Ford Case Study

CASE NO: 1 Ð'- FORD

Summary:

Ford has been in Auto industry for more than a century. During this period it has come across different situations and problems from time to time. This case talks about the different strategies that Ford has used over time to manage its environment.

In its early years, Ford depended on different suppliers for the input of various parts and it only bolted them together into a finished vehicle. However, soon it had the problem with the quality of equipments and compatibility of parts made by different manufacturers. Ford decided to produce parts itself, merged few suppliers and also started its own supply operation. In 1950, this strategy became too expensive and was costing very high as compare to buying from independent suppliers. So once again Ford resumed contract with suppliers and used its buying power to negotiate favorable prices to gain advantage over competitors like GM. Prior to 1980s, Ford did not find much competition. Big 3 carmakers, GM, Chrysler and Ford coordinated their pricing policies to avoid competition. The three mainly competed over quality and features.

However, than competition became hostile, as Japanese carmakers entered the market to capture the ultimate resource: customers. Japanese carmakers had an advantage over American carmakers in terms of new technology. They gained competitive advantage over American carmakers with strategies like, Keiretsu and Just-in-time inventory. Toyota and Nissan owned significant stake of suppliers and were better able to control the prices.

Realizing the situation, Ford also started to increase its efforts to compete and stay in the business. It established its own Keiretsu-type arrangements. It bought minority interest in Cumming U.S., Excel and Decoma Int'l. which manufactured different body parts and wheels. Ford also forged links with rivals, by owning 25% of Mazda, established strategic alliances to share technology and design. It bought Aston Martin, Lagonda and Jaguar of Britain, as well as KIA of Japan.

Ford also owned several business units to handle commercial and consumer credit. It bought 49 percent of the Hertz car rental company, and made agreements with other rental car companied to use its cars. Apart from that, it also belongs to eight industry consortia along-with GM, Chrysler and others to fund joint research on projects and development.

Q1: List the various ways in which Ford has attempted to manage its environment over time?

A1: Ford has adopted and responded with many different ways time to time, in-order to manage its environment. That includes various strategies like:

Strategic Alliances:

With Mazda to share technology and design facilities.

Long-term contracts:

With different suppliers to provide parts.

Network:

With rental car companies to use Ford