1 Ford Motor Strategic Analysis

Executive Summary

Ford Motor Company (FORD), a global automotive industry leader based in Dearborn, Mich.,
manufacturing and distributing automobile across six continents. The company’s automobile
brands include, Ford, Lincoln, Mercury, Mazda, Aston Martin, Jaguar, Land Rover and Volvo.
The company also provides financial services through Ford Motor Credit Company.

In coming years we will transform Ford Motor Company into a growing and profitable global
automaker. We have also analyzed our problem and have aggressively reorganized our work to
match production to customer need. At the same time, we have to shift to a more balanced
product line up offering quality, safety, fuel economy and hybrid vehicles. Our product quality is
unsurpassed by competitors as we have more vehicles.

The automotive industry faced a worst financial crisis and a slowdown in all major global
markets. Like all automakers, Ford Motor Company was adversely impacted by these economic
conditions. However, the strategic plan we came out with will help Ford Motor Company to
endure these current situations and position ourselves for future success. Our strategic plans are:
-

 Develop Asian Market (China) for Ford Division for global expansion

 New product development – Fuel efficient vehicle, Hybrid Vehicle that customers want
and value.

The Ford Motor Company design, develops, manufactures, market, and sells them worldwide. It
is experiencing an intricate time as the automobile market is stagnant in North America, while
those in other parts are still growing especially Asian countries like China and India. China is
soon to become the leader in automobile industry as it is experiencing immense growth. After its
entry into the World Trade Organization (WTO) in 2001, the development of the automotive
industry further accelerated. Other than this china is also encouraging the development of clean
and fuel efficient vehicle.

Other than that we have to implement a disciplined business plan process to regularly review our
business environment, risks and opportunity, our strategies, and identify areas that need special
attention and pursue opportunity to improve our plan. In addition, we will have strategic
alliances to help us execute our plan to deal with business realities and create an exciting and
viable Ford business going forward.
2 Ford Motor Strategic Analysis

Company Overview

Ford motor Company (Ford) is one of the largest automotive manufacturers in the world. It
manufactures and distributes automobile across six continents. The company’s automotive
brands include Lincoln, Mercury, Mazda, Volvo, Jaguar, Land Rover, and Aston Martin. Other
than these they have services such as Ford Motor credit, Genuine Parts and Services and Motor
craft. The company primarily operates in the US and the Europe. It is headquartered in Dearborn,
Michigan.

Business Description

Ford is one of the Big three manufacturers in the US. The other companies that include are
Daimler Chrysler and General Motors (GM). Ford motors manufacture and distribute
automobiles across six continents. With almost 108 plants worldwide, the company’s core and
affiliated automotive brands include Lincoln, Mercury, Mazda, Volvo, Jaguar, Land Rover, and
Aston Martin. Other than these Ford Motors also operate other businesses: Automotive and
services.

The automotive business consists of the design, development, manufacture, sales and services of
trucks, and service parts. In addition to producing and selling cars and trucks, ford also provides
retail customers with a range of after sales services and products through its dealer’s network.
The financial services segment operates through the company subsidiary, Ford Motor Credit
Company (Ford Credit). Ford Credit offers a wide variety of automotive financing products to,
and through automotive dealers throughout the world. Ford credit’s primary financial products
fall into the three categories retail financing, wholesale financing and other financing.
3 Ford Motor Strategic Analysis

MAJOR PRODUCTS & SERVICES

Ford Motor Company is one of the largest automotive manufacturers in the world. It
manufactures and distributes across ix continents. The company’s key products and services
include the following:

Products Services: -

Passengers Cars Financial Services: -

Trucks  Retail financing
Buses and vans  Wholesale financing
Sport utility vehicles (SUV)  Third – party claim management
Vehicle accessories services
After sales services: -
 Extended repair services
 After sales vehicle parts

Brands:

 Ford
 Mercury
 Lincoln
 Volvo
 Jaguar
 Land rover
 Aston martin

Automotive Service brands

 Ford Credit
 Ford Genuine Parts and Service
 Motocraft
4 Ford Motor Strategic Analysis

Ford Vision

“FORD’s vision is to become the world’s leading consumer company for

automotive products and services.”

FORD’s Mission

We are a global family with a proud heritage passionately committed to providing personal
mobility for people around the world. We anticipate consumer need and deliver outstanding
products and services that improve people’s lives. Our business is driven by our consumer focus,
creativity, resourcefulness, and entrepreneurial spirit. The health and safety of our people are
paramount. We are a leader in environment responsibility. Our integrity is never compromised
and we make a positive contribution to society. We constantly strive to improve in everything we
do. Guided by these values, we provide superior return to our shareholders.

Purposed Statement

Our purposed vision statement for FORD Motors is to become the leader in automobile industry.
While our purposed mission statement is to lead the team of highly qualified professionals,
dedicated to provide service to our customer. We also emphasizes on:

o Create a safe environment

o Provide a quality product
o Enhance research and development

Objectives

Ford motors objective is to restructure to operate profitability at the current market, development
of new market and accelerate product development to meet our customers’ needs and work
together effectively as one team, leveraging our global assets.
5 Ford Motor Strategic Analysis

PESTAL Analysis

Political Factor

Since, 11th September 2001, the terrorist attacks on U.S, followed by war in Afghanistan and Iraq
have reduced the automobile sales in U.S. The U.S government policy for automobile industry
has not been favorable. The economic recession in Argentina in 2002 adversely affected car
sales and production fell down.

Economical Factor

The rise in demand for Japanese car because of its fuel efficiency and pricing have severely
affected ford motors as they have to reduce their price to sell their vehicle to maintain market
share. The other economical factor is the rising prices of oil have a negative effect on consumer
as it inclines to change their vehicles to use alternatives energy.

Social Factors

Cars are viewed as status symbol and choice of cars influences their perseverance’s. The demand
for luxury cars are in rise in Europe and Asia as there are more millionaires. Smaller cars are on
rise in India and some European countries were traffic is high to facilitate access in busy centers.

Technological Factors

Technological advancement is vital for Ford Motors to stay competitive. Continuous research
and development (R&D) is necessary to attract new buyers and firms cannot be laggard. Firms in
automobile industry must develop alternative energy such as Ford is developing Hybrid vehicle
with British Petroleum (BP). They have to also develop their supply chains to ensure quicker
delivery to customers. Recently Toyota had to recall its Corolla brand of vehicle because of its
acceleration problem. This kind of problem will severely have an effect on its reputation.

Competitive Factor

Competition in Automobile industry can be described as intense. GM, Toyota motors and
Daimler Chrysler are three major competitors. Toyota is intensifying its presence and their
production plans suggest the company could lead the top position. Ford has to come out with
strategies to make cars that customer desire. Japanese manufactures are coming out with sleek
design and price incentives, causing Ford and GM to lose market share.
6 Ford Motor Strategic Analysis

Competitive Analysis: - Porter’s Five Forces Models

Potential entry of new competitors

There are distinctive barriers to entry in the automobile industry. The top leaders of this industry
have great power in terms of reputation, finance, technology and large product portfolios. It
would be very difficult for new company to compete with the above. It is seen that the existing
firms are joining forces making it difficult for new players to survive. But, few Chinese
companies are entering the industry. It is believed that they were able to overcome the barriers to
entry due to the pricing of their vehicles.

Threat of Substitutes

Due to increase awareness about global warming people are using other forms of transportation
such as public buses, train or bicycles. This can help reduce pollution and traffic conjunction. As
governments is encouraging to develop alternative energy. If it happens it may pose problems for
the current manufacturers in the industry.
7 Ford Motor Strategic Analysis

Competitive Rivalry

The automobile market is the most competitive market in the world. In addition, companies are
trying to reduce cost by moving to lower cost countries such as Asian countries and try
increasing market share as competitive rivalry is very high in this industry. Ford Motors in the
past was very successful due to their advantages relating to volume and scale and it was
anticipates that they would become the biggest player in the industry taking the place of GM.
However, due to the actions taken by their arch rival, GM, Ford Motors continue to remain in
second place.

Bargaining Power of suppliers

Supplier’s power has a certain affect on the firms in this industry but remains relatively low.
They provide certain components necessary for the production of the vehicles and also spare
parts. However, in order to benefit from economies of scale, firms are reducing the numbers of
their suppliers and increasing their orders on their existing suppliers.

Bargaining Power of Buyer

The bargaining power of the buyer is high but it is greatly affected by inflation, interest rate and
fluctuation in oil prices. The competition is high for that product that is similar with minor
differences. Manufacturers such as Ford and Toyota are coming out with aggressive marketing
techniques to influence potential buyers.
8 Ford Motor Strategic Analysis

Ford Motors Company Opportunities and Threat

Opportunities

1. Growing automobile industry in Asian Market – China

2. Increase Market penetration in International Market (New Market)
3. Ford can benefit from devaluated dollars
4. Product Development - Hybrid Vehicle (New Segment)

Threats

1. Continuous increase in oil price, raw material and interest rate may affect the sales
2. Highly competitive environment
3. Current recession may impact the sales (Customers purchasing power)
4. Union in America are very Strong
5. Competitors are trying to minimize the differentiation by imitations
6. Entry barriers in international Markets
 9 Ford Motor Strategic Analysis

4: Comprehensive Profile Matrix (CPM)

Critical Success FORD GM TOYOTA

Factors Weight

Rating Score Rating Score Rating Score

Customer Loyalty 0.13 3 0.39 3 0.39 3 0.39
Market Share - U.S 0.12 2 0.24 4 0.48 3 0.36
Product Branding 0.10 3 0.30 3 0.30 4 0.40
Global Expansion 0.10 4 0.40 2 0.20 3 0.30
Advertisement 0.10 3 0.30 4 0.40 3 0.30
R&D 0.10 4 0.40 2 0.20 3 0.30
Product Quality 0.08 4 0.32 3 0.24 2 0.16
Financial Strength 0.07 2 0.14 3 0.21 3 0.21
Price Competitiveness 0.06 3 0.18 3 0.18 3 0.18
Dealer Network 0.05 3 0.15 4 0.20 3 0.15
Employee Morale 0.04 1 0.04 2 0.08 3 0.12
Management 0.04 1 0.04 2 0.08 3 0.12
Corporate Social Resp. 0.01 2 0.02 3 0.03 2 0.02

Total 1.00 2.92 2.99 3.01

10 Ford Motor Strategic Analysis

5: External Factor Evaluation (EFE) Matrix

KEY EXTERNAL FACTORS WEIGHT Rating Wgt. Score

OPPORTUNITIES

1.Growing automobile industry in Asian Market – China 0.12 4 0.48

2. More market penetration in Int'l Market because of its 0.10 4 0.40
wide variety of brands
3. Ford can benefit from devaluated dollar 0.10 3 0.30
4. Hybrid Vehicles - New Segment 0.05 3 0.15

THREAT

5. Continuous increase in Oil price, raw material and interest 0.12 1 0.12
rate may affect the sales
6. highly crowded and competitive environment 0.11 1 0.11
7. Current recession may impact the sales (Customer 0.10 1 0.10
purchasing power)
8. Union in America are very strong 0.10 1 0.10
9. Competitors are trying to minimize the differentiation by 0.08 2 0.16
imitation
10. Decline in U.S real estate have affected the demand the 0.07 2 0.14
Ford Trucks
11. Entry barriers in international market 0.05 1 0.05

TOTAL 1.00 2.11

11 Ford Motor Strategic Analysis

6: Ford Motors Internal Strength and Weakness

Strength

 Ford is American icon, it enjoys the benefit of good reputation

 Strong market presence – Operating in Six continents
 Wide variety of products targeting all levels of customers
 Continuous R&D to innovate latest product
 Profitable financial division – Ford Financing

Weakness

 Decline of Market Share – North America Market

 Production Capacity – Most manufactured in America while competitors manufacture all
over
 Poor financial declaration – Ford Motors
 Closed number of plant due to high operating cost
 Rising health cost and Pension
 Less Control over dealer’s network
 Tarnished brand images - dealers sales
12 Ford Motor Strategic Analysis

Internal Factor Evaluation (IFE) matrix

KEY INTERNAL FACTORS WEIGHT Rating Wgt. Score

STRENGTH
1. Ford is American icon, it enjoys the benefit of good
reputation 0.12 4 0.48
2. Strong Market Presence - Operating in Six Continents 0.10 3 0.30
3. Wide variety of products targeting all levels of customers 0.10 4 0.40
4. Continuous R & D to innovate latest Product 0.08 4 0.32
5. Profitable financial division – Ford Financing 0.05 3 0.15

WEAKNESS

6. The decline of market Share - North American Market 0.12 1 0.12

7. Production Capacity - Most manufactured in America
while competitors manufacture all over 0.10 1 0.10
8. Poor financial declaration – Ford Motors 0.08 1 0.08
9. Closed no of Plant in U.S due to high operating cost. 0.08 1 0.08
10. Rising health cost and pension 0.07 2 0.14
11. Less control over its dealers network 0.05 2 0.10
12. Tarnished brand images - Dealers sales 0.05 2 0.10

TOTAL 1.00 2.37

13 Ford Motor Strategic Analysis

8: Matching Stage

SWOT

SO Strategies WO Strategies

Strong Icon and wide variety of Restructuring FORD to reduce cost

products can help Ford to open Plant such as raw material, Labor cost or
in Asia - China sells off unprofitable business.
(S1, S3, O1,O2) ( W3, W4, O3)

Continuous R & D can to develop Increase Market Share by entering New

hybrid automobile Market
(S4, O4) (W1, O1)

ST Strategies WT Strategies

Increase market penetration to Minimize losses by closing down

create awareness in the highly
competitive market
(S1, T1)
Use pioneering R& D to differentiate
your products from competitors
(S3, T4)
operation that are losing money
(W4, W5, T1, T2)
Focus on equal opportunity and come
out with new policies to handle rising
health cost and pension.
(W5, T3)
14 Ford Motor Strategic Analysis

b. SPACE MATRIX

FINANCIAL STRENGTH (FS) ENVIRONMENTAL STABILITY (ES)

Return on Investment (ROI) 1 Rate of Inflation -4

Leverage 1 Technological Changes -3
Net Income 2 Price Elasticity of Demand -3
Net Asset 2 Competitive Pressure -6
Return on Equity 1 Barriers to entry to Market -2
Financial Strengths (FS) 1.4 Environmental Stability (ES) -3.6

COMPETITIVE ADVANTAGE (CA) INDUSTRY STRENGTHS (IS)

Market Share -3 Growth Potential 5

Product Quality -2 Profit Potential 3
Customer Loyalty -2 Financial 6
Technological Know – How -1 Resource Utilization 3
Control over suppliers -2 Easy of Entry into the market 4
Competitive Advantages (CA) -2 Industry Strengths (IS) 4.2

According to the Space Matrix, the directional vector appears in the lower right or competitive
quadrant of the SPACE matrix, indicating competitive strategies. Ford Motors is having
competitive advantages in a high – growth industry. So, Ford Motors competitive strategies may
include backward, forward, and horizontal integration; market penetration; market development
and product development.
15 Ford Motor Strategic Analysis

c. BCG

The BCG Matrix allows Ford Motors multidivisional to manage its portfolios of businesses by
examining the relative market share position and the industry growth rate of each division
relative to all other divisions in the organization.

Quadrant I (Question Mark), Ford Motors Genuine Parts and services and Motorcraft represent
low market share position; they compete in a high growth industry. These business portfolios
cash needs are high and their cash generation is low. So, Ford Motors must decide whether to
strengthen them by pursuing an intensive strategy or to sell them.

Quadrant II (Star), Ford Motor and Ford Credit and Financing represents the firm’s best long run
opportunities and profitability. They should receive substantial investment to strengthen their
dominant position.

Quadrants III (Cash Cow), Mazda, Lincoln and Mercury have a high relative market share
position but compete in a low – growth industry. These businesses generate cash in excess of
their needs. Product development can be attractive strategies.

Quadrant IV (Dogs), Volvo, Aston Martin, Jaguar and Land Rover division of Ford have a low
market share and competes in slow or no industry sales growth. Because of their weak internal
and external position, these businesses are advised to divest.
16 Ford Motor Strategic Analysis

d. IE Matrix

The IE Matrix for Ford Motor Company is based on two key dimensions: the IFE and the EFE.
IE matrix is divided into three major regions that have different strategies implication. Grow and
build falls into quadrant I, II and IV; intensive or integrative can be most appropriate for Ford
Motors.

e. Grand Strategy

Grand strategy is a popular tool for

formulating alternative strategies. Ford Motors Company is in an excellent strategic position. For
this company, market development and product development is an appropriate strategies. Ford
motors can take advantage of external opportunities and develop a market in several areas for
instance china or develop hybrid vehicle.
 17 Ford Motor Strategic Analysis

f. QSPM

Asian Product
Market Devp - Fuel
efficient Car
STRATEGIC ALTERNATIVES development
/ Hybrid car

Key Factors Weight AS TAS AS TAS

OPPORTUNITIES
1.Growing automobile industry in Asian Market especially China and India 0.12 4 0.48 2 0.24
2. More market penetration in International Market 0.10 4 0.40 3 0.30
3. Ford can benefit from devaluated dollar 0.10 4 0.40 4 0.40
4. Hybrid Vehicles - New Segment 0.05 4 0.20 4 0.20

THREAT
1. Continuous increase in Oil price, raw material and interest rate may affect 0.12 2 0.24 2 0.24
the sales
2. Highly crowded and competitive environment 0.12 2 0.22 3 0.36
3. Current recession may impact the sales (Customer purchasing power) 0.11 2 0.10 2 0.22
4. Union in America are very strong 0.10 1 0.10 1 0.10
5. Competitors are trying to minimize the differentiation by imitation 0.09 3 0.27 2 0.18
6. Decline in U.S real estate have affected the demand the Ford Trucks 0.09 3 0.27 3 0.27
1.00
STRENGTH
1. Ford is American icon, it enjoys the benefit of good reputation 0.12 3 0.36 3 0.36
2. Strong Market Presence - Operating in Six Continents 0.10 4 0.40 2 0.20
3. Wide variety of products targeting all levels of customers 0.10 4 0.40 4 0.40
4. Continuous R & D to innovate latest Product 0.08 2 0.16 4 0.32
5. Profitable financial division 0.05

WEAKNESS
1. The decline of market Share - Especially, North American Market 0.12 1 0.12 1 0.12
2. Production Capacity - Ford produces most of the Cars in U.S where as 0.10 1 0.10 1 0.10
competitors may be strategically located worldwide
3. Poor financial declaration 0.08 1 1 0.08
4. Closed no of Plant in U.S due to high operating cost. 0.08
5. Rising health cost and pension 0.07 2 0.14 2 0.14
6. Ford motors have less control over its dealers 0.05 3 0.15 3 0.15
7. Tarnished brand images - Through dealers sales 0.05 2 0.10 2 0.10

TOTAL 1.00 4.61 4.48

18 Ford Motor Strategic Analysis

Ford Motor Company came out with the best two strategies that can help them be competitive in
the automobile industry. These two strategies are: -

1. Develop Asian Market (China) for Ford Division

2. New Product Development – Fuel Efficient Vehicle / Hybrid Vehicle.

Strategy 1: Develop Asian Market (China) for Ford Division

Advantages: China is emerging as the biggest auto market in the world. Since, Chinese
government is actively developing a car culture and car industry it is the perfect time for Ford
motors to tap in that great market opportunities due to its rapid economy growth and huge
market.

Disadvantages: China Market has its fair share of challenges, ranging from inadequate market
data, inappropriate entry strategy, and lack of access to sales channels, difficult in finding the
right partners and cultural differences.

Strategy 2: New Product Development – Fuel Efficient Vehicle / Hybrid Vehicle.

Advantages: New Product development gives you first – mover advantage by being the first to
enter the market, business gains over its actual and potential rivals. Ford Motors is developing
new product (Hybrid and Fuel efficient vehicle) to develop new / existing market or segment for
existing product. Ford Motors can capture market share more easily without having to worry
rivals trying to capture the same market.

Disadvantage: Sometimes, competitors may benefit from Ford Motors by just following the lead
and being able to capture greater market share, despite entering late. There is a huge expense in
terms of high research and development (R&D) cost and marketing cost necessary to educate
public about their new product. The competitors can learn from the experience of the Ford
Motors and they may not face such high research and development costs if they are able to create
similar product using the existing technology.
19 Ford Motor Strategic Analysis

Recommendation and implication.

Ford Motors Company strategies

Ford Motors Company strategy will be to develop market in china. This will increase their
presence in the global auto market. Since, China is increasing its demand for vehicles as the
country is becoming more and more progressive.

We will implement our strategy by investing US $ 490 million to build a new, state – of – the art
and highly flexible plant in Shenzhen, China where our production will begin before end of
August, 2008. The automobiles to be assembled at this plant will be suited to needs of Chinese
motorists. Ford Motors at china will roll out some successful models such as premiere and mid –
size vehicles, small cars, SUVs and commercial vehicles. We will offer models which have and
is currently popular in the American and European market.

11: Specific annual objectives and policies

Ford motors company’s objective is to restructure to operate profitability at the current market,
development of new market and accelerate product development to meet our customers’ needs
and work together effectively as one team, leveraging our global assets.

In order to strengthen the financial condition, these policies should also be taken. They are: -

 Restructuring employee’s salary and achieving additional efficiency

 Reduce inventory cost
 Long term restructuring actions
 Increase warranty cost.
20 Ford Motor Strategic Analysis

References

 Strategic Management: Concepts and Cases, 12/E, Fred David. Publisher: Prentice
Hall, USA

 Bak, Richard. Henry and Edsel: The Creation of the Ford Empire (2003)

 Bardou; Jean-Pierre, Jean-Jacques Chanaron, Patrick Fridenson, and James M. Laux.

The Automobile Revolution: The Impact of an Industry University of North Carolina
Press, 1982
 Maynard, Micheline. The End of Detroit: How the Big Three Lost Their Grip on the
American Car Market (2003)
 http://strategyclub.com

 http://ford.com

 FORD Annual Report - 2008 – About the company