Building Mrketing Strtegy of Ford Motor - Case Study Example

Mrketing strtegy of Ford Compny [Nme of the School] [Nme of the Table of Contents: Introduction Ford Motor bckground 2. Politicl fctors to consider in building Mrketing strtegy of Ford Motor 3. Structurl rules under the system of mss production 4. Product development nd design 5. Technologicl innovtion 6. Globl expnsion nd distribution 7. Ford Motor IT strtegy Conclusion Introduction Ford Motor compny is fced with the problem of gret number of redundncies worldwide nd loss of up to 5b. The problem lies in the re of finncil control (its hs been hit by successive rises in lbor nd mterils costs) nd poor mrketing strtegy. "Lst week Ford reported $12.7bn net loss for 2006, the biggest in its 103-yer history". 1Under its Wy Forwrd pln, the compny is cutting tens of thousnds of jobs nd stremlining its business in bid to return its core North mericn opertion to profitbility by 2009. Ford hs now reduced its proportion of fleet sles to 28 per cent of the totl, from 39 per cent yer previously. "Tht's some good news in the mix of our business," Ford's sles nlyst George Pips sid yesterdy. Current pper provides comprehensive mrketing review of Ford Motor compny nd defines strtegic pproch to plcing the compny on the competitive position of worldwide leder in the cr industry. 1. Ford Motor bckground Ford Motor is the second lrgest utomotive compny in the world nd the most trnsntionl of ll uto mkers. It hs opertions in more thn 200 countries nd territories, employing bout 350,000 workers (Schnpp, Cssettri, 2004) Historiclly, Ford sought to compete ginst the industry's leder, Generl Motors, by incresing its presence in foreign mrkets. Ford's Interntionl utomotive Opertions co-ordintes ctivities in twenty-six countries grouped in three principl regions (Europe, Ltin meric, nd si Pcific). In the lte 1970s, Ford produced outside the United Sttes hlf of its worldwide vehicle production - compred with GM's one-fourth. The Ford Motor Co. hs lso been leder in introducing or rpidly dopting technologicl innovtions in the industry. Henry Ford, the founder nd president of the compny, is considered the fther of mss production. In the difficult decde of the 1980s, Ford showed its cpbility to rpidly dopt the Jpnese system of production nd to move fster thn ny other uto mker in seeking the integrtion of its opertions on globl bsis. The compny ws lso pioneer in the interntionliztion of production, s it ws the first to open n ssembly plnt in Cnd (1904), in Mexico (1925), nd in mny other countries. Historiclly, the compny hs hd leding role in developing n utomotive cpbility in those countries, nd its strtegies hve been chrcterized by its responsiveness to locl government demnds nd its reltively high levels of export ctivity. 2. Politicl fctors to consider in building Mrketing strtegy of Ford Motor Politicl fctors such s US government policies of intermittent intervention in the industry help to undermine the extent of competition in the US utomobile industry. The dversril reltionship between government nd business in the United Sttes tht emerged in the mid-1960s ws founded on the underlying tension which existed between the neo-clssicl model or ideology tht shped US government policies towrd the utomobile industry nd the system of mngeril cpitlism bsed on lrge, oligopolistic corportions. In the 1960s, nd responding to growing public wreness on sfety nd fuel emissions, the US government incresed nd modified its forms of intervention in the utomobile industry. Before the 1960s, US government intervention in the utomobile industry ws "intermittent nd inconstnt, " s "periods of mild support nd benign neglect hve lternted with periods of fierce scrutiny nd shrp intervention" (Dyer et l. 2001:45). Most government policies ffecting the industry re not shped by the underlying ideology of lissez-fire, which justified government intervention only when there were strong demnds by powerful economic or socil ctors to do so, or when it ws justified to correct mrket filure (Gilpin 2006:418-19). Direct US government intervention in the utomobile industry is limited to procurement of vehicles nd regultion of trde, lthough nturlly other "implicit" policies lso hd n influence on lbor nd cpitl mrkets. In generl, most US mcroeconomic policies, such s fiscl nd trde policies, nd infrstructure projects tht creted long-hul trnsporttion nd wide nd stright rods, fostered the utomobile industry's growth. The US government even dopted pro-consumer policies, such s low gsoline txes, tht contributed to the predominnce of the stndrd mericn cr in the US mrket (Clrk nd Fujimoto 1991:37-8). ll of these policies "were eqully importnt in shping industriliztion, nd fvoured the rise of stndrdized production over more flexible mens of mnufcture" (Morles 1994:64). Institutionl fctors, such s the highly concentrted nd stble oligopoly with high entry brriers nd with gint firm - GM - s leder, thus hmpered the incentives tht the smller compnies hd in pursuing independent nd optimum strtegies. This implied tht Ford strtegies were only mrginlly distinct from other US uto mkers, prticulrly GM. Furthermore, becuse of the dominnt position tht the US Big Three uto mkers enjoyed in the utomobile industry worldwide, wht hppened in the US context ws relevnt to the opertions tht those uto mkers hd outside of their home country. 3. Structurl rules under the system of mss production In order to survive nd mximize profits, Ford Motor must comply with structurl rules or the "who-gets-wht" rules in the utomobile industry. Structurl rules re derived from production technologies (hrd nd soft technologies) tht re successful in producing crs efficiently. n utomobile is complex product, which consists of over 10,000 prts nd requires multiple nd complex processes for its mnufcture. Mss production proved successful in efficiently producing utomobiles, which explins tht for lmost seven decdes, it determined the structurl rules for the utomobile industry. But it is complex system tht needs to be understood in order to comprehend Ford's strtegies. The structurl rules for the industry under mss production consisted of high economies of scle t the plnt, firm, nd product levels; hevy cpitl investments; high degrees of verticl integrtion, multiple sourcing, nd competitive bidding mong suppliers; nd strong orgniztionl cpbility for co-ordinting different stges of the production process tht could tke plce within or outside the firm. These excting requirements mde mss production rigid, high-risk, nd costly system, which lso encourged cutious behvior mong uto mkers. 4. Product development nd design Ford Motor used to hve decentrlized pproch to product development nd design bsed on centers of expertise, which were geogrphiclly dispersed: Mzd (Hiroshim, Jpn) in smll crs; Ford North meric (Derborn) in mid-size nd full-size crs; nd Ford of Europe (Dgenhm, UK, nd Cologne, Germny) in compct or smll crs. During its lmost 20-yer ssocition with Mzd, Ford developed nd produced jointly number of components nd t lest five vehicles to mrket in North meric nd the Pcific Rim: the Probe (bsed on Mzd's 626 pltform), severl models of the Mexicn-built Ford Escort nd Mercury Trcer (Mzd's 323 front-drive pltform), nd the 1990 Ford Lser, subcompct built nd sold in the si Pcific region. Ford's globl cr Contour ws bsed on Mzd's 626 pltform. Other collbortive projects included the Rnger nd B2000, the Explorer nd the Nvjo. Mzd lso provided the mechnicl engineering of the ustrlin-built Cpri, designed by Ford's Ghi studios in Itly. Mzd, for instnce, could develop cr such s the 323 or 626, counterprts of the Escort nd Contour/Mystique series, for s little s one-third wht Ford hd to py out. This ment net dvntge of $500 million to $1 billion per model; in other words, Ford would hve to sell between 1 nd 2 million units just to cover its cost disdvntge (utomotive Industries Februry 1997:98). In the long run, Ford's decentrlized system for product development turned out to be highly inefficient nd contributed to restricting the compny's profit potentil, s it filed to fcilitte co-ordintion between the compny's subsidiries nd to solve their different pproches to vehicle design. 4 In the lte 1980s, for instnce, Ford of Europe rgued tht the new Mzd 323/Escort ws too smll for Europe nd pushed hed with its own design. Similrly, the Europen subsidiry introduced new Fiest model in the next size clss fter rejecting the Mzd 121 design, lso considered too smll for Europen mrkets. Ford Europe lso opposed the inclusion of the Europen lrge cr (the Scorpio) in the Turus/Sble replcement progrm, rguing tht "no single design [could] stisfy both mericn nd Europen consumers in tht clss of crs" (Womck et l. 2004:212-13). One of the min gols of Mrketing strtegy of Ford Motor is to introduce more efficient product-development process tht could sve the compny bout $2-3 billion nnully or totl of $11 billion by the end of the century. One single process to develop crs, rther thn different one t ech engineering center in the world, could crete such efficiencies. Its seven worldwide design opertions (Michign, Cliforni, Turin, Englnd, Germny, ustrli, nd Jpn) were merged into one group clled Ford Corporte Design (FCD), nd Ford's North mericn nd Europen opertions nd its utomotive Components Group (tody, nmed Visteon) were integrted lso into single operting unit, Ford utomotive Opertions (FO). Five vehicle progrm centers (VPC), four in the Ford reserch nd engineering center in Derborn nd one split between the United Sttes nd Germny, were set up under FO. Ech VPC hd worldwide responsibility for the design, development, nd engineering of the vehicles ssigned to it. The Europen center ws responsible for smll, front-wheel-drive crs, nd the Derborn center for lrge front-wheel-drive crs, rer-wheel-drive crs, personl-use trucks nd commercil trucks. The mnufcturing mnger for ech progrm ws thus responsible for plnts ll over the world, i.e. the smll-cr progrm center ws responsible for plnts in Europe, the United Sttes, nd Mexico tht produce tht type of uto. By stremlining its product design nd development ctivities, Ford's gols re: to improve the use of common systems, common processes nd components to reduce stff employment to reduce the number of unique pltforms to reduce the number of drive-trin configurtions, while incresing the number of vehicles nd model vritions per pltform. But reducing the number of unique pltforms is not n innovtion for mrketing strtegy of Ford Motor. Well before the lunching of tht progrm, Ford hd estblished "common development progrms" with sin vehicle compnies with the objective of designing nd engineering "vehicles with common pltforms nd power trins whose driving chrcteristics nd exterior nd interior designs cn be modified to meet the needs of different mrkets" (Ford Motor Compny's nnul Report 2005:12). One of the benefits of hving common product development process is enhncing Ford's mngement bility to respond to specil needs tht would emerge in prticulr subsidiry round the world. In ddition to these orgniztionl chnges, Ford hs to build corporte synergies with the purchses of ston Mrtin, Jgur, nd Volvo. It is suggested tht Ford weighed the cquisition ginst the cost of developing vehicle in mrket segments where the compny hd wek position, i.e. upper/ middle-uto segments, prticulrly in the luxury brnd. 5. Technologicl innovtion In the nnul Report of Ford Motor it is stted tht " technologicl innovtion is t the hert of compny's heritge nd the future, it is the only wy to meet simultneous mbitions: reducing the fuel use nd greenhouse gs emissions of vehicles, stisfying diverse customers round the world nd trnsforming business for sustined profitbility".2 Besides, s it is known, innovtion is good pproch to competing in the contemporry business environment. Tht is why, Ford Motor mrketing strtegy hs to be oriented on the technologicl innovtion nd introducing new models on good prices. The core of the technologicl strtegy is to leverge flexible rry of technology options including hybrids, clen diesels, dvnced engine nd trnsmission technologies, nd vehicles tht run on biodiesel nd bioethnol. Ford Motor hs to continue reserch nd development of lithium bttery-powered hybrids, s well s hydrogen internl-combustion engines nd fuel cell technologies. Ultimtely, it will be customers who decide which technologies best suit their needs. By flexibly deploying multiple technologies, Ford cn mke improvements cross the rnge of vehicles, chieving rel impct through the sles volume. Severl developments in 2005 nd the first prt of 2006 reflect this strtegy. In North meric in 2005, Ford Motor lunched its second hybrid vehicle, the Mercury Mriner Hybrid, full yer hed of schedule. It debuted in September nd benefited from collbortive promotion by the Sierr Club. In 2008, Ford Motor plns to introduce hybrid versions of the populr Fusion nd Miln sedns. The weknesses of such strtegies might be tht this pproch is not effective. However, I believe tht the compny hs to sty committed to hybrids s prt of its portfolio. 6. Globl expnsion nd distribution UK Ford Motor should continue to expnd to its mjor mrkets in Europe nd United Sttes. In the UK, for exmple, Ford Motor cn increse its present by doubling the previous rte of environmentl spending in the region, investing t lest $1.8 billion to develop rnge of globl environmentl technologies for its mjor brnds (Ford, Jgur, Lnd Rover nd Volvo). This inititive would deliver more thn 100 models nd derivtives tht offer improved emissions or fuel economy performnce through the use of lightweight, hybrid electric nd biofuel vehicles, mong other technologies. North meric Ford Motor hs been leder in offering "flexible fuel" vehicles cpble of running on biofuels produced from loclly grown renewble energy resources. In North meric, where 1.5 million Ford flexible fuel vehicles re on the rod, the compny will double its originlly plnned cpcity to produce flexible fuel vehicles. If the vilbility of these fuels will be needed, Ford Motor is dvised to mke prtnership with VerSun Energy to expnd the number of fueling sttions offering mix of 85 percent bioethnol nd gsoline (E85). Ford Motor in its mrketing strtegy hs not concentrte of developing sfety innovtions to help drivers void ccidents nd enhnce occupnt protection in the event of collision. Volvo's Blind Spot Informtion System, lredy vilble on severl vehicles, continully monitors vehicle's blind spot nd helps to lert the driver to vehicles pproching longside. Compny's dptive Front Lighting System is significnt brekthrough nd will llow drivers to tke curves more sfely by helping them see round them. On the mnufcturing side, compny's North mericn fcilities should improve energy efficiency, greenhouse gs emissions nd wter use, sving millions of dollrs in the process. 7. Ford Motor IT strtegy The rpid emergence of vrious types of informtion technology hs revolutionized the utomobile industry in recent yers. bove ll, IT hs given compnies the bility to operte more efficiently nd effectively. The utiliztion of technologies, nmely the internet, will give Ford competitive dvntge by decresing the overll time needed to mnufcture crs, better shre ides through rel time progrms, dvertise more ppropritely trgeting demogrphics nd the desires of customers, bolster product innovtion nd new technologies, nd ultimtely to find other wys to gin n edge over the competition. Ford hs been exceptionl in the re of product innovtion, using technologicl innovtion in order to offer more diverse utomobiles nd to mke mnufcturing more efficient. The development of computer ided design, engineering, nd mnufcturing will enble enbled Ford to sve money s well s time when it comes to mnufcturing utomobiles. dditionlly, IT such s the wireless rel-time locting system tht will llow Ford to trck inventory using low-power rdio frequency tgs nd communictions network will enble Ford to hve criticl informtion t their fingertips. s it ws discussed in this pper, innovtion in technology hs llowed Ford to offer new sfety fetures nd luxurious menities tht ppel to consumers by enhncing the overll driving experience nd minimizing risk. IT will ffect Ford's mrketing strtegies s well. Online mrketing cn tke mny forms, nd Ford is ble to utilize service compnies tht help retilers sell crs nd mnufcturers build brnds through mrketing, dvertising, nd customer reltionship mngement tools nd progrms. Ford hs so fr creted direct online presence through recent llinces mde with meric Online Inc. nd Yhoo Inc. Ford's mrketing strtegy is extremely integrted with product development. n informtion technology clled Focl Point collects dt from customers nd in turn llows Ford to mke better conclusions bout dt nd gives greter cpbility to focus on specific groups in the mrketplce. Bsed on the reserch done on Ford in the res of mrketing, mnufcturing, nd product innovtion nd technology, we hve formulted six recommendtions for Ford. The recommendtions for Ford Motor in its online mrketing strtegy is: to continue developing innovtionl IT in order to compete with foreign compnies tht re tking wy sles. to lobby for fvorble interprettion of lws tht re not cler cut tht prevent compnies from llowing customers to purchse utomobiles online nd hve them delivered to your door. To continue to try nd unite trck, lb nd nlyticl testing under one system. To crete device connected to your key-chin tht loctes your vehicle. To put infrred night-vision in vehicles to increse night driving sfety. Conclusion Current report hs provided coherent mrketing strtegy for Ford Motor, leder in the mnufcturing nd distribution of crs. Strtegy concerned with effectiveness nd getting the compny out of finncil problems ws outlined in terms of the fit between the orgniztion, its resources nd objectives nd the environment. It cn be therefore concluded, tht Ford's rnge of strtegic options re influenced, first, by its bility to comply with the rules of competition, i.e. those rules tht were determined by mss production. The compny's strtegic choices were lso influenced by its position or cpbilities reltive to the other competitors. The distribution of reltive cpbilities mong the Big Three nd other uto mkers set the limits for Ford's ttempts to follow strtegic ctions tht were independent of its competitors' moves. Being "price tker" ment tht Ford's ctul strtegic choices, prticulrly regrding product nd price, were set by GM, owing to the dominnt position of the ltter. Ford's strtegic choices for profit mximiztion were ctully interdependent with the collective behvior of other industry competitors. Following the rules of mss production, Ford's interntionl strtegies sought to expnd sles nd rech high production volumes, but the high risks of doing business brod impelled cutious strtegy of estblishing only few pockets of mnufcturing opertions, minly in industrilized countries. Sovereign risks explined Ford's insistence on locting simple ssembly opertions or sles offices in foreign loctions nd mintining 100 percent ownership s condition to estblish brod. Bibliogrphy: 1. Clrk, K.B. nd Fujimoto, T. (1991) Product Development Performnce. Strtegy Orgniztion nd Mngement in the World uto Industry, Boston, M: Hrvrd Business School Press. 2. Dyer, D., Mlcom, S., Webber, S. nd Webber, . (2001) Chnging llinces, Boston, M: Hrvrd Business School Press. 3. Ford Motor Compny's nnul Report 2004: http://www.ford.com/en/company/investorInformation/companyReports/annualReports/2004annualReport/2004_pdfs.htm Ford Motor Compny's nnul Report 2005 4. Ford Motor Compny's nnul Report 2004 http://www.ford.com/en/company/investorInformation/companyReports/annualReports/2005annualReport/2005_pdfs.htm 5. Ford Motor Sustinbility Report 2005/06 http://www.ford.com/en/company/about/sustainability/default.htmsource=rt&referrer=company_default 6. Gilpin, R. (2006) "Economic evolution of ntionl systems, " Interntionl Studies Qurterly 40, no. 3, September: 411-31. 7. Morles, R. (1994) Flexible Production. Restructuring of the Interntionl utomobile Industry, Cmbridge, M: Polity Press. 8. Morrison, . (1990) Strtegies in Globl Industries, New York: Quorum Books. 9. Pres Nuez, W. (1990) From Globliztion to Regionliztion: the Mexicn Cse, technicl pper no. 24, Pris: OECD. 10. Rugmn, .M. nd Verbeke, . (2000) Globl Corporte Strtegy nd Trde Policy, London: Routledge. 11. Ruigrok, W. nd Tulder, R.V. (1995) The Logic of Interntionl Restructuring, London: Routledge. 12. Schnpp, J.B. nd Cssettri, J. (2004) Corporte Strtegies of the utomotive Mnufcturers, Lexington, M: Lexington Books. 13. Stopford, J.M. nd Wells, Jr., L.T. (2002) Mnging the Multintionl Enterprise, New York: Bsic Books. 14. Strnge, S. nd Stopford, J.M. (1991) Rivl Sttes, Rivl Firms. Competition for World Mrket Shres, Cmbridge: Cmbridge University Press. 15. Womck, J.P. (1991) " positive sum solution: free trde in the North mericn motor vehicle sector, " in M.D. Ber nd G.F. Erb. (eds) Strtegic Sectors in Mexicn-US Free Trde, Wshington, DC: Center for Strtegic nd Interntionl Studies, pp. 31-65. 16. Womck, J.P. nd Jones, D.T. (1989) "The new entrnts: serching for role in the world, " mimeogrph, IMVP Interntionl Policy Forum. Interntionl Motor Vehicle Progrm, Msschusetts Institute of Technology, My. 17. Womck, J.P., Jones, D.T. nd Roos, D. (2004) The Mchine tht Chnged the World, New York: Bsic Books. Read More