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Ford Motor Case Essay

1964 words - 8 pages

Executive Summary:

From 1995 – 1999 Ford has seen smaller companies with fewer capital assets and lower revenues and profits achieve much more market capitalization in comparison to Ford. With increased technology and economies of scope, companies now want to on the benefits of being a larger company, so we are seeing frequent merges. Two notable consolidations were Chrysler merging with Daimler-Benz in the summer of 1998 and, Ford acquiring Volvo in early 1999.

With the emergence of Information technology, the first public website was launched in 1995, and corporate intranet website in 1996. Ford has also launched a Business to Business website that connected the company to its ...view middle of the document...

Environment Analysis:

Market Invasion: Since the 1970’s, the Big Three automakers (GM, Ford, and Chrysler) have seen their home markets invaded by foreign-based auto manufacturers (Toyota and Honda). In addition, the auto industry was facing overcapacity of an estimated 260 million vehicles. This led to decreased profit margins for automakers as well as reduced sales.

Traditional supply chain methods: At the moment Ford Motor follows the traditional supply chain model. The purchasing department was highly independent, and was responsible for manufacturing and purchasing orders for internal and external manufacturing locations. After the orders have been completed within the company, the finished goods are then stored at the company’s warehouse and shipped out using the company’s trucks or a distribution company when ordered by the customer. The traditional supply chain model is fragmented and slow to adapt to change in the market, which makes it difficult for Ford to effectively control all aspects of the production process.

Large supplier base: Ford has over a 1000 supplier base, which results in complex business networking. Suppliers are picked only based on cost, and no consideration is given to the overall cost in maintaining supply chain and costs involved in maintaining such relationships. This number is however becoming unmanageable and we definitely need a change.

Virtual Integration: what it is, and what are the benefits to Dell

Virtual integration is a term used to describe the use of internet to replace physical components of a company with information. A business engaged in virtual integration owns only its brand name and their clients. This eliminates the need to physically produce ship or handle any products as they are now outsourced. Dell has had much success with its vertically integrated supply chain, as this approach has allowed them to reduce their need for capital and decrease their inventory and therefore the associated risk of holding inventory in a technological environment.

• The main benefit is the elimination of reseller mark-ups, resulting in lower costs for the company and lower costs for the customers. For Dell, we see that virtual integration definitely does offer this cost savings, allowing Dell to differentiate from its competitors based on cost.
• The next benefit of virtual integration is the elimination of costs/risks associated with carrying large inventories of finished goods. As technology keeps changing, no company would want to be stuck with a large amount of inventory. Dell takes delivery of products only when it needs it.
• The final benefit of virtual integration that worked for Dell is their relationship with the customer, often resulting in high customer satisfaction. For Dell, this relationship is formed when customers order a pc online. The pricing and customization Dell offers its’ customers breeds customer loyalty, leading to repeat buyers.

However, while the...

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