Value chain analysis of Ford Motors

The Ford Motors company headquartered at Michigan United states is one of the leading automobile manufacturers in the world. It has established an extensive global sales and distribution network.  In fiscal 2019, the company achieved worldwide retail sales of 5.5 million vehicles as well as net revenue of $155.9 billion. However, unit sales and revenue of the brand were lower than the previous year in 2019. The automobile industry is passing through a  challenging phase and apart from growing competition, changing market dynamics have also affected demand and sales of Ford products around the world.

In 2019, the overall market share of the company declined slightly coming down to 6% from 6.3% in 2018. However, Ford is still among the mightiest brands in the US and other leading markets. In the US, its market share remained higher than 13% in 2019. Ford is a popular automobile brand and has excellent manufacturing and distribution capabilities. However, like every leading brand, it invests substantially in research and development which is also crucial to maintaining competitive position in the industry. Ford focuses on managing the entire value chain in a manner to avoid wastage of resources, grow cost efficiency and achieve superior results through efficient use of resources.

Ford Motors Company Value Chain:

The Concept of Value chain was introduced by Michael E Porter of Harvard business school. It includes all the stages from planning to production, sales and after-sales service which add value to the product. There are two types of activities in the supply chain that include primary activities and support activities. The primary activities are directly related to value creation and the secondary activities mainly support the primary activities. Ford has optimized both the primary and support activities in its value chain to eliminate bottlenecks that hinder smooth operational performance.

Primary Activities in the value chain of Ford Motors:

Inbound logistics:

Ford’s manufacturing network is spread globally. Its manufacturing and assembly plants are located throughout the world from Africa to the U.S. and China. Ford collects raw materials from its suppliers around the world. The raw material is then delivered to its assembly plants with the help of third-party logistics providers. DHL is one of the main logistic partners of Ford Motors. It has played a major role in helping Ford maintain its European supply chain. Ford Motor Company has awarded a new contract to DHL, under which DHL will provide freight management services as its Lead Logistics Partner solution. As a part of the contract, DHL Supply Chain will manage the movement of prototype parts from suppliers to Ford’s R&D locations globally.

Outbound logistics:

Logistics plays an integral role in the efficient and successful operation of Ford’s supply chain. Whether inbound or outbound, the role of logistics is integral to maintaining supply chain efficiency. The assembled vehicles are shipped from Ford’s manufacturing plants to its dealerships. Ford has used a balanced mix of transport solutions that focus on reducing road miles as well as optimizing efficiencies apart from environmental sustainability. It collaborates with its logistics partners and industry to accurately measure and improve the impact of transport down its supply chain.

Operations:

Ford is a global brand and has sales around the world in nearly every corner. It has its offices, assembly plants and dealerships operational globally. Based on the geographic region of operation, it has divided its business into five segments – North America, South America, Europe, Middle East & Africa, and the Asia Pacific. Its main properties include manufacturing and assembly facilities, distribution centers, warehouses, sales or administrative offices, and engineering centers. Ford also owns substantially all of its US and non-US manufacturing and assembly facilities. However, most of its part distribution centers outside the US are either leased or provided by vendors. 

As of 2019, Ford had eight regional engineering, research, and development centers, and 55 manufacturing and assembly plants. 

Marketing and sales:

Growing competition in the automobile industry has led to companies growing their focus and investment in marketing and utilizing both online and offline sales channels. Ford Motors spends a large amount on advertising and sales promotions every year.  Its advertising expenditure has remained $4 billion or higher for the previous four years. In 2019, its expenditure on advertising was slightly lower at $3.6 Billion. Apart from advertising the brand also uses events and auto shows for the promotion of its product and brands. The total number of Ford dealerships (including Ford and Lincoln) in 2019 was 10,921.

Products and services:

Ford has brought a large range of products and services to the market. The company has continued to improve its product range through a continuous focus on research and development. Apart from its Ford products, the company also sells Lincoln brand products that cater to higher-end consumers. In 2019, the company sold approximately 5,386,000 vehicles at wholesale throughout the world. The company sells cars, SUVs, trucks, electrified vehicles, and Lincoln luxury vehicles in global markets. Its primary market is the US where it sold 2,422,698  vehicle units in 2019. Ford also provides financial services through Ford Motor Credit Company LLC (“Ford Credit”).

Support Activities:

Technology:

Technology is driving most of the growth in the vehicle industry in this decade. It is a source of competitive advantage as well as the main differentiator helping auto brands acquire a stronger competitive advantage and grow their market dominance. Ford has built excellent technological capabilities that drive higher productivity in its manufacturing and supply chain network. The company is also working on further improving its manufacturing efficiency through investment in technology and the implementation of a world-class IT system. Every year Ford invests a heavy sum in research and development.

Infrastructure:

Infrastructure has an important role in the management and growth of businesses. Ford is led by James P Hackett as its CEO.

“Breakthrough technologies are transforming nearly every aspect of the vehicles we build and how people use them, demanding a rethink of how we design transportation systems.”

Jim Hackett, President & CEO. Ford Motors.

Tim Stone is Ford Motors’ CFO. William Clay Ford Jr. is the executive chairman of Ford Motor company and James D Farley Jr. is the COO of Ford Motors company. 

“I believe the purpose of a company is to make people’s lives better. That is how we became great in the past and it is how we will become even greater in the future.”

William Clay Ford Jr. Executive Chairman, Ford Motors Company.

The company manages its business operations on a global as well as regional basis. Each region has its own head, a Vice President and CEO who oversee the business operations in the region. The management of Ford Motors is also divided into various functions from marketing and sales to production, product design, government relations, finance, etc.

HRM:

Ford currently has around 190,000 employees (2019). The automobile industry is highly competitive and since employees can be a major source of competitive advantage for any brand, companies place special focus on managing them strategically in order to ensure their career growth. Ford also focuses a lot on strategic HRM and invests in the development of its Human Capital through appropriate financial and nonfinancial rewards as well as training programs designed to help employees find faster growth.

Procurement:

Ford obtains raw materials from thousands of suppliers from around the globe. Global procurement at Ford allows it to contribute to local economies, encourage entrepreneurship and thus enrich livelihoods in the communities where it operates and where its suppliers are located. It also helps the brand secure a continuous supply of materials, goods, and services through responsible and sustainable sourcing.

Other sources: Ford Motors form 10K 2019.

Abhijeet Pratap

Abhijeet has been blogging on educational topics and business research since 2016. He graduated with a Hons. in English literature from BRABU and an MBA from the Asia-Pacific Institute of Management, New Delhi. He likes to blog and share his knowledge and research in business management, marketing, literature and other areas with his readers.