Ford Strategic Management

Ford motors, one of the most leading automobile industries in the world. Missions and goals of the company made them excel into the automobile sector. Strategies and decisions made by ford motors brought them in front of the many leading automobile manufactures. But the recent economic crisis that hit made and also due to the some false analysis made ford motors many issues. The report deals with the strategic reasons behind the acquisition of JLR motors and also deals with the reason for the sale of JLR to Tata motors.

The present strategies of the ford motors made them to recover from the lose that occurred in the recent decades which is also being discussed here. INTRODUCTION Ford motor company is a global auto motive industry leader based in Dearborn Michagan. They produces and distributes automobiles across six continents with 1,98,000 employees and about 90 plants worldwide . Ford provides financial services through Ford motor credit company. Ford was started their operations in 1903. They principally involved in the production and the distribution of automotive vehicles. The company was founded by Henry ford in 1903.

It is one of the world’s most profitable and the largest companies in the world, it is ranked as the fourth largest automaker being controlled and managed by a family more than 100 years . The company produced their first few models in Detroit ,Michigan. The company started production with the model of A in 1903. Model T was one of the famous model in the early years of company history, it helps the company to boost their operations. (Ford motors,2009) Ford is one of the largest automakers in the Europe. The company ended their operations with a net profit of $2. 7 billion in 2009.

The company had a lot of parent companies like Lincoln, Volvo, and Aston martin. Ford sold their UK subsidiaries Jaguar and Land rover to TATA motors of India in march 2008. The company reported its largest annual loss in 2006 of $ 12. 7 billion, it estimated that company would not come to profitability until 2009 but they ended their operations in 2009 with a good net profit. (See appendix revenue and profitability comparison of Ford motors) Ford has been at the centre of many of the acquisitions and divestiture activities over the past 20 years, this was the reason for the development of Premier auto motive group.

The recent economic decline saw ford dissolve their premier automotive group leading to the sale of jaguar and land rover, Aston martin and now Geely group based in china signed a contract with Ford to acquire their Volvo car business. On 28th march 2010, Geely signed a 1. 8 billion deal with Ford to get their Volvo car operations. The Volvo brand has been part of ford for many years and they have had certain policies and procedures for developing their vehicles. This report aims to focus the following strategic questions . There are certain reasons for the company to sell their parent companies.

(edi. basics . com) (See Appendix 5 for Sale History) 1) What are the strategic reasons behind the acquisition of jaguar and land rover by Ford? 2) What are the reasons behind the sale of Ford JLR group to Tata and UK plant closure? 3) What are the strategies does Ford follow now? MAIN BODY 3. 1 REASONS BEHIND THE ACQUISTION OF JAGUAR AND LAND ROVER BY FORD Acquisition history:- Jaguar is a British luxury car manufacturer ,head quarter in Coventry England . jaguar was founded by sir William Lyons in 1922,made motor cycle side cars before they enter in to the passenger cars .

company changed their name to jaguar after 2nd world war . The Ford motors made offers to US and UK Jaguar share holders in 1989 to buy their shares . Jaguar became a part of the ford motors new premier auto motive group in 1999. Ford purchased land rover in 2000, it has been closely associated with jaguar. Ford sells fancy versions of jaguar in Britain that bear the Daimler name . Ford paid 3. 3 billion for the Marques, when they bought Jaguar for 1. 6 billion in 1989, and 1. 7 billion for Land rover in 2000. Jaguar employs nearly 20000employees in UK.

Ford purchased decision of Jaguar received heavy objections from industry observers . Jaguar never loses it’s as one of the most prestigious beautifully designed cars. The success formula of Ford with jaguar was to keep the image of the brand and retain the classic design of the jaguar. Ford created a team called transition team and appointed some of its executives into the board members of jaguar. The company set three main objectives based on three critical issues. 1) Constant improvement of product quality 2) Increased manufacturing efficiency 3) Existing new model programs.

Jaguar vehicles are high quality vehicles that are more popular than luxury car buyers . Jaguar history from 2002 to 2004 says that it made a good sale. it takes jaguar from two model lines and 45000 vehicles to 200000 units of annual production . Jaguar plantas are not Fords plants, but with the assistance of ford jaguar has transformed their manufacturing operations . (auto industry. com,2000) Ford purchased Land Rover from BMW in 2000 for 1. 85 billion . Land Rover was mainly based in Solihull and it has a terrific global brand with wonderful heritage .

Land rover employs 9500 and produces Land rover, Discovery, Range rover and free land off road vehicles . when ford takes over Land rover in 2000 the plant recorded the production of 166000vehicles in the previous year . (independant business. com) Ford buys Land rover because of the following reason 1) The Land rover brand known throughout the world . it is perfectly fit into the Fords growing family of brands. 2) The acquisition helps the company to boost their luxurary car segments. 3) It helps the company to achieve its sales target easily, when land rover and range rover came under their premier auto group.

Ford has not been strong in the European off road and luxury utility vehicles because of that they purchased Land rover in 2000. Ford paid a big amount to BMW to buy the land rover from them. Land rover has a strong brand name their products have a distinctive look. Ford created a team of its own people ,it includes some of the members from jaguar to analyze the Land rover operations and assist with change in future. Ford used Jaguar template on land rover to capture the European market. (independent business. com) Ford merged operations with Jaguar and Land rover is profitable, land rover sold 2,26,395 SUV ‘s worldwide in 2007.

(See appendix 1 for External factors affecting Ford) 3. 2 REASONS BEHIND THE SALE OF FORD JLR GROUP AND THE UK PLANT CLOSURE The rise of sales in 1998 impress the management of ford motors company in the future success of Jaguar and the whole premier auto mobiles group. Since 2004 jaguar sales downed to 22%. Various surveys founded that the brand had a bad reputation regarding their quality issues dull and out dated designs lack of an suv and it is too expensive . Jaguar was one of the poorest performing part of the Ford, they failed in their efforts to broaden their jaguar sales .

Ford motors sold their Jaguar and land rover to India’s Tata motors limited for 2. 3 billion in 2008. It was less than what ford paid to acquire these brands. Ford early steps to improve the sale of jaguar showed positive results but the company invested undisclosed amounts to increase the efficiency at the UK factories . in 2002 Paris Auto show scheele one of the spokes man of ford told to the reporters that jaguar would post a 500 million loss. The company announced in 2004 that it was cutting jobs and reducing the jaguar work force . In December 2005 ford disclosed that it paid 2.

1 billion to jaguar to help their reorganisation. (Bloomberg. com) Jaguar worldwide sales were 60,485 in 2007 compared with a peak of 130,334 in 2002. In 2007 the Ford motors announced their plan to sale their Volvo, jaguar and Land rover brands in Europe because they want to concentrate more on their North American plant operations. By selling their different brands ford ended their 20 year effort to widen their sales of luxury cars by acquiring European companies . Among their European luxury brands Volvo and Land rover were profitable brands but Jaguar has unspecified losses.

(koeing,B. ,Lippert,J. ,2007. ) (See Appendix 2 for Strategic Rationale and Implication of Ford UK Plant Closure) 3. 3 CURENT STRATEGIES OF FORD MOTORS FORD VALUE CHAIN ANALYSIS Michael porter developed the value chain approach in 1980s in his book competitive advantage . all organisations activities such as activities include purchasing activities manufacturing the products distribution and marketing of the company products and services . The vale chain frame work is a power full analytical tool for the strategic planning of an organisation .

To conduct the value chain all the activities of the organisation is split into primary and support activities . Primary activities include inbound logistics, operations ,out bound logistics ,marketing and sales it also include procurement ,human resource management, technology development and the firm infrastructure . Tailoring design models Ford motors value chain is not all that different from other manufactures in the automobile industry. Increased demand of the suppliers led to poor suppliers relation ,so the company is taking a new approach to rejuvenate its value chain.

In old days the company is always try to reduce their supply chain cost by demanding lower prices from their suppliers . now a days Ford is working closely with their suppliers to avoid their cost and reduce cost for both the organisations . One of the important impact of the Ford value chain is the design phase . Ford has begun to realise the value of the consumer input is successful on latest design technologies . Ford introduced tailoring design models in their vehicles because of the increased demand of the public. Thier design proved that it is highly successful in recent financial periods.

Marketing is an another important aspect of the value chain analysis . The company has been working together with their dealers to build up marketing strategies to increase their sales . Caterpillar logistics and sap models Ford is using latest information technology to improve their value chain . It has teamed up with CATERPILLAR LOGISTICS and SAP to improve their warehousing Companies main aim is partnering with cat logistics was to secure a partner with expertise in the auto motive supply chain to develop the new information system.

Apart of their cat logistics and sap ford is also using SAS platform that support customer relationship management . It boost fords existing customer relationship database and provide a good base for information analysis ,data mining and predictive modelling . The application of the information technology allowed the value chain to be a cost saving power for the company. Ford decreases their supply chain cycle from 57% to 40%within 37 days in inventory levels in us . Value added lean manufacturing process Ford is also implementing lean manufacturing practice to help the constant development in the value chain .

Studies says that there is 30 percentage waste in the manufacturing process . in order to avoid this Ford introduced value analysis centre with these two programs critical data elements are identified in order to determine the best approach to eliminate the waste and add the great the value to all aspect of the value chain. Lean uses different technological tools data collection and manipulation data soft ware to describe base lines . Essentially the value analysis center at ford is its cost management programme 3. 4 FORD MOTORS: GENERIC STRATEGY : Ford is a high volume full range vehicle manufacturer .

One of the main essence of their market expansion strategy is the producing at highest volumes and lowest prices with a range of the general purpose cars . Ford follows the cost leadership strategy in their business . A firm which follows the cost leader ship strategy attempt to get competitive advantage. A firm which follws the cost leadership strategy attempts to get competitive advantage primarily by reducing their economic cost below its competitors. Ford is trying to remain one of the biggest name brand in American cars without loosing the value of their cars .

cost leadership strategy mainly concentrates on efficiency by producing high volume of products. Ford producing products at a low cost and made available to a very large customer base. In order to maintain this strategy the company requires a constant research for cost reduction in all aspects of the business. Companies in the auto motive industry are taking same steps to get advantage ,Ford has their own strategy to get most from their value chain. Presently Ford is taking steps to enhance supplier relations. Ford reduces the number of suppliers and giving bigger tenders and longer contracts to their existing suppliers .

Company hopes that it helps them to reduce their cost while increasing quality and consistency. Success implementation of cost leadership strategy also benefits from good engineering skills ,designing products for the simplicity of the manufacturing process. Ford achieved unchallenged cost leadership through limiting their models and varieties . Ford motors has completed major cost reduction actions over the past four years to restructure their business . it includes personal level ,facilities and related costs. in 2009 they achieved 5. 1$ billion in auto motive structure cost reductions exceeding their target 4$billion .

Ford introduces a new generation of global products, the company one Ford strategy is clearly evident in their assembly plants . 3. 5 THE ANALYSIS USING FIVE FORCE (PORTERS FIVE FORCE) Competitive rivalry: – Competition is very much high in the auto motive industry. The biggest players in the auto motive industry by their volume are general motors, Ford, Daimler Chrysler and Toyota . Different companies are providing different incentives to attract their customers. Ford was very successful in their volume of scale and they anticipated that they would be the biggest players in the industry taking the place of GM.

Due to the sleek design and price incentives provided by Japanese manufactures Ford is losing their shares while Toyota and Hyundai gained. (reulters,2005) Barriers to entry There are a lot of barriers to entry in the automotive industry. The main 10 giants in the automotive industry have great power in terms of reputation, finances, experiences, technology and existing large product portfolio. The high level of barriers is the research and development capability, investment capability in promotions and new product development. All these minimise the threat of new entrants.

Chinese cars are entering the automotive industry they can overcome the barriers because of their low priced cars . Buying power US and Europe buyers experience very strong bargaining power because of the high competition in the global market. The current accessibility of different information channels and the presence of different service providers it further increased bargaining power. Car manufactures are providing a lot of incentives to attract their buyers. Ford is providing free upgrades worth up to $2000 for their customers in the UK. (ford. uk. com) Supplier’s power

Supplier’s power has major affect on the firms in the automotive industry. Suppliers provide essential components for the production of vehicles and providing spare parts for future repairs. In order to benefit the economies of production Ford is reducing the number of their suppliers and increasing their orders to their existing suppliers (BBC 2005). Due to the action taken by the auto maker, the competition taken by the auto maker, the competition between the suppliers is also increasing. Suppliers provides the products with a lower price and provide other financial incentives.

4: MARKET ANALYSIS OF FORD MOTORS Ford motors company sales and revenue over the last 5 years has fluctuated tremendously, 2005 it was 176. 8 billion, 160. 1 billion for the year 2006 and 172. 5 billion for 2007. The ford Europe and premier auto group recorded strong revenue growth in 2005 financial year. The revenue from Europe and premier auto group hits nearly $60258 million in 2005. it shows a growth 11. 3 % over 2004. Ford motors posted $2. 6 billion profit in the second quarter ,a jump of 13 % compared to same reporting quarter in the financial year 2009.

Ford second quarter revenue amounted to $31. 3 billion. It is $4. 5 billion higher than the second quarter of financial year 2009. Ford is now able to repay $7 billion of auto motive debt in the quarter period, which help them to save $470 million in annual intersest. Ford the first time in 12 years beat General motors monthly sales when they posted 43% jump in vehicle sales of 14,285 vehicles compared with 141951 of GM vehicles in February 2010. Ford light vehicle sale increased to 1,42,006 vehicles compared to 99,050 vehicles in 2009. (See appendix 4 for Revenue Comparison )

Region| FY2009 worldwide wholesale unit volumes by automotive segment (in thousands)| North America| 1,959| South America| 443| Europe| 1,568| Ford Asia Pacific and Africa| 523| Volvo| 324| Jaguar, Land Rover, and Aston Martin| 0| Total| 4,817| Ford revenue comparison with GM and Volks wagon 5. Recommendation and conclusion In 2008 Ford announced the sale of Jaguar and land rover operations to Tata motors . Ford ended the operations of their another subsidiary company Volvo to a Chinese based car company called Geely motors . Ford re organized their plans to concentrate core Ford brand .

The last few years of the company’s financial performance shows that Ford parent companies did not gave any good results for the growth of the company, so the company closed all of their operations of the parent companies. Disadvantage of the agreement At the closing Ford paid a massive ammoud more than million to the Jaguar and land rover operations. More than 600 billion to the Jaguar and Land rover pension plans. As part of the agreement Ford has to supply their power train models, plat form technologies and also engineering support including Research and development.

Ford faced a lot of challenges because of the acquisition and demerging of their parent companies over the last 20 years . Joint ventures and acquisition played an important role in the performance of the company . It affects both positively in the performance of the company. To conclude this report try to focus the different faces of the strategic alliance and the current strategies’ of ford motors . 6. Appendix 1. The external factors affecting the operations of Ford motors Opportunities * The huge expansion in the devoloping Asian pacific market * Additional expansion in the US luxury car’s market

* Synergy saving and cost sharing of different premier auto group. Threats * Intensive competition on the major market of operations * Demand decline in various models * Liquidity problem (massive investments related with the development of new models and existing models and technology) * Changes in consumer trends * Share holders dislikes in the approval of Jaguar recovery. (The poor financial performance made more pressure on the Fords management in their further h Strengths * Good history of jaguar brand * Ford motors operating capabilities.

Weakness * Absence of transparency regarding the role of PAG in the strategy of Ford. * Lack of finance for aggressive marketing campaign. * Product positioning problems . * Problems related with quality. 2. Strategic rationale and the implications of Ford UK plant closure 1) The review of macro factors Political factors: – One of the distinguish factor of the auto motive industry is that it is not country bound, various and events are inter related the events take place in one country may directly affect the operations of other country.

Ford manufactured their certain models in specific countries. Ford produced most of their Jaguar models in Europe even though the markets for the jaguar cars were in America. European customers put higher preference on small engine cars . British labour union pressure was one of the major cost increase factor of Ford operations . The closing decision forced to cut the job of 2000 people . Global political stability that is free trade flows, oil prices, exchange rates deterioration of economic and technological cooperation between countries forced to close the jaguar operations in uk.

(Mackintosh,2004) Economic factors: – The market size and the maturity of the target market ,potential growth of the market are the key factors to determine the location of production. The cost factors and the direct and indirect costs are the key issues obtain the competitive advantage over the industries. One of the important issue that influence the operation location decision is the specific labour costs. The cost factors and the relationship between the direct and the indirect cost become one of the main issues in maintaining the competitive advantage , Specific labour cost is an important issues which affect the production locations .

According to the survey (KPMG 2004) industry specialist put a major emphasis on the specific cost saving . Massive increase in the labour cost in UNITED STATES and EUROPE directly affect the ford’s operations . High wage rate of employees directly affect the JAGUAR UK operations . the data provided by the Macintosh says that Ford UK plant output is lower (130000) than output of BMW plants in Germany ( 166000). Fluctuations in the price of oils in the oil market directly affect the Jaguar operations . A hike in the oil price added the difficulty to sale the luxury cars .

Majority of the jaguar cars have big sized engines ,greater than 2 litters . This table shows that United states will be the largest markets for vehicles accounting 23% of global sales upto 2010. Sales in the western Europe will be high after the futher expansion of Europe zone , but the current maturity of market ,excessive competition and demand trends suggests that the share of Europe will be drop. Special attention shall be given to the present and the potential rate of Asian pacific market. One of the major threat for the fierce competition is the US Europe and the Asian pacific market .

Ford has to compete with US and Japanese firms ,they follows aggressive customer switching strategies Fluctuations in the currency rate is an another important factor which affect the Jaguar operations . weak positions of the US dollar against various currencies especially the British pound reduced the price competiveness in US market. BBC says that it was weak us dollar that affect the reduction in jaguar sales by 20%, it directly affect the overall performance of the ford group and Jaguar sales (BBC. com) SOCIAL FACTORS

One of the important feature of the automotive industry is that the demand sequences is not homogenous . Customers change and preference towards more fashionable ,sport type ,suv equipped cars slashed the jaguar sales because the jaguar brand had old fashioned cars and they are always struggled because of their quality features . TECHNOLOGICAL FACTORS Technological factors are the important factors which affect the performance of the jaguar cars . The ford company invested more in their e business technologies which affect the Jaguar operations.

Consumers choice for various technological improvements made a gap in the architecture of supply chain. 4. revenue comparison 2009 – 2010 5. Ford sale history of its parent companies REFERENCE: * Culpan , R . 2002. Global Business Alliance: Theory and Practice, Quorum Books, USA. * Hitt, M. Ireland, D & Hoskisson , R . 2009, Strategic Management Competitiveness and Globalization: Cases, south western Cengage learning, USA. * Dobson, P. Starkey, K & Richards, John. 2004, Strategic Management: issues and cases, Black well publishing Ltd * McAfee , P. R. , 2002 .

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