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FORD Motor Company

One FordGroup 5

DU Chuhan 10811338DLI Yifan

JIN Luchun SHEN Congxiang 10819489D

WANG Yuan 10806365DYUE Pujue 09815346D

Outline

Company and Industry Background

PEST, Five Forces

Resources Based View and Value Chain Analysis

SWOT

How to Compete?

What has been done? Challenges Remain

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Company Background -- Ford

The second-largest U.S.-based automaker and the fifth-largest in the world based on 2010 vehicle sales

Founded in 1903 by Henry Ford

First car produced: Ford Model A

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Company Background -- Ford

History

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Automotive Industry Crisis (2008–2010)

2009 Financial Crisis severely hurt the industry, especially the American ‘Big Three’

Big Three: Originally focus on SUV and Pickup Trucks

Higher Fuel Price Reduced Sales

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Company Background -- Ford

During the Financial Crisis Corporate bonds had been downgraded to junk

status Declining sales and profit margin, 14.9 billion loss in

2008

Survived the Financial Crisis The only one among “Big Three” to survive Constant revenue growth after the crisis

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Alan Mulally and “One Ford”

Former head of commercial airplanes at Boeing

Elected as president and CEO of Ford in Sept 2006

Apply “One Ford” to reshape the company

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Q1

What are key forces in the general and industry environments that affect Ford’s choice of strategy?

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General Environment

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PEST Model

Political Government’s new policy

New federal gas mileage standard 25miles→35.5 miles per gallon in 2016

New safety standards New pollution control policy

Eco-friendly automobiles Government discourage fully automating operations

Provide more local jobs

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PEST Model

Economic Global economic downturn and financial crisis in

2008 Weak economy Volatile financial markets Lack of liquidity in the market

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PEST Model

Social Pollutions Oil prices increase

A shift in consumer’s car-buying habits Fuel-efficient models

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PEST Model

Technological Intelligence system Fuel-efficient models Electrocar

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Industry Environment

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Five Forces Model

Rivalry among existing competitors (Extremely High)

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Auto Manufacturer Market Share in USA November

2011

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Five Forces Model

Threats of New Entrants (Low) High barrier to entry Capital intensive business

substantial fixed costs

Influence of brand names upon sales Dealership model

Threats of Substitutes (Low) imperfect substitutes

public transportation motorcycle

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Five Forces Model

Bargaining Power of Suppliers (Low to Moderate) Metal/ Body part supplier

A good amount of rivalry 3,300 to 1,600

IT/ITES suppliers regular research and development mode depend upon the

requirements of the car manufacturer

Engine and auto part suppliers Critical part a good amount of leverage over the car manufacturer

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Five Forces Model

Bargaining Power of Buyers (Moderate) Plenty of options in the market place High customer loyalty

47.4% of Ford owners purchase another Ford vehicle *

*Data from data from Experian Automotive

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Key Forces

General environment Law and regulations Economic factors Fuel price increases

Industry environment Competitors in the industry

Similar technology Customer preferences

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Q2

What internal resources and assets does Ford have that may give it a competitive advantage?

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Internal Resources

Value Chain Analysis

Resource Based View

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Value Chain Analysis

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Resource Based View

Core Competenci

es

Key Activities

Competitive Advantages

Superior Firm

Performance

Resources

Capabilities

Reinforce

Leverage

Orchestrate

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Tangible resources

Physical Resources Strong Manufacturing capacity

Four manufacturing segments over the world 10 vehicle assembly plants & 24 powertrain,

stamping, and components plants Standardized Facilities State-of-the-art machinery and equipment

Flexible engine & transmission plants modern, numerically controlled machine tools

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Tangible resources

Financial Resources- Strong borrowing capacity for operation

- Obtain access to $2.3 billion of Temporary Asset Account during financial crisis.

- Borrow $10.1 billion under secured revolving credit facility in 2008

- Receive $2 billion from European Investment Bank over the 2008 to 2012 period

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Intangible Resources

Reputation The second largest automobile manufacturer in

U.S.A and the fifth largest in the world Build brand power with tradition, trust and safety Strategic alliance with suppliers and dealers A heritage of operating responsibly and sustainably

Affordable fuel economy product Environmentally-friendly facilities

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Intangible Resources

Intellectual /Property Resources Manufacturing Platforms for different brands of automobiles

Organizational culture Diverse work force Open culture Trust and respect

Human Experience and capabilities of research fellows Talent management practices

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Organizational Capabilities

Ability for Talent acquisition and workforce composition

Flexible manufacturing

Quickly response to changing market needs

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VRIS Analysis

Physical ResourcesReputation with

stakeholders

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VRIS Analysis

Valuable• Suppliers--eliminate waste• Customers---generate revenue• Dealers---Sustainable dealer profit

Rare• Well known brand name --Industry revolution & American

Dream• The only automobile company survive from financial crisis in

2008 Costly to imitate• Path dependent Causally ambiguous Socially

complexDifficult to substitute

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SWOT Analysis

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Strengths

One of oldest and largest car manufacturer with strong brand

Wide network of distributors and dealers

Profitable financial service division

Invested efforts to go green in order to help the environment

Ford is present in Motorsports like Formula One, Rally, Sports cars, Touring cars & sponsorship of event

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Weaknesses

Product Recall

Lack of diversification (product and geographic)

Low capital spending (R&D)

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Opportunities

Emerging Market (China, Brazil)

Restructuring Plan (One Ford)

Expanding automobile sector in hybrid cars and fuel-efficient cars

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Threats

Competition from major international players (Toyota)

Rising raw material prices and oil prices

Increasing usage of public transport

Production problems in local plants due to labor and similar issues

Economics Slowdowns in the U.S and Europe

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Q3

How should Ford compete?

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Q4

What has Mulally done to implement strategy, and what challenges remain?

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Strategy implementation

‘One ford’ strategy

Friendly competition

‘Less is more’ new approach

Reduction of complexity

Creating a new corporate culture

A shift toward smaller and more fuel-efficient cars

Globalizing the Ford brand

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One Ford

One team People working together as a lean, global enterprise

for automotive leadership Measured by customer, employee, dealer, investor,

supplier, council and community satisfaction

One goal An exciting viable Ford delivering profitable growth

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One Ford

One plan Aggressively restructure to operate profitably at the

current demand and changing model mix Accelerate development of new products customers

want and value Finance plan and improve balance sheet Work together effectively as one team

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‘Less is more’ new approach

The ‘bigger is better’ worldview defined ford for decades

Replaced with a new approach: less is more Cut costs Transform the way it did business than to measure

market share

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Controlling the scale——Reduction of complexity

The vision: have a smaller and more profitable Ford. Cutback plan

14 plant closures 30000 plus job cuts

Increase the plant utilization and production levels in each production unit

Obtain operating profitability at lower volume and with a changing mix of products

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Brand Acquisition year

Selling year

markets

Lincoln 1922 - North America, Middle east

Mercury 1939 2011 North America

Volvo 1999 2010 Global

Land Rover 2000 2008 Global

Jaguar 1989 2008 Global

Aston Martin 1989 2007 Global

Merkur 1985 1989 North America

Controlling the scale——Reduction of complexity

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A New Corporate Culture

Structural and procedural changes Executives meet with Mulally every week ‘we are actually committed to hitting the numbers.’ Team working

Senior executive reorganization Report directly to him

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cost advantage through focus——A shift toward smaller and more fuel-efficient cars

Oil prices persistently increasing over the last few years

A dramatic change in consumer’s car buying habits, reducing the demand for large vehicles

leased cars are sold for much less than their residual values

A change in products, shifting to smaller and more fuel-efficient cars

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Globalizing the Ford brand

Globalize the Ford brand All Ford vehicles competing in global segments

would be the same in North America, Europe, and Asia within the next five years

Deliver more vehicles worldwide from fewer platforms and maximize the use of common parts and systems reduction of costs in the purchasing and

manufacturing processes

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Performance?

Bankruptcy

Bankruptcy

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Stock Price

51Source: ford.com

Bond credit rating

Moody

Caa1

Moody

B3

Moody

B2

Moody

Ba+

Moody

Baa+

Oct,2011May, 2012

Oct,2010

Nov ,2009

Jul ,2009 Investment Grade!! 7 Years’ Effort!!

52Source: statistics collected from moody.com

Sales

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Source: statistics collected from Ford’s annual report 2012

Profitability

10 years highest

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Source: statistics collected from Ford’s annual report 2012

Top Selling Vehicles in U.S.(2012)

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Source: http://bestsellingcarsblog.com/

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Challenges?

Alan Mulally

Conflict between his management style and the old “Ford” way His Fearlessness is not suitable to Ford’s culture He may be Confidence in the early days, but later… Senior executives left Ford

Trouble being accepted as an auto guy

Serious clash with Workers Union

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Challenges: European Financial Crisis

Global

Europe

29, Jan,2013

Second largest market 2012 is the worst of 20 years 2 billion annual loss in Europe in

2012 Closed three factories in Europe If recover, still too late!!

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Challenges: Mature Markets

Largest market: North America Market share: 15.2% (2012) Intensified competition since 1980s Highly depend on

General economic situations Cost of purchasing and operating cars & trucks The availability of credit & fuel

Consumers could wait to replace them! 59

Challenges: Emerging markets

Ford market share review (2012)

Competitive pressure • Chinese own brands• Japanese cars’ dominant position• All the manufacturers focus on china

Limited brands• Focus & Fiesta

Chinese market could lose Ford,but Ford could not lose Chinese market60

Source: statistics collected from Ford Annual report 2012

Closing points

In the future, Uncertainty of fuel prices Fluctuations of foreign exchanges Increased competition Economic distress of suppliers …

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References

Ford Q4 2012 financial results:http://corporate.ford.com/doc/ir_20130129a_financial_results.pdf

Ford 2012 SEC Filing:http://corporate.ford.com/doc/FordMotorCompany_10Q_20120219_2012Q4.pdf

Top selling vehicles:http://bestsellingcarsblog.com/2012/05/20/world-q1-2012-discover-the-top-100-best-selling-cars/

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References

Xinhua.net, 2011http://news.xinhuanet.com/auto/201109/29/c_122104101.htm

NY times,2013http://www.nytimes.com/2013/01/30/business/north-american-results-bolster-ford-earnings.html?_r=0

Moody.com,2012http://www.moodys.com/Pages/rr003_0.aspx?bd=4294966708&ed=4294966848&rd=4294966708&tb=0&po=0&sb=&sd=&lang=en&cy=global&searchfrom=SearchWithin&kw=ford

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Q&A

Thank you!

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