Define and discuss Ford’s business-level strategy
There are two basic business-level strategies which Ford Motor Company has followed for the whole period of its performance. The company started with realizing a low cost strategy, which allowed it to gain market share due to the lowest costs as compared with its competitors:
The founder, Henry Ford, created a mass market for automobiles by driving the price of a car down to the point where the average man could afford one. To do this, Ford limited the product model in one color and set up a production line to produce large numbers of cars very efficiently. (Harmon, Rosen, & Guttman, 2001, p. 31)
This resulted in the company’s complete domination of the automobile markets of the United States in the 20th century. Currently, however, the company started aligning its resources and capabilities with differentiation strategies. The matter is that since 1927, the leader of the U.S. automobile market is General Motors which uses a differentiation strategy; this made it impossible for Ford to compete with it using only the cost leadership strategy (Adcock, Halborg, & Ross, 2001). Such a course is more beneficial for Ford Motor for the reason that differentiation offers an extremely secure basis for competitive advantage, which low cost is unable to do. Cost advantage does not allow resisting external forces, especially at the global market where Ford has been successful over the past several decades. Therefore, differentiation is going to assist Ford Motor Company in gaining sustained high profitability, which will improve the company’s performance at the global market.
How can the company’s value-chain activities be better linked to create value for the company?
Ford Motor has always been a classical example of a value chain. At the time when the company was founded, it was the owner of several mines in Michigan, Minnesota, West Virginia, and Kentucky from which it extracted iron ore and coal to produce iron and steel (Moseley, 2008). Then these materials were passed to assembly plants and converted into different components further assembled into engines and automobiles. As stated by Moseley (2008), “If Ford had sold its cars through company-owned dealerships, it could be said to have controlled the entire automobile manufacturing industry value chain” (p. 99).
These days, however, the company needs some changes in its value system. Creating value for the Ford Motor through modifying some of its value activities can help to increase the efficiency of the company. This can be done through redesigning internal and external processes and starting to treat the information as the value-adding, rather than simply supporting elements of the company’s value chain. The main problem in Ford Motors value chain is that its managers use information “that they capture on inventory, production, or logistics to help monitor or control those processes, for instance, but they rarely use information itself to create new value for the customer” (Rayport & Sviokla, 1996, p. 22). Efficiently utilizing marketspace, the company will be able to use information as a raw material and transform it into new products or services. For instance, Ford can create an additional service for its customers, such as getting car insurance online. This will not only create value for the company, but ensure customers’ loyalty, which means that the company will benefit twice from such activities.
How can Ford successfully position itself in terms of the five forces of competition?
If a proper approach is used, Ford Motor can position itself successfully in terms of all the five forces of competition. Thus, with respect to the threat of substitute products, the company should take into account not only the availability of the products by other manufacturers, but public transport and gasoline prices as well. The cost of the car produced by the company should balance between all these factors; only then will it correspond to the customers’ needs.
The threat of the bargaining power of buyers may be dealt with in a similar way. The customers are unlikely to switch to foreign cars’ manufacturers as long as they stay price sensitive. The buying power of price sensitive customers is not great for the volumes of cars which they purchase are not huge. This is why the bargaining power of buyers will not be of special threat to Ford Motor if the company keeps to its old low cost strategy.
Considering the threat of new entrants, Ford should become customer and quality-oriented. The company should pay special attention to its regular customer base and attract new customers simultaneously. It may provide discounts or other advantageous offers for its customers in order to retain them; in addition, quality of the products should be constantly maintained and improved. Then new entrants will be of no threat to the company.
Retaining suppliers is no less important than retaining customers. Ford, just like other automakers, is highly dependent on the suppliers this is why changing them may become destructive for the company. Ford will stay at a beneficial position if it maintains employee solidarity and good relations with its suppliers, as well as if it concludes contracts which forbid the suppliers to switch costs or refuse to work with the company.
Lastly, in terms of competitive rivalry, Ford may obtain a successful position if it avoids price-based competition. Instead, the competitive advantage should be achieved through ensuring high quality of the products and retaining its customer base, which will allow the company to increase its size of the marketplace with time.
Outline a rough competitor analysis. What can be learned about expected competitor behavior by using the model of competitive rivalry to understand Ford’s situation?
At present, Ford’s main competitors are General Motors, Chrysler, Toyota, and Honda. At this, its greatest competitor is GM with Ford being second to this company. Toyota is the second greatest competitor because its market share is almost the same as Ford’s. Taking into account the model of competitive rivalry, Ford should consider such drivers of its competitors’ behavior as their motivation and capability. Thus, knowing that Toyota, for instance, wishes to acquire bigger market share, Ford should increase its own. Since the difference in these two companies’ market shares is not great, Ford is likely to fortify its positions by preventing Toyota from buying bigger market share. Similarly, Ford can prevent the attack of its competitors through evaluating their resources and using the rivalries’ weaknesses for its own benefit.
Moreover, Ford itself can attack its competitors if it considers its resources sufficient for this. Since most of the market is owned by General Motors, Ford should attack this company. If Ford succeeds in taking at least 10 percent of this GM’s business, its market share is expected to double. This is extremely beneficial for the company this is why it should consider the attacks on GM’s weak points and exploit them for increase its market share.
What role will strategic leadership play in helping Mulally and the organization meet its strategic objectives?
Strategic leadership plays a great role in helping Alan Mulally to improve Ford’s brand image and increase its profitability. Firstly, it will provide vision for the company’s growth and the ways to meet its strategic objectives. Thus, strategic thinking will help Mulally to work out and implement a development plan, as well as contribute into managing changes which will arise during the plan implementation.
Secondly, strategic leadership will allow Mulally to effectively use human and analytical dimensions to meet the company’s objectives. With respect to this issue, Mulally’s task is to ensure future success of the company by using its competitive advantage and prepare the company’s personnel for changes which the implementation of the plan is going to require. Apart from other benefits, this will reduce the personnel’s resistance to change.
And thirdly, strategic leadership will help Ford Motor Company’s new president to build a team to support his strategy. Successful implementation of the plan will be guaranteed if Mulally divides the team into senior and minor ones and appoints the leaders for each team. This will result in gradual implementation of the plan with each step performed carefully and under the observance of skilled leaders, which will ensure that Ford’s business is not neglected. In this way, Mulally will be able to implement the plan step-by-step and contribute greatly into meeting the company’s strategic objectives.
Reference List
Adcock, D., Halborg, A., & Ross, C. (2001). Marketing: principles and practice. London: Pearson Education.
Harmon, p., Rosen, M., & Guttman, M. (2001). Developing E-business systems & architectures: a manager’s guide. New York: Morgan Kaufmann.
Moseley, G.B. (2008). Managing health care business strategy. Boston: Jones & Bartlett Publishers.
Rayport, J.F. & Sviokla, J.J. (1996). Exploiting the Virtual Value Chain. The McKinsey Quarterly, 1(21), 21.