Ford Case Study

1. *Development and attractiveness * Segment and characterize the most important strategic groups. The Automotive industry consists of two main acting groups. On the one hand there are the OEMs (Original equipment manufacturer) like Ford, BMW, Audi, etc. And on the other and there are the OES’ (Original equipment supplier) like Bosch, Delphi, Continental etc. The main strategic groups that act in this industry are the Buyers, the Suppliers, the Competitors and of course the Government. The Buyers: Is one of the most influencing group in terms of strategy, as they have the power to not guarantee the OEM any revenue. But they are somehow susceptible as the OEM still has the power  to set an price for the car and influence the market for example with not offering any cheaper model. The Suppliers: As they are generating about 75% of the value chain the strategic choice of the supplier is one of the most important parts for the OEMs. OEMs rely responsibility and confidence in the supplier industry. The outsourced production and research and development processes foster further dependence in this OES-OEM-relationship. The Competitors: The automotive industry is a branch with a lot of competition in terms of cost reduction and discounts. Asian manufacturer are well known as low cost car producers, which is nowadays a problem that other OEMs have to face with because of globalization and more easy access to export and import of other countries. The Government: Regulations and the law limit the possibilities for the automotive industry, in electrical as well as in the combustion concepts.
   Developm. & Attract.: After the appearance of the combustion cars in the 19th century a lot of small companies built vehicles. In mid of the 20th century two different paths were notable in the world. On the one hand there was Western Europe and Japan where the market matured and the maximum production was reached in the 1990s. On the other hand there was the US market, which had been growing rapidly at the beginning but saturated after a while. While the volume of cars produced in the US and Canada was shrinking from 1993-2011, the industry kept growing worldwide. The development of different technologies and the convergence of all main operating countries fostered growing market segments. Till the development and establishment of electric cars the market in the countries was relatively the same. But while the first electric cars were introduced in the early 1900s the major comeback was about 100 years later, when all leading OEMs had a all-electric model on the market.
2. *characterize the business system of Ford * affecting the developments of Ford? Ford is operating in a business system where state regulations and the interest of different stakeholder play a big role. In Ford for example after the crisis in 2008 we could see that the governments in Europe and North America implemented the scrappage bonus to raise the demand of cars as they are interested to keep this industry going as in most countries it is one of the main industries with thousands of employees. Furthermore the governments sent direct state-aid or even subsidies to help the automakers come over this crisis. Another significant fact about the automotive industry within Ford is working is that this market never sustains stable. As you could see in the hard years of 2008/2009 where the biggest OEMs, which couldn’t even cover their cost of capital had to grow to new markets as Asia as their demand was constantly increasing, where other competitors where already acting. One of the main aspects that describe the automotive business system is the standardized process they use. In 1903 Henry Ford was planning a production of 1000 vehicles a year but this changed quickly as assembly times differed from 23 hours in 1912 to 4 hours in 1913. The invention of assembly lines and the use of lean production, which includes the process control, JIT- scheduling, quality circles, teamwork and flexible production, enabled the companies to set less importance on economies of scale as their minimum efficient scale decreased. The development of the platform-principle for multiple models is the most common used in the automotive industry. It also influenced the production and development of new cars at Ford. In 2012 a global model was introduced to the market. The automotive industry is compared to others like aircraft, motorcycles, etc. it is a fragmented industry. Alliances as well as M&A are quite a lot but there were a considerable number of new competitors from India and China. Beside the many divestments in 2008/2009 there was one big merger of Fiat and Chrysler.
3. * likely developments in the industry in the coming years * what will be important factors Developments: Demand and Sales will rise in all other countries than Europe. Despite the market growth there will be no adequate profit margins due to the excess capacities. * Eliminate the overhang of excess capacity * all-electric car concepts – as the demand could be increasing because of environmental regulations and concerns and depleting oil reserves. * Do not invest in both, electrical and hybrid solutions *small cars concept, as they are fuel efficient, save and have a attractive design * Offer customized cars, to increase product differentiation.
4. Analyse Ford’s strength and weaknesses applying Duncan et al.’s framework?

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