The Ford Motor Corporation has always been regarded as a world leader from pioneering mass production to being one of the first car manufacturers to build overseas assembly plants. Ford Europe, founded in 1967, proved the value of the overseas strategy and in the 1980s its profits offset US losses. However, by 2000, its market share was only 8 percent and accumulated annual losses totaled $2.6 milliard dollars. A recent study by Coventry Business School looks at what went wrong and how Ford fixed it.
The industry model: global, rational and modular
Ford Europe’s difficulties become clearer against the background of the automobile industry where three trends dominate:
• (1) Globalization – giant companies reduce costs and expand market share by moving production overseas and through mergers and acquisitions. Success depends on balancing global strategy with local markets’ needs.
• (2) Rationalization – Lean production is now the norm as Japanese principles such as zero stock, TQM and continuous improvement are adopted.
• (3) Modularization – Engines, transmissions and other key parts are interchangeable between models in order to cut costs and reduce new product development time from six years to three or less.
These three concepts – particularly modularization – allow companies to concentrate on building a range of products; and enable fast response to an increasingly segmented market where distinct consumers demand the latest MPVs, SUVs or executive saloons.
Ford Europe: strategy under-steer
Ford Europe operates 35 plants employing 100,000 people. It competes with around 30 other manufacturers in a market with excess capacity of 3-5 million units. By the mid-1990s, this market was almost static with annual growth at 2 percent, and new ca ...