Enhance Management Practices in Ford Company | Free Essay Example

Enhance Management Practices in Ford Company

Words: 1034
Topic: Business & Economics
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Introduction

Organizations today strive to etch a commanding global presence. Many of the multinational companies, though having significant global presence, are not equally aggressive in their global strategy. Globalization today has become a necessity for sustenance for most organizations and firms strive to fulfill this obligation. The effectiveness of management in framing a proper globalization strategy is essential.

The presence of a proper global strategy has become an indispensable part of the corporate strategy (Prahalad 1990). As the nature of competition is different with respect to industries and their domestic and international scope, it is crucial to properly gauge the strategy one adopts (Porter 1986). This paper recommends strategies that would be helpful for Ford Motors.

Global Strategy and Management

Literature on global strategy and management is vast. One of the pioneers in studying competitiveness in globalization, Michael Porter, has stated: “In a multidomestic industry, competition in each country … is essentially independent of competition in other countries” (Porter 1986, p. 18). Globalization of business means that when a firm operates in more than one country and has a competitive position in one country, it has a significant effect on the firm’s position in another country (Boyacigiller & Adler 1991).

International diversification is an essential part of growth in the industry for corporate executives and involves complex strategic decisions (Carpenter & Fredrickson 2001). Management researchers have emphasized on the importance of corporate performance, which is influenced greatly by corporate strategy (Hitt, Ireland & Hoskisson 2013).

Researchers have established a strong linkage between the characteristics of organizational managers and the performance outcome of the organization (Carpenter & Fredrickson 2001; Carpenter, Geletkanycz & Sanders 2004). The upper echelon of the management has a strong influence on formulating the strategy of a company and the way a company adopts its globalization strategy (Carr 2005). Hambrick (2007) suggests that top management influences the understanding and handling of facts and premises and the choices that are made by the company. In terms of globalization of business, the influence of the top management is inevitable.

Further, the globalization process is a strategy that comes from within the organization. The main importance of the globalization strategy undertaken by firms is to understand the approach and structure of the management (Meyer, Mudambi & Narula 2011). Top management also facilitates development of new markets for companies originating from advanced countries and helps firms acquire non-market advantages (Cuervo-Cazurra & Genc 2011). The next section is the evaluation of Ford Company and its global management strategies.

Ford Motors

The case study provides recommendation for Ford Motor to enhance management’s influence in global context. The influence of top management on change of the company’s fortunes is apparent in case of Ford Motors. However, the vision of the company was not completely delivered to the employees. In 2006, the CEO of Ford Motors took the reigns of the company, when it was posting high losses (Nisen 2013). Even though initially the company posted profits, from the turn of the century the company went into losses. The process of globalization was still not in place and the company lacked innovation in their product development.

In an interview, Alan Mulally pointed out that the top management or the executives in the upper echelon had little to do with the success of a company (Nisen 2013). This contradicts the popular literature, which enforces that the upper management body influences strategizing and success of a company. The optimism in the employees and the corporate vision has to be shared by the top management with all the employees, which helps in improving performance.

The performance of Ford Motors, as shown in table 1 in the appendix, illustrates that the company’s revenue has been declining steadily over the years. It has only shown an increase in their income in 2013. However, the revenue has fallen by 14.53 percent since 2004 (Ford 2014).

Profits of the company have declined considerably since 2004 and 2005. The reason for the decline in the profits of the company is posted as external reasons, mostly due to the economic slowdown. A deeper analysis reveals that the company has been performing well in its domestic market, that is North America. However, in international market the sales figures have been declining resulting in a loss, as one of the company’s second largest markets was the European market, which was in recession during the period.

Streamlining of the supply chain and the value chain of the company is important to facilitate globalization process. For globalization, the company has to adopt a unified strategy that would streamline operations in all global locations.

A few significant changes that the company has to bring about in order to expand its presence in European and Asian markets is increasing the number of hatchback and small cars and decreasing the number of large cars in its product portfolio.

The aim of the strategy should be to align the operations and expectations of the employees and guarantee the alignment of the efforts. The alignment should not only involve the employees of the company, but also to its business partners and investors. Due to severe economic crisis, the sales volume in the European and North American market has declined considerably. Ford must change its market focus. They have to shift their focus from western markets to Asia Pacific.

The company was undergoing severe crisis in the early half of the twenty-first century. However, since adoption of the One Ford plan, the company has observed a steady revival of its production and performance. The reason for the turnaround was a steady delivery of high quality innovative products that were in demand in the market.

The company has to restructure its operation and align its product development, production, and marketing strategies. Further, the company must understand that irrespective of the region, the organizational commitment for efficiency has to remain the same.

Conclusion

Management has a strong influence on the strategy and expansion plans of the company. Researchers have demonstrated that management has a strong influence on the performance of a company, especially when the firm is in the process of expanding its business. The limitation of the upper echelon model is that they do not consider the bottom down approach.

References

Boyacigiller, NA & Adler, NJ 1991, ‘The parochial dinosaur: Organizational science in a global context.’, Academy of management Review , vol. 16, no. 2, pp. 262-290.

Carpenter, MA & Fredrickson, JW 2001, ‘Top management teams, global strategic posture, and the moderating role of uncertainty’, Academy of Management Journal, vol. 44, no. 3, pp. 533-545.

Carpenter, MA, Geletkanycz, MA & Sanders, G 2004, ‘Upper Echelons Research Revisited: Antecedents, Elements, and Consequences of Top Management Team Composition’, Journal of Management December, vol. 30, no. 6, pp. 749-778.

Carr, C 2005, ‘Are German, Japanese and Anglo-Saxon Strategic Decision Styles Still Divergent in the Context of Globalization?’, Journal of Management Studies, vol 42, no. 6, pp. 1155-1188.

Cuervo-Cazurra, A & Genc, ME 2011, ‘Obligating, Pressuring, and Supporting Dimensions of the Environment and the Non-Market Advantages of Developing-Country Multinational Companies’, Journal of Management Studies, vol. 48, no. 2, pp. 441-455.

Ford 2014, Web.

Hambrick, DC 2007, ‘Upper Echelons Theory: An Update’, Academy of Management Review, vol. 32, no. 3, pp. 334-343.

Hitt, M, Ireland, RD & Hoskisson, R 2013, Strategic management cases: competitiveness and globalization, Cengage Learning, Mason, OH.

Meyer, KE, Mudambi, R & Narula, R 2011, ‘Multinational enterprises and local contexts: the opportunities and challenges of multiple embeddedness’, Journal of Management Studies , vol. 48, no. 2, pp. 235-252.

Nisen, M 2013, Alan Mulally Reveals How He Turned Around Ford, Web.

Porter, ME 1986, Competition in Global Industries, Harvard Business Press, Massachusets.

Strategy 2013, Web.

Prahalad, CK 1990, ‘Globalization – The intellectual and managerial challenges’, Human Resource Management, vol. 29, no. 1, pp. 27-37.

Appendix

Table 1: Income Statement of Ford(Ford 2014)

2004 2005 2006 2007 2008 2009 2010 2011 2012 2013
Total Revenue 172B 177B 160B 172B 146B 118B 129B 136B 134B 147B
Cost of Revenue 123B 138B 132B 130B 117B 100B 104B 109B 107B 119B
Gross Profit 48.8B 38.9B 27.8B 42.9B 29.6B 18.3B 24.5B 27.2B 26.9B 28.1B
Research & Development 0 0 0 0 0 0 0 0 0 0
SG&A 25.1B 24.7B 19.2B 21.2B 21.4B 13.3B 11.9B 11.6B 12.2B 13.2B
Amortization & Depreciation 13.1B 6.72B 16.5B 13.7B 12.3B 0 0 4.26B 5.20B 6.46B
Other Expenses -1.24B -1.53B -1.66B 850M -163M -4.27B -1.55B -1.00B -2.06B -1.07B
Total Operating Expenses 36.9B 29.8B 34.0B 35.8B 33.6B 8.99B 10.4B 14.8B 15.3B 18.6B
Operating Income 11.9B 9.03B -6.27B 7.18B -3.97B 9.30B 14.1B 12.3B 11.5B 9.58B
Other Income 0 612M 0 0 0 552M -624M 767M 0 1.11B
EBIT 11.9B 9.64B -6.27B 7.18B -3.97B 9.85B 13.5B 13.1B 11.5B 10.7B
Minority Interest 282M 280M 210M 312M 214M 245M -4.00M 9.00M -1.00M -7.00M
Interest Expense 7.07B 7.64B 8.78B 10.9B 10.4B 6.83B 6.37B 4.43B 3.83B 3.69B
Income Before Taxes 4.57B 1.72B -15.3B -4.06B -14.6B 2.78B 7.15B 8.67B 7.72B 7.01B
Income Taxes 937M -512M -2.65B -1.29B 63.0M 69.0M 592M -11.5B 2.06B -147M
Net Income from Continuing Ops 3.63B 2.23B -12.6B -2.76B -14.7B 2.71B 6.56B 20.2B 5.67B 7.16B
Income – Discontinued Ops -147M 47.0M 2.00M 41.0M 9.00M 5.00M 0 0 0 0
Extraordinary Items 0 0 0 0 0 0 0 0 0 0
Effect of Accounting Changes 0 -251M 0 0 0 0 0 0 0 0
Other Items 0 -251M 0 0 0 0 0 0 0 0
Net Income 3.49B 1.77B -12.6B -2.72B -14.7B 2.72B 6.56B 20.2B 5.67B 7.16B
Preferred Dividends 152M 0 0 0 0 0 0 0 0 0
Net Income to Common 3.33B 2.02B -12.6B -2.72B -14.7B 2.72B 6.56B 20.2B 5.67B 7.16B