COMPETITIVE ADVANTAGE FORD MOTOR COMPANY
Sekolah Tinggi Manajemen Transport Trisakti
PENGANTER MANAJEMEN LOGISTIK
Created by: Alvin Senna
BRIEF FORD BACKGROUND
Few companies are as closely identified with the history and development of industry and society throughout the 20th century as Ford Motor Company. Ford Motor Company entered the business world on June 16, 1903, when Henry Ford and 11 business associates signed the company’s articles of incorporation. As with most great enterprises, Ford Motor Company’s beginnings were modest. With $28,000 in cash, the pioneering industrialists gave birth to what was to become one of the world’s largest corporations. With the company’s first sale came hope—a young Ford Motor Company had taken its first steps. The company went public and, on Feb. 24, 1956, had about 350,000 new stockholders.
Today, With about 300,000 employees and 108 plants worldwide, the company’s core and affiliated automotive brands include Aston Martin, Ford, Jaguar, Land Rover, Lincoln, Mazda, Mercury and Volvo. Its automotive-related services include Ford Motor Credit Company. They are currently headquartered at Dearborn, Michigan (US), and distribute automobiles, including cars and trucks, in 200 markets spanning six continents. Perhaps Ford Motor Company’s single greatest contribution to automotive manufacturing was the moving assembly line. The line proved tremendously efficient, helping the company exceed the production levels of their competitors by a sizeable amount—and making the vehicles more affordable.
The company is beginning its second century of existence with a worldwide organization that retains and expands Henry Ford’s heritage by developing products that serve the varying and ever-changing needs of people in the global community.
Ford Motor Company was founded in 1903 by Henry Ford and has continuously remained
under family ownership since this time. The company developed and implemented assembly
line production by the release of the Model T in 1909, and produced planes and vehicles for
the Allies in World War II. Ford has operated internationally since 1904, when it opened a branch in
Canada to gain access to Commonwealth markets. For the first half of the 21 st
Century, Ford remained the dominant car manufacturer within the market it had effectively
created. In 1956, Toyota exported its first automobile to the United States, and began
acquiring market share. In hindsight this was a turning point in the U.S. market, and as the 21 st
Century drew to a close Ford faced declining market share and had difficulty remaining
competitive in the global marketplace. Ford was particularly inhibited by substantial legacy
costs—primarily from employee pensions and healthcare benefits—and falling demand for
its most profitable lines of vehicles.
In 1996 the company launched the ‘Ford 2000’ initiative to streamline supply lines and
reorganize the company’s worldwide operations into a more cohesive unit. In spite of some
important successes, including the popular Ford Focus model and a streamlined
organizational structure, costs at Ford remained higher than most of the firm’s competitors.
In 2006, Ford posted its biggest operating loss to date: $12.6 billion. This coincided with
continued deterioration in market share, with the majority of these losses being captured by
Toyota and General Motors. From 1997 to 2007, Ford’s United States market share
plummeted from 25% to 15%.
In 2006, Alan Mulally was hired as CEO and took over a company at the precipice of failure.
Mulally announced a new restructuring plan in 2006 entitled ‘The Way Forward’, designed to
“better align capacity to demand”. At its core, this plan involved the closure of seven
assembly plants and strategic reorientation towards ‘One Ford’. Championed by Mulally,
this strategy focuses on creating a standard Ford personality which is seen and felt within
every automobile produced by the company. In addition, the plan entails standardizing
chassis worldwide and a greater focus on the core Ford nameplate. As a part of this plan,
Ford mortgaged all of its assets—both physical and intellectual property—in December
2006 for a $23.4 billion line of credit. While originally seen as a risky and potentially
desperate move, this timely acquisition of capital has made Ford the most stable of the Big
Three carmakers. The company also divested some of its non-Ford brands during this time,
selling Jaguar and Land Rover to Tata Motors for $2.3 billion in 2008. Ford is also currently
attempting to sell Volvo, which it purchased in 1999 for $6.5 billion.
Business Model and Market Overview
Ford Motor Company currently employs approximately 213,000 workers worldwide and
markets vehicles under four primary brands: Ford, Lincoln, Mercury, and Volvo. The firm is
divided into two departments, Automotive and Financial Services. Ford Credit offers
vehicle financing to both retail consumers and to dealers. Approximately forty percent of
vehicles sold by Ford, Lincoln, and Mercury dealerships within the United States were
financed by Ford Credit in 2008, a number which has remained stable in the past three years.
In Europe, the only other region with reported data, this figure has remained steadily around
27%. Conversely, financing for wholesale purchases by dealerships is nearly exclusively
(98%) done by Ford Credit in Europe whereas in the U.S. this number is slightly below
eighty percent. Ford Credit also plays a role in financing dealership purchases of real estate
and other larger capital expenditures by the company and its affiliates.
Ford’s automotive segment designs, manufactures, and services cars, trucks, SUVs, and
vehicle parts. This sector is primarily broken down by region: North America, South
America, Europe, and Asia Pacific Africa. The only exception to this regional model is
Volvo, which operates as a separate subsector and manages all Volvo sales worldwide.
Ford retail sales operate under a dealership model, where dealerships sign exclusive contracts
with the company to sell Ford vehicles. At the close of 2008, Ford operated nearly 3,800
dealerships within the United States. Approximately half of these dealerships sold only the Ford brand, with another quarter selling Ford, Lincoln, and Mercury. 1
Production of vehicles for Ford typically takes within 20 days from point of order to
shipping, meaning the firm faces little to no backlog or inventory buildup. Production is
typically higher in the first two quarters to accommodate peak seasonal demand, which
occurs in the spring and summer.
SWOT (Strengths, Weaknesses, Opportunity, Threats)
- Timely acquisition of capital makes Ford more financially sound than the other Big Three carmakers.
- Product line is respected by industry experts and is qualitatively seen to be a step above many of its competitors. Recent surveys place Ford in a tie with Toyota for greatest customer satisfaction, a significant improvement from five years ago.
- Has a global market presence, with worldwide brand recognition and a particularly strong presence in Europe.
- Is perceived to be a thoroughly “American” brand, which helps Ford among certain groups of consumers.
- U.S. market share, after years of decline, has stabilized in recent years.
- The Ford F-series pickup remains the most respected commercial truck available; despite demand shifts, profitability on this line should remain high.
- Ford has had great success, particularly when compared to its competitors, at renegotiating labor contracts with the UAW.
- Poor Profitability: Ford still loses money on many automobile lines, particularly within the United States.
- Importance of single components source (Visteon).
- The automotive market is highly competitive with large fixed costs. In addition, the market demands continual long term planning and research and development.
- Very little market penetration within China and India.
- Global excess capacity for the automobile industry is estimated to average 30.5 million vehicles per year from 2009-2011.
- Ford is selling a durable good during the most severe economic downturn in recent history.
- Ford has recognized the importance of small, fuel efficient vehicles and is actively transitioning into this market. Of particular interest is Ford’s ‘EcoBoost’ technology, which the company claims will result in 20% greater fuel efficiency and 15% fewer CO2 emissions.
- The ‘One Ford’ vision has the chance to generate significant margin increases for Ford’s smaller line of vehicles. Of particular importance is the Ford Fiesta, which was recently released in Europe and China and is slated for an early 2010 release in North America. The ‘One Ford’ vision appears to be a coherent strategy for Ford to adopt given its changed role within the industry.
- Ford is perceived to be the most stable ‘American’ car manufacturer because it has not been forced to take bailout money, leading to slight increases in market share.
- GM and Chrysler flexibility is limited by government involvement in their debt situation, putting Ford as a competitive advantage.
- In the event of a GM or Chrysler bankruptcy, Ford has placed itself in a position to steal market share—at least in the short term.
- While not in need of a government bailout, poor financial results are straining Ford’s capital. Cash burn continues unabated, and estimates indicate Ford may be forced to seek government financing by early 2010 unless sales stabilize.
- While Ford is readjusting production, truck sales are falling rapidly and Ford may not be able to shift production quickly enough to meet changing demand.
- Bankruptcy of Visteon or other parts supplier could cause severe disruption of supply chain.
- While Ford has too many dealers at this time, it should remain wary of too many closures. In addition, because Ford Credit provides financing for most dealers it must be careful to avoid holding the bag when dealerships close.
- It is possible that the ‘One Ford’ strategy could fail. While standardization across regions provides significant cost savings, the success of such a strategy is predicated on consumer tastes remaining consistent enough across geographical region.
- Continued abatement in fuel prices could result in American preferences reverting back to larger vehicles.
- All indications so far are that the new Ford Fiesta will be a success in North America. However, the failure of the Ford Fiesta in the American market would be disastrous for the company. Ford has staked its future on the Fiesta, and while early reviews are positive, North American acceptance is critical.
- Weakness of the supply base: most Ford suppliers rely on contracts with GM and Chrysler. A bankruptcy of one or both could decimate Ford’s suppliers.
- Current managed bankruptcy proposals for General Motors could allow GM to emerge from bankruptcy in a significantly advantaged cost position.
After many decades, the company launched a new strategy plan in 2000 to focus on the 21 century. The new strategy was aimed an in creasing the market share, increase the revenues earned and production of smart cars with fuel efficiency. Ford implemented the centralized decision making system. This allowed the company to concentrate on the available market opportunities both locally and internationally. With the implementation of centralized decision making system, the top management becomes more engaged in the development of products to satisfy the customer expectation in various markets (porter, 1986). This strategy allowed the company to improve the communication system from top to bottom.
Ford motors adopted the strategy that allowed it low production cost by cutting all the excessive cost involved in this operations. The huge expenditure on raw materials was cut down and the online manufacturing process was introducd that focus on the development of cars on one process rather than having different segments of engineering and production. This strategy was establishes cost advantage and give the company advantage over its competitors in terms of lower cost (porter, 1983), in the mean while company focused on producing smart cars that were not price sensitive and offered the functionality of traditional ford cars.
The market position of ford has been enchanced due to multiple factors. Firstly, since it fought hard against bancruptcy and refused governmental funding as its competitors did, the consumer trust has increased in the company and its brands. Secondly, its products are widely accepted by the cunsomers and integrating with the first factor, the company has increased market share. Lastly, the company has adopted the strategy to provide smart cars to the cunsomers it will further benefit the company in terms of market share and increased volumes (GLG Expert, 2009). Ford can benefit from the industrial recovery by offering and focusing on the consumer-oriented products and give value to them while generating reasonable profits.
The demand for better fuel economic cars has increased due to high energy prices with the increasing wealth of developing world; the ford motors currently believe in providing few automobile models to sell around the globe with some modifications; to be called world cars. Ford fiesta is the first world car which was designed by ford europe and was produced in US and China. The future strategy of ford company is to develop more world cars with the idea of providing standarized products to its worldwide markets. The company developed its competitive edge thet carried it to the future. They introduced a technology which was already in use by its competitors but wich the new perspective and modification. The tech gadget called ford SYNC. It is a science sync-equipped in the vehicles thet can connect the driver with so many options
Ford SYNC is a company fitted, fully integrated communication and entertainment system that connects the users with internet, through his smart phone and allows them to make telephone calls and control music and other functions using voice commands. This system is the integrated interface developed by ford and microsoft that operates on microsoft Windows Embedded Automotive operating system
The value chain of the Ford Motor Company is not all that different from other manufacturers in the automobile industry. Many years of increased arbitrary demands on suppliers has led to poor supplier relations and so the 100 year-old company is taking a new approach to reinvent its’ value chain.
Procurement makes up more than a quarter of the value chain and so Ford has focused its efforts there. In the past, Ford lowered its’ supply chain costs by demanding lower prices from its suppliers, in effect obtaining savings at the supplier’s expense. It is now taking a different approach. Ford is working closely with its suppliers to eliminate waste and thereby lower costs for both organizations. This should be a “win-win” situation for both companies and should help lift Ford from its near-last ranking in supplier relations.
Another high value impact of the Ford value chain is the design phase. Ford has begun to understands the value of consumer input in successful modern design technologies. They have initiated tailoring design models after public demand. This method has proven highly successful in recent financial periods.
Marketing is also a very important aspect of the Ford automotive value chain and is considered a high value-added part in the value chain. Ford has been working together with dealers to create marketing strategies that help boost sales. This is proven to be the primary basis for the consumers’ perceived values. (duke.edu)
Ford is also using information technology to improve its value chain. It has teamed-up with Caterpillar Logistics and SAP to improve warehousing and its Daily Parts Advantage network for getting spare parts to their dealers. Their hope in partnering with Cat Logistics was “to secure a partner with expertise in the automotive supply chain, laying a foundation for development of a new information system. The goal was to obtain end-to-end visibility of service parts, increase the speed of time to market, optimize inventories at each location, and do a better job serving the customer” (Supply Chain Brain).
Along with Cat Logistics and SAP, Ford is also using an SAS platform that supports customer relationship management (CRM). This SAS platform enhances Ford’s existing customer relationship database and provides a powerful base for information analysis, data mining and predictive modeling thus enabling highly effective reporting, trending, segmentation, customer scoring, and customer life-cycle analysis all of which support key activities for CRM. But according to Jim Ader, IT coordinator for analytics at Ford, “Predictive modeling is the most important endeavor supported by SAS platform. Using data modeling to leverage your understanding of customers and the way that you treat them is the key to customer relationship management. In the future, one of the big challenges for any company marketing to consumers will be to use models more and more effectively.” (SAS)
The implementation of these information technologies has enabled the Ford value chain to become a cost savings powerhouse for the company. Ford has been able to reduce its’ supply chain cycle by 57% to 37 days, achieve a 40% decline in inventory levels in the U.S. and an 85% reduction in customer back order lines.
Critical Data Elements
Ford is also adopting Lean Manufacturing practices to support continual improvement in the value chain. Studies have suggested that there is as much as 30% waste in many manufacturing processes. In order to combat this, Ford established the Value Analysis Center. With these two programs, critical data elements are identified in order to determine the best approach to eliminate this waste and add greater value to all aspects of the value chain. “Lean” uses various technological tools, data collection sensors and data manipulation software to describe process baselines, lead times and processes in order to discover waste in the value chain processes. Essentially, the Value Analysis Center at Ford is its’ cost management program.
Ford’s Generic Strategy
Most companies in the auto industry are taking similar steps to gain an advantage, but Ford has its own strategy to get the most out of their value chain. Ford is now taking steps to enhance supplier relations. By improving these relations, Ford hopes to ensure consistent production of parts and supplies. By reducing the number of suppliers and offering bigger and longer contracts to the remaining suppliers, Ford hopes to be able to reduce costs while increasing quality and consistency. “If the parts suppliers collapse, the automakers would face paralyzing production disruptions and financial repercussions of their own.” (Washingtonpost.com)
AICPA.org Top 10 Technology Issues
Ford is also taking steps to become more rapidly adaptive by using technology to access key resources while “on-the-go”. AICPA.org has listed the making of the supply process more efficient as one of the top 10 technology issues and, clearly, Ford has taken its’ cue from them. Ford has set-up an information system infrastructure that supports advancement in mobile accessibility. Ford has recently launched an internet-based program that enables the company to capture, track, and verify supplier information and value chain data. It is accessible from the standard Blackberry cell phones issued by Ford to its employees. According to Steve McKelvey, the Business Technology Manager for Ford, the company has witnessed “greater productivity, decreased lead times, and reduced waste” (Supply Chain Brain).
Ford has invested millions of dollars in improving its’ value chain. They have seen how the use of technology, standardization, collaborative partnerships with Cat, SAP and SAS has greatly improved their CRM system, predictive modeling and productivity while reducing lead and supply chain cycle times that, together has resulted in an increase in profits. The implementation of these systems has created an efficient and effective value chain for all organizations involved, not just Ford. “It is no longer about getting after a supplier’s profits. It’s about creating a mutually harmonic and financially beneficial experience for the suppliers in our new value chain” (Automotive Industries).
The automotive industry is noted for its intense rivalry, and within the United States market
Ford faces five major competitors: GM, Toyota, Chrysler, Honda, and Nissan.
Toyota, Honda, and Nissan have grown in market share largely as a result of their ability to
deliver better products at lower prices, particularly for more fuel efficient smaller vehicles.
Because of lower labor costs and greater efficiency (typically measured by the number of
hours needed to produce each vehicle), these companies have been able to turn a profit with
smaller vehicles. In the past, Ford has differentiated itself by focusing on more profitable
SUV and truck lines while often losing money on its smaller vehicles. Given changing
demand, this strategy is no longer feasible. The 2008 Harbour Report found extreme
differences in profit per vehicle between The Big Three (General Motors, Chrysler, and
Ford) and the foreign automobile producers within the U.S. markets. Whereas Toyota
makes approximately $922 profit per vehicle sold, estimates show that Ford lost $1,467 per vehicle
in 2008 and General Motors lost $729.3 Toyota is now the undisputed lead in vehicle
production worldwide. In 2008, Toyota sold nearly nine million vehicles, compared to
General Motors’ 8.3 million. In recent years Toyota has not only been one of the most
profitable producers, but also the most efficient: in 2008, it took an industry shortest average of
30.37 hours to produce a vehicle from start to finish.
Within Europe, Ford’s main competitors are Volkswagen, PSA (Peugeot), Renault, GM, and
Fiat. Volkswagen is the dominant producer in the region, and has seen strong growth in the
past four years. Ford experienced much greater success at turning a profit on small vehicles
in the region, and the ‘One Ford’ strategy intends to take advantage of this. Overall, 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, and is demonstrative of Ford’s ability to achieve
success with smaller vehicles.
Because Ford has not received bailout money, it generally has more flexibility than GM and
Chrysler in the current market. While there is a great deal of internal rivalry, industry
upheaval appears to be imminent
Supplier power is a significant threat to auto companies and manifests itself in several
different ways. While the primary raw materials used in vehicles (metals and resins) have
many suppliers around the globe, intermediate parts pose a greater problem.
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.
Since 2004, the number of parts suppliers has fallen from 3,300 to 1,600, and the company has set a
target of 750 suppliers. The goal of this process is to solidify supplier viability during difficult
economic times and combat one of the biggest threats posed to Ford: the potential for
failure or unexpected bankruptcy of a critical parts supplier The United Auto Workers Union (UAW)
is the single greatest source of supplier power vis-
à-vis Ford, GM, and Chrysler. This union controls the majority of the U.S. labor supply for
the Big Three, which leads to higher costs per worker. Ford has been particularly successful
recently in reaching cost concessions with the union, however, lowering the average wage from
approximately $70 per hour to $55 per hour in an agreement reached in March 2009.
The largest difficulties, however, are with co-called legacy costs: retirement, benefits, and
healthcare costs. In the past, these costs have been significantly higher than its international
competitors such as Honda and Toyota. Ford has again been more successful than both
GM and Chrysler in reducing these costs, successfully renegotiating multiple contracts by
swapping equity contributions for cash infusions. In the long run, we believe that these
recent negotiations may finally have turned the tide against this strategic disadvantage. Of
particular importance is the structural changes which have been made regarding healthcare
benefits and other legacy costs.
Retail bargaining power for automobiles is very limited throughout the world. While car
dealerships negotiate with and may offer concessions to individual purchasers, the dealer—
not the automotive company—bears the costs of these concessions. Because dealers operate
within a limited geographic range, they are typically not large enough to exact cost
concessions from the manufacturer. In addition, dealers typically finance their purchases
through Ford Credit. Overall, diseconomies of scale effectively eliminate buyer power in
Fleet sales—which include purchases by large corporations, rental car companies, and the
government—are the exception to this and have accounted for approximately thirty percent
of Ford’s sales in the past three years. Large daily rental car companies purchase nearly three
million new cars annually in the United States, for example. 7 Hertz was a subsidiary of Ford
until it was spun off in 2005, but the two companies retain significant ties. As with all rental
companies, Hertz is limiting its car purchases at this time. Outside of the federal
government, which announced plans to purchase 17,600 vehicles from the Big Three in
April 2009, it is likely most fleet purchasers will postpone all but the most critical orders until
the economy stabilizes. This represents a shift towards more buyer power, although its
impact upon revenues is difficult to extricate from the overwhelming decline in demand.
COMPETITIVE ADVANTAGE OF ME
“As you know, my name is Alvin Senna, i will explain about my competitive advantage. You Can See my Competitive Advantage bellow”
- I always interested about everything to build a bussiness organization, and then i had a trade soul strong. I had it, causes my grand pa is more than a bussiness man since he still young same with me. Now, i found what bussiness i must to take?… i interest about logistic, and then the value is more than tax revenue in this nation. Wow,, i very interested about it…(inbound)
- I always focus in“one think”about what i interest to (process)
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- My perseption:
“Sell your self” i mean, what skill do you have? You can sell it, don’t judge your self you can’t… world must see your tallented
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- And other :
I Handsome, i always do efficiently, i’m smart enough to expecting, coordinating, and resolve the problem (outbond)
And i hope, i can be a young enterpreneur in the future and i hope, i useable for family, and people Like FORD corp. (outbond)