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Ford Case
Ford Case
Ford Case
STRATEGY
Summary of the case
In 2006, Ford CEO Alan Mulally took over the company and was surprised to find that
Ford produced different versions of cars like the Ford Focus for Europe and the
United States, leading to inefficiencies.
Ford's regional model strategy was based on the belief that consumers in different
regions had different preferences.
But Mulally questioned why cars like the Focus were not built on the same platform and
did not share common parts.
The global financial crisis in 2008-2009 forced Ford to reevaluate its practices and
control costs. Mulally introduced the "One Ford" strategy to create a few common car
platforms that could be used worldwide.
Summary of the case
Under the "One Ford" strategy, new models share common designs, platforms, and
parts, and are built in identical factories worldwide. Ford aims to reduce the number
of platforms from 15 in 2006 to just five, achieving significant cost savings.
This strategy is expected to reduce the cost of developing a new car by one-third and
significantly decrease the annual budget for component parts.
While enabling knowledge transfer between identical factories, resulting in cost
savings.
Ford hopes that the "One Ford" strategy will lower costs, improve profit margins in
developed markets. And allow the company to compete effectively in developing
markets like China, with the goal of increasing sales from $5.5 million in 2010 to $8
million by 2015.
Summary of the case
Goal:
Ford plans to reduce the number of platforms from 15 to just 5 and achieve
significant cost savings by sharing design and tooling costs.
Aims:
Ford aims to take about one-third of the $1-billion cost of developing a new car model
and significantly reduce its $50-billion annual budget for component parts.
Timeline of the case
2006 2010
Alan Mulally becomes CEO of Ford Ford sets a sales growth target
and discovers that the company from $5.5 million in 2010 to $8
produces different versions of million by 2015.
cars like the Ford Focus for
Europe and the United States.
“ Question 01
Why do you think that ford historically made
different cars in different region? What are the
advantages of ford’s historic strategy? What are
the drawbacks?
Reasons for ford historically made different cars in different
region
Regional Preference Regional Autonomy
consumers in different S S
Many large multinational
parts of the world had
corporations, including Ford,
distinct tastes and
operated with a high degree
preferences
E W of regional autonomy
Regulatory Differences
Different regions often have Legacy and Tradition
Reasons
varying safety and environmental Over time, producing region-
regulations, which necessitated specific cars became a deeply
modifications to vehicles to A B ingrained tradition and part of
comply with local laws the corporate culture for some
automakers, including Ford.
Market Segmentation Market Competition
Market Segmentation: Competition in the automotive
Automakers believed that industry was fierce, and
segmenting the market by automakers believed that
region and offering offering unique models for each
specialized models for each region could provide a
segment could potentially lead competitive edge.
to higher sales and market
share.
Business Plan Advantages of ford’s historic strategy
01 02 03 04 05
Customization for
Regional Preferences Local Autonomy Market Segmentation Brand Positioning Risk Mitigation
Ford believed that Ford's strategy By offering different Differentiating By producing region-
tailoring its vehicle allowed its regional vehicles in different products by region specific models, Ford
offerings to the divisions to have a regions, Ford could allowed Ford to might have believed it
specific preferences degree of autonomy, segment the market position its brands could reduce risks
and needs of which could be seen more effectively, differently in various associated with
different regions as an advantage in potentially maximizing markets market fluctuations
allowed them to responding to local sales and profits in
better meet customer market dynamics and each region.
demands. customer preferences
Drawbacks of ford’s historic strategy
9
Disadvantages of ford’s historic strategy
10
“ Question 02:
What global developments forced Ford to re-
think its historic strategy?
Answer for Q2
Second:
First: 01 02
The global development that forced Ford needed to get its costs under
Ford to rethink its historic control, so it resulted in the “One
strategy was the financial crisis of Ford” strategy created by Mark
2008-2009 that rocked the world’s Fields and implemented by Alan
automobile industry. Mulally.
12
Answer for Q2
Forth:
Third: 03 04
Ford had originally built different In 2008-2009, there was a global financial
model cars for Europe and the crisis that greatly affected the automobile
United States; industry and led to the biggest drop in sales
because Europe was more focused Ford had experienced since the Great
on driving smaller, more fuel- Depression.
efficient cars and the United This caused them to leverage its global scale to
States enjoyed driving trucks and produce low-cost cars in order to compete in the
SUVs. large, developing markets of China and India.
This led to Ford creating the “One Ford” strategy,
which aims to create a handful of car platforms
that Ford can use anywhere globally
13
“ Question 03:
How will the 'One Ford’ strategy benefit Ford?
What does this strategy mean for Ford’s ability
to compete in established markets like the
United States and Europe, and emerging markets
like China?
Q4. How will the 'One Ford’ strategy benefit Ford?
Under the “One Ford” strategy, benefits include new car models that share a
common design, are built on a common vehicle platform, use the same parts,
and will be built in identical factories around the world.
When the global financial crisis hit in 2008-09 it rocked the automobile
industry and precipitated the steepest drop in sales since the great
depression.
During this time there was a large developing market in China and India,
Ford would have to leverage their global scales to produce low cost cars
to compete effectively.
The result of this was the “One Ford” strategy that aims to create a
handful of car platforms that ford can use everywhere in the world.
“ Question 03(B)
for Ford’s
ability to
This strategy should significantly
reduce costs to enable them to compete in
improve their profit margins in
developed markets and achieve
established Ford trails global rivals such as
06 Volkswagen and General motors 07
good margins at lower price points markets in this market interest
in hypercompetitive developing
nations such as China, now the
world's largest car market.
They will also significantly
reduce their current annual
budget for component parts.
05
“ Question 04
How would you describe Ford’s global strategy?
Answer for Q4
A global strategy means building market dominance without sacrificing
what makes your brand unique.
There are four basic strategies:
21
Global standardization strategy
A localization strategy
A localization strategy focuses on increasing
profitability by customizing the firm’s goods
or services so that they provide a good
match to tastes and preferences in
different national markets.
Transnational strategy
A transnational strategy tries to simultaneously achieve low costs
through:
o location economies,
o economies of scale,
o and learning effects differentiate the product offering across
geographic markets to account for local differences foster a
multidirectional flow of skills between different subsidiaries in the
firm’s global network of operations .
An international strategy
An international strategy involves taking products first produced for
the domestic market and then selling them internationally with only
minimal local customization .
When there are low cost pressures and low pressures for local
responsiveness, an international strategy is appropriate
Ford’s global strategy
McDonald's. Apple
The fast-food giant McDonald's is a classic Apple is known for its standardized
example of a company that follows a global approach to product design and user
standardization strategy. experience. Whether you buy an iPhone in
While it adapts its menu to cater to local tastes the United States, Europe, or Asia, or in
to some extent, it maintains a core set of menu Mymensingh Bangladesh the product's core
items and standards that are consistent features and interface remain largely
worldwide. This allows McDonald's to achieve consistent.
cost efficiencies and maintain a strong global
brand identity