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Ford Motor Company SWOT Analysis

"Ford Motor Company is a global company with two core businesses: Automotive and
Financial Services. The Automotive business consists of the design, development
, manufacture, sale and service of cars, trucks and service parts. In 2003, the
Company organized its Automotive business as two primary segments, Americas and
International. The Americas segment includes primarily the sale of Ford, Lincoln
and Mercury brand vehicles and related service parts in North America and Ford-
brand vehicles and related service parts in South America. The International seg
ment includes the sale of Ford-brand vehicles and related service parts outside
of North and South America and the sale of Premier Automotive Group brand vehicl
es and related service parts throughout the world" (Yahoo Finance).
Ford's chairman and CEO, Bill Ford has a simple strategy, "Our vision for the fu
ture is simple: We want to build great products, a strong business, and a better
world." Ford's vision is, "To become the world's leading consumer company for a
utomotive products and services" (Ford.com).
Ford has been focusing on cutting costs to increase margins more than its compet
itors. In 1997, Ford cut $1 billion in costs as a result of work suggestions and
using standardized parts for different Ford models. As a result of using standa
rdized parts, Ford was able to decrease the number of inventory parts, which dec
reased the chance of inventory parts not in stock. This meant the assembly plant
would be shut down less for out of stock parts, saving Ford money (Stevenson 54
8).
Ford has used reverse engineering in the development of their products. The Taur
us is one example of this tactic. Ford examined the close competitors of the Tau
rus to see which parts on each car were the best of the group. Ford then designe
d the same parts as well or even better than the competitions. Since the Taurus
had the best parts when compared with its competitors, the Taurus was viewed as
the best-in-class car. This tactic allowed Ford to "leapfrog" ahead of the compe
tition in the family sedan category (Stevenson 130).
Ford has been an innovator in the auto industry when it comes to technology. "Fo
rd Motor Company has aggressively adopted videoconferencing and computer-assiste
d design and manufacturing technologies." These innovations have led Ford to sta
ying successful and efficient in the auto industry. Another technology innovatio
n is the "use an online computer network to share ideas, create the actual desig
ns, integrate the designs for the various parts and components, and build and te
st prototypes via computer simulations" (Thompson and Strickland 157). Ford has
recently added Voice over IP phones to help control costs. Ford paid SBC $100 mi
llion to install and manage a network of 50,000 VoIP phones. "The immediate bene
fit is going to be efficiencies in cost and operations related to moves, adds an
d changes" (Pappalardo 14). Ford is hoping that VoIP phones will become a long t
erm cost saver and help the company save their profit margins. "Ford Motor Co's
state-of-the-art F-150 truck-assembly facility, expected to be operational by su
mmer and running at full capacity by year's end, is a body shop and final stagin
g area where trucks are assembled and prepped before being shipped to dealers. I
t's also Ford's first completely wireless assembly factory." The factory utilize
s a flexible body shop, automated-materials-replenishment system, "self-adjustin
g platforms at each bay station, and software-driven systems that monitor mainte
nance for tooling, conveyers, robots, and other machines. The wireless infrastru
cture Ford is deploying for parts replenishment and vehicle tracking comes from
WhereNet Corp Inventory replenishment is driven by Ford's Auto Call, part of its
synchronous material-replenishment trigger system, with assistance from about 5
8 antennas around the compound" (InformationWeek 26). This wireless technology w
ill allow Ford to be more effective and efficient in all operations of manufactu
ring vehicles at this facility.
Bill Ford said, "We've made solid progress in the last two and a half years and
we're building momentum. We're not going to let up on our efforts to raise our q
uality, lower our costs, or improve on the fundamentals of our business, and we'
ll continue the biggest product roll-out in our company's history" (Company News
). Ford has been introducing new products to the market which include the all-ne
w Ford Mustang, Ford GT, Ford Five Hundred, Ford Freestyle, and the redesigned F
-Series Super Duty; the all-new Mercury Montego and Mercury Mariner; the all-new
Ford Escape Hybrid - the world's only hybrid SUV; the redesigned Ford Focus in
Europe and Asia; the Land Rover LR3; the Volvo S40 and V50; and the long wheelba
se Jaguar XJ" (Company News).
The first quarter of 2004 was a great quarter for Ford Motor Company. Ford repor
ted earning of $1.9 billion. This was "twice as much as the company had told Wal
l Street to expect and far more than historical rival General Motors, which made
only $ 1.3 billion." Ford's management says that "Rather than relying on windfa
ll profits from a couple of hot-selling models that might cool off later, the co
mpany showed a mastery of the myriad small but important details that bolster th
e bottom line. It reduced overheads, cut product expenditures and slashed warran
ty costs. At the same time, it boosted revenues by targeting incentives and incr
easing the mix of high-profit vehicles, such as sports utility vehicles (SUVs) w
ith four-wheel-drive packages" (Taylor 10).
"Behind the earnings hoopla, something even more interesting is beginning to eme
rge: Bill Ford's strategy for the company. It is uncharacteristically audacious
and sweet in its apparent simplicity. Ford wants to make more money selling fewe
r cars. In Detroit that makes him a virtual heretic and threatens to turn accept
ed industry practice on its head. This is a business where the fixed costs are s
o enormous that bosses like DaimlerChrysler's Juergen Schrempp have staked their
company's future on selling more cars, whatever the immediate impact on profits
. Pushing fewer cars out of the factory also means accepting lower market share,
blasphemous to some ears, particularly since Ford has been losing share since 1
995. And prioritizing profits might also threaten brand loyalty, a fragile commo
dity. Customers who shop elsewhere because Ford's prices are a few dollars highe
r could be lost forever" (Taylor 10).
Bill Ford is taking a very new outlook on the automobile industry. While economi
es of scale always determined if an automobile was successful or not, Bill Ford
wants to make money by selling fewer cars. This viewpoint is an unbelievable sta
nce from the CEO of an automobile manufacturer.
Ford has been struggling to maintain consistent sales numbers. Its first quarter
numbers were twice what was expected, but the rest of the quarters have been la
gging. Ford hopes that the release of the many different new vehicles will revit
alize Ford. The financial numbers will turn out decent for the year due to the m
oney made on the financing side. Some critics say that the financing side of For
d is what makes the money. Ford counters with saying that they must sell vehicle
s before the financing side can make the money.
Some recommendations are needed for Ford to maximize profits. Ford needs to capi
talize on all the new vehicles coming on to the market. Aggressive advertising c
ampaigns might entice consumers to go to a Ford dealer and look at the new produ
cts. The only way Ford can make money from theses new vehicles is to sell a lot
of them. Costs need to be reasonable for the appropriate class of vehicles.
Along with selling all the new vehicles, Ford must make sure that the new vehicl
es are what the consumer wants. The consumer won't buy the car if he or she does
n't like its appearance, performance, and price. If Ford can meet these three ne
eds better than its competitors can, Ford will gain market share. Extensive test
ing is needed before a new vehicle is launched onto the market. If Ford has not
done enough testing and surveys of potential customers, sales might lag causing
Ford not to get much return on its investment.
Ford needs to stop using reverse engineering on the development of their automob
iles. If reverse engineering is used, then Ford is behind its competitors. Ford
must stay on the cutting edge for developing new ideas. Stealing its competitor'
s ideas does not make Ford first to the market with a new concept. Ford appears
that it wants to be seen as an innovator. This is seen with the first wireless t
ruck manufacturer facility and using VoIP phones. Ford needs to find ways to cut
costs while maintaining or improving efficiency. To be viewed as an innovator,
Ford must continue to be the pacesetter for anything new related to the auto man
ufacturer sector.
An advantage for releasing new products by Ford would be the potential profit ma
king opportunity. Humans have a natural tendency to be competitive. This competi
tive nature carries over to automobiles. One person will usually want a better c
ar or truck than his or her neighbor. If a new car or truck is released on the m
arket, the neighbor with the new car or truck that very few others have will hav
e bragging rights. This explains why brand new vehicle sales are very large imme
diately after the release date. People want what others don't have. Ford is play
ing this game. Releasing several new cars and trucks will hopefully entice the m
asses to purchase a new automobile. The down side of this is the cost to create
the new vehicle. Millions and even billions of dollars are put into designing, d
eveloping, testing, and producing a new vehicle. In order to make a profit on th
e specific car or truck, thousands of that type of vehicle must be sold in order
to cover the development costs. If that number of sales is not met, the car or
truck was not a success. Ford would not make a profit on it and would end up los
ing money on the project.
There are many advantages for Ford to be an innovator in its industry. Costs can
usually be saved in the long run. The publicity of the new innovation will help
sales. Newer efficient ways of running the company can be found. The major disa
dvantage of innovation is the initial cost of the innovation. Savings in the lon
g run might be large, but the costs to switch from the old way of doing somethin
g to a new way are usually a sizeable amount. If the innovation doesn't work, th
e company will lose lots of money. They would lose the initial investment to swi
tch and create new costs to switch back to the old way of doing something.