By: Ed Zielonka, Bill McCann, Matt Gaynor, Zach Metcalfe, and Garrett Hasanbasic

INTRODUCTION

Introduction

Ford Motor Company is a global automotive industry leader based in Dearborn, Michigan Manufactures and distributes automobiles across six continents Includes Lincoln & Mazda 2nd largest automaker in the U.S. 5th largest in the world based on annual vehicle sales in 2010 118,308,000 in Revenues & 2,717,000 in Profit 2010

Introduction Cont.

Competitors GM, Toyota, and Honda Products Automobiles Automotive parts Services Automotive finance Vehicle leasing Vehicle service

History

Founded by Henry Ford 1903: Ford Motor Company was incorporated 1908: Ford introduces the Model T 1913: First moving assembly line and making Model T production 8 times faster. 1964: Ford Mustang and Ford GT40 was introduced as super cars. 1975: The famous Ford F150 was introduced.

History Cont.

1990: Ford Explorer was introduced as sport utility vehicle 1993: Ford opens its first dealerships in China. Its brand sales in China increased 46 percent in 2005. 2001: Ford Motor Company recalls 13 million tires and Bridgestone/Firestone dumps Ford as a customer 2006: Alan Mulally hired as new CEO to try to revive the company

Key Executives

William C. Ford Jr., Executive Chairman

Alan R. Mulally, President & CEO

Lewis Booth, Chief Financial Officer

Fords Mission Statement

ONE FORD MISSION:

ONE TEAM:

People working together as a lean, global enterprise for automotive leadership, as measured by: Customer, Employee, Dealer, Investor, Supplier, Union/Council, and Community Satisfaction Aggressively restructure to operate profitably at the current demand and changing model mix Accelerate development of new products our customers want and value Finance our plan and improve our balance sheet Work together effectively as one team An exciting viable Ford delivering profitable growth for all.

ONE PLAN:

ONE GOAL:

Expected Behaviors

SITUATION ANALYSIS

Industry Analysis

U.S. consists of 13 international automakers together produce 5.7 million cars and commercial vehicles (9% of global output) China surpassed North America in 2009 with 13.8 million units Laws and government regulations have affected the automotive industry
Emissions Safety MPG

Industry Analysis

New Marketing
Demand from consumers Technology Advances Different Age Focus

Automotive industry one of the largest employers in the country

Represents 4% of GDP in the nation

Competitors

General Motors Honda Toyota

General Motors

Founded September 27, 1908 Headquartered in Detroit, Michigan Products are automobiles and financial services

209,00 employees

Honda

One of Fords largest competitors Founded September 24, 1948 Headquartered in Tokyo, Japan

Currently manufacture 13 different products

Toyota

Founded August 28, 1937 Headquartered in Aichi, Japan Products are automobiles and financial services 317,734 employees

Market Analysis

China
Top auto market with 1.37 billion people and growing affluence This market is growing at a rate of 30.45% year on year growth to 7.18 million units during the first six months of 2010

Europe
Electric and hybrid cars are really taking over this market About 10% of new cars sold globally are either hybrids or electric cars

Market Analysis

Electric cars
Automakers are looking to develop newer electric cars powered by batteries, the sun, or hydrogen fuel cells Automakers are also looking for new ways to secure the power to refuel these newer cars on a national scale

Current Status (China)

Over the first half of 2010 Ford sold 301,524 units Resulted in a 53% growth in sales The Ford Fiesta was a popular model with the younger generation in China

Also helped Ford gain market share

Chart
World Motor Vehicle Rankings by Country (Million Units Produced)
16 13.8

14 11.95 10.8 10 8.88 8 8.71 10.78 9.25

12

11.6

11.56

Us
7.93

China
6 5.71 5.71 4

Japan

0 2005 2007 2008 2009

Current Status (Electric Cars)

Plans to launch a new electric Ford Focus sedan and the Ford Transit Connect commercial van Retooling North American truck plants to be used to produce

Current Status (Europe)

Has a weak marketing strategy Focus on developing more fuel efficient cars and developing the Focus and Transit vehicles

Ford Drive ONE!

Porters Five Forces

Used for industry analysis and business strategy. Developed by Michael Porter of the Harvard Business School in 1979. Used to develop a competitive edge over rival competitors.

Porters Five Forces

Threat of New Entry Power of Suppliers Power of Buyers

Threat of Substitute
Intensity of Rivalry

Threat of New Entry

Low Manufacturers must be able to mass produce automobiles so they can be affordable for every consumer Extreme amount of capital is needed in order to manufacture automobiles keep up on research and development Difficult entering into established industry

Power of Suppliers

Relatively Low It takes several suppliers to manufacture an automobile because there are so many different parts used. When there are a large number of suppliers in an industry, they do not have much power.

Power of Buyers

Fairly high All of the manufacturers will depend on the consumers because they purchase most of the output Most of the revenue comes from the buyer If Ford cannot keep the consumer happy, they will lose them to another competitor

Threat of Substitute

High Other forms of transportation

Walking Riding a bike Public Transportation

Customer Loyalty Ample amount of other options in car industry

Intensity of Rivalry

Very High Most competitors have the same general focus so it makes the rivalry intense All competitors are trying to achieve same common goal Price, quality, and durability are factors that are taken into consideration to become superior to other competitors

P E S T Analysis

Political Economic Social

Technological

Political

Exchange rates of the US dollar compared to other countries Oil prices and free trade flows Foreign ownership regulations Foreign laws and regulations Labor unions

Economic

The growth potential of foreign target markets The size of potential target markets Economic development Oil price fluctuations The sales increase of Eastern European countries (Turkey, Hungary) Ford is the market leader in the UK, Hungary and Turkey

Social

Geographical changes Consumer attitude Travel habits of consumers Cut on personnel and jobs

Technological

Supply chain collaboration Fords operational capability Technological improvements in distribution Product development

External SWOT Analysis

Opportunities

Threats

Opportunities

Customers demand for more fuel efficient cars Fords investment in the Solar Power industry The Way Forward Plan The European and Chinese markets Release of the 2011 Ford Fiesta

Threats

Rising new material prices Increasing competition The war on terrorism and its overall threat to the world market and economy The economy Rising oil prices Housing market decline

INTERNAL ANALYSIS

Corporate Culture

Second largest car manufacturer in the world Widely know for its vehicle service for its customers Large emphasis on customer first and customer satisfaction Areas served are worldwide Ford has invested $50,000 to help hundreds of Ford volunteers complete urgent projects identified by the company's nonprofit agency partners.

Current Mission
1.) Aggressively restructure to operate profitably at current demand changing model mix. 2.) Accelerate the development of new products our customers want and value. 3.) Finance their plan and improve their balance sheet. 4.) Work together effectively as one team which emphasizes the importance of working together as one team to achieve automotive leadership , which is measured by the satisfaction of our customers, employees and other essential business partners, such as our dealers, investors, suppliers, unions/councils and communities.

Industry Rankings
Ranking Automake Jan. r 2010 Sales Jan. 2009 Year to Sales Year % Change (unadjust ed) Year to Jan. 2010 Year % Market Change Share (adjusted )

1
2 3 4 5 6

GM
Ford Toyota Honda Nissan Chrysler

146,825
112,406 98,796 67,479 62,572 57,143

129,227
90,596 117,287 71,081 53,884 62,157

+13.6
+24.1 -15.8 -5.0 +16.1 -8.1

+23.1
+34.4 -8.7 +2.9 +25.8 -0.4

20.9%
16.7% 14.1% 9.6% 9.0% 8.1%

Hyundai Group

52,626

46,608

+22.3

+12.9

7.6%

Ford Financial Performance

Revenues Gross Margin % Earnings per share

2006 (160,065,000)
2007 (168,884,000) 2008 (143,584,000) 2009 (116,283,000) 2010 (128,954,000)

2006 (7%)
2007 (16.9%) 2008 (11.8%) 2009 (15.5%) 2010 (19%)

2006 (-6.72)
2007 (-1.32) 2008 (-6.46) 2009 (0.86) 2010 (1.66)

BCG Matrix

In the matrix there are four quadrants. These quadrants are the Dogs, Question Marks, Stars, and Cash Cows.

The Dog quadrant describes parts of the company that are not doing well The Question Mark quadrant deals with the parts of the company that have low market share but are growing Stars are the part of the matrix where there is high relative market share and high market growth Cash Cows are the most desirable market segment. These divisions have a high relative market share and low market growth

BCG Matrix
Relative Market Share

High

Low

Market Growth Rate

Stars

Question Marks

Cash Cow

Dogs

Low

CEO Book
Ford sales during the last year Recorded revenue of $128.954 billion in fiscal year 2010 Net Income of $6.561 Billion Operating Income of $7.149 Billion Total sales grew by 15.2 % Increased market share for 2nd consecutive year Inventory Velocity is 21 Return on assets is 4%

Ford and their competitors

As of 2010, Fords net profit margin was 6.56 Billion

Honda net profit margin=3.8 Billion Toyota net profit margin=5.2 Billion

General Motors net profit margin=4.7 Billion

Profit Margin

2006

5.98 Billion
6.23 Billion 6.12 Billion 6.21 Billion 6.56 Billion

2007

2008

2009

2010

Effects on Profit Margin

Ford started to hire more employees

Ford must increase prices

There have been new implications for strategy

Cash Flow & Competition

Increased revenues 48.7%

Revenues have continued to increase Ford is the second largest automotive maker in the United states

Internal SWOT Analysis

Strengths

Weaknesses

Strengths

Producing Hybrid vehicles Brand recognition Profitable financial services division (Ford Motor Credit) Manufacturing facilities in more than 30 countries Wide Range of Products targeting all customer classes

Weaknesses

Weakening North American automotive operations Recalls Sales in trucks decreasing rapidly Firing of Employees

Current Strategy

Use free cash flow to pay off significant amounts of debt Truck/car sales mix transitioned to 48%/52% from 54%/46% Sell off preferred securities to reduce $2.98 billion in outstanding principal, and decrease interest on debt by 190 million a year

Reduce debt, generate free cash flow

Sold off Jaguar, Land Rover, Mercury, and Volvo

STRATEGIC ANALYSIS

Key Strategic Issues

Strategic Issues of the Economy

Fuel Prices Better marketing strategies for automobiles Finding ways to lower emissions The US government and automobile companies have agreed on a long term fuel efficiency plan Better quality and safety

Strategic Issues of the Industry

Finding ways to attract customers in a struggling industry Expanding into other markets that offer a greater potential (ie. China and Europe) Finding a way to build more fuel efficient vehicles (ie. Hybrid and Electric vehicles) Separating themselves from competitors through the use of marketing and new innovations

Strategic issues for Industry

Auto industry has faced shortages of engineers U.S. industry must add thousands of carmakers to build fuel-efficient vehicles to meet more stringent federal regulations and growing consumer demand. The nations auto sector has added a total of 32,000 employees 1,000 of which are engineers Threat of industry wide bankruptcies Fuel efficiency standards are placed on 2012 models

Competitors - Toyota

In January 2010 Toyota announced it would temporarily stop building and selling eight models in the North American market Toyota recalled more than 11 million vehicles globally because of floor mats and sticky accelerator pedals in late 2010 Toyota was issued three fines totaling $48.8 million because the Transportation Department said Toyota had not reacted appropriately to reports of problems

Competitors - GM

GM was forced into bankruptcy court in March 2009 In July of 2009 GM sold off its assets to a government owned company and the US government now owns 61% of the new company

This creates an opportunity for Ford to capitalize on a company that is not financially stable

Competitors - Honda

Recalls on 2,800 Odyssey mini-vans due to defect in front windows coming off the tracks New Odyssey mini-vans re-called 33,000 models due to faulty windshield wipers Third highest automaker involved in recalls in the U.S. last year second highest in Japanese market Struggles through the effects of the earthquake, tsunami, and nuclear meltdown

Competitors Honda Cont.

Increased pressure from U.S., South Korea, and European competitors Honda lagged 12 points behind industry average of J.D. Power APEAL (Automotive Performance, Execution and Layout) Introduction of new line of cars will be delayed due to March 11, natural disaster

Ford Strategies in the Past

Ford used to have a very corporate orientated strategy, but now focus on specialized product production and meeting specific needs of the consumer Ford used to imply a mobility strategy that worked to determine the long term profitability of the company but has altered that strategy since the recession

Ford Strategies Now

Ford is making more hybrid vehicles through the increase use of renewable and recyclable materials Ford is developing natural-fiber composites as a potential substitute for the glass fibers traditionally used in plastic car parts to make them stronger while reducing vehicle weight Ford has developed a very strong sustainability strategy

Ford Strategies Now Cont.

Ford is beginning to use Solar energy to power their manufacturing plants Global Electrification strategy Ford has a strategy on new key design Ford has a very strong marketing strategy as they market all of their vehicles differently

TOWS Chart

Uses the SWOT matrix to develop specific strategic options for your company The components of the SWOT are matched, and strategies are developed to address them SO , WO, ST, AND WT

TOWS Charts
Strengths 1. Producing Hybrid vehicles 2. Brand recognition 3. Profitable financial services division (Ford Motor Credit) 4. Manufacturing facilities in more than 30 countries 5. Wide Range of Products targeting all customer classes Weaknesses 1. Weakening North American automotive operations 2. Recalls 3. Sales in trucks decreasing rapidly 4. Firing of Employees

TOWS Charts TOWS Charts

Opportunities 1. Customers demand for more fuel efficient cars 2. Fords investment in the Solar Power industry 3. The Way Forward Plan 4. The European and Chinese markets 5. Release of the 2011 Ford Fiesta Threats 1. Rising new material prices 2. Increasing competition 3. The war on terrorism and its overall threat to the world market and economy 4. The economy 5. Rising oil prices

TOWS Combinational
1.

2.

SO Strategy Focuses: Continue marketing and research & development of hybrid cars(S1,O1, O2) Consolidate more in European and Chinese markets (S4, O4)

1.

2.

ST Strategy Focuses: Continue marketing and research & development of hybrid cars (S1,T4,T5) Improve fuel consumption (S1,T4,T5 )

TOWS Combinational

1.

2.

WO Strategy Focuses: Continue Research and Development of Hybrid Cars (S1,W2) Reduce recalls in newer products (W2, O2)

1.

2.

WT Strategy Focuses: Increase incentives for customers. Examples: mileage warranties (T2,W1) Reduce threat of competition by developing flexible product line(T2,W3)

Ansoff Matrix

Purpose is to use this matrix to increase sales of a companys current products without adjusting it in the existing market.

The four main quadrants are market penetration, market development, product development and diversification.
These four major classifications are in the new markets and existing markets.

Ansoff Matrix
Existing Product
Market Penetration Existin Discount vehicles g and focus and Market advertise for the company. Market Development Target the internet as prime source for marketing.

New Product

Product Development New range development.

New Market

Diversification Develop new line of cars.

Identification of Strategic Alternatives

Overarching Strategy

Expand Globally, while mass producing hybrid technology (Aggressive) Continue to compete in automotive market, while focusing on core profitable products (Passive)

Expand Globally

Develop a plan:

Expand into different market segments

China Europe

Stronger Marketing campaign Brand Awareness in foreign markets

Focusing On Core Products

Develop a plan:

Slim down to grow

Getting

rid of weakest brands and using that money to invest into new product development and marketing

Separate the companys slow-selling secondary brands, and concentrate on shoring up its core business.

RECOMMENDATION S

Strategic Intent (Goals)

Increase total sales in European Auto Industry. Become industry leader in the Chinese market. Pass General Motors and become the highest ranked company in the US automobile market

Expanding Globally Pros

Larger market potential, increase in sales Better brand recognition Access to different economies of scale Extend product life cycle by reaching larger markets Operational flexibility

Expanding Globally Cons

Foreign economies are all structured differently Labor in foreign countries Lack of brand recognition Low customer loyalty Higher marketing costs

Slim Down to Grow Pros

More room to focus on specific products Easier to market to certain economies Less costs associated with product development Better chance of financial safety

Slim Down to Grow Cons

Loss of highly-skilled and reliable workers and the added expense of finding new workers An increase in overtime wages A decline in customer service because workers feel they lack job security after layoffs Restructuring programs sometimes take years to complete because of ensuing employee confusion and the amount of time it takes for employees to adjust to their new roles and responsibilities

Preferred Choice

Expand Globally, while mass producing hybrid technology (Aggressive)

Arguments for Preferred Choice

Car ownership in China has more than doubled in the last five years, from 12% of households in 2004 to 28% in 2009 Report show that it's possible for China's percentage to top 50% by around 2015. Chinese have become less sure about their preferences, leaving a large group of undecided customers European market has increased demand for fuel efficient compact cars

Projections
Globally Expansion

Grow customers by 20% annually Increase number of dealerships by 10 per year

Market Expansion (China)

Annual Objectives - Year 1

Total Cost: 1.2 billion (China)

Franchise: $500,000+ Technology Investment: 750 million Operating Cost: 400 million Unforeseen Cost:1.5 million

Total Earnings: 3.5 billion

Annual Objectives - Year 2

Total Cost: 1.2 billion (Europe)

Franchise: $500,000+ Technology Investment: 750 million Operating Cost: 400 million Unforeseen Cost:1.5 million

Total Earnings: 3 billion

Annual Objectives - Year 3

Total Cost: 1.7 billion

Technology Investment: 750 million Operating Cost: 800 million (400 China/Europe) Unforeseen Cost:1.5 million

Total Earnings: 7.5 billion

Europe Market: 3 billion China Market: 3.5 billion

Implementation

Increase Research and Development of Hybrid energy

Joint venture with energy companies Help to develop longer lasting fuel supplies

Increase Foreign market share

China Europe

Technology!

Trigger/Contingency-1

Trigger: Unstable economy Contingency Plan:

Reduce lower selling models/product lines to maintain profitability Downsize work force to generate operating cash

Trigger/Contingency-2

Trigger:

Natural disaster

Affects gas prices Affects production in foreign sectors Contingency Plan:

Develop partnership with relief organizations Donate F150s (help brand awareness)

Mission Statement Revision

ONE FORD MISSION: ONE TEAM:

People working together as a lean, global enterprise for automotive leadership, as measured by: Customer, Employee, Dealer, Investor, Supplier, Union/Council, and Community Satisfaction Aggressively restructure to operate profitably at the current demand and changing model mix throughout the world Accelerate development of new products our customers want and value Finance our plan and improve our balance sheet Work together effectively as one team to manufacturer the safest possible vehicle An exciting viable Ford delivering profitable Strive to be the safest automobile manufacturer in the world along with providing consumers with eco friendly vehicles.

ONE PLAN:

ONE GOAL:

ONE WORLD:

QUESTIONS?