FORD MOTOR COMPANY

CASE STUDY

“Ford Motor Company”

Submitted By

MUHAMMAD EBADMAHEEN IFTEKHAR

RABIA IQBALSHAMA NASEEM

Submitted to

MAM SAIRA IBRAHIM

Introduction

U.S. automotive corporation Ford motor company. Founded in Detroit, Michigan in 1903 by Henry Ford and a group of investors, the company introduced the hugely successful Model T in 1908 and by 1923 was producing more than half of all U.S. automotive vehicles.

Through the Lincoln Motor Co. (acquired in 1922), Ford produced luxury Lincolns and Continentals. After years of declining sales, the Model T was succeeded by the Model A in 1927; other companies such as General Motors took the opportunity to make serious inroads into Ford's dominance. The company was reincorporated in 1919, with Ford and his family acquiring full ownership. Henry's son Edsel served as president 1919 – 43, and Henry's grandson Henry Ford II led the company 1945 – 79, reviving its fortunes considerably.

Its stock was first publicly traded in 1956. Ford acquired the British automaker Jaguar in 1989 – 90, bought the rental car company Hertz Corp. in 1994, and purchased the automobile division of Volvo in 1999. Later acquisitions included Aston Martin and the Land Rover brand of sport utility vehicles. Ford also owns a significant share of the Mazda Motor Corp. Because of financial struggles at the beginning of the 21st century, the company sold off Aston Martin in 2007 and both Jaguar and Land Rover in 2008. Ford manufactures passenger cars, trucks, and tractors as well as parts and accessories.

One of the world's largest auto makers, Ford brands includes Ford, Lincoln, and Mercury. Finance unit Ford Motor Credit is one of the US's leading auto finance companies. Ford owns a small stake in Mazda but has sold Volvo to Zhejiang Geely Holding, parent of Geely Automobile, for about $1.3 billion cash and other monetary consideration.

Currently William Ford is performing the duty of executive chairman of the board in the orgnization.

Ford Motors Analysis

Our Vision

To become the world's leading Consumer Company for automotive products and services.

Our 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.

Vision Evaluation

The vision statement is quite well organized as it highlights the products and offerings made by the company. It also highlights that the company is growth oriented and wants to be the leading company in automotive industry.

Mission statement Evaluation

Components

a Customers Yes

b Products Or Services No

c Markets Yes

D Technology No

E Concern for survival, growth & Profitability No

F Philosophy No

G Self-Concept No

H Concern For Public Image Yes

i Concern for Employees No

We are a global family with a proud heritage passionately committed to providing personal mobility for people around the world (c).We anticipate consumer need (a) and deliver outstanding products and services that improve people's lives (h)Proposed Vision

“Ford – Inspire the way you drive! “

Proposed Mission

“Providing the global customers (a) with the premium quality and the state of art technology catering their automotive needs (b) as well as covering the aspects of comfort and style. Along with the team of professionals (i) pursuing the continuous innovation (d) and growth (e) globally (c) - And creating the value for our customers’ (f) through making positive contribution to the society considering their health and safety issues (h).”

CPM

  Ford G.M Toyota

Critical Success Factors Weights Ratings

Weighted Score Ratings

Weighted Score Ratings

Weighted Score

Hybrid/Fuel Efficient Vehicles 0.15 3 0.45 3 0.45 2 0.3

Product Quality 0.15 4 0.6 3 0.45 3 0.45

Price Competitiveness 0.2 2 0.4 2 0.2 4 0.8

Management 0.05 2 0.1 3 0.15 3 0.15

Financial Position 0.1 2 0.2 3 0.3 3 0.3

Customer Loyalty 0.1 3 0.3 3 0.3 4 0.4

Global Expansion 0.1 2 0.2 3 0.3 3 0.3

Market Share 0.15 2 0.3 4 0.6 2 0.3

Total 1   2.55   2.75   3

Opportunities

Demand and trend for hybrid energy vehicles. China, a vibrant market for automotive industry. Reduction of GM sales due to perceived lower quality and fuel efficiency. Demand of fuel efficient cars. Alliance with the British Petroleum to develop hydrogen power. High expectations of consumers. Ford’s “S-Max” Car of the year in Europe in 2006.

Threats

Excessive sales to rental car agencies affecting the brand image and resale values.

Strict standard of CO² emission result in increasing the manufacturing cost to produce engines.

New entrants i.e.: Honda, Toyota and Nissan result in tough competition.

Currency rate fluctuation and increased cost of raw materials effect the production and sales.

Car financing sector facing financial hardship due to increasing mortgage rates.

Lack of desired vehicles available on the dealer’s lot.

Rising cost of health care and pension will effect the future investment.

Toyota selling vehicles through E-commerce (Gazoo.com).

Chinese auto firms gaining strength and soon to enter in the US markets.

Strength:

Increased in revenue to 6% (i.e. $87.62 B) in June 30, 2007.

Production of hybrid energy vehicles.

Ford’s credit division achieved an increase of $16.5B in 2006.

Strong brand recognition as affordable and safe vehicle.

Increase in PAG division from $ 8.0 – 8.6 B in 2006.

Effective distribution and manufacturing channels covering 17.5% of market share in the automotive industry.

World’s largest loving roof in Michigan.

Running world’s largest finance company.

Opening of research and engineering centre in China.

Operate throughout the 6 continents with 108 plants globally.

Weaknesses:

Net income of the company was negative $16B in 2006. Revenues decreased by 9% in 2006.

Ford’s revenue from North America decreased by 10% in 2006. EPS of -3.723 reflecting the company is facing huge losses. Profit margin declined from 18% - 7% in 2006. Ford does not provide financial incentive to dealers. Organization’s morale decreased due to downsizing

External Factor Evaluation

Key External Factors Weights 0.0-1.0

Ratings 1- 4

Weighted Score

OpportunitiesDemand and trend for hybrid energy vehicles. 0.08 3 0.24China, a vibrant market for automotive industry. 0.07 3 0.21

Reduction of GM sales due to perceived lower quality and fuel efficiency. 0.05 2 0.1Demand of fuel efficient cars. 0.07 3 0.21Alliance with the British Petroleum to develop hydrogen power. 0.07 3 0.21High expectations of consumers. 0.05 2 0.1Ford’s “S-Max” Car of the year in Europe in 2006. 0.06 2 0.12

Threats Excessive sales to rental car agencies affecting the brand image and resale values. 0.05 3 0.15 Strict standard of CO² emission result in increasing the manufacturing cost to produce engines. 0.07 2 0.14

New entrants i.e.: Honda, Toyota and Nissan result in tough competition. 0.08 3 0.24 Currency rate fluctuation and increased cost of raw materials effect the production and sales. 0.08 3 0.24 Car financing sector facing financial hardship due to increasing mortgage rates. 0.05 2 0.1  Lack of desired vehicles available on the dealer’s lot. 0.06 2 0.12 Rising cost of health care and pension will effect the future investment. 0.05 1 0.05Toyota selling vehicles through E-commerce (Gazoo.com). 0.05 2 0.1

Chinese auto firms gaining strength and soon to enter in the US markets. 0.06 1 0.06

Total 1 2.39

Internal Factor Evaluation

Key Internal Factors Weights 0.0-1.0

Ratings 1- 4

Weighted Score

Strengths Increased in revenue to 6% (i.e. $87.62 B) in June 30, 2007. 0.06 3 0.18

Production of hybrid energy vehicles. 0.07 3 0.21

Ford’s credit division achieved an increase of $16.5B in 2006. 0.06 3 0.18

Strong brand recognition as affordable and safe vehicle. 0.07 3 0.21

Increase in PAG division from $ 8.0 – 8.6 B in 2006. 0.06 3 0.18

Effective distribution and manufacturing channels covering 17.5% of market share in the automotive industry. 0.05 3 0.15

World’s largest loving roof in Michigan. 0.05 4 0.2

Running world’s largest finance company. 0.05 4 0.2

Opening of research and engineering centre in China. 0.06 3 0.18

Operate throughout the 6 continents with 108 plants globally. 0.05 3 0.15

WeaknessesNet income of the company was negative $16B in 2006. 0.07 2 0.14

Revenues decreased by 9% in 2006. 0.07 1 0.07

Ford’s revenue from North America decreased by 10% in 2006. 0.06 1 0.06

EPS of -3.723 reflecting the company is facing huge losses. 0.07 1 0.07

Profit margin declined from 18% - 7% in 2006. 0.07 2 0.14

Ford does not provide financial incentive to dealers. 0.06 2 0.12

Organization’s morale decreased due to downsizing. 0.02 1 0.02

Total 1 2.46

SPACE MATRIX

Financial Strength Rating Industrial Strength Rating Leverage --- 1 1 Profit Potential 4Earning Per Share--- 1 1 Growth Potential 5Profitability-----1 1 Financial Stability 3

Retained Earning ----- 2 2Ease of Entrance in the Market 3

Total 9   15Average 1.25   3.75

Competitive Advantage Rating Environmental Stability RatingBrand Image -3 Technological Changes -3Innovation -2 Rate of Inflation -2Customer Loyalty -3 Competitive Pressure -1Product Quality -2 Demand Variability -2Total -10   -8Average -2.5   -2

X- Axis:

CA+ IS = (-2.5) + 3.75 → 1.25

Y- Axis:

ES + FS = (-2) + 1.25 → (-0.75)

SWOT MATRIX

Strengths Weaknesses1. Increased in revenue to 6% (i.e. $87.62 B) in June 30, 2007.

1. Net income of the company was negative $16B in 2006.

2. Production of hybrid energy vehicles.

2. Revenues decreased by 9% in 2006.

3. Ford’s credit division achieved an increase of $16.5B in 2006.

3. Ford’s revenue from North America decreased by 10% in 2006.

4. Strong brand recognition as affordable and safe vehicle.

4. EPS of -3.723 reflecting the company is facing huge losses.

5. Increase in PAG division from $ 8.0 – 8.6 B in 2006.

5. Profit margin declined from 18% - 7% in 2006.

6. Effective distribution and manufacturing channels covering 17.5% of market share in the automotive industry.

6. Ford does not provide financial incentive to dealers.

7. World’s largest loving roof in Michigan.

7. Organization’s morale decreased due to downsizing.

8. Running world’s largest finance company.9. Opening of research and engineering centre in China.10. Operate throughout the 6 continents with 108 plants globally.

Opportunities SO WO

1. Demand and trend for hybrid energy vehicles.

1. Produce hybrid energy vehicles with British petroleum.( S2,O1,O5)

1.Use of competitive intelligence information for restructuring of production processes to produce attractive and economical products.(W3,W2,W5,O3,O2,O6)

2. China, a vibrant market for automotive industry.

2. Produce innovative and economical vehicles through detailed market research. ( S3,S8,O2,O6)

2. Fulfilling of existing demand through strong brand image and applying retrenchment strategies in production and vehicle cost.( W1,W3,W4,O1,O4,O6,O7)

3. Reduction of GM sales due to perceived lower quality and fuel efficiency.

3. Production of fuel efficient Cars ( S5,S9,O4,O6,O3)

4.Demand of fuel efficient cars.

5. Alliance with the British Petroleum to develop hydrogen power.6. High expectations of consumers. 7. Ford’s “S-Max” Car of the year in Europe in 2006.

Threats ST WT

1. Excessive sales to rental car agencies affecting the brand image and resale values.

1. Apply market penetration strategies globally A) sponsor events related to sports, entertainment etc B) Partnership with a television channel that will display ads of ford motors in different intervals C) Developing of Ford's Blog (S3,S5,S9,T3,T8,T9)

1. Alliance with competitors or horizontal integration should be applied. ( W2,W3,W4,W5,T2,T3,T4)

2. Strict standard of CO² emission result in increasing the manufacturing cost to produce engines.

2. Seek Cost effective strategies utilizing alternative energy in production and use Backward integration technique to overcome high costs.(S6,S8,S9,T2,T4,T6)

2 Providing monetary packages to dealers or providing some percent of company's share (W6,T6)

3. New entrants i.e.: Honda, Toyota and Nissan result in tough competition. 4. Currency rate fluctuation and increased cost of raw materials effect the production and sales.5. Car financing sector facing financial hardship due to increasing mortgage rates. 6. Lack of desired vehicles available on the dealer’s lot.7. Rising cost of health care and pension will effect the future investment.

8. Toyota selling vehicles through E-commerce (Gazoo.com).

9. Chinese auto firms gaining strength and soon to enter in the US markets.

BCG Matrix

  Revenues % Revenues Profit % Profit % Market Share

% Growth Rate

USA 69,425 49.00% (15,992) 91.23 16% 10%

SA 5,697 4.00% 661 (3.7) 11.5% 18%

Europe 30,408 21.40% 371 (2.2) 8.5% 3%

PAG 30,028 21.00% (2,322) 13.24 1.1/2.1% 5%

Asia & Africa

6,539 4.6% (250) 1.46 2.4% 10%

Credit financing

16.8 0.01% 1.966 0.012 6% 12%

Total 142,113.8 100 (17,530.034) 100

USA 49%SA 4%EU 21.4%PAG 21%ASIA 4.6%CREDIT FINANCING 0.01%

RELATIVE MARKET SHARE (CASH GENERATION) High 1.0 Medium .50 Low 0.0 H

igh

+2

0 M

ed

ium

0

Low

-20

IND

US

TR

Y G

RO

WTH

RA

TE

(CA

SH

US

AG

E)

The internal-external Matrix

VOLVO EFE ( 2.6) IFE (3.25)MOTORCRAFT 2 3.25MERCURY 2.5 3.25FORD CREDIT COMPANY 3 3.25AUSTIN MARTIN 3 2.3JAGUAR 2.7 2.5LAND ROVER 2.5 2.8MAZDA 2.9 2.5

Ford credit Company

Volvo

Mercury

MotorCraft

Astin Martin

Mazda

Land Rover

Jaguar

Grand strategy Matrix

Rapid Market Growth

Quadrant II Quadrant 1 1 I

Strong

Competitive

Slow Market Growth

Weak Competitive

Position

Quadrant III Quadrant IV

Evaluation :

Ford falls in the second quadrant of grand strategy matrix as its facing huge losses and its competitive position has also been affected by new entrants in the automotive industry so it has weak competitive position and the market growth is rapid. Increasing consumer’s expectations had made the environment more competitive as on one hand it had provide a room for innovations but due to continuous rising prices of raw material and gas prices and also the currency rate fluctuation, it has been difficult for the firms to manufacture new models frequently. As far as this current scenario is concerned appropriate strategies would be:

Market Penetration: Apply market penetration strategies globally. A) sponsor events related to sports, entertainment etc. B) Partnership with a television channel that will display ads of ford motors in different intervals. C) Developing of Ford's Blog.

Product Development: A) Production of fuel efficient cars.B) Production of Hybrid energy vehicles.

Horizontal Integration:Alliance with the competitors can be helpful to achieve competitive advantage by combining the distinctive competencies of both the firms.

QSPM

   

1.Apply market penetration strategies globally

2. Production of fuel

efficient cars.

3. Alliance with the

competitor.

Key Factors Weight AS TAS AS TAS AS TAS External              Opportunities              1. Demand and trend for hybrid energy vehicles. 0.08 2 0.16 3 0.24 1 0.082. China, a vibrant market for automotive industry. 0.07 3 0.21 4 0.28 2 0.143. Reduction of GM sales due to perceived lower quality and fuel efficiency. 0.05  -  -  -  -  -  -4. Demand of fuel efficient cars. 0.07 3 0.21 4 0.28 2 0.145. Alliance with the British Petroleum to develop hydrogen power. 0.07  -  -  -  -  -  -6. High expectations of consumers. 0.05 3 0.15 4 0.2 2 0.17. Ford’s “S-Max” Car of the year in Europe in 2006. 0.06  -  -  -  -  -  -Threats              

Excessive sales to rental car agencies affecting the brand image and resale values. 0.05  -  -  -  -  -  - Strict standard of CO² emission result in increasing the manufacturing cost to produce engines. 0.07 1 0.07 2 0.14 3 0.21 New entrants i.e.: Honda, Toyota and Nissan result in tough competition. 0.08 4 0.32 3 0.24 2 0.16 Currency rate fluctuation and increased cost of raw materials effect the production and sales. 0.08 2 0.16 3 0.24 4 0.32 Car financing sector facing financial hardship due to increasing mortgage rates. 0.05  -  -  -  -  -  -  Lack of desired vehicles available on the dealer’s lot. 0.06  -  -  -  -  -  - Rising cost of health care and pension will effect the future investment. 0.05  -  -  -  -  -  -Toyota selling vehicles through E-commerce (Gazoo.com). 0.05 4 0.2 2 0.1 1 0.05Chinese auto firms gaining strength and soon to enter in the US markets. 0.06 3 0.18 4 0.24 2 0.12Internal              Strengths              1. Increased in revenue to 6% (i.e. $87.62 B) in June 30, 2007. 0.06  -  -  -  -  -  -2. Production of hybrid energy vehicles. 0.07 2 0.14 3 0.21 4 0.283. Ford’s credit division achieved an increase of $16.5B in 2006. 0.06  -  -  -  -  -  -3. Strong brand recognition as affordable and safe vehicle. 0.07 4 0.28 3 0.21 1 0.074. Increase in PAG division from $ 8.0 – 8.6 B in 2006. 0.06  -  -  -  -  - - 5. Effective distribution and manufacturing channels covering 17.5% of market share in the automotive industry. 0.05 4 0.2 3 0.15 2 0.16. World’s largest loving roof in Michigan. 0.05  -  -  -  -  -  -7. Running world’s largest finance company. 0.05  -  -  -  -  -  -8. Opening of research and engineering centre in China. 0.06 2 0.12 4 0.24 3 0.189. Operate throughout the 6 continents with 108 plants globally. 0.05 4 0.2 3 0.15 2 0.1Weaknesses              1. Net income of the company was negative $16B in 2006. 0.07  -  -  - -   -  -2. Revenues decreased by 9% in 2006. 0.07  -  -  -  - -   -

3. Ford’s revenue from North America decreased by 10% in 2006. 0.06  -  -  -  -  - - 4. EPS of -3.723 reflecting the company is facing huge losses. 0.07  -  -  -  -  -  -5. Profit margin declined from 18% - 7% in 2006. 0.07 2 0.14 4 0.28 3 0.21 6. Ford does not provide financial incentive to dealers. 0.067. Organization’s morale decreased due to downsizing. 0.02 1 0.06 2 0.04 3 0.06Total 1   2.92   3.54   2.82

Conclusion

From the above analysis of all the matrices we suggest three alternatives but the analysis of QSPM matrix one best alternative has been selected. As in grand strategy ford motors fall on second quadrant it means that the firm should first go for intensive strategy. Hence the best selected alternative is production of fuel efficient car, which is an intensive strategy.