2016 Fall Semester

Strategic Management : Big Case

2009120085 Hajun Lee

2012150244 Kyungho In

2016952299 Xu Zhiwen

2013170774 Syazwani Aqilah

2012130774 Hakyung Hong

 Conten
ts
A. Firm Analysis

B. Competitor Analysis

C. Problem Identification

D. Recommendation
i. Focusing on SUV Market
ii. More investment in EV
Market
iii. Targeting Global CV
Market

E. Implementation Plan
 Conten
ts
A. Firm Analysis

B. Competitor Analysis

C. Problem Identification

D. Recommendation
i. Focusing on SUV Market
ii. More investment in EV
Market
iii. Targeting Global CV
Market

E. Implementation Plan
 A. Company Introduction

Founded byHenry Fordand incorporated on June 16,

1903
Sells automobiles and commercial vehicles under
theFordbrand and most luxury cars under
theLincolnbrand
Ford also owns BrazilianSUVmanufacturer, Troller, and
Australian performance car manufacturerFPV
Vision :
People working together as a lean, global enterprise to make
peoples lives better through automotive and mobility leadership.
 A. Internal : Value Chain Analysis

Firm infrastructure: General Administration, Financial

Planning, Quality management; Focus to preserve and
enhance financial, environmental and social value
HRM: Strong management with continuous evaluation
process; Healthy relation with labor union
Technology development: Product responsibility starts at the
planning and design stage; R&D play a key role in the development
of sustainable products
High-tech information technology to integrate suppliers
Procurement: Complying with all relevant legislation (timely, low-
cost, and high quality of raw materials); Engages with its supplier
base on social, ethical and environmental standards; Strong long
lasting relationships with suppliers and efficient inventory
management
After
Inbound Outbound Marketing
Operations Sales
Logistics Logistics & Sales
Servic
e
 A. Internal : Value Chain Analysis - Primary Activities

1. Inbound 2. Operations
Logistics . Global scale
commitment
. Building strong
relationships with
suppliers and
engaging strategic
suppliers
. Developing shared
commitment and
supplier capability
. Quality Operating
System (QOS)
 A. Internal : Value Chain Analysis - Primary Activities

3. Outbound 4. Marketing &

Logistics Sales
. Optimizing Packaging . Pre-owned car sales
 A. Internal : Value Chain Analysis - Primary Activities

5. After-sale
Service

. Ford warranties
. Roadside assistance
. Ford dealer network
. Ford parts plus
dealers
. Regular servicing
 A. External & Internal: SWOT Analysis

STRENGHTS WEAKNESSES
Geographically
Slowing R&D
diversified revenue
streams spending
Profitability of
Pickup trucks product
line smaller vehicle
models
Brand reputation
Declining U.S market
loyalty
share
OPPORTUNITIES THREATS
Potential of Chinese,
Indian and other Increased competition
markets Increased governemnt
Improving U.S regulation
economic conditions Vulnerability to fuel prices
 A. External & Internal: SWOT Analysis - Strength

Geographically
Geographically diversified
diversified revenue
revenue Brand
Brand reputation
reputation &
& loyalty
loyalty
streams
streams
Ford Sales

Source : 2015 Ford

Annual Report
Pickup
Pickup trucks
trucks product
product line
line
Rank Best- 2015 2014
sellin
g
truck
1 Ford F- 780,35 753,85
Series 4 1
2 Chevor 600,54 529,75
let 4 5
Silvera Source : Bad Car Good
do
 A. External & Internal: SWOT Analysis - Weakness

Slowing
Slowing R&D
R&D Spending
Spending
Compan 2015 % As a % 2014 % As a %
y R&D change revenue R&D change revenue
(US $bn) from s (US $bn) from s
2014 2013
Ford 6.7 0 4.5 6.7 8 4.7
Toyota 8.4 10.3 3.7 7.6 12.8 3.5
Volkswag 14 0 6.9 14 20.2 7.1
en
Source : Annual report of each
GM 7.5 1.4 4.9 7.4 company2.8 4.7
Declining
Declining U.S.
U.S. market
market share
share

Source : Annual report of

each company
 A. External & Internal : SWOT Analysis - Weakness

Profitability
Profitability of
of smaller
smaller vehicle
vehicle models
models

Emerging Markets Light Vehicle Growth

Market value($ in millions)

$4,159 $4,383
$3,840
$3,564
$3,068 $3,294

2013 2014 2015 2016 2017 2018

Source : Orr & Boss
 A. External & Internal : SWOT Analysis - Opportunity

Potential
Potential of
of Chinese,
Chinese, Indian
Indian and
and other
other markets
markets

Car Sales In China Forecast of the global middle class

population 3500
3,228

3000
2500
2000 1,740

1500
1000 703
680525
664
2009
500 338
332 313
251
333 181
Population in millions 2020*
0 2030*

Source : Statista

Source : Statista
 A. External & Internal : SWOT Analysis - Opportunity

Improving
Improving U.S.
U.S. economic
economic conditions
conditions

Car sales in U.S.

20,000 +5.8%

18,000 17,386
16,435
16,000

14,000
+12.7
12,000 % 2014
- 9,861
10,000 2.1% 8,747 2015
Car sales (thousands)
8,000
7,6887,524

6,000

4,000

2,000

0
Cars Trucks Total
Source :
WardsAuto
 A. External & Internal : SWOT Analysis - Threat

Increased
Increased competition
competition Vulnerability
Vulnerability to
to fuel
fuel prices
prices

Small Large
vehicle vehicle
s s

Fuel
Price

Increasing
Increasing government
government regulation
regulation

Reducing greenhouse gas

emissions
encouraging fuel efficiency
initiatives
increasing production cost
 Conten
ts
A. Firm Analysis

B. Competitor Analysis

C. Problem Identification

D. Recommendation
i. Focusing on SUV Market
ii. More investment in EV
Market
iii. Targeting Global CV
Market

E. Implementation Plan
 B. Competitor Analysis : Mission and
Vision Vision

General Motors Chrysler

Mission Statement Mission Statement

We win when the customer says we win Cars, Customers, and Returning to
Profitability

Five Principles to guide its business Vision

1. Safety and Quality First
2. Create Life-Long Customers
3. Innovate
4. Deliver Long-Term Investment Value
5. Make a Positive Difference
To build cars and trucks people
want to buy, will enjoy driving
and will want to buy again
 B. Competitor Analysis : Strengths and Weaknesses

General Motors

STRENGHTS WEAKNESSES
Global presence
Strong brand High cost structure
portfolio Bureaucratic
Strong presence in culture
China
Knowledge of home
market
Chrysler
OPPORTUNITIES THREATS
STRENGHTS WEAKNESSES
High fleet sales way Due to high fleet sales, there
above industry is also a non-preference by
average customers for some of the
Domination in Chrysler models
minivan market Limited market share (4th in
Reputation for V-8 U.S market in 2015)
Hemi engines Lax preparation for future
green car
 B. Competitor Analysis : R&D and Profitability

R&D Expense
R&D
R&D Expense
Expense 9000
8000
7000
- Slow increase in R&D 6000
Ford
GM
5000
spending 4000
Chrysler

- R&D spending is weak 3000

2000
compared to foreign 1000
companies such as 0
2010 2011 2012 2013 2014 2015
Volkswagen and Toyota
Net Income
25000
Net
Net Income
Income
20000
Ford - Large decrease in net
GM
15000
Chrysler
income from 2011
10000 - Unstable earnings with
5000 relatively higher volatility
0 than competitors Hard
2010 2011 2012 2013 2014 2015
to predict
 Conten
ts
A. Firm Analysis

B. Competitor Analysis

C. Problem Identification

D. Recommendation
i. Focusing on SUV Market
ii. More investment in EV
Market
iii. Targeting Global CV
Market

E. Implementation Plan
C. Problem Identification : Low Operating Margin

Low
Low Operating
Operating Margin
Margin

- Ford has one of the lowest

operating margin of 8.2%
- Lowest compared to its
competitors
- Ford 's5-Year Average
operating margin Growth
Ratewas-20.20%per year
- F's Operating Margin is
rankedlowerthan
58%of the
1258Companies
in theGlobal Auto
Manufacturersindustry.
( Industry Median: 5.21 vs.
F: 4.28 )
 C. Problem Identification : Increasing Competition

Increasing
Increasing Competition
Competition

Toyota, Honda, Nissan and Hyundai >8% of the market

share
Internationalization of auto industry requires existing
players to constantly adapt, utilize and innovate
 C. Problem Identification : Declining Market Share

Fords
Fords worldwide
worldwide sales
sales

2010 2011 2012 2013 2014 2015

U.S 16.4 16.5 15.2 15.7 14.7 14.7
Europ
8.4 8.3 7.9 7.3 7.2 7.7
e
(Sources: Ford Sustainability
Report)

Fords
Fords worldwide
worldwide sales
sales fell
fell 4
4 per
per cent
cent to
to 1.5
1.5 million
million
vehicles
vehicles
Down in every market except Asia
As of Oct 2016, overall U.S sales down 12% versus a year
ago
Ford
Ford will
will idle
idle its
its Wayne,
Wayne, Mich.,
Mich., car
car factory
factory by
by the
the
end
end of
of 2016
2016
To better match supply and demand
 Conten
ts
A. Firm Analysis

B. Competitor Analysis

C. Problem Identification

D. Recommendation
i. Focusing on SUV Market
ii. More investment in EV
Market
iii. Targeting Global CV
Market

E. Implementation Plan
 D. Recommendation : Focusing on SUV market

Domestic:
Domestic: Market
Market Trend
Trend

Current increase of light duty truck sales in US

Sales is decreasing for cars

Source : The Wall Street Journal

D. Recommendation : Focusing on SUV market

Domestic:
Domestic: Competitor
Competitor (GM)
(GM)

Source : The Wall Street Journal

 D. Recommendation : Focusing on SUV market

Global:
Global: China
China

SUVs market in China is

rising
100

90
Customer trends is
favourable to SUVs 80

70
- SUVs combine the looks of a car 60

and the functionality and power 50 SUV

of a utility vehicle, over sedans 40 sedan

30

20

Geographical factors help 10

demand positively 0
2010 2011 2012 2013 2014 2015 2016
- In the smaller cities of China,
Source : Bloomberg
these vehicles find more use
due to the bumpy road
conditions
 D. Recommendation : Focusing on SUV market

The
The need
need of
of improvising
improvising Fords
Fords SUV
SUV to
to create
create competitive
competitive
advantages
advantages

Fords SUV : Function

+ Fuel Efficiency

Source : Google Frontpage

Methods
Methods
Tapping
Tapping SUVs
SUVs market
market Tapping
Tapping SUVs
SUVs market
market

International strategies: Increase R&D on

Global Strategy engine research
Increasing production of
SUV
 Conten
ts
A. Firm Analysis

B. Competitor Analysis

C. Problem Identification

D. Recommendation
i. Focusing on SUV Market
ii. More investment in EV
Market
iii. Targeting Global CV
Market

E. Implementation Plan
 D. Recommendation : More investment in EV Market

Types
Types of
of EV(Electric
EV(Electric Vehicles)
Vehicles)

ICE Internal Combustion Engines

PHEV Plug-in hybrid electric vehicles

HEV Hybrid electric vehicles BEV Battery electric

vehicles
 D. Recommendation : More investment in EV Market

EV
EV Market
Market Growth
Growth

Source: www.iea.org
ELECTRIC VEHICLES stocks has increased 1000%
during 2010-2015
 D. Recommendation : More investment in EV Market

Comparison
Comparison of
of EVs
EVs
Time to Range
MPG(EP Top
boost(0- HP Price (per
A) Speed
60) charge)
Ford
Focus 110/99 9.9sec 143hp 85mph $30,045 76miles
electric
GM
$37,495 -
Chevrolet 128/110 6.5sec 200hp 93mph 190miles
$41,780
Bolt
Fiat
122/108 8.4sec 147hp 88mph $32,795 84 miles
500e
Tesla
Unknown(Production will start in 2017) $35,000 215miles
model 3
 D. Recommendation : More investment in EV Market

Forecast
Forecast of
of EV
EV
Improveme
nt of
batteries for
electric car
is expected
to be
positive

Source: US Department of Energy

 D. Recommendation : More investment in EV Market

Suggestion
Suggestion
Increase R&D expenses on EV
- Improve Batteries for electric car
- The company aims to bring 13 new
electrified vehicles to market by 2020
- Ford said it plans to invest $4.5 billion
over the next four years to develop
new electric vehicles. (Source: WSJ) The Ford C-MAX
Energi
Install charging station
- Not enough fast-charging stations
for convenient long-distance travel.
- Volkswagen, Daimler, BMW and
Ford on Nov 29th,2016 announced
they will build 400 charging stations
starting next year by establishing
joint venture (Source: Financial
times)
Teslas
Supercharger
 Conten
ts
A. Firm Analysis

B. Competitor Analysis

C. Problem Identification

D. Recommendation
i. Focusing on SUV Market
ii. More investment in EV
Market
iii. Targeting Global CV
Market

E. Implementation Plan
 D. Recommendation : Targeting Global CV Market

Targeting
Targeting the
the emerging
emerging market,
market, especially
especially in
in commercial
commercial vehicle
vehicle

Market Market Market Sub

Segment Segment
Rally cars
Sports
Cars Racing
Ford cars
Motor Cars
Economic
Buses
Vehicles
Trucks

Top
Top 10
10 Emerging
Emerging Market
Market
 D. Recommendation : Targeting Global CV Market

Ford has produced the best-selling commercial vehicle

Profitability of commercial vehicle is much better than that of
smaller vehicle
Commercial
Commercial Trucks
Trucks Product
Product Line
Line Profitability
Profitability of
of CV
CV vs
vs PV
PV
Ran %
Best-Selling Truck 2015 2014
k change
780,35 753,85
1 Ford F-Series 3.5
4 1
2
Chevrolet 600,54 529,75
13.4
$8,000 ~ $10,000
Silverado 4 5 (Margin on each
451,11 439,78
3 RAM P/U
6 9
2.6 Ford F-series truck)
224,13 211,83
4 GMC Sierra 5.8
9 3
179,56 155,04
5 Toyota Tacoma 15.8
2 1
(Source : Good Car Bad Car)

$2,500
(Pretax profit in NA
per vehicle sold)

(Source : Ford)
 D. Recommendation : Targeting Global CV Market

U.S. economy positively impacts on commercial vehicle industry

Most of sales are replacement sales & Four strong competitors
exist
Housing
Housing starts
starts vs.
vs. MDT
MDT Demand
Demand from
from truck
truck
transportation
transportation

(Source : IHS Markit) (Source : IHS Markit)

High
High competition
competition in
in U.S.
U.S. CV
CV Market
Market
(Source : IBIS World)

Market share 9.20% 12.30% 18.80% 29.60% 30.10%

Navistar International Corp. AB Volvo PACCAR Inc.

Daimler AG Other
 D. Recommendation : Targeting Global CV Market

Continuing Higher Fixed- Higher Cargo Raising Demand

Urbanization asset Transportation For Commercial
& Industrialization Investment Demand Vehicle
The 15 largest emerging Urbanization & To follow up the economic Higher demand for cargo
market is experiencing industrialization is growth in the emerging transportation in the
the biggest capital continuing unabated in markets, cargo emerging markets drives
outflows since the 2008 the emerging market, transportation demand is higher demand for CV
global financial crisis investment on also increasing
infrastructure is also
Emerging markets are in increasing
the process of rapid
growth and Highways, Buildings,
industrialization Airports
Infrastructure
Infrastructure investment
investment in
in Truck
Truck Sales
Sales by
by region
region in
in 2020
2020
India
India
Ch i n a In d i a
HD MD HD MD

327
272 201

211 1303 141

1017 116 293
536 155
113
2008 2010 2020 2008 2010 2020
(Source : JD Power, China National Statistics Bureau, Booz&Company
(Source : Government of India Planning
Commission) Analysis)
 Conten
ts
A. Firm Analysis

B. Competitor Analysis

C. Problem Identification

D. Recommendation
i. Focusing on SUV Market
ii. More investment in EV
Market
iii. Targeting Global CV
Market

E. Implementation Plan
 E. Implementation : Open the New Market

Full investment in production, sales, and after-sales

structures
Recognizing local market mechanisms, success in the
long term Truck
Truck Market
Market Entry
Entry Model
Model Options
Options

Characteristic Situation
No foreign manufacturing expertise
Exportin High cost, low control Requires investment only in
g distribution
Needs to connect with a local
Strategi Shared cost/resources/risks partner
c Problems of integration Facing uncertain situations
Alliance
Quick access to new markets Needs rapid cross-border access
Acquisitio
n High costs, complex negotiation to international markets
# of firms in the industry is growing
Complex, often costly
New Wholly fast
owned High risk, maximum control,
subsidiary
The need for global integration is
Potential AAR high Source : Strategic Management
 E. Implementation : Global Value Chain

Global
Global Value
Value Chain
Chain

Situation Advantage
Starting a business by building Cost advantage, competitiveness
a few, isolated facilities of manufacturing
Step 1

Integrate these facilities Ford can use these markets as

procurement sources
Step 2
Lack understanding of new
customers
Get help from local partners
No major dealership groups in the
Step 3
market

Build R&D, PD centers Support businesses in new markets

Step 4 Complete the global value chain

Source : Booz & Company analysis

 E. Implementation : Exploit the Growth in New Market

Recognize real opportunities, and acts

decisively
Enormous globalby
opportunity is available
Truck sales region
Truck sales by region One
One Ford
Ford Strategy
Strategy
3500
3000
2500 NAFTA
2000 Europe
1500 IEA
1000 BRIC
500 Other
0
2006 2013 2020
(Source : IHS Markit)
Growth
Growth in
in emerging
emerging market
market based
based on
on clear
clear path
path to
to
profitability
profitability

(Source : Ford)