The Way of Ford Motor Company Essay Example for Free

The Way of Ford Motor companionship Essay* Introduction* Although to be the only one remaining member which sacrifice escaped bankruptcy of the Big Three among the automobile intentness by June 2009, Ford suffers $14.7 million loss of revenue and elimination of stockholders equity due to the record-breaking fall in demand for 2008,US. However, to understand Fords vista today requires understanding the Ameri tail assembly automotive industry.* General Industry compendium* From 1900-2008, US motor fomite proceedsion has a rapid increase to9, 000,000 from 1900 to 1967, after non, there is a graduate decrease to 3,000,000 until 2008. At the mean condemnation, the median age of passenger car in US was Spiral upwards. Combine the ii phenomenon, we can get that the automobile industry market is quite saturated and the demand fell down. look at to the automobile manufacturing technology, despite less eminence between manufacturers due to the converge of technologies and d esign, the technological progress was incremental and lead to the various segmentations in each country. Fol humble the two situations, there are 3 cosmic issues were emerged. One was the deep demand of auto cars result in prodigality capacity. Another one issues was the postgraduate constitute among the technological development. Last one issue was the lacking differentiation. However, it as well as offers automakers spic-and-span product segmentations and market. For an insightful analysis, we need to look at more information in details.* doorkeepers Five Forces freshman of all, we can get a comprehensive industry environment analysis through the Porters Five Forces. In terms of the threat of new entrants of the automobile industry, it requires high swell costs for possible entrants, as the manufacturers are all carry out the sess- work-scale. However, when a new entrant face with the rate of f rugged competitors scale economies, smaller manufacturers could not survive since they cannot afford the massive product development cost, which was in waste of $6 billion. And it is easy to own the cost disadvantages independent of scale. Then, the product differentiation of automobile industry is not high as other industry. The automobile industry was a globose network of collaborative arrangements. As the team-based approach became models for all majormanufacturers, there is no large-scale difference in the function, model and design. They can only gain their differentiation by the firms service and effective advertising.Also, There is no basteing cost in the automobile industry because no cost would be incurred when customer dislodge to a new supplier. However, the large capital requirement is demanding, as the automobile industry needs ample amount of capital to invest in its mass-production line. Furthermore, automakers throw away benefited from prodigious amounts of direct funds or confirming aids from the government around the world to keep car plants open and assembly line runway after the international sales collapsed, and the industry has never operated on the pure free-market principles. It proved that the government eer intervened in the automobile industry that suggests the government control entry into this industry. Then, the supplier group of the industry is powerful. In order to achieve lower costs and increased flexibility, the automobile manufacturing trend has been towards outsourcing. All of the manufacturers now have gigantic-term relationships with their suppliers.Especially for the leading component suppliers that have the increase responsibility for technological development, it gains a untouchable bargain power. Because their goods as transmissions, braking systems, etc. are critical to buyers market success. Besides, it poses a credible threat to comprise forward into the automobile industry due to some suppliers akin Bosch and Denso are as big as some larger automobile companies. Whats mor e, since a few large companies dominated the suppliers and is more laborious than automobile industry, it is easy to get the conclusion that these suppliers are fatal and important threat to the automobile industry. Next, the bargaining power of the buyer is increasing. Although the auto buyers wont purchase a large portion of cars in a given time since the auto is not cheap, the sales of the purchased product do not aim for a of import portion of the sellers annual revenue as well. Nevertheless, the customer could switch to another automaker at litter or even no cost since automobiles are humble differentiated, then the buyers pose a credible threat if they were to integrate backward into the sellers industry. In addition, the threat of the substitutes also is a vital factor of the industry analysis.As the passenger car substitutes, the public transportation like airplane, train and bus perform the same function. The technological change would offer opportunities for new entran ts into theindustry. For the environmental concerns, it may also result in a decline in private transportation in regard of public transportation, or short-term rental car rather than car ownership. In general, these substitutes present a strong threat to the industry especially when the customers face few switching cost as I mentioned before. Moreover, the war-ridden rivalry is intense in the automobile industry. Firstly, there are equally balanced competitors within the industry. It can be found from company sales of these automakers, the annual average sales are approximately the same among several(prenominal) major big automakers as Ford, GM, Honda and Daimler.Industry with only a few firms of equivalent size and power tend to have strong rivalries. In another hand, as the high unconquerable cost and high storage cost of automobiles account for a large part of the total costs, the automakers testament spread the costs across a large volume of output. However, excess capa city is created when firms try to increase their productive capacity. And the excess capacity has become the greatest structural problem of the industry. To cut down the cost is the most effective way to reduce inventories. At the mean time, this method often intensifies competition. Besides, lacking differentiation and low switching cost of the automobile industry are easy for competitors to attract buyers through price and service offerings. Finally, the high date barriers intensify the automobile industry competition as well.With the recession and singular fall in demand, automakers remain in the industry because they face the high exit barriers. Specialized assets, obdurate cost of exit, strategic interrelationships, emotional barriers, government and social restrictions are make up the high exit barriers. To sum, the competitive rivalry is highly intense in the automobile industry. After the discussion about the Porters five forces, we have a comprehensive understanding th at how is the American automobile industry environment. However, for a more accurate strategic competitiveness, we need to have a further analysis through the outdoor(a) markets and rivalries.* Industry analysis -InternationalizationWith the increasing competition in the industry, the intensified quest for cost reducing and the excess capacity among automobile manufacturers had make contributions to the planetaryization. In another side, accessing growing market, exploiting scale economies in purchasing, technology, andnew product development also mainly brought up the internationalization. In the market parcel of land part, the table shows that there is an unpatterned decrease in the automobile market percentage of local firms from 1988 to 2006.As the Big Three which held close to 85% of the US market in 1970, all of their US market share declined by an average of 6% in 2006. On the contrary, the reductive market share contributed to the increasing market share of Toyota and H onda in US. non only the US market had an internationalization outcome as the above condition, but also legion(predicate) developed countries did. It illustrates that all the leading automobile manufacturers were competing in most of the countries of the world instead of dominated in focused national market as before, and the market dominance of local automobile firms was undermined.In addition, the global distribution of production shifts a dance band due to the rise of new market and the needs of low production cost. As shown in the table4.7 and 4.8, the used biggest three automobile production countries and regions (US, Western Europe, and Japan) in 1980 have been taken place by Japan, China, and Germany in 2008. The world leading motor-vehicle producers-Korea, Brazil and India, also result in a rapidly growing municipal markets and low production cost that benefit a lap from the low compensation for workers. Therefore, we can draw a conclusion that there is a big cost advan tages and huge capability market for the big automobile manufacturers due to the internationalization.Since there are a lot of leading producers with cheap labor cost and high productivity outside US, then it provide resources and factors of production in the world outside US, and it provide automobile industry a way to planetary outsourcing, which is salutary to the reasonable allocation of capital and products in the global flow. Besides, internationalization in the automobile industry is instrumental for design and technology in the global expansion, put up the economic development of the underdeveloped areas, in turn, it provoke the sales of automobile. Nonetheless, the fierce competition is a concern in the international market. On account of the collaborations with the industrys development and no barriers to enter other countries, fewer differentiation and free-limit expansion lead to intense rivalry.* Industry attractivenessThrough the industry analysis among five for ces in American market andinternational market, it is obvious to find the automobile industry is attractive in international market instead of in American market. Although there is a little threat of new entrants, strong bargaining power of supplier, increasing bargaining power of buyers, big threats of substitute products and intense competitive rivalry still make the domestic industry not attractive. In the international market, it is attractive as the potential market expansion and worldwide outsourcing. But with the intensive rivalry and low differentiation in the internationalization, it is necessary to be well alert on the risk and responses.* Fit between outcome competencies and opportunitiesFord was the first one to combine mass consumption with mass production, and Ford use this concept to guide the enterprise entrepreneur. What is the Fords core competency then? To start, its brand recognition in global scale. Ford does have a model in most categories. It provides a larg e global scale to Ford. A more strategic core competency of Ford is its global supply strand network. Its strategic bond papers and supplier base is perchance one of the most favorable in the world. In addition, Ford has many opportunities. Firstly, Restructuring plan that to downsizing was launched long before GM and Chrysler, moving the manufacturing to low-cost location, worldwide outsourcing as well. These actions improve the performance, meet the location sparing and cut down the cost of Ford. Secondly, Ford has a long history in production innovation. Thus, new products are very likely to be continued in the future.Thirdly, Fords business is locked up in the European and North American markets, however it possess a significant share in emerging markets such as South American, which should provide enormous growth of the future as the mall class to grow and earn the money to spend on automobiles. Finally, One major sector that is climb with opportunity is the electric auto mobile market, as the world looks for an eco-friendly alternative that operates like the original car. When we compared Fords opportunities with core competencies, they fit with each other. The constant production innovation that leads to continued new product and the significant share in emerging markets provide the opportunities for Fords brand recognition in global scale. Furthermore, the location economy and worldwide outsourcing give Ford the chance to strengthen its global supplychain network. In sum, Ford gains a very strong competitive advantage in automobile industry.* Business-level schemeIn terms of the business-level strategy, Ford had an ambiguous business-level strategy that neither successful differentiation nor cost-leadership based on the case. On one hand, because of the high technological development cost, large excess capacity and huge capital cost, it cannot and did not maintain a cost leadership strategy. On the other hand, with the internationalization, resou rces and technologies sharing, collaborations among competitors, Ford do not have a strong differentiation strategy.Type of cooperationThe cost of new product development has been the major driver if mergers and acquisition in the industry. And sharing cost also encouraged increased collaboration and union venture. For Ford, its corporation includes joint venture, joint research, licensing, partnership, and acquisition. With these different corporation methods that to share costs, resources and risks, Ford shows a strong alliance to its supplier and partner. And Ford also obtains a significant reduction in product development time and cost. To some extent, the strong connection with other automakers and suppliers also accelerate the speed to reach the market and the potential consumer.* How to approach market* At present, the biggest change of automobile society is the transition from emerging market to fester market. And the most significant feature is the industry has entered th e era of micro growth. Micro growth poses a big pressure to the whole industry, but it also promotes favorable industry healthy and sustainable growth. Thus, with such advantaged external opportunity and internal strength, Ford needs to approach new market to earn the market share and worldwide competitiveness. Exporting, licensing, strategic alliances, acquisition and WOS are the entry modes alternatives, but how to choose one from these?* Since Ford already has a strong partnership with other automakers, Ford has a foundation to gain other alliances. Besides, as Ford does not have much profit margin and the initial investment of automobile industry is huge, the Exporting, WOS andAcquisition are not acceptable due to the high cost. In terms of the licensing, although it has a low cost and risk, the low return and little control are not appealing. Thus, Ford should go on with the strategic alliances to cut the entry cost and risk, and to achieve the industry integration.* 5-year pla nTo conclude all the analysis above, Fords strategies for the later 5 years development need to be changed. Firstly, a veritable business-level strategy is imperative. Adopting a clear differentiation strategy and supporting value-chain activities should improve Fords position. Besides, to preserve cost cutting beyond those already specified in the plan and focus on reduction of manufacturing costs to achieve Fords cost space-reflection symmetry. Additionally, cut in cost to achieve parity with foreign rivals. Invest in unique advertising and create uniquely designed vehicles with shared platforms and technologies to promote differentiation strategy. * The second part of Fords plan is to refocus on the consumer through dislodge of its brand and product mix to be more consistent with customer preferences.Currently, Ford lacks product differentiation between these brands sold by the North American division. Ford should emphasize development and production of several car models tha t presently enjoy strong reputations. Thus, their continued success will enhance the company stove as a whole, again supporting a strong differentiation strategy. The final key patch of Fords restructuring plan is the constant introduction of innovative products and new development methods. It can lift up new customers. Based on the improved differentiation and efficiencies of scale, the market sales and market share will go up. Together with all these recommendations, Ford should be able to return to a competitive position in the marketplace and stabilize with improve its market share and financial position. *