BUS402ExampleStrategicPlan.pdf

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Ford Motor Company’s Strategic Plan

John Smith BUS 402 Strategic Management & Business Policy

Instructor Dr. Ronald Beach June 19, 2020

FORD’S STRATEGIC PLAN 2

Ford Motor Company’s Strategic Plan

Executive Summary

Company History

Mission Statement

Ford’s mission statement, according to Corporate Ford (2019), is “One Team. One Plan. One Goal […] One Ford is Fords motor Company’s mission and vision” (para. 1). The statement is concise, easy to remember, unique and incorporates the importance of the people, goal and plan, but it does not contain the four especial questions in their mission statement as

Ford Motor Company has a long history of innovation, quality, and cutting-edge technology and brand recognition that has become a household name around the world. Henry Ford started his journey as an automaker 1896 with a four-cylinder Quadracycle on four bicycle wheels. Ford founded the Detroit Automobile Company eighteen months later; the company ended in bankruptcy. Moving his talents, knowledge, and experience to the second innovative company, Ford founded another automotive company in 1901, which was called the Henry Ford Company. This company would then fail, and later become Cadillac, one of Ford’s major competitors (Henry Ford Biography, n.d.).

Investing $28,000, in June of 1903, Henry Ford and twelve others founded the formattable Ford Motor Company in Dearborn Michigan, a suburb of Detroit. Also incorporated the same year, Ford sought to produced affordable cars for the average working man as they were inexpensive to manufacture (Ford Motor Company Timeline, 2019). According to Henry Ford’s obituary (1947) Starting with the Ford Model A one month after incorporating, the Ford Motor Company produced the most affordable and serviceable cars during his tenure. The Model A base model sold for a whopping base price was $850.00 (Ford Motor Company, 2019c).

After the Model A was produced, Ford’s next innovation was the Model T, manufactured in Highland Park, another suburb of Detroit in 1908 also priced at $850.00. In 1909, 10,666 Model T’s were produced (Tomac, Radonja & Bonato, 2019). In 1913 Ford’s state of the art assembly line reduced the cost of the Model T to just $300.00 (Ford Motor Company, 2019c), and in 1921 the same Model T was only $200.00 (Link, 2018), this was due to an upgraded assembly line and consolidation of parts. Although the public mocked the early models because they were not made for the elitists, the Ford Motor Company “Became the greatest automobile manufacturer in the World” (Henry Ford obituary, 1947, p. 399). Ford models were regarded as poor people’s cars, but the laugh was on them, as people were buying them “By the thousands” (Henry Ford obituary, 1947, p. 399). Ford Motor Company’s products over the next hundred years include trucks, WWI, and WWII military vehicles such as boats, tractors, tanks, and airplanes. Ford also mass-produced Lincoln and Mercury luxury vehicles, race cars, the famous Mustang, economical cars, minivans, SUVs, hybrid and electric cars, as well as the favorite F-series trucks (Ford Motor Company, 2019b). In 1959 Ford founded the credit department (Ford Motor Company Timeline 2019), which provides financing to its buyers and lessees, as well as mobility services; a smart connectivity program provides transportation networks to urban areas (Reuters, 2019).

FORD’S STRATEGIC PLAN 3

it does not present what they do, how it’s done and for whom, nor does it express the benefit or value the organization brings (Hull, 2014).

Analysis Ford is an automotive manufacturer which is not stated. As Abraham (2012) expressed,

“The mission does not differentiate the company from other firms” (sec. 2.1); this differentiation is essential to the mission statement, as it must state what Ford does. There is no mention of the product or service that is offered. Although the company works together, and this could be a partial answer to what they do, but it is too broad and assumed. Ford’s mission statement does not reveal how they do it, although that they do it as one. Ford’s customers are global dealers, distributors, and the end-user which is the buyer of the vehicle. This mission statement does not identify Ford’s customers. The target market should be defined in the strategic analysis and revealed in the mission (Martin, Cowburn & Mac Intosh, 2017). Ford brings a vehicle that will change the lives of its customers, workforce, community, and the world, but the mission statement does not express the value they bring to other than working together for the common goal.

Using the Fortune 500 five-star rating system, Ford’s mission statement would score one star, as the statement does not encompass the company. The statement is vague and does not include the industry, or products they produce, nor does it define the customers, how they are providing their products or the value they offer. Although once researched, the “One Ford” mission and value statement did reveal that Ford’s strategy is one plan to lower variability in the parts used to manufacture its cars and compete in one world market. According to IBISWorld (2019), One Ford’s purpose was to streamline “Ford’s global design and production by sharing designs, platforms and parts for Ford vehicles sold in different regions” (sec. 2, para. 2). After examination of the Ford website, governance policies, and sustainability report the mission statement was nowhere to be found. It should be integrated into every website, flyer, policy, and the sustainability report as the mission statement should drive the progress of the company.

Situational Analysis Current Situation

The Ford Motor Company is a multi-billion-dollar global company that manufactures autimobiles, mobility, and a credit-issuing company and has been in business for over one hundred years. Ford’s headquarters located in Dearborn, Michigan and employed over 199,000 people globally at the end of 2018 and is the number one American automobile producer. Ford, designs, manufactures, markets, and services; cars, trucks, SUVs, Lincoln luxury vehicles, as well as parts and accessories. Ford also provides financing to its buyers and lessees, as well as mobility services; a smart connectivity program provides transportation networks to urban areas (Reuters, 2019). The mobility programs that will connect drivers with parking locations, alternative traffic routes, and rideshare, this service will connect with the autonomous cars once in production. As the front runner of electric performance vehicle/SUV such as the Mustang, which debuted November 21, 2019, and is in the process of transforming trucks to electric power as well. Today the lowest price car that Ford Motor Company offers is the Fiesta, with a base price of approximately $14,000, and in the first quarter of 2019, 15,943 units were produced (Cruz, 2019).

FORD’S STRATEGIC PLAN 4

SWOT Analysis

The purpose of the SWOT analysis is to assess the company’s strengths, weaknesses, opportunities, and threats. This is done by listing external and internal factors that affect the company, determine alternative strategies, and mitigate threats (David, David & David, 2017).

Ford’s SWOT Analysis Environment Opportunity Threat

The Ford Motor Company is the highest revenue yielding automotive company in the United States. As the leader of the “Big Three,” Ford Motor Company has remained successful over the last century, and was the only company that did not pursue funding from the $85 billion governmental bailouts of 2009. These bailouts were the “Largest government bailout of a nonfinancial industry in modern history” (Wollmann, 2018, p. 1374). The Ford Motor Company’s 2019 revenue is 158 billion (Mergent, 2019). Ford’s top U. S. competitors are; General Motors (GM) with 144.81 billion revenue (Deloitte & Touche LLP., 2019), and Fiat Chrysler Automobiles (FCA) 110.4 billion revenue (Ernst & Young S.p.A., 2018). Ford’s household name, known for its steadfast force of serviceable, high-quality, and affordable cars, trucks, and sport utility vehicles (SUVs) has remained strong over its tenure.

(Gale Business Insights: Global, 2019)

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Strengths  A technology leader for over 100 years  The brand is an industry tradition which presents strong customer loyalty  High revenue in the U.S. automobile market  A competitive edge on autonomous and electric performance vehicles  Financial health overall is strong

Weaknesses  Recall costs for 2018 were 147.7 billion  Business strategies must change to accommodate autonomous and

environmentally friendly cars Opportunities  Collaboration with Volkswagon to build smart and autonomous vehicles  The demand for smart cars combined with Ford’s well-known brand will

create greater loyalty  The U. S. automotive market is the second in the world and Ford is a top

competitor  Creating a more conclusive global strategy  An innovative contribution to yet again change the world  By changing the business strategy, sales will increase in the global market

Threats  The aggressive race for technology between competitors  Advancing technology may be difficult to integrate  Global issues; exchange rates, tariffs, no brand recognition  Governmental regulation has raised operational costs and lowered profit

Com

pany

Stre

ngth

Technology leader Brand recognition and loyalty High revenue stream Completive edge – Innovative vehicles Financial health

Rapidly advancing technology Oil price instability Innovative process changes

Wea

knes

s

Product recalls Changing business strategy Debt

Global market Changes in government policy Fierce competitors Supply chain

FORD’S STRATEGIC PLAN 6  Supply chain interruptions have plagued Ford over the last

S.W.O.T. Summary As environmental and atmospheric changes are developing, so too is the influence

society brings to decreasing the environmental impact of the people in the world. The demand and need to change gas-guzzling vehicles, into innovative low environmental impacting machines. Today technology is changing rapidly, but Ford has stepped across the finish line as according to the article Autonomous Vehicles (2019), “In 2018, Ford became the first automotive manufacturer to pilot autonomous vehicles in Washington, DC” (para. 3), and is working on electric cars as well. Ford has joined forces with Volkswagen to advance autonomous automobiles and develop electric vehicles (Autonomous Vehicles, 2019). Ford is now the first to mass-produce cars, the first in autonomous vehicle production and has proven it has a competitive edge. Although they are not in mass production, autonomous vehicles and electric cars are the wave of the future, and Ford, GM, FCA, and every other U. S. competitor is racing to the finish line.

There were several threats found in Ford’s SWOT analysis, such as oil price instability, governmental regulations, rapidly advancing technology, and fierce competition, as every automotive company is competing for zero-emissions vehicles. Oil instability has always been a problem; the automotive world is still trying to play catchup with these fluctuations. Another threat is changing governmental regulations. But, new environmental regulations will be added as chemicals are used in the batteries, and to store them. These chemicals are corrosive, and will ultimately leak, allowing them into the atmosphere. Global expansion produces other governmental and environmental regulations.

Another threat of doing business globally is foreign currency rates; the translation costs are higher than expected. Ford faced a supply chain interruption, last year a fire erupted at the Meridian Magnesium Products plant; this plant three critical parts for the F-series trucks. Resulting in almost nearly 8,00 layoffs, a shutdown production of an estimated 35,000 vehicles costing Ford $1.6 billion in lost revenue (Foley, 2018). Taking into consideration that Ford is an industry leader in technology, with a global presence and an excellent reputation and impressive revenue stream, the opportunities for environmentally-friendly vehicles will alter business as they know it in the future. Opportunities such as introducing alternative fuels and smart cars will also be a challenge as it is doing business differently than it has been done over the last 100 years.

Contingency Plan As the currency exchange rate continues to be volatile, Ford should investigate

manufacturing in more host countries, and utilizing local suppliers; this will maintain the same exchange rates (Abraham, 2012). Research opportunities to mitigate volatile currency exchange rates (i.e., joint ventures, acquisitions, forward exchange rate contracts and variable prices) (Lander, 2016). Unpredictability in oil prices are a constant concern, but the hybrid, alternative fuel, and electric vehicles are the contingency plan for this risk. Once these vehicles are mass-produced, oil instability will no longer be a threat. To drive the Ford brand, it must also ramp up the advertisement in the host countries to drive the Ford brand as well as continue to develop alternative fuel vehicles, smart cars, and autonomous automobiles.

To mitigate supply issues generated by the fire, Ford must find alternative suppliers to step in when another supplier drops the ball; this is done by having a few key suppliers that distribute parts and diversify suppliers. Ford could also add to the strategic plan to seek other suppliers so that this trigger or contingency will not be required; furthermore, the company

FORD’S STRATEGIC PLAN 7

could store supplies, build up six to eight months supply as part of their strategic plan, and then implement the contingency once the inventory drops to 30%. As mentioned above, the trigger is an external supplier, specific, and quotative as the chemicals are delayed for six months, the trigger is when the manager learns that the needed supplies will be delayed (Abraham, 2012). As always, the contingency plan must be reviewed at least annually.

Environmental Scan and Porter’s 5 Forces

The environmental scan revealed that the challenges Ford faces are new technology, moving away from the traditional automotive industry, to utilizing alternative fuels, moving to all-electric popular vehicles such as the Mustang and F-150 trucks, to smart vehicles, and autonomous cars (Ford, 2019). Ford’s competitors such as GM touts, they are “The only company with a fully integrated solution to produce self-driving vehicles, at scale” (General Motors, n.d., p. 1). Tesla is also an upcoming competitor that has built its first all-electric car in 2008, which has become best in class (Tesla, 2019). The environmental scan demonstrates that Porter’s five-forces model aids in Ford's understanding of its competitive position as the rivalry of competitors are fierce amongst automakers, which means there is little profit margin, especially automobiles manufactured in the United States of America.

Ford’s environmental analysis revealed fierce competition and that rivalry drives the following four forces of Porter’s model which effects buyer bargaining power; this requires the supplier or seller to lower the profit margin to sell the product (Abraham, 2012). Most automotive manufacturing in the U.S. is approximate in size and delineates little in variation; thus, industry growth is slow, and barriers are high (Porter, 2008). Rivalry among the automakers lowers profitability by forcing the company to lower prices, increase advertising, and create distinctive vehicles, all of these expenses reduce the profit margin. One example of Ford Motor Company’s sustainable innovation, was its history of mass-production, and has now entered the mass-production race to manufacture electric vehicles (Azadi & Rahimzadeh, 2012).

The Ford Motor Company has created a brand that reduces buyer’s bargaining power, as an emotional connection has been created; customers are loyal to its brand, and will buy that brand even though the price may be slightly higher (Kwan, 2018). The bargaining power of suppliers can be mitigated by utilizing multiple suppliers and not just put its eggs in one basket. According to Mergent (2018), Ford’s form 10k “We purchase a wide variety of raw materials from numerous suppliers around the world for use in the production of our vehicles” (p. 7). Ford, GM, and FCA have faced many new entrants from the global industry, and these entrants receive a higher profit margin and can lower their price points, which has burdened the U.S. automakers over the last several years. Ford contributes to the threat of entrants as the company has brand loyalty, experience in the industry, supply connections, capital, and resources. The final concept in Porter’s forces revealed by the environmental scan, is the high risk of substitution, as competition is high and automobiles do not vary, customers may choose another brand. Ford has created a brand that is dependable, easy to service, and reasonably priced, the customers loyal to the brand will keep them buying, and the threat of substitution is low in the U. S. Although this is true in the U. S. the global market does not hold the loyalties of domestic buyers. Ford’s U. S. brand loyal customers consistently buy, but if a bargain does come along, they will weigh the options, including their emotional comfort, before buying another brand.

FORD’S STRATEGIC PLAN 8

International Performance

Ford Motor Company is a global organization that manufactures automobiles in North and South America, Europe, the Middle East and Africa, and Asia Pacific (Ford Media Center, 2019). As automobile manufacturing exceeds the demand globally, Ford has not maintained a profitable price point and a prolonged period of this situation, according to Mergent (2018), “Could have a substantial adverse effect on our financial condition and results of operations” (p. 19). Below is the operating profit margin of Ford’s global market.

(Ford Motor Company, 2019c)

Above are Ford’s operating margins for the last six quarters, 2018 and 2019. The operating profit margin is the Earnings Before Interest and Taxes (EBIT) divided by the total revenue. The higher percentage rate means higher profitability, and at the end of the third quarter, Ford’s operating margin was 8.6%; this means that there is only $0.086 operating profit for every $1 of revenue in the North American market. South America came in at (15.9%), Europe (2.8%), Middle East and Africa (4.4%), and Asia Pacific (1.9%). The global operating margins are in the negative. Thus far, it appears that Ford’s global strategy is not working and must be reexamined. The foreign exchange rates are volatile, and this risk “Cannot be avoided” (Abraham, 2012, sec. 11.2). The alternative is to reevaluate the strategies in place to create more revenue and reduce costs. Foreign currency translation cost Ford $4.8 billion in 2018, which contributed to a deficit of $2.2 billion, earnings before interest and taxes (EBIT) in South America, Europe, the Middle East, Africa, and Asia Pacific (Mergent, 2018). Monetary exchange rates are one of the risks that every corporation performing business globally will face, as they are unstable, to say the least.

Operational Planning

Financial Performance

As mentioned above, Ford Motor Company’s financial health has been at a gradual climb since 2009, with a few dips; as you can see below, September 30, 2019, the revenue drop was 8%. PricewaterhouseCoopers (2019) expects the trend to stay constant, and the Earnings Before Interest, Taxes, Depreciation, and Amortization (EBITDA) is anticipated to be $12,613.00 in the first quarter of 2021, although with the release of the all-electric Mustang the trend could go straight up.

FORD’S STRATEGIC PLAN 9

(Gale Business Insights: Global, 2019)

(Mergent, 2018) Ford’s liquidity or current Ratio is 1.2, which means that the company has positive

capital sufficient to satisfy short-term liabilities. The Inventory turnover rate is 12.68 which means that every 29 days the inventory stock turns over. Ford’s return on assets (ROA) is 1.43, and the return on equity (ROE) is 10.38. ROA and ROE measure how effectively assets and equity are being used, and the numbers show that they are using debt, assets, and equity adequately. Ford’s Debt-to-Equity Ratio is 4.3; this means that the company’s debt is high, as for each dollar of equity, there is four dollars debt. Although the debt to equity ratio is high, the ROE is greater than the ROA, which means that Ford is increasing overall earnings by using its borrowing effectively. Although the total revenue has improved, the total costs and expenses have also increased resulting in the third-lowest net income in three years.

The outlook in the global industryperformance has declined recently but is estimated to be flat in 2019, compared to the 2018 volumes sold (Mergent, 2018). After assessing the Ford Motor Company’s financials, overall, the financial health of the company is robust, extremely well managed, and the financial condition proves they are performing exceptionally to date (Abraham, 2012).

Operational Budget and Assessment

FORD’S STRATEGIC PLAN 10

An organization’s condition is demonstrated by its financial health, and analyzing the financial statements. These statements provide a financial picture that illustrates the organizations’ performance at specific periods of time, such as annually, quarterly or monthly. The visual representation of the financial statements allows the organization to see trends that may affect company progress, and quickly move to correct negative trends. Below is an estimated budget for the current quarter and the next, a trend analysis, as well as a simple balance sheet, and a ratio chart that analyzes the financial health of Ford. The estimated working capital is determined by subtracting the current liabilities, Ford’s working capital for this quarter is 16.7 billion, and next quarter is projected to be 15.3 billion; this lower estimate is due to the current assets steadily declining since the first quarter of 2019.

[Prior Quarter]

Budget Projection Next

Q

Var +/-

Var % Revenue

Sales Revenue 36,990,000,000 36,600,000,000 (390,000,000) (1.05)

Interest Income N/A – 0

Investment Income N/A –

0

Other Income N/A 350,000,000 350,000,000 100

TOTAL INCOME 36,990,000,000 36,950,000,000 (40,000,000) (1.08)

[Prior Quarter]

Budget Projection Next

Q Var +/- Var %

Costs and Expenses

Salaries 2,601,000,000 2,615,000,000 14,000,000 .54

Supplies 33,969,000,000 34,029,595,000 60,595,000 .18

Insurance N/A

Rent/Lease Payments 400,000,000 304,400,000 (95,600) (24)

Interest Expenses 1,000,000 1,000,000 0 0

TOTAL EXPENSES 36,971,000,000 36,949,995,000 (21,005,000) (.06)

NET PROFIT/LOSS (19,000,000) 5,000 (18,995,000) (.05)

Net Earnings Before Taxes (Gain or Loss) (19,000,000) 5,000 (18,995,000) 99.97

Income Tax Expense

442,000,000

1,250 (441,998,750) (99.99)

Net Earnings After Taxes 423,000,000 3,750 (422,996,250) (99.99)

FORD’S STRATEGIC PLAN 11

Ford Motor Company (In Millions)

Estimated Next Quarter

September 30, 2018 Percentage of Change

Total Current Assets 114,700 115,754 (.9) Total Assets 258,300 258,157 .05 Total Current Liabilities 99,400 99,087 .316 Total Liabilities 223,000 222,770 .15 Total Equity 35,000 35,387 (1.11) Retained Earnings 21,000 22,590 (7.5) Total liabilities & equity 751,000 753,749 (.365)

Ford Financial Health

(In Millions except NPM & ROA 12/18, and ROE 9/18) Ratio Ratios 12/30/18 9/30/18 12/18 9/18 Ideal

Current Ratio 114,700/99,400 115,754 /99,087 1.15 1.17 1.0 > Total-asset turnover 36,600/258,300 36,990/258,157 .14 .14 0.5 < Debt-to-equity ratio 223,000/ 35,000 222,770/35,387 6.37 6.30 2.0< Net profit margin 3,750/36,990,000,000 423,000/36,600 0.0010138 1155.7 5 > Return on assets 3,750/258,300,000,000 423,000 /258,157 0.0000014 1.64 10 > Shareholder Equity 258,300-223,000 258,157-222,770 35,300 35,387 Return on equity 423/35,300

3,750 /35,387,000,000 1.2 0.0001 10 >

The Ford Motor Company’s ratios demonstrate its financial health. According to the ratio chart above the 2018 last quarter revealed a current ratio of 1.15, which is favorable, as it is greater than one, and working capital was positive in both quarters revealing that Ford’s liquidity is 1.5/1.7 times more assets than liabilities, and can meet its short-term obligations. The automotive industry average is 1.58, which is slightly higher; therefore, Ford’s short-term liabilities will take longer to settle than its average competitor (CSI Market Inc., 2019). The total asset turnover ratio of 0.14; this means that for every dollar in assets generates $0.14 of revenue. The ratio is below the industry standard of 1.02 (CSI Market Inc., 2019), which indicates that Ford is less efficient than its competitors, revealing that it needs to invest more to deliver more revenue. Ford’s leverage is high, as its debt-to-equity ratio is 6.37, revealing that creditors’ funding is unequal to Ford’s input.

To determine profitability and efficiency, the following ratios and analysis will reveal the effectiveness of management. Ford’s net profit margin (NPM) dropped from the third quarter to the last quarter as the last quarter did not include an income tax benefit of 42 million, revealing a NPM of $0.01, which means that Ford’s net income is less than one cent per dollar of its revenue. Profitability ratios are ROA and ROE. The ROA was also below .01% which means for every dollar the company invests, there is a less than 0 return; this is less than the industry standard of 4.47% (CSI Market Inc., 2019). The ROE is the return that Ford earns on

FORD’S STRATEGIC PLAN 12

its shareholder equity is 1.2%, which is considerably below the industry standard of 14.67% (CSI Market Inc., 2019).

According to the estimated budget, the financial health of the Ford Motor Company is weak, as many of the ratios are low, for the history of the company and below industry standards. Ford’s asset turnover is low, creating a $0.86 revenue deficit for each dollar of assets which reveals it cannot keep up with the efficiency of its competition. When comparing Ford to the industry standards, the deficiency of its dollar declines to $0.88; this means that Ford’s competition generates $0.88 more revenue. Ford’s debt is high, as for each dollar of equity, there is $6.37 debt, and compared to the industry standard of $0.36, its debt is exceptionally high, revealing that Ford’s debt management is abortive, as its competitors start with a $6.01 lead. Ford’s profitability ratios are also low, revealing that it is not as efficient as its competitors, as the return on equity is approximately $13.00 less than the industry standards. Although the Ford Motor Company is the highest revenuing U. S. based company, the industry standards show that it is not being managed well, and its financial health is unsatisfactory. It is imperative that Ford creates an aggressive, comprehensive strategic plan or its legacy will be just a memory.

Strategic Goals: Core Strategies and Tactics Strategic Goals

In January of 2019, Ford committed to reforming global operations, as well as strengthen North America (Ford Media Center, 2019). Ford has changed its strategy to generate more sales globally by hiring a global advertising company and will put in place a tier two advertising campaign. This will broadcast local deals in these regional global markets to bring more attention to Ford's already known brand. Another strategy that Ford will be focusing on, is replacing its existing lineup in the U. S. and utilizing common parts between the different models to streamline and reduce production time (Ford Motor Company, 2019c). Ford’s more agile marketing model, restructuring production line, reducing inefficiencies, and offering cutting-edge designs will increase revenue and decrease costs, and will transform its global presence, and become the world’s most trusted company.

Today more than ever, people are trying to find ways to contribute to environmental sustainability, and with Ford’s hybrids, electric vehicles, and smart cars, they will be able to enjoy the performance while saving the planet. Ford estimates that during the 21st-century, transportation will look very different from the traditional gas-fired automobiles of yesteryear (Hughes-Cromwick, 2011). As environmental and atmospheric changes are developing, so too is the influence society brings to decreasing the environmental impact of the people in the world. Today technology is changing rapidly, but Ford has stepped across the finish line, as according to the article Autonomous Vehicles (2019), “In 2018, Ford became the first automotive manufacturer to pilot autonomous vehicles in Washington, D.C.” (para. 3), and is working on electric cars as well as collaborating with Volkswagen to advance autonomous vehicles (Autonomous Vehicles, 2019). Ford is now the first car mass producer and will be the first in autonomous car production and has proven it has a competitive edge. Although they are not in mass production autonomous vehicles and electric cars are the wave of the future, and Ford, GM, FCA, and every other competitor is racing to the finish line.

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Prioritized Core Strategies

Prioritized Strategies

1. The Ford Motor Company has already begun its alternative powered vehicle strategy and has invested nearly 30% of its quarterly revenue, to research and develop electric cars. As revealed in the total asset turnover ratio, Ford must invest more to deliver more revenue; this core strategy is a direct result of the financial analysis. The implementation of this strategy has already yielded the first Electric performance vehicle and expects to mass-produce hybrid and fully electric cars by 2022, and phase out “Internal combustion engines and fossil fuels by 2040” (Ford Sustainability Report, 2019, para 2). Included in the new objectives must be to hire new staff, such as scientific, chemical, electrical, industrial, materials, and mechanical engineers, these will be the people who will drive the strategy formation and implementation.

2. Ford has also formed an alliance with Volkswagen to create innovative smart/autonomous vehicles. The projected launch date of autonomous delivery vehicles will be 2021, although there is no estimated date to begin sales to individual consumers, an estimated $4 billion investment is funded through 2023 (Ford Sustainability Report, 2019). New electrical engineers will be needed to upgrade the electrical systems to transmit the necessary energy to create and charge the vehicles, as well as create the unique electrical systems in the cars (Hughes-Cromwick, 2011). The chemical engineer will compound the chemicals needed for batteries used in the vehicles, as well as battery storage. Mechanical and materials engineers will upgrade the assembly line to accommodate electric and smart cars.

3. Ford will begin by aggressively marketing its brand abroad by creating a tier two advertising campaign; this will build brand recognition, and loyalty generating higher sales, thus increased revenue. Ford will begin its aggressive marketing plan in January of 2020 (Ford Media Center, 2019).

4. Ford’s global optimization is another strategy; streamlining operations in the U. S. and abroad is essential to its success. Revamping the organizational structure will according to Marx (2016), “Align global, transnational and multi-domestic strategies” (sec. 7.3, para. 4). The divisional organization structure will optimize efficiency and effectiveness in the world market.

5. Another strategy to align global operations is to develop a more efficient system by utilizing universal parts, between different models. Simplifying these parts will create less variation, therefore reducing expenses in domestic and international markets. Streamlining the process will also minimize recall costs and increase profitability (IBISWorld, 2019). This continuous improvement initiative has already begun and will proceed to reduce variation.

6. Ford has incorporated environmental, ethical, legal, philanthropic, and economical social responsibilities into its organizational culture, and strategic plan. According to Ford Motor Company (2019), proactive leadership cultivates inclusion, and equality into the workplace “Through training, awareness-raising, and strong talent pipelines” (para. 2). The training and awareness must be included in the strategic plan, as it will take capital to implement. Ford Smart Mobility invests in SHE-MOVES, which provides forty females with training and jobs in transportation through grants to in India, South Africa, and Nigeria. It shuttles over six hundred women while advancing their personal and professional development with onboard learning during their commute (Ford Motor Company, 2019b). Although this is an ethical responsibility, it also satisfies the philanthropic obligation as it is voluntary to

FORD’S STRATEGIC PLAN 14

provide these services to and contributes to “Human welfare and goodwill” (Abraham, 2012, sec. 10.6). This also must be added into the strategic plan, as the grant and training involved need to be added as this cannot be done without implementing into the corporation’s strategy. Ford Motor Company’s mobility services, alternative fuel-powered vehicles, and the use of recycled material delivers environmental and legal responsibility. Profits cannot be won “Over the harm being done to society” (Abraham, 2012, sec. 10.6). The volunteer and legislative regulations used to protect the environment are costly, and require considerable strategic planning.

Recommended Organizational Structure

The organizational structure the Ford motor company should utilize, is a divisional structure, where functionality is optimized. The divisional structure will meet the rapidly changing transportation needs of society and must establish the right strategies, talent and organizational culture (Muller, 2017). In 2013 the newly appointed CEO James P. Hackett, shook up the organization’s structure by decreasing his executive direct-reports to create more effective decision making, he also reduced the division heads to three; these are global marketing, global operations, and mobility. The three new divisions will focus on the strategic goals stated above, and will share power with William Ford. Decreasing the number of leaders will generate additional responsibility to those entrusted executives, and enhance communication, thereby accelerating decision making (Muller, 2017). This structure establishes swift responses that are vital in the rapidly changing automotive technology of today.

(Ford Motor Company, 2019a)

Hackett and Ford are changing the organizations’ culture by empowering employees at all levels by increasing their decision-making power and creating autonomy to make quick responses as needed. According to Muller (2017), Hackett declares, the new structure will “Foster even greater teamwork, accountability and nimble decision-making…We have to move fast and… trust our people to move fast” (para. 2 & 10). Hackett has created global optimization by integrating Ford’s global strategy into its leadership and culture; this is done

William Ford Executive Chairman

Jim HackettPresident and CEO

James D. FarleyPesident of Global

Markets

Mark Ovenden President

International Markets Group

Joe HinrichsPesident of Global

Operations

Joy Falotico President Lincoln Motor

Company & Ford CMO

Marcy KlevornPesident of Mobility

John LawlerCEO Autonomous &

Vice President of Mobility

FORD’S STRATEGIC PLAN 15

by aligning “Structures, systems, staff and skills” (Marx, 2016, sec. 7.2, para. 6). Ford is redefining the automotive industry by creating a more efficient and effective way to do business.

Recommended Marketing Positions and Opportunities for Growth

Ford’s greatest market position domestically is its brand loyalty. The Ford Motor Company market strategy is to position itself as a trusted automotive manufacturer nationally. By creating brand recognition and customer loyalty abroad, Ford will uncover a whole new market of global brand-loyal customers. Brand loyalty is vital to any company that wishes to enter and succeed in the global market, because once that loyalty is established, the customer will buy the brand they trust regardless of price (Kwan, 2018); the global market provides a high potential for growth.

Ford is also a technology leader, exemplified by being the first of his competitors to manufacture and pilot autonomous vehicles. Ford’s goal to launch autonomous commercial vehicles by 2021, will offer hybrid and fully electric cars by 2022, and eliminate internal combustion engines by 2040 (Ford Sustainability Report, 2019). The strategic objectives are now focused on the high costs of electronic and smart vehicle productions; the new technology creates many challenges such as new electrical technologies, security, virtual driver systems, software development, and chemical compounding (Hamilton, 2012). Although the investment in this innovative market is costly, the growth opportunity is momentous.

To improve the company’s position in the global market, Ford will, and has brought popular performance vehicles into the all-electric line of cars, as a matter of fact just a few months ago “November 21, 2019, Ford introduced the world to the newest member of the Mustang family the all-electric Mustang Mach-E” (Ford Motor Company, 2019b, para. 1). The innovative move satisfies Ford’s improvement in the market, but contributes to the sustainability of the organization and the environment as well. The electric and autonomous vehicles will increase Ford’s positioning in the global market and create significant growth potential.

Measuring Success

Every organization must plan to succeed. The Ford Motor Company must take strategic issues, calculated improvements, and desired outcomes into consideration when developing its strategic plan. Then create a strategy to advance the organization to the desired future state; this plan must include measuring that success. According to Elena Ford, the “Real measure of our success as a company is keeping customers’ loyalty over time” (Ford Media Center., 2019, para. 5). Non-financial measures are brand equity and customer retention as mentioned above, which increases the competitive advantage. Although non-financial measures give the company an idea of how they are doing, business metrics will express the financial performance over a period of time to determine company success. The key indicators of success are revenues, revenue growth, market share, shareholder value, EBIT, NIAT, cash flow and profit ratios (Ford Motor Company, 2019b). Ford’s financial health is weak globally, but domestically it is the highest revenuing of the big three u. S. companies, and plans to globally optimize its strategy, by incorporating the production of customer sought environmentally friendly vehicles to achieve the desired success.

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