Fordâ€™s European Organization Changes Strategy

8/3/2019 Fordâ€™s European Organization Changes Strategy

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Ford’s European OrganizationChanges Strategy

Santanu Roy (87)

Sanjay Kumar Pal (86)Sanit Sadhu (85)Saumik Ghosh (89)Suman Biswas (114)Sagnik Mukherjee (79)Siddhatha Chatterjee (99)Samik Bandyopadhyay (81)



Introduction

• Ford Motor Company has a long history of operating in Europe

• The European operations were separate subsidiaries, each accountable tothe headquarters in USA• This was mainly due to each country having its own tariff regulations and

each country’s customers had different tastes, needs and preferences. • As European countries grew closer together, Ford used a coordination

strategy to achieve economies of scale and to reduce cost of engineering.• In 1994 the Ford 2000 strategy emerged, it merged its North American

operation units with that of Europe in 1995• This strategy did not work well as shown by 1998 performance report.• Ford was losing market share to competitors like General Motors and

Volkswagen.• Ford reviewed its Ford 2000 strategy and reintroduced the market focus

orientation, which gave more autonomy to the regions.• Ford also introduced the Luxury car division to stay in the competition.



Problem Identification

• The entire European market is passing through alternative

phases of unification and diversification• The most suitable way in which an organization can adapt to

such fluctuations, is what forms the basis of this case study

• As seen Ford had adopted:

• Decentralization Centralization Re-decentralization

• Acquisition of premium luxury European brands to somehow remaincompetitive.



Decentralization VS Centralization



Decentralization VS Centralization (contd..)



The FORD 2000 Strategy

• In 1994 the FORD 2000 strategy was adopted

• Ford merged its operation unit in North America with that of Europe• This was done to be more competitive and to achieve cost reduction by

eliminating unnecessary car platforms and duplication of engine models.• Out of 5 vehicle centers 4 were in North America and the one in Europe

was responsible for developing small and mid-size automobiles.

• Ford created a global sales operation and a global purchasing unit• Suppliers who wanted to do business with Ford would have to be global,

not regional.• This resulted in a lot of confusion and also heavy losses.

• Ford President Nick Scheele visited a German engineering centre. Anescalator was broken, and he wanted to know why it remained unrepaired.

• The engineer said that the requisition order for its repairs had gone backand forth between Germany and Dearborn. No one knew what to do.



Changes Adopted by Ford

• Decentralization: This was mainly due to each country having its own tariffregulations and each country’s customers had different tastes, needs and

preferences .• Centralization : As European countries grew closer together, Ford used a

coordination strategy to achieve economies of scale and to reduce cost ofengineering and later used the FORD 2000 strategy.

• Re-Decentralization: To stem heavy losses in Europe and South America, and

restored decision-making power to Ford's regional organizations .

• Establishment of Luxury car division:• Acquisition of premium luxury European brands like Lincoln, Volvo, Jaguar and

Aston Martin to remain competitive.

Decentralization Centralization Re-Decentralization



SWOT Analysis

Strength:

• Acquiring successful brands bring their market and their talent pool, which will helpto penetrate the European Market much more.

Weakness:• Centralization was ahead of its time• Cost effectiveness did not influence decisions.

• Re-Decentralization lead to increasing cost, had the centralization process beeneffected at the time of the emergence of the European Union, further Re-Decentralization would not be needed.

Opportunity:• Giving more autonomy to the regions would help improve performance

• Gained market expertise may aid sales and recapture market share in othersegments thereby overriding increasing competition.

Threats:• Increased Operating loses.• With the openness of European markets, duplication of models along with non-

uniformity in pricing would severely hamper operations in Europe.



Conclusion

• The Strategies taken by Ford were mainly Reactive , whereas

Pro-Activ e Strategies were needed.• Centralization was ahead of its time and Re-Decentralization

was a mistake as:• There was the formation of the European Union

• Ease of trade became the order of the day• Operating losses across various segments• Sale of premium brands like Jaguar Land Rover to bail them out.

• Formation of base models with certain basic specifications atsingle European manufacturing center along with variouscountry based marketing centers selling the variants accordingto the tastes and preferences of the local consumer in aunified yet diverse business environment.



Questions ?



Thank You



Slide Distribution

• Slide 2: Introduction – Suman Biswas

• Slide 3: Problem Identification – Siddharta Chatterjee• Slide 4: Decentralization vs Centralization (graph)• – Sagnik Mukherjee• Slide 5: Decentralization vs Centralization comparison• - Sanit Sadhu• Slide 6: Ford 2000 strategy – Samik Bandyopadhyay• Slide 7: Changes adopted by Ford – Sanjay Kumar Pal

• Slide 8: SWOT analysis – Saumik Ghosh• Slide 9: Conclusion – Santanu Roy

Fordâ€™s European Organization Changes Strategy

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