MBA 6024 Ford Corporate Strategy

Ford Corporate Strategy

FP-MBA 6024-001

Abstract

While Ford has had a difficult time in recent years with their ongoing issues with profitability and the difficulties faced by the automotive industries, it is a company driven by a singular goal, which has allowed them to grow strategically through their tumultuous times. They have done this by focusing on a few main strategies: 1) growing the vertical supply chain that they manage 2) expanding and regionalizing their global markets and being more strategic about the offerings in the market and 3) expanding their financing and new technology markets within the United States. This allows them to remain focused while still attempting to increase profits and manage an increasingly competitive field.

Corporate Strategy

Product Scope

Ford’s product scope is fairly narrow, but their ability to be strategic allows them to maximize their products scope. Ford’s main activities consist of three major parts: a vertical supply chain integration where they own the factories that are creating parts and pieces; the vehicles that they sell to dealers and their certified dealers sell to consumers; and the financing arm of their business that they use to get more consumers vehicles by offering incentive financing and loans. This product scope, while narrow, covers the major functions of the business. Today, Ford is exploring some additional products scope including self-driving and autonomous vehicles and is investing more into the technology arm of their business.

Geographical Scope

Ford continues to expand geographically, covering more areas of the world through their global departments and creating vehicles that best fit the needs and cultures of the local populations that they need. In addition, the company has seen decreasing profitability in the United States, but they have been increasing their profitability around the world. This expansion has allowed them to grow and support other business operations while increasing their vertical scope and supply chain.

Corporate Structure

Key Management Systems

Ford Motor Company has structured their systems based on a combination strategy of geography and key business lines. Historically, Ford has been a family run business where Ford heirs have run the companies. However, in more recent times Ford has been looking to the outside for new management to best develop their leadership pipeline and expertise. Currently, their CEO, Jim Hackett, who was named in 2017, has a background of running companies through times of downsizing and turmoil, but also a background in Ford’s business innovation division. Hackett’s main management strategy is to “streamline Ford’s hierarchy and speed up decision-making” due to increasing competition, especially in the areas of automation and self-driving cars.

Ford’s Vice President was named because of his role at UBER and will help assist helping with the self-driving and autonomous technology. Other key hires are more geopgraphy based, with Vice Presidents overseeing Europe, Africa and the Middle East and another Vice President in charge of China and Asia. They have also cut more white-collar jobs that will help to streamline processes over the coming years.

Diversification, Vertical Integration and Globalization

Ford Motor Company was one of the very first examples of a company using a strategy of vertical integration in their business operations, starting all the way back with the company’s founding. Ford owned everything from the rubber plantations for the tire creation, railroads for transportation and more. When the 1960’s and 1970’s rolled around and foreign—and especially Chinese– manufacturing became easier to use and significantly cheaper, businesses, including Ford, began to outsource their supply chain. Now, vertical integration is becoming more popular and Ford is working to re-integrate their supply chain in order to minimize cost. Ford is also working to minimize their needed supply by minimizing the number of models of cars that they create, which should allow for a more streamlined vertical system.

Ford’s diversification strategy is really based on globalization and regionality. In the US, for example, Ford is getting rid of small cars and focusing on fewer models, while also developing autonomous and ride sharing technology. Ford also works to provide smart inventory to dealers around the world through the use of “ it’s in-house development of its Smart Inventory Management System, or SIMS, which sought to equip dealers with data they could use to better predict which vehicles people would want to buy well before they set foot on the lot, allowing assembly plants enough time to make and ship them.” (CITE: http://fortune.com/2014/06/02/fortune-500-ford-big-data/) Ford is a global company, with regional global focus.

Global Alliances

In the past few years, Ford has attempted to create more strategic alliances in an effort to future proof their business for years to come. This idea of strategic alliances allows Ford to work with key partners to make technological advances go further and their investments deeper. One example of this global alliance is the partnership that Ford has announced with Volkswagen. This partnership will “Ford and the Volkswagen Group are combining forces in a global alliance, and they will start by making pickup trucks together, the two automakers announced on Tuesday. The companies will also build commercial vans together, and are exploring collaborations on autonomous and electric vehicles as well as new mobility services.” (CITE: https://www.theverge.com/2019/1/15/18183498/ford-volkswagen-alliance-trucks-vans-detroit-auto-show-2019)

While Ford is further along in some of this technological development than VW, including in mobility and artificial intelligence, this partnership has real potential for Ford. Ford has struggled in Chinese and European markets, where Volkswagen has seen more success. On the flip side, VW will benefit in the US from working with a United States based corporation.

Strategic Fit

Ever since 2010, Ford has had one goal: to increase profitability by narrowing their scope and focusing on regional markets that are competitive and allow them to create vehicles that meet the needs of various regions—for example, removing their smallest passenger vehicles in the United States markets. In addition, the regional focus that they have employed has allowed them to maximize their vertical supply chain and maximize their ability to focus on new and innovate technology. Ford has essentially trimmed the fat, which has allowed them to create more of a strategic company and maximize profits.

References

Bassette, C. (n.d.). Ford’s $100 million data machine. Retrieved from http://fortune.com/2014/06/02/fortune-500-ford-big-data/

Bunkley., N., & Bunkley, N. (2018, April 25). Ford cuts brand sedans — and marketing spending. Retrieved from https://adage.com/article/cmo-strategy/ford-brand-sedans-nixed-deeper-cost-targets/313274/

Chahal, M., Bacon, J., Chahal, M., Ritson, M., Rogers, C., Woollen, P., . . . Joy, S. (2017, September 20). Ford is launching cars with personality to change perceptions. Retrieved from https://www.marketingweek.com/2016/12/14/ford-changing-perceptions/

Ford’s Focus on Control. (n.d.). Retrieved from https://www.automationworld.com/article/technologies/hmi-hardware/fords-focus-control

O’Kane, S. (2019, January 15). Ford and Volkswagen form global alliance, will start by building trucks and vans. Retrieved from https://www.theverge.com/2019/1/15/18183498/ford-volkswagen-alliance-trucks-vans-detroit-auto-show-2019