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Case 18 Teaching Note Ford Motor Company: New Strategies for International Growth
8
Ford’s ability to achieving and sustaining a competitive advantage in the mobility industry may well be
confounded by the following factors:
nChronic industry overcapacity, which has driven the wave of cross-border consolidation via acquisitions
by the largest producers
nHighly fragmented industry below the “top tier” — 1,000 producers
nDependence on low interest rates and weak U.S. dollar in international currency markets
nModerate-to-low threat of government action with respect to local assets that could be nationalized.
These are mitigated somewhat by the following factors:
nImpressively large addressable market—272 million riders, large substitution effect—73% of alternative
forms of transport, and enormous potential annual revenue stream—$19 billion – $26 billion, if the
assumptions and estimates in case Exhibit 2 are correct
nTechnological advances in transportation such as autonomous vehicles, robotics, GPS, and wireless
technology lower costs of labor (drivers)
nPresence of established mechanized and non-mechanized substitutes that perform the same transportation
functions
On balance, due to the above factors, to achieve a competitive advantage, a Ford Dynamic Shuttle program
must compete via achieving economies of both scale (vertically) and scope (horizontally).
Vertical scale refers to the ability of a firm like Ford to capture higher value added across activities such
as investing in research and development (R&D) to develop mobile apps, improve vehicle safety, climate
Case 18 Teaching Note Ford Motor Company: New Strategies for International Growth
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Horizontal scope refers to the range of product and service segments that a firm like Ford serves within
its focal market, which is considerable due to its presence in automotive manufacture. Increasing Ford’s
horizontal scope can strengthen its business and increase its profitability in five ways: (1) by improving the
TABLE 1. Appraising Ford’s Horizontal Diversification Strategies – Smart Mobility
Strategic intent Plusses Minuses
Leverage global scale economies
Potential higher purchase volumes
Highly dependent on market
Heighten product dierentiation
via ease of use & quality of service
Fundamental to strategy to
leverage technology and
Huge reliance on local labor to
operative vehicles and support
in emerging markets such as India,
China, Africa, or South America
Better understanding customers to
Localized services tailored to
Cost to obtain access to global
municipalities and nations; uncertain
ability to “mine” data
Enhance flexibility & dynamic
‘Tailored products’ to serve local
transmission system
Unknown impact and pace of
4. Perform a competitive strength assessment of Ford’s prospective partners in the mobility
industry. Based on that assessment, which partner makes the most sense for Ford?
Students should be able to prepare a competitive strength assessment for the major discount retailers.
Although the students’ strength measures, respective weightings, and ratings may vary, conclusions should
be consistent with Table 1.
Case 18 Teaching Note Ford Motor Company: New Strategies for International Growth
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TABLE 2. Competitive Strength Assessment for the Ford’s Prospective Partners in
Implementation of the Dynamic Shuttle Project
Rating Scale: 1 = very weak; 10 = very strong
Key Success Factors/
Strength Measures
Importance/
Weight
Vrigg Ryderz Car-Go ShuttleX Quark
Rating
Weighted
Score Rating
Weighted
Score Rating
Weighted
Score Rating
Weighted
Score Rating
Weighted
Score
Business model 0.20 51.00 81.60 81.60 71.40 71.40
Franchise-ready 0.10 80.80 80.80 80.80 60.60 50.50
Investment 0.05 90.45 80.40 50.25 60.30 60.30
App & user interface 0.10 70.70 80.80 60.60 80.80 50.50
With the caveat that the weightings and rankings of each company in each category are subjective, the table
above indicates that Ryderz is the strongest prospective partner for Ford to implement the Dynamic Shuttle
project, which is supported by the partner criteria presented in the case. Ryderz competitive strength is pri-
The table above, however, does not compare Ford to established players in the smart mobility space, such
as Uber, Lyft, Didi, or Ola Cab, as the case presents scant information about those companies’ efforts in
5. What specific business strategy recommendations would you make to Ford’s management
regarding its Dynamic Shuttle program? Should the company consider a greenfield develop-
ment, a strategic partnership or alliance, or acquire an existing mobility provider? Are there
other potential strategic options that should be under consideration? Please justify your
recommendations by outlining the pros and cons of each.
While the decision has already been made to pursue market entry into India and other emerging markets via
partnership and franchising, there is also the question of entry into other markets with the Dynamic Shuttle
Case 18 Teaching Note Ford Motor Company: New Strategies for International Growth
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See Table 3 below [shaded areas indicate our preferred strategic priorities].
Of the six options listed, we think that it is highly likely that Ford will pursue (3) an acquisition of an
established smart mobility company (such as Uber, Lyft, or Ola Cab) or possibly (4) partnerships with
existing providers in emerging markets as it seeks to expand operations in markets besides India (such
TABLE 3. Evaluation of Strategic Options for Ford’s Dynamic Shuttle Program
Ford’s Options Pro Con
(2) Grow concentrically from
new Indian partnership
• Ford has an established production
base here
• Local and national governments
may require a local partner or a
(3) Pursue an acquisition
• Bolt-on revenues from established
• Hard to find undervalued assets at an
• Costly “bidding war” among primary
rivals may ensue
(4) Pursue partnerships in
emerging markets
• Relatively low cost of entry into
attractive growth segments
• Increases operating margins
• Increases market share
• Control issues
• Host governments may bar entry
• Extensive training & MIS
implementation requirements
(5) Pursue selective
• Increase both ROE & margins
risk
• Costly & time-consuming
Case 18 Teaching Note Ford Motor Company: New Strategies for International Growth
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The biggest risks for Ford remain:
nThe possibility of a stronger U.S. ($), making its domestically produced products uncompetitive in
world markets
nDemand in emerging markets such as Brazil, India, China slows due to political turmoil or adverse
events
Wrapping Up The Class
In developing regions such as India, building a local market for a Ford’s proposed Dynamic Shuttle is likely to
turn into a long-term process, involving:
nTraining and education and monetary incentives to motivate drivers and other front-line personnel to provide
superior customer service
nWillingness to collaborate with local government and industry to contribute to upgrades of local infrastructure
(transportation systems, distribution channels, Internet and e-commerce systems, store appearance, etc.).
Epilogue
On May 5, 2016, Lyft and General Motors announced, as part of their $500 million partnership, that they planned
to begin testing self-driving taxis within the next year. They were considering using a self-driving Chevrolet Bolt
for this purpose.
By August 2016, Ford had made numerous announcements of strategic and technological initiatives aimed at
auto 2.0 (shared, autonomous, electric) with real investment expenditure at both the R&D and partnership level.
Yet the stock market did not seem to care. Ford´s stock price has underperformed the S&P by nearly 20% YTD.
Case 18 Teaching Note Ford Motor Company: New Strategies for International Growth
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Tables 4 and 5 provide recent financial information on Ford Motor Company.
Meanwhile, the world´s largest and most technologically advanced tech firms were directing vast sums of
investment and strategic focus on disrupting nearly every aspect of the industry that Henry Ford created 100
vehicle procurement and eet management.
Jonas, A and Jain, P. (2016, August 17). Ford Motor Company: Autonomous Goal Addresses Challenges of
Investor Attraction, Morgan Stanley Equity Research.
TABLE 4. Ford Motor Company (U.S.) as Reported Quarterly and Annual Income Statements,
2013 – 2016 (millions except per share amounts)
Report Date
06/30/2016
2nd Quarter
03/31/2016
1st Quarter 12/31/2015 12/31/2014 12/31/2013
Automotive revenues $36,932 $35,257 $140,566 $135,782 $139,369
Financial services revenues 2,553 2,461 8,992 8,295 7,548
Total revenues 39,485 37,718 149,558 144,077 146,917
Automotive interest income &
other income (loss), net 389 404 1,188 76 974
Financial services other
income (expense), net 82 91 372 348 (348)
Equity in net income (loss) of
Weighted average shares
outstanding - basic 3,973 3,970 3,969 3,912 3,935
Weighted average shares
outstanding – diluted 3,997 3,996 4,002 4,045 4,087
Year end shares outstanding 3,902 3,973 3,970 3,956 3,944
Case 18 Teaching Note Ford Motor Company: New Strategies for International Growth
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TABLE 5. Ford Motor Company (U.S.) as Reported Selected Balance Sheet Data, 2013 – 2016
(millions)
Report Date 12/31/2015 12/31/2014 12/31/2013
Cash & cash equivalents $14,272 $10,757 $14,468
Marketable securities 20,904 20,393 22,100
Receivables, net 101,975 101,975 101,975
Total liabilities and s/h equity 224,925 208,527 202,026
Source: Mergent Online, accessed September 27, 2016
