978-1259278211 Case 33 Solution Manual Part 3

Unlock access to all the studying documents.

View Full Document

Referencing Chapter 8: Entrepreneurial Strategy and Competitive Dynamics

Entrepreneurship involves the creation of new value by an existing organization or new venture

For an entrepreneurial venture to create new value, three factors must be present — an

entrepreneurial opportunity, the resources to pursue the opportunity, and an entrepreneur or

entrepreneurial team willing and able to undertake the opportunity. Entrepreneurs must go

Entrepreneurs need to understand the concept of opportunity recognition: the process of

discovering and evaluating changes in the business environment, such as a new technology,

Good entrepreneurial opportunities are those that are attractive to the marketplace (there must be

demand for the new product or service), achievable (it must be practical and physically possible

Resources are an essential component of a successful entrepreneurial launch. The most important

resource is usually money, but human resources, and a strong and skilled management team, is

Launching a competitive venture requires a special kind of leadership involving courage, belief

in one’s convictions, and having the energy to work hard. Three characteristics of entrepreneurial

leaders are:

●Vision

To achieve excellence, venture founders must understand the customer, provide quality products

An adaptive new entry can work. Strategies meant to enter a new market must quickly generate

cash flow and build credibility for the overall brand. New entries that are adaptive offer a product

or service that is somewhat new and sufficiently different to create new value for customers and

Ford saw an opportunity to create an adaptive new entry with the hybrid technology of EcoBoost

and the in-car electronics product SYNC. It had already used resources from the European small-

Certainly there were adaptive new entries in car designs with products such as the hybrid

electrics, but it appears Ford had only reached parity in North American with these products –

everyone else already had something similar, or was developing it. Could Ford use this new

1. What has leadership done to implement strategy, and what challenges remain?

Referencing Chapter 9: Strategic Control & Corporate Governance

Strategic control involves the process of monitoring and correcting a firm’s strategy and

performance. In a contemporary control system, managers continually monitor both the internal

and external environments, and identify trends and events that signal the need to revise

A contemporary approach to strategic control utilizes two different types of control:

informational control and behavioral control. These two types of control play a role in the

formulation and implementation of strategies. Informational control is a method of

Informational control is concerned with whether or not the organization is “doing the right

things,” while behavioral control is concerned with whether or not the organization is “doing

Chapter 9 emphasizes the importance of aligning both informational and behavioral control

systems with organizational strategy. The information gained from the internal and external

environment is reviewed against the firm’s strategy and goals. If the results are not what was

In addition, this chapter discusses the importance of a strong, positive culture and reward

systems that rely more on achievement of jointly created and internalized goals and objectives

Mulally encouraged weekly meetings where he rewarded those who told the truth. Although

Referencing Chapter 10: Creating Effective Organizational Designs

Strategy consists of analysis (setting goals, assessing the internal and external environment of the

firm), formulation (deciding which industries to compete in and how to compete in those

industries), and implementation, where organizational leaders allocate the necessary resources

Organizational structure refers to the formalized patterns of interactions that link a firm’s tasks,

technologies, and people. Structure provides a means of balancing two conflicting forces: the

Structure identifies the executive, managerial, and administrative organization of a firm and

indicates responsibilities and hierarchical relationships. It also influences the flow of information

An effective organizational design can encourage the flow of information and enhance working

relationships between functional departments and activities. However, achieving the coordination

Early on, Mulally did some senior executive reorganization. Many of the newly appointed

executives reported directly to him, including the global head of product development, the head

This meant Ford utilized a strategic business unit (SBU) structure, or an organizational form in

which products, projects, or product market divisions are grouped into homogenous units. Highly

diversified corporations may consist of dozens of different divisions. A purely divisional

Each of the SBUs at Ford operated as a profit center, yet certain key responsibilities such as

product development, information technology, and quality all reported directly to Mulally. This

Referencing Chapter 11: Strategic Leadership

See the concept of leadership, the process of transforming organizations from what they are to

what the leader would have them become. Leadership is proactive, goal oriented, and focused on

the creation and implementation of the creative vision. This definition implies dissatisfaction

with the status quo, a vision of what should be, and process for bringing about change. Leaders

are change agents whose success is measured by how effectively they formulate and implement a

strategic vision and mission. See Exhibit 11.1. This involves:

●Setting a direction

The interdependent nature of these three activities is self-evident. Consider an organization with

a great mission and a superb organizational structure, but a culture that implicitly encourages

Leaders need to set the direction for the organization by continually scanning the environment to

develop knowledge of all stakeholders, and knowledge of salient environmental trends and

One interesting aspect of the Ford story was the extent of Ford family member involvement.

Controlling about 40 percent of the company’s voting shares, these individuals had considerable

power to set direction for the company, especially through chairman of the board Bill Ford.

Leaders are responsible for designing the organization: a strategic leadership activity of building

structures, teams, systems, and organizational processes that facilitate the implementation of the

One immediate change that new CEO Mulally implemented was the weekly meeting with

executives to discuss business plans. Previously, executives used to meet only monthly or

As previously stated, Mulally changed the structure of the organization’s design, moving top

executives to report directly to him, consolidating key functions globally, and encouraged frank

Leaders play a key role in changing, developing, and sustaining an organization’s culture. An

excellent and ethical organizational culture is an organizational culture focused on core

competencies and high ethical standards. Organizational culture can be an effective means of

By the time Mulally was ready to retire, it appeared that his vision had been sound, and, although

some long-time executives had left, other executives were pleased with the new transparency and

open communication between departments and divisions. Mulally had been an effective role

and he realized that to do this he needed to continue the culture of openness and collaboration

cultivated under Mulally. Would the ONE Ford strategy work long-term?

NOTE – ADDITIONAL READING, EMBEDDED VIDEO:

Watch this video about Henry Ford, founder of Ford Motor Company:

http://webcast.mediaondemand.com/library_video/20000901/07_henry_ford_300.asx

How might Ford Motor Company today capitalize on Henry Ford’s ideas, image, and

philosophies?

Here’s a 2007 video interview of Mullaly talking about how his experience with Boeing will

help him at Ford:

http://video.nytimes.com/video/2007/01/24/business/1194817109720/planes-strains-and-

automobiles.html?scp=13&sq=mulally&st=cse

The decision to restructure Ford’s debt in late 2006 and raise over $23 billion is now considered

one of the best decisions Mulally made: “There are two big events in the history of Ford,” said

James V. McTevia, a corporate turnaround expert who runs the firm McTevia & Associates in

In this video Mulally discusses his visit to Congress and Ford’s restructuring plan in early 2009:

http://www.youtube.com/watch?v=xSADVo-PIno

And in May, 2009, after the U.S. government announced that by 2016 all vehicles would have to

reach an average of 35.5 miles per gallon, one analyst said the new fuel standards would be

The five Ford family members, including Chairman William C. Ford, Jr., have 40 percent voting

control over the company. They decided to back Mulally with an emotional commitment to the

company, even though Mulally’s plan to aggressively borrow the money that now shields Ford

Motor from the problems faced by GM and Chrysler cost the family shareholders tens of

millions of personal dollars:

http://www.nytimes.com/2009/06/23/business/23ford.html

See the multimedia presentation of the Ford family tree,

http://www.nytimes.com/interactive/2009/06/23/business/20090623-ford-graf.html

In August 2013, Mulally was interviewed about the Chinese car market, and shared his history

there – apparently Sun Yat-sen had asked Henry Ford to set up operations in China, long ago, and

now Mulally had the opportunity to accelerate this original vision:

http://www.businessweek.com/articles/2013-08-08/fords-alan-mulally-on-chinas-car-market-

and-his-experience-there

In 2013, Mulally would be 68 and perhaps ready to retire. Although it appeared he was in no rush

to leave, in 2012 he had promoted Mark Fields, former head of Ford North America to COO of

Regarding Mulally and his pending retirement, he had stated he would stay at Ford as CEO at

least through 2014. What might happen then? See this 2013 video of Bill Ford discussing

Referencing Chapter 12: Managing Innovation and Fostering Corporate Entrepreneurship

Innovation involves using new knowledge to transform organizational processes or create

commercially viable products and services using the latest technology, experimentation, creative

Before proceeding, firms must first define the scope of the innovation efforts, and they must

A strategic envelope defines the range of acceptable projects. Strategic envelope means a firm-

specific view of innovation that defines how a firm can create new knowledge and learn from an

One way to determine which projects to work on is to focus on a common technology. Then,

innovation efforts across the firm can aim at developing skills and expertise in a given technical

In defining the innovation scope, a firm should answer several questions:

●How much will the innovation cost?

●How likely is it to actually become commercially viable?

●How much value will it add; that is, what will it be worth if it works?

●What will be learned if it does not pan out?

The challenges of innovation involve:

●Choosing when and how to continue to innovate

●The scope and pace of future innovation

Mulally certainly had demonstrated the vision, dedication, and drive to succeed. His

restructuring efforts had provided the needed human and social capital resources, and the

financial resources were returning through improved margins. Mulally had steered adaptive

The remaining question left to ask was if the pace and scope of innovation was what it needed to

be. Would Ford actually achieve the ONE Ford vision?