1.0 INTRODUCTION

Ford Motor Company was initiated in 1903 by Henry Ford who was passionate with engineering and mechanics. Ford's first leap into the world of automotive mechanics was in 1899 when he founded the Detroit Automobile Company. The failure of Detroit Automobile Company led to the foundation of Ford Motor Company on June 16. 1903.

Ford operates in two segments: Automotive and Financing. Products offered include: Ford, Mercury, Lincoln, Volvo and Jaguar. The company is led by CEO William Ford Jr. and employs over 246,000 people. It is headquartered in Dearbon, Michigan and has a 13.8 percent market share of the auto industry as of February 2009, as compared to 17.5 percent in 2007. The firm’s major competitor in the United States is General Motors and Toyota.

Ford manufactures and distributes automobiles across six continents. The company operates about 108 plants globally and produces such models as Ford, Lincoln, Mazda, Mercury and Volvo. It has sold its Jaguar, Land Rover, and Aston Martin businesses.

The company developed and implemented assembly line production by the release of the Model T in 1909, and produced planes and vehicles for the Allies in World War II. Ford has operated internationally since 1904, when it opened a branch in Canada to gain access to Commonwealth markets. For the first half of the 21st Century, Ford remained the dominant car manufacturer within the market it had effectively created.

However, in 2006, Ford posted its biggest operating loss to date $12.6 billion. This coincided with continued decline in market share, with the majority of these losses being captured by Toyota and General Motors. From 1997 to 2007, Ford’s United States market share plummeted from 25% to 15%. In 2006, Alan Mulally was hired as CEO and took over a company at the precipice of failure. Mulally announced a new restructuring plan in 2006 entitled ‘The Way Forward’, designed to “better align capacity to demand”. At its core, this plan involved the closure of seven assembly plants and strategic reorientation towards ‘One Ford’. Championed by Mulally, this strategy focuses on creating a

1

standard Ford personality which is seen and felt within every automobile produced by the company.

In addition, the plan entails standardizing chassis worldwide and a greater focus on the core Ford nameplate. As a part of this plan, Ford mortgaged all of its assets involving both physical and intellectual property in December 2006 for a $23.4 billion line of credit. While originally seen as a risky and potentially desperate move, this timely acquisition of capital has made Ford the most stable of the Big Three carmakers. The company also divested some of its non-Ford brands during this time, selling Jaguar and Land Rover to Tata Motors for $2.3 billion in 2008. Ford is also currently attempting to sell Volvo, which it purchased in 1999 for $6.5 billion.

Since 2009, Ford Motor Company received $5.9 billion in Energy Department loans to helps retools its plants in Illinois, Kentucky, Michigan, and Ohio to produce 13-fuel efficient models, including 5000 to 10 000 electric cars per year starting in 2011.

The success of Ford Motor Company was because of its strategy which encompassed a new way of manufacturing called mass production, advancements in technology, the supply chain and most of all changes in lifestyle. Ford's personal motto, “Help the Other Fellow” affected the goals, work environment and the corporate strategy of the Ford Motor Company.

In this report, we have come up with a strategic plan of action for Ford for the next three years from 2010 to 2012 as the company is in financial trouble. This is because of the global economic recession as consumer demand for new autos has plummeted. Unavailability of credit and high unemployment rate are among the factors that create the needs of a new strategic plan of action for Ford to improve its financial performance.

2

2.0 FINANCIAL RATIO ANALYSIS

Growth per year over year

Years 2005 2006 2007 2008 2009Revenue

(%)3.17 -9.58 7.70 -15.18 -19.12

Operating Income

(%)

-29.85 N/A N/A N/A N/A

Net Income

(%)

-41.96 N/A N/A N/A N/A

EPS (%) -39.31 N/A N/A N/A N/A

The overall growth performance of the company does not handled easy. The company suffers a huge decline of growth over the period of 2008-2009, and still struggling after that, with a raise of minimum growth and suffer quite considerable loss.

For the Ford’s growth ratio, the company plummeted to a declining rate, from 7.7% growth in revenue during the year 2007 to the loss of 15% in 2008 and further loss in 19% over the year 2009. The severe loss may due to the global recession of 2007-2009 that hit this United Stated-based automobile company.

Profitability Ratio

Margins % of Sales

2005 2006 2007 2008 2009

Revenue 100 100 100 100 100COGS 81.85 92.97 83.07 88.17 84.54Gross Margin 18.15 7.03 16.93 11.83 15.46SG&A 13.92 11.98 12.28 14.65 11.21

Operating Margin 4.23 -4.95 4.66 -2.82 -2.39

Net Int Inc & Other

-3.10 -4.45 -6.83 -7.02 4.94

3

EBT Margin 1.13 -9.40 -2.17 -9.85 2.56

For the profitability ratio, the company shows a stable yet fluctuate numbers on the Earning before Tax Margin (EBT Margin).

2005 2006 2007 2008 2009 2010 2011 2012 2013 2014

-15

-10

-5

0

5

10

15

20

25

Gross Margin Operating Margin EBT Margin

From the graph depicted above in contrast between Gross Margin, Operating Margin and EBT Margin, we see a mirroring pattern between them, fluctuates and rises with mirroring image. We conclude that although the company suffer most severe loss, the is no clear gap between this margin, and thus predicted that the company is mostly stable, in performance alone and not economically.

Profitability 2005 2006 2007 2008 2009Tax Rate % N/A N/A N/A N/A 2.28

Net Margin % 1.14 -7.88 -1.58 -10.03 2.30Asset

Turnover0.63 0.58 0.62 0.59 0.57

Return on Asset %

0.72 -4.60 -0.98 -5.90 1.32

Financial Leverage

20.80 N/A 49.62 N/A N/A

Return on Equity %

13.96 -265.76 -251.78 N/A N/A

Return on Invested Capital

4.33 -2.96 2.58 N/A N/A

Interest Coverage

N/A N/A N/A N/A N/A

While most of the data are not available for analysis, the company’s asset turnover shown a little decline from 2007 to 2009, due to the problem of global recession and its impact on entrepreneurship on US soil. Problems of foreclosure,

4

inflation and production problems may reduce the number of people buying automobiles or using Ford’s services, thus reducing the profit that the asset can generate.

As you can also see, the Return on Asset has also fluctuates during the period of global recession, from a loss of 0.9% declining to a loss of 5.9%, and finally gain by 1.32% during the period of 2007-2008-2009 respectively. With the loss suffered from the previous two years (2007-2008), and the inactive state of the assets, it is thought that the company incur a loss to the investor and the stakeholder of the company during the period.

Financial Health

Balance Sheet Item 2005 2006 2007 2008 2009Total Current Asset (%) 74.27 65.64 63.80 67.62 77.05Total Assets (%) 100 100 100 100 100Total Current Liabilities (%) 35.55 28.80 27.49 50.76 26.06Total Liabilities (%) 95.19 101.24 97.98 107.93 104.01Total Stockholders’ Equity 4.81 -1.24 2.02 -7.93 -4.01

From the table above, we can observe the method of financing does the Ford Company hold true. The main method of financing used by the company mostly came from liabilities, such as loans. Since the company mainly operates on liabilities, it is easily influenced by the condition of the market, reflected by the amount of financing in 2007-2009 period, where they maxed out their financing not only to cover for the operation of the company, but the equity of the shareholders.

Liquidity / Financial Health

2005 2006 2007 2008 2009

Current Ratio 2.09 2.28 2.32 1.33 2.96Quick Ratio 1.64 2.13 2.19 1.25 2.85Debt/Equity 11.91 N/A 24.92 N/A N/A

The liquidity ratio of the company is surprisingly stable for a company that fluctuates on the earning. Mainly due to the nature of the business as a producer of American automobile, the company may have numbers of assets available to be liquefied to cover for the short-term obligation.

Source: http://financials.morningstar.com/ratios/r.html?t=F

5

3.0 STRATEGIC POSTURE

Vision- To become the world's leading consumer company for automotive products and services.

Mission- to be relevant and profitable for the future.

One team, one plan, one goal

One Team

“People working together as a lean, global enterprise for automotive leadership, as measured by:

Customer, Employee, Dealer Investor, Supplier, Union/Council, and Community Satisfaction”

One Plan

I. Aggressively restructure to operate profitably at the current demand and changing model mix

II. Accelerate development of new product our customers want and valueIII. Finance our plan and improve our balance sheetIV. Work together effectively as one team

One Goal

“An exciting viable Ford delivering profitable growth for all”

Expected behaviours

Ford functional and technical excellence

Know and have passion for our business and our customers Demonstrate and build functional and technical excellence Ensure process discipline

6

Have a continuous improvement philosophy and practice

Own working together

Believe in skilled and motivated people working together Include everyone; respect, listen to, help and appreciate others Build strong relationship; be a team player, develop ourselves and

others Communicate clearly, concisely and candidly

Role model Ford values

Show initiative, courage, integrity and good corporate citizenship Improve quality, safety and sustainability Have a can do, find a way attitude and emotional resilience Enjoy the journey and each other; have fun – never at others

expense

Delivery results

Deal positively with our business realities; develop compelling and comprehensive plans, while keeping an enterprise view

Set high expectation and inspire others Make sound decisions using fact and data Help ourselves and account responsible and accountable for

delivering result and satisfying our customers

Goals

Nonfinancial Goals

Retain spot as global market leader with over 100 plants and 280 000 employees worldwide

Sustain probability and rank 1 US auto company Enter and increase manufacturing in India to lower plant cost Build efficiency through better logistics, distribution and control

7

Succeed at all implementation factors Build awareness and increase sales of all Ford Hybrid automobiles

Financial Goal

Push industry hybrid sales to increase 10% annually

Current Strategy

Ford’s business strategy is embodied in the One Ford plan, which was adopted in 2007 and has guided the company ever since. One Ford expands on the company’s four-point business plan for achieving success globally. The four-point business plan consists of the following:

I. Aggressively restructure to operate profitably at the current demand and changing model mix

II. Accelerate development of new products the customers want and valueIII. Finance the plan and improve the balance sheetIV. Work together effectively as one team

Building on this plan, One Ford encourages focus, teamwork and a single global approach, aligning employee efforts toward a common definition of success. It emphasizes the importance of working together as one team to achieve automotive leadership, which is measured by the satisfaction of all customers, employees and essential business partners, such as the dealers, investors, suppliers, unions/councils and the communities in which the company operate. Ford has defined a set of behaviours that are expected of all employees to support the One Ford plan.

The goal of One Ford is to create an exciting and viable company delivering profitable growth for all. They are focused on building:

Great Products, a full family of vehicles – small, medium and large; cars, utilities and trucks – with best-in-class quality, fuel efficiency, safety and smart design;

Strong Business, based on a balanced portfolio of products and global presence; and

Better World, accomplished through our sustainability strategy.

8

The company aims to have profitable growth across geographies and product types.

One Ford has been implemented through the consistent use of processes at the highest levels of the company for risk assessment, strategy development, business planning and performance review.

The financial turnaround has been based largely on the company’s ability to deliver high-quality, innovative and desirable products everywhere it operates, in both mature and rapidly growing markets. Ford had aligned their product development, manufacturing and marketing organizations worldwide to deliver the right products to the right markets as efficiently as possible.

In all vehicles and regions, Ford’s global vehicles showcase its commitment to sustainability. Technologies like EcoBoost®, direct injection of gasoline or diesel fuel, six-speed transmissions, and hybrid and plug-in hybrid powertrains deliver choice to drivers everywhere.

Ford is continuing to implement the One Ford plan. But it also Go Further – to deliver ingenious products, make them available to everyone, and serve each other, our customers and our communities. Go Further is Ford’s d global brand promise and their approach as it accelerates ahead.

Current Policy

Ford company policies

1. Human Rights

This is the basic working conditions and corporate responsibility, which forms the foundation for work within the operations and Ford supply chain. This code articulates our commitments on key human and labor rights issues.

2. Diversity

9

This policy are about to increase the diversity in work force. In Ford, all opportunity are equal in all aspect in business. Provide a broad work environment in which different ideas, perspectives and beliefs are respected.

3. Bribery and Corruption

Ford Company are fully comply with the law in the company that they do business. Which there are no bribery and corruption in the whole organization.

4. Political Contributions

Ford is committed to help the government to covers the issue relating the public policy.

5. Customer Satisfaction and Safety

Ford has several policy statements aimed at increasing the quality of their products and promoting the safety of their customers.

6. Environment and Employee Health and Safety

Ford are focus on employee health and safety and the global environment to make it clear that sustainable economic development is important to the future welfare of Ford and society in general.

7. Privacy

Privacy policy is to gain trust and confidence of ford customers are important to Ford Company and essential to building long-term relationships and delivering excellent products and personalized services.

Ford New Vision

The new vision that we would like to propose to Ford is to become automotive industry leader in fuel efficient and other fueled vehicles at an affordable cost with better quality to global customers. People will think of quality and innovation, when they think about Ford.

Ford New Mission Statement

10

The new proposed mission statement for Ford will be: Ford Co is going to be an industry leader by anticipating consumer needs and provide safe, quality, and innovative products and services to consumers worldwide. To recover lost market share that was lost to local and foreign competition. Take back the position as the auto industry leader in sales, market share and profit by maximizing return by meeting and exceeding customer’s expectations for great quality, advanced technology, and world class customer service. Ford is committed to save the environment, to help the society and making sure that the employees’ welfare is taken care of, which is going to help improving Ford's name in the entire world.

4.0 EXTERNAL ENVIRONMENT ANALYSIS (EFAS)

Opportunities

1. Further concessions from the United Auto Workers regarding labour costs, in times of hardship

2. The few consumers purchasing vehicles focus on fuel efficiency, durability, and carmaker’s sustainability

3. Light vehicle production exceeded the production of cars and trucks in North America and Europe by an estimated 16 percent and 14 percent, respectively

4. In 2008, the Big Three began offering lowered interest rates or zero percent financing to lure buyers

5. The auto industry has experienced a shift from trucks and SUVs to hybrid and small fuel-efficient vehicles

6. Consumers’/dealers’ willingness to improve brand/sales

Threats

1. The auto manufacturing industry has been crushed of late by the global economic recession as consumer demand for new autos has plummeted.

11

2. Unemployment rates exceed 10 percent in many areas in the United States and is expected to remain high for part of 2010

3. Automakers have faced rising health care and pension costs4. The government bailout money is diminishing, and Ford has exhausted its

credit lines5. Consumers are concerned about voided Warranties if the Big Three go out

of business 6. Many banks are not making car loan which has been detrimental to auto

firms.

12

Key External Factors Weight

Rating

Weighted Score

Opportunities

1. Further concession regarding labour costs 0.08 4 0.32

2. Few consumers purchasing vehicles focus on fuel efficiency, durability and carmaker’s sustainability

0.08 3 0.24

3. Light vehicle production exceeded production of car and trucks in north America and Europe estimated by 16% and 14%

0.07 2 0.14

4. The Big Three offering lowered interest rates or zero percent financing to lure buyers

0.08 3 0.24

5. The auto industry experienced a shift trucks and SUVs to hybrid and small efficient vehicles.

0.07 3 0.21

6. Consumers/ dealers willingness to improve sales/ brand

0.08 4 0.32

Threat

1. Due to global economic recession, consumer demand for new autos has plummeted

0.09 3 0.27

2. Unemployment rate exceed 10% in many areas in United States and expected to remain high for part of 2010

0.10 4 0.4

3. Automakers faced rising health care and pension costs

0.08 3 0.24

4. Government bailout money is diminishing and Ford has exhausted its credit lines

0.09 2 0.18

5. Consumer are concerned about voided warranties 0.09 2 0.18

6. Many banks are not making car loans 0.09 2 0.18

Total 1.00 2.92

13

5.0 INTERNAL ENVIRONMENT ANALYSIS (IFAS)

Strengths

1. The brand is well-known in automobile industry and global markets2. Huge marketing and advertising3. Greater amount of customer loyalty4. Individual brands have been enjoying the benefits of the good reputation

that they have through the quality makes and services5. Providing the consumer more variety of car and commercial vehicle6. Quality to ensure Ford to be more complete and must be consistently

monitored with permit standard7. Good relation with the employees8. Safety and better work environment 9. Competitive wages that are assert to recruits a qualified and skilled

employee in all its functions10.‘ONE Ford’ approach11.Always develops cars on standardized procedure and invested heavily in

alternate fuel source12.ECOnetic initiative

Weaknesses

1. Brand image was harmed and cause a large cost

2. Lack of design phase and innovative design structures on their new paddle of cars

3. Management is missing focus on some lines performance

4. Does not have an effective cost management system

5. Ford will manufacture the standard cars which are not able to cope up with current

market automobile.

6. Has a small market share therefore the sale will decline the sales

14

Internal Factors Evaluation Matrix for Ford Motor Company

FORD MOTOR COMPANY SWOT ANALYSISKey internal factors Weigh

tRating

Weighted score

Strengths1. The brand is well-known in automobile industry and

global markets0.04 3 0.12

2. Huge marketing and advertising 0.02 3 0.063. Greater amount of customer loyalty 0.05 4 0.204. Individual brands have been enjoying the benefits of

the good reputation that they have through the quality makes and services

0.04 3 0.12

5. Providing the consumer more variety of car and commercial vehicle

0.04 4 0.16

6. Quality to ensure Ford to be more complete and must be consistently monitored with permit standard

0.05 3 0.15

7. Good relation with the employees 0.11 3 0.338. Safety and better work environment 0.10 3 0.309. Competitive wages that are assert to recruits a

qualified and skilled employee in all its functions0.05 3 0.15

10.Always develops cars on standardized procedure and invested heavily in alternate fuel source

0.03 4 0.12

11.ECOnetic initiative 0.06 3 0.1812.‘ONE Ford’ approach 0.06 4 0.24

Weaknesses1. Brand image was harmed and cause a large cost 0.03 1 0.032. Lack of design phase and innovative design

structures on their new paddle of cars0.04 2 0.08

3. Management is missing focus on some lines performance

0.10 1 0.10

4. Does not have an effective cost management system

0.07 1 0.07

5. Ford will manufacture the standard cars which are not able to cope up with current market automobile.

0.05 2 0.10

6. Has a small market share therefore the sale will decline the sales

0.06 2 0.12

Total 1.00 2.63

15

6.0 ANALYSIS OF STRATEGIC FACTORS (SFAS)

1. SWOT Matrix

Strengths1. The brand is well-known in automobile industry and global markets2. Huge marketing and advertising3. Greater amount of customer loyalty4. Individual brands have been enjoying the benefits of the good reputation that they have through the quality makes and services5. Providing the consumer more variety of car and commercial vehicle6. Quality to ensure Ford to be more complete and must be consistently monitored with permit standard7. Good relation with the employees8. Safety and better work environment9. Competitive wages that are assert to recruits a qualified and skilled employee in all its functions10. ‘ONE Ford’ approach11. Always develops cars on standardized procedure and invested heavily in alternate fuel source12. ECOnetic initiative

Weaknesses1. Brand image was harmed and cause a large cost2. Lack of design phase and innovative design structures on their new paddle of cars3. Management is missing focus on some lines performance4. Does not have an effective cost management system5. Ford will manufacture the standard cars which are not able to cope up with currentmarket automobile.6. Has a small market share therefore the sale will decline the sales

Opportunities1. Further concessions from the United Auto Workers regarding labour costs, in times of hardship2. The few consumers purchasing vehicles focus

S-O Strategies1. Expand into S. American and European countries by offering better incentives and financing (S1, S4, O3, O4 O5),2. Produce more fuel

W-O Strategies1. Improve operations by being more lean and cutting back excessive executive spending (W3, W4, W5, O1)2. Sell off business units to improve cash infusion

16

on fuel efficiency, durability, and carmaker’s sustainability3. Light vehicle production exceeded the production of cars and trucks in North America and Europe by an estimated 16 percent and 14 percent, respectively4. The Big Three began offering lowered interest rates or zero percent financing to lure buyers5. The auto industry has experienced a shift from trucks and SUVs to hybrid and small fuel-efficient vehicles6.Consumers’/dealers’ willingness to improve brand/sales

efficient and smaller models and promote them with lower financing options (S1, S3, S4, O2, O3, O5)

to the company (W2, W3, W4, W5, O6)

Threats1. The auto manufacturing industry has been crushed of late by the global economic recession as consumer demand for new autos has plummeted.2. Unemployment rates exceed 10 percent in many areas in the United States and is expected to remain high for part of 20103. Automakers have faced rising health care and pension costs4. The government bailout money is diminishing, and Ford has exhausted its credit lines5. Consumers are concerned about voided Warranties if the Big Three go out of business6. Many banks are not making car loans.

S-T Strategies1. Improve promotion on selected lower priced models with zero or very low rate financing to younger generation through Internet using Facebook, Twitter, and other networking channels (S2, S3, S4, S6, T1, T4, T6)2. Offer “Free” extended warranty for additional 2 years to gain customer loyalty and brand image (S4, S5, T1)

W-T Strategies1. Since dealers are not able to turn around their inventory fast enough, offer advertising with more incentives for moving the cars faster (W1, W3, T4, T6)

17

FP

CP

SP

IP654321

Conservative

Aggressive

CompetitiveDefensive

1

2

3

4

5

6

7-2-3-4-5-7 -1-6

7

-7

-6

-5

-4

-3

-2

-1

2. The Strategic Position and Action Evaluation (SPACE) Matrix

Financial Position (FP) Environmental Position (EP)Return on Investment 1 Unemployment -5Leverage 1 Technological Changes -3Liquidity 1 Price Elasticity of Demand -2Working Capital 1 Competitive Pressure -4Cash Flow 1 Barriers to Entry into Market -5

Financial Position (FP) Average 1 Environmental Position (EP) Average

-3.8

Competitive Position (CP) Industry Position (IP)Market Share -2 Growth Potential 4Product Quality -3 Financial Stability 2Customer Loyalty -2 Ease of Entry into Market 4Capacity Utilization -3 Resource Utilization 3Technological Know-How -2 Profit Potential 3

18

Competitive Position (CP) Average

-2.4 Industry Position (IP) Average 3.2

Y-axis: FP + EP = 1.0 + (-3.8) = -2.8X-axis: CP + IP = (-2.4) + (3.2) = 0.8Conclusion: Vector points in Competitive quadrant

Ford is competing fairly well in an unstable automotive industry.3. The Boston Consulting Group ( BCG) Matrix

Relative Market Share Position

High Medium Low

1.0 0.5 0.0High +20

Industry Sales

Growth Rate

Percent(percent)

Stars

IIQuestion Marks

I

Medium 0

Low -20

Cash Cows

III

Dogs

IV

The U.S. Market Share of Top 11 Auto Firms (February 2009)

Company % of Market ShareGeneral Motors Corp 18.8Toyota Motor Sales USA Inc. 16.9Ford Motor Company 13.8 (RMSP=0.73)Chrysler LLC 10.9American Honda Motor Co. Inc. 10.6

19

Nissan North America Inc. 8.0Hyundai Motor America 4.1Kia Motors America Inc. 3.3Mazda Motor of America Inc. 2.4Subaru of America Inc. 1.9Mitsubishi Motors N A Inc. 0.7Source: Based on http://online.wsj.com/mdc/public/page/2_3022-autosales.html#autosalesD.4 . The Internal-External (IE) Matrix

The IFE Total Weighted Score

Strong3.0 to 4.0

Average2.0 to 2.99

Weak1.0 to 1.99

High3.0 to 3.99

I II III

Medium2.0 to 2.99

IV V

Ford Motor Company

VI

Low1.0 to 1.99

VII VIII IX

20

The EFE Total

Weighted Score

Weak Competitive

Position

Quadrant II Quadrant I

Quadrant IVQuadrant III

StrongCompetitive

Position

Rapid Market Growth

Slow Market Growth

5. Grand Strategy Matrix

1. Market development2. Market penetration3. Product development4. Forward integration5. Backward integration6. Horizontal integration7. Related diversification

21

7.0 ALTERNATIVE & RECOMMENDATION

Quantity Strategic Planning Matrix (QSPM)

Produce more different car models to cater distinct global preferences

Expand the business into other continent’s automotive market as to increase the market share value

Key Factors Weight

AS TAS AS TAS

Opportunities

1. Further concessions from the United Auto Workers regarding labor costs

0.08 3 0.24 4 0.32

2. Few consumers purchasing vehicles focus on fuel efficiency, durability, and carmaker's sustainability

0.08 3 0.24 2 0.16

3. Light vehicle production exceeded the production of cars and trucks in North America and Europe by an estimated 16 percent and 14 percent,

0.07 2 0.14 4 0.28

22

respectively4. The Big Three began offering lowered

interest rates or zero percent financing to lure buyers

0.08 - - - -

5. The auto industry has experienced a shift from trucks and SUVs to hybrid and small fuel-efficient vehicles

0.07 4 0.28 3 0.21

6. Consumers’/dealers’ willingness to improve brand/sales

0.08 4 0.32 3 0.24

Threats

1. Due to global economic recession, consumer demand for new autos has plummeted

0.09 3 0.27 4 0.36

2. Unemployment rates exceed 10 percent in many areas in the United States and is expected to remain high for part of 2010

0.10 2 0.20 4 0.40

3. Automakers have faced rising health care and pension costs

0.08 - - - -

4. The government bailout money is diminishing, and Ford has exhausted its credit lines

0.09 - - - -

5. Consumers are concerned about voided Warranties if the Big Three go out of business

0.09 - - - -

6. Many banks are just not making car loans

0.09 - - - -

TOTAL 1.00 1.69 1.97Strengths

1. The brand is well-known in automobile industry and global markets

0.04 4 0.16 4 0.16

2. Huge marketing and advertising 0.02 3 0.06 4 0.083. Greater amount of customer loyalty 0.05 4 0.20 4 0.204. Individual brands have been enjoying

the benefits of the good reputation 0.04 3 0.12 3 0.12

23

that they have through the quality makes and services

5. Providing the consumer more variety of car and commercial vehicle

0.04 4 0.16 3 0.12

6. Quality to ensure Ford to be more complete and must be consistently monitored with permit standard

0.05 2 0.10 3 0.15

7. Good relation with the employees 0.11 1 0.11 1 0.118. Safety and better work environment 0.10 1 0.10 1 0.109. Competitive wages that are assert to

recruits a qualified and skilled employee in all its functions

0.05 2 0.10 4 0.20

10.Always develops cars on standardized procedure and invested heavily in alternate fuel source

0.03 4 0.12 3 0.09

11.ECOnetic initiative 0.06 3 0.18 3 0.1812.‘ONE Ford’ approach 0.06 4 0.24 4 0.24Weaknesses

1. Brand image was harmed and cause a large cost

0.03 4 0.12 3 0.09

2. Lack of design phase and innovative design structures on their new paddle of cars

0.04 4 0.16 3 0.12

3. Management is missing focus on some lines performance

0.10 2 0.20 3 0.30

4. Does not have an effective cost management system

0.07 2 0.14 2 0.14

5. Ford will manufacture the standard cars which are not able to cope up with current market automobile.

0.05 3 0.15 1 0.05

6. Has a small market share therefore the sale will decline the sales

0.06 3 0.18 4 0.24

SUBTOTAL 1.00 2.60 2.69

SUM TOTAL ATTRACTIVENESS SCORE 4.29 4.66

24

Strategic Recommendations

The following strategic recommendations are designed to address short run and long run problems faced by the company. Ford’s management seems to be on the right track, but recent progress is uncertain and could easily decadent as the current market and industry conditions was not in the good condition. Thus, the strategic recommendation would be as follows according to the QSPM analysis.

1. Market share expansionThrough an agreement with a China automotive firm which is Chang’an Automotive, Ford is able to access market in China. This joint venture had sold approximately 204,000 vehicles, comprises the manufactures of Ford Focus, Fiesta and Mondeo lines. As the production was progressing positively, Chinese demand for vehicles is expected to rise approximately 20% by the year of 2009. However, despite of the increase demand on Ford’s cars, Ford only held a meager two percent of China’s market share.

The Ford Fiesta was observed as it has high demand in China automotive market as it experiencing strong sales and we believe that Ford Fiesta is the key to enhance Ford’s market share in China. Sales of the sedan and hatchback Fiesta models combined should surpass the 100,000 unit mark and significantly boost Ford’s overall 2009 China sales. Given the economic incentives provided by the Chinese government and GMs ongoing difficulties, we believe now is the opportune time for Ford to make a full push to steal market share in China and establish itself as the dominant American brand. While there is inherent risk to this strategy, we believe that a narrow window of opportunity exists for the company to overcome its poor start in the Chinese market.

25

Other than that, we also recommend Ford to divest Volvo division, produce more different car models to cater distinct global preferences and reconstruct their factory and supply chain management. The explanations are as follows.

Divest Volvo divisionVolvo seems befitting with its brand name as it has an excellent reputation whereby the main market target are the upper middle class consumers who seeks for an ultra-safe luxury vehicle but with an affordable price which are significantly lower than other luxury brand such as Mercedes and BMW. Thus, this make Volvo had the potential to serve within Ford’s premium line of vehicle.

However, Volvo does not fit into the ‘One Ford’ strategy that being pursued by the company. Given the current conditions of economy, it is best to sale Volvo as it is seen as the best alternative to increase the capital of the company. We would like to suggest Ford to sell Volvo division back to the Volvo Group, a Swedish parent company which sold Volvo to Ford in 1999. Volvo Group continues to manufacture trucks, buses, construction equipment and boats within Sweden. Ford held over 15,000 jobs position in Sweden, through the Volvo Cars Subsidiary. In 2008, the Swedish government issued a $3.5 billion bailout of Volvo Cars and one other brand. We believe that Ford should use this opportunity to pressure the Swedish government to support the repurchase of Volvo Cars by Volvo Group by providing significant support for the deal. However, if the Volvo Group was not interested in repurchasing Volvo Cars, it would affect Ford as Ford will be exposed to a long term strategic risk.

There are three firms were bidding for the acquisition of Volvo which are Geely Holding Group, Beijing Automotive Industry Holding, whereby both firms are China-based automotive firms and the other firm is a Europe-based group of investors. Ford should not hesitate to execute

26

the sale of Volvo if any of these three firms are able to procure the necessary funds.

Product differentiationRegional product differentiation is necessary for Ford to ensure that products are suitably geared towards distinct global preferences. As we recognize management was under substantial pressure to affect change, Ford should never again stake so much of its future on one line of vehicles. The Ford Fiesta “World Car” will determine the future of Ford, and while early reactions and sales are positive Ford should create a high end equivalent to the Fiesta to capitalize on similar cost savings measures.

Ford has joined the growing hybrid market by introducing Ford Fusion which is a hybrid model car. Although being late in joining to the growing hybrid market, Ford has succeeded in manufacturing a vehicle that compete with the existed hybrid cars as it has similar quality and price if to be compared with the competitors such as Toyota and Honda. Despite being still at a disadvantage compared to Toyota in this market, it has launched a new lineup of vehicles that has an opportunity to redefine the competitive landscape. Thus, investment towards new innovative technologies will benefit the company in its future for profitability growth.

Factory and supply chain managementFord must continue its aggressive drive to confine and passive factories, emphasizing on factories situated in the European and US regions. Additionally, Ford must reconstruct its supply chain after executing these

27

closures as this helps to accomplish the results faster than anticipated. Previously Ford entertained approximately 1600 supplier with an expected reduction leaving only 750 active.

Current instability within the market, particularly the potential bankruptcy of a competitor, heightens the importance of this reduction and leads us to recommend deeper cuts in the number of suppliers Ford contracts with. All the suppliers must be carefully examined, in order to identify those that are vital to the Ford supply chain.

8.0 IMPLEMENTATION

For the implementation part of the Ford Company, there are several implementations that can be done to ensure the Ford Company sustainability in the market. Most of the implementations are more toward the customers in order for the company to grab customer’s loyalty to stay with them. The implementations are as follow:

1. Get to market the finished product as soon as possible.

In the manufacturing plant, the faster the end product produced means faster the product can be market. In China and India, the manufacture plant in both countries will help to the tremendously market the Ford product as that countries have enough raw material and huge plant site that can produce more and even faster than other countries.

2. Customers easy and affordable take home a Ford vehicle by providing them special programs.

28

This programs can be determine at dealer level, the Ford Company can provide overall guidelines as to what the dealer can and cannot do to the customers in terms of contracts that provided. By this program, the customers can easily own the Ford product as it can gives benefit for both customers and the company itself.

3. Customer services improvement.

In the customer service, it becomes necessary to make sure unhappy customer to feel warm and comfortable about their purchase. This can be done by provide them with the suitable solution based on their problems. The improvement also gives the huge impact that depict how the company care about their customers

Besides that, Ford should offer manufacturer’s rebates as a matter of their policy. By included in the policy, it protect customer because customers feel save about their products.

4. Specific features based on regional markets.

Manufacture plants in India are not as same as manufacture pants in China. There will little bit different processes for a slightly different car model in both countries. This is due to different countries have different kind of features which is suit for certain countries.

In the regional suppliers, the customers may choose their features based on their needs in the region. This is to ensure that Ford Company can give customers with the features that match with the function and uses in that region.

5. Aware specific government programs that support car purchasing.

Different countries have different kind of government regulations. Like in China, government are subsidizing the fuel cost in huge scale, making the customers affordable to own cars with less money.

29

6. Press release.

On the press release, the Ford Company may have to create the good word of mouth to attract more customers to use Ford products. A good press not only attract, but can bring a huge impact to customers by bring the new technology into Ford’s products such as implementation the hybrid into Ford product.

7. Make a specific market campaign for different regions.

Ford Company should partner with the local advertising company in different regions. This step to ensure Ford delivers the suitable messages and media for the target market in different regions and grab the attention of customers.

Besides that, it should be based on the projection of target markets so that the advertisement cost can be covered with the demand in the regions. If not, the Ford Company will end with larger cost of advertisement from getting selling profit.

8. Global pricing standardizing.

The use of price standardizing is most suitable way to obtain the customers. By the standardizing, it can depict how elastic the demand of certain product in different culture and markets. This can help to provide company to better insight about that product in different regions.

9. Facilitators acquire.

The Ford Company cannot moving forward successfully without the help from the financial institutions and the insurance companies. Both of the institutions and the companies helps in term of giving the choice to customers, best rate of financing and even the best kind of protection package that suit to the

30

customers needed. It actually brings back to the company because it increasing their products sales.

10.Car rebates and services warranty.

On the rebates of the Ford product, the rebates are managed by the dealer level with the supervision of the company. The rebates given to ensure the all the stock of the product can be cycle and finished based on the target of the company.

In additions, services warranty that provides by Ford Company attracts the customers to come again and maintain their Ford product in the authorized Ford service centre. This not only gives benefit and easier to the customers, but also to the company because the company still can provides extra sales and services even after the customers purchase their products.

9.0 EVALUATION AND CONTROL

Companies are investing enormous amount in make sure that managers and directors work in the best interest of their shareholders, beyond this fact they are also expected to the decision that are strategic and beneficial , both in the short and long term. Currently some managers take decision that seek their own interest and as a result put the company, shareholder and stakeholder at risk. It is extremely important that these managers work with some code of ethic, which is enforceable by law to protect stakeholder interest.

The Ford motor company was founded June 16, 1903, when Henry ford and 11 others signed the company articles of incorporation. Their first sale was a

31

month after they commenced operation. Fords moving assembly line proved tremendously efficient and this increased the production levels, which outwitted that of their competitors and making the vehicles more affordable. Henry Ford competitive strategy focused on the production of cars for the masses, and after 19 years, ford motor company was a force to reckon with in the car industry. 1925 saw the acquisition of Lincoln motor company thus moving into a different competitor group more luxurious segment, ford motors also created the mercury division,

Companies are investing enormous amount in make sure that managers and directors work in the best interest of their shareholders, beyond this fact they are also expected to the decision that are strategic and beneficial , both in the short and long term. Currently some managers take decision that seek their own interest and as a result put the company, shareholder and stakeholder at risk. It is extremely important that these managers work with some code of ethic, which is enforceable by law to protect stakeholder interest.

Some macro environmental factor and globalization have driven companies to pursue growth strategies such as integrating both vertically and horizontally. Clearly is important to spell out the role of the board, evaluate the logic behind their corporate strategy evaluate their performance against industry benchmarks and guidelines. Some general board duties are to ensure that the company survives continuously, profitable. Maximizes shareholders interest , also the board must ensure control, be entrepreneurial as they decide the corporate strategy, define the purpose and scope of business activities they should be sensitive to short term issue as they plan long term. The board also must evaluate the performance of the chief executive against goals and strategies, they should also nominate key personal, structure remuneration, and also ensure that the company is effectively managed and not to run it.

As a result of the various corporate scandal internationally, Investors currently focus on two key areas, the reliability of audited account and the factor that drive corporate strategy its effect on their wealth. The element of corporate governance and area of accountability are to set and review purpose. Strategy, communicate this to shareholders and to conduct current and future activities in compliance with legislature, also to give true financial position of the company. Ford growth and global strategy has been by horizontal integration and in becoming a global player competing within different competitor groups. Ford

32

motors are faced with challenges of managing their current financial crisis, which has caused the sale of Aston martin and force them to shut down their factories in North America and made 45,000 workers redundant.

An extensive analysis of fords corporate strategy and logic behind the strategy will be evaluated to determine its effectiveness and whether or not have really worked in the interest of shareholders, or their strategies were merely short term and not strategic. It is important to analyse and define the problems they are facing, explore option available and recommend strategic options that are suitable, acceptable and feasible.

Ford Motor has achieved its globalization strategy largely through horizontal integration with acquisitions and forward integration. Their competitive strategy differs as per competitor group, their objective is to satisfy their global customer need irrespective of the consumer segment. Their initial objective was produce affordable car for the mass market, until they started developing new market and product for middle and upper class. Ford motors product portfolio is made up seven different band namely Ford , Jaguar , Volvo ,Loncoln , Land Rover , Mazda and Mercury. The financial position of ford motor for 2006 was $12 Billion loss and this has necessitated the sale of Aston martin

Ford Motor are in a critical situation, but with the right strategies could win this battle, but the worst that could happen are the sale of other brands which are not that profitable from manufacturing like Jaguar and Land Rover as finance option for the car giant, but this could happen in the short to medium term. If the problem retain, there could be pressure from shareholders, stakeholder to sell off their stake in the business as they want to make economic profit from their investment. The risk of takeover will be eminent in the long run as other players who want access to new market and technology would be option for opportunity like this.

Balanced Scorecard

Area of Objectives Measure or TargetTime

expectation

Primary Responsibilit

y

33

Customers-satisfy the customer-market share-customer retention percentage-time taken to fulfil customer requests

Returning customer score

1 year Front line

Financial-improve profitability-operating income-cost reduction in some areas-return on investment

Gross margin 2 years Finance

Process-deliver products on time-defect rates

On-time deliveries 1 year Operation

Learning and Growth-foster an enjoyable workplace-employee education and skill level

Employee retention 1 year Human Resource

10.0 CONCLUSION

Ford Motor Company has been the King of innovations in the automobile industry. Ford R&D and their all-time proven invention of interchangeable parts

34

in moving assembly lines resulted in phenomenal global expansion for them. They ruled the global automobile markets of the world. In fact some of the most prestigious motor brands of the world have been owned by Ford Motor Company.

Ford had witnessed the best times in terms of revenues and profitability and enjoy a large customer base until today. However, some mistakes such as Ford 2000 initiative caused permanent damages for which Ford Motor Company is still paying the price and in this context they completely went the wrong way and hence could not survive Japanese competitors that were quick to grab Ford’s own home market in USA.

As presented earlier in terms of mapping with Michael Porter’s five forces theory, Ford Motor Company was critically hit by new entrants in the market. They indulged deep into debt financing due to financial crisis and hence have today become largely debt financed company. The highest debt/equity is in 2005 with 11.91%. They had sell Jaguar and Land Rover companies to Tata Motors to build some cash which, however are peanuts because bad times are continuing. Moreover, they haven’t paid dividends for past two years and hence are losing shareholder confidence.

They have not able to manage their cash flows and have lost substantial cash in 2008 and rapidly closing extra plant capacities and laying off people to downsize as per their current market standing. The lowest EBT Margin is in 2008 with -9.85%. Their Net Margin in 2008 is -10.03% and Return on asset in 2008 is -5.90%.

We strongly recommend the company to implement the strategy that we have presented in this analysis. Ford Motor Company should take corrective action as soon as possible to avoid from losing market share to Chrysler LLC who holds 10.9% of market share in the United States in February 2009.

11.0 REFERENCES

35

Bateman, T. S., Snell, S., A., (2009); Management: Leading and Collaborating in the Competitive World, Eighth Edition. McGraw-Hill/Irwin: New York, NY.

Fred R. David. (2013). Strategic Management: Concepts and Cases, Fourteenth Edition. Pearson Education Limited: United Kingdom

Ford Motor Company. (2008). Ford Motor Company - Press Release - As customers rebuild from hurricane Ike, Ford Motor Credit offers financial relief. Retrieved Oct. 1, 2008, from http://media.ford.com/newsroom/release_display.cfm?release=29045

Ford Motor Company: Cars, Trucks, SUVs, Hybrids, Parts-Ford. (2008). Letter from Alan R. Mulally. Retrieved October 3rd, 2008 from http://www.ford.com/microsites/sustainability-report-2007-08/overview-letter-mulally

36