Birla Institute of Technology & Science, Pilani

Second Semester (2012-2013)

A Report on Ford Motor Company

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Introduction
Ford Motor Company is an American multinational automaker headquartered at Deaborn,
Michigan that manufactures or distributes automobiles across six continents. It was founded
by Henry Ford on June 16, 1903.The first model introduced to the market was the T-model in
1908.It is listed in the New York Stock Exchange and is controlled by the Ford family,
although they have minority ownership. Ford is the second largest US based automaker and
the fifth largest in the world based on 2010 vehicle sales. [2] With about 171,000 employees
and 65 plants worldwide, the company‟s automotive brands include Ford and Lincoln

Product and Services

Ford Motor Company sells a broad range of automobiles under the Ford marque
worldwide, and an additional range of luxury automobiles under the Lincoln marque
in the US.

Ford has produced trucks since 1908.From the late 1940‟s to 1970‟s Ford‟s F-series
were used as the base of light trucks for the North American market.

Ford manufactured complete buses in the company's early history, but today the role
of the company has changed to that of a second stage manufacturer

Ford also provides financial services through Ford Motor Credit Company.

Ford‟s FoMoCo division sells aftermarket parts under the Motorcraft brand name.

Market and Market Share

Ford Motor market spreads across North America, Europe, Asia Pacific, South
America, Africa and Middle East.

Ford‟s sales in the U.S. were up 14.3 percent in 2011 compared to 2010. Ford‟s
market share for 2011 was 16.5 percent, up 0.1 percentage points over 2010 and 2.3
points over 2008.

Market share data for Ford Motors as of 2011 are as follows:

Country/Continent Share
US 16.5 %
Europe 8.3 %
Asia Pacific and Africa 2.7 %
South America 9.3 %

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Sales and Revenue
Ford Motor Company delivered strong results in 2012 – achieving 14 straight quarters
of operating profit and our fourth year in a row of positive net income.

The company reported revenue of about 6.3 billion USD of pre-tax profit from the
automotive sector. (Nearly 72%)

As of year-end 2012, Ford Credit was financing about 5,200 Ford and Lincoln dealers
and more than 3.6 million retail customers around the world. It reported revenue of
2.4 billion USD of pre-tax profit. (Nearly 28%)

Revenue grew +12.7% YoY to 136.3 billion USD. (From 2010 to 2011).

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Competitors
Brands like General Motors, Chrysler, Toyota and Honda are giving stiff competition
to Ford Motors all over the world.

With the evolution of hybrid engines, Ford is facing a threat in terms of decreasing
market share. But recent strategies have been extremely helpful in regaining the lost
share especially in the United States.

Organizational Culture
Values of an organization define its character and personality. Ford supports a participative
culture and an open communication system. It is being characterized by a strong culture with
the key values being intensely held and widely shared.Throughout the history of Ford Motor
Company, inclusion has been as much a part of the company's success as the great products
that the company‟s diverse employee base has created.

People Orientation - Ford exhibits a culture that is adaptive in nature and managers in the
company show care for their clients, stock holders and employees. Employees at Ford are
treated as a very important asset to the company and their contribution is valued and always
encouraged. Opinions of employees at Ford Motors are always listened to through their
participative model and the organization offers them chance to air their opinions and have
them weighed for chances of consideration. The company focuses on the development of
future leaders and it runs a leadership development program that reaches an estimated 2000
managers round the globe.

Aggressiveness/competitiveness- The employee involvement plan put to work at Ford

Motors makes a significant impact on the competitive nature of employees. This happens
through the identification and promotion of factors that may be motivational to the
employees, like sending top performers for better training to hone their skills. This itself
make the culture completive enough to best fit according to the goals of the company.

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Team Orientation – through one ford approach the company emphasizes the importance of
working together as one team to achieve automotive leadership. Even though there are many
types of employees and work arrangements all are made to work with each other the common
goal of making ford a leader in automobile industry, be it in any part of the world.

Outcome Orientation- Company has always tried to focus on quality, even if it is at the cost
of profits sometimes.

Attention to detail- Being a leading manufacturer, precision and reliability are the hallmark
of ford‟s products from its employees.

Innovation and risk taking- Employee views are valued and frequent launch of new
products exhibiting innovative features depicts a high degree of same.

Stability- Low degree of stability as status quo has been put to stake many a times in the past
in favour of innovations and boosting employee morale.

Corporate Social Responsibility

Ford Motors is a top leader in the corporate social responsibility component and is recognized
as one of the world's most ethical companies by Ethisphere.

 Ford has been rated among the top 25 companies in the world in corporate social
responsibility reporting by “Tomorrow‟s Value: The Global Reporters”.

 Ford has earned best-in-class status for its environmental and social performance in
Storebrand Investments‟ 2006 Socially Responsible Investment survey. [3]

 Ford participates in the fight for „labor‟ rights of workers across the world. Much of
Ford‟s focus is on eradicating labor issues within supply chains all around the world,
whether in pig iron from Brazil, cotton from Uzbekistan or cocoa from West Africa.

 The Ford factories themselves put out a carbon footprint that has to be controlled by
regulation and corroboration with government and world leaders.

 Ford has been making electric automobiles and producing better MPG on their
gasoline and diesel powered automobiles, and steadily improving on lessening the
carbon impact on the world.

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Corporate Strategies
Ford through its ONE Ford Plan has tried to implement its growth and renewal strategies.

Growth strategy-Accelerate development of new products to suit customers want and value;
Finance plans and improve balance sheet; and work together effectively as one team,
leveraging the company‟s global assets are some of the major steps taken by the company in
recent years. [4]

 Concentration- Ford has delivered consumer friendly, highly fuel efficient and
innovative vehicles most of the time and concentrated on quality over quantity.
 Vertical integration – The ford motor credit company provides automobile loans in
support of its parent company. The company offers consumer loans and leases to car
buyers, as well as business loans and lines of credit to dealerships selling Ford Motor
Company products. The firm also issues commercial paper and other debt instruments
on Ford's behalf. In this way the company has achieved dual objectives, it has become
its own supplier as well as distributor, thus achieving forward and backward
vertical integration at the same time.
 Horizontal integration- Ford‟s competitors are themselves some of the oldest
automobile companies, like Chrysler and general motors. Hence any kind of
collaboration was simply not possible as these companies know it better to resolve the
crisis by other means possible.
 Diversification- Ford has combined with Aston Martin, a sports car manufacturer, a
company which is different but related. Hence a related diversification can be seen
here.

Stability strategy- Since its inception, one of the most remarkable achievements of ford is its
constant focus on production of highly fuel efficient vehicles. Ford‟s global vehicles
showcase their commitment to fuel efficiency. Technologies like EcoBoost®, direct injection
of gasoline or diesel fuel, six-speed transmissions, and hybrid and plug-in hybrid powertrains
are some of the innovations in this regard. [5]

Renewal strategy- To maintain status quo ford has come up with some solutions.

 Retrenchment- Owing to its financial deficits, the company discontinued its

production of luxury vehicle under mercury brand in 2008.

Business Strategies
Business strategies are meant for how a company will compete in its businesses. Based on
Porter‟s 5 forces model following are the activities of the company

 Current rivalry- Ford faces five major competitors: GM, Toyota, Chrysler, Honda,
and Nissan. Toyota, Honda, and Nissan have grown in market share largely as a result

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 of their ability to deliver better products at lower prices, particularly for more fuel
efficient smaller vehicles. Ford has been losing money on its smaller vehicles. Ford
has managed to remain competitive in Europe by designing cars which appeal to
European tastes and by increasing the quality ratings of its vehicles. This has led to
stable market share and profits over the past three years.
 Bargaining power of Suppliers - Currently, Ford wields significant buying power
over its parts suppliers. Many parts suppliers rely on contracts with only one or two
automotive firms, meaning changes in production at Ford can dramatically impact the
stability of its supply chain. In the past few years Ford has made a concerted effort to
reduce the number of suppliers it contracts with.
 Bargaining power of buyers - Retail bargaining power for automobiles is very
limited throughout the world. The dealer not the automotive company bears the costs
of these concessions. Dealers typically finance their purchases through Ford Credit.
Overall, diseconomies of scale effectively eliminate buyer power in retail
circumstances.
 Threat of new entrants - Within the developed world, there are significant barriers to
entry for the automobile manufacturing sector. Substantial fixed costs, the influence
of brand names upon sales, and the dealership model all hinder new entrants. The
entry threat to Ford in the medium run will continue to be from manufacturers with
existing access to these developed markets
 Threat of substitutes - public transportation may pose as an imperfect substitute. As
oil supplies dwindle and fuel prices rise .This has provided an additional impetus for
Ford provide highly fuel efficient vehicles for the consumer.

Organizational Structure
Ford being a global organisation exhibits a very complex structure fairly mechanistic in
nature.

According to classification based on functions; there is a CEO, a chairman and a number of

vice presidents. [6]

Under CEO work-

Chief operating officer

Chief technical officer
Chief financial officer
Executive vice presidents
Group vice presidents

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Under the following listings a rigid departmentalization can be seen

The group vice presidents deal with-

Procurement
Legal
Manufacturing and labour affairs
HR and corporate service
Quality and new model launch

The executive vice presidents handle operations related to -

Europe, middle east and Africa

The Americas
Ford motor credit company
Global sales and services and Lincoln

The Chief Operating Officer handles-

Global trading and automotive risk management

Communications

The Chief Technical Officer handles-

Ford of Europe
Sustainability, environmental and safety engineering
Engineering and global product development
Powertrain engineering

The Chief Finance officer deals controller and treasurer.

Under these chief officers works a number of respective directors hence showing a low span
of control overall.

There is a clear chain of command flowing from CEO to Vice presidents to Department
directors and employees.

The degree of centralization is fairly high. Although employees are free to give opinions
the ultimate decision power resides in the hands of top management only.

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SWOT Analysis

Ford Motor Company SWOT analysis

Strengths Weaknesses

1. Strong position in US market 1. High cost structure

2. ECOnetic initiative 2. Unprofitable Europe operations
3. Sound financial performance 3. Low exposure to Asia-Pacific
4. „ONE Ford‟ approach
5. Significant growth in China

Opportunities Threats

1. Positive attitude towards “green” 1. Decreasing fuel prices

vehicles 2. Rising raw material prices
2. Increasing fuel prices 3. Intense competition
3. New emission standards 4. Fluctuating exchange rates
4. Growth through acquisitions

Strengths

1. Strong position in US market. Ford is the second largest automaker in US; Ford has
great reputation in its home market and strong commercial vehicle sales that generate
maximum revenue.
2. ECOnetic initiative. Ford‟s ECOnetic initiative is an effort to produce highly fuel-
efficient engines by improving existing engines rather than new hybrid engines. The
result of this initiative is the Ford Fiesta, currently the lowest emitting mass-produced
car in Europe and Ford Focus ECOnetic that has better fuel consumption than Toyota
Prius.
3. Sound financial performance. Ford was the only big US car company that didn‟t
need the government bailout and was the first to get investment status back. The
firm‟s profit margin is high compared to competitors with the highest liquidity ratio.
4. „ONE Ford‟ approach. Ford has decided to produce single, streamlined global
lineup of its models. The carmaker no longer produces customized vehicles for
different regions but focus on designing and engineering the car that fits different
regional tastes and regulations. It significantly decreases costs for Ford and drives
record profitability.
5.
Significant growth in China. Ford, although not the strongest player in the China has
experienced the significant growth in the largest automotive market in the world for
the 2012. It grew its sales by 46%, according to Ford press release. [7]

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Weaknesses

1. High cost structure. Although „One Ford‟ initiative led to substantial cost reduction,
Ford still has a high cost structure, compared to other automobiles manufacturers.
Ford‟s costs are driven by its generous employee compensation and pension plans.
2. Unprofitable Europe operations. In 2012, Ford lost $1.75 billion in Europe and
plans to experience losses in the region until 2015. [8]
3. Low Exposure to Asia-Pacific: Only 15.82% of Ford‟s volume was derived from
Asia-Pacific sales in 2011, the fastest growing segment of their business (7.52%
growth from 2010 to 2011)

Opportunities

1. Positive attitude towards “green” vehicles. Cars that are Consumers are aware of
the negative impact of fuel inefficient cars that emit large quantities of CO2 and
negatively affect the environment. Ford has developed electrification strategy to
reduce the carbon dioxide (CO2) emissions from its vehicle and make them more
efficient.
2. Increasing fuel prices. Ford‟s strong emphasis on engineering fuel-efficient vehicles
(Ford Fiesta and Ford Focus ECOnetic) with flexible fuel and hybrid engines will pay
off due to increasing fuel prices in the world.
3. New emission standards. A new wave for stricter regulations on vehicle emission
standards would positively affect Ford position in automotive industry. Ford invests
large amounts of money to produce fuel-efficient engines and reaped some success
with its ford Fiesta and Ford Focus ECOnetic models.
4. Strategic partnerships. Ford has great experience in creating strategic alliances and
partnerships with other automotive companies. Due to current competitive pressure,
all companies are more likely to enter into such partnerships to drive R&D costs
down, access new markets and gain some new skills.

Threats

1. Decreasing fuel prices. Some analysts forecast that future fuel prices will drop due to
extraction of shale gas. This would negatively affect Ford as it focus on compact fuel-
efficient hybrid and flexible fuel cars that are less attractive when the fuel price is
low.
2. Rising raw material prices. Rising prices for raw metals will lift the costs for auto
manufacturers and result in squeezed profits for the companies.
3. Intense competition. Ford faces more intense competition from other auto
manufacturers more than ever, especially in small cars segment with hybrid engines.
4. Fluctuating exchange rates. Ford, including other largest automotive companies,
may negatively be affected by fluctuating exchange rates as it earns more than half of
its profits outside the US. The profits may be lower due appreciating dollar against
other currencies.

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Suggestions based on SWOT analysis-

1. The company should try to expand sales in the Middle East.

2. It should try to gain share in some major oil companies to tackle uncertain oil prices
in future.
3. There is a lot of scope for ford to take advantage of the growing needs of public
transports, utility vehicles as well as other vehicles that may find their use in some
other industries. For example, manufacturing buses and trucks for India and African
nations, oil tankers for oil producing countries, etc.
4. The company in order to gain public favor in Asia and China and to gain profits in
recession hit Europe may try to reduce its cost structure for these countries as a short
term plan.
5. The company may risk its sales in the US to cover the subsidy given in third world
countries, but given the large size of potential customers in the target countries,
possibility of profits in long term can‟t be ruled out.
6. The company may resort to multiple raw material suppliers and may even try to set
up its own unit for production of raw materials. This will reduce dependence and
make company more competent with rapidly shifting raw material prices.
7. the production of cheaper motor vehicles in masses for mass sales rather than the
making of luxury cars is a good option because this will offer a large market and
there is safety in the numbers because of the large market share presented
8. Ther should be some more less degree of centralization than present standards with
some more autonomy to regional heads to match different demands.

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 REFERENCES

1. Robbins, Stephen P., Mary K. Coulter and Neharika Vohra, Management. 10th Editon,
New Delhi: Prentice Hall. 2010. Print.
2. “Ford Motor Company”, Wikipedia, the free encyclopaedia. Web. 14-04-2013
<https://en.wikipedia.org/wiki/Ford_Motor_Company>
3. “A LEADER IN CORPORATE SOCIAL RESPONSIBILITY”, Ford Motor
Company© 1998-2013.Web. 16-04-2013
<http://media.ford.com/article_display.cfm?article_id=24900>
4. “Supporting ONE Ford”, Ford Motor Company© 1998-2013. Web. 16-04-2013
<http://corporate.ford.com/microsites/sustainability-report-2011-12/people-
workplace-employees-oneford>
5. “Ford‟s Electrification Strategy”, Ford Motor Company. Web. 15-04-2013
<http://corporate.ford.com/microsites/sustainability-report-2011-12/environment-
products-electrification-strategy>
6. "Ford Motor Company, United States", 2012 iProfile, 14-04-2013
<http://www.iprofile.net/system/resources/BAhbBlsHOgZmSSIzMjAxMi8xMC8zM
C8yMy8xMS80NS8yMjAvRm9yZF9Nb3Rvcl9Db21wYW55LnBkZgY6BkVU/>
7. “Ford China Sales Up 46% for the Year, February Sales up 7%”, Ford Investor
Relations (2013). Web. 16-04-2013
<http://corporate.ford.com/our-company/investors/investor-news-detail/pr-ford-china-
sales-up-4625-for-the-37786>
8. “Despite Strong Earnings, Europe Weighs on Ford Motor Company”, The Motley
Fool (2013). Web. 16-04-2013.
<http://www.insidermonkey.com/blog/despite-strong-earnings-europe-weighs-on-
ford-motor-company-f-48589/>

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