INTERNATIONAL MASTER OF BUSINESS
ADMINISTRATION
Strategy - Group Assignment
Faculty:
Prof. Franco Quillico
Group 1:
Thais Della Torres – thais.dellatorres@mip.polimi.it
Sabra Boldrini – sabra.boldrini@mip.polimi.it
Alina Plesca – alina.plesca@mip.polimi.it
Alexis Rivas Castro – alexis.rivas@mip.polimi.it
Mattia Negroni – mattia.negroni@mip.polimi.it
Pawel Kracki – pawel.kracki@mip.polimi.it
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Question 1
What are Ford’s challenges and opportunities?
Ford’s Challenges:
Facing high competition – Ford is already facing high competition from its rival companies like GM,
Toyota, Honda, Tesla, and Tata. All the companies are though opponents and Ford keeps struggling
to maintain its innovative position in the industry. Moreover, there is also high competition with a
low-cost manufacturer - Chinese Auto Makers (Greely, SAIC)
Apart from other car manufacturers there is another big challenge – the travel habit of people is
changing so instead of car they could select Public Transportation o Bus o Railway (Metro) or one of
the Ride-hailing entrants like Uber, Lyft, Didi Taxify
Another challenge that Ford needs to face is Technology currently mainly Electric (also hybrid), selfdriving cars that is making new trend different then vehicles with combusted engine.
The rising raw material prices of steel and steel coil can directly affect the company’s cost and profit
margin. Also, Oil prices fluctuations can affect the profit margins and making companies look for
other types of ‘fuel’. Therefore, another challenge is related to Increased Prices of Raw Materials.
In today’s world big role are playing the regulations and compliance – The compliance and regulatory
threats for automobile brands have increased in the past years because of environmental
improvements going around the world. Vehicles are now inspected for public safety and quality
issues. Ford can face serious challenges if it fails to comply with the new regulations.
Ford needs to face also the economical challenges - US companies (like Ford) are more affected in
case of global crisis – history is showing that the stable markets are suffering more during the crises
and the effects are also more severe
Ford Opportunities:
Eco-Friendly Trends – As Ford is already trying adapt the technology to be less destructive to the
environment. They have an opportunity to produce fuel-efficient cars and commercial vehicles. For
example, they can build vehicles that run on different forms of energy. (The 2018’s C-Max and Fusion
Hybrid car model can be their most significant opportunity).
Exploring new markets– Ford is already working on his presence in the automobile market in India
and China, they have an excellent opportunity to tap into other countries in the world and grow their
customer base.
Marketing – Ford has a really strong and well known brand. Digital marketing is dominating all over
the world these days, so Ford has an opportunity to improve their digital presence and marketing
skills to grow its customer and supplier engagements.
Self-driving cars – It is a controversial term because of some political and moral uncertainty in case
of an accident however it is clear that this is a dream about the future. Ford is actively working with
this topic - In 2017, Ford has invested $1 Billion in Artificial intelligence company, Argo AI, to
develop its self-driving technology. In addition, Ford has partnered with Walmart and Postmates to
test the future of grocery delivery.
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Question 2
Describe the global and domestic contexts facing Hackett
Hackett become chairman of Ford in 2017, a very challenging period for the automotive industry in
the USA, suffering from the largest bankruptcy in the US history with the collapse of giant investment
banks in 2009 and then transformed and disrupted by new competitors, coming from the emerging
countries (BRICS).
We will hereinafter analyse the global and domestic context in which Hackett operated using the
Porter’s Five Forces Model.
COMPETITIVE RIVALRY : very high
The automotive market sees a high level of competition among leading manufacturers:
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domestic market : Ford still maintains a 14%MS thanks to his brand recognition, but a serious
threat is represented from the rise of EMNC, powerful and hungry, venturing outside their
countries and seeking globally competitive positions.
in China, Ford is struggling and losing ground versus Geely, GM, Volkswagen, Toyota which
enjoyed a 11% global rise on the light vehicles sales, while Ford was losing 18% in Jan 2018.
Considering that the automotive industry has very high exit barriers (because of high costs and
investments) and low switching costs, the intensity of rivalry is very high.
Ford’s response is an emphasis on quality, focus on technological innovation & expertise and
production off-set in China.
THREAT OF POTENTIAL ENTRANTS : high
These are not considered viable competitors, but they may become on the near future.
The so-called DISRUPTORS are :
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electric and self-driving cars like TESLA,
ride hailing entrants like Uber or Didi.To face this threat, Ford has made plans to invest in the
development of electric vehicles in the next 4 years (Carey and White, 2018).
THREAT OF SUBSTITUTE : moderate to high
It is represented by other modes of transportation, such as public transportation, bicycles or walking.
In the domestic US market is low or moderate, considering Americans’ reluctancy to these form of
transportation. But globally, bikes are becoming a remarkable mean of transport, very suitable for
short distances and bike-sharing is significantly growing in China.
BARGAINING POWER OF SUPPLIERS : moderate
The established and prominent position of FORD should reduce the bargaining power of suppliers
which are firms providing sub-assemblies and components as well as raw materials.
However, the regulatory changes such as the tariffs applied on import of steel (+25%) and aluminum
(+10%) under Trump in 2018 and the law anti-pollution (ban on certain fuels) have generated a
Competitive Disadvantage for FORD versus the Non-US competitors and lead to an increase of the
manufacturing costs.
BARGAINING POWER OF BUYERS : moderate
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Buyers are the end users, that could be individuals or car rentals or dealers.
If Ford cannot keep their consumers happy, they will lose them to another competitor.
Buyers cannot exert a significant control on the price decisions, but can influence the production
strategies :
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Consumers demand innovative and fuel-efficient or hybrid vehicles, thus Ford strategy of “smart
vehicles for a smart world”.
Fords focused its production on trucks, sport utility vehicles and cross-over as most appreciated
and most profitable products.
Ford decides to discontinue manufacturing of Sedans in North America.
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Question 3
What is the effect of rising EMNCs on established global corporations?
During the last 30 years, the worldwide economy has changed drastically, and the biggest companies
has been affected due to these changes. Some corporations have adapted at the market requirement
others contrary have not followed the market request and consequently have lost market quote and
positioning and in the worst cases have disappeared.
In the latest twenty years emerging economies has grown in healthy way and has create a relevant
differentiation between their own products and the products of the multinational companies. Due to
certain circumstances such as political situation, market growing, natural resources, established
positioning in the country, these conditions allowed certain companies to be able to approach new
markets and copy their current business model in biggest economies.
EMNCs business model is mainly focused on lowering cost production and the main goal is to
concentrate in increasing efficiency and productivity. These goals must be addressed in medium
and long terms. Contrary, the biggest multinationals usually have as a goal to increase yearly income
concentrated mainly on short term.
EMNCs is approaching the market with three main differences between biggest multinational:
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First, as mentioned before, they have lower production costs compare with the advanced
economies thanks to lower labor costs and access to natural resources.
Second, maximizing the revenues controlling the production costs and constantly increasing
supply chain and consequently increasing the production efficiency.
And third, having a strong position in the local market the EMNCs companies have learned
how innovate quickly and have understood which are the market request of the local people
with less purchasing power. That translates in EMNCs goal of enlarging the customers base,
maximizing the income.
The increasing position of the EMNCs in the global market is impacting the business model of the
big multinational companies so that they need to change their approach and adapt it accordingly to
the continuous changes of the market requests. As we already know, some big multinational
companies have disappeared as result of this effect (e.g. Nokia, Blockbuster, Kodak,..). On the
contrary, there are different companies that have been very active and have followed the market
request in order to maintain/grow market share and leadership (e.g. Apple, Louis Vuitton,
Microsoft,..).
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Question 4
What approach would you recommend to Mr Hackett, also in light of the recent (September
10, 2019) downgrade of Ford’s debt to junk status from Moody’s?
The recent September’s news about Moody’s downgrade of Ford has added additional complexity to
an already “delicate” situation for the company. Moody’s cut the rating on Ford’s bonds one notch
from Baa3, the lowest investment grade rating, to Ba1, the highest rung of the junk bond scale
(previously Ford was upgraded to investment grade in 2012). According Moody’s:
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“Ford’s cash flow and operating profit margins have fallen below the forecasts and noted the
automaker’s sharply weaker performance in China, where Ford’s sales have plummeted over
the last two years, leading to sharp losses”
 “Ford now faces the challenge of addressing these operational problems as demand in major
markets is softening, and as the auto industry is contending with an unprecedented pace of
change relating to vehicle electrification, autonomous driving, ride sharing, and increasingly
burdensome emission regulations.”
 "The erosion of Ford's performance has occurred during a period in which global automotive
conditions have been fairly healthy."
The recommended strategy for Mr Hackett would be to adopt an action plan that aims to mitigate the
critical points mentioned above:
1. Chinese market - the world's largest automotive market
Ford operates in China through 2 Joint Ventures (Changan and Jiangling Motors Co.) to produce
its commercial vehicles. Therefore, it is crucial to have strong and united relationships with its JVs
and dealers and to understand the ins and outs of the local market. For years, Ford relied on an everchanging group of American and European executives to run operations in China—many of whom
had a limited understanding of the local marketplace. Ford has already started to address this issue;
in October 2018, it appointed Anning Chen as the President of Ford China. Chen is a U.S. citizen,
but grew up in China and speaks fluent Mandarin. He is a Ford veteran, having worked for the firm
for 17 years. Chen said that Ford must work at “China speed” and prioritize features appealing to
China’s style-conscious buyers. China is a technology-obsessed country and Ford should invest its
resources in restructuring its business processes and moving faster to put out new car models in line
with the speed of Chinese technological innovation. Important features to Chinese buyers, such as
internet connectivity and large multimedia displays should be default for Chinese vehicles.
While tariffs on American cars will make importing more difficult, Ford only imported 46.300
cars last year from the US to China. Ford China only uses 24% of its Chinese production capacity to
produce 1.6 million vehicles and could increase its local production to make up for the previously
imported cars. The major issue for Ford is that there were only able to sell around 900.000 vehicles
in China last year. Obviously, there is a serious demand problem for Ford, rather than one of supply.
Focussing on marketing of its China adapted vehicles could be significantly advantageous for the
company. Perhaps this could be achieved by instilling a sense of pride in Chinese consumers by
buying a vehicle designed for and made in China. Another possibility Ford could look into is to use
more of its production capacity in China and subsequently export those vehicles to other markets,
should it be profitable to do so.
2. New technology firms and technologies (electric and self-driving cars, ride sharing)
New technological trends, such as ride sharing, electric and self-driving cars, have caused significant
disruption in the automotive market, and they can no longer be ignored. Ford had already put in place
some initiatives to deal with this disruption. For example, it had already formed an alliance with the
German carmaker Volkswagen in which they will share the development costs of electric cars. This
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will provide important long-term benefits to Ford's position in the electric, autonomous and
commercial vehicle markets. However, this could be not enough; the recommendation for Ford would
be to continue refocussing the company on areas of growth, such as electric or self-driving vehicles,
and away from areas of slow growth, such as traditional fuel-powered cars. Another reason for new
focus is the global movement against pollution, with the goal to reduce or even eliminate fuel powered
engines in some parts of the world.
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