Question

It was reported in the Wall Street Journal that Ford Motor Co. was reorganizing to place its functions such as product development, sales, and engine/transmissions under their own executives with global authority. Alexander Trotman, chairman and CEO, wanted to create a structure that would avoid costly duplication in different parts of the world and that would foster Ford's development of models such as its Mondeo (Europe) and Contour (U.S.), which could sell worldwide with few modifications. Trotman wanted a company that was strong internationally in product development, manufacturing, and purchasing and that could take advantage of Ford's geographical strengths throughout the world. The company had been organized geographically into three relatively independent divisions Ford North America. Ford of Europe, and Ford Asia/Pacific. The new products cited above, Mondeo and Contour, sapped $6 billion in development costs because of expensive coordination time between the sometimes-conflicting European and North American divisions. Elimination of duplication was a goal of the new structure. Simultaneously a new "program team facility" was being constructed so that all of Ford's new product development would be by teams. The new coupe Mustang was born from an experimental cross-functional team that designed the product in less than three years compared to Ford's normal four-to-five-year development cycle. Trotman emphasized that he wanted to change the process, not just the structure, by which new products were developed. Ford apparently found the team process convincing because the Mustang was developed on a budget about 30% lower than budgets for comparable projects. SOURCE: Summarized from "Ford to Realign with a System of Global Chiefs," The Wall Street Journal, March 31. 1994, pp. A3-A4. Refer to Case 7.0. Identify the strategy in the textbook that Ford appears to be adopting. Describe advantages and disadvantages of that strategy for Ford. Why do you think CEO Trotman moved to that strategy?

Answer 1

Ford Motor Co. is adopting a strategy of globalization to streamline its operations, reduce costs, and develop products with global appeal. This includes creating cross-functional teams for efficient product development and addressing the rising global competition in the automotive industry.

Step-by-step explanation:

The strategy that Ford Motor Co. appears to be adopting based on the Wall Street Journal report is a move towards globalization of its operations, with an emphasis on reducing costs through the elimination of duplications and fostering a global product development process. This strategy includes reorganizing the company to have functions such as product development, sales, and engine/transmissions under individual executives with global authority. The decision to create a global structure came as a response to the changing automotive industry landscape, where companies like Ford were competing internationally against manufacturers such as Toyota, Honda, and Nissan. By doing so, Ford aimed to streamline operations and capitalize on geographical strengths.

In applying this strategy, Ford looked to create vehicles like the Mondeo and Contour, which could be sold worldwide with few modifications, reducing development costs. Additionally, the establishment of a 'program team facility' alongside cross-functional teams helped in reducing development times and budgets, as demonstrated by the Ford Mustang's successful development.

Advantages of this strategy include increased efficiency, cost savings, and the ability to respond more quickly to global market demands. Disadvantages might include potential challenges related to managing global teams, aligning different market needs, and the risk of losing focus on local customer preferences.

CEO Trotman likely moved to this strategy due to the increased global competition in the automotive industry and the need to innovate and remain competitive in a rapidly changing global market.