Essay Preview: Ford
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[pic 3][pic 4][pic 6]Ford Motor Company is a US based company, a market leader in the automotive industry. Operating in all 6 continents, with about 65 plants and about 160,000 employees worldwide, it has been leading the automotive industry in both USA, and Europe.Their successful mergers with Volve, jaguar and Aston Martin has aided their market leadership in areas like UK. Their vision, One Plan One Goal, shows they aim to integrate their suppliers and distributors to become the true market leader in the industry. Their strategy to be the one stop shop for all vehicle related products and services shows their vision to get a stronghold in the industry. They now plan to enter the Asian markets and sim for the same success as they achieved in US and Europe (www.ford.com, 2010).During the time of global economic crisis, the automotive industry started to face problems in operating their business due to an increase in material costs and labor costs along with a decrease in demands. Because of these conditions, Ford was forced to cut jobs in North America and close down some plants. They were forced to lay off about 30,000 employees, on account of suffering loses (Bordenave and Lung, 2000). Their main competitor faced the same problems. This along with not adapting to changing customer needs, led to both Ford and GM to lose market share to non-American players like Toyota and Honda.Increasing oil prices made heavy and expensive cars unaffordable to customers, due to which foreign players focused on manufacturing low cost hybrid cars, receding Ford’s market share and revenues. During this time Ford focused on a strategy of diversification localized operations for different markets, EG Ford model car called explorer was different in USA and Europe markets (Bartlett, and Ghoshal1989). This caused Ford to incur high costs in parts, R&D and there was no knowledge sharing amongst strategic business units.To avoid this, Ford launched their globalization 2000 plan which served as their way forward. According to this plan, Ford shut down some of their plants and chose a more standardization strategy which drastically reduced their costs in R&D, and made production more efficient. Following the acquisitions with Volvo, Aston Martin and Jaguar, they were able to share best practices and save costs in parts as their global presence gave them more bargaining power over their suppliers. With this globalization strategy, Ford was easily able to execute their low cost strategy which increased their profitability (Buckley and Casson, 1976).
The automotive industry is sensitive to the vehicle performance and safety, hence the industry is highly dependent on good word of mouth publicity and a good brand image. This compelled Ford to spend heavily on their brand especially while entering emerging markets. For properly reaping the benefits of their standardization strategy, Ford had to have an efficient distribution channel. This is also validated by the fact that customers trust the opinions of the dealers and the more efficient the dealer is, the more credible he/she id to the consumer. Efficient distribution channels also save costs and Ford being a global player must improve its geographical management of channels to help reduce costs.The industry is also characterized by heavy costs and huge capital investments; hence a company must have good cash flow management which supports their operational expenses. Ford’s finance SBU provides financing to customers for their purchases. The key is to look into an overall cash flow to aid the operations positively and in the global standardization scenario, this strategy is all the more critical.An issue faced by most global companies including Ford, compliances vary from region to region, affecting their standardization strategy. Difference in local and global regulations cause companies to make small modifications in production standards and the way they conduct business. These modifications come with extra costs and may also cause a strategic shift and may even compel a strategic move for an organization.