Strategies for Leadership: A Ford Case Study

Global Manufacturing Practices

Q1. Critically analyze and discuss the key forces in the general and industry environments that affect Ford’s choice of strategies. (35 marks-750 words)

Q2. Critically assess Ford internal resources, assets and capabilities that may give Ford a competitive position. Explain how Ford creates value to customers. Identify problems you think they are facing in respect. (35 marks-750 words)

Q3.  Discuss Ford Business –Level strategies and Corporate-level strategy .What are the advantages and disadvantages generated from such strategies? Suggest ways by which Ford may improve and sustain its competitive position. (30marks- 500 words)

In the commercial world, organizations respond differently to outside events and the process of change. Some constantly seek opportunities for growth while others wait until changes are forced upon them. Some run out of energy and stagnate, while others develop and move forward in the face of stiffening competition. It is often said that ‘if you don’t think about the future, you won’t have one!’ Strategic planning is the process most successful companies embrace when determining the route to achieving their business objective.

It is a powerful technique, which mobilizes resources behind a plan and is one of the most important factors, which distinguishes progressive organizations who have identified and communicated, externally and internally, the type of business they want to become. When Ford developed Ford 2000, it was accepted that the company, although successful, had reached a cross-roads. The business faced many challenges in a number of its competitive environments and required innovative solutions to boost global competitiveness, in order to sustain continuous growth.

There are some 600 million cars in use across the globe. Automobile production is the world’s largest manufacturing industry, with sales per annum of £350 billion. The industry supports jobs not only in automobile manufacture, but also in components, distribution, finance, insurance, repairs and maintenance, which in Europe alone ,fore-example; amounts to 18 million jobs. Based on the general environmental forces, the industry is under pressure, but there are also opportunities.

Things are changing quickly, especially customer tastes, yet the auto industry’s lag time in development means it takes a long time to react. Possibly firms with well-coordinated and integrated research and development/logistical supply teams could have an advantage In recent years, the industry has been characterized by the global manufacturing practices of Japanese, Malaysian, Korean, and lately Chinese competitors , which have stimulated a series of innovative developments. A significant factor has been the adoption of lean production processes.

Car Industry Process Manufacturing

‘Lean production’ was first coined by researcher John Krafcik, who wrote that ‘lean production is lean because it aims to use less of everything, compared to other forms of production. It resulted in fewer defects and fewer hours to develop products together with greater productivity and lower stock levels. The lean producer has therefore significant cost and marketing advantages, which reduce costs and improve choice. Such changes have created a need for companies like Ford to look again at their operations to view how they could improve their competitiveness in order to counter threats and reduce the performance gap between themselves and their global competitors.

Ford’s vision is ‘to be the world’s leading automotive company’. It is a management declaration of the direction the company is taking and sends a clear message to customers, competitors, suppliers and shareholders. Ford’s vision does not “mean the biggest; it means the best.” In Ford terms, leadership means ‘product excellence linked to being the best in customer satisfaction, value, cost and profitability’. In order to achieve this vision Ford indicated that manufacturing plants could no longer be managed on a local basis and must become integrated into the new worldwide manufacturing strategy.

The goal has been to focus every Ford resource and to use it more effectively to meet customer needs. It represents a different way of thinking allowing the pace of change to accelerate. Having established the vision, Ford needed to communicate the strategic process into the organization, in such a way that allowed operational divisions to embrace the principles and take ownership for their part in the overall plan. It was important to encourage operating units to develop their own mini-agendas, which would fit into, and be compatible with the Group’s overall vision.

The manufacture of motor cars involves a number of simultaneous processes. As an example, the same time as sheet metal is being stamped into body panels, seats are being trimmed, engine blocks cast, gearboxes built and instrument clusters assembled. The synchronization of these operations and the subsequent distribution of sub-assemblies and components to various stages of the assembly line is highly complex and difficult to manage logistically.

•Molten metal, produced in cupolas being transferred to holding furnaces and then to ladles;

•Rough castings are fettled before they are machined to accurate dimensions;

•Starting with the cylinder block, engine assembly includes fitting cylinder heads, moving parts and ancillary components;

Empowering People at Ford

•Giant presses stamp body panels from rolls of sheet steel;

•Robots weld the body panels together to form a complete shell;

•The bodies are phosphate coated and immersed in a giant trough containing electro-static primer;

•A body shell is mated to the engine and transmission;

•Assembly includes the fitting of wheels, glass, trim, electric’s and other equipment;

•Final checks are made on a rolling road before the completed car leaves the factory.

•Improving the interaction between computer systems and manufacturing;

•The computer sequencing of parts and components;

•Developing proposals for effective logistical delivery;

•Continually exploiting processes which are designed to improve production

Ultimately Ford’s major long-term sustainable competitive advantage lays in the empowerment of its people. Achieving this has involved the formation of a partnership of management, staff and unions to create a high performing organization, which values learning and knowledge. The key at Ford  has been to train, develop and skills enhance at all levels.

•Ford has approached work in an integrated way and on a team basis

•Layers of management have been removed

•Principles of empowerment combined with improvements in technology have enhanced the flow of effective information through the organization

•Group working has created synergistic benefits which has led to the solving of problems and improved productivity.

Ford, which was one of the world’s most profitable companies until 1999, had been struggling for survival since 2003 and had faced its largest single-year loss in 2006. Although foreign automakers had been aggressively targeting the U.S. market during this time, some of the important reasons for Ford’s decline had been internal: frequent leadership and organizational changes, poor leadership, loss of touch with customers, and a failed diversification plan.

In an attempt to improve the financial condition of the struggling automaker, a new chief executive officer, Alan Mulally, had been selected in September 2006. Mulally, a former executive vice president of the Boeing Company, was expected to use his expertise and leadership skills to rebuild the corporate culture and regain Ford’s ability to compete in a global industry. After being brought in to reposition Ford for turnaround following its near bankruptcy in 2006, the one thing CEO Alan Mulally did early in his tenure was to refocus Ford’s vision into a smaller and more profitable Ford – “ONE Ford.” The ONE Ford message was intended to communicate consis¬tency across all departments, all segments of the company, requiring people to work together as one team, with one plan, and one goal: “an exciting viable Ford delivering prof¬itable growth for all.”

Mulally wanted to leverage Ford’s unique automotive knowledge and assets to build cars and trucks that people wanted and valued.His mission was to focus organizational stakeholders on the Ford and Lincoln brands, close down Mercury, and sell off the other “premier” autos (Aston-Martin, Jaguar, Land Rover, and Volvo.) The management of these brands had confused customers, and had not added any value to the Ford name. Mulally wanted to “integrate and leverage” the core Ford assets around the world. In order to operationalize this focused mission, Mulally had to set some strategic objectives.

His overall strategy was to obtain operating profitability at a lower volume while changing the mix of products to better appeal to the market. Mulally had to make structural and procedural changes in the company: he reconfigured executive reporting relationships, closed plants and cut jobs, increased goals for plant utilization and production levels in each production unit, tried to pay attention to market trends and encourage designers to develop more appealing vehicles.

The vision was to have a smaller and more profitable Ford. Mulally’s “ONE Ford” message was intended to communicate consistency across all departments and all segments of the company, requiring people to work together as one team, with one plan, and one goal: “an exciting viable Ford delivering profitable growth for all.”Mulally made structural and procedural changes in the company especially in top management. He also refocused on the Ford brand by selling off the brands Jaguar, Land Rover, Volvo, and Aston Martin, as well as discontinuing Mercury.

Mulally had the full support of the Ford family, including chairman of the board Bill Ford. This confidence appeared well-founded when Ford was able to avoid the bankruptcy scenarios used by GM and Chrysler and posted sales in 2010 that made it the world’s top-earning automaker once again.  Accordingly ,after refusing the government bailout offered in the spring of 2009, Ford had the challenge of doing business carrying a debt load, while rivals Chrysler and GM escaped this via bankruptcy.

By 2013, these threats appeared to be in the rearview mirror. In August 2013, Ford had its greatest sales month since 2006, with the F-Series trucks leading the way. According to reports, Ford had been operating near full manufacturing capacity since 2012. This had a positive effect on profit margins because it kept fixed costs low. But tight inventories for products like Fusion, Focus, and Explorer also limited Ford’s potential to grow sales and gain market share. Ford was also facing challenges in China but had been “making up ground there, with a 46 percent increase in sales for 2013 over the previous year.

In China, Ford was planning to spend $5 billion in new plants and bringing 15 new vehicles to the country by 2013. The company believed that China and India combined could account for 40 percent of the company’s sales by 2020 versus 15 percent of sales today. 

By 2013, although problems remained in Europe, Asia, and South America, Ford had seen sales recover in the United States to its best performance ever. This performance confirmed Mulally’s vision and allowed him to retire, hand picking his successor, Mark Fields, who took over in July 2014.Nnew CEO Mark Fields announced Ford would be using innovation “not only to create advanced new vehicles but also to help change the way the world moves by solving today’s growing global transportation challenges.” Fields’ vision was to make “people’s lives better by changing the way the world moves,” and the mission was to deliver top quartile shareholder returns through both the standard automo¬tive and also the new high-growth mobility businesses.

Fields’ objectives included fortifying profits for the standard-bearers – trucks, vans, commercial vehicles – as well as updating the performance line-up – Ford GT and Mustang; transforming the underperforming Lincoln, Continental and Navigator luxury products; and growing investments in emerging opportunities, especially in electrification, autonomous vehicles, and mobility services.

Fields was focusing Ford’s efforts on technology – not just making products for people who could afford luxury vehicles, but using technology to solve problems of mobil¬ity and access, providing not only products but also trans¬portation services that made people’s lives better In 2015 Ford Motor Company had the best financial results in years. The year 2016 was almost as profitable, but, going into 2017, Ford was guiding profits lower, primar¬ily because of CEO Fields’ intent to invest in emerging mobility services opportunities. In 2017, Ford Motor Company was facing disruption in the automobile industry and moving in a direction that meant it was becoming more than just an auto company.

Fields addresses “disruptors” in the auto industry, seeing this as an opportunity, positioning the car as the “ultimate technology product” and points out the presence of the new Ford research center in Silicon Valley as a way of transitioning Ford from just an automotive manufacturer into a “mobility company. Reminding investors of the company’s long-term legacy, CEO Mark Fields had pointed to founder Henry Ford and his idea of “democratizing technology” – not just making products for people who could afford luxury vehicles, but using technology to solve problems of mobil¬ity and access, providing not only products but also trans¬portation services that made people’s lives better.

So, although Ford would always sell cars, CEO Fields was making big bets in autonomous technology (self-driving cars), electric vehicles, and other transportation services such as urban mobility solutions via ride-sharing, bike-sharing, and customized interior vehicle experiences serv¬ing multiple customer needs. This might have been a bit of a gamble.

Fields was facing an industry in disruption: not only were global markets hard to predict but technology shifts and consumer preferences were changing the nature of the whole transportation experience. This would require significant innovation, and an adaptable, nimble organization that could deliver. New, “next generation” vehicles such as hybrids and EV’s were being promoted, using the “small-vehicle platform,” incorporating ideas from the Ford Silicon Valley Research Lab and advances in manufacturing technology.

In 2015, Ford announced plans to spend some $4.5 billion by 2020 to offer 13 new electric-vehicle nameplates.  Field stated "Our view is that the industry offerings, 15 years from now, is that there is going to be more electrified offerings than there are internal combustion engines," Fields said. "So we want to build a reputation around that, we want to build our brand resonance around that. We want to be a leader in this area."

But just because Ford is making big investments in electrifying its lineup doesn't mean it is abandoning gas-powered vehicles. "Fifteen years out, there's still going to be a lot of vehicles on the road that are internal combustion engines, and we are going to be there," Fields said. "We are going to be there for the best ones, giving customers what they want, but at the same time we also want to be there for electrification."

In January 2017, CEO Mark Fields talked about how Ford had “big plans to transform itself from a company that just sells cars to a company that touches all aspects of mobility,” with big bets on autonomous technology, electric cars and transportation services. But then, in May 2017, CEO Mark Fields was abruptly removed from his position, replaced by James P. Hackett, head of Ford’s Smart Mobility LLC subsidiary.

During Fields’ three year tenure Ford’s shares dropped 40 percent, and the shareholders were concerned that he was unable to expand the company’s core auto business, and had been slow to implement the “mobility strategy” he had championed. Other concerns were that Fields had lacked his predecessor’s ability to “rally employees around a common mission or make critical decisions about the company’s strategy

Opinions about why Mark Fields might have been removed from the top job at Ford included the following: “Fields might have said he supported ‘the future,’ but he showed no results, he bungled Trump, Ford’s car sales fell harder than the industry standard and Ford’s stock price took a dive under his watch.” It also appeared that Ford Chairman Bill Ford “didn’t think Fields acted enough like his counterpart at General Motors, Mary Barra.

 Under new Ford CEO Jim Hackett, Bill Ford said the automaker needs to address ‘underperforming areas,’ modernize its business and invest in The Future. Yes, The Future. But Ford has lagged behind General Motors, particularly on autonomous vehicles and electric cars. GM has had a number of milestones this past year, with its investment in the autonomous tech start-up Cruise, as well as the rollout of the Bolt EV. As for ‘underperforming areas,’ Barra also oversaw GM’s departure from Russia and India, along with the sale of its European operations to PSA Group. ‘This is a time of unprecedented change,’ Bill Ford said. ‘A time of great change requires a transformational leader,’ he added.”

Obviously, Mark Fields was NOT Alan Mulally. Speaking about the transition, chairman Bill Ford identified incoming CEO Jim Hackett as “not just a futurist, he’s a very good operative executive” and stressed that Jim will continue to transform the culture of the company, caring about this culture, making sure that ideas will flow freely without regard to hierarchy. Bill Ford believes the business needs to be “sharpened,” “modernized” in regard to current and upcoming technology, and that new business needs to be developed via better, speedier decision making.