978-1259278211 Case 33 Solution Manual Part 2

Unlock access to all the studying documents.

View Full Document

NOTE – ADDITIONAL WEB LINKS TO FINANCIAL DATA, EMBEDDED VIDEO:

Ford Motor Company has created a multimedia website. Take a look here:

http://www.thefordstory.com/

Here’s one website summarizing Ford’s status and news events. Examine Ford’s stock price over

the last five years using the tools available. Also view all auto and truck manufacturers’ data:

http://topics.nytimes.com/top/news/business/companies/ford_motor_company/index.html

Visit this website http://www.ford.com/vehicles/ to take a look at Ford’s current brands. As of

2015, Ford promoted Ford vehicles – the Fiesta, Focus, Fusion, Taurus, and the new C-Max, with

the F150 pickup, and iconic Mustang being among the top brands. The company also promoted

New, “next generation” vehicles were being promoted, using the “small-vehicle platform,”

incorporating ideas from the Ford Silicon Valley Research Lab and advances in manufacturing

technology. See http://corporate.ford.com/innovation for current news, and see this video

interview from June 2013 with Alan Mulally discussing how Ford is as innovative as Tesla, and

is focused on the Lincoln brand, and is also focused on growth in India and China:

https://www.youtube.com/watch?v=anTB0c5a6ZA

One example of innovation from 2015 is the “Info Cycle” project at the Ford Innovation and

Research Center, which is gathering data on how bicyclists navigate the streets of Palo Alto, CA

“in order to develop new ideas for increasing roadside safety, reducing traffic congestion, and

Does Ford appear ready to deal with the competitive forces in its industry?

1. What internal resources and assets does Ford have that may give it a competitive

advantage?

Referencing Chapter 3: Analyzing the Internal Environment of the Firm

When one firm outperforms others by a wide margin over a long period of time, it’s important to

figure out how this could be. The answer may lie in how that firm arranges its activities and

Remember, value chain analysis is a strategic analysis of an organization that uses value-creating

activities. Value is the amount that buyers are willing to pay for what a firm provides them and is

Every activity should add value. Take a look at Exhibit 3.1 to see the value chain activities.

A sample value chain analysis is below:

Value chain activity How does Ford create value for the customer?

Primary:

Inbound logistics (distribution

facilities, material control

systems, warehouse layouts)

Assumed adequate.

Operations (efficient work flow

design, quality control systems)

Outdated manufacturing facilities for some products;

few “flexible manufacturing systems” that could build

Outbound logistics

(consolidation of goods, efficient

scheduling, finished goods

processing)

Assumed adequate.

Marketing and Sales (motivated

advertising & promotion,

effective pricing, proper ID of

customer segments &

distribution channels)

Some strong brands built customer loyalty: Taurus,

Service (ability to solicit

customer feedback & respond)

Ability to manage massive product recalls.

Secondary (or support):

Procurement (win-win

relationships with suppliers,

reduced dependence on single

supplier)

Poor material requirement planning in the past?

Technology development (state

of the art hardware & software,

Strong technological skills, but technological

breakthroughs not disseminated or communicated

Human resource management Workforce highly unionized; culture had been highly

General Administration

(effective planning systems to

establish goals & strategies,

Lack of knowledge sharing led to duplication &

complexity in operations with a concurrent increase in

costs. Over dependence on price-based competition cut

Primary Activities

In terms of primary activities, the key to Ford’s possible ability to differentiate itself in the

market resided in its marketing. Certain brands, especially the F-150 truck and the Mustang, had

Support Activities

With regards to support activities, a competitive advantage is achieved by developing a strong

general administration that is built around visionary leadership and a culture that pushes for

In addition, see the concept of the resource-based view of the firm, and the three key types of

resources: tangible resources, intangible resources, and organizational capabilities. A firm’s

strengths and capabilities – no matter how unique or impressive – do NOT necessarily lead to a

An important issue to focus on here is the importance of intangible resources like innovation and

reputation. Especially in mature brands, sustaining reputation is essential. Look at resources that

Tangible Resources:

Financial: not great, but better than other U.S. automakers, and improving

Physical: considerable physical resources worldwide – perhaps too many unproductive facilities

Technological: considerable advances, especially the hybrid electric models

Organizational: CEO Mulally streamlined reporting relationships to encourage transparency in

Intangible Resources:

Human: although considerable depth in employee tenure and skill, poor relationships between

Innovation and creativity: hard to evaluate given the previous lack of trust

Reputation: poor, but improving

Determining whether the internal resources are valuable, rare, difficult to imitate, or difficult to

substitute (VRIN) can help a firm sustain a competitive advantage. See Exhibit 3.6. Applying the

VRIN concept, Ford had no valuable, rare, inimitable and non-substitutable capabilities that

could become a source of sustainable competitive advantage. In comparison, the Japanese

Referencing Chapter 4: Intellectual Capital

See the concepts of intellectual capital, human capital and social capital, all of which are

intangible assets that a company such as Apple needs to have in order to compete successfully.

Intellectual capital is a measure of the value of a firm’s intangible assets, its reputation,

Human capital involves the individual capabilities, knowledge, skills, and experience of the

company’s employees and managers. This knowledge is relevant to the task at hand, as well as

Success in retaining human capital could also be attributed to the nurturing of the “social ties” or

social capital. Social capital is a function of the network of relationships that individuals have

throughout the organization and beyond. Relationships are critical in sharing and leveraging

Intellectual assets or intangible resources are critical to organizational success. The growing

importance of knowledge, coupled with the move by labor markets to reward knowledge work,

Human capital: Does the organization effectively attract, develop, and retain talent? Does the

organization value diversity?

Social capital: Does the organization have positive personal and professional relationships

among employees and alliance partners?

Technology: Does the organization effectively use technology to transfer best practices across

the organization, codify knowledge, and develop dynamic capabilities for competitive

advantage?

Organizational Capabilities:

Specific Competencies or Skills: Due to Ford’s legacy, it should have had considerable

intellectual and human capital it could have used to leverage employees’ experience and skills,

Capacity to combine resources: Although Ford had the capacity to combine resources, prior to

2. How should Ford compete?

Referencing Chapter 5: Business-Level Strategy

A competitive strategy is linked to the value chain, and supported by intangible assets. The value

chain of Ford Motor Company provides a case for how lack of coordination across the value

In order to achieve a sustainable competitive advantage, Ford had to assess its ability to contend

with other consumer electronics products companies. The question of how to compete in a given

business to attain competitive advantage requires an assessment of the types of competitive

strategies, including the three generic strategies that are used to overcome the five forces and

achieve a competitive advantage:

●Overall cost leadership

oLow-cost-position relative to a firm’s peers

●Differentiation

oCreate products and/or services that are unique and valued

●Focus strategy

oNarrow product lines, buyer segments, or targeted geographic markets

Generic strategies are plotted on two dimensions: competitive advantage and strategic target. The

It’s hard to see what competitive strategy would be best for Ford. It had tried differentiation in

the past, and had been partly successful with pickup trucks and the Ford Mustang, but

differentiation advantages are easily copied (NOT in the case: see Toyota’s push into the big

Ford did have an opportunity for cost leadership if it had been able to better manage its value

chain relationships. Production efficiencies would have helped contain costs, but, as with

Ford, at the conclusion of this case, appeared to be stuck-in-the-middle.

Referencing Chapter 6: Corporate-Level Strategy

Corporate strategy focuses discussion on the questions of what businesses a corporation should

compete in and how the businesses should be managed so they can create “synergy” – creating

Diversification is the process of firms expanding their operations by entering new businesses.

Some possibilities include:

●Mergers and acquisitions

●Strategic alliances

Whatever the choice, it should create value for all stakeholders – employees, suppliers,

Companies can achieve synergy through diversification in two ways:

Through related businesses (horizontal relationships)

●Sharing tangible resources

Or through unrelated businesses (hierarchical relationships)

●Value creation derives from corporate office

Ford’s previous leadership, primarily under Jacques Nasser, had followed an unrelated

diversification strategy (some of the relationships were tenuous at best). The objective had been

to move from low-margin businesses into high-margin businesses. (NOT in the case: As a result,

the company divested from auto-parts making and invested in luxury car business, bought up

Primarily a mass-market carmaker, Ford could not work any wonders in the luxury-car business

(e.g., Jaguar had not been marketed as a “Ford” product, and the Lincoln brand had struggled to

Related diversification seeks to add value through synergy, though leveraging the competencies

and activities that exist in business units that have some meaningful relationships. Core

competencies reflect the collective learning in organizations—how to coordinate diverse

Sharing activities means that value chain elements are shared across business units, so that two

Again, given its iconic legacy, Ford should have had considerable core competencies in

automobile production; however, those competencies were not well coordinated as Ford grew.

Mulally’s concept of the “ONE Ford” meant that all Ford vehicles competing in global segments

would be the same in North America, Europe, and Asia – sharing activities through common

Referencing Chapter 7: International Strategy

International expansion is a viable diversification strategy. However, before pursuing this, a firm

needs to determine why an industry in a given country is more (or less) successful than the same

industry in another country. When choosing a country to expand into, firms must assess the

There are two opposing forces that firms face when entering international markets: cost

Ford tried to pursue a global strategy – ONE Ford – but their production technologies appear to

be multidomestic, different in different countries, with questionable production capacity,

especially in China where Ford had only one production partner, Changan Ford. Also, see Case

China by 2017. The global strategy was meant to take advantage of synergies between brands.

Was this strategy working?

NOTE – ADDITIONAL READING, EMBEDDED VIDEO:

In May of 2007 Ford sold off Aston-Martin, and by July 2008 had sold Jaguar and Land Rover to

Tata Motors of India. Volvo was also divested in 2010 to China.

Was Mulally right to divest these brands from the Ford portfolio?

Regarding Ford’s prospects in the international market, see this article about expansion in Asia

and prospects for the Fiesta:

http://www.ibtimes.com/contents/20090713/ford-aims-asian-small-car-market-with-thai-

venture.htm

In Europe, Ford’s market share had grown. As of July 2014, the Fiesta had become the best-

selling vehicle of all time in Britain, having first reached that status in 2009 and then having

successfully come to the U.S. in 2010:

http://www.thisismoney.co.uk/money/cars/article-2703943/Ford-Fiesta-biggest-selling-car-time-

Do you think Ford’s strategy going forward will be able to sustain this momentum?

Regarding the need to design automobiles that please and delight the consumer, read this article

from October 2007 about the changing models over time. What has happened since?

View this video showcasing the 2015 Mustang GT in competition with the 2015 Chevy Camaro

SS:

https://www.youtube.com/watch?v=rTJPDurLEKw

Here’s a video explaining how to design a new car, featuring a designer for the Ford Focus:

http://videos.howstuffworks.com/howstuffworks/164-how-car–design-works-video.htm

Do you think Ford did something right with the Mustang, and should it take one author’s advice

and stick with designs, like the Explorer, that have long served the U.S. market well? Given that

it takes at least two years to design a new car, how can Ford make the correct choices to meet the

consumer wants and needs?

In the fall of 2015, European demand appeared to be stabilizing. According to Ford press

releases, Ford’s European sales led to increased market share in 12 out of its 20 traditional

European markets, driven by strong demand for new models such as the Mondeo.

(https://media.ford.com/content/fordmedia/feu/en/news/2015/10/07/new-models-drive-ford-

This would be the company’s second plant in the country, and was a much needed investment

since the company was finding it difficult to satisfy demand for its EcoSport compact SUV. This

compact SUV, which seated five and looked better than its nearest competitor, Renault’s Duster,

had been a runaway hit in the country. The EcoSport made more sense than a Duster since it

There had been press about the challenges Ford had with the Lincoln brand. Ford had

acknowledged this, planning a re-imagining campaign for 2013 to hopefully improve perception

And see this video from February 2013 of Mulally talking about Ford’s Lincoln re-launch

strategy, and its entry of Lincoln into China – suggesting that the Chinese people “love heritage”

In 2015, the emerging markets had been a disappointment for all auto makers. Even though

significant investment had been made, current profits were not happening. Some were cautioning

Do you think expansion outside the U.S. is a strategy Ford can successfully pursue to regain

profitability and worldwide reputation?