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Strategic Planning: Ford Motor Company
Planning is an essential process in today’s organizations. Based on the three types of managers: top-level (strategic managers), middle-level (tactical managers), and frontline (operational managers), exist three corresponding levels of planning: strategic, tactical, and operational. The purpose of this essay is to focus on the strategic level of planning for the Ford Motor Company; a leader in the global automobile industry. Strategic planning, according to Bateman and Snell (2009), “involves making decisions about the organization’s long-term goals and strategies” (p. 137). This paper will elaborate on six key influential factors: economic, environmental, competition, foreign policy, domestic policy, and innovation; that shape this corporation’s strategic plan. Finally, a SWOTT analysis will be conducted covering the strengths, weaknesses, opportunities, threats, and trends, that the Ford Motor Company has in relation to its business environment.
Many economic factors exist that impact the development of Ford Motor Company's strategic plan and it’s no small task to project how some of these factors might change as the strategy is being realized. Consider the prospect of expansion into a new market like China or Mexico. Economic changes like currency devaluation will make Ford’s product more expensive to their target market potentially reducing overall sales revenue. Oil prices as we’ve seen in the U.S. economy can also play a big factor as large vehicles become less desirable and more fuel efficient compact cars gain market share.
Ford’s production plants rely on very high-tech computers and automated assembly. It takes a significant financial investment and time to reconfigure a production plant after a vehicle model is setup for assembly. Ford has made this mistake in the past and surprisingly hasn’t learned the valuable lesson as evidence from the hybrid revolution their missing out on today. Between 1927 and 1928, Ford set in motion their “1928 Plan” of establishing worldwide operations. Unfortunately, the strategic plan didn’t account for economic factors in Europe driving the demand for smaller vehicles. Henry Ford established plants in Europe for the larger North American model A. Their market share in 1929 was 5.7% in England and 7.2% in France (Dassbach, 1988). Economic changes can wreak havoc on a corporation’s bottom line and profitability as well as their brand.
Environment is another significant factor that affects the strategic plan. When a major environmental disaster occurs, such as a hurricane, it can affect a company’s production facilities, their sales facilities and the community that the company serves. How well the company is able to recover can often depend on how the company responds to the disaster. When Hurricane Ike wreaked havoc across Texas, Ford responded immediately with the following press release; as customers rebuild from hurricane Ike, Ford Motor credit offers financial relief (Ford Motor Credit, 2008). According to this release, Ford Motor Company offered Texas residents affected by Ike, the ability to miss an undisclosed number of payments so that they could focus on damage control and get back on their feet before resuming a regular payment schedule. These actions set an excellent example for community involvement and compassion toward its customer and strengthen the brand of the company. Corporate citizenship in response to environmental disasters should be part of the overall strategy.
The automobile industry is among the largest industries in the world and this competition directly influences the company’s strategic planning. A few of the competitive advantages that these companies work to gain include; vehicle pricing, gas mileage efficiency and vehicle stability. With the constant rise in gas prices the Ford Motor Company must develop a plan to overcome the threat to their products value. “Ford has not always been a leader in fuel economy, particularly in North America, but we believe that the steps we have laid out will bring our product plans in line with our commitment to leadership in addressing the climate change issue and our goal to provide customers with vehicles that are fully competitive in every way, including fuel economy.” (Mulally, 2008) Continuous customer satisfaction is vital because society is being impacted not only by rising gas prices but also an increase in population causing congestion which in return may result in alternate means of transportation. “There are currently 900 million vehicles in the world, and that number is increasing rapidly as individuals in developing markets reach new levels of prosperity. It could reach two billion vehicles by the middle of this century.” (Mullally, 2008) Ford’s strategic plan must take these factors into consideration and ensure future growth and product development address factors that would take away competitive advantage or result in lost market share.
Foreign Policy Factors
The Ford Motor Company is a global entity with branches and assembly lines all over the world. Foreign policy directly affects Ford’s ability to be successful in international markets and is another central component to Ford’s strategic planning. “The latest results from the Confidence in U.S. Foreign Policy Index reveal that the American public is anxious about increasing prices at the pump, and that economic issues are increasingly driving foreign policy attitudes. Achieving energy independence is now respondents' number one foreign policy concern. Six out of ten Americans say reducing energy dependence would strengthen our nations security a great deal; the highest percentage since the Indexes inception” (Council on Foreign Affairs, 2008). Ford is also very active in FDI to its supplier countries, and aspires to have an efficient trade agreement with those countries. Thailand on the other hand has presented stumbling blocks to a proposal by Ford, and the company is considering investing in one of Thailand’s neighboring countries, instead. “Ford Motor Company said today in Washington that it is considering whether to scrap a planned $1 billion program in new and upgraded factories in Thailand over the recent curbs on currency and foreign investment. Ford will decide where to invest the earmarked $1 billion by the end of June. China and India are possible alternative destinations” (World News Connection, 2007).
Part of the strategic plan must drive innovation. Research and development has led Ford’s competition into Hybrid vehicles well ahead of the demand curve. If Ford Motor Company intends to stay competitive, they need to make vehicles that are more fuel efficient. As it stands today, the U.S. has already implemented laws and incentives for automakers to manufacture smaller more fuel efficient vehicles. Washington wants automakers to achieve 4.5% annual improvements in federal standards (Automotive News, 2008). Mark Fields, who is president of The Americas Ford Motor Co., realizes that drastic changes need to be made from the top down. For them to stay in the game Fields states, ‘that he would like more government participation in the creation of vehicles that run on alternative fuels such as E85 ethanol and hydrogen as well as an infrastructure to support them’(Byron Pope, 2006). New energy laws will be needed to maintain a competitive edge for automakers since the government expects the fleet wide fuel economy to improve by 40% by the year 2020(Automotive News, 2008).
Ford Motor Company has been working hard to improve its green technologies and even received a Clean Vehicle Award for Hybrids (Hardigree, 2007) from the International Energy Agency Implementing Agreement on Hybrid and Electric Vehicles. With the recent price of crude oil and the price at the pump on a general upward trend, these technologies will be important to the future success of Ford. From Ford’s success in selling over 50,000 Hybrids it’s obvious that their innovation is a contributing factor to their leadership in the green aspect of manufacturing and their commitment to the customers and communities that they serve. According to A to Z of Materials (2006), Ford is also working hard on ethanol (flex fuel vehicles), hydrogen and diesel fuel technologies. In Missouri and Illinois, Ford is working with Fuel suppliers to establish a “Midwest Ethanol Corridor” so they can expand upon the E85 fuel mixture already in use in their flex fuel vehicles. Continued innovation is a must to remain relevant in such a competitive industry.
The Ford Motor Company faces significant challenges in such a competitive industry and evolving market. The key factors outlined in this essay only begin to touch on the difficulty faced by the automaker to remain a leader and a profitable corporation. Ford’s strategic plan must adequately address these issues or industry changing opportunities may overlooked leaving the company poorly position against its competition or worse damage their brand’s value.
Organizationally the Ford Motor Company faces significant challenges. Their current weaknesses intensify the issues uncovered by the trend analysis and while opportunities to gain market share due to these trends exist, the threat from current competition as well as from new alternative and flex fuel competitors has never been greater. At this time the Ford Motor Company is facing significant risk from threats posed by the U.S. economy and because those risks are derived from elements attributed to their core strengths.
Bateman, T. S., Snell, S., A., (2009); Management: Leading and Collaborating in the Competitive World, Eighth Edition; McGraw-Hill/Irwin; New York, NY.
Council on Foreign Affairs; (2008); Oil Ills; Spring 2008 Confidence in U.S. Foreign Policy Index; Foreign Affairs
Dassbach, Carl Henry August (1988) Global enterprises and the world economy: Ford, General Motors and IBM, the emergence of the transnational enterprise. Ph.D. dissertation, State University of New York at Binghamton, United States -- New York. Retrieved September 30, 2008, from Dissertations & Theses: Full Text database. (Publication No. AAT 8819303).
Ford Motor Company. (2008). Ford Motor Company - Press Release - As customers rebuild from hurricane Ike, Ford Motor Credit offers financial relief. Retrieved Oct. 1, 2008, from http://media.ford.com/newsroom/release_display.cfm?release=29045
World News Connection; (2007); Capital Controls Reportedly Causing Ford to Rethink Upgrade of Thai Factories; SEP20070131116016; Database: International Security & Counter Terrorism Reference Center.
Ford Motor Company: Cars, Trucks, SUVs, Hybrids, Parts-Ford. (2008). Letter from Alan R. Mulally. Retrieved October 3rd, 2008 from
A to Z of Materials. (2006). Ford Offers Three Alternative Fuel Technologies. Retrieved October 5, 2008, from http://www.axom.com/News.asp
Hardigree, M. (2007, December 5). Ford Wins Clean Vehicle Award For hybrids [Industry News]. Gawke: Jalopnik, Retrieved October 5, 2008, from Intenational Security & Counter Terrorism Reference Center database.
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"Levels Of Planning." 123HelpMe.com. 11 Dec 2013