CASE STUDYOn

FORD

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2008 Case Study

INTRODUCTION

American multinational corporation based in Dearborn, Michigan, a suburb of Detroit.

Distributes automobiles across six continents.

About 213,000 employees and about 90 plants

Worldwide

Wide variety of product line3

Brief History

The Dream Becomes a BusinessFord Motor Company entered the business world on June 16, 1903, when Henry Ford and 11 business associates signed the company's articles of incorporation.

With $28,000 in cash, the pioneering industrialists gave birth to what was to become one of the world's largest corporations.

Ford Motor Company's beginnings were modest. The earliest record of a shipment is July 20, 1903, approximately one month after incorporation, to a Detroit physician. With the company's first sale came hope young Ford Motor Company had taken its first steps.

FORD AS A BRAND

Ford Motor Company offers a wealth of variety to the automotive consumer. As they start their second century of business, they are in a position to appeal to the widest range of potential customers. Each of their automotive brands has a unique personality and holds a distinct place in the Ford Motor Company family.

Ford and its Competitors

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FORD’s Vision

Our Vision to become the world's leading Consumer Company for automotive products

and services.

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FORD’s MissionWe are a global family with a proud heritage passionately committed to providing personal mobility for people around the world. We anticipate consumer need and deliver outstanding products and services that improve people's lives. Our business is driven by our consumer focus, creativity, resourcefulness, and entrepreneurial spirit. We are an inspired, diverse team. We respect and value everyone's contribution. The health and safety of our people are paramount. We are a leader in environmental responsibility. Our integrity is never compromised and we make a positive contribution to society. We constantly strive to improve in everything we do. Guided by these values, we provide superior returns to our shareholders.

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• Market Structure: Perfect Competition

• Largest auto market: U.S.

• 16 million vehicle in year, 22 firms

• Big Five: GM, Ford, Toyota, Chrysler and Honda

Automobile Industry

U.S. Market Share - 200815%

22%11%

11%16%

25%Other 17 Co.

Source: http://www.usnews.com

Subsidiaries

8 Brands (Ford, Lincoln, Mercury, Mazda, Volvo, Jaguar, Land Rover, Aston Martin)

13 Brands (Buick, Cadillac, Chevrolet, GM Daewoo, GMC, Holden, Hummer, Pontiac, Opel, Saab, Saturn, Vauxhall, and Wuling)

5 Brands (Toyota, Lexus, scion, Daihatsu, Hino)

4 Brands (Chrysler, Dodge, Jeep, Mopar)

2 Brand (Honda, Acura)

Ford’s Objective

• Maximum Profit• Market share growth• Technological leadership• Service leadership

STP-Methodology

• STP includes market strategy; target markets; positioning; market segmentation and target markets; market segmentation and demographics(positioning)

Methodology Adopted• Target

– Different segments based on• Age• Personality• Gender• Economic standard• Eg: Ford Mustang-Middle Aged Ford Trucks-Rugged men Ford Taurus-Family

Innovation

• Technical Research • Design planning• Financial Analysis• Intelligent vehicle

– Voice enabled– Net connected

CSR

• Motto to better the community and safetyby educating the customers: Safety seats (children) Seat Belts Environmental Cleaniness (Recyclable components,cleaner opr veh)

• Product Mix– Options available for the customer.– Customize the vehicle.

• Eg: explorer

• Services Offered– Reminders for servicing– Veh Maint– Safety Tips– Online manuals– ESP( Extended service plans)

• Protects consumer from future price rise(inflation)

– Various assitance centers– Warranty guides, offers,discounts

• Promotional Strategy – Free servicing of the radiators, brakes, battery– Extended warranty of battery– Aiding convenience to customers in cold weather

• Pricing strategy– Financing the vehicle-Under Red carpet Lease– EMI policies fitting the needs– Flexibility in payment-Under Mobility Financing– Offering whole line of pre-owned cars

Ford credit earned top ranking place in the world of automotive finance

SWOT MATRIXStrengths S1. Customer Loyalty2. Diversities 3. Total sales have remain

strong, over $150 billion 4. European Market share5. Operate in 6 continents6. Hybrid Mariner 20077. Targeting all income

classes8. Supportive to Us Govt.9. Ranked 7 in fortune 500

Weaknesses1. In efficient marketing in US2. Closing 14 MF in North

America3. Weak org structure (only white

in top mgt)4. Limited warranty of 30000

miles (competitors 100000)5. Reported year end 2009 (Loss

of $14 billion)6. Operating with $154 billion

debt(2009) GM $42 billion 7. Cut 30,000 jobs8. Poor operation declarations.

Opportunities O

1. Ford is American Company, results in Cx trustworthiness

2. Progressive in technology3. Forces Cx to return to dealer

for services4. European division Expected

to become more profitable5. Sluggish global economy

(lower prices of fuel)6. Cx desires for hybrid and fuel

efficient vehicles

7. By 2011 electronics are expected to account for 40% of an average vehicle value

8. China as vibrant market*Cx=CustomerSO=strength (oppurtunities)

WO=weakness(oppurtunities)

SO

1. Continue R&D for hybrid automobile, pure battery electric motors

2. Open new production facility in eastern Europe and china

WO

1. Focus on social marketing that will cause more support from the Govt.

2. Restructure to reduce cost of labor and raw material

Threats T

1. $ devalues against many major currencies

2. GM and Toyota offers great discounts than ford

3. Most Americans prefer foreign brands

4. United Auto Workers (Powerful union)

5. Competing in US automobile market

6. New Toyota manufacturing plants all over

7. High Inventory cost

8. Global recession

ST

1. Focus development on cutting edge. Fuel efficient automobiles

2. They should focus on more customer oriented approach rather than other

WT

1. E.E.O, should encourage black people and position them in top management

2. Should offer at least 100,000 miles warranty on all new vehicles (0 meter)

BCG MATRIX

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Ford motor credit & financingVehicle Brands

Genuine parts and

Areas Need to be Addressed

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1. FINANCIAL Ford company is continuously facing loss Ford has high debt ratios. Low return on investment.2. CUSTOMER Customers loyalty with ford Strong customer service Comparatively low market share.3. PROCESS Focusing on product approach rather than customer approach Efficient supply chain management Ineffective employment policy4. LEARNING AND GROWTH Focusing on new technology Innovate their products Strong in learning hybrid products

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Ford’s electrifications strategy

Pure battery electric vehicles

Affordability

Fuel economy solution

Planning to invest in new, smaller, fuel efficient vehicles

Ford Adapted Blue ocean strategy

Alternative Strategies

• X => R&D for Hybrid Cars

• Y => Reduce cost of labor and raw material and increase cost of warranties

• Z => Open production facilities in Eastern Europe, china and Asia

Clout on the world economy• Ford Motor Co. is marketing bonds backed by auto loans at half the relative yield it paid six

months ago and Nordstrom Inc. sold notes at its lowest rate ever as investors gain confidence that consumer spending is strengthening.

Corporate borrowers that serve US consumers are selling debt as returns on their bonds accelerate. Retailers, which lost 0.35% in March, have gained 0.83% this month through yesterday, according to Bank of America Merrill Lynch index data. Retail sales increased 1.6% last month, more than anticipated and the biggest gain in four months, raising the odds of an economic recovery.

“There is no question that the consumer is back,” said James C. Camp, managing director of fixed income at Eagle Asset Management Inc. in St. Petersburg, Florida, with $17 billion in assets under management.

•Retailers’ sales, which declined every month from September 2008 to August 2009, have rebounded as employment and consumer confidence have improved. The US economy added 162,000 jobs in March, the most in three years. The Conference Board’s confidence index rose to 52.5 last month from 46.4 in February.

• Standard & Poor’s raised its ratings on consumer cyclical companies such as retailers by a 2-to-1 margin this year, compared with 0.8-to-1 for corporate America overall, according to data compiled by Bloomberg.Nordstrom’s 10-year senior unsecured notes priced to yield 100 basis points more than similar-maturity Treasuries, Bloomberg data show. The chain initially planned to sell $350 million of the debt. In November 2007, Nordstrom sold $650 million of notes due in January 2018 at a spread of 230 basis points, Bloomberg data show. A basis point is 0.01%age point.

The largest portion of Ford’s offering of auto-loan debt is expected to pay a spread of 20 basis points to 25 basis points more than benchmark interest rates, according to a person familiar with the transaction. In its last sale of similar debt in November, Ford paid 45 basis points over benchmarks.

‘Punch Bowl’

With the US jobless rate at 9.7%, the recovery in consumer confidence become fragile, put forward by Scott MacDonald, head of credit and economics research at Stamford, Connecticut

• “There is no way the consumer can have the same dynamic impact on the US economy it did before 2008,” he said. “Unemployment is still an issue and there are still housing foreclosures. The consumer binge pre-2008 was based on borrowed money, the punch bowl is gone.”

The performance of retailers’ bonds compares with a gain of 0.86% this month through yesterday for US investment- grade debt, following a 0.35% return in March, according to Bank of America Merrill Lynch index data.

Questions

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