Ford Motor Company: The Product Warranty Program

1759 words - 8 pages

Ford Motor Company is America's one of the largest car manufacturer and seller. In year 1987 it faces an external business environment change in the form of new warranty policy announcement by its major competitors General Motor, which changes the current philosophy of warranty in U.S car market. This policy change may have implications not only on Ford’s sales and market share but also on various departments within organization (such as manufacturing, quality assurance, parts and service, and extended service plans) and their dealer network. In answer, Ford executives have to respond through a best suitable course of action by carefully analyzing the current market variables. ...view middle of the document...

So these forces had both positive and negative effects.

Rivalry amongst existing competitors: Increased competition from cars produced in countries new to U.S. market e.g. Korea and Yugoslavia. However, fast growth rate of industry have positive effect as during growth, competition is minimized. The increased production and substantial overcapacity both had negative effect.
Threats of substitutes: In U.S., an automobile was considered as necessity so for every adult there was car on roads. Even for inter-city travel more than 70% time cars were used. Buses, trains and other means didn’t have much impact. The growing array of higher priced imported models had negative effect.
Threat of new entrants: Intensified price competition as new entrants sought their share of mature market had negative effect. However, high capital requirements positively affect Ford Motor Company. High capital was allocated for research and development which was and advantage against new entrants.
Bargaining power of supplier: High levels of competition among suppliers act to reduce prices to producers. This is a positive for Ford Motor Company. Standardization of parts allowed Ford to reduce dependency on fixed supplier/vendor which goes into producer’s favor.
Bargaining power of buyer: 46% percent brand loyalty means product is important to customer and he can pay more for the product – had positive effect. Also a large number of customers minimize bargaining leverage.
Market Research:
Ford makes good use of market research on new car buyers shopping habits, buying processes, and ownership experiences. A new car ownership cycle has been increased from 3.7 to 5.4 years. 72% of buyers financed their cars, the vast majority 80% bought on four to five year loan period. The percentage of loyal customers was 46% and it is around highest in 10 years, percentage of the customers who switched from other manufacturers had increased and ratio gain/loss had increased.
The market research has helped Ford to anticipate customers buying criteria like Core Benefits and Augmented product that included quality, reliability and warranty for different type of cars. This data also helped to know owner’s Buying Behavior and loyalty influencers like quality, drivability, engine and transmission etc. It helped in understanding that the introducing of successful new car models had become a key to the success in industry. Ford changes it product policy from focus on standardization and narrow product line to proliferate and upgrade its models with quality as corporate philosophy and released multiple modifications in different models in one year. 1986 cars quality measured by TGW and was 50% better than of its 1980 models. Nationwide independent surveys were conducted to collect quality ratings data during years 1981-1986.

Warranty and Service Plans:
Warranty: Till 1960, basic warranty of 3 months/4000 miles was offered as a limited liability which increased to 1 year/12000 miles...

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