single goal,

economics of scale. Within the strategy, the company strives for producing vehicles in the most

efficient cost structure and in the most timely manner and sell as many as they can.

Pros

Ford’s production and pricing strategy are mostly directed to achieve faster and cheaper

ways to build cars for market demands. It helps the company to build affordable vehicles

for customers

The strategy helps the company finds the production time cycle from 36 to 24 months

and reducing platforms from 24 to 16. Therefore, the strategy increases time-efficiency

(Smith, 1996).

Cons

Customers are segmented. Therefore, developing affordable price is not heavily true

since customers would think there is a sacrifice to build ‘cheap’ cars like security,

accessories etc.

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7.1. Recommended Strategy

Despite being known as efficient producer of cheaper cars in the historical days, there are

considerable developments within Ford’s strategic directions today. For instance, the company is

now also aiming to be the market leader in the luxury car segment.

The Luxury division is established in 1999 to coordinate their luxury brands like Jaguar,

land Rover, Volvo and Lincoln. Managers of the company believed that by coordinating these

brands, the company is in the right position to become a major force in the luxury segment

(Banks, 2001).

Although, the company has successfully made brand extension for their luxury cars

segments, still there are several recommendations to the Ford Motor Company to help increase

the company’s conditions.

Change of Leadership

According to some automotive analysts, Ford requires a new style of leadership. Besides

providing means to escape the old image, a change of leadership will also send a good

message toward stakeholders, especially within these hard times (the declining market share

in some key markets)

Design a New Market Image

The company is known as producer of high quality and luxury cars with premium prices.

The current image is about stability and elegance. It is about a legacy that is maintained and

hoped to provide customers with the same amount of satisfaction. This image is losing to

futuristic and ‘younger’ designs of cars that offer both quality and distinction. Ford needs to

find it new and better programs to demonstrate the new product image.

Introduce Hybrid Cars: Maintaining Ford’s Brand Name

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Currently, there are many kind hybrid cars from various brands such as Toyota, Honda

and many others. Some examples of famous hybrid cars include the Toyota Prius, Honda

Civic Hybrid (HCH), and the Honda Insight. Where are Ford’s cars? Although hybrid cars

would not saleable within the next one year, still Ford should develop its prototype to tell

customers they cope with the trend.

8. Implementation

Table 1 Implementation Plan

No Activities Budgets

(USD)

Time Schedule (2008)

1 Customer Gathering

(Product Presentation

and Retention

Program)

2,000,000 Detroit Motor Show

Tokyo Motor Show

Frankfurt Motor Show

3 Visiting Universities

(Looking for talents

and conducting

research agreement)

40,000 MIT; March 2007

Texas University; July 2007

Harvard University; Sept 2007

Stanford University; Dec 2007

4 Press Release 30,000 monthly

5 Website Updates 20,000 Any time

9. Evaluation & Control

Table 2Evaluation and Control Plan

No Communication

Activities

Measure for Evaluation/Control

1 Customer Gathering (Product

Presentation and Retention Program)

The number of Audiences at the

Customer Gathering (minimum 500

people per seminar-day)2 Visiting Universities (Looking for

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talents and conducting research

agreement)

Participants/Audience Feedbacks

on product improvement

Post-seminar Sales

Record/Achievement

3 Press Release News Distributed into Media

4 Website Updates Web sites updated once a changes/new

activities occur

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Reference:

Banks, Cliff. (2001). Special Dealership are Part of Ford’s Luxury Strategy. Retrieved

September 17, 2007 from

http://wardsdealer.com/ar/auto_special_dealerships_part/index.html

Cadrain, Diane. (2002) State Programs offer Alternative to Layoffs. Retrieved September 18,

2007 from http://www.stateline.org/live/ViewPage.action?

siteNodeId=136&languageId=1&contentId=14794

Carty, Sharon Silke. (2005). GM, Ford Try to Alter Pricing Strategy. Retrieved September 17,

2007 from http://www.usatoday.com/money/autos/search

Ford Motor Company. (2006). Retrieved September 17, 2007 from

http://en.wikipedia.org/wiki/Ford_Motor_Company

Hoffman, Bryce G. (2005). Slumping Ford Picks Employee Brains. Retrieved September 18,

2007 from http://www.detnews.com/2005/autosinsider/0510/25/C01-359823.htm

Jani, Pranav. Sustar, Lee. (2002). Ford Makes Worker Pay. Retrieved September 17, 2007 from

http://www.socialistworker.org/2002-1/390/390_12_FordLayoffs.shtml

Kotler, Philip. (2002). Marketing Management. New Jersey: Prentice Hall Inc.

International Labor Organization. (2006). Labor Market Trends and Globalization Impact on

Them. Retrieved September 17, 2007 from

http://www.itcilo.it/english/actrav/telearn/global/ilo/seura/mains.htm

Ford Motor Company. (2007a). 2006 Annual Report.

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---. (2007b). GLOBAL MANUFACTURING STRATEGY GIVES FORD COMPETITIVE

ADVANTAGE. Retrieved September 18, 2007 from

http://media.ford.com/article_display.cfm?article_id=13633

---. (2006). Partners and Suppliers. Retrieved September 18, 2007 from

http://www.ford.com/en/company/about/partnersAndSuppliers.htm

Smith, David C. (1996). How Ford’s new Brand Strategy Works. Retrieved September 18, 2007

from http://wardsautoworld.com/ar/search

Tierney, Christine. (2005). Ford Pays Workers to Sell Cars. Retrieved September 18, 2007 from

www.detnews.com/2005/autosinsider/ 0506/17/C01-218739.htm

Work Sharing Unemployment Insurance Program. 2005, EDD Fact Sheet -State of California

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