Executive Summary

Ford Motor Company Analysis

Background and • History: Ford Motor Company was founded in 1903 and has since focused on 3 key brands: Ford, Lincoln, and Troller.
Strategic Issue • Key Strategic Issue: How can Ford better compete with a rapidly evolving automotive landscape to compete in the global market with brands such as Volkswagen, BMW, and Tesla?
Consumer views are changing and shaping the evolving landscape of the automotive industry.

• Political: Brexit will impact Ford due to loss in free trade agreements and higher tariffs on imports/exports. However there are many growth opportunities in emerging markets
Macro • Economic: There has been a decreasing number of car sales globally. Additionally forecasted trade growth expected to decrease as well.
Analysis/PEST • Social: Ford has an opportunity to enter the growing electric and hybrid sector. This is also in part by the demand for environmental care and social governance.
• Technological: Consumers are increasingly tech savvy so they have expectations for modern technology in cars.

• Opportunities & Threats: Ford has many opportunities including being able to potentially expand globally by penetrating emerging markets. However, Ford also faces potential
threats such as global economic growth and disruption in production.
External Analysis • Porter’s Five forces: The analysis shows that there are many substitutes because consumers prefer to buy used cars. There is also a a high threat of fierce rivalry and aggressiveness
from competitors because of a large number of competitive firms.

• Corporate Walkthrough: Ford is focused on being competitive in various markets while also being environmentally friendly in combination with innovative and high quality.
• In-Depth Business Overview: Although 2019 financials fell short, strategic agreements and partnerships bolstered Ford’s capabilities in the autonomous and electric vehicles segment
Internal Analysis as well as emerging and emerged markets.
• Resources, Capabilities, & Core Competencies: Ford’s underlying strengths come from having a strong brand recognition, adaptability of products and services, and an extensive
network.
• Proven Track-Record of FCF Generation: James Hackett has experience of turning companies around and has proven adept in excelling in a sales focused environment.

• Alternative A – Acquisition: Ford can engage in related diversification through backwards vertical integration by purchasing Tianneng Power, a battery manufacturing company
Strategic • Alternative B – Internal Development: Ford can reinvest a greater proportion of its profits into retained earnings, and funnel that surplus into Research and Development.
Alternatives • Alternative C – Spinoff: Ford can break off their electric car and/or autonomous car division(s) to create its own company. This spinoff would be managed under Ford Motor
Company but will be its own public company with a focus on the future of automobiles, specifically electric and autonomous automobiles.

• Recommendation: Our recommendation would be for Ford to acquire 100% of Tianneng Power International’s shares, in an all-equity transaction, at ~US $0.65 per share Our
Recommendation
recommendation would be for backwards integration through an acquisition of Tianneng Power to maintain innovation and diversify product line.
and • Implementation: With a formidable and actionable implementation plan, Ford is able to mitigate and minimize risks in order to present high-upside post-acquisition of Tianneng. This
Implementation implementation plan will include 5 phases: alignment, bids and negotiation, bid reviews and tension, announcement, and close.

Slide #
Section 1: Introduction and Strategic Issue

Company background
Key Strategic Issue & Analysis
 Ford Motor Company Overview
Background & Strategic Issue
Ford Highlights Current Automotive Brands Owned by Ford Motor Company
• History: Ford Motor Company was founded in 1903. It has since underwent a successful IPO in 1956 on the
NYSE and has become one of the world’s most trusted automaker companies.
• Corporate/Business Strategy: Ford is focused on: creating a fresher, more targeted vehicle portfolio that
can compete and win in all markets where we have a presence, executing a compelling plan for vehicle
propulsion that also supports the company’s commitment to reduce CO2 emission as part of the Paris
Accord, developing technology, user experience and business models to unlock the massive potential of
autonomous vehicles, and creating a portfolio of successful mobility offerings that can deliver recurring
revenue
• Operations: Ford currently has operations in over 20 different countries with 199,000 employees and serves
worldwide except for Cuba, North Korea, Iran, Sudan, Japan, and Indonesia.
• Company Segments:  Ford’s business is split up Automotive, Ford Credit and Mobility. Ford’s Automotive
segment is the biggest and earns the most revenue followed by Ford Credit and Mobility. Ford’s Mobility
segment is it’s R&D division for self-driving cars and the software required for self-driving cars. The Since 1930, Ford has introduced and acquired 10 other brands but has discontinued the brands or sold them. As of
company does not yet sell self-driving cars so it does not produce revenue in this area. now they own Ford, Lincoln, and the Brazilian brand Troller.

 Industry Trends  Key Insights on the global automotive consumer

• A global increase in interest and demand for electrical powered vehicles 2010 Value is ranked as the main factor among consumers when choosing brands

• Interest in autonomous vehicles stalled in most markets 2012 Consumer interest in hybrids due to cost and convenience

• Consumers are still resistant to multiple modes of transportation in a single trip 2014 Modes of shared transportation emerge rather than owning a car

•
2017 Interest in autonomous cars increases but safety is a concern
Consumers are concerned about their privacy and data security
2018 Consumers begin to move away from internal combustion engines

2019 Due to safety concerns, consumers become risk adverse on autonomous vehicles

Slide #
Source: Bloomberg. Ford & Company Filings, Deloitte Note: All dollar values listed in USD unless otherwise noted
 Key Strategic Issue
Background & Strategic Issue
Key Strategic Issue
How can Ford better compete with a rapidly evolving automotive landscape to compete in the global market with brands such
as GM, Chrysler, and Tesla?
Why is this an issue?

• Since 2015 overall car demand has been declining in the recent years due to a shift of more concern for the
environment and because of growing alternatives. This decrease in demand has even led Ford to cut
thousands of European jobs. To better compete within the automotive industry, Ford must keep
• It is expected that by 2040, electric cars could outsell gasoline and diesel, possibly making the automotive
up with the changing automotive landscape.
industry shift focus.
• Globally, the electrical vehicle (EV) market has grown around 60 percent per year indicating that demand will
continue to increase.
• A forecast done by CNN business predicts that Tesla and GM will be ahead of Ford in terms of electrical care
manufacturing by 2025.

Source: Business Insider, CNN Business, Financial Times, McKinsey and Company Slide #
Shifting Consumer Psychological Profiles
Background & Strategic Issue
• While Ford targets different consumer groups with different types of vehicles, their biggest source of sales is their trucks with a total of 1,243,136 sold in
the US in 2019.

Robert Carl

Age: 46 Age: 27

Home: Edmonton Home: Toronto

Location: Suburban Home Location: Basic Apartment

Status: Married Status: Engaged

Children: 3 Children: 0

Occupation: Construction Worker Occupation: Business Consultant

Income: $ 82,000/year Income: $ 70,000/year

Hobbies: Camping with the Hobbies: Watching shows and movies

family, hunting during the summer on Netflix, going to bars with friends

To better compete within the automotive industry, Ford must keep up with the changing views and values of consumers

Slide #
Source: Hedge Company. Note: All dollar values listed in USD unless otherwise noted
Section 4: Internal Analysis

Corporate Walkthrough
In-Depth Financial & Business Fundamental Overview
Resources, Capabilities, & Core Competencies
Proven Track-Record of M&A Integration
 Corporate Walkthrough
Internal Analysis
FORD HIGHLIGHTS GEOGRAPHIC MIX
• History: The largest family-controlled company in the world and the third largest automaker based on
worldwide industry revenue, Ford Motor Company was founded in 1903. It has since underwent a successful
IPO in 1956 on the NYSE and has become one of the world’s most trusted automaker companies.
• Corporate/Business Strategy: Ford is focused on: creating a fresher, more targeted vehicle portfolio that
can compete and win in all markets where we have a presence, executing a compelling plan for vehicle
propulsion that also supports the company’s commitment to reduce CO2 emission as part of the Paris
Accord, developing technology, user experience and business models to unlock the massive potential of
autonomous vehicles, and creating a portfolio of successful mobility offerings that can deliver recurring
revenue
• Operations: Ford's Automotive segment represents more than 90% of revenue and includes the sale of Ford
and Lincoln brand vehicles. The Financial Services segment contributes more than 5% of revenue and
includes vehicle-related financing and leasing through Ford Motor Credit Company. Outside the US, Europe
is Ford Credit’s largest operation with nearly 60% of that region’s receivables in the UK and Germany.
• Brand Structure: 2 Core brands – (1) Ford, (2) Lincoln; substantially all of their vehicles, parts, and
accessories are sold through distributors and dealers, the majority being independently owned.
• Major Corporate Finance Transactions:
- 2017: Acquires Quantum Signal, a robotics company with a mission to deliver autonomous vehicles
solutions Ford’s contract related bonuses, higher warranty and lower wholesales has helped maintain a strong 12.8% market
- 2019: Acquires Breeze, a leasing platform that provides its users with no-commitment lease share in North America.
KEY MANAGEMENT & BOARD OF DIRECTORS BUSINESS UNITS RESULTS
KEY MANAGEMENT NORTH AMERICA BUSINESS UNITS RESULTS

James Hackett, President & Chief Executive Officer

In 2013, Mr. Hackett joined Ford’s board of directors. He has since become Chairman of Ford
Smart Mobility LLC in 2016 and moved into the President/CEO role in 2017.

BOARD OF DIRECTORS
William Ford Jr, Chairman
Anthony Early Jr, Independent
Edsel Ford, Independent
John Thornton, Independent
Kimberly Casiano, Independent
Stephen Butler, Independent
“(Ford) has made great strategic progress this past year with a fundamental redesign of Ford that
William Helman, Independent
is setting us up to compete and win in this emerging era of Smart Vehicles for a Smart World –
John Lechleiter, Independent
William Kennard, Independent
with great products, services and long-term value” – Jim Hackett Slide #
John Weinberg, Independent Source: Bloomberg. Ford & Company Filings Note: All dollar values listed in USD unless otherwise noted
 In-Depth Financial & Business Fundamental Overview
Internal Analysis
Ford Cash Flow, Cash Balance & Liquidity Revenue & EBIT Metrics

• Q4 Adj. FCF of $0.5B, down 67%, driven by $0.6B UAW contract-related bonuses, lower Ford Credit
distributions and higher capital spending
• FY Adj. FCF of $2.8B, flat YoY; improvements in working capital and lower capital spending, offset by UAW
contract-related bonuses
• Cash balance and liquidity remain strong and above targets of $20B and $30
• Q4 revenue of $40B, down 5%, driven by lower volume in all regions; FY revenue of $156B, down 3%
• Q4 wholesale units down 8%, driven by North America; FY wholesale units down 10%
• Q4 Adj. EBIT down 67% and Adj. EBIT margin down 227 bps, including impact of UAW contract-related
bonuses
• FY Adj. EBIT of $6.4B, down 9%; FY Adj. EBIT margin of 4.1%, down 27 bps

2019 results fell short of expectations mainly due to operational execution. However, strategic agreements and partnerships bolstered Ford’s capabilities in the
autonomous and electric vehicles segment as well as emerging and emerged markets. This is demonstrated by their reveal of the Mustang Mach-E in Q4 ’19. Slide #
Source: Bloomberg. Ford & Company Filings Note: All dollar values listed in USD unless otherwise noted
Resources, Capabilities & Core Competencies
Internal Analysis
INTERNAL ANALYSIS: RESOURCES CORE COMPENTENCIES

1 Tangible – Financial & Physical

Manufacturing & Supply Chain
• Free cash flow generation - ~US$2.8Bn in FY
19 with slow and steady growth…
• Borrowing capacity – Ford has an investment
grade/speculative grade credit rating – (1) Fitch Brand Recognition
rating: BBB and (2) Moody’s rating: Ba1
Ratings indicate that expectations of default
risk are moderate
Market Share

2 Intangible – Reputation & Technology

• Brands – (1) Ford, (2) Lincoln, (3) Mercury (discontinued in June 2020), and (4)
Rivian – each of the four brands prove to serve different classes of the market and
typically have strong brand recognition and global reach • Strong brand recognition - Known as a consumer friendly brand and

Strengths
• Reputation – Ford aspires to become the world’s most trusted company which particular strong reputation for trucks
perfectly compliments their reputation of being reliable with solid long term • Adaptability – Wide product and services portfolio offered to consumers
performance giving flexibility to changing technologies
• Extensive Network – Divers operations and distributions demonstrated by
their manufacturing presence in 62 countries

Weaknesses
• High debt on balance sheet – Minimal borrowing capacity for growth
3 Human • Dependence on U.S. Markets – Highly dependant on U.S. and European
• Experienced management team – Decades of relevant experience among the C-Suite markets with a weak foothold in emerging markets like India which is
and senior management predicted to provide majority of future car sales
• Proven executive of finance and design – Tim Stone (ex-Amazon & Snap) is heading
Ford’s push for financial stability while Moray Callum (ex-Mazda) is heading Ford’s
design of concept/production vehicles
Slide #
• ~199,000 employees globally Source: Bloomberg. Ford & Company Filings Note: All dollar values listed in USD unless otherwise noted
Proven Track-Record of FCF Generation
Internal Analysis
VALUE CREATION: FREE CAHS FLOW GENERATION Executive Spotlight
$MM
James Hackett, President & Chief Executive Officer

In 2013, Mr. Hackett joined Ford’s board of directors. He

has since become Chairman of Ford Smart Mobility LLC
in 2016 and moved into the President/CEO role in 2017.

1977-1981
• Sales and Management, Procter & Gamble

1981-2014
• CEO, Sales and Marketing, Steelcase
2014-2016

• Interim Director: Athletics, University of Michigan

Slow & Steady FCF Growth 2017-Present
• President, CEO, Ford Motor Co

“We remain optimistic about Ford’s long-term prospects because the company
now makes cars people actually want to own instead of vehicles that are
purchased only because of heavy incentives. Ford's challenge is to increase share
James Hackett has experience of turning companies
profitably while also elevating Lincoln into a global luxury brand. The mostly no-
such as Steelcase around and has proven adept in
moat nature of the auto industry will make these tasks difficult, and we see
excelling in a sales focused environment.
headwinds from commodities, exchange, investments in mobility and
electrification, and a slowing U.S. and China market hurting results for some
time.” Slide #
-David Whiston, Morningstar Equity Analyst Report Source: Bloomberg. Ford & Company Filings Note: All dollar values listed in USD unless otherwise noted
Section 6: Recommendation

Decision Matrix & Recommendation

In-Depth Analysis: Pandora A/S Corporate Overview
In-Depth Analysis: Pro Forma Business Fundamentals
What Are the Strategic Benefits for Tapestry?
How Tapestry Can Add Value to Pandora
Post-Merger Integration: Organizational Structure
Redefining Tapestry’s Strategic Positioning
Contingency Plan: What If A Merger Doesn’t Work?
Decision Matrix & Recommendation
Recommendation
IN-DEPTH ALTERNATIVE SCORECARD

Offers On Trend Economic Strategic Execution

Key Takeaway
Diversification Given Industry Value-Add Sense Feasibility

 -- 
• Internal option that provides
INTERNAL
A DEVELOPMENT
-- -- marginal benefits; does not do as
much to support Ford’s strategic
issue while increasing investor
worry with dividend slash

• Provides massive upside potential

B SPINOFF  --   -- if done correctly, however

execution feasibility is a big
question, as well general future
uncertainty
• Best opportunity for Ford to
address its key strategic issue

    
on a risk-adjusted basis;
C provides opportunity for Ford
to fast track itself for the future

Recommendation
Ford acquire 100% of Tianneng Power International’s shares, in an all-equity transaction, at ~US $0.65 per share (1)

Tianneng presents the best strategic opportunity to best compete in a rapidly evolving automotive landscape. While the spinoff comes close as a
secondary alternative, there are issues with executional feasibility.
Slide #
1. 5 HKD per share of Tianneng; implies exchange ratio of 0.13 Ford shares per share of Tianneng
Source: Bloomberg. Ford & Company Filings Note: All dollar values listed in USD unless otherwise noted
(all-equity transaction)
 Corporate Walkthrough
Internal Analysis
TIANNENG POWER HIGHLIGHTS DEBT TO EQUITY /CASH AND EQUIVALENTS HISTORY AND ANALYSIS
• History: Tianneng Power International Limited (“Tianneng Power”) and its subsidiaries is a leading
enterprise in the industry of new energy power battery in China, founded in 1986. In 2007, Tianneng Power
was listed on the Main Board of The Stock Exchange of Hong Kong Limited (the “Stock Exchange”) as the
“First mainland enterprise of power battery”.
• Corporate/Business Strategy: Tianneng Power International Limited is a Hong Kong-based investment
holding company principally engaged in the manufacture and sales of lead-acid batteries and battery-related
accessories. The main products of the Company include lead-acid motive battery products, such as electrical
bicycle batteries, electrical tricycle batteries and pure electric car batteries. Its products also include recycled
lead products, lithium battery products, as well as new energy storage battery products for wind and solar
power generation systems. The Company operates its businesses in China.
• Operations: Tianneng’s lead-acid batteries segment represents roughly 80% of total revenue. Management
is taking measures to improve profitability in this conventional segment, including: 1) investment in
production facility upgrade, which should improve production efficiency; 2) development of advanced lead-
acid batteries with lower production cost; and 3) control material costs by leveraging its high bargaining
power and its material trading and recycling businesses. Management believes that margin improvement of
lead-acid battery business will drive the earnings growth of Tianneng in the next few years.
• Main Product Offerings: Environmentally friendly power batteries for electric vehicles, while offering While Tianneng Power International does have more liabilities than liquid assets, it also has net cash of CN¥2.71b.
integrated power storage services, and integrating the R&D, production and sale of lithium batteries for new The cherry on top was that in converted 105% of that EBIT to free cash flow, bringing in CN¥832m. So we are
energy vehicles, start-and-stop batteries for vehicles and wind power and solar power storage batteries. not troubled with Tianneng Power International’s debt use.
KEY MANAGEMENT & BOARD OF DIRECTORS VALUATION
KEY MANAGEMENT COMPANY, INUDSTRY, MARKET

Zhang Tianren, President & Founder

Dr. Zhang has been a general manager of Tianneng Battery since 2003. With over 33 years of
experience in technological research and development and management of rechargeable industry
in China.

BOARD OF DIRECTORS
Dr. Zhang Tianren, Chairman
Zhang Kaihong, Vice-President
Zhang Aogen, Vice-President
Shi Borong, Vice-President
Zhou Jianzhong, Vice-President
Wu Feng, Independent
Huang Dongliang, Independent
Zhang Yong, Independent
• Great value based on Price to Earnings Ratio. Slide #
• Good value based on Price-Earnings to Growth Ratio. Source: Bloomberg, Simply Wall Street, Tianneng &
• Slightly overvalued based on Price to Book Ratio. Company Filings
Strategic Issue
PERFORMANCE VS PEERS

Ford Fiat Chrysler General Motors S&P 500 DOW

Ford has underperformed its peers and the market which begs the question…
How can Ford better compete with a rapidly evolving automotive landscape to better compete in the global market? Slide #
Source: Bloomberg, BMO Equity Research, Ford & Company Filings Note: All dollar values listed in USD unless otherwise noted
Implementation Timeline
Internal Analysis
TIANNENG POWER HIGHLIGHTS

Alignment: Bids and Negotiation: Bid Reviews and Tension: Announcement: Close:
Ford must do close due During this period of time, Ford Management meetings must be This is the finalization stage of the Any issues that arise post
diligence on Tianneng including can submit a non-binding offer arranged in order to gain more acquisition. Any legal acquisition or upon close will be
reviewing potential synergies, and can begin with negotiations familiarity between the requirements will be addressed addressed in this period of time.
legal considerations, risks on valuation of the company. They companies before the and accounting issues will be Post- acquisition monitoring must
associated with the transaction will be able to probe for any gaps acquisition. The final accusation finalized. After all the smaller also be implemented in order to
etc. There must be agreement on and be able to gain more price must be submitted and the details are completed, the deal will ensure the acquisition is
the acquisition price and an knowledge that is lacking letter od intent must be signed in be publicly announced and the continuing to provide benefits and
internal discounted cash flow surrounding the acquisition. order to declare the serious market will respond to that the transition is smooth. This
model can, comparable Negotiations may be intense, intent of Ford to acquire announcement. Due to synergies will also ensure that synergies can
transactions, or comparable however a friendly acquisition Tianneng. This will be a time of as well as a signal that Ford is be maximized and realized in both
publicly traded company should be the goal of the high tension as deal is in the looking towards the future, the the short and long term.
analysis can be used for this negotiations rather than a hostile final stages and is ready to be market reaction should be
process. takeover. finalized. positive.
7 Months 8-10 Months+
0 – 1 Months 2 – 4 Months 5 – 6 Months

WITH A FORMIDABLE AND ACTIONABLE IMPLEMENTATION PLAN, FORD IS ABLE TO MITIGATE AND MINIMIZE RISKS IN ORDER TO Slide #
PRESENT HIGH-UPSIDE POST-ACQUISITION OF TIANNENG
 PEST ANALYSIS
Factors Relevant Facts
• Brexit: Brexit will have a negative impact on Ford due to a loss in free trade
Political •
agreements and higher tariffs on imports/exports
Emerging Markets: Many growth opportunities in emerging markets like South
America and Asia due to free trade agreements and government incentives
(Ford’s registration numbers rose by 11% in Brazil in 2019)
Economic • Car Sales Slump: A global slump in the number of car sales around the world
since 2017
• Less Trade Growth: Downgrade in forecasted trade growth by WTO

• Electric Cars: Opportunity in the electric and hybrid sector due to huge growth
in that sector over the last 3 years 
Social • Triple Bottom Line: Increasing demand by society for environment and social
governance concerning the automobile industry

• Autonomous Cars: Advent of autonomous cars, a market that Ford has invested
upwards of 1 billion in with the hopes of emerging as a market leader
Technological • Gadgets: Tech savvy consumers expect modern gadgets in their new cars 

Key takeaway: The automobile industry is currently facing disruption in the political, economic, social 16
and technological market.
CURRENTS EVENTS Developing news from Ford from the month of March 2020

March 18, 2020

Ford is temporarily closing its 8 factories in North America to prevent the
spread of the Coronavirus which is predicted to have a drop in their
production and sales for 2020

March 19, 2020

Ford is suspending dividends (14% dividend yield) to conserve cash during
the Coronavirus outbreak. They will also borrow $15.4 billion dollar to
support their current cash stockpile. To put that number into context, they
borrowed $23.4 billion in the Great Recession.
17
STRATEGIC ALTERNATIVE C - Spinoff
Definition Visual Representation
Spinoff: A spinoff is the creation of
an independent company through
the sale or distribution of new
shares of an existing business or
division of a parent company.

Proposal
Ford can break off their electric car and/or
autonomous car division(s) to create its own
company. This spinoff would be managed
under Ford Motor Company but will be its
own public company with a focus on the
future of automobiles, specifically electric
and autonomous automobiles.

18
STRATEGIC ALTERNATIVE C - Spinoff
Feasibility

 As seen in the Technology part of the PEST Analysis (Slide x), there has been huge growth in the electric car
sector over the last 3 years.
 A spinoff can clear up Ford’s vision statement by allowing one company to solely focus on electric and
autonomous cars
 The current automobile market is very saturated and for Ford Motor Company to solve the strategic issue of
being an industry leader, they will need their complete focus in order to outperform their opponents.
Case Study
Hilton, a hotel company, did a spinoff in 2017 and
split into separate public companies with one
company focusing on brand building, one focusing
on timeshares while another focuses on franchising
and licensing. This has shown to be very profitable
for Hilton with an increase in OM and FCF as seen in
Exhibit 1.

Exhibit 1. Hilton Financials since their 19

Spinoff
STRATEGIC ALTERNATIVE C - Spinoff
Pros & Cons

Pros:
• Two separate companies allows investors to choose which company they want to invest in based on what they believe in.
If they want to focus on the future of automobiles, they can buy Ford Electric Motor Company and if they want to focus on
the Ford we know today, they can buy Ford Motor Company.
• Having a spinoff allows the separate companies to focus on what they do best. Ford Motor company can focus on
becoming a global market leader while Ford Electric Motor Company can focus on electric and autonomous automobiles.
• A spinoff diversifies business risk by separating the companies and reducing the liability in event of a company failure.

Cons:
• By dividing the company into separate entities, resources will be split up and harder to move around once the split has
been completed.
• By creating another separate company, there will be increased costs because the company will have to be public and incur
all the costs that comes with being a public company.
• Having two separate but similar companies may create identity confusion among employees, also because a spinoff is
usually smaller than the parent company, employees may feel as if they are getting demoted which reduces morale

Key takeaway: A spinoff is a very feasible alternative for Ford that allows Ford and its spinoff 20
to focus on what they do best at a high cost
STRATEGIC ALTERNATIVE A – Acquisition
Scenario Industry Value Chain
In this situation, Ford would engage in
related diversification by purchasing a • Raw Materials
battery manufacturing company. This would
enable them to backwards integrate,
bringing an integral process within their • Intermediate goods
internal supply chain and fostering further • (Batteries)
growth of their electric car division.

Proposal • Manufacturing
Most electric vehicle battery manufacturing
companies are either already closely
partnered with rival firms, or private. When • Marketing Sales
evaluating options from publicly listed
battery manufacturers, Tianneng Power
International appears to be the ideal
candidate for acquisition. • After-Sales Services
21
STRATEGIC ALTERNATIVE A - Acquisition
Feasibility?
Tesla provides a perfect example of why backwards integration is absolutely
necessary
2017: Tesla and Panasonic enter into Tensions flare between
partnership: Construct ‘Gigafactory’ the two companies
to streamline vehicle production
• Musk blames Panasonic for the • Tesla purchases Canadian battery
Sedan 3’s slowed production
• Panasonic executives and BoD
become concerned by Musk’s
eccentric behavior and micro-
management style of leadership
• Significant corporate culture
clashes
• Companies begin to realize they
are entirely too dependent on
each other; Panasonic begins
freezing further investment with • Panasonic then strikes a battery 22
Tesla
2019: Tesla and Panasonic begin
cutting ties
manufacturer Hibar Systems, shortly
thereafter files a patent for a new lithium-
ion battery cell.
• The new cell is projected to last over
1 million miles
• Tesla has limited the huge supplier
power previously acting upon them
• Greater control over vital component,
and greater knowledge acquired
enables rapid advancements
manufacturing deal with Toyota
STRATEGIC ALTERNATIVE A - Acquisition
Pros & Cons

Pros:
• Backwards integration provides greater control over supply chain, reducing dependency on external firms
• Incorporation of Tianneng will not only give Ford access to its technology and information, due to it’s location in Hong
Kong, it provides them with an opportunity and a base from which to expand operations abroad
• Potential synergies: Shared information/technology, cooperative Research and Development, and transfer pricing for cost
savings
• Ford will save R&D costs of attempting to develop their own batteries by acquiring Tianneng and all of its assets and
knowledge. Delegation of tasks: Ford can focus on creating competitive electric vehicles while the new Tianneng division
can work on developing new battery technology to supplement

Cons:
• Mergers and Acquisitions can be risky. Management can tend to overestimate synergies and overlook potential areas of
difficulty when evaluating a potential company
• Increased transit costs when shipping batteries from Hong Kong to Ford factories in North America
• Potential culture clashes

Key takeaway: An acquisition is an incredibly feasible alternative for Ford, that will enable
the company to rapidly acquire knowledge and capacity for their electric car division while 23

reducing dependence on external firms

STRATEGIC ALTERNATIVE B – Internal Development
Scenario
In this situation, Ford would simply reinvest a
greater proportion of its profits into retained
earnings, and funnel that surplus into Research
and Development. This would provide growth
opportunities without having to resort to
utilizing an external entity, the battery
development would be in-house

Proposal

To do so, Ford would announce cutbacks to

their dividends in order to preserve the
future of the company and ensure further
growth. The company would not need to
issue additional shares, meaning corporate
governance will not be diffused, nor must it
take on long-term debt, which adds
insolvency risk when the economy falters. 24
 STRATEGIC ALTERNATIVE B – Internal Development

Feasibility?
The automotive manufacturing industry spends the most on R&D of any industry, and Ford lags behind many of its competitors
of comparative size. Ford is the 8th most valuable vehicle manufacturer (having fallen behind Tesla, a far smaller firm)

Shares outstanding Divideneds per share Total dividends paid (2019)

Research and Development Expenditures
16 (in billions) 3,989,839,270 $ 0.60 $2,393,903,562

14 Volkswagon; 13.67

12

10 General Motors; 7.68

Daimler; 7.53 Toyota; 7.5 BMW; 8.6
Ford; 6.92
8

4 By reinvesting all dividend expenses, Ford would surpass every

Tesla; 1.34 automobile manufacturer in R&D expenses except Volkswagon
2

25
STRATEGIC ALTERNATIVE B – Internal Development
Pros & Cons

Pros:
• Everything is done in-house, greater oversight from headquarters and tight-knit relationship between divisions could spur
innovation
• Reinvestment of retained earnings into R&D inspire further growth of the company
• Easily the cheapest alternative, requiring no additional funding. It merely redistributes how the company uses its profits
without expanding its geographic scope

Cons:
• Slashing dividends will likely upset shareholders, and may cause negative speculation, resulting in a lower stock price.
• R&D is expensive, and is not guaranteed to produce new technology. Engineers and scientists within the company
effective have to start from scratch when learning about new tech like batteries.
• Much slower than just acquiring a battery manufacturer and combining efforts and information.

Key takeaway: Internal development could be an effective method to solve Ford’s strategic
issues, however, the other alternatives provide greater benefits 26
 PEST ANALYSIS
Factors Relevant Facts
• Brexit: Brexit will have a negative impact on Ford due to a loss in free trade
Political •
agreements and higher tariffs on imports/exports
Emerging Markets: Many growth opportunities in emerging markets like South
America and Asia due to free trade agreements and government incentives
(Ford’s registration numbers rose by 11% in Brazil in 2019)
Economic • Car Sales Slump: A global slump in the number of car sales around the world
since 2017
• Less Trade Growth: Downgrade in forecasted trade growth by WTO for 2020 with
the growth forecast being substantially lower than originally forecasted

• Electric Cars: Opportunity in the electric and hybrid sector due to huge growth
in that sector over the last 3 years 
Social • Triple Bottom Line: Increasing demand by society for environment and social
governance concerning the automobile industry

• Autonomous Cars: Advent of autonomous cars, a market that Ford has invested
upwards of 1 billion in with the hopes of emerging as a market leader
Technological • Gadgets: Tech savvy consumers expect modern gadgets in their new cars 

Key takeaway: The automobile industry is currently facing disruption in the political, economic, social 27
and technological market.
CURRENTS EVENTS Developing news from Ford from the month of March 2020

March 18, 2020

Ford is temporarily closing its 8 factories in North America to prevent the
spread of the Coronavirus which is predicted to have a drop in their
production and sales for 2020

March 19, 2020

Ford is suspending dividends (14% dividend yield) to conserve cash during
the Coronavirus outbreak. They will also borrow $15.4 billion dollar to
support their current cash stockpile. To put that number into context, they
borrowed $23.4 billion in the Great Recession.
28
STRATEGIC ALTERNATIVE C - Spinoff
Definition Visual Representation
Spinoff: A spinoff is a type of divesture that results
in the creation of an independent company through
the sale or distribution of new shares of an existing
business or division of a parent company. The
spinoff will have its own management team, often
made up of members from the parent company. The
new company usually has a more focused business
model than the parent company leading to it being
more valued because investors tend to prefer
companies with specialized vision statements.

Proposal
Ford can break off their electric car and/or
autonomous car division(s) to create its own
company. This spinoff would be managed under
Ford Motor Company but will be its own public
company with a focus on the future of
automobiles, specifically electric and autonomous
automobiles. This allows Ford Motor Company to
focus on selling their current automobiles on a
global scale while the spinoff can operate like a
startup, focusing on electric and autonomous
29
automobiles.
STRATEGIC ALTERNATIVE C - Spinoff
Pros & Cons

Pros:
• Two separate companies allows investors to choose which company they want to invest in based on what they believe in. If they want to
focus on the future of automobiles, they can buy Ford Electric Motor Company and if they want to focus on the Ford we know today, they
can buy Ford Motor Company.
• Having a spinoff allows the separate companies to focus on what they do best. Ford Motor company can focus on becoming a global
market leader while Ford Electric Motor Company can focus on electric and autonomous automobiles.
• A spinoff diversifies business risk by separating the companies and reducing the liability in event of a company failure.
• Employees moved to the spinoff company are more likely to take up an entrepreneurial mindset and treat their company like a Startup
which could lead to high growth
• Spinoffs tend to grow well by focusing on their core business model

Cons:
• By dividing the company into separate entities, resources will be split up and harder to move around once the split has been completed.
• Leadership is divided and diluted in a spinoff.
• By creating another separate company, there will be increased costs because the company will have to become public and incur all the
costs that comes with being a public company.
• Having two separate but similar companies may create identity confusion among employees, also because a spinoff is usually smaller than
the parent company, employees may feel as if they are getting demoted which reduces morale.
• Existing contracts are often in the name of the parent company and will need to be revised to apply to the spinoff.

Key takeaway: A spinoff is a very feasible alternative for Ford that allows Ford and its spinoff 30
to focus on what they do best at a high cost
STRATEGIC ALTERNATIVE C - Spinoff
Feasibility
 As seen in the Technology part of the PEST Analysis (Slide x), there has been huge growth in the electric car sector over the last 3 years. A
spinoff that’s business model focuses on electric cars could take advantage of that.
 A spinoff can clear up Ford’s vision statement by allowing one company to solely focus on electric and autonomous cars with a very specific
business model that differs from the parent company.
 The current automobile market is very saturated and for Ford Motor Company to solve the strategic issue of being an industry leader, they will
need their complete focus in order to outperform their opponents.
 Investors of AI and renewable energy are more likely to invest in the Ford spinoff even if they do not care about automobiles because of the
technology involved.

Case Study
The hotel industry is well known to be cyclical and capital intensive.
Massive up-front investment is required to build a hotel and the
success of it depends largely on the economy. In order to prevent
some of these complexities, Hilton, a large hotel company, did a
spinoff in 2017 and split into separate public companies with one
company focusing on brand building, one focusing on timeshares
while another focuses on franchising and licensing. Investors are
known to prefer differentiated company with clear and concise
business models because they are easier to understand and value.
This spinoff has shown to be very profitable for Hilton with an
increase in OM and FCF since the spinoff in 2017 as seen in Exhibit
1. Hilton was even able to reverse their dropping FCF with the Exhibit 1. Hilton Financials since their Spinoff 31
spinoff.
What are the Strategic Benefits for Ford?
Recommendation

Favorable Exchange Opportunity Optimistic Economic Position

Tianneng’s lower relative share price ($6.7) allows Ford ($10. to acquire Tianneng at Despite up and down historical revenue marks, Ford revenues are projected to make
a discount which will favor Ford. steady growth with this acquisition (Statista).
20 = Ford’s historical revenue = Ford’s projected revenue
15 M ($)
10 162
160 161.5
5 Tianneng = $6.7 160.3 159.1
0 158 156.8 155.9 157.3 Sources:,Wagner
Ford = $10.3 (Statista)
156
154
Sources: Yahoo Stocks
152
2017 2018 2019 2020 2021 2022

Diversification within the Company Strengthening Resources and Capabilities

Within the resources and capability matrix, Ford has the tangible and intangible
Product resources to shift towards key strengths with the electric vehicle battery acquisition.

Main Trucks Luxury Electric Car

Brand
Tianneng

Bridging stronger
Geography connection between
NA North America and Asia Asia

Key takeaway: Ford has benefits in the exchange opportunity, increased revenues, diversification (product, brand, geography), and also eliminating their
key weaknesses with their tangible and intangible resources.
How can Tianneng add value to Ford?
Recommendation
Factors that are affecting Ford’s Strategic Positioning
Emergence of Electric Vehicles (EV’s)
Problem • The world’s fossil fuels vehicles have shown a
downward trend in years, dropping 4.35 million
sales (4.7%) from 2018 to 2019.
• Global demand EV’s are rising. China and
Europe reaching increased market shares of
4.7% and 3.8% respectively from 2018-2019. [1]
• Tianneng Power is a leader in the industry of
new energy power battery topping the China
Industrial Association of Power Sources
ranking in 2019[1].
Value • China is the world leader for EV’s with 45% of
global EV deployments[4]
Added • Tianneng is committed to innovation
increasing 2019 R&D costs to $71M from last
year’s $61M. [1]
Sources: Tianneng 2019 Interim Report [1]
, IEA[4]
Key takeaway: A Ford + Tianneng Power Battery Manufacturer acquisition will help add value in terms of:
keeping innovative, backwards vertical integration, and diversifying product line.
Vertical Integration
• Ford in their very early years has vertically
integrated their production, but not within the
electric/green parts of production.
• Ford does not have a supplier of batteries
from China: the world leader in electric
vehicles.
• Tianneng Power will be a powerful acquisition
with a strong gearing ratio (debt relative to
equity) of 19.52%, which is way lower than
the industry average of 25%[2]. This means
Tianneng is low risk and will be a valuably
integrated into Ford.
• Ford can leverage Tianneng’s position to break
through into the Chinese/Asia market.
Sources: Investopedia[2]
Static Product Line
• Ford is not an industry leader with their
EV’s. The 10 best-selling EV models in the
US last year were from: Tesla, Chevrolet,
Nissan, BMW, Volkswagen, Audi, Jaguar
and Daimler.[3]
• One of Tianneng’s main specialties is the
diversity of the products powered by their
batteries: EV’s, electric bikes, electric
tricycles, forklifts, etc.[1]
• Ford has the capability to now launch a
new EV model of their automobiles geared
toward the Asian consumer market with
their geographic advantage.
Sources: Business Insider [3]
What type of Risks can affect Ford?
Recommendation
Description
1 • The purpose of a merger or acquisition is
to achieve synergies and economies of
scale in their production.
Failed • A failed synergy can present itself in the
form of misaligned: geographical focus,
Synergies products, employees, supply chain, etc.
• •
2 Any M&A decision needs to be carefully
examined to most properly determine the
Miscalculation in the value a merger or acquisition would bring
to the parent company.
Valuation of Assets • Unethical or “creative accounting”
practices can overvalue firms.
• Organizations with clashing cultures find it
3 difficult to communicate, make decisions, or
operate cohesively towards their goals.
• Studies show that up to 30% of culture issues
Differences in Culture are the underlying cause of failed M&A.
Sources: Society for Human Resource Management
4 • The China-United States Trade war has
Political Tensions increased tensions, especially under
Trump’s rule.
and Tariffs • These are manifested in trade barriers and
added tariffs
Key takeaway: Ford has to consider the fundamental risks of acquisitions, and also the
political, cultural, and financial effects associated with Tianneng.
Application to Ford
• The geographical gap between China
and the US may hinder logistics.
• One of Ford’s rivals may acquire a
domestic electric battery company,
increasing their market share in the
US
Ford needs to carefully evaluate
Tianneng’s financial assets.
• According to Transparency
International’s 2019 Corruption
Perception Index, China ranks 80th
in the world and the US ranks 23rd.
• Chinese and American cultures are
very different on all levels of the
firm, from the senior management,
to the operational teams.
• Tianneng’s mission statement and
company vision will need to
compromise and align with Ford’s
• With China and the US being the 2
largest economies in the world, there
are serious effects Ford needs to
consider. There’s uncertainty if the
next US president upholds tariffs.
Contingency Plans for those Risks
Recommendation
Contingency Plan
1 Spinoff
Failed • In the case of failed synergies, or a
Synergies vast miscalculation of assets, Ford
can looks towards a spin-off by
creating their independent
company with a focus on
2 electrical cars.
• The financial risks of a merger
Miscalculation in the will be avoided, and the internal
creation of a spin-off can more
Valuation of Assets easily synergize with the existing
company
3 Domestic
Differences in Culture Acquisition
• If the tariffs and differences in culture
are too detrimental, Ford can turn to a
4 domestic acquisition of battery
manufacturing and postpone the
Political Tensions •
foreign Tianneng acquisition.
Ford can bide their time and until
and Tariffs PEST conditions are more favored.
Key Takeaway: With 2 major financial focused risks, Ford can fall back on a spin-off route. With the other 2 risks being politically/culturally/geographically focused, Ford can
pursue domestic acquisition. With either contingency plan, in the long-term Ford should aim to return to the Tianneng foreign acquisition.
Implementation
Short/Medium Term Long Term
1-3 years
• Identify which parts of the
business had the most glaring
weaknesses in synergizing, and
provide remedies.
• Bolster R&D for internal
production of EV’s; cut
production costs per unit.
• Select new headquarters location,
successful transitioning of new
and existing employees, re-
establish new supply chain.
• Research potential candidates for
domestic electric battery
manufacturers that provide the
most value with the lowest risk.
• Begin negotiations with company,
settle on share price valuation and
how to combine operational
advantages.
• Carefully monitor political
situation and China-US relations
4-10 years
• Begin to develop focus in
to EV consumer markets
while balancing existing
markets and already loyal
customers.
• Consider geographic
strategic expansion with
new spin-off brand.
• Save funds for acquisition
of foreign/Chinese electric
battery manufacturer
(Tianneng)
• Seek any other domestic
acquisitions (if profitable)
• Leverage increased cash
flow for original Tianneng
acquisition plan.
• Hire Human Capital
consulting firm to bridge
cultural differences and
solving weaknesses from
initial acquisition failure.
Citations in Notes

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36
ADD A FOOTER
 Opportunities and Threats
External Analysis
Opportunity #1: Global Expansion via Market Penetration
• Mckinsey: By 2020, global profits for automotive OEMs are expected
to rise by almost 50 percent. The new profits will come mainly from
growth in emerging markets.(1)
• Due to high demand for vehicles in emerging markets, Ford has the
opportunity to expand its operations into underpenetrated and emerging
markets to capitalize on the growing middle class, particularly in Asia
Pacific
Opportunity #2: Growth Through Product Innovations
• Ford 10-K – CEO Remarks: Two forces are driving this disruption:
rapidly advancing technology and innovation that offer the promise of
increasingly intelligent vehicles and a deep need for a smarter
transportation system – one that is cleaner, safer, and less congested. It
is the pairing of the two that will revolutionize the industry.(2)
• Investment and research into decreasing carbon emissions and
transforming vehicles into self-driving by implementing machine
learning presents a massive market that is gaining global interest
Opportunity #3: E-Commerce & Rise of Big Data
• Deloitte: Analytics and information management present a significant
opportunity for automakers to use quantitative techniques to support the
planning and interventions across the customer lifecycle.(3)
• Ford can capitalize on the increased use of online shopping by utilizing
big data analytics to better understand their customer base & therefore
adjust marketing tactics
Source:
1. McKinsey&Company Advanced Industries
2. Ford Motor Company 10-K
3. Deloitte Big Data & Analytics in the Automotive Industry
Threat #1: Disruptions in Production
• Ford 10-K – Risks: Ford’s production, as well as Ford’s suppliers’
production, could be disrupted by labor disputes, natural or man-made
disasters, financial disasters, production difficulties, or other factors.(2)
• Many components used in Ford vehicles are available from a single
supplier and cannot be re-sourced quickly or cheaply to another supplier
due to long lead times and new contractual commitments
Threat #2: Global Economic Slowdown
• Ford 10-K – Risks: Industry sales volume, particularly in the United
States, Europe, or China, can be volatile and could decline if there is a
financial crisis, recession, or significant geopolitical event.(2)
• Due to high proportions of fixed structural costs, small changes in
industry sales and volumes can have substantial effects on the
company’s cash flow and profitability
Threat #3: Higher Input Costs
• Ford 10-K – Risks: Fluctuations in commodity prices, foreign currency
exchange rates, and interest rates can have a significant effect on results.(2)
• Changes in commodity prices resulting from tariffs, foreign exchange
rates, and interest rates cannot always be predicted or hedged
effectively which may have substantial impacts on company earnings
1
Porter’s 5 Forces Analysis Overview
External Analysis

Threat of New Entrants: Low

 Lage upfront capital expenditures
 Constant, new innovation requires constant
investment
 Building brand image is a very lengthy
process
 Government and environmental policies
are making it increasingly difficult for new
entrants

Intensity of Rivalry: High

Bargaining Power of Suppliers: Low
 Several parts for vehicles are obtained
from a variety of suppliers
 Large number of suppliers in automotive
industry
 Standardized inputs for products which
allows company to switch between different
suppliers
 Herfindahl-Hirschman Index for the
automotive industry was at 700 in
2016 (1)
 Fierce rivalry and aggressiveness from
competitors
 High exit barriers due to upfront and
ongoing capital invested
 Large number of competitive firms
 Shifting consumer sentiment to electric
and hybrid vehicles
Bargaining Power of Buyers: Moderate
 Buyers in this industry have moderate
switching costs (customers make long
term purchases) and have high levels of
information
 Industry is prone to macroeconomic
events (downturn may influence
customers to switch to cheaper vehicles)
 High level of consumer preferences

Threat of Substitutes: High

 High availability of substitute vehicles in
industry
 Popularity of the used vehicle market is
increasing which presents a threat for
sales on newer vehicles
 Increasing consumer demand for lower
cost and higher quality vehicles

Source:
1. Ark Invest (2016) 2
 Threat of New Entrants
External Analysis

1 Financially: Capital Expenditures/Access to Capital

Significant Capital requirements are needed when
• Capital Expenditures: Capital expenditures for new entrants to the industry are very high as there initially entering the automotive industry as investments
are many differentiated vehicles in the market. into new technologies, manufacturing and marketing
• In order to expand to global and emerging markets, new entrants require large amounts of costs must be incurred. However, once established,
investments to fund their operations, establish manufacturing facilities, and market their products. costs may begin to decline as the rate of production
and mass market increases (1)

2 Financially: Economies of Scale

• Economies of Scale: Economies of scales are difficult to achieve in the increasingly competitive
automotive industry in which Ford Motor Company operates in. This is advantageous in costs to companies
who are able to cope with the rising consumer expectations at lower prices due to their large producing
capacities. This increases the cost of production of new entrants into the industry.

3 Operationally: Increasing Demand of Electric Vehicles & Hybrids

• Specialist Knowledge: Ford also lacks a strong presence in the electric car market while most of its
competitor brands (GM, Volkswagen, Toyota etc.) all have brands that specialize in electric cars.
“The International Energy Agency
expects EV use to rise from 4 million
• Brand Recognition: Ford has been traditionally been known as a brand for its heavy duty trucks and vehicles in 2018 to 120 million by
their strong towing abilities. However, the global landscape is shifting as consumers and competition is 2030, or by 0.3 percent to over 7
investing into renewable sources of energy (electric) as well as creating hybrid versions of vehicles.
percent of the global car fleet.” (2)

4 Operationally: Access to Distribution Channels

• Distribution Networks: Access to distribution networks is not difficult for new entrants as it is easy for
any new entrant to get their products to market.

• Distribution Networks are the routes and networks through which companies sell their products to
consumers. They are critical driver of operations, performance and value for a company.

Source:
1. Case file of Henry Ford, Committee of Science and the Arts, 1928 Cresson Medal 3
2. Bank of Canada Outlook for Electric Vehicles & Implications for the Oil Market
 Threat of Substitutes & Bargaining Power of Buyers
External Analysis

Relative Price
Points

Budget / Mass-Market

Truck / Off-Road

Premium / Luxury

Sports

Hybrid / Electric

Buyer Power – Moderate Result Threat of Substitutes - High

 High buyer concentration  High performance of substitutes

 Moderate switching costs
 Aggressive competitive rivalry
 Large amount of substitutes available
 Moderate size of individual purchases
 Fluctuating price of oil and new technologies
 Moderate switching costs
 High levels of information available in market
 High availability of substitutes
Moderate  Increasing consumer demand for lower cost &
high quality vehicles

4
Corporate Scope
Timeline

Development of American
Automobile Industry
• Ford Motor Company is
incorporated in 1901
Mass Production & Expansion of
Assembly Lines
• Ford begins producing military jeeps for
the U.S Military
• Ford becomes a publicly traded company
Technological Revolution & Age of the
Internet
• Ford introduces the Lincoln • Ford begins offering its
navigator to spur the growth turbocharged EcoBoost
of the luxury SUV market line of engines as part of
its environmental initiative

1890 1900-1910 1920-1930 1940-1950 1960-1970 1980-1990 2000-2005 2006-2010 2011 - Present

• Ford acquires the Lincoln Motor Company

• Begins production of Ford Tri-Motor airplanes • Introduction of the radical 13th
generation F-150 truck (2014)
• Introduces the flathead V8 engine
• Ford launches its first electric
• Henry Ford builds the Quadricycle powered • Ford introduces the GT as its car – the Ford Focus (2011)
by a four-horsepower engine signature premium sports car

Since its incorporation, Ford has designed and built products ranging from motorized quadricycles,
airplanes, the first V8 engine and the manufacturing of trucks, jeeps, muscle sport cars and more recently, a
stronger focus on more carbon efficient and electric vehicles

Source: Ford Motor Company

4
SWOT Analysis Overview
Internal Analysis

Strengths Weaknesses

Strong Brand Reputation & Loyal Customer Base Smaller Production Capabilities than Competitors

Strong Global Supply Chain Network Sales Heavily Reliant on Pickup Trucks

Focus on Research & Innovation Highly Dependent on US Market

Opportunities Threats

Global Expansion via Market Penetration Disruptions in Production & Supply-Chain

Growth Through Product Innovations Global Economic Slowdown

Leveraging Big Data Analytics for Marketing Increase of Input Costs

Source:
1. 2
 Case Study: Alphabet (Google)

In the early 2000s, Google was failing to capture audiences in

the video hub space

• As the advent of the internet was becoming increasingly popular with new technologies
and inventions, the web was in desperate need for a video hub.
• Google attempted to cater to this demand by launching Google Videos which failed to
become popular and accepted in the mainstream web.

• Google needed to determine value-creating strategies in order to improve its

performance and advertising by capturing the large and increasing audience base from
the online web
• YouTube was currently dominating the online video web space and was one of the
world’s fastest growing websites at that time period

Source: Ford Motor Company

4
Case Study: Alphabet (Google)
Description
• Google needed to conduct due diligence to
determine whether an acquisition of YouTube
would be improve the company’s core
business
• It also needed to evaluate YouTube’s mission,
values, strategy, and corporate culture
Source: Ford Motor Company
Strategic Rationale
1. Google would eliminate a direct competitor (if you
cannot beat them, buy them)
2. Acquisition would give Google access to an
increasingly growing audience which it can advertise
to
3. An acquisition could allow Google to achieve greater
revenues and cost synergies
4
 Case Study: Alphabet (Google)

Today Google is among the top Fortune 500 Companies &

a market leader in digital advertisement

• Google acquired YouTube for 1.65 billion USD of stock worth on November 13 th, 2006
• Improved Company’s Core Business: YouTube is the world’s largest video search
engine which has a massive database of videos that are all navigable by Google’s
algorithms

• Advertisements: Display and video ads have generated in billions of dollars of

revenues
• Market Value: Google’s stock set a new all-time high immediately following the
acquisition
• Smart Investment Decisions: Google made a decision to split ad revenue with video
creators which stimulated the creation of high-quality content & implemented new
formats such as livestreaming and virtual reality

Source: Ford Motor Company

4
 References (Convert to APA***)

• Slide 4 - threat of new entrants(1): Cost & Production Graph (

https://transportgeography.org/?page_id=1257)
• Slide 4 – threat of new entrants(2):
https://www.bankofcanada.ca/wp-content/uploads/2019/06/san2019-19.pdf
• https://www2.deloitte.com/content/dam/Deloitte/uk/Documents/manufacturing/deloitte
-uk-automotive-analytics.pdf
Slide 1 (Deloitte)
• Slide 1 – Ford 10K
https://s22.q4cdn.com/857684434/files/doc_financials/2018/annual/2018-Annual-Report.
pdf

• Slide 1: McKinsey & Company:

https://www.mckinsey.com/~/media/mckinsey/dotcom/client_service/Automotive%20and
%20Assembly/PDFs/McK_The_road_to_2020_and_beyond.ashx
• https://ark-invest.com/research/automotive-consolidation (slide 2)
• https://www.theringer.com/2016/10/10/16042354/google-youtube-acquisition-10-years-t
ech-deals-69fdbe1c8a06
• https://notesmatic.com/2019/04/swot-analysis-of-ford-motors-2019/ (for SWOT slide)