Henry Ford was the creator of Ford Motors that started on June 16, 1903. “Henry Ford was a farmer’s son whose manufacturing genius transformed life around the globe” (Ford Motor Company, 2010) Henry was born July 30, 1863 and was the oldest of six siblings. Although he was committed to his family farm, he was always interested in machinery and mechanics. Which later helped him develop Ford Motors? “When Ford Motors began it consisted of eleven business associates and $28,000 in capital.” (Ford Motor Company, 2010)
Define and discuss Ford’s business-level strategy. We are going to now look at Ford’s business-level strategy: which is cost leadership strategy. Defined as: “A firm pursuing a cost-leadership strategy attempts to gain a competitive advantage primarily by reducing its economic costs below its competitors. If cost-leadership, numerous firms in an industry can implement strategies, or if no firms face a cost disadvantage in imitating a cost-leadership strategy, then being a cost leader does not generate a sustained competitive advantage for a firm.
The ability of a valuable cost-leadership competitive strategy to generate a sustained competitive advantage depends on that strategy being rare and costly to imitate” (Bernard, 2003). Muallay is trying to decrease the cost of operation cost; he believes that “the key to its future success is not squeezing by with fewer resources than competitors use, but “working smarter with what it has” (Hitt, Ireland, & Hoskisson, 2009). Ford is trying to remain on of the biggest name brand in American cars without losing the value of its cars.
How can the company’s value-chain activities be better linked to create value for the company?
Per Ford Motors website “Increasingly, we are bringing our understanding of a wide range of sustainability issues into the stages of our value chain. Environmentally, we are improving our manufacturing efficiency, cutting the emissions of our vehicles, designing vehicles with end of life in mind and increasing the recyclables of our vehicles and our use of recycled materials. Socially, we seek to strengthen the communities we’re part of, expand the connections within them and improve our relationships throughout the value chain. Economically, we are trying to build our capacity to adapt and respond to the variety of challenges and opportunities present at every stage, meeting our customers’ needs as well as our stakeholders’ expectations.” (“Our Value chain”2009)
There are several challenges that affect each of the life cycle stages that Ford has being: Population growth, poverty, education, child mortality, maternal health, infectious diseases, loss of ecosystem services and many more, Ford needs to look at ways that could be less effected by the above, and with that they can strive to create more value for the company. The company already has a plan as quoted above from their national website.
How can Ford successfully position itself in terms of the five forces of competition? Let us first look at the five forces of competition in the auto industry in general then see where ford could position itself in terms of it to make it successful. Threat of New Entrants The threat of new entrants is very low in this industry. In order to compete in this industry a manufacture must be able to achieve economies of scale. Bargaining Power of Suppliers-The bargaining power of suppliers is also very low in this industry. There are so many parts that are used to produce an automobile, that it takes many suppliers to accomplish this. There are so many suppliers to this industry; manufactures can easily switch to another supplier if it is necessary. Bargaining Power of Buyers-The bargaining power of the buyers is high. Consumers purchase almost all of the industries output.
The manufacturers depend on them to stay in business. The buyers also are a significant portion of the industries revenue. If they cannot keep their buyers happy then they risk losing them to their competitors Threat of Substitute Products-There are not many substitute products for automobiles. Some of the substitutes are walking, riding bike or taking a train. Substitutes products all depend on the geographic location of the consumer. Rivalry among Competing firms-Rivalry among the competitors is very strong is this industry. The major competitors are so closely balanced that it increases the rivalry.
The competitors are compared to one another constantly. The price, quality, durability, and many other aspects of different manufacturers are greatly taken into consideration when deciding what type of vehicle to purchase. Ford can successfully position itself with the bargaining power of buyers- they need to build and maintain trust from their consumers and always try and strive to be on top with the latest technologies and mileage savers. This in turn will result to repetitive customers and their word of mouth being used. Outline a rough competitor analysis. What can be learned about expected competitor behavior by using the model of competitive rivalry to understand Ford’s situation?
A competitor analysis aids a firm to understand the following areas with key questions: Future Objective: How do your goals compare with our competitors’ goals? Where will emphasis be placed in the future? What is the attitude toward risk? Current Strategy: How are we currently comparing? Does their strategy support changes in the competitive structure? Assumptions: Do we assume the future will be volatile? Are we operating under a status quo? What assumptions do our competitors hold about the industry and themselves? Capabilities: What are our strengths and weaknesses? How do we rat compared to our competitors?
Fords responses to these questions should answer the following questions: What will our competitors do in the future? Where do we hold an advantage over our competitors? How will this change our relationship with our competitors? This is all taken from the model on pg 59 of (Hitt, Ireland, & Hoskisson, 2009).If Ford was to use an outline it will be able to see the areas of strengths and increase the strength on their weaker areas. This will aid them to stay on top. What role will strategic leadership play in helping Mulally and the organization meets its strategic objectives?
I believe at a corporate level that the strategic leadership will help Mulally and the organization in meeting its strategic objectives. It will aid them in trying new things rather then being limited on one. It will implement a plan that would then need to be carried out so that it does not seem so overwhelmed it is better to look at a broken down plan versus trying to do everything at once.
- Bernard, J. (2003). Cost leadership strategy. Retrieved from http://www.ecofine.com/strategy/Cost%20leadership.htm
- Ford Motor Company, (2010). Innovator, industrialist, outdoorsman: henry ford started it all. Retrieved from http://www.ford.com/about-ford/heritage/people/henryford/650-henry-ford
- Hitt, M, Ireland, R, & Hoskisson, R. (2009). Strategic management: competitiveness and globalization, concepts and cases. Mason, Oh: Cengage Learning. Our Value chain and its impacts. (2009). Retrieved from http://www.ford.com/microsites/sustainability-report-2008-09/operations-value