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Subject Business Strategy

1) Define and discuss Ford's business-level strategy

Henry Ford began a family automobile business in 1903; this was during the industrial revolution. This
business has become the most famous automobile brand in the world. Over the years the business
structure had adapted to changes in leadership, markets trends and the economic conditions. The Ford
family still controls the company through multiple voting shares, even though it owns a much lower
proportion of the equity

Ford's business level strategy is to produce automobiles and light trucks at the mass market level, all
around the world. This orients the company to a cost leadership strategy, but Ford also attempts to
differentiate as well. This split tactic is common in industries characterized by monopolistic competition,
as is the case in the automobile industry.

The company supports this in a number of ways. Ford has a global manufacturing strategy, which
includes building plants with similar layouts, increasing flexibility in the production process, being able
to supply parts globally and increasing standardization. Each of these tactics supports lowering
production costs while increasing production quality. The company has shifted emphasis on innovation
marketing so that the most innovative new features are launched first on the low-end models (Henry,
2010), again signalling that while Ford pursues cost leadership, it also pursues differentiation.

Monopolistic competition forces Ford into this position. The automobile market is one that is highly
segmented. Firms in the industry work with the same basic product concepts, but within those concepts
have a tremendous amount of leeway with respect to architecture, design, features, performance and
price. As a result, differentiation is an inherent feature of the market, even at the lowest-cost segments.
Not all of Ford's products are in the cost leadership category. Its trucks, for example, are oriented
towards differentiation. The high end of the truck market is relatively mass market compared with the
high end of the car market, which allows Ford to pursue a differentiated strategy in trucks even though
it cannot do the same in cars.

The fact that Ford must pursue cost leadership and differentiation simultaneously is one of the most
difficult strategic issues facing the company. Cost leadership inherently leads to production
standardization, yet the differentiated strategy leads to more expensive products and decreased
standardization. That Ford is compelled to differentiate and then not charge extra for its differentiations
makes the automobile industry a difficult one in which to operate.

2) How can the company's value-chain activities be better linked to create value for the
company?

Ford is an interesting company in that it has significant control over all elements of its value chain, and
all elements contribute to the firm's success. There are tight linkages, and in general the tighter those
linkages become, the more success Ford will have.
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Subject Business Strategy

For example, it has long been speculated that one of the reasons why Ford has seen its market share
decline over the past few decades is because it is out of touch with the needs of consumers. Linking
consumer research, a component of the marketing and sales part of the value chain to product
development and ultimately back to inbound logistics, will allow Ford to create products that appeal
more to consumers. The needs of consumers, in particular with respect to quality, can be translated
more directly to specs issued to Ford's OEM suppliers. This increases quality, which will improve the
service function.

Ford's outbound logistics and service functions are also inextricably linked, since they are at the same
site (the dealership). Ford has at times had contentious relations with its dealers, which has harmed

both of these facets of the value chain. Strengthening dealer relations will improve the company's
outbound logistics and its service function as well.

3) In what ways can the company effectively manage customer relationships to increase
strategic competitiveness?

Ford can do little with respect to barriers to entry. Governments in many countries lend support to
domestic automakers in order to help them overcome barriers, and eventually most of these companies
will compete against Ford. Where Ford can position itself to take advantage of industry forces is with
respect to pricing power. The company should have high bargaining power over its suppliers. Ford is one
of the world's largest automakers, and many of its suppliers are dependent on Ford's business to
survive. This improves Ford's bargaining power, which if leveraged can support a cost leadership
strategy.

Ford’s customer management strategy also increases the value of the existing customer and the overall
efficiency of the company. The main goal is to help businesses in marketing the products and services as
well as in improving the relationship with the customers. It is ideal to hire their services if you want to
make your business successful. They know how to find profitable customers and how to deal with them.
This should allow Ford to innovate and make pricing decisions that are not directly replicated. Firms in
monopolistic competition often behave like monopolies in the short run, something that Ford will need
to do to improve its bottom line. Eventually any tactic Ford adopts will be mirrored by its competitors,
but the increased competition allows for Ford to implement strategy and not receive a direct and
immediate response from its competitors

4) 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?

Directly competing against Ford is a large number of companies both domestic and international. Firms
such as General Motors and Chrysler are direct competitors with similar cost structures, although their
bankruptcies last year may change the nature of competition from these two firms. Foreign competitors
include Honda, Toyota, Mazda, Hyundai, Kia, Mitsubishi and others. The Japanese firms tend to be more
differentiated than Ford but retaining cost structures still in the mass market range. The Korean
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Subject Business Strategy

manufacturers tend to compete more in the low-cost segment. Most of the Asian companies have
strong government and institutional support in their home countries. European automakers also
compete against Ford, and they tend to adopt a differentiated strategy, even more so than the Japanese
automakers

In Ford's situation, the large number of competitors and the relatively high intensity of rivalry implies
that consumers are going to be price sensitive. Pricing information is readily available for all automobile
products, which means that prices are going to be driven down. Indeed, competitors' behaviour gives
other firms in the industry additional insight into consumer behaviour, and this has a tendency to lead to
price wars (Ibid). This may be the result of an overreaction to the tendency of firms in intense rivalries to
focus on the rivalry more than consumer behaviour. For Ford, focusing on consumer behaviour rather
than on the rivalry may yield better outcomes. Consumers are going to have high price sensitivity and
because differentiation is important in this industry as well, consumers will also seek out a degree of
differentiation even at the lowest price points.

5) What role will strategic leadership play in helping Mullaly and the organization meet its
strategic objectives?

Strategic leadership will be critical for Ford to deal with its issues. The company's structure and
operations are complex, and Ford can derive competitive advantage from every part of its value
chain. This will required Mullaly to have tremendous vision, to see the different linkages and
know how to improve them.

Given its relatively weak financial position and poor brand image, Ford does not have much
leeway with respect to its performance improvement efforts. The company needs to be
successful in its strategy, and this will require it to focus on a handful of the most effective and
achievable strategic objectives. Where Mullaly can improve this process is by setting these
objectives, and ensuring that each objective set fits with the company's overall strategy.

In addition, Mullaly needs to be able to see these strategies through. This may be the most
difficult part of the turnaround, given that Ford has been so close to failure for a while now. The
corporate culture may prove to be an impediment to change as well. Mullaly will need to keep
the company focused on the strategic objectives and outline the different tactics that will bring
the company to its objectives. The plan must also be long-term in nature, so that it can be built
upon at a later point. For Mullaly, setting the company on a different course will not be easy. He
must have strong strategic leadership with vision and the ability to change whatever parts of the
organization -- structure, culture, focus -- that need to be changed. He will need to achieve
organizational buy-in for his plans as well, if they are to succeed.