Ford Motor Company
International Business Strategies of Company
By Kiran Toshniwal PGDM-B Roll No-62 Submitted To Prof. C. P. Joshi
The Company name: Ford Motor Company Founded in 1903 by Henry Ford the company has constantly remained under family ownership since the time of its establishment. It’s an American Multinational automaker headquartered in Dearborn, Michigan, suburb of Detroit. The company manufactures and distributes automobiles across six continents. It also provides financial services through Ford Motor C redit. The company's key automotive vehicle brands include Ford and Lincoln. Ford primarily operates in North America, Europe, Asia Pacific, South America, and the Middle East and Africa. Company Objectives are:
1
“Enable better communication and full engagement on sustainability across the enterprise
Achieve alignment on Ford’s Integrated Sustainability vision across business units and functional skill teams, looking for best practices and efficiencies
Inventory sustainability initiatives across business units and functional skill teams and determine where to go further Establish a global integrated sustainability operating system.”1
Company Strategies are:
The strategic priorities of our One Ford plan are to:
Ensure our company is structured to operate profitably at the current demand and changing model mix Accelerate the development of new products, services and experiences that customers want and value
Finance our plan and maintain a strong balance sheet
Work together effectively as one team, leveraging Ford’s global assets
Company products and Services:
The company's operating activity consists of two operating sectors: automotive and financial services. Within the automotive business, the company is engaged in the design, development, manufacture, sale, and service of cars, trucks, and service parts. The company's automotive business is organized into four operating segments: North America, Europe, Asia Pacific, South America, and the Middle East and Africa. Segment
Product/Services
Automotive
Cars Trucks Buses SUV Luxury Vehicles Renting and Leasing services
Financial Services
Wholesale Financing Retail Financing
Key Milestones: Years
1903 1904
Milestones Ford Company Established. First Model of car Model A
1908
Starts its first International Plant outside U.S. in Canada. Introduced Model-T, shut down its production in 1927 after selling 15Million units. Opens First foreign sales branch in Paris.
1917
Introduced first Truck-Model TT
1922
Ford Acquires Lincoln Motor Company
1938
Ford Introduced Medium priced Mercury Brand
1941
Begins Production of Jeeps for U.S. Military
1948
Introduced F-series Line of Trucks
1956
1959
Ford Becomes Publicly traded company Financial Services arm- Ford Motor credit company LLC was founded
1976
Ford Europe- Introduces Ford Fiesta
1990
Enters SUV Segment with model Explorer Acquired Jaguar Cars
1994
Acquired Aston Martin
1995
Started its operation in India through Ford India Limited
1999
Purchased Volvo Car of Sweden
2004
Introduces GT premium Sports car
2007
Sold Aston Martin and retained just 8% stake in the company
2008
Sold Jaguar and Land Rover to Tata Motors
2010
Sold Volvo Car segment
2011
Discontinued Mercury Brand to focus on Ford and Lincoln
Current active brands:
Brand
Country of origin Years used/owned
Markets
Ford
United States
1903 –present
Global
Lincoln United States
1922 –present
North America, Middle East
Troller Brazil
2007 –present
Brazil
Subsidiaries and Joint Ventures of Ford Motor Company
1. Ford Lio Ho Motor Company Ltd. (“FLH”) — a joint venture in Taiwan among Ford (70% partner), the Lio Ho Group (25% partner), and individual shareholders (5% ownership in aggregate) that assembles a variety of Ford and Mazda vehicles sourced from Ford as well as Mazda. 2. Ford Sollers Netherlands B.V. (“Ford Sollers”) — a 50/50 joint venture between Ford and Sollers OJSC (“Sollers”), in which Ford has control. The joint venture primarily is engaged in manufacturing a range of Ford passenger cars and light commercial vehicles for sale in Russia . 3. Ford Vietnam Limited — a joint venture between Ford (75% partner) and Diesel Song Cong One Member Limited Liability Company (a subsidiary of the Vietnam Engine and
Agricultural Machinery Corporation, which in turn is owned by the State of Vietnam represented by the Ministry of Industry and Trade) (25% partner). 4. Auto Alliance (Thailand) Co., Ltd. (“AAT”) — a 50/50 joint venture between Ford and Mazda that owns and operates a manufacturing plant in Rayong, Thailand . 5. Changan Ford Automobile Corporation, Ltd. (“CAF”) — a 50/50 joint venture between Ford and Chongqing Changan Automobile Co., Ltd. (“Changan”). CAF currently operates five assembly plants, an engine plant, and a transmission plant in China where it produces and distributes an expanding variety of Ford passenger vehicle models. 6. Ford Otomotiv Sanayi Anonim Sirketi (“Ford Otosan”) — a joint venture in Turkey among Ford (41% partner), the Koc Group of Turkey (41% partner), and public investors (18%) that is a major supplier to us of the Transit, Transit C ustom, and Transit Courier commercial vehicles and is our sole distributor of Ford vehicles in Turkey. 7. Getrag Ford Transmissions GmbH (“GFT”) — a 50/50 joint venture with Getrag International GmbH, a German company. GFT operates plants in Halewood, England; Cologne, Germany; Bordeaux, France; and Kechnex, Slovakia to produce, among other things, manual transmissions for our Europe business unit. 8. JMC — a publicly-traded company in China with Ford (32% shareholder) and Jiangling Holdings, Ltd. (41% shareholder) as its controlling shareholders.
Annual Sales and Revenues:
The company recorded revenues of $149,558 million during the financial year ended December 2015 (FY2015), an increase of 3.8% over FY2014. The operating profit of the company was $10,518 million in FY2015, as compared to an operating profit of $3,336 million in FY2014. The net profit of the company was $7,373 million in FY2015, as compared to a net profit of $1,231 million in FY2014.
Country and continent Wise:
Revenue:
Ford's operating activity consists of two sectors, automotive and financial services, which are further divided into six reportable segments. The automotive sector includes five segments: North America (61.4% of the total revenues in FY2015), Europe (18.8%), Asia Pacific (7.2%), South America (3.9%), and Middle East & Africa (2.7%). The financial services segment contributed 6% of total revenues during FY2015.
Revenue $100,000.00 $90,000.00 $80,000.00 $70,000.00 $60,000.00 $50,000.00 $40,000.00 $30,000.00 $20,000.00 $10,000.00 $0.00
$91,870.00
$28,170.00 $5,766.00 North America
South America
$4,005.00 Europe
$10,755.00
Middle East Asia Pacific and Africa
Automotive Automotive Automotive Automotive Automotive
ROI:
$8,992.00
All Financial Services
Employment Data:
Analysis and conclusion:
From above graphs, it can be seen that company derives most of its revenue from North America region. Though sales in north America over the last three years has remained same without any significant increase. Company has lost its sales by 29% is South America region. Ford did not have really captured Middle east and Africa and ASIA pacific region so it has opportunity to increase its position in these regions. Country Entries:
Region South America
North America
Europe
Country
Entry Year
Exit Year
Entry Strategy
Argentina
1913
Wholly owned Subsidiary
Brazil
1967
Assembly
Canada
1904
Wholly owned Subsidiary
Mexico
1964
Assembly
US Belgium
1903 1964
2014
France
1973
2011
Middle Asia Pacific
Started its operation by setting up an assembly plant.
Germany Romania
1924 2008
Joint Venture
Russia
2011
Joint Venture
Spain
1976
Assembly
Turkey
1982
Joint Venture
UK
1953
Joint Venture
South Africa
1964
Wholly owned Subsidiary
Venezuela
1962
Assembly
Australia
1926
China
2001
Joint Venture
India
1995
Wholly owned Subsidiary
Japan
1931
Wholly owned Subsidiary
Philippines
1913
Assembly
Taiwan
1972
Joint Venture
Thailand Vietnam
1976 1997
Joint Venture Joint Venture
2016
Company’s Global Strategy:
Ford through its ONE Ford Plan has tried to implement its growth and renewal strategies. Growth strategy-Accelerate development of new products to suit customers want and value; Finance plans and improve balance sheet; and work together effectively as one team, leveraging the company’s global assets are some of the major steps taken by the company in recent years.
Concentration- Ford has delivered consumer friendly, highly fuel efficient and innovative vehicles, most of the time and concentrated on quality over quantity. Vertical integration – The ford motor credit company provides automobile loans in support of its parent company. The company offers consumer loans and leases to car buyers, as well as business loans and lines of credit to dealerships selling Ford Motor Company products. The firm also issues, commercial paper and other debt instruments on Ford's behalf. In this way, the company has achieved dual objectives, it has become its own suppliers as well as distributors, thus achieving forward and backward vertical integration at the same time. Horizontal integration- Ford’s competitors are themselves some of the oldest automobile companies, like Chrysler and general motors. Hence any kind of collaboration was simply not possible as these companies know it better to resolve the crisis by other means possible. Diversification- Ford has combined with Aston Martin, a sports car manufacturer, a company which is different but related. Hence a related diversification can be seen here.
Stability strategy- Since its inception, one of the most remarkable achievements of ford has been its constant focus on the production of highly fuel efficient vehicles. Ford’s global vehicles
showcase their commitment to fuel efficiency. Technologies like Eco Boost®, direct injection of gasoline or diesel fuel, six-speed transmissions, and hybrid and plug-in hybrid powertrains are some of the innovations in this regard. Global Competitors:
1. Fiat Chrysler Automobiles N.V. 2. General Motors Company 3. Honda Motor Co., Ltd. 4. Hyundai-Kia Automotive Group 5. Nissan Motor Co., Ltd. 6. PSA Groupe 7. Renault-Nissan B.V. 8. Suzuki Motor Corporation 9. Toyota Motor Corporation 10. Volkswagen AG Challenges Company Faces: 1. Currency exchange rate Volatility-The interest rate hike by U.S. federal reserves has
resulted in downward pressure on several emerging market currencies. In some cases, that pressure is aggravated by low commodity prices, high inflation, or unstable policy environments. Additionally, the weak yen, in particular, adds significant potential downward pressure on vehicle pricing across many markets globally. In most markets, exchange rates are market-determined, and all are impacted by many different macroeconomic and policy factors, and thus likely to remain volatile. 2. Pricing Pressure-Excess capacity, coupled with a proliferation of new products b eing introduced in key segments, will keep pressure on manufacturers’ ability to increase prices. 3. Increase Sales of Smaller vehicles-the emerging markets like brazil, china and India demand smaller vehicles. To increase participation in these markets Ford will have to increase production of small vehicles. This increasing sales will add positively to company’s margin but with the average margin per unit will decrease as small vehicles tend to have lower margins.
4. Strict Standard of Co2 Emission is increasing the manufacturing cost to produce engines.
Recommendations:
Ford motor is the leading US auto motor who tried to sustain its leadership and its market position with effective strategies to match the market requirements and needs. It updated its products with latest technology gadgets and equipped its products with the latest ones. After conducting the indepth analysis of the company’s success factors, revamped processes, following are the recommendations for the Ford Motors that can help the company to leverage its market position and sustain profitability:
Short term: Minimize excess capital, try to reduce debts, cut inventories and reduce days of sales receivables. Sell off undeforming assets to increase cash while weathering storm
Long term: Continue to improve factory flexibility. Continued investment in h ybrid technology, R & D will position Ford better to compete with close competitor such as Honda and Toyota. Expansion in ASIAN and Middle East Market Adopt more aggressive version to current restructuring and cost improvement. Continue high level of product development into alternative fuel technology. Emerging markets purchasing synergies.
Learning:
Real life company analysis done to understand how they have expanded in the International Business. Country Entry Strategies used by firms from time to time to enter into the market and expand current business footprint. Read through Annual Reports of Company and analyzed different business parameters to determine performance of a company. Studied business of company country wise, trade block wise, revenue generation and employee nationality wise. Analysis different strategies applied by companies like Corporate level strategies, Genetic Strategies, Market Development and Diversification Strategies. Analysis of the challenges faced by company today in operating and expanding in International Markets and suggestions and recommendations to improve upon business model with changing time.
References:
1.
http://corporate.ford.com/content/dam/corporate/en/investors/reports-andfilings/Annual%20Reports/2015-Annual-Report.pdf
2.
http://ophelia.sdsu.edu:8080/ford/12-10-2010/about-ford/global-operations.html
3.
http://corporate.ford.com/homepage.html
4.
https://en.wikipedia.org/wiki/Ford_Motor_Company