CLOSING CASE Ford's Global Strategy When Ford CEO Alan Mulally arrived at the com- was no way that Ford would be able to compete ef- pany in 2006, after a long career at Boeing, he was fectively in the large, developing markets of China shocked to learn that the company produced one and India unless Ford leveraged its global scale to Ford Focus for Europe, and a totally different one produce low-cost cars. The result was Mulally's for the United States "Can you imagine having "One Ford" strategy, which aims to create a hand- one Boeing 737 for Europe and one 737 for the ful of ear platforms that Ford can use everywhere United States?," he said at the time. Due to this in the world. product strategy, Ford was unable to buy common Under this strategy, new models-such as the parts for the vehicles, could not share development 2013 Fiesta, Focus, and Escape share a common costs, and couldn't use its European Focus plants to design, are built on a common platform, use the make cars for the United States, or vice versa. In a same parts, and will be built in identical factories business where economics of scale are important, around the world. Ultimately, Ford hopes to have the result was high costs. Nor were these problems only five platforms to deliver sales of more than limited to the Ford Focus the strategy of design- 6 million vehicles by 2016. In 2006, Ford had 15 ing and building different cars for different regions platforms that accounted for sales of 6.6 million was the standard approach at Ford. vehicles. By pursuing this strategy, Ford can share Ford's long-standing strategy of regional mod- the costs of design and tooling, and it can attain els was based upon the assumption that consum- much greater scale economies in the production ers in different regions had different tastes and of component parts. Ford has stated that it will preferences, which required considerable local cus- take about one-third out of the $1 billion cost tomization, Americans, it was argued, loved their of developing a new car model and should sig. trucks and SUVs, whereas Europeans preferred nificantly reduce its S50-billion annual budget for smaller, fuel-efficient cars. Notwithstanding such component parts. Moreover, because the different differences, Mulally still could not understand factories producing these cars are identical in all why small car models like the focus or the Escape respects, useful knowledge acquired through ex- SUV, which were sold in different regions, were not perience in one factory can quickly be transferred built on the same platform and did not share com- to other factories, resulting in systemwide cost mon parts. In truth, the strategy probably had to savings. do with the autonomy of different regions within Ford hopes this strategy will bring down costs Ford's organization, a fact that was deeply embed- sufficiently to enable it to improve profit margins ded in Ford's history as one of the oldest multina- in developed markets and achieve good margins at tional corporations lower price points in hypercompetitive developing When the global financial crisis rocked the nations such as China, now the world's largest car world's automobile industry in 2008-2009, and pre- market, where Ford currently trails global rivals cipitated the steepest drop in sales since the Great such as General Motors and Volkswagen. Indeed, Depression, Mulally decided that Ford had to the strategy is central to Mulally's goal for growing change its traditional practices in order to get its Ford's sales from $5.5 million in 2010 to $8 million costs under control. Moreover, he felt that there by 2015 (continued) Read: 1. Closing Case in Chapter 8 (Ford) Respond to the following prompts. Using the framework outlined in this chapter and summarized in Figure 8.3, to: 1. 1. Describe Ford's historic global strategy? 2. Describe its current global strategy? 1. Discuss the benefits and drawbacks of its current global strategy? 2. Identify TWO products/service to which Ford's current global strategy would be appropriate when expanding to China. Justify your choice