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Strategic Audit For Ford Motor Company

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Autor:  anton  17 June 2011
Tags:  Strategic,  Company
Words: 2696   |   Pages: 11
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Strategic Audit

Section 1: Current Situation.

My team members and I have researched the Ford Motor Company and have found that they seem to be doing quite well despite the $12.6 billion in losses and plants. They have the first SUV Hybrid on the market and it continues to be number one. Last year in 2007 for the J.D. Power Initial Quality Study, Ford vehicles got 14 vehicle honors and that is more than any other automaker. Their mission is to provide personal mobility for everyone around the globe with heritage, culture, and passion. They anticipate consumer needs and deliver high quality products and services that will help improve the lives of the people around them (Ford Motor Co., 2005, April 27).

One of their major goals is to contribute to stabilizing the climate by considering reducing long-term emission. They have reported that they will achieve this goal by continuously reducing the GHG emissions and energy usage of their operations, developing more products that lower GHG-emissions, and establishing an effective and predictable market policy and technological framework for reducing road transport GHG emissions. Another one of their goals is to promote the development of an infrastructure that will expand the use of bio-fuels and help reduce our dependence on oil. One more goal of theirs is to cut the usage of global energy by 27% and the usage of water by 25% which they have been working on since 2000. Some of their major timeframe targets they are currently working on to contribute to the climate are to reduce North American facility emissions by 6% by 2010, voluntarily offset 2007 and 2008 CO2 emissions from manufacturing facilities, and reduce U.S. facility emissions by 10% per vehicle produced by 2012.

Section 2: Corporate Governance.

Ford Motor Company: Board of Directors

(Feb 2007)

Name Position Entry Date Organization

Alan Mulally President & CEO 2006 Ford Motor

Irvine O. Hockaday Jr. Retired President &CEO 1987 Hallmark Cards

Stephen G. Butler Retired Chairman & CEO 2004 KPMG, LLP

Richard Manoogian Chairman & CEO 2001 Masco Corp.

Jorma Ollila Chairman & CEO 2000 Nokia Corp.

Gerald L. Shaheen Group President 2007 Caterpillar

Kimberly A. Casiano President & Chief Ops Officer 2003 Casiano Communications

Edsel B. Ford II Retired Vice President 1998 Ford Motor

William C. Ford Jr. Executive Chairman 1988 Ford Motor

John R.H. Bond Group Chairman 2000 HSBC Holding

William C. Ford Director Emeritus 1948 Ford Motor

Ellen R. Marram Managing Director 1988 North Castle Partners

John L. Thornton Professor & Director 1996 Tsinghua Univ.

Homer A. Heal Director, Univ. Michigan ATLAS Project 1997 Univ. of Michigan

Section 3: External Environment; Opportunities and Threats.

In the EFAS process of scanning a firm’s external environment, one is looking for their opportunities and threats which contribute to the developed relationship between a firm and its profitability within the market setting. The ability to identify these factors within a corporation’s societal and task environment are the influential forces placed on their long-run decision making. The identifiable factors lie within these forces: Economic, ability to regulate the exchange of materials, money, energy, and information; Technology, solving problems trough innovation; Political-legal, power attained through protective laws and regulations; and Sociocultural, a society’s overall view of values, morals, and customs (Hunger & Wheelen, 2007).

Opportunities – Foreign markets and organizational culture. Through globalization Ford has been able to attain additional revenue. In Europe, Ford's overall sales increased by 5 percent compared to 2005. The Ford S-MAX won Europe's Car of the Year, and the Ford Transit won International Van of the Year for 2007. Ford also maintained the best-selling car nameplate in Britain for the 30th consecutive year, and the Ford Transit remained the best-selling medium commercial vehicle in Europe. As of 2006, Ford has attained 10.6% of the market share and 27% of total auto sales in Europe.

The American people have become huge fans of reality TV, evident in several series such as “Orange Co. Croppers” and “Celebrity Fit Club” Ford is taken a hold of this fad and developed an online documentation series that views the inside-workings of the automaker as it designs, engineers, and produces new vehicles in hopes of re-gaining consumers in North America (Media.Ford.Com., 2006, May 2). Ford also sponsors the hit reality TV show “American Idol” which has produced a number of new vocal artists like Kelly Clarkston; who’s 24-city summer concert tour in 2006, was exclusively sponsored by Ford which allowed them to give back to their community through the donation of 24 new cars and a portion of ticket proceeds given to “Ford’s Warriors of Pink” supporting the Susan G. Komen Foundation Race (Media.Ford.Com., 2006, May 2).

Threats – Imports and Rising healthcare costs. On August 27, 2007, it has been reported that for the first time in history the “Big Three” automakers have dropped below 50% of the US market share, as a result of foreign-based automakers. This report showed the US dropping to 49.5% of the market which included foreign nameplates they owned such as Jaguar, Land Rover, and Volvo (Associated Press., 2007, August 2). Ford’s current share of the 49.5% is approx. one-third which indicates that they have a slightly below-average presence within their market.

When the cost of healthcare increases so does the price tag attached to a health plan which Ford provides for their retirees. The amount of money Ford pays for this program is cutting into their profits. Ford has attempted to address this situation because it is causing a major upset with individuals they made a promise to (Durbin, 2006, March 18).

External Factor Analysis Summary (EFAS) Tables for Ford Motor Company

External Factors Weight Rating Weighted Score Comments

Opportunities

▪ Eco-Friendly 0.10 4.75 0.48 See SFAS Matrix

▪ Foreign Markets 0.15 4 0.60 Sales increase in Europe

▪ R&D technology created "Value" 0.10 4.5 0.45 See SFAS Matrix

▪ Organizational Culture 0.15 4.75 0.71 Americans and Reality TV

Threats

▪ Fuel Prices 0.20 3.5 0.70 See SFAS Matrix

▪ Imports 0.10 2.75 0.28 Share's decrease in US market

▪ Rising Healthcare Costs 0.10 4 0.40 Aging workforce (future retirees)

▪ Technology 0.10 1 0.10 See SFAS Matrix

Totals 1.00 3.71

Section 4: Internal Environment; Strengths and Weaknesses.

In the IFAS process of scanning a firm’s internal environment, one is looking for their strengths and weaknesses which contribute to determining the ability of the firm to take advantage of opportunities while avoiding threats. The identifiable factors lie within these forces: Structure, the ability to develop a basic structure to support strategies; Culture, the ability to learn and share beliefs, expectations, and values; Resources, the organizations basic building blocks (Hunger & Wheelen, 2007).

Strengths – Organizational structure and differentiated. They are making themselves known with a global presence. The new 2.2-litre Duratorq TDCi is the largest displacement and most powerful diesel engine available in Ford of Europe’s passenger cars. At the 2008 Geneva Auto Show Ford of Europe unveiled the Ford Fiesta and anticipates a warm reception from a new generation of customers. It was designed and developed in Europe and will be for sale by 2010 for Europe, Asia, South Africa, Australia and North America. It’s the first major product of Ford’s new global product development process.

They have made eight different models of cars; fusion, mustang, focus, five hundred, crown Victoria, Freestar, GT. They also have crossed over to three different models as well; Edge, Freestyle, Taurus X. They have made four different models of the SUV; Explorer, Expedition, Escape, Escape Hybrid. They have also made four different models in the truck category; Ranger, F-150, Super-duty, E-series. All their vehicles regardless of what it is have been built to be reliable.

Weakness – Size of the company. Due to the size of the organization, it is becoming a stumbling block for innovation and growth. Ford needs to improve their Human Resource Management.

Internal Factor Analysis Summary (IFAS) Table for Ford Motor Company

Internal Factors Weight Rating Weighted Score Comments

Strengths

▪ Strong Brands 0.10 4 0.40 See SFAS Matrix

▪ Organizational Structure 0.10 3 0.30 Global presence

▪ Pioneers 0.20 4 0.80 See SFAS Matrix

▪ Differentiated 0.10 5 0.50 Cars, trucks, and SUV's

Weaknesses

▪ Financial Structure 0.15 1 0.15 See SFAS Matrix

▪ Technology 0.15 3 0.45 See SFAS Matrix

▪ Size of Company 0.10 1 0.10 Redtapism

▪ Aging workforce 0.10 2 0.20 See SFAS Matrix

Totals 1.00 2.90

Section 5: Analysis of Strategic Factors.

SWOT - Pioneers (S) – The first car was manufactured by Henry Ford. June 16, 1903 was the entry date into the business world. This is proof to the customers that Ford is good quality. It is an American product.

Strong Brand Name (S) - Ford has a list of strong brands, such as Mercury, Lincoln in the United States market. There is also the Jaguar and Land Rover in the England market. Also, Ford owns 1/3 interest in Mazda.

Financial Structure (W) - Ford’s return assets and return capital have been less than .5% and the return equity has been 3.2%.

Aging workforce (W) – With their workforce getting older they are not going to be as productive as the competition.

Eco-Friendly (O) - The average fleet fuel consumption of our vehicles sold in Europe has continued to improve. In the United States, the Corporate Average Fuel Economy (CAFE) of our cars and trucks declined 1.0 percent for 2006 model year, as expected. Preliminary data for 2007 model year shows a 5.4 percent improvement in CAFE compared to 2006, with a 1.7 percent improvement for cars and a 5.2 percent improvement for trucks. The Energy Independence and Security Act of 2007 marked the first time in 32 years that the U.S. Congress had raised fuel economy standards (ACEEE, c. 2008).

R&D technology created "Value" (O) - As the American culture continues to become technology savvy, many industries are tapping into new territories in hopes of attaining a niche, which in turn meets the customer’s growing expectation. Ford has created business arrangements with Microsoft and Stargate Mobile to offer their customers additional options.

Fuel Prices (T) - With the US facing increasing fuel prices, $100-per-barrel oil, customers are demanding their vehicles to be more fuel efficient. To meet the demand of customers for more fuel efficient vehicles Ford has 13 U.S models that get at least 30 mpg.

Technology (T + W) - On February 28, 2008, the National Highway Traffic Safety Administration (NHTSA), years after it first learned of the problem, took unusual steps of issuing an "urgent warning" to more than 5 million owners of Ford vehicles, announcing their tendency to catch fire (Benton, 2008, March 5). Due to a faulty cruse control system Ford’s vans and some passenger cars there have been numerous vehicle fires that have destroyed homes, trucks and cars, even killing people and family pets; yet, it took years for the issue to be addressed.

The final score for Ford on the SFAS is a perfect 3. This means that Ford is perfectly average. Internally Ford is below average and externally Ford is above average so as a whole Ford company is average.

Strategic Factor Analysis Summary (SFAS) Matrix for Ford Motor Company

Duration

Strategic Factors Weight Rating Weighted Score Short Intermediate Long Comments

Pioneers (S) 0.10 4 0.40 X Manufactured the first car

Strong Brand Name (S) 0.10 4 0.40 X Builds consumer loyalty

Financial Structure (W) 0.25 1 0.25 X Increased Losses

Aging workforce (W) 0.05 2 0.10 X Competitiveness has been reduced

Eco-Friendly (O) 0.10 4.75 0.48 X Higher standards (EcoBoost)

R&D technology created "Value" (O) 0.10 4.5 0.45 X Mobile Office system introduced

Fuel Prices (T) 0.25 3.5 0.88 X SUV Costly to consumer (American Favorite)

Technology (T + W) 0.05 1 0.05 X Urgent warnings by NHTSA

Totals 1.00 3.00

Section 6: Strategic Alternatives and Recommended Strategy.

It looks like according to the SFAS report that Ford is doing okay with their strategic factors except for two of them. They are not responding well to their financial and technology failure factors. The first alternative strategy for the financials would be a functional strategy such as a financial strategy. A financial strategy will force management to focus on core businesses. One financial strategy they could use is the LBO (leveraged buyout). The company would be financed through a third party. In order for this to work, management will have to make sure that the company stays profitable. The only downfall to this strategy is that if the company’s debt is too large it could cause a decline. Another financial strategy could be to manage dividends to stockholders. They could use some of the money they might have used on dividends to finance growth. If they are successful with this they will eventually have a capital gain from the sale of their common stock.

As for the technology problems, they really should look into R&D (research and development) strategies. These strategies deal with product and process innovation and improvement. There are two kinds of R&D strategies, one is to pioneer innovation and the other is to imitate. In order for them to have a differentiated competitive advantage they would have to go with the R&D choice of a technological leader. Here they would focus on pioneering a new and unique product or innovation in other activities that will increase buyer value. Beings that this strategy does focus on improvement, this is the one we recommend. R&D strategies help company’s to figure out where the problems are and how to improve the problems. Ford definitely needs help with their problem areas.

Section 7: Implementation.

The concept of strategic implementation includes all the activities and decisions that are required to execute the strategic plan (Hunger & Wheelen, 2007). It is important to comprehend that the process of implementation is a key part for strategic management to succeed. In short, the process more than likely, will involve strategies and policies that are put into action through developmental programs, budgets, and certain procedures.

In order for Ford to implement the R&D technological leader strategy they will have to take action through action planning. The action plan will clearly state the actions that will take place, who by, what timeframe, and the expected results. The first step will be to make the program operational which can be done by preparing a proposal. The second step will be to decide when the action will begin and when it will end. The third step will be to communicate to those who will be responsible for each action. The fourth step will be to communicate to those who will be responsible for monitoring each action’s timeliness and effectiveness. The fifth step will be to clearly state what the financial and physical consequences will be for each action. Last but not least if not one of the proposals are accepted make sure that there is a timeframe indicated to get another one ready.

The advantages of an action plan are that they link strategy formulation, evaluation, and control together. They also specify what need to be done. Another advantage is that during the evaluation and control process, as needed, an action plan appraises performance and identifies remedial actions. The key advantage is that action plans often improve motivation.

Section 8: Evaluation and Control.

Evaluating our implemented strategies is crucial to having positive results for management to reference to. In the case of Ford Motor Company, there are two strategies that need to be addressed. The first involves the financial strategy that will eventually bring a capital gain that has been brought to our attention previously. The second involves a straight-forward technological strategy that focuses on improvement and pioneering innovation, which involves R & D. The main focus should be to focus on performance and long-term survival in the end. Evaluation, along with the control process compares the results of monitored performance against desired performance.

In order to evaluate and control the action plan Ford will have to tailor their measurements and rewards with objectives and timeframes that are strategically explicit. One effective way to do that is to combine three approaches through a reward system. The first approach is the weighted-factor approach which measures and rewards top SBU managers and group executive’s performance. The second approach is the long-term evaluations approach which during a given timeframe managers are compensated for achieving objectives. The third approach is the strategic-funds approach which through encouraging executives to focus on the difference between current operation expenses and development expenses.

References

ACEEE. (c. 2008). Market trends, retrieved 03/03/08 from www.greenercars.org.

Associated Press. (2007, August 2). U.S. Automakers Market Share Lowest Ever, retrieved 03/06/08 from http://archive.newsmax.com.

Benton, J. (2008, March 5). Ford fires continue despite much-delayed federal warnings, retrieved 03/05/08 from www.consumeraffairs.com.

Durbin, D.-A. (2006, March 18). Automakers’ proposal to raise healthcare cost splits retirees, retrieved 03/06/08 from http://the.honoluluadvertiser.com.

Ford Motor Co. (c. 2008). Company Information; About Ford, retrieved 03/05/08 from www.ford.com.

Ford Motor Co. (2005, April 27). Ford’s (F) Mission Statement, retrieved 03/05/08 from http://manonamission.blogspot.com.

Hunger, J.D., & Wheelen, T. L. (2007). Essentials of Strategic Management (4th Ed.). Upper Saddle River, NJ: Pearson Education, Inc.

References (Continued)

Media.Ford.Com. (2006, May 2). Bold moves put consumers at center of all ford-brand marketing, retrieved 03/05/08 from http://media.ford.com.



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