Monday, April 4, 2011

My Project Thesis for Ford Motor Company Chapter Three.

Chapter Three
Option Selection
As suggested by the title of this chapter, the options that Ford has are many. However, most of them carry consequences and many of these will have a negative impact on the automaker and those of the stakeholders. While the focus has been to implement plant closings and restyle their higher profit trucks, this writer will argue that there are other options that Ford should implement that will cost it nearly nothing.
At present, most new vehicles are sold in trim levels. The Focus, for example, is sold in four package levels from the S starting at $14,000, the SE at $15,000, the SES at $16,000 and the SEL at $16,200 . These are the starting prices for each package and they are approximate. Package pricing allows the manufacturer and the dealer to simplify their inventory, but the options included with these packages are confusing and add additional cost to the vehicle the customer might not want.
An example is ordering the Focus S online with automatic transmission. This adds $1,300 to the cost of the car. This is 9% to the cost of the vehicle price alone, a substantial figure. However, Ford has limited options available for this model and to get more available (and more choices); the customer has to spend even more. On the dealer’s lots, there is a tendency to stock higher end models. While this adds profits, it also adds additional cost to a new car and may actually drive customers to the used car market; essentially defeating the object of increasing new car sales. The point this writer is trying to make is that Ford had a good plan 60 years ago for selling new vehicles, even in times of tight credit. In basic terms, this was offering the base price and a complete options list for every car.
While this would add to the cost of making the car or truck initially, it would also allow the customer the flexibility to choose the options he or she wants and can afford. Lastly, if someone wants ambient lighting in their new Focus for example, they will not have to spend thousands more on options they do not want. Another would be to eliminate this altogether as most customers opt for aftermarket ambient lighting anyway.
Another option would be to limit the amount of equipment available, especially on the smaller cars to save overhead costs. The aforementioned ambient lighting and even leather trim in a Focus might seem superfluous to customers trying to buy a new, entry level vehicle. This is especially true in an economy where disposable incomes have not kept up with inflation, credit is tight and the perception of “hard” times is a part of those where the former two conditions may not apply.
The third option and this is the most costly, would involve introducing the European version of the Focus to the United States as well as a subcompact such as the Fiesta as made mention of in previous chapters. There will be issues that need to be addressed with meeting the standards here (safety and otherwise), but Ford does not at present have a subcompact available in the United States (and the only firms offering them are Smart (For Two), GM (Aveo), Toyota (Yaris) and Honda (Fit). This is a market that Ford is missing out on, much the way they did for many years in the SUV boom before introducing the Expedition and Excursion. As for the European version of the Focus, this is a subjective viewpoint, but the design is more modern in a market that demands vehicles that are current. The Focus sedan’s design is already eight years old with a few modifications while the coupe (which is more expensive) is also dated in style compared to competing manufacturers from GM, Europe and Japan.
There really is not a reason that Ford cannot implement at least one of these changes. They have spent much money and time restyling their F-150 for 2009 and sales of light trucks are down, maybe permanently, because of anticipated higher operating costs. Yet the cars that need to be selling are languishing with older designs and loaded with features which customers may not want and add cost, rather than value, to their potential purchase. What are hurting car sales are also hurting truck sales as well. While adding another $2,000 to the purchase price of a truck to add a bigger engine and few options may seem to make it more desirable, it is putting it out of reach for many buyers. Lower end options have to come special order, while higher end ones are available now. The buyer may opt for a used truck, if he or she needs one quickly, rather than wait for the factory to bring one. The dealer can and should be able to add some “must haves” to a vehicle if the customer so desires, or order a new vehicle to his or her tastes.
This was how automakers made sales in the 1950’s and 1960’s (and this was no small reason why many bought “American”). At present, many buy from dealer stock to get the discounts. However, Ford should make vehicles that customers want without discounting them. They should not compromise style, cost-effectiveness or features. There is no ideal car or truck that any automaker is capable of building without input from the customer. Any firm that forgets the importance of the customer in their business will not be in business long. In addition, a firm should not continue to offer their customers “yesterday’s specials” when there are better alternatives available at little or no initial cost to the manufacturer. Ford listened to customers nearly 20 years ago concerning the direction that their Mustang was taking. In 2007 sales of the Mustang were declining, while sales of the Focus are 28% higher than they were a year ago. Ford should also cater to customer of “need” cars as well as those of “want” cars such as the Mustang. The need for this direction should be obvious.

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