Strategy by Ford

Name : Girish K Chetty

a) Enrolment Number :

161300912368

A case discussing strategic

excellence performed by FORD
company.
The case pertains to Ford and its
restructuring plan i.e. the steps
taken by the company to manage a
down turn situation in the economy.

Ford & Its Environment

Ford was facing a declining market due to a

downturn in the economy. The reasons were
many but the important ones were: Entering of Japanese cars in the market.
Japanese cars were competitive, since they were of low
cost & fuel efficient .
Increasing cost of fuel, due to OPEC nations deciding to
control the supply of crude.
The decreasing sales and continued expenditure was
affecting the financials.

Ford dwelled and tried to understand the need of

the hour . The actions planned were to improve
the financials & more of the company as needed.
Hence the work planned were :
Need to focus on business improvement.
Improving sales by providing differentiation in product,
thus resulting in providing a custom built car.
Improvement on design and safety of the car.
Reducing unimportant company expenditure and
overhead as much as possible.
Reducing architecture and related R&D expenditure of
parts by having common parts in different models.
Quick delivery of the product to the customer.
Introduction of supplier participation in low cost
architecture.

The Way Forward Plan

To improve capacity utilization of assembly plant, by making

the manufacturing more efficient.
To drastically reduce the unproductive resource and
manpower of the company.
The actions mentioned above was likely to reduce the cost
of car and make the same more competitive.
The layoff will reduce the healthcare cost on the company.
The company decided to focus more on small cars and
hybrids.
The company decided to go multi pronged, i.e. it decided to
try & win the car customer & maintain the companies
commitment to the loyal truck customers.
Decided to firmly focus and follow leaner manufacturing
systems.
Negotiated suppliers commitment to achieve competitive
cost structure. It continued pursuing low-cost supply.

(Way Forward Contd.)

The effort to reduce cost had another alternative by way of a

smaller organization i.e.
Improved Capacity utilization in all plants.
Closing down of its 14 manufacturing facilities gradually by
2012.
Lay of a total of 30000 workers in North America. Thus
reducing its expenditure and assembling capacity by 1.2
million vehicles against then existing capacity of 4.6 million
vehicles.
Reducing the discount and incentives , the company offered on
its vehicles. It also announced that it would follow the strait
forward pricing methodology. Thus reduce the MSRP
(manufacturers straight pricing scheme), for all its models.
It also planned to increase its product advertising with prime
focus on marketing brand characteristics.

Analysis of the issue

The case is about the FORD motors business getting

affected negatively.
One of the primary reason was the war between Israel and
Arab nations, causing OPEC nations to control supply of
crude.
The unfavorable fuel supply situation made the US citizens
to opt for fuel efficient cars, which also were cheap. The
answer was the introduction of Japanese cars in US.
This resulted in FORDs market shrinking from 26% in 95 to
17% in 2005.
To tackle the problem it came out with a plan named Way
Forward . Its salient features were:

Focus on business improvement.

Ways to attract customers was implemented.
Restructuring the company to reduce expenditure
Reducing R&D expenditure by using similar part in more model

Analysis contd

Closing down 14 plants and laying off 30,000 workers to achieve a

smaller organization. This reduced the companies overhead
expenses towards pension fund and health care fund.

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Conclusion
1. Due to the OPEC deciding to control crude supply
to those supporting Israel in the war, there was a
crisis in fuel supply in the US. This then resulted
in the customer demanding a fuel efficient car.
This need of the consumers was answered by the
Japanese imports.
2.

The FORD company due to facing a drop in sales

landed up into financial difficulties. This problem
was strategically managed by Ford by reducing
their expenditure, by taking many other steps all
culminating to reduction on expenditure.