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An In-Depth Analysis of Ford’s Strategic Management

Apr 28, 2023 | 0 comments

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Apr 28, 2023 | Essays | 0 comments

Ford Strategy

The current ford strategic management model was adopted by the company in the year 2007. Before this year, ford had experienced a decrease in demand and a lowering performance in the brand. Ford is a company that is renowned for affordability as well as quality. In the past, Ford was the one company that was leading the automobile industry. However, increased competition coupled with a decrease in demand and saturation of various models in the market led to ford losing its number one position. In 2007, with the appointment of new executives and managers, the company introduced a strategic plan that was designed to overhaul performance and rekindle the competitive edge. Ford’s strategic management mode covers the following:

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Aggressively restructure to operate profitably

(Sadler 2003) states that one of the areas of concern in the development of a strategic management model is the operating costs. Companies need to focus on ways to decrease the costs of operation while at the same time maintaining the quality of products. The majority of the companies go wrong today when they focus on just decreasing costs of operation without focusing on increasing the quality. The result is that even with Lowe costs the company may make even bigger losses and experience a severe decrease in income. A low-cost strategy is vital for survival in the current economic market. During the economic downturn, for example, ford experienced severe losses in some of the branches. Ford’s line of vehicles was considered a luxury item that very few consumers were willing to spend on.

This fact led to the management considering a refocus on affordability. Ford has found a strategic inning formula where affordability can be achieved without compromising quality. The result is that consumers are more willing to purchase durable products at lower and affordable prices.

Development of new products

The automobile industry has been growing at the fastest rate. Each year, there are more than sufficient new products being introduced to the market. Technology has advanced so that companies can find better, faster. More durable and more unique products are developed and introduced into the market, (Brinkley 2003). Ford has not been left behind in this era. For decades, the automobile company has focused on introducing new products perhaps in response to the competition. However, even with the new products, the performance of Ford has remained wanting. The new strategic la does not do away with the desire to work towards new products, instead, it refocuses the new products to include the customer wants and needs.

Before any investment is made in the development of a product, exclusive research will be done to determine what the consumers want and which needs have been left vacant. In this way, the company can create a niche and increase the target market by going ahead of the competition. (Gould 1996) states that customer needs, desires, and even tastes are often changing. The speed with which needs are changing today means that companies need to keep up with new trends. Companies that are not sensitive to the changing trends are likely to become obsolete and be overtaken by completion. Flexibility in the assessment of new products is required to take advantage of changing customer trends. Also, Ford expects to be fast in adapting to the changing trends.

Enhanced teamwork

For a while branches of Ford seemed to operate on their own independent front and forums. Managers and employees all seemed to be working on their own independent goals. The result is that the company business goals and visions suffered greatly especially in the international market. In 2007, the decision was made to introduce policies that would enhance teamwork. These included exchange programs and centralization of operations with the centralization of operations, decisions are made by the executives and executed uniformly in the entire company. Small changes are of course made to accommodate the needs, desires, and culture of the local markets. (Banham 2002) evaluates the same principles which are found in large companies such as coca-cola. He finds that these companies draw their success from uniformity. Consumers keep coming to them because they are aware of what they offer and they know what to expect from the company. It is expected that by enhancing teamwork, productivity will increase and a positive environment will draw the market to the company.

Ideal Strategy For Ford

The main issue with Ford is that it has lost its competitive edge. Competitors such as general motors have taken advantage of the periodic lull of the company to push into the ford market. Consumers no longer recognize the company products or have a great desire to interact with the customers. Despite maintaining a good portion of loyal clientele, the company is growing at a much slower rate as compared to the industry growth rate. It is on this basis that something must be done to bring about immediate and effective change to the company. The five-factor model is the most ideal in bringing about change and enhancing a competitive edge.

Protection against new threats: the automobile industry has been growing exponentially in the past decade. New, better, and more exciting companies and products are being introduced to the market daily. Based on the current strategy of ford, however, the company can easily keep away competition by maintaining its low cost and high-quality business strategy. (Sorenson 2006) cautions that the global economy has not encouraged increased buying among consumers. It is most likely that consumers are inclined to hoard whatever little income they earn in fear of another economic crash and therefore lack of income. Coupled with this is the increase in a variety of products from which consumers can elect to buy. With the current economic environment, consumers are more interested in cost than with the flowery additions to products. Ford needs to continue enhancing its affordability while at the same time maintaining durability. Consumers will be less inclined to be drawn away from products they now buy newer products when their old choice is still affordable.

Substitutes from the competition: the Ford Company needs to deal exclusively and absolutely with the threat brought on by competitor products. (Cahill 1992) for example, shows that in comparison much of the ford products are similar to those of general motors. Competition has crept into the market niche created by Ford. Consumers, therefore, have no reason to elect the ford products, they have nothing exclusive on which they can base their decision. They are easily swayed by the competition. The focus on product development will allow the company to come up with unique products that cannot be easily substituted so that it can regain the market niche that was lost to completion.

In addition to product development, the company needs to refocus on advertising. Ford’s completion has been aggressive in terms of marketing and advertising. This has ensured that their share of the market continues to grow. On the other hand, ford has been less aggressive and the share of the market has been decreasing. No matter how many unique products a company has, even when they are durable and excellently priced, they provide no advantage unless the consumer is aware of their existence. Advertising and marketing allow the company to communicate to the consumer the availability of the product, which needs the product will meet, and other advantages which will accrue to the consumer upon selection of the said product.

Customer bargaining power: before the year 2007, ford customers enjoyed much power. In fact, a large portion of the automobile industry was controlled by the customer. Decisions made in companies mainly focused on the needs and demands of the consumer. Few companies would have survived by ignoring consumer bargaining power. Toyota for example chose to follow the industry and market trend ignoring the consumer bargaining power, the company is yet to recover from the losses incurred during this period. However, Ford has realized that the cost of maintaining consumer bargaining power is quite high. Prices are dictated by the consumer, sales, and profit margins are completely dependent on the consumer. (Shook 1990) suggests that for companies that are operating in such a market, it is wise to decrease the power of the consumer. This is especially necessary where the industry is saturated with similar manufacturers. The idea is to create a loyal customer base, consumers who are loyal to the Ford brand despite costs and other factors. Such consumers will always purchase products from this brand and cannot be swayed.

Bargaining power of suppliers: unlike other newer industries, Ford has little concern when it comes to suppliers. The company enjoys a strong supplier relationship with local suppliers who are often willing to be flexible to the company’s new strategies. The majority of the suppliers are also stakeholders in one form or another within the company. Increased company profits are therefore an advantage even to them. For this reason, they are more willing to be flexible, to negotiate, and to work with the company’s strategic goals. This is because the opportunity to supply raw material ford is indeed a lucrative deal. Furthermore, ford’s main services and materials are sourced and produced by the company itself to remain self-sufficient.

Competition: the main focus of the company s creating a competitive edge. Companies such as General Motors have been giving ford a run for its money literally. Income has decreased and profits have become obscure as completion works hard to catch up with ford. Whenever the company gains ground, the others quickly catch up, simply because the strategy employed lacks sustainability. Ford needs to begin restructuring and aggressively seeking ways to regain control of its own market share. This may mean increased investment in advertisement and marketing, to attract consumers and bring awareness to the brand. B

Intended Formation Process

(Hoffman 2012) indicates that strategy formation in any company can take two forms. The first form is the emergent form of strategy which simply means that the strategy is a response to a problem. The issue with emergent formation is that it is often unplanned, resources are not set up towards ensuring success, and the steps involved in strategy formation are not clearly defined. Mainly the strategy continues to take shape with time. The emergent formation is a process that is defined by problems that have not been expected. The company has therefore not had time to set up a proper strategy and plan for the upcoming change. Unfortunately because of the lack of preparation emergent formation often has not sustainability. After a short while, the company can become chaotic as the stakeholders have no clear strategy on which they are basing decisions and working.

The Ford strategy on the other hand represents the sound strategy formation process which the intended or deliberate process. In this process, the company sets up policies and plans which are structured o bring about change in the business strategy. Acceding to (Lewis 2003) intended strategy is a pattern of steps in a flowing river of decisions that are focused on making the strategic operational and tangible. The main advantage of this form of strategy is that it allows the company to bring about change in a short while. Change is much easier when people understand clearly the steps that are to be applied in bringing about the change. Also, the company is focused on ensuring that the change process is a success. However, it is also important to note that the deliberate or intended formation process lacks flexibility. Since there are likely to be challenged in the process of strategy implementation, changes are to be made to the process. Unfortunately, because the process is already set up, and plans are already structured, decisions of change take time and are not as quick in a flexible manner as an emergent strategy. The emergent strategy is not completely uncontrolled but simply open, flexible and a learning process that is ideal in an environment where changes are constant.

The Ford company has satisfied the three characteristics set forward by (Jones 2008) to define the informed strategy:

Articulated intentions in a concrete level of detail: doing the planning stages the executives take time to formulate not just the general plan but the details of the plan also. This means clearly detailing the necessary steps in ensuring the change is complete. Unlike the emergent formation, there are no just guidelines but clear steps and definitions of activities from the beginning to the end. Communication s vital in the process, managers and everyone in the company needs to be aware of the details of the deliberate strategy. In this way, everyone can make the necessary changes to accommodate the changes.

The ford company has taken the time to not only formulate the guidelines of the strategy but also to detail what is required to bring about change. The company for example expects to invest greatly in advertising and marketing, a plan that includes details of the time and nature of activities. Great investments have been made in the way of communication, ensuring that employees, management, and even external stakeholders are aware of the strategy changes. This has provided an avenue through which stakeholders can determine ways in which they can assist the company. Another good example of the detailed activities is Ford’s upcoming plans in research and development. Clear tasks have been assigned and new talent has been put in place to lead the research and development department. To ensure that the company becomes a leading pioneer. Activities are centered and embroidered in the concrete level of the strategy. They are precise and articulated in such a manner that everyone knows what to expect.

Ford becomes a collective action organization: (Jeffs 2008) states that strategy is a collection of activities that paint the picture to a unique and reasonable or desirable end. Management paints a picture for all stakeholders in the business, the picture being the conclusion and results of the proper application of the techniques. The stakeholders are therefore tasked with tasks and duties that are collective and lead to the desired end. Collective action is vital in ensuring that the actions are consistent and appropriate to the strategy. For example, Ford aims at reducing the costs of operations. Therefore consistent cost-cutting measures are the only appropriate form of action. Everyone needs to be working toward the same goal. Cost-cutting is not only desirable in one department, branch, or even sector of the company. Cost-cutting must be pursued by all members of the company. Performance is to be measured by the profit margin which increases when costs are lowered. Therefore from the highest executive at Ford to the lowly employees in the company, each works towards the same goal.

Collective action must have been realized as intended: The collective action is already set in the plan for strategy implementation, however, the company has got to ensure that the actions are realized as they were intended. The actions are defines as they should happen when they should, and most importantly the results of the actions. Resources are mobilized to ensure that the actions achieve the results that were desired. The strategy is analytical in nature, designed to achieve a specific end. For collective action to have the same results: strong analysis is made on the resources required, values of the company that can be changed, and the industry opportunities and threats. This is an environment that helps to determine the course of action that is most desirable and which should have the greatest chance of success.

Collective actions define what is in the organization’s best interest, breaking down the entire strategy into small, tangible actions that make a difference. These small actions are what are likely to differentiate the Ford Company from the competition.

Conclusion

The Ford strategy is one that is uniquely designed to bring about competitive advantage. The strategy has been implemented at the highest level of the company. Risk assessment, strategy development, and consideration of the previous performance of the company. Recent increases in income, in comparison to years before the strategy and the current business year, show that the strategy is gaining success. The financial turnaround is based on the ability of the company to continuously and consistently focus on quality as well as affordability. The strategy has brought together research and development, manufacturing, and marketing to bring about extended growth in the target market.

References

Banham, R. (2002). The Ford Century: Ford Motor Company And The Innovations That Shaped The World. New York, Artisan.

Brinkley, D. (2003). Wheels for the World: Henry Ford, His Company, and a Century of Progress, 1903-2003. New York, Viking.

Cahill, M. (1992). A History of Ford Motor Company. New York, N.Y., Smithmark.

Gould, W. (1996). Ford. London, Cherrytree.

Hoffman, B. G. (2012). American Icon: Alan Mulally and the Fight to Save Ford Motor Company. New York, Crown Business

Jeff’s, C. (2008). Strategic Management. Los Angeles, Sage

Jones, P. (2008). Communicating Strategy. Aldershot, Gower.

Lewis, D. L. (2003). 100 Years of Ford: A Centennial Celebration of the Ford Motor Company. Lincolnwood, Ill, Publications International.

Sadler, P. (2003). Strategic Management. Sterling, VA, Kogan Page

Shook, R. L. (1990). Turnaround: The New Ford Motor Company. New York, Prentice-Hall Press.

Sorensen, C. E. (2006). My Forty Years with Ford. Detroit, Wayne State University

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