Reference no: EM133164895
"Ford's Global Strategy"
"When Ford CEO Alan Mulally arrived at the com-pany in 2006, after a long career at Boeing, he was shocked to learn that the company produced one Ford Focus for Europe, and a totally different one for the United- States. "Can you imagine having one Boeing 737 for Europe and one 737 for the United States?," he said at the time. Due to this product strategy, Ford was unable to buy common parts for the vehicles, could not share development costs, and couldn't use its European Focus plants to make cars for the United States, or vice versa. In a business where economies of scale are important, the result was high costs. Nor were these problems limited to the Ford Focus-the strategy of design-ing and building different cars for different regions was the standard approach at Ford.Ford's long-standing strategy of regional mod-els was based upon the assumption that consum-ers in different regions had different tastes and preferences, which required considerable local cus-tomization. Americans, it was argued, loved their trucks and SUVs, whereas Europeans preferred smaller, fuel-efficient cars. Notwithstanding such differences, Mulally still could not understand why small car models like the Focus or the Escape SUV, which were sold in different regions, were not built on the same platform and did not share com-mon parts. In truth, the strategy probably had to do with the autonomy of different regions within Ford's organization, a fact that was deeply embed-ded in Ford's history as one of the oldest multina-tional corporations.When the global financial crisis rocked the world's automobile industry in 2008-2009, and pre-cipitated the steepest drop in sales since the Great Depression, Mulally decided that Ford had to change its traditional practices in order to get its costs under control. Moreover, he felt that there was no way that Ford would be able to compete ef-fectively in the large, developing markets of China and India unless Ford leveraged its global scale to produce low-cost cars. The result was Mulally's "One Ford" strategy, which aims to create a hand-ful of car platforms that Ford can use everywhere in the world.Under this strategy, new models-such as the 2013 Fiesta, Focus, and Escape-share a common design, are built on a common platform, use the same parts, and will be built in identical factories around the world. Ultimately, Ford hopes to have only five platforms to deliver sales of more than 6 million vehicles by 2016. In 2006, Ford had 15 platforms that accounted for sales of 6.6 million vehicles. By pursuing this strategy, Ford can share the costs of design and tooling, and it can attain much greater scale economies in the production of component parts. Ford has stated that it will take about one-third out of the $1-billion cost of developing a new car model and should sig-nificantly reduce its $50-billion annual budget for component parts. Moreover, because the different factories producing these cars are identical in all respects, useful knowledge acquired through ex-perience in one factory can quickly be transferred to other factories, resulting in systemwide cost savings.Ford hopes this strategy will bring down costs sufficiently to enable it to improve profit margins in developed markets and achieve good margins at lower price points in hypercompetitive developing nations such as China, now the world's largest car market, where Ford currently trails global rivals such as General Motors and Volkswagen. Indeed, the strategy is central to Mulally's goal for growing Ford's sales from $5.5 million in 2010 to $8 million by 2015."
- Describe Ford's historic global strategy?
- Describe its current global strategy?
- Discuss the benefits and drawbacks of its current global strategy?
- Identify TWO products/service to which Ford's current global strategy would be appropriate when expanding to China. Justify your choice.