Chapter 5 Case – “Ford Motor Company”
Instructor: Professor Pamela McLaughlin
Course: Management of Concepts – BUS 302
Date: July 17, 2011
* This case outlines 4 strategic options Ford is pursuing to increase its profitability. Describe each of the 4 options. For each option list 2 criteria you would use to evaluate the option.
The four strategic option that Ford Motor Company might pursue to increase its profitability is to (1) close down older plants in an effort to realign production and sales, (2) move the company to produce only smaller cars, eliminating or sharply reducing the SUV and truck lines, (3) take a dramatic step of dramatically reducing their North American ...view middle of the document...
L.C. in his paper on The Effect of Buyouts/Severance Packages on Worker’s Compensation Benefits. Ford would also have to deal with the political implications of a closure or any kind, no matter the number of factories. Other companies could portray Ford as a weak company that is hardly staying afloat and consumers could loss trust in the company and move to competitor’s products. If there is no other option but to close the business, Ford should do this as soon as possible to stop the financial bleeding. Then Ford can look at the whole picture. Can they reduce and/or renegotiate their current debt? Can they financially afford to pay it down and pay it off? If a pay schedule can be agreed to, they are in position to work it through and come out free and clear.
If Ford took option two, which is to move the company to produce only smaller cars, eliminating or sharply reducing the SUV and truck lines, then Ford has the advantage of getting back to Henry Ford’s vision for the company as well as dealing with products that are simply not selling in today’s expensive gas environment. Henry Ford’s vision was to “build a car for the great multitude. It will be large enough for the family, but small enough for the individual to run and care for. It will be constructed of the best materials, by the best men to be hired, after the simplest designs that modern engineering can devise. But it will be low in price that no man making a good salary will be unable to own one — and enjoy with his family the blessing of hours of pleasure in God's great open spaces” (Great Minds, para. 1). SUV and trucks are not small enough for an individual to run and care for; nor are they low in prices that no man making a good salary can afford one. Also, as high as the gas prices are today, consumers are looking for better gas mileage vehicles to drive. SUVs and Trucks do not get good gas mileage even though they have a gigantic tank for gas. Yes the tank of gas in a SUV and Trucks are bigger than the smaller compact cars but SUVs and Trucks get around 16 miles per gallon, where smaller compact cars get around 28 miles per gallon.
Now looking at option three, Ford could take the dramatic step of dramatically reducing their North American presence and focus their efforts on international markets where they have been very successful. Europe, South America, and China have been very receptive to Fords vehicles and the company is doing well in these markets. While Ford's domestic sales have been generally quiet, Ford's European operations have increased share by producing many critically acclaimed vehicles well known for quality. The difference between Ford's domestic and international operations is a result of costly US manufacturing facilities caused by high wages, expensive healthcare and retirement obligations for union labor. By focusing Ford’s efforts internationally, domestic consumers will lose interest with Ford and buy competitor’s products.
Finally the last...
