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1. How would you characterize the strategy for competing internationally that Ford was pursuing prior to the arrival of Alan Mulally in 2006? What were the benefits of this strategy? What were the costs? Why was Ford pursuing this strategy?2. What strategy is Mulally trying to get Ford to pursue with his One Ford initiative? What are the benefits of this strategy? Can you see any drawbacks?3. Does the One Ford initiative imply that Ford will now ignore national and regional differences in demand?

Question

1. How would you characterize the strategy for competing internationally that Ford was pursuing prior to the arrival of Alan Mulally in 2006? What were the benefits of this strategy? What were the costs? Why was Ford pursuing this strategy?

2. What strategy is Mulally trying to get Ford to pursue with his One Ford initiative? What are the benefits of this strategy? Can you see any drawbacks?

3. Does the One Ford initiative imply that Ford will now ignore national and regional differences in demand?

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Step 1

 

  1. Alan Mulally was appointed as Ford CEO in 2006 after a long career at Boeing; he was astonished to learn that the Ford was producing two different types of cars for capturing the European and American market by using different product strategy. Under this product strategy, Ford was producing two types of cars for the international market by considering the taste and preferences of their European and American customers irrespective of the aim to achieve economies of scale which results in high cost that was even ignored by Ford prior to 2006 i.e. Fords’ standard approach was to build and design different cars for different regions according the customers choice. However, it was generally argued that Europeans prefers to have small and fuel-efficient cars whereas Americans prefers trucks and SUV’s.

 

Benefits of this strategy - Firstly, the adoption of the aforementioned strategy makes Ford to have a wide variety of cars. Secondly, Ford considers its customers choice and optimal quantity of production before producing cars. Thirdly, it makes Ford to have share in the international market; thereby, Ford has a higher goodwill.

 

Costs of using this strategy – Firstly, higher production cost. Secondly, Ford forget to achieve its main aim of achieving economies of scale which is very crucial factor for automobile market. Thirdly, more resources and laborers were required to produce variety of products which is generally considered as wastage of resources, labor, and time.

 

Reason why Ford was using this strategy – Firstly, Ford want to maintain its brand name as it is one of the oldest multinational corporation. Secondly, Ford wishes to capture a higher share in the world market, and Thirdly, Ford doesn’t find any drawback in this strategy prior to the great financial crisis of 2008.

 

Step 2

2. When the global financial crisis affected the world’s automobile industry, Alan Mulally as a CEO of Ford suggested that as currently, there is a steepest decline in the sales , Ford must change its long-standing practices of higher price in order to raise its sales and even by reducing the production cost; hence, price of car will help Ford to occupy a large share in other big markets as well (China and India) in order to raise its sales and profit. Alan mainly stated that Ford must build a common platform where it can use same parts that can be build in identical factories around the world. He further stated that, Ford must operate from only five platforms to deliver around 6 million vehicles by 2016 whereas in 2006, Ford operates from fifteen platforms and deliv...

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