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Ford Motor CompanyAutomotive Industry

BUS 800

Case Analysis


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Table of Contents

Introduction .................................................................................................................P2

Analysis .......................................................................................................................P2

Alternatives .................................................................................................................P4

Recommendation ........................................................................................................P4

Appendix

External Assessment ......................................................................................P5

PESTEL Analysis .................................................................................P5Dominant economic Features .............................................................P6

Porter’s 5 Force Analysis ....................................................................P7Driving Forces Analysis ......................................................................P8Strategic Group Map............................................................................P9Framework for Competitor Analysis.................................................P10Key Success Factors .........................................................................P11External Assessment Summary........................................................P12

Internal Assessment......................................................................................P12

Financial Analysis (Income and Balance sheet) ..............................P12

Financial Analysis Ratios ..................................................................P13Current Strategy.................................................................................P14SWOT Analysis...................................................................................P14Value Chain Analysis.........................................................................P15Competitive Strength Assessment ...................................................P16

References .....................................................................................................P17


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Case Report

Introduction

The Ford Motor Company was founded in 1903 by Henry Ford and has since

established a brand that is instantly recognizable no matter what region you live in. Ford isalso distinguished as one of the “Big 3” North American automotive manufacturers and is anindustry leader on a global scale. They are North America’s 2nd largest automotivemanufacturer in the 2nd largest automotive market in the world. The company employsapproximately 224,000 individuals and has nearly 90 manufacturing plants worldwide. Fordowns and manufactures several well known brands: Lincoln, Volvo, Mercury, Land Rover and Aston Martin. The organization’s belief of what their foundation for success is lies in itsdedication to providing consumers with great products to strengthen their business andbenefiting their communities. Ford is committed to achieving profitable growth by executingtheir sustainability strategy, investing in innovative technologies and supporting thecommunities that surround them.

Analysis

The “One Ford” initiative set in place by senior management in 2007 emphasizes thatworking collaboratively as a single team and under one plan, will help the company reach acommon goal that will deliver profitable growth for all. Achieving profitable growth for allemployees of the company and its shareholders is guided by the steps outlined under the“One Plan” (9.3) objectives. The issues concerning Ford’s future for profitability growth isgrounded on how the company will maintain strong market share in existing and newdemographic locations, embracing new innovative technologies and remaining competitive inan industry that is saturated with powerful rivals.

Ford’s future for profitability growth is dependant on how well the company is able to

increase market share domestically and internationally by cultivating to the dominanteconomic features of the industry (2.0). As of 2014, Ford’s Canadian market sharepenetration (5.0) was at 8.3% whereas the majority was held by Honda at 13%. The keyforces that drive the automotive industry (4.0) dictate how Ford must execute and implementtheir strategic operations. Increasing globalization (4.1) is a key driving force in theautomotive industry with many industry members competing to seize market share indeveloping nations. Automotive industry members are subject to government policies andregulatory influences (4.6) and may be either limited from or encouraged to expand intoforeign markets. Lower labour costs in developing countries provide incentive for automotivemanufacturing firms to establish plants, provide jobs to local residents and contribute to theoverall economic development of that region. Ford’s international expansion strategy hasbeen successful in China (10.1) but has recorded substantially weak performance inEuropean markets (10.2) due to economic conditions of the region (1.3). Weak European

performance has forced Ford Motors to re-strategize their European market operations byclosing a number of plants down to save on high industrial costs. There are also other threats associated with international operation and/or expansion such as exchange ratefluctuations (10.4). The “One Ford” vision (9.1) promotes the idea that there is only onefamily vehicle line-up offered regardless of where the consumer is located. In past years,Ford’s strategy had been to develop automobiles that catered to different demographicalregions thereby increasing production costs and minimizing manufacturing processefficiencies. The automotive industry’s long-term growth rate is expected to increase (4.3)due to increasing demand and population growth. Changing societal concerns, attitudes and


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lifestyle (4.5) are also important forces that help navigate how research and development of new technologies is implemented for future vehicles.

Technology change and manufacturing process innovation (4.2) along with changingsocietal attitudes (4.5) are other key driving forces behind the automotive industry that willdictate how Ford’s future profitability for growth will take shape. Technological factors (1.5)

pertaining to automotive innovation (2.5) are coupled with environmental impact (1.5). Fordremains competitive in the market as they have kept up with the pace of technologicalchange (2.6) and have embraced new innovative technologies with their continuousinvestment in research and development (11.1). From the Key Success Factors table (7.0),Ford obtained a perfect score for product innovation capabilities. Automotive firms facestrong pressure stemming from customer bargaining power (3.5) and are driven to provideconsumers with vehicles that are fuel efficient and are able to meet the requirements of thebuyer (2.3). At the operations (11.3) stage in the Value Chain Analysis (11.0), Fordstrategically implements operational efficiencies that promote quality control, distributioncapabilities (7.0) and that reduce negative externalities to the environment (1.6). A rise in fuelprices may looked upon as an opportunity to increase market share by utilizing new producttechnology and catering towards a more fuel-efficient consumer mindset. Ford’s effortstowards reducing the CO2 emission levels of their vehicles and enhanced social

responsibility have earned them 1st place in Interband’s 50 Best Global Green Brands Annual List. Despite their most recent accomplishments and recognition for its sustainabilityplan, it is detrimental that their effort towards innovation and environment sustainability arenot diminished.

Another important factor that Ford must heavily consider to prepare itself for a futurewith profitability growth is how to remain competitive in a market that is saturated withcompetition and become more appealing to consumers. Automotive manufacturers must bestable enough to withstand strong pressure from competition (2.4, 2.7 and 3.4) by improvingindividual capabilities on all key success factors (7.0). Ford’s highest scored areas includequality control, brand image/reputation, personalized customer involvement, clever advertising, distribution capabilities and product innovation capabilities. The Framework for Competitive Analysis (6.0) portrays the number of recalls performed by certain mainstreammanufacturers and the brand perception of quality that is perceived by the consumer. Whenan automotive manufacturer performs a large number of recalls, consumers are sometimesobliged to believe the notion that the vehicles manufactured by that company are less safe or of less quality thereby tarnishing that company’s brand image and reputation. Due to Ford’shistorical prowess and resilience during the 2008 economic recession, the company’s brandimage and reputation continue to captivate many consumers.

The issues concerning Ford’s future for profitability growth is dependant on how thecompany will maintain strong market share in existing and new demographic locations,embrace new innovative technologies and remain competitive in an industry that is saturatedby powerful rivals.


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Alternative

The alternative presented to Ford that will help promote a future for profitabilitygrowth is to increase investment in new innovative technologies. Gains from increasedinvestment in research and development will be; a) up-to-date with technological capabilitiesleading towards renewable resources to run engines, b) cater to changing societal

concerns/attitudes leading to less pressure from customer bargaining power, c) increasedgovernment subsidies, d) ready to meet more stringent government regulations regardingemissions standards and e) becoming a more socially responsible firm thereby increasingbrand reputation and image.

The losses associated with increased investment towards new innovativetechnologies are; a) opportunity cost of forfeiting certain expansionary projects in emergingmarkets, b) potential for fuel prices to decrease causing a consumer shift towards vehiclesthat are not fuel-efficient, and c) governments may impose barriers on highly efficientvehicles from entering the market.

Recommendation

It is recommended that the Ford Motor Company pursue an increase in investmenttowards new innovative technologies as it will benefit the company in its future for profitabilitygrowth. Ford’s brand image and reputation remain solid among mainstream industrymanufacturers. The company strives in many areas corresponding to key success factorsand is equipped to withstand the driving forces behind the automotive industry. Its recent netprofit margin (8.1) for years 2012 and 2013 increasing from 4.24% to 4.87% indicate that thecompany is already on a path towards sustainable growth. Net return on assets (8.1) from2009-2013 also reflect Ford’s profitability growth. Ford’s working capital numbers have alsoincreased within recent years of analyzed data, increasing from 81,302 (millions) in 2010 to114,317 (millions) in 2014. The Ford Motor Company is in a position that is relatively healthywith increasing working capital to strategically implement new innovative investment.


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Ford Motor Company External Assessment

PESTEL Analysis1.0

Political Factors1.2

Political agendas weigh as a heavy factor for members of the automotive industry asenvironmental issues are heavily considered when automotive companies designnew vehicles.

Hybrid vehicles are in high demand and receive more support from governmentbodies- firms are charged greater tax rates if vehicles emit higher levels of CO2.

Economic Conditions1.3

Economic cycles such as recessions can severely impact the industry where somefirms are subject to bankruptcy.

Inflation, exchange rates and market prices of fuel are greatly considered by theautomotive industry when projecting future sustainability decisions.

Market prices of fuel may dictate shifts in consumer preferences of automobileselection and can heavily impact productions decisions made by industry firms.

Socio-cultural Forces1.4

Automotive firms will always face consumer biases on brands or labels. Industry is subject to changing buyer patterns and consumer demand shifts

pertaining to market forces such as recessions or expansions. Automotive firms may experience greater incentives in establishing operations in

developing countries where there are emerging markets due to a higher demand for automobiles.

Technological Factors1.5

Technological advances help automotive companies produce vehicles that are morefuel efficient, safer and better equipped with more accessories such as driver-assistsystems.

Technology has also enabled the productions of vehicles that can alternate betweenfuel systems (gasoline, electricity and hydrogen).

Environmental Forces1.6

There is an increasing need to reduce pollution levels exerted on the environment byreducing exhaust emission levels produced by motor vehicles.

Motor vehicle producers are obliged to adhere to standards set by governmentbodies in regards to acceptable emission levels. These standards also serve topromote corporate responsibility.

Legal and Regulatory Factors1.7

Automotive firms are subject to changing labour laws and union pressures set inplace to promote adequate compensation to appropriate workers. Automotivecorporations must be in a position to comply with certain pressures to avoidpotentially damaging operational failures and labour strikes.


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PESTEL Analysis Summary

The automotive industry is heavily influenced by the six components of the macro-environment with each component weighing heavily on crucial decisions that must beexecuted by all automotive manufacturers. Industry members must consider politicalagendas, economy status, societal changes, environmental impact and regulatoryconstraints when strategizing company directives. Each automotive firm is bound by thesepressures so that each component of the macro-environment is satisfied in their respectivenature. Each member must conduct their operations in a socially responsible manner toadhere to adhere to the various stipulations.

Dominant Economic Features2.0

Market Size and Growth Rate2.1

The global automotive industry represents manufacturers and sellers of automotivesand contributes roughly 3% to global GDP.

Increasing demand for vehicles year after year; total number of units sold in North America increased from 60.82 million in 2011 to 72.12 million in 2014. This

represents a yearly average increase of approximately 3.92% and is forecasted toincrease as population increases.

Number of Buyers2.2

Large number of buyers across various demographic locations. Emerging marketsare opportunities for growth.

Buyer Needs and Requirements2.3

Constantly changing buyer needs and requirements where more emphasis is placedbehind cost efficiency, reliability and safety.

Number of Rivals2.4

Large number of rivals that offer a breadth of vehicle options at significantly varyingprice points.

Product Innovation2.5

Members of the automobile industry are obligated to continuously invest in researchand development to innovate new vehicles that embrace a changing consumer mindset that promote efficiency and reliability.

Pace of Technological Change2.6

Advances in technology enable automotive firms to stay competitive in the market byproviding consumers with diverse options such as driver-assist functions, GPSnavigation and various comfort options.

Scope of Competitive Rivalry2.7

Many rivals in the market making the automotive industry extremely competitive withlarge number of options available to consumers.

Some rivals have a stronger brand/reputation perception than others.


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Dominant Economic Features Summary

The automotive industry is a pillar in developing the macro-environment by providingmillions of jobs on a global scale; nearly 5.4 million people are employed by the industry inJapan which translates to about 9% of the total workforce. The industry increases thestandard of living for many countries by enabling mobility to its citizens in a safe andcomfortable manner. Overall, the automotive industry contributes nearly 3% towards globalGDP; in many cases this statistic is higher in emerging markets. Global population isexponentially increasing with consumer demand for vehicles also on the rise. Automotiveindustry members must be able to adapt to a changing consumer needs and embrace newinnovative technology to remain competitive against the large number of rivals.

Porter’s 5 Forces Analysis3.0

Competition from Rival Sellers3.1 (Strong): Competitive pressures are high in the industrydue to rapidly changing consumer demands. Rivals utilize differentiation strategies toincrease customer traffic and raise brand awareness. Existing corporations in the industryare looking to expand their market reach by incorporating environmentally friendly

technology and entering into new geographical areas with emerging markets.

Competition from Potential New Entrants3.2

(Moderate): It is relatively difficult for newpotential entrants to enter the market due to heavy industrial and government regulations.New potential entrants encounter significant competition from existing members due toestablished brand reputation however existing companies in foreign markets may become athreat when entering a new market due to an establishment of strategic alliances.

Competition from Producers of Substitute Products3.3

(Moderate): Comparablesubstitutes for automobiles are readily such as public transportation but consumers aresubject to constraints and destination limitations when travelling.

Supplier Bargaining Power 3.4

(Weak): Suppliers have low bargaining power due to low

costs associated with industry members switching to different suppliers. There are a vastmajority of firms and facilities available to provide an array metals and vehicle components.Ultimately, industry members are major customers of suppliers and account for a largeportion of suppliers’ sales.

Customer Bargaining Power 3.5

(Strong): Customer bargaining power is high due to thelarge number of buyers in the industry. Customers also have significant bargaining power due to the vast number of options available in the industry. Consumers are leveraged due tothe amount of information about the sellers’ quality of products, service, atmosphere andprices.

Porter’s 5 Forces Analysis Summary

Porter’s Five Force Analysis provides an important overview of the various pressuresthat industry members are subject to. For instance, the automotive industry experiencesstrong pressure from competitive rivalry due to the large number of automotive firmscompeting for market share. Each firm provides a various vehicle line-up at different pricepoints to provide consumers with options that will meet their needs and requirements.Industry members also receive strong pressure stemming from customer bargaining power.The market size is immense and customers are not restricted to buying a vehicle from anyone motor company over another. Customers are leveraged about the sellers’ quality of


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products, service, atmosphere and prices. The industry also experiences moderatepressures arising from competition of new entrants. New entrants face stringent industrialand governmental regulations that make it relatively difficult for a new member to enter themarket however existing manufacturers in foreign countries may consider strategic allianceswith domestic firms which will in turn facilitate a more competitive advantage. An example of recent events would be to consider Fiat entering the North American market and merging

with Chrysler. The industry also faces moderate pressure of substitute products as publictransportation is readily available to many citizens of urban locations but may be subject tolimited flexibility concerning destinations, seating, schedules and delays. Supplier bargainingpower is relatively weak as industry members have greater bargaining power than their suppliers. Many supplier firms compete for large contracts and may include bulk pricing tomake purchase agreements more attractable to automotive manufacturers.

Driving Forces Analysis4.0

Increasing Globalization4.1

Increasing demand in foreign markets and developing countries coupled with

government actions to reduce trade barriers provide incentive for industry membersto expand. Lower labour costs also provide incentive for automotive firms to establish production

plants which may be essential to supply market demand globally.

Technological Change and Manufacturing Process Innovation4.2

Technological advances can alter industry manufacturing processes such asharnessing alternative energy sources that eliminate the use of fossil fuels.

Changes in an Industry’s Long Term Growth Rate4.3

Industry’s long term growth rate is increasing due to increasing global population,development of better infrastructure and rise of emerging markets.

Changes in Cost and Efficiency4.4

Changes in market costs of fuel and fuel efficient vehicles greatly alter industryproduction volumes. Rising costs will drive consumers to seek more fuel efficientvehicles and may result in surplus volumes of trucks and sport utility vehicles.

Changing Societal Concerns, Attitudes and Lifestyles4.5

Societal concerns have shifted towards a direction for minimizing the carbon footprintleft on the planet and demand industry members to comply with socially responsiblebehaviors.

Regulatory Influences and Government Policy Changes4.6

Regulatory influences and government policy changes often mandate significantindustry changes such as government injections in times of economic recessions.

International governments may impose barriers on foreign companies or inviteinternational presence to accommodate growing demand.


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Driving Forces Analysis Summary

The driving forces behind the automotive industry are crucially considered whenindustry members formulate new strategies that promote market sustainability. The mostimportant driving force is increasing globalization. Expansion into emerging markets is aremarkably important option for automotive firms to consider and capitalize on. Not only doemerging markets provide an opportunity for the macro-development of that region butindustry members are also able to increase market share penetration, take advantage of lower tariffs and labour costs associated with production operations. Technological change/manufacturing process innovation, changes in cost/efficiency and changing societalconcerns, attitudes and lifestyles are all important driving forces behind the industry. Autocompanies are continuously investing in research and development to cultivate newtechnologies that are environmentally friendly, more efficient and that meet changing societalconcerns. Automotive manufacturers will in turn benefit from enhanced governmentsubsides, gain substantial market position and strengthen their reputation.

Strategic Group Map5.0

The strategic group map below represents the position of commonly known industrymembers pertaining to two variables; Canadian market share percentage in 2014 and thenumber of models available in the 2014 vehicle line-up offered by each respective company.GM offers Canadian consumers the most number of vehicle models with that number being38 whereas Subaru offers the least at 7. Honda/ Acura retain the majority of Canadianmarket share at nearly 13% and Subaru’s Canadian market share penetration isapproximately at %1.8. Ford is positioned comfortably around its competitors providingconsumers with 22 different vehicle models and capturing about 8.3% of Canadian marketshare in 2014.

Strategic Group Map

Chrysler

GM

Hyundai

Nissan

Mercedes-Benz

Subaru

BMW-Mini

Ford

Honda/Acura

Mazda

Toyota

Volkwagen

0

2

4

6

8

10

12

14

16

0 5 10 15 20 25 30 35 40

Number of Models in 2014 Vehicle Lineup

C a n a d i a n M a r k e t s h a r e i n 2 0 1 4 ( % )

BMW-Mini

Chrysler

Ford

GM

Honda/Acura

Hyundai

Mazda

Nissan

Mercedes-Benz

Subaru

Toyota

Volkwagen

+


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Framework for Competitor Analysis6.0

G r a p h A

G r a p h B

Framework for Competitor Analysis Summary

Graph A measures the total number of recalls performed by five of the mainstreamautomotive manufacturers from the years 2011-2014. GM experienced the most recalls of allthe manufacturers in 2014 with a number at 14 million whereas Chrysler experienced theleast at 130,000 units in 2014 despite Chrysler’s much larger volume in 2013 at 4.7 million.Volkswagen performed the best among its competitors along the 4 year span with valuesranging from a low point of 160,000 units in 2012 to a high point of 710,000 in 2013. Toyota

remained fairly consistent averaging a recall value of 4.375 million units per year from 2013-2014. Ford’s average recall value for 2011-2014 was approximately 2.125 million units per year.

Graph B ranks 8 of the mainstream automotive manufacturers’ brand perception of quality (data obtained from ALG’s Brand Perception of Quality Rankings- June 2014). Theindustry average was calculated at 53.5 index points as a benchmark to compare other manufacturer scores. The highest scoring automotive firm was Honda with a score of 64.9and Suzuki scored among the lowest with 45.1. The only other auto manufacturer that

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N u m b e r o f

R e c a l l s

( M i l l i o n s )

2011 2012 2013 2014

Year

Number of Recalls from 2011-2014

Toyota

Ford

GM

Chrysler

Honda

Volkswagen

0 10 20 30 40 50 60 70

I n

d e x P o i n t s ( 0 - 1 0 0 )

Brand Perception of Quality- Mainstream Manufacturers

Average

Suzuki

Mazda

Nissan

Volkswagen

Honda

Chrysler

GMFord

Toyota


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scored below the industry average was Chrysler at 50.3 index points. A company’s brandperception is detrimental in predicting future growth and market share acquisition. Thenumber of recalls a company has to perform affects consumer brand perception of quality.Strategic quality management processes not only ensure vehicle safety but also improvebrand reputation and thus reflects on the competitor analysis charts above.

Key Success Factors7.0

Rating Scale:1 = Very Weak

10 = Very StrongFord GM Mercedes-Benz Toyota

Key SuccessFactors

ImportanceWeight

StrengthRating

Score Strength

Rating Score

StrengthRating

Score Strength

Rating Score

Qualitycontrol

.15 9 1.35 8 1.20 10 1.50 8 1.20

Direct salescapabilities

.05 8 0.40 7 0.35 8 0.40 7 0.35

Breadth of product line& productselection

.15 8 1.20 10 1.50 9 1.35 8 1.2

Brandimage/reputation

.20 9 1.80 7 1.40 10 2.0 10 2.0

Personalizedcustomer involvement

.05 10 0.50 8 0.4 10 0.50 7 0.35

Clever advertising

.15 10 1.50 7 1.05 9 1.35 9 1.35

Distribution

capabilities .15 9 1.35 10 1.50 10 1.35 10 1.50

Productinnovationcapabilities

.10 10 1.0 9 0.90 9 0.90 10 1.0

Sum of ImportanceWeights

100 - - - - - - - -

WeightedOverallStrengthRating

- 73 9.1 66 8.3 75 9.35 69 8.95

Key Success Factors Summary

The chart above scores Ford, GM, Mercedes-Benz and Toyota along various keysuccess factors. Mercedes scored the highest overall score at 9.35 and GM scored thelowest at 8.3. The heaviest weighted factor was brand image/ reputation with a weight of 20% and Mercedes and Toyota both scored a perfect score of 10 in this category. Fordplaced second highest among the other rivals with an overall score of 9.1 proving its well-roundedness in all areas.


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Summary of External Assessment

The External Assessment highlights the automotive industry in context of the sixmacro-economic components, dominant economic features, Porter’s five forces, drivingforces, framework for competitor analysis and key success factors. All areas of assessmentare critical to determine an industry member’s position relative to its competitors and howeach one is affected by changing economic conditions.

Ford Motor Company Internal Assessment

Financial Analysis (*all figures are in millions)8.0

Consolidated Income Statement Fiscal Year Ending

2013 2012 2011 2010 2009Net Revenues 146,917 133,559 135,605 119,280 103,868Cost of GoodsSold

141,478 127,678 128,073 113,491 107,220

Gross Profit 5,439 5,881 7,532 5,789 (3,352)Other Income 1,562 1,839 1,149 1,360 5,951OperatingProfit

7,001 7,720 8,681 7,149 2,599

Taxes:Provisionsfor/(benefitfrom) inctaxes

(147) 2,056 (11,541) 592 (113)

Net Profit 7,155 5,665 20,213 6,557 2,712

Consolidated Balance Sheet Fiscal Year Ending

2013 2012 2011 2010 2009Cash and

CashEquivalents

14,468 15,659 17,148 14,805 21,441

Short TermInvestments

22,100 20,284 18,618 20,765 21,387

Other CurrentAssets

152,310 141,180 120,211 105,938 148,685

Total CurrentAssets

174,410 161,464 155,977 141,508 170,072

Property andEquipment

27,616 24,942 22,371 23,179 24,778

Total Assets 202,026 186,406 178,348 164,687 194,850

CurrentLiabilities

59,993 67,567 63,093 60,206 61,193

Long-termLiabilities

114,688 105,058 100,184 105,123 140,172

TotalLiabilities

175,279 173,095 163,277 165,329 201,365

Stockholder’sEquity

26,416 15,989 15,071 (642) (6,515)

TotalLiabilities andEquity

202,026 189,406 178,348 164,687 194,850


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Profitibality8.1

Gross Profit MarginIn 2009, Ford operated at a gross profit margin of -3.23% as it was still facing therepercussions of the 2008 recession. From 2010-2011, Ford began to recover from negativemargin percentages and achieved a gross profit margin of 4.85% in 2010 an increased to a

high of 5.56% in 2011. Operating gross profit margins have remained relatively steady since2011 but have slightly declined to 4.4% in 2012 and then to a slightly lower figure of 3.7% in2013.

Net profit MarginFord’s net profit margin ranges from a low of 2.61% in 2009 to a high of 14.91% in 2011. Thespike is attributed to benefits received from income taxes in 2011. 2010 reports alsodemonstrate Ford’s ability to recover from the recession by attaining net profit margins of 5.5%. For recent years 2012 and 2013, Ford has demonstrated a more consistent net profitmargin of 4.24% and 4.87% respectively.

Net Return on AssetsFord’s net return on assets ranges from a low of 1.39% in 2009 to a high of 11.33% in 2011(high return attributed to benefits received from income taxes in 2011.) For the years 2010,2012 and 2013, Ford’s net return on assets was 3.98%, 3.04 and 3.54% respectively.

Liquidity8.2

Current RatioCurrent ratios for the Ford Motor Company range from a low of 2.35 in 2010 to a high of 2.91in 2013. Year-to-year average from 2009-2013 for solvency of assets is 2.58. In other words,Ford holds an average of 2.58 times its current liabilities in current assets if the assets wouldhave to be liquidated.

Working Capital Ford’s working capital has been steadily increasing from 81,302 in 2010 to 114,317 in 2013.The steady incline represents that current strategic operations are contributing to a futurethat holds promise for profit growth and expansionary capabilities.

Leverage8.3

Total Debt-to-Assets RatioThe Ford Motor Company reported a debt-to-asset ratio high of 1.03 in 2009 to a low of 0.87in 2013. These figures represent how the company is moving towards a positive direction for growth by holding onto less debt relative to its assets from the 2009-2013..


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Current Strategy9.0

Vision9.1

In 2007, Ford embraced a new vision that embraces a “One Ford” initiative that is built upon“One Team, One Plan and One Goal.”

Mission9.2

“Our One Ford plan aligns our efforts toward a common definition of success: having OneTeam, One Plan and One Goal for an exciting, viable Ford that delivers profitable growth for all.”

Objectives9.3

Ford’s objectives are outlined under their “One Plan” directive and are as follows:1. “Aggressively restructure to operate profitability at the current demand and changing

model mix.”2. “Accelerate development of new products our customers want and value.”3. “Finance our plan and improve our balance sheet.”4. “Work together effectively as one team.”

SWOT Analysis10.0

Strengths10.1

Strong Brand Recognition and position in North American market- Ford is a globallyknown brand and is the second largest automotive manufacturer in North Americawhich is also the second largest automotive market in the world.

Forward-thinking approach to environmental responsibility- Ford has been awarded1st place on the annual list of Interbrand’s 50 Best Global Green Brands,outperforming last year’s winner, Toyota.

Resilient Financial Performance- Ford was the only North American automotivemanufacturer that did not opt in for a government bail-out plan that was issued to GM

and Chrysler in 2009. Significant growth in China- Although not having the majority market share in China,

Ford has still demonstrated significant growth in the world’s largest market by selling906, 613 vehicles during the first 10 months of 2014 which translates to a %22increase from October 2013.

One Ford Initiative- A plan that was adopted by Ford in 2007 that emphasizes aguide to sustainability which embraces a family line-up of vehicles that are availableglobally rather than manufacturing specific vehicles per region as they had done inthe past resulting in significant cost reductions.

Weaknesses10.2

Weak performance in Europe- In 2013, Ford’s full year loss was announced at $1.75

billion however not the only automotive firm that incurred losses in European market,mainly due to a number of recessions in many European countries. Operating lossesare still predicted in the region until 2015.

High Cost Structure- The “One Ford” initiative, adopted by the company in 2007, hasresulted in maximizing cost efficiencies but the company still operates with a highcost structure relative to other automotive firms due to their competitive employeebenefit and pension plans.


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Opportunities10.3

Increasing fuel prices- An increase in fuel prices will shift consumer demand towardsmore eco-friendly vehicles. Ford’s ECOnetic and ECOboost technology coupled withflex-fuel or hybrid engines may become an attractive product to meet consumer demand.

More Strict Emission Standards- Government bodies may introduce more strictemission standards on automotive manufactures as pollution and environmentalresponsibility become of greater importance. Ford hold a positive attitude towardsengineering more fuel-efficient vehicles and may meet new standards with relativeease.

Strategic Alliances with Other Automotive Manufacturers- Ford has reputableexperience with making strategic partnerships with other automotive firms. Growingcompetitive pressure may make alliances an attractive opportunity because there areopportunities to enter new markets (ie. Fiat entering North American Market viaChrysler), innovative research costs can be driven down and there is a gain of experience to all parties.

Threats10.4

Decreasing Fuel Prices- A decrease in fuel prices may shift consumer demand toless fuel-efficient vehicles which could result in lower sales of fuel-efficient vehiclesthat have been manufactured by Ford. This commodity price shift may result in asurplus of Ford’s fuel-efficient lineup and a shortage in sport utility vehicle/ pick-uptruck line-up.

Strong Market Competition- The automotive market is saturated with manyautomotive companies manufacturing an array of vehicles competing for marketshare.

Exchange rate Fluctuations- Fluctuating exchange rates pose as a significant riskvariable that may impact operating profits in foreign or domestic markets. For instance, an appreciation of the US dollar may make it less attractive for foreignmarkets to purchase vehicles from Ford as they would effectively be over-priced.

Increase in Raw Material Prices- An increase in the price of metals, plastics, fabricsand any other raw material required for the manufacturing of a vehicle will severelycause costs to become inflated leaving less room for gross margin when pricingvehicles.

Value Chain Analysis11.0

Product R&D, Technology and Systems Development11.1

Product research and development play integral role as part of Ford’s Value Chain.Important decisions are made pertaining to which vehicles should be manufactured,what kind of new technology should be implemented when manufacturing newvehicles, maximizing process-efficiency and establishing how and how and wheremanufacturing should occur.

Ford spent nearly $6.14 billion on engineering, research and development. There were 718 U.S utility patents that were issued to Ford and subsidiaries for new

technologies that were developed in 2013.


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Supply Chain Management11.2

Raw material extraction plays a vital role in Ford’s value chain as it pertains to their objective in minimizing global environmental impact and surrounding communities.Value is created for suppliers to Ford.

The Supplier Parts Manufacturing process account for nearly $100 billion that Fordspent on the 12,100 different production and non-production supplier companiesglobally in 2013. As part of Ford’s Global Terms and Conditions Policy, all directsuppliers must adhere to their strict requirements on human rights, workingconditions and environmental sustainability.

Operations11.3

Ford plant manufacturing accounts for the majority of where value is added along theValue Chain. Ford is dedicated to lowering the environmental impact created by itsmanufacturing facilities and increasing the social and economic benefit that is addedto surrounding communities (creating jobs and investment opportunities).

Ford employs an estimated 224,000 people globally and plans to add another 11,000 jobs in the U.S. and Asia markets combined.

Ford also invested $37.7 million in local communities through charitable donations in

2013.

Distribution11.4

Logistics/ Transportation include the transport of supplier parts to Ford manufacturingfacilities and finished products from manufacturing plants to dealerships. Value iscreated for businesses in the transport industry but impact local communities andenvironment (emissions, traffic and road safety.) Ford is working on improving routeefficiencies and opting for lower-emission transport methods.

Sales and Marketing11.5

At this stage of the Value Chain, Ford communicates information about new vehiclesand embraced technologies to the market ensuring that their products can meet theconsumer demand and satisfaction.

In 2013, The Ford Motor Company sold more than 6.33 million vehicles globally andhad 11,722 Ford and Lincoln dealerships.

Service11.6

Value is created through dealership network and their service facilities that arededicated to maintaining quality of vehicle performance and sustaining brandawareness.

Competitive Strength Assessment12.0

From the Key Success Factor Table (7.0), Ford’s Competitive Strength stems fromtheir personalized customer involvement, clever advertising and product innovationcapabilities. The Ford Motor Company scored the highest a perfect score of 10 in each of these categories. Ford’s commitment to social responsibility and product innovation/research & development investments coupled with its powerful brand recognition will enablefuture growth and sustainability. Ford’s competitive strengths will also help establish itspresence in emerging markets and further increase market share penetration.


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References:

1. http://www.atkearney.com/documents/10192/2426917/The+Contribution+of+the+Automobile+Industry+to+Technology+and+Value+Creation.pdf/8a5f53b4-4bd2-42cc-8e2e-82a0872aa429

2. http://corporate.ford.com/microsites/sustainability-report-2012-13/blueprint-value

3. http://corporate.ford.com/microsites/sustainability-report-2012-13/blueprint-strategy

4. http://corporate.ford.com/microsites/sustainability-report-2012-13/blueprint-governance

5. http://www.nrcan.gc.ca/energy/publications/efficiency/industrial/cipec/6021

6. http://gatton.uky.edu/faculty/scott/mba603-605fall2009/industrystudy3.pdf

7. https://www.ic.gc.ca/eic/site/smt-gst.nsf/vwapj/dgtp-007-04-ford.pdf/$FILE/dgtp-007-04-ford.pdf

8. http://best-management-articles.blogspot.ca/2012/12/ford-motor-company.html

9. http://www.reportlinker.com/ci02294/Automotive.html

10. http://corporate.ford.com/news-center/press-releases-detail/ford-to-drive-growth-in-2014-with-additional-jobs--three-new-worldwide-plants

11. http://www.gbm.scotiabank.com/English/bns_econ/bns_auto.pdf

12. http://corporate.ford.com/our-company/investors/investor-news-detail/ir-20141107-ford-china-sales

13. http://www.thecarconnection.com/image/100468731_alg039s-brand-perception-of-quality-rankings-june-2014

14. https://www.dbresearch.com/PROD/DBR_INTERNET_EN-PROD/PROD0000000000323649/Presentation%3A+Economic+and+regulatory+prospects+for+the+global+automotive+industry.PDF

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