Case Study: When Ford CEO Alan Mulally Joined The Company

Case Study 1when Ford Ceo Alan Mulally Arrived At The Company In 2006

When Ford CEO Alan Mulally arrived at the company in 2006 after a long career at Boeing, he was shocked to learn that the company produced one Ford Focus for Europe and a totally different one for the United States. “Can you imagine having one Boeing 737 for Europe and one 737 for the United States?” he said at the time. Due to this product strategy, Ford was unable to buy common parts for the vehicles, could not share development costs, and couldn't use its European Focus plants to make cars for the United States or vice versa. In a business where economies of scale are important, the result was high costs. Nor were these problems limited to the Ford Focus.

The strategy of designing and building different cars for different regions was the standard approach at Ford. Ford's long-standing strategy of regional models was based upon the assumption that consumers in different regions had different tastes and preferences, which required considerable local customization. Americans, it was argued, loved their trucks and SUVs, while Europeans preferred smaller, fuel-efficient cars. Notwithstanding such differences, Mulally still could not understand why small car models like the Focus or the Escape SUV, which were sold in different regions, were not built on the same platform and did not share common parts. In truth, the strategy probably had more to do with the autonomy of different regions within Ford's organization—a fact that was deeply embedded in Ford's history as one of the oldest multinational corporations.

When the global financial crisis rocked the world's automobile industry in 2008–2009 and precipitated the steepest drop in sales since the Great Depression, Mulally decided that Ford had to change its long-standing practices in order to get its costs under control. Moreover, he felt that there was no way that Ford would be able to compete effectively in the large developing markets of China and India unless Ford leveraged its global scale to produce low-cost cars. The result was Mulally's One Ford strategy, which aims to create a handful of car platforms that Ford can use everywhere in the world. Under this strategy, new models—such as the 2013 Fiesta, Focus, and Escape—share a common design, are built on a common platform, use the same parts, and will be built in identical factories around the world.

Ultimately, Ford hopes to have only five platforms to deliver sales of more than 6 million vehicles by 2016. In 2006, Ford had 15 platforms that accounted for sales of 6.6 million vehicles. By pursuing this strategy, Ford can share the costs of design and tooling, and it can attain much greater scale economies in the production of component parts. Ford has stated that it will take about one-third out of the $1 billion cost of developing a new car model and should significantly reduce its $50 billion annual budget for component parts. Moreover, because the different factories producing these cars are identical in all respects, useful knowledge acquired through experience in one factory can quickly be transferred to other factories, resulting in systemwide cost savings.

What Ford hopes is that this strategy will bring down costs sufficiently to enable Ford to make greater profit margins in developed markets and be able to achieve good profit margins at lower price points in hypercompetitive developing nations, such as China (now the world's largest car market), where Ford currently trails its global rivals such as General Motors and Volkswagen. Indeed, the strategy is central to Mulally's goal for growing Ford's sales from 5.5 million in 2010 to 8 million by mid-decade. Fields, appointed CEO in July 2014, joined Ford in 1989 and has been entrenched in the company’s operations for a long time, and has held various strategic and executive positions, most recently chief operating officer (COO), before taking on the president and CEO role.

Sample Paper For Above instruction

Ford Motor Company's strategic approach prior to Alan Mulally’s tenure was deeply rooted in regional differentiation. The company assumed that consumer preferences varied significantly across different geographical markets, leading them to develop unique models tailored to specific regions. This meant that vehicles like the Ford Focus in Europe and North America were designed independently, with separate platforms, parts, and manufacturing facilities. Although this approach allowed for customization to local tastes, it severely limited economies of scale, increased production and development costs, and hampered operational efficiency. The fragmentation of the product line impeded resource sharing, resulting in duplicated efforts and higher costs, which in an industry characterized by intense price competition, put Ford at a disadvantage.

Alan Mulally aimed to shift Ford’s strategic paradigm towards a globalized model—what he termed the “One Ford” strategy. This approach advocated for standardizing vehicle platforms, components, and production processes across markets to leverage economies of scale effectively. Under this strategy, Ford aimed to develop a limited number of global platforms compatible with various models sold worldwide. For instance, models like the Fiesta, Focus, and Escape were to share common architectures, parts, and manufacturing plants regardless of the region. The benefits of this strategy included significant cost reductions—through shared R&D, reduced manufacturing and tooling expenses, and consolidated supply chains—thus enabling Ford to be more competitive in both developed and emerging markets.

One of the primary benefits of Mulally’s global strategy was the potential for cost efficiency and increased profit margins. Sharing platforms and parts across vehicles meant lower capital expenditure, faster innovation cycles, and more flexible manufacturing operations. Ford could also respond more swiftly to global market trends, entering new markets with a unified product line. The strategic move was crucial for its survival during the 2008–2009 financial crisis, which exposed the vulnerabilities of a fragmented, region-specific manufacturing model.

While the advantages above are evident, several drawbacks could emerge from such a unified approach. First, standardization risks diluting regional preferences, potentially alienating customers who expect customized features aligned with local cultural and regulatory requirements. For example, consumers in Europe might prefer smaller, more fuel-efficient vehicles, whereas some markets in the U.S. might prioritize large trucks and SUVs. Furthermore, integrating diverse regional markets under a single platform could complicate compliance with different safety, emissions, and regulatory standards, leading to delays and increased costs in adapting vehicles for specific markets. Lastly, global standardization might reduce the flexibility to innovate in local models, hindering responsiveness to localized consumer demands.

Looking forward, Ford’s CEO, Mark Fields, continued the implementation of the global platform strategy, but with potential modifications. Strategic focus should be on fine-tuning the balance between global standardization and regional customization to optimize market responsiveness while realizing cost efficiencies. Moreover, fostering a corporate culture that emphasizes innovation, flexibility, and local market insights is essential.

Regarding Fields's long-term employment at Ford, it can be perceived as both a benefit and a hindrance. On the one hand, deep institutional knowledge accumulated over years can facilitate consistent strategic implementation and organizational stability. On the other hand, a long tenure without external perspectives may lead to complacency or groupthink, potentially limiting innovative responses to rapidly changing global automotive trends. To ensure continued competitiveness, it is vital that Fields balances internal expertise with openness to external innovation and strategic agility.

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