Issues that come from organizational structure, stability, management, and resources belong to internal pressures. On the contrary, external pressures are risks related to overall conditions of economy/industry, political, legal, and socio-cultural factors. Ford Motor Company, which is a well-known American automaker, already had a successful turnaround in its history under Alan Mulally (Shein & Bell, 2017). His efforts changed both company’s HR and marketing strategy addressing internal and external problems. However, the company still needs some changes to operate under new conditions. This paper will further analyze both internal and external risks of Ford Motor Company to define its current business environment.
Market/Industry Pressures
Despite Ford’s title as the best-selling American brand, the company has to put more effort to remain competitive in the global and the US automotive market. Ford stock has been decreasing for a long time, and the company opted to focus more on selling sports utility vehicles (SUV) and trucks, whereas passenger car models were abandoned. On the contrary, Toyota is currently leading the market in terms of passenger car market share (Arroyo, 2018). Ford also announced the intention to increase its presence in the electric vehicles segment. However, Tesla and new entrants from other industries such as Google and Apple are more competitive, considering that Ford is a latecomer to autonomous driving, electrification of cars, and ridesharing technologies.
The main legal factors include the questionable future of NAFTA what can influence the automotive industry. Despite planning to introduce its autonomous drive models, the regulatory framework for such cars is still under development; thus, there is legal uncertainty. The lawsuits looking for damages caused by product defects are other legal challenges. In terms of economic factors, the financial results of 2019 showed that the US economy continues to grow, and recent tax reform would be favorable for Ford’s development (Arroyo, 2018). CIS and ASEAN became the company’s fastest-growing sales regions that can be an opportunity for further expansion. The oil/gasoline prices significantly dropped due to the coronavirus pandemic; hence, consumers may consider buying new cars before prices will be stable. However, high unemployment both in Europe and the US may increase HR costs for Ford. The main environmental challenges, such as climate change, low-carbon trends, and declining oil reserves, belong to opportunities rather than risks for the American automaker.
Internal Risks
Operational risk is a type of loss that occurs due to imperfect internal processes, systems, and employees. According to Wong (2019), Ford still suffers from a limited alignment between work organization, individual motivation, and organizational performance. The operating margin was found to influence Ford’s return on assets (ROA), which informs investors about the quality of a company’s management. When the operating margin increases, the ROA also rises, and the enterprise receives higher profits. An increase in ROA usually tells experts that a company uses its resources wisely. Ford’s average operating margin is 3.20%, whereas its ROA reached 2.04% (Wong, 2019). These indicators reveal that currently, Ford is not sufficiently converting used assets into profits; hence, its internal structure and management should be revised.
SWOT Analysis
The SWOT analysis has to be conducted to evaluate current Ford’s strategy. In terms of strengths, the American giant has a well-known brand, a strong presence in the US market, a wide supply chain, and robust manufacturing capabilities. A huge network increases the overall adaptability and cost reduction (wages) of the vehicle maker. An extensive product portfolio helps Ford to maintain its position on the market by targeting all niches (SUVs, tracks, electric cars) to compete for both GM and Tesla. Intense research and development (R&D) and the current focus on innovation belong to strengths because autonomous driving, electric cars, and AI become more and more demanded (Wong, 2019). The main weaknesses are product recalls caused by faulty designs that taint the brand’s reputation, low performance in Europe, and high dependence on the US market. The company is underrepresented in emerging markets (China, India), which are currently promising.
Concerning threats, the high competition from Tata, Tesla, and Toyota makes it challenging to maintain Ford’s innovative position. The costs of labor and raw materials were growing last decade that directly influencing the company’s profit margin. Moreover, the environmental issues brought changes to the regulations and emerged as a new threat for automakers, and now they are obliged to comply with them. Ford’s opportunities include digital marketing, autonomous driving technology, electric vehicles, and intensified expansion of emerging markets. The majority of opportunities are related to R&D and beneficial collaborations with IT companies. It will create a foothold for Ford in its struggle to compete with GM and Tesla.
Developing a Strategic Plan
A well-structured strategic plan allows management to direct the company’s development, increase the efficiency of its operations, and meet long-term strategic objectives. A successful turnaround of Ford Motor Company headed by Alan Mulally in 2006-2014 is known as an example of amazing revitalization of the broken organization. Despite such a significant breakthrough, there were many issues left to be addressed following Mulally’s retirement. Jim Hackett, who took the reins of power in 2017, also realizes the importance of strategy improvement due to the negative trend of the company’s stock price and overall underperformance (Brandt, 2020). However, the new phase of turnaround seems to be too modest when it should be more aggressive. This paper aims to suggest suitable leadership style and strategic practices for the current Ford company.
It is important to put oneself in the position of Ford’s CEO in order to define the issues needed to be addressed. In 2018 Ford sold 9.5% fewer cars than it did a year before, while in 2019, this indicator dropped further by 10% (Boudette, 2020). The American automaker is currently too dependent on the US and European markets. Hence, the need for the revision of Mulally’s One Ford strategy becomes evident to meet new market challenges. To address these challenges, the company should improve operational efficiency, continue decreasing costs, especially in Europe, by closing extra manufacturing sites, downsizing, and focus on intensive growth strategy aimed at emerging markets (China, India). Moreover, a good strategic plan should be led by proper leadership and accompanied by organizational culture change.
Value Proposition
Ford can capitalize on its capabilities to see another successful stage of the turnaround. Its main driving forces are manufacturing controls, market analysis, and human capital. Manufacturing controls are aimed to improve the quality of the produced vehicles to avoid possible recalls due to technical issues. The product portfolio should be further revised, relying on market analysis, and insufficient car models should be eliminated. Furthermore, the value proposition may include eco-friendly vehicles and self-driving technology. Competition is high both in SUV’s (GM, Toyota) and electric cars (Tesla) segments, so Ford must focus on further diversification to provide customers with cheaper vehicles. The American automaker can benefit from partnerships with promising IT companies to foster innovation. Further expansion into China and India is essential right now because it may yield profits to compensate for losses in the European market. In terms of people, new leadership will improve alignment with the company’s objectives.
Leadership and Team Building
The next CEO should enhance the further alignment of the company’s different departments with the help of the most suitable team-building strategies. Before Mulally’s tenure, the level of transparency and communication within the company was too low. The introduction of One Team was essential for the establishment of transparency and overall alignment (Kraemer, 2015). I believe that the same accountability approach should be developed right now. The centralized strategic leadership remains the primary option because Ford operates on multiple markets. It helps top management to consider market opportunities, make centralized decisions, and enhance product development for specific markets.
Ford’s CEO has to apply the affiliative style of leadership to bind employees and management with shared objectives and vision. The essential turnaround steps will be shared with every team member to make them believe in its successes and do not perceive small setbacks as a tragedy. The drawbacks of strategy’s implementation should be honestly discussed, instead of being ignored. I feel ready to lead a turnaround utilizing this kind of leadership. Affiliative style requires the ability to listen and finding mutual solutions to the conflicts. I have pretty strong communication skills and hate conflicts, so my main priority would be a quick resolution of conflicts and the establishment of harmony within the workplace. Feedback can be a suitable team-building tool for Ford Motor Company. When leaders and management give feedback to their employees, it usually increases their engagement and, consequently, the company’s performance. The feedback system also helps to identify blind spots and strategy’s miscalculations.
HR Strategy and Conflict Management
Management by objectives (MOB) appraisal method can be introduced to evaluate and foster the company’s performance. Performance management is an integral part of the HR strategy, and MOB will help to control the top, middle, and line managers. This method grounds on the alignment of the organization’s objectives to employees’ ones and requires the review periods (Kiitam et al., 2016). Successful results cause promotion and salary growth, whereas failure evokes further training.
The turnaround process usually causes different conflicts that stem from attitude and culture. According to Kiitam et al. (2016), the primary sources of conflicts are communication, structure, personal factors, shared resources, and differences in goals. Leaders can reduce adverse outcomes of conflicts and instead use them to increase productivity. Collaborating and compromising will be selected from the Thomas-Kilmann five conflict-handling modes to find solutions to the emerged conflicts (Kiitam et al., 2016). In order to promote organizational stewardship, the CEO has to communicate in ways to enhance commitment, engagement, alignment, and simultaneously encourage creativity. It is essential to start the cultural transformation from top management that will challenge practices that reduce organizational effectiveness and enhance the company’s moral standards.
To conclude, One Ford strategy has to be continued and improved to face new internal and external challenges. The main problems of American giant automaker are the high dependence on the US and European markets, drop in stock price, and operational underperformance. Those issues can be addressed by improved strategy using manufacturing controls, market analysis, and human capital as its driving forces. MOB appraisal method, together with the affiliative style of leadership, can be utilized to facilitate change that leads to better communication and transparency.
References
Arroyo, J. D. (2018). Ford and the new auto industry.
Brandt, E. (2020). Ford’s CEO has a plan to turn the company around. The Motley Fool.
Boudette, N. E. (2020). Ford shuffles top management as it chases a turnaround. The New York Times.
Kraemer, H. (2015). How Ford CEO Alan Mullaly turned a broken company into the industry’s comeback kid. Quartz.
Kiitam, A., McLay, A., & Pilli, T. (2016). Managing conflict in organizational change. International Journal of Agile Systems and Management, 9(2), 114-134.
Shein, J.B., & Bell, M. (2017). At Ford, turnaround is job one. HBS No. 5211250. Kellogg School of Management Cases.
Wong, M. K. (2019). An analysis of the effects of operating margin and beta for performance on Ford Motor Company. Munich Personal RePEc Archive.