Industrual Revolution and the American Dream

Ford has gone through many phases since June 16, 1903. Henry Ford began the corporation that is now known for the assembly line, the industrial revolution and the American dream, with 11 business associates and $28,000 in start-up capital. Ford Motor Company continued along with little to no leadership problems until the death of its president, Edsel Ford in 1943. Intense dissension about who should succeed Edsel Ford continued until Henry Ford, at the age of 79, returned from retirement to lead the company. For the next two years under Henry Ford’s leadership, the company operated with substantial losses of $10 million dollars per month.

Finally, in 1945, Henry Ford was forced to step down and Henry Ford II assumed the role of president. Henry Ford II managed to effectively bring the company back to productivity and empowered Robert McNamara and his group to transform Ford’s leadership style from a despotic dictatorship to a powerful, professional oligarchy.

Over the next 20 years, Ford Motor Company’s presidents and CEOs turned over 13 times. The current CEO, Alan Mulally, was appointed in September 2006 to take over for William Clay Ford, Jr., who had served as both president and CEO since 2001. William Clay Ford, Jr., led Ford Motor Company to three straight years of profitability followed by a sharp cut in profits marked by a $1.44 billion loss in the first half of 2006. These losses drove Ford to search for a new CEO from outside the industry, Alan Mulally, formerly of Boeing Corporation. Mulally stood out as a qualified successor because he demonstrated the leadership skills Ford had established many years ago as critical to success.

Environmental analysis During Mulally’s reign, Ford was going through a difficult time because of the financial crisis that was taking place in the U.S. The government voted and passed several sanctions and policies regarding the big three, particularly with energy and fuel. One of the policies created was a new federal gas mileage standard. The U.S. government increased the gas mileage from 25 miles to 35.5 miles for all vehicles and had to be implemented by 2016. New safety regulations were created as well as brand new pollution control policies which birthed eco-green friendly vehicles. The government also required Ford to provide more local job, less outsourcing, with better benefits for the employees. Although the U.S. government at that time were inauspicious of Ford creating fully self-driving vehicles, the company is still working on perfecting this technology.

Although Ford wasn’t hit as hard as Chrysler and GM during the financial crisis, they were still devastated economically. During this era, the overall economy was weak, which caused sharp decreases in car sales and revenue. The financial markets were also extremely volatile, which caused stocks to decrease immensely. The weak economy in this time period also dried up most of the liquidity in the market. Fuel companies such as Exxon Mobile, BP and Shell start jacking up the oil prices to attempt to make up for lost revenue and profits because of lack of car sales in the market. As oil prices increased, there was a shift in consumer’s vehicle buying habits. Many consumers started trading in their big cars, suv’s and pickup trucks in exchange for green-friendly or fuel-efficient cars.

This crisis and recession also gave birth to super technology vehicles with intelligence systems, gps, satellite radio and Bluetooth technology. The electric car also came to fruition with Ford, as they were working on prototypes for vehicles of the future Unfortunately, the successes Mullaly brought to Ford also came with plenty challenges and problems. The CEO was his own challenge impeding progress as well as uncertain fuel costs, increased competition, economic distress of suppliers and foreign exchange fluctuations. First major problem was that his leadership style conflicted with the traditional Ford “way.” Many senior executives left the car company under his management. While the old Ford showed caution and watchfulness of things going on in the company, Mullaly fearlessness proved to be a real problem for Ford, as it wasn’t suitable to the current culture as well as causing major up stir from executives all the way to the employees.

Mulally’s confidence started strong in the beginning of his career at Ford, but as time progressed, his confidence started to wane as well. Employees had a difficult time accepting him as an auto guy, since he knew little about cars and car mechanic; this was a major challenge as well. Another big problem Mulally had was consistently clashing with the union workers. A big time challenge Ford was facing was the European financial crisis, which the company took a major revenue and profit fall of $2 billion in 2012. Since Europe is their second largest market, it caused Ford severe devastation. This was the worst financial plummet they had in the last two decades. They had to close three major factories in Europe as well. Although recovery is a possibility, it could be too late to rise from that major setback.

Mature markets was also a huge problem for Ford. The company had a market share of 15.2 in percent in 2012 in the North America, which happens to be their largest market. The competition has grown tremendously since the 1980’s particularly with foreign car companies like Toyota, Honda, BMW, and Hyundai. This major increase with competition in the market has given Ford a lot of trouble. The market share was highly dependent on purchasing and operating costs of trucks and cars, general economic situations that might or might not favor them and the availability of fuel and credit was a challenge in itself. The company had challenges regarding emerging markets as well, particularly from China. The Chinese market didn’t need Ford, but Ford didn’t have the luxury of doing away with the Chinese market because they needed them.

China having their own brands gave the American car company high competitive pressure. Japanese cars having a domineering position in the Chinese market just added more competitive pressure to Ford. It didn’t help that majority of the manufactures focused on the China limited brands. External analysis The automobile industry has become much more highly competitive in the last two decades. Despite the stiff competition, Ford has managed to hold on to its top-tier position in the market. 2011, they held a 16.7 percent market share which was significantly more than majority of their competitors including Honda, Toyota, Nissan, Subaru and BMW. Regarding competitive advantages and forces, there are two types of vehicles in the market. There are luxury/premium cars and economic cars.

Luxury vehicle companies doesn’t make as many cars, but they create more quality cars and charge premium prices for them because their target market are consumers who willing to pay more money for better quality and luxury features. Economical vehicles are massed and produced at a much cheaper price than their luxury counterparts, but their cars aren’t as aesthetically attractive to the consumers and aren’t as comfortable with little to no premium options. Ford decided to merge the two vehicles types, focusing on comfort while at the same time emphasizing on performance and fuel efficiency with models such as the focus, fusion and flex. There was a significant increase in the market for luxury vehicles at an affordable price and companies like Ford, were incorporating premium and luxury features built into their economical cars.

There was also car companies who were participating in acquisitions and mergers of luxury car companies as well. Another thing Ford did to generate more revenue is stop producing all parts of their vehicles in the U.S. they began outsourcing in the 1980’s to countries like Mexico and China and have expanded ever since. This move allowed them to lower labor and wage cost, increase plant production, significant jump in profits as well as increased flexibility. The threats of new entry and substitutes are very low. Due to stiff competition and plenty of government regulations and other red tape, the entry barrier is high.

The automobile industry is a capital intensive business; it takes a lot of capital to not only start a car company, but to maintain it as well. There’s a large substantial fixed costs that are required to keep automobile companies afloat. Newcomers won’t have the capital necessary to break into the car market, much less being sustainable in the market. Ford also has a large brand influence and customer loyalty along with the dealership model. Newcomers will find this almost impossible to break let alone penetrate when it comes to gaining a loyal customer base. The car company doesn’t have to be worry about being replaced with the likes of public transportation and bikes, as the majority of their customers lives in areas where vehicles are pretty much required to get around.

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