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Transcript of Ford pp
Introduction
Ford Motor Company is a global automotive industry leader based in Dearborn, Michigan
Manufactures and distributes automobiles across six continents
Includes Lincoln & Mazda 2nd largest automaker in the U.S. 5th largest in the world based on annual
vehicle sales in 2010 118,308,000 in Revenues & 2,717,000 in
Profit 2010 Ranked #23 on Fortune 500
Introduction Cont.
Competitors GM, Toyota, and Honda Products
Automobiles Automotive parts
Services Automotive finance Vehicle leasing Vehicle service
History
Founded by Henry Ford 1903: Ford Motor Company was incorporated 1908: Ford introduces the Model T 1913: First moving assembly line and making Model T
production 8 times faster. 1964: Ford Mustang and Ford GT40 was introduced as
super cars. 1975: The famous Ford F150 was introduced.
History Cont.
1990: Ford Explorer was introduced as sport utility vehicle
1993: Ford opens its first dealerships in China. Its brand sales in China increased 46 percent in 2005.
2001: Ford Motor Company recalls 13 million tires and Bridgestone/Firestone dumps Ford as a customer
2006: Alan Mulally hired as new CEO to try to revive the company
Key Executives
William C. Ford Jr., Executive Chairman
Alan R. Mulally, President & CEO
Lewis Booth, Chief Financial Officer
Ford’s Mission Statement
ONE FORD MISSION: 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: Aggressively restructure to operate profitably at the current
demand and changing model mix Accelerate development of new products our customers
want and value Finance our plan and improve our balance sheet Work together effectively as one team
ONE GOAL: An exciting viable Ford delivering profitable growth for all.
Industry Analysis
U.S. consists of 13 international automakers together produce 5.7 million cars and commercial vehicles (9% of global output)
China surpassed North America in 2009 with 13.8 million units
Laws and government regulations have affected the automotive industry Emissions Safety MPG
Industry Analysis
New Marketing Demand from consumers Technology Advances Different Age Focus
Automotive industry one of the largest employers in the country Represents 4% of GDP in the nation
General Motors
Founded September 27, 1908
Headquartered in Detroit, Michigan
Products are automobiles and financial services
209,00 employees
Honda
One of Ford’s largest competitors
Founded September 24, 1948
Headquartered in Tokyo, Japan
Currently manufacture 13 different products
Toyota
Founded August 28, 1937
Headquartered in Aichi, Japan
Products are automobiles and financial services
317,734 employees
Market Analysis
China Top auto market with 1.37 billion people and
growing affluence This market is growing at a rate of 30.45%
year on year growth to 7.18 million units during the first six months of 2010
Europe Electric and hybrid cars are really taking over
this market About 10% of new cars sold globally are either
hybrids or electric cars
Market Analysis
Electric cars Automakers are looking to develop newer
electric cars powered by batteries, the sun, or hydrogen fuel cells
Automakers are also looking for new ways to secure the power to “refuel” these newer cars on a national scale
Current Status (China)
Over the first half of 2010 Ford sold 301,524 units
Resulted in a 53% growth in sales The Ford Fiesta was a popular model
with the younger generation in China Also helped Ford gain market share
Chart
2005 2007 2008 20090
2
4
6
8
10
12
14
16
11.95
10.78
8.71
5.715.71
8.889.25
13.8
10.8
11.6 11.56
7.93
World Motor Vehicle Rankings by Country (Million Units Produced)
Us
China
Japan
Current Status (Electric Cars)
Plans to launch a new electric Ford Focus sedan and the Ford Transit Connect commercial van
Retooling North American truck plants to be used to produce
Current Status (Europe)
Has a weak marketing strategy Focus on developing more fuel efficient
cars and developing the Focus and Transit vehicles
Porter’s Five Forces
Used for industry analysis and business strategy.
Developed by Michael Porter of the Harvard Business School in 1979.
Used to develop a competitive edge over rival competitors.
Porter’s Five Forces
Threat of New Entry
Power of Suppliers
Power of Buyers
Threat of Substitute
Intensity of Rivalry
Threat of New Entry
Low Manufacturers must be able to mass
produce automobiles so they can be affordable for every consumer
Extreme amount of capital is needed in order to manufacture automobiles keep up on research and development
Difficult entering into established industry
Power of Suppliers
Relatively Low It takes several suppliers to manufacture
an automobile because there are so many different parts used.
When there are a large number of suppliers in an industry, they do not have much power.
Power of Buyers
Fairly high All of the manufacturers will depend on
the consumers because they purchase most of the output
Most of the revenue comes from the buyer
If Ford cannot keep the consumer happy, they will lose them to another competitor
Threat of Substitute
High Other forms of transportation
Walking Riding a bike Public Transportation
Customer Loyalty Ample amount of other options in car
industry
Intensity of Rivalry
Very High Most competitors have the same general
focus so it makes the rivalry intense All competitors are trying to achieve
same common goal Price, quality, and durability are factors
that are taken into consideration to become superior to other competitors
Political
Exchange rates of the US dollar compared to other countries
Oil prices and free trade flows Foreign ownership regulations Foreign laws and regulations Labor unions
Economic
The growth potential of foreign target markets
The size of potential target markets Economic development Oil price fluctuations The sales increase of Eastern European
countries (Turkey, Hungary) Ford is the market leader in the UK,
Hungary and Turkey
Technological
Supply chain collaboration Ford’s operational capability Technological improvements in
distribution Product development
Opportunities
Customers demand for more fuel efficient cars
Ford’s investment in the Solar Power industry
“The Way Forward Plan” The European and Chinese markets Release of the 2011 Ford Fiesta
Threats
Rising new material prices Increasing competition The “war on terrorism” and its overall
threat to the world market and economy The economy Rising oil prices Housing market decline
Corporate Culture
Second largest car manufacturer in the world Widely know for its vehicle service for its
customers Large emphasis on customer first and
customer satisfaction Areas served are worldwide Ford has invested $50,000 to help hundreds of
Ford volunteers complete urgent projects identified by the company's nonprofit agency partners.
Current Mission
1.) “Aggressively restructure to operate profitably at current demand changing model mix.”
2.) “Accelerate the development of new products our customers want and value.”
3.) “Finance their plan and improve their balance sheet.”
4.) “Work together effectively as one team which emphasizes the importance of working together as one team to achieve automotive leadership , which is measured by the satisfaction of our customers, employees and other essential business partners, such as our dealers, investors, suppliers, unions/councils and communities.”
Industry Rankings
Ranking
Automaker
Jan. 2010 Sales
Jan. 2009 Sales
Year to Year % Change (unadjusted)
Year to Year % Change (adjusted)
Jan. 2010 Market Share
1 GM 146,825 129,227 +13.6 +23.1 20.9%
2 Ford 112,406 90,596 +24.1 +34.4 16.7%
3 Toyota 98,796 117,287 -15.8 -8.7 14.1%
4 Honda 67,479 71,081 -5.0 +2.9 9.6%
5 Nissan 62,572 53,884 +16.1 +25.8 9.0%
6 Chrysler 57,143 62,157 -8.1 -0.4 8.1%
7 Hyundai Group
52,626 46,608 +22.3 +12.9 7.6%
Ford Financial Performance
Revenues
2006 (160,065,000)
2007 (168,884,000)
2008 (143,584,000)
2009 (116,283,000)
2010 (128,954,000)
Gross Margin %
2006 (7%)
2007 (16.9%)
2008 (11.8%)
2009 (15.5%)
2010 (19%)
Earnings per share
2006 (-6.72)
2007 (-1.32)
2008 (-6.46)
2009 (0.86)
2010 (1.66)
BCG Matrix
In the matrix there are four quadrants. These quadrants are the Dogs, Question Marks, Stars, and Cash Cows. The Dog quadrant describes parts of the company that
are not doing well The Question Mark quadrant deals with the parts of
the company that have low market share but are growing
Stars are the part of the matrix where there is high relative market share and high market growth
Cash Cows are the most desirable market segment. These divisions have a high relative market share and low market growth
BCG Matrix
Stars Question Marks
Cash Cow Dogs
Mark
et
Gro
wth
Rate
Relative Market ShareHig
h
Low
Low
Trucks
Electric Cars
CarsSUVS
CEO Book
Ford sales during the last year Recorded revenue of $128.954 billion in
fiscal year 2010 Net Income of $6.561 Billion Operating Income of $7.149 Billion Total sales grew by 15.2 % Increased market share for 2nd consecutive
year Inventory Velocity is 21 Return on assets is 4%
Ford and their competitors
As of 2010, Ford’s net profit margin was 6.56 Billion
Honda net profit margin=3.8 Billion
Toyota net profit margin=5.2 Billion
General Motors net profit margin=4.7 Billion
Profit Margin
2006 5.98 Billion
2007 6.23 Billion
2008 6.12 Billion
2009 6.21 Billion
2010 6.56 Billion
Effects on Profit Margin…
Ford started to hire more employees
Ford must increase prices
There have been new implications for
strategy
Cash Flow & Competition
Increased revenues 48.7%
Revenues have continued to increase
Ford is the second largest automotive maker in the United states
Strengths
Producing Hybrid vehicles Brand recognition Profitable financial services division (Ford Motor Credit) Manufacturing facilities in more than 30 countries Wide Range of Products targeting all customer classes
Weaknesses
Weakening North American automotive operations Recalls Sales in trucks decreasing rapidly Firing of Employees
Current Strategy
Use free cash flow to pay off significant amounts of debt
Truck/car sales mix transitioned to 48%/52% from 54%/46%
Sell off preferred securities to reduce $2.98 billion in outstanding principal, and decrease interest on debt by 190 million a year
Reduce debt, generate free cash flow
Sold off Jaguar, Land Rover, Mercury, and Volvo
Strategic Issues of the Economy
Fuel Prices Better marketing strategies for
automobiles Finding ways to lower emissions The US government and automobile
companies have agreed on a long term fuel efficiency plan
Better quality and safety
Strategic Issues of the Industry Finding ways to attract customers in a
struggling industry Expanding into other markets that offer a
greater potential (ie. China and Europe) Finding a way to build more fuel efficient
vehicles (ie. Hybrid and Electric vehicles) Separating themselves from competitors
through the use of marketing and new innovations
Strategic issues for Industry Auto industry has faced shortages of engineers U.S. industry must add thousands of carmakers to
build fuel-efficient vehicles to meet more stringent federal regulations and growing consumer demand.
The nations auto sector has added a total of 32,000 employees 1,000 of which are engineers
Threat of industry wide bankruptcies Fuel efficiency standards are placed on 2012
models
Competitors - Toyota
In January 2010 Toyota announced it would temporarily stop building and selling eight models in the North American market
Toyota recalled more than 11 million vehicles globally because of floor mats and sticky accelerator pedals in late 2010
Toyota was issued three fines totaling $48.8 million because the Transportation Department said Toyota had not reacted appropriately to reports of problems
Competitors - GM
GM was forced into bankruptcy court in March 2009
In July of 2009 GM sold off its assets to a government owned company and the US government now owns 61% of the new company This creates an opportunity for Ford to
capitalize on a company that is not financially stable
Competitors - Honda
Recalls on 2,800 Odyssey mini-vans due to defect in front windows coming off the tracks
New Odyssey mini-vans re-called 33,000 models due to faulty windshield wipers
Third highest automaker involved in recalls in the U.S. last year – second highest in Japanese market
Struggles through the effects of the earthquake, tsunami, and nuclear meltdown
Competitors – Honda Cont. Increased pressure from U.S., South
Korea, and European competitors Honda lagged 12 points behind industry
average of J.D. Power APEAL (Automotive Performance, Execution and Layout)
Introduction of new line of cars will be delayed due to March 11, natural disaster
Ford Strategies in the Past
Ford used to have a very corporate orientated strategy, but now focus on specialized product production and meeting specific needs of the consumer
Ford used to imply a mobility strategy that worked to determine the long term profitability of the company but has altered that strategy since the recession
Ford Strategies Now
Ford is making more hybrid vehicles through the increase use of renewable and recyclable materials
Ford is developing natural-fiber composites as a potential substitute for the glass fibers traditionally used in plastic car parts to make them stronger while reducing vehicle weight
Ford has developed a very strong sustainability strategy
Ford Strategies Now Cont.
Ford is beginning to use Solar energy to power their manufacturing plants
Global Electrification strategy Ford has a strategy on new key design Ford has a very strong marketing
strategy as they market all of their vehicles differently
TOWS Chart
Uses the SWOT matrix to develop specific strategic options for your company
The components of the SWOT are matched, and strategies are developed to address them
SO , WO, ST, AND WT
Strengths Weaknesses1. Producing Hybrid vehicles 2. Brand recognition 3. Profitable financial services
division (Ford Motor Credit)4. Manufacturing facilities in more
than 30 countries5. Wide Range of Products targeting
all customer classes
1. Weakening North American automotive operations
2. Recalls 3. Sales in trucks decreasing
rapidly4. Firing of Employees
TOWS Charts
Opportunities Threats
1. Customers demand for more fuel efficient cars
2. Ford’s investment in the Solar Power industry
3. “The Way Forward Plan”4. The European and
Chinese markets5. Release of the 2011
Ford Fiesta
1. Rising new material prices2. Increasing competition3. The “war on terrorism” and
its overall threat to the world market and economy
4. The economy5. Rising oil prices
TOWS ChartsTOWS Charts
TOWS Combinational
SO Strategy Focuses:1. Continue marketing
and research & development of hybrid cars(S1,O1, O2)
2. Consolidate more in European and Chinese markets (S4, O4)
ST Strategy Focuses:
1. Continue marketing and research & development of hybrid cars (S1,T4,T5)
2. Improve fuel consumption (S1,T4,T5 )
TOWS Combinational
WO Strategy Focuses:
1. Continue Research and Development of Hybrid Cars (S1,W2)
2. Reduce recalls in newer products (W2, O2)
WT Strategy Focuses:1. Increase incentives
for customers. Examples: mileage warranties (T2,W1)
2. Reduce threat of competition by developing flexible product line(T2,W3)
Ansoff Matrix
Purpose is to use this matrix to increase sales of a company’s current products without adjusting it in the existing market.
The four main quadrants are market penetration, market development, product development and diversification.
These four major classifications are in the new markets and existing markets.
Ansoff Matrix
Market Penetration
Discount vehicles and
focus and advertise for
the company.
Product Development
New range development.
Market Development
Target the internet as
prime source for marketing.
Diversification
Develop new line of cars.
Existing Product
New Product
Existing
Market
New Marke
t
Overarching Strategy
Expand Globally, while mass producing hybrid technology (Aggressive)
Continue to compete in automotive market, while focusing on core profitable products (Passive)
Expand Globally
Develop a plan: Expand into different market segments
China Europe
Stronger Marketing campaign Brand Awareness in foreign markets
Focusing On Core Products
Develop a plan: “Slim down to grow”
Getting rid of weakest brands and using that money to invest into new product development and marketing
Separate the company’s slow-selling secondary brands, and concentrate on shoring up its core business.
Strategic Intent (Goals)
Increase total sales in European Auto Industry.
Become industry leader in the Chinese market.
Pass General Motors and become the highest ranked company in the US automobile market
Expanding Globally Pros
Larger market potential, increase in sales
Better brand recognition Access to different economies of scale Extend product life cycle by reaching
larger markets Operational flexibility
Expanding Globally Cons
Foreign economies are all structured differently
Labor in foreign countries Lack of brand recognition Low customer loyalty Higher marketing costs
“Slim Down to Grow” Pros More room to focus on specific products Easier to market to certain economies Less costs associated with product
development Better chance of financial safety
“Slim Down to Grow” Cons Loss of highly-skilled and reliable workers and the
added expense of finding new workers An increase in overtime wages A decline in customer service because workers
feel they lack job security after layoffs Restructuring programs sometimes take years to
complete because of ensuing employee confusion and the amount of time it takes for employees to adjust to their new roles and responsibilities
Arguments for Preferred Choice
Car ownership in China has more than doubled in the last five years, from 12% of households in 2004 to 28% in 2009
Report show that it's possible for China's percentage to top 50% by around 2015.
Chinese have become less sure about their preferences, leaving a large group of undecided customers
European market has increased demand for fuel efficient compact cars
Projections
Grow customers by 20% annually
Increase number of dealerships by 10 per year
Globally Expansion
Annual Objectives - Year 1 Total Cost: 1.2 billion (China)
Franchise: $500,000+ Technology Investment: 750 million Operating Cost: 400 million Unforeseen Cost:1.5 million
Total Earnings: 3.5 billion
Annual Objectives - Year 2 Total Cost: 1.2 billion (Europe)
Franchise: $500,000+ Technology Investment: 750 million Operating Cost: 400 million Unforeseen Cost:1.5 million
Total Earnings: 3 billion
Annual Objectives - Year 3 Total Cost: 1.7 billion
Technology Investment: 750 million Operating Cost: 800 million (400
China/Europe) Unforeseen Cost:1.5 million
Total Earnings: 7.5 billion Europe Market: 3 billion China Market: 3.5 billion
Implementation
Increase Research and Development of Hybrid energy Joint venture with energy companies Help to develop longer lasting fuel supplies
Increase Foreign market share China Europe
Trigger/Contingency-1
Trigger: Unstable economy
Contingency Plan: Reduce lower selling models/product lines to
maintain profitability Downsize work force to generate operating
cash
Trigger/Contingency-2
Trigger: Natural disaster
Affects gas prices Affects production in foreign sectors Contingency Plan:
Develop partnership with relief organizations
Donate F150s (help brand awareness)
Mission Statement – Revision
ONE FORD MISSION: 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: Aggressively restructure to operate profitably at the current demand and
changing model mix throughout the world Accelerate development of new products our customers want and value Finance our plan and improve our balance sheet Work together effectively as one team to manufacturer the safest possible
vehicle ONE GOAL:
An exciting viable Ford delivering profitable ONE WORLD:
Strive to be the safest automobile manufacturer in the world along with providing consumers with eco friendly vehicles.