Ford was founded in 1903 by Henry Ford. The first company’s car was Model A (1903) followed by the Model T that made a revolution in car manufacturing and became extremely popular due to its features. In early 2000 the company was the truck-producing leader and the most profitable auto manufacturer. It owns the auto-credit company and the largest car-repair operator.
In late 1999, Ford Motor Company (Ford), the leader in mass car production in the world, was intended to introduce a new e-business strategy with the objective of becoming the leading e-business transforming its structure and strategy with the help of Web technologies. The company announced creation of the virtual marketplace within which customers, dealers and competitors would efficiently cooperate. The Ford’s CEO, Jacques Nasser, wanted to transform the old sales activities into new revolutionized industry with the modern techniques of designing, developing, manufacturing, and purchasing cars. The new strategy was a prototype of the Dell computers’ model and was based on the “order-to-delivery” method of cars choosing and purchasing just with a click. Ford Motor Company expected considerable cost reduction and supply chain management improvement due to fundamental changes in purchase strategy through a single website where customers have an immediate access to different car brands.
Ford’s SWOT Analysis
For the development of this model the SWOT analysis was run at the stage of strategic analysis as well as opportunities of success. Actually, Ford was the first car manufacturer which runs its business via Internet. Ford’s SWOT analysis helps to reveal the major internal strengths and weaknesses and potential external opportunities and risks. Thus, applying this important information Ford started formulating its new competitive strategy.
Strengths. - The world’s No.1 in trucks manufacturing
- Industry leader in profitability
- Great quantity of subsidiaries including the biggest car-repair operator in Europe (Ford Credit and Kwik-Fit holdings)
- Ford is one of the biggest employers in the worldWeaknesses.
- Old and fragmented industry, stagnant purchasing activities
- Excessive production, advertising, delivery costs and dissatisfied customers
- Market share reduction – for instance, due to Toyota Motor competitor enlarging its presence in the U.S. marketplace.
Opportunities.
- Asian market expansion – Ford owned one third of Mazda’s stock; thus, it has strong links with the Asian car manufacturer.
Threats.
- New strong competitors – Honda, Nissan, Toyota, etc.
- Slowdown in truck and auto manufacturers’ industry due to great taxes, high petrol prices, other current expenses.
Ford’s PEST Analysis
Political factors.
The company has to follow the local laws, especially concerning franchise and dealers work. Moreover, each U.S. state has its own peculiarities that sometimes contrast with the manufacturer strategy.
Economic factors.
Bad influence of constant economic depressions.
Social factors.
Society is dissatisfied with high prices and dealers. E-commerce and changing the role of the dealer are of great concern for Ford.
Technology.
New technologies are the integral parts of modern life including auto manufacturing. Developing its innovative business strategy, Ford should implement, for instance, modern in-vehicle communication products.
Five Forces Analysis
Buyer power.
Customers in this industry are financially strong; they like new cars and don’t like dealers as they offer overpriced cars. Moreover, they dissatisfied with the Ford’s prices and manufacturers. Unfortunately, dealers are one market players who diminish buyer power. Thus, it is rather mild in auto-manufacturing industry.
Supplier power.
Suppliers have the tremendous influence on auto manufacturer, on Ford in particular, as it has the thousands of parts and details that are produced by thousands of supplies and assembled together.
New entries.
Though there is high competition in this branch of industry, small firms are not seem to enter this market because of the lack of intellectual property and difficulties in finding distribution channels.
Substitutes.
Used vehicles are considered to be the substitutes of new cars. However, modern environmental protection laws forbid the old cars usage. Actually, Ford also generates additional revenues from used cars purchase.
Rivalry.
Ford has three major competitors among which are: Toyota, GM, and Daimler. The competition is extremely fierce and unpredictable.
When analyzing Ford Company in the perspective of strategic group mapping it surely obtains the best place having one of the broadest product range and global geographical scope. It shares its place with its main competitors listed above: GM, Toyota and Daimler.
Value Chain Analysis
Ford’s value chain is similar to those applied by other players of auto-manufacturing industry. However, 100 year old infrastructure urgently needed a new approach to create and renew its value chain.
Procurement plays one of the most important roles in value chain development and forms almost the quarter of it. In the past, Ford tried to lower the suppliers’ expenses and inventories and diminish excessive stocks by providing the suppliers with the accurate data, however sometimes it didn’t succeed. An integrated e-business strategy and improved supply chain was the best decision for both, Ford and suppliers. As the result, Ford would be able to improve its image among the great quantity of suppliers and to influence working conditions for its advantage.
Another value of high importance is the consumers’ wishes and their influence on the Ford’s design phase. The company’s CEO realized perfectly well the significance of consumers’ contribution into the design of new autos and unusual configurations that should follow public demand. Actually, the constant relationship between Ford and customers proved to be very effective.
Cars’ marketing is another important issue in Ford’s value chain management as it is believed to be the highest value-added element in this system. Ford cooperates with the dealers whose role can be hardly undervalued. They help to boost sales and constant demand.
Strategic Choice and Implementation
The chosen model for implementation would provide the customers exactly with what they wanted and ordered within the shortest possible period of time. At the beginning, customers were permitted to use Ford official website when sending personal information concerning cars configuration, type, color, price, insurance issues. The company announced the strategy to bring the main positive changes in supply chain management and, additionally, to increase the demand for their cars and trucks due to the wide use of e-commerce. Most importantly, Ford trusted in raising consumers’ satisfaction by convenient value-added purchase options and easiness. However, it was a great risk to promote the e-commerce initiatives as broadly as Ford did.
In 1999 to improve their relations with the suppliers, Ford introduced AutoXchange venture that would provide B2B proceedings with the suppliers. It also was aimed at reduction of inventories and suppliers’ excessive stock. But still, the main benefit was to reduce expenses on purchases.
Chances of Success
Nevertheless, there are several obstructions to the successful strategy implementation. To achieve success, Ford must refuse from the dealer-oriented strategy when the customers’ choice is limited, to the customer-oriented strategy offering the wider range of possible purchases. Moreover, the Ford’s suppliers should be integrated into a single supply network to provide the effective supply chain. Additionally, Ford should be aware of its major competitors and try to be a step forward. Franchise Laws, typical for each separate U.S. state, should always be taken into account as they may have the negative influence on the future prospects of the company.
Web Customers
Ford and its competitors are rather confident that web-customers may fully constitute the auto-buyers market. That’s why they focus their attention mainly on the web-customers’ needs and wishes.
Renewing Dealerships
The question of retail dealers is of great importance for Ford’s e-commerce strategy. Changing its orientation, from dealers to customers, Ford would oblige the dealers to change themselves. Indeed, the company didn’t know what to do with the dealers in the framework of e-commerce initiatives. Dealers, in their turn, saw not just danger in that transformation. They believed, Internet would help them in their future internet-related businesses.
Dealer connection was implemented with the help of which consumers can appeal to a certain dealer in his area, use different online services and take advantage of them. Additionally, Ford made efforts to improve relationships among web-customers, dealers and Customer Relationship Centers.
Hence, dealers are still significant as many customers even before Internet purchase want to visit the dealers’ showrooms and take the test drive. However, those who are keen on web-purchases and know exactly what they want will refer themselves to the official web-site of the auto-manufacturer saving time and money.
Ford’s Customer-Connection
Ford applied several services together will e-commerce introducing, among which the most valuable are Hertz, Ford Credit and Kwik Fit. Thus, Ford linked several important services into a single integrated system, everything for the customer’s convenience – auto-rental service, auto-finance and auto-repair operators. Such an approach convenient not just for the consumers, it also allows Ford to gather data about customers and their purchases, about problems, and help to find the effective solutions for them, guaranteeing needs satisfaction.
The Prospects for Future
Conclusion
E-business is extremely important for the successful development of any organization, especially for the manufacturers. Announcing the e-commerce strategy implementation Ford made efforts to change its stagnant industry and to become even more prosperous. SWOT-analysis proved the company’s sustainability and need for changes and revealed the main threats and opportunities of this process. Value chain analysis showed the efficiency of the e-commerce initiatives where the main changes might bring in additional value to the Ford’s cars. Moreover, the strategy might make it possible to diminish suppliers’ stocks, purchasing costs and provide additional profit.
