Case Discussion Questions 3 1. How would you characterize the strategy for compet- ing internationally that Ford was pursuing prior to the arrival of Alan Mulally? What are the benefits of the more standardized platform strategy? Can you see any drawbacks? 2. What would you recommend that Ford undertakes in terms of continuing or possibly changing the global strategy that Mulally put in place? Clearly Fields' long-term employment with Ford did not Case Discussion Questions 1. How would you characterize the strategy for compet- ing internationally that Ford was pursuing prior to the arrival of Alan Mulally? What are the benefits of the more standardized platform strategy? Can you see any drawbacks? 2. What would you recommend that Ford undertakes in terms of continuing or possibly changing the global strategy that Mulally put in place? Clearly Fields' long-term employment with Ford did not Part 624 Ford's Global Platform Strategy When Alan Mutally arrived at Ford after a long career at universal platforms that can handle all of their vehicle Boeing, he was shocked to learn that the company pro types. By pursuing this new platform strategy. Ford can duced one Ford Focus for Europe and a totally different share the costs of design and footing, and it can attain one for the United States. "Can you imagine having one much greater scale economies in the production of com Boeing 737 for Europe and one 737 for the United ponent parts Stales" he said at the time (Boeing's 737 series is the In developing this much more standardized set of plat best-selling jet commercial airliner in history). Due to forms, Ford says that it will take about one-third out of this product strategy. Ford was unable to buy common the $1 billion cost of developing a new car model, and it parts for the vehicles, could not share development should also significantly reduce its 550 billion annual costs, and couldn't use its European Focus plants to budget for component parts. Moreover, because the dif make cars for the United States, or vice versa. In a busi ferent factories producing these cars are almost identical, ness where economies of scale are important, the result useful knowledge acquired through experience in one fac was high costs. Nor were these problems limited to the tory can quickly be transferred to other factories, result Ford Focus. The strategy of designing and building di ing in system wide cost savings as well. ferent cars for different regions was the standard ap What Ford hopes is that this standardized platform proach at Ford strategy will bring down costs sufficiently to enable the Fond's long-standing strategy of regional models was company to make greater profit margins in developed based on the assumption that consumers in different re markets and be able to achieve good profit margins at sions had different tastes and preferences, which required lower price points in hypercompetitive developing nu considerable local customization Americans, it was an tions, such as China (now the world's largest car market pued, loved their trucks and SUVs, while Europeans pre where Ford currently trails its global rivals such as Gen- ferred smaller, fuel-eficient cars. Notwithstanding such eral Motors and Volkswagen. Indeed, the strategy is also differences, it is hard to understand why small car models central to growing Ford's sales to 8 million like the Focus, or the Escape SUV, which were sold in Or, at least that was the strategy advocated by CEO different regions were not built on the same platform and did not share common parts. In truth, the strategy prob Mark Fields. He became Ford CEO in July 2014. having ably had more to do with the autonomy of different re held various strategic and executive positions at Ford gions within Ford's organization fact that was deeply since 1989. Fields pointed out that "Reducing fixed cap embedded in Ford's history as one of the oldest multina ital costs while maintaining a focus on cars and cross tional corporations over vehicles is 'The Way Forward. That strategy, When the global financial crisis rocked the world's however, coming from a person entrenched in the car automobile industry in 2008-2009 and precipitated industry for decades has now been turned upside down, the steepest drop in sales since the Great Depression, some people think with the appointment of Jim Hackett Ford decided to change its long standing practices in as the new Ford CEO on May 22, 2017. He has a track order to get its costs under control. Basically, there record for focusing on self-driving cars and for hiring was no way that Ford would be able to compete effec- Jim Harbaugh as University of Michigan football coach tively in the large developing markets of China and In when he served as Michigan's Athletic Director, but dia unless the company leveraged its global scale to mostly Hackett is synonymous with office furniture- having served as the CEO of Steelcase for almost two decades. produce low-cost cars. The resulting strategy became known as the "One Ford" strategy, which aims to cre ate a handful of car platforms that Ford can use every. where in the world. Under this strategy, models such as the Fiesta Focus, and Escape share a common design, are built on a com mon platform, use many of the same parts and are built in virtually identical factories around the world. As an example, in 2007 Ford was building vehicles on 27 differ- ent platforms. At that time, Ford was able to build 3.9 vehicles per platform compared with today being able to build 5.7 vehicles per platform: the goal is to reach 6.6 by 2020. With the reduction of some obsolete car models coupled with the standardization of platforms across model types. Ford cars and trucks are today built on eight Sources Aaron Smith. "New Ford CEO's Resume Includes Furniture and Football, CNN Money, May 22, 2017: Trefis Team. "Here's How Ford Can Benefit from Bringing 'Alesa' to its Cars." Forbes, January 9, 2017: Michael Martinez. "Ford to Decrease Global Platforms to 8. The Detroit News, January 13, 2015; "Ford Motors Courts Donald Trump by Scrapping a Planned Plant in Mexico." The Economist, January 5, 2017: D. Brady, "How Ford Helped Mark Fields Win." Bloomberg Businessweek May 2. 2014; M. Ramsey, "Ford SUV Marks New World Car Strategy." The Wall Street Journal, November 16, 2011: B. Vlasic "Ford Strategy Will Call for Stepping Up Expansion. Especially in Asia, The New York Times. June 7, 2011