Essay on "Ford Motor Company"

Essay 5 pages (1469 words) Sources: 4

[EXCERPT] . . . .

Ford

Define and discuss Ford's business-level strategy. Ford's business level strategy is to produce automobiles and light trucks at the mass market level, all around the world. This orients the company to a cost leadership strategy, but Ford also attempts to differentiate as well. This split tactic is common in industries characterized by monopolistic competition, as is the case in the automobile industry.

The company supports this in a number of ways. Ford has a global manufacturing strategy, which includes building plants with similar layouts, increasing flexibility in the production process, being able to supply parts globally and increasing standardization (Ford.com, 2002). Each of these tactics supports lowering production costs while increasing production quality. The company has shifted emphasis on innovation marketing so that the most innovative new features are launched first on the low-end models (Henry, 2010), again signaling that while Ford pursues cost leadership, it also pursues differentiation.

Monopolistic competition forces Ford into this position. The automobile market is one that is highly segmented. Firms in the industry work with the same basic product concepts, but within those concepts have a tremendous amount of leeway with respect to architecture, design, features, performance and price. As a result, differentiation is an inherent feature of the market, even at the lowest-cost segments. Not all of Ford's products are in the cost leadership category. Its trucks, for example, are oriented towards differentiation. The high end of the truck market is relatively mass market compared with the high end of the car market, which allows Ford to pursue a differentiated strategy in trucks even though it cannot do the same in cars.

The fact that Ford must pursue cost leadership and differentiation simultaneously is one of the most difficult strategic issues facing the company. Cost leadership inherently leads to production standardization, yet the differentiated strategy leads to more expensive products and decreased standardization. That Ford is compelled to differentiate and then not charge extra for its differentiations makes the automobile industry a difficult one in which to operate.

2. Explain how the company's value-chain activities can be better linked to create value for the company. Ford is an interesting company in that it has significant control over all elements of its value chain, and all elements contribute to the firm's success. There are tight linkages, and in general the tighter those linkages become, the more success Ford will have.

For example, it has long been speculated that one of the reasons why Ford has seen its market share decline over the past few decades is because it is out of touch with the needs of consumers. Linking consumer research, a component of the marketing and sales part of the value chain to product development and ultimately back to inbound logistics, will allow Ford to create products that appeal more to consumers. The needs of consumers, in particular with respect to quality, can be translated more directly to specs issued to Ford's OEM suppliers. This increases quality, which will improve the service function.

Ford's outbound logistics and service functions are also inextricably linked, since they are at the same site (the dealership). Ford has at times had contentious relations with its dealers, which has harmed both of these facets of the value chain. Strengthening dealer relations will improve the company's outbound logistics and its service function as well.

3. Explain how Ford can successfully position itself in terms of the five forces of competition. With respect to the five forces, Ford can do little with respect to barriers to entry. Governments in many countries lend support to domestic automakers in order to help them overcome barriers, and eventually most of these companies will compete against Ford. Where Ford can position itself to take advantage of industry forces is with respect to pricing power. The company should have high bargaining power over its suppliers. Ford is one of the world's largest automakers, and many of its suppliers are dependent on Ford's business to survive. This improves Ford's bargaining power, which if leveraged can support a cost leadership strategy (QuickMBA, 2007).

Ford has less bargaining power over buyers, a function of the nature of the industry, a high level of competition and even the threat of substitutes. Ford can, however, take advantage of the intensity of rivalry that exists among firms in the industry. With increased competition, the intensity of rivalry remains high, but is less focused on any… READ MORE

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