Monday, April 4, 2011

My Project Thesis for Ford Motor Company Chapter Four.

Chapter Four
Description of the Alternatives
Statement of the Objectives
Ford Motor Company has lost over 14 billion dollars in 2008 (New York Times website, 2009). Though there are many reasons for this, the result is that fewer customers are buying their products. While this is not a problem unique to Ford and the responses have been to cut jobs and spend more money on developing new models, including a hybrid version of the Fusion, a midsize car, Ford should also keep other options open. These should be options that do not include cutting more jobs and spending millions of dollars in developing new products and redesigning new ones. A firm cannot merely downsize, nor can it spend itself into prosperity. Though not included in the objectives, these cannot be accomplished be Ford by cutting jobs or merely spending money hoping for the economy to turn.
Objective One. The first objective is to increase car sales by ten percent and overall vehicle sales by fifteen percent or more.
Objective Two. The second objective is to improve customer satisfaction and retention. This is vital as there are allegations of denied warranty claims and the perception of poor products and workmanship.
Objective Three. It is not enough to retain customers for Ford; they need to add new ones. This is because their current customer base is not enough to keep the firm solvent. Ford has lost a significant amount of customers to Toyota, Honda and other firms. More significantly, they are also losing customers due to financing and the used car market. Ford needs to better market their argument that new cars are better and more reliable. It is common knowledge that depreciation is a significant and hidden expense on a new vehicle. This is something Ford must counter with vehicles with options that add value, not just cost, to their product.
Description of the Alternatives
Alternative One. This is to continue with the present business model, concentrating on selling the competent, yet dated design of the current Focus compact. It also means pursuing the current plans with the Fusion, which is still a relatively innovative design until 2010 and introduce the 2010 Taurus, a very innovative and compelling, though probably expensive vehicle that fewer customers will be able to purchase. The current Crown Victoria, or Police Interceptor, at present a fleet sales only vehicle is also competent for its current purposes. However, the design dates back to the late 1970’s and is not purpose-built. The longevity of the vehicle for police work is about sixty to seventy thousand miles and fuel economy is poor. A firm called Carbon Motors, under the direction of the Department of Homeland Security, is building such a purpose-built car codenamed the E7 which is superior in range, handling, operating costs and officer use and protection and durability (Carbon Motors website, 2008). It will most likely erode Ford’s near monopoly on the police car market without extensive and costly modifications. One aspect the firm has in its favor is the reputation of its trucks. They are dependable and tough and with the exception of the E-Series, current models. The E-Series, or the van, has a design that dates back to the 1970’s, has poor fuel economy and handling, (Car Gurus website, 2009). The aforementioned challenges that Ford has, along with the current financial situation make this a choice that Ford will make at its own peril.
Alternative Two. Introduce the International version of the Focus compact in place of the current model that dates back from 1999. The coupe, while more recent, is still reminiscent of 1970’s and 80’s subcompacts made by domestic manufacturers. This was not a period of nostalgia for anyone that knows about vehicles and surely not the manufacturers themselves. The International model is arguably more modern even though the differences between the coupes are more subtle than the sedans, where the differences are profound.
Alternative Three. Introduce the Fiesta, an international subcompact, to the United States and Canada. It is one of the most successful cars Ford has ever sold (Wikepedia, 2009) and was sold briefly in the United States in the 1970’s. It would be Ford’s alternative to General Motor’s Aveo, which suffers from clumsy styling, including, but not limited to, the corporate “big mouth” grille (Autoblog website, 2007) that is gracing Chevrolets and to some extent, other GM vehicles. The reintroduction of the Fiesta should be a money maker for Ford.
Alternative Four. Hire an independent firm to determine warranty claims. This firm, contracted by Ford, would be paid to evaluate problems with Ford’s products without pressure from the manufacturer, dealer, or consumer. More importantly, it would encourage efforts to improve quality and workmanship, along with modifying the design of failure-prone parts. An added benefit would be to insulate Ford from bad publicity caused by frivolous warranty claims and reduce the pressure to deny claims that are in fact valid. This will increase customer retention even if a claim is denied.
Alternative Five. Ford can and should evaluate parts that suffer frequent breakage, even those determined not to be the fault of the manufacturer. A common problem with many of the earlier Triton overhead cam V-8 engines is the propensity to “blow out” a spark plug.
This is a repair that can cost a consumer thousands of dollars to replace a cylinder head to spend hundreds of same to repair at an independent mechanic. Ford frequently denies this claim and many consumers faced with this problem may never buy a product from them again. This is only one example of problems with a product that consumers spend increasing amounts of money to purchase, maintain and insure. Nearly all want a product to be reliable and a firm to honor the warranty when a part is defective. An increasing number of consumers are turning to public forums when things do not go their way and a surprising number of them are even angry at the manufacturer of perceived defects when the causation is merely that the car or truck has reached the end of its service life.
The alternatives are not the only ones that Ford has before them. There are many options that they can pursue and this is not a complete list. These are meant to be the most basic. Because the object of this work is to get the best benefit for the cost involved, the options can be taken inclusively, or exclusive of one another. In the interest maximizing the benefit of increasing small car sales, while the profits are not as large, will be better than having high-end vehicles sitting on dealer’s lots not being driven, or making money for anyone. In addition, the alternatives are ones that Ford, as well as other automakers have already tried to some extent in the past to increase sales. While these worked in the very short term, they have had longer-term consequences the consumer and industry are still reeling from today. For decades, the United States has had a very easy time selling larger vehicles for a larger profit. This is an option not afforded in many other nations, save for nations such as Australia, China, or the Middle East. The majority of nations consider what the United States uses for compacts as full-size. With few exceptions, the United States has also enjoyed far lower fuel prices than the majority of nations, save those that produce a large surplus of oil.
These are factors that no automaker that wants to remain in business should ever count on. It has already sent General Motors and Chrysler to the government for bridge loans, yet Ford has managed to weather this better than the others. This does not mean that Ford can, or should retain the status quo. There is plenty that Ford is doing right with their present situation. Yet there is some room for improvement, considering the need to do more than just maintain in a very competitive marketplace with external threats increasing daily. The firm is in need of a credible small car program in the United States, something it has seen as unnecessary and unprofitable when fuel was inexpensive, credit was available and employment plentiful. At the present time, with these factors reversed, or highly diminished, more consumers will be turning away from “want” vehicles in favor of “need” vehicles. It will be up to Ford Motor Company to use this to their advantage.

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