Ford Motor Company Assignment, Research Paper Example

Henry Ford and eleven business associates founded the Ford Motor Company which pioneered the moving assembly line where the employees performed the same task on every automobile that came. The long-term goal was to produce vehicles that many people would afford. Lincoln, Mazda, Jaguar, Volvo, Mercury, Aston Martin, Land rover and Ford have been the current product lines of Ford Motor Company (2009). The company is currently producing at a higher rate that it is supplying. When a firm produces higher than it can sell, this automatically brings a channel to increase costs without having revenues to cover the costs. Excess production increases costs because if customers are not purchasing vehicles then Ford Company would end up incurring costs like storage costs.

This industry has a history of having hard and complicated conditions with their personnel. Ford has its production employees registered under the labor union commonly known as United Auto Workers. There has been a noticeable change on how job protection, benefits and generous contribution for retirement have adversely affected the company’s operations. United Auto Workers is said to have been formed when the company was doing good and that’s why they came up with all these benefits that should be given to the employees. Currently, the union is seen to negatively affect the operations of the company.

Initially, the company’s vision was to make vehicles that would be affordable to everyone but it came to a point where the management decided to venture into the luxury car market. This is where Premium Automotive Group came in. The Premium Automotive Group has been in charge in making the Jaguar, Astro-Martin, Volvo and the Land rover brands. The brands did not do as well as they were intended and that is why the automotive group has been reported to lose billions over the years. The financial safety net of the company has also been decreasing by the day and it is likely to affect the company’s cash reserves.

The above are therefore the issues that Ford Company is facing. The first one that needs to be evaluated is the fact that it has been producing more than it can sell. This is a not healthy in the business since it’s always preferred when demand is higher than supply rather than when supply is higher than demand. NetMBA (2007) states that supply goes higher with increase in price because suppliers are willing to produce and supply more at high prices whereas demand has the opposite effect on customers. Customers want to buy things at low prices and that is why demand increases with decrease in price. Lower demand than supply as discussed above, has cost implications just as low supply than demand has shortage and opportunity cost. Ford should therefore strategize.

When Ford Company was producing cars that were affordable to masses, the demand for the vehicles was very high unlike now when it has ventured into the expensive models and the demand has gone down. The company is currently making many vehicles that are not selling. The company should therefore decide on which strategy to take because decrease in sales would continue resulting to losses and eventually would lead to company closure.

The other option would be closing down older plants so that the company can realign its production and sales. It therefore means that if the revenues are down, it is hard to meet costs. A reduction in the workforce would be required if the company would decide to drop some of the products it is producing. This would cut redundancy costs which would enable the company to be at a better position. The other thing that the company would have to face is the implications that are brought about by a closure besides a reduction in personnel costs. One major thing that the company needs to be aware of while implementing this is that there are even political processes required in order to conduct a closure.

There could also be a need to reduce the number of vehicles being produced. The company can concentrate on producing only the smaller cars and avoid the SUVs and truck lines. The effect here would be to reduce the high maintenance costs like gas prices because these are the costs that make people not to buy the vehicles. This would even help in attaining Ford’s vision which he had when he founded the company. The vision was to sell fair priced vehicles to everyone.  The small cars would therefore be everyone’s favorite because of the low costs related to them.

Ford has focused its operations more in the North America market for quite a while now. There is need to focus more on other international markets where it has been gladly accepted in the recent past. The countries under discussion are South America, Europe and China. The fact that Ford Company has operated in North America for too long would make people in that country get used to their vehicles and become monotonous hence develop a desire to venture into different type of products. That is why it is reported that Ford is accepted better in other places than it is in Northern America.

When a company is weighing the option of moving to a different location, there are so many factors that are supposed to be considered. Ninemsn (2009) gives different tips that can help a business when relocating. These are: developing specific reasons for relocation that analyses the business needs, looking at the current location and evaluating on its suitability, making a list of the improvements and benefits expected through relocation, speaking to the businesses in the area to access the economic situation currently, interacting with business people who had already relocated and short listing the key issues required in order to leave the current business premises. Some of these issues may be cost of relocating, lease arrangements among others.

These factors are meant to ensure that the business runs normally after relocation. The best thing about Ford Company is that it has met almost all the factors because it has already traded in the areas it would want to venture more into plus it would only want to reduce its presence in the North America because the people there no longer seem appreciate the products from the company as they used to. The other countries are offering ready market and that is why they above factors were listed to ensure that the company would have qualified to concentrate on other areas.

The last option would be about the Premium Automotive Group. This group was originally meant to be a platform for the Company to enter the luxury market but it has turned to be like a parasite to the company because all it has done is bring losses year after year. The company’s reserve has also started to be affected by these operating losses and the trend does not look favorable. There is therefore a need to sell the group because the more they make the four brands of vehicles, the more expenses the firm incur hence the losses continue increasing. This would also enable the business to go back to its initial vision which was to serve everyone by producing affordable products.

The above options all have different weights on the company. The management should therefore work on what seems to be the best for the moment or short term in preparation for the long term one. First, the company should reduce the number of vehicles produced and reduce the number of workers to avoid redundancy costs. Then it should reduce its presence in North America and move international where the company seems to have ready market. The Premium Automotive Group should be sold since there has not been much input from it to the company. These decisions should be given a period of about a year to assess if there would be any change.

References

Ford Motor Company (2009). Ford Vehicles. Retrieved on November 4, 2009 from http://www.ford.com/

NetMBA (2007).Supply and Demand. Retrieved on November 4, 2009 from http://www.netmba.com/../supply-demand/

Ninemsn Pty Ltd (2009). Relocating your business. Retrieved on November 4, 2009 from http://money.ninemsn.com.au/article.aspx