1. The case creates four options to choose from. Discuss at least three criteria the company should use to decide which of the four listed options is best and the reasons why each criterion should be used.
One criterion to be discussed is to find out where the company is losing the most money. In order to start trimming down the losses the management must first find out where the leakage is greatest and then decide which area needs to be downsized first. The decision could be made to shut down plants in North America to only find out the company is still experiencing great loss in the PAG.
What exactly are the costs involved in buying out the union workers? Are we prepared to deal with possible strikes and the negative media coverage? How would employee morale be affected by this decision? If the workers decide to go on strike then production would slow down which would create financial loss. Negative media coverage could result in consumers moving away from the brand and going over to the competition.
Have we made a significant impact in the luxury car industry? How much money have we invested in this group and how much have we lost as a result of this investment? Where can these dollars be better allocated? Ford was built on simple products for the average American family. The decision to move away from the luxury car market could allow us to gain a greater market share in the eyes of the mainstream consumer again.
2.In light of the possibility that market conditions can and do change, discuss at least three examples of how the company should build-in flexibility to back-up its decision-making process.
One example of how the company should use flexibility to back up its decision making process is to keep options open. For example, one of the possible decisions could be to sell the PAG but while this process is still being though through the fuel prices may decrease dramatically. With the decrease in fuel prices consumers may be inclined to return to purchasing SUVs. The Land Rover may potentially become the top selling SUV for the company. So an option could be to keep the Land Rover just in case fuel prices decrease but to sell the other cars in the PAG.
The automotive industry may experience a significant t increase in sales thus allowing the company to maintain the benefits afforded to the union workers. With this possibility in mind there should be a team in place to be sure they are taking a close look at the income in the event sales increase enough to not have to decrease the benefit packages for the current employees.
The Unites States economy may bounce back and consumers may be able to put money back into the economy which may cause our stocks to rise and allow consumers to go out to purchase more cars. As a result, the North American production may need to increase thus negating the need to close all of the plants in the United States. An alternative would be to close some plants where the economy may be slowly increasing versus all of the plants.
3.Discuss how an effective action plan can be created and how progress can be monitored..
An action plan must be in place with the specific steps (the how), people (the who) and the resources (the what) and the time period (the when) of how the goal will be reached. (Williams, 2010).
Specific steps should be in place to measure how the economy is doing in order to decide which plants need to be closed in the North American market. Financial analysts must be tracking the economy for the company by utilizing their expertise within the next 6 months to get the necessary data to upper management. If the company does not have competent financial analyst onboard they may need to hire a consultant to help track and measure the economic data.
Monthly meeting need to be held to get a status as to how the market is doing as it relates specifically to downsizing plants. One short term goal could involve real estate prices. If real estate market is still trending down then the cost of building rents would directly impact operational costs of the plants. Once the data has been tracked then management can make the decision on which plants, if any, need to be closed.
If the results prove the data validates the strength of the American dollar then the operations in North America would prove to be profitable again. Salaries would be payable along with the overhead costs needed to effectively run each plant.
4. List at least three steps that make-up a workable plan and explain why each is important.
Three components of a workable plan include the cooperation of top, middle and first-level managers (Willams, 2010). The top managers are responsible with giving the overall vision and position of the entire company. The vision includes the purpose statement for the company.
This statement is often clear, inspirational and related to the company’s beliefs and values. The upper management may also develop a strategic objective which is a more directed goal concerning the overall vision of the company. Ford may state “We plan to maintain our position as the best American selling car by streamlining our focus in selling the simple, affordable vehicle while remaining committed to our employees and customers.”
Middle management is responsible for creating tactical plans to detail how the company will use resources, budgets and its people to bring about specific goals aligned to the strategic goal. At this level the management will meet with its employees to discuss possible goals, as a group, choose goals, come up with ways to reach the goals then meet regularly to track progress to reaching the goals.
The action starts really at the first-level management position. The day to day plans are set in place which will facilitate the fruition of achieving the overall goals. In this phase behaviors, efforts and priorities are set in place in time periods. Single-use plans are also set in place to help move towards the overall goals. At this level policies, procedures, rules and regulations are created to help the first-level managers manage the day to day activities needed to reach the specific goals which will help to reach the upper level management goals. (Williams, 2010)
5.Discuss the option or combination of options you selected as the best course of action for Ford Motor Company and detail your reasons for selecting that option or combination of options.
“On May 2, 2010; Ford Motor Co reported that its U.S. sales increased 25.0% to 162,996 units in April. Car sales considerably increased 10% while truck sales increased 38% from the year-ago period.” ("Is f-ford motor," 2010) With this recent news in mind I don’t think it would be a good idea to eliminate or reduce the production of the SUV and truck lines. According to Forbes.com, Ford has started producing more fuel efficient vehicles which are attracting consumers who are feeling the crunch on gas prices during this fickle economy.
I believe the best option would be to sell the Premium Automotive Group. The original plan may have been to allow Ford to become a part of the luxury car industry but it has proven to be very unprofitable for the company. As stated in the case study, Henry Ford’s vision was the production of cars that was affordable to the masses. Luxury cars simply did not line up with the vision of the company.
The formation of the PAG is an example of unrelated diversification. Although they have one thing in common they do not share the same type of consumer, marketing strategy or dealership atmosphere. Jerry Flint states “Lumping four unrelated brands under one letterhead does not a group make. For the most part, they are completely different auto companies with their own unique markets and dealer forces.”(Flint 2004) Ford was not able to enter this market with great impact because of the diversification was too great.
Williams, C. (2010). Management. Mason, OH: Cengage Learning.
Is f-ford motor company a buy, sell, or hold?. (2010, October). Retrieved from http://finapps.forbes.com/finapps/BuyHoldSellAnalysis.do?tkr=F
Flint, J. (2004, July 27). Ford's premier automotive goof. Retrieved from http://www.forbes.com/2004/07/27/cz_jf_0727flint.html