In the shrinking higher auto market, Ford’s Lincoln and Land Rover have relative high market share. Customer loyalty towards these brands is high, so in the segment they still have their power to be the cash cow to provide liquid funds. It is wise to hold the sales and market share of cash cows so that excess cash would be used to fund the development of stars or question marks.
On the other hand, another luxury brand Jaguar may be the dog product of the company that needs to harvest or divest. Ford Company finally decides to sell the Jaguar brand in order to generate a positive cash flow to fund other brands and operation.
V. EVALUATION AND CONTROL
5.1 Strategic Evaluation
It is important to evaluate corporate strategies to ensure that a company is achieving its goals through right direction. To examine if the business objectives, plans and policies are appropriate is essential for the organization development. There are three major criteria of evaluating business strategies: suitability, acceptability and feasibility.
Suitability concerned about if the strategies fit the environment and the organization capability and to see if the strategies can meet the expectations of stakeholders.
In terms of business-level strategies, Ford Company takes the advantage of its large scale and makes the best of its diversity of brands to enhance its business profile and enlarge its business area. Each brand under the Ford Company can have their own target market and customers, and at the same time different marketing strategy can be used to boost sales. This strategy is fitting well with the corporate development that ensure a solid basis of its growth. Besides, Ford Company’s generic strategies can be considered successful for the perfect performance in its businesses especially in its star brands such as Ford and Mazda.
As to the product development and international expansion strategies, Ford Company’s different growth strategy through that used on different target market can be considered in the right direction. By using market penetration strategy through lowing the cost and provide a cost-efficient Ford brand products and increasing the promotion of its luxury auto brands, the market position would be well protected. Besides, by exploiting market in some developing country and new products development, market development and product development strategy is well received. In addition, the diversification is found effective in its financial service sector where bring lots of profit every year.
And for portfolio management, it is reasonable for Ford Company to maintain its stars and sell several brands that has limited future development potential in order to obtain enough money to fund other brands.
Acceptability is concerned with the expected performance outcomes of a strategy in terms of return, risk and stakeholder reactions. As Ford Company’s financial performance can be found now on the downward, according to company’s annual report(2006), the company’s developing strategy should be carefully examined to see the market prospect. For example, although the hybrid vehicle may have potential in the future, the right time to put to much effort on this kind of product may not yet come. If the company spends too much money on it, there would be a financial risk. So, in order to ensure a solid expansion in the future, market penetration strategy would first be considered. In addition, as the financial service sector is performance well, it is the right time to strengthen this market in order to win more profit to support the company’s operation.
Feasibility is concerned with whether an organization has the resources and competences to deliver a strategy.
Ford Company’s financial performance can be found now not such satisfied. According to company’s annual report(2006), the company is seen a downward trend. Both the sales and the market share are found declined. As a result of this, the company’s developing strategy may confront difficulties. The company would not have sufficient funds to support its product development strategies as well as the international expansion strategy.
Besides, The competitor’s situation is an important factor that would impact the company’s strategy. Although most of Ford’s main rivals such as Volkswagen, Renault and Peugeot have also found decline, the Japanese carmaker Toyota still in growth. And Toyota is the major rival that compete with Ford on its most potential hybrid vehicle market. This situation would effect the product development of the Ford Company, as a result, the company should take action to prevent further decline in order to maintain strength to compete with its rivals.
5.2 Strategic Control
After critical evaluating of the company strategy and comparing the actual performance with desired results, feedback would be generate for management in order to decide how to take corrective actions.
After experienced a difficult year in 2006, Ford Company is taking dramatic steps to transform its business by improving cost structure, raising product quality, obtaining financing and refilling product line with new vehicles. The company hoped that good results could be seen through these strategic controls.
Besides, Ford’s regional operations that run as largely autonomous business units in the past are considered to be changed due to inefficiencies past systems. In December 2006, the company announced an organizational realignment that aim to improve operation effectiveness had puts additional focus on markets and customers and emphasis on better leveraging its global assets and capabilities. By sharing vehicle architectures and components globally, and taking full advantage of global economies of scale, the company will leverage its resources worldwide more efficiently.
In addition, because of the bad performance in the North America Market, the company has decided to fix its business in that area. A $5 billion reduction in annual operating costs by 2008 would be put into effect. At the same time, the company is accelerating new product development, it is said that it will speed up the time it takes new products to market by 30 to 50 percent. And the most recent decision made by Ford Company that to sell Jaguar and Land Rover is another methods to make money which can used to restructure the company’s North American operation because it bring the company billions of funds if they successfully sell the two brands.
Based from pervious analysis and evaluation of Ford Company’s strategies, here comes some recommendations.
On business-level strategy, it should keep on seizing opportunities of new business and by using its advantages on corporate scale to expand business area. Opportunities exist not only in its traditional markets in those western countries, big potential can be found in other region such as Latin America and Asia. Besides, the financial service sector is found full of potential, so emphasis could be put in this area in order to generate more funds to support its auto sector.
Besides, the company should strengthen its core business, new products that are more cost-effective and distinctive could be concentrated on in order to boost the sales and revenues by overcoming rivals’. Besides, some star business of the company should still be paid attention to, such as to keep Ford’s market position in China, strengthen the sales of 2006 best seller such as Ford Fiesta, Mondeo, Focus in the European market, make effort to keep these models being the market leader. Meanwhile, production cost should be strictly controlled to achieve higher margin. Some plans that focus on a relatively small market such as the hybrid vehicles would be postponed after the company’s performance is turnaround to positive.
In addition, if the selling of Land Rover and Jaguar still can not obtain enough capital to fulfill the insufficient funds to restructure the North America operation, the company would have to choose to sell Volvo in order to lighten the burden of operate such a big company and generate enough money to continue its business.
After a detailed analysis of the Ford Motor Company, conclusion may draw at that the multinational company adheres its mission and vision, through consistent strategies as well as the continuing global development to achieve its business goals and objectives. Although its recent years’ bad performance had brought some difficulties to the company, strategic changes ‘start with a solid foundation of team work and an unwavering focus on customer’ would hopefully bring dramatic results. The overall development of Ford Company’s strategy and the way of controlling its business can be learned from many aspects.