Fords European Organization Changes Strategy

Santanu Roy (87) Sanjay Kumar Pal (86) Sanit Sadhu (85) Saumik Ghosh (89) Suman Biswas (114) Sagnik Mukherjee (79) Siddhatha Chatterjee (99) Samik Bandyopadhyay (81)

Introduction
Ford Motor Company has a long history of operating in Europe The European operations were separate subsidiaries, each accountable to the headquarters in USA This was mainly due to each country having its own tariff regulations and each countrys customers had different tastes, needs and preferences. As European countries grew closer together, Ford used a coordination strategy to achieve economies of scale and to reduce cost of engineering. In 1994 the Ford 2000 strategy emerged, it merged its North American operation units with that of Europe in 1995 This strategy did not work well as shown by 1998 performance report. Ford was losing market share to competitors like General Motors and Volkswagen. Ford reviewed its Ford 2000 strategy and reintroduced the market focus orientation, which gave more autonomy to the regions. Ford also introduced the Luxury car division to stay in the competition.

Problem Identification

The entire European market is passing through alternative phases of unification and diversification The most suitable way in which an organization can adapt to such fluctuations, is what forms the basis of this case study
As seen Ford had adopted:
Decentralization Centralization Re-decentralization

Acquisition of premium luxury European brands to somehow remain competitive.

Decentralization VS Centralization

Decentralization VS Centralization (contd..)

The FORD 2000 Strategy

In 1994 the FORD 2000 strategy was adopted Ford merged its operation unit in North America with that of Europe This was done to be more competitive and to achieve cost reduction by eliminating unnecessary car platforms and duplication of engine models. Out of 5 vehicle centers 4 were in North America and the one in Europe was responsible for developing small and mid-size automobiles. Ford created a global sales operation and a global purchasing unit Suppliers who wanted to do business with Ford would have to be global, not regional. This resulted in a lot of confusion and also heavy losses. Ford President Nick Scheele visited a German engineering centre. An escalator was broken, and he wanted to know why it remained unrepaired. The engineer said that the requisition order for its repairs had gone back and forth between Germany and Dearborn. No one knew what to do.

Changes Adopted by Ford

Decentralization

Centralization

Re-Decentralization

Decentralization: This was mainly due to each country having its own tariff
regulations and each countrys customers had different tastes, needs and preferences.

Centralization: As European countries grew closer together, Ford used a

coordination strategy to achieve economies of scale and to reduce cost of engineering and later used the FORD 2000 strategy.

Re-Decentralization: To stem heavy losses in Europe and South America, and restored decision-making power to Ford's regional organizations.

Establishment of Luxury car division:

Acquisition of premium luxury European brands like Lincoln, Volvo, Jaguar and Aston Martin to remain competitive.

SWOT Analysis
Strength:
Acquiring successful brands bring their market and their talent pool, which will help to penetrate the European Market much more. Centralization was ahead of its time Cost effectiveness did not influence decisions. Re-Decentralization lead to increasing cost, had the centralization process been effected at the time of the emergence of the European Union, further ReDecentralization would not be needed. Giving more autonomy to the regions would help improve performance Gained market expertise may aid sales and recapture market share in other segments thereby overriding increasing competition.

Weakness:

Opportunity:

Threats:
Increased Operating loses. With the openness of European markets, duplication of models along with nonuniformity in pricing would severely hamper operations in Europe.

Conclusion

The Strategies taken by Ford were mainly Reactive, whereas Pro-Active Strategies were needed. Centralization was ahead of its time and Re-Decentralization was a mistake as:
There was the formation of the European Union Ease of trade became the order of the day Operating losses across various segments Sale of premium brands like Jaguar Land Rover to bail them out.

Formation of base models with certain basic specifications at single European manufacturing center along with various country based marketing centers selling the variants according to the tastes and preferences of the local consumer in a unified yet diverse business environment.

Questions ?

Thank You

Slide Distribution

Slide 2: Introduction Suman Biswas Slide 3: Problem Identification Siddharta Chatterjee Slide 4: Decentralization vs Centralization (graph) Sagnik Mukherjee Slide 5: Decentralization vs Centralization comparison - Sanit Sadhu Slide 6: Ford 2000 strategy Samik Bandyopadhyay Slide 7: Changes adopted by Ford Sanjay Kumar Pal Slide 8: SWOT analysis Saumik Ghosh Slide 9: Conclusion Santanu Roy