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Case Details

Case Code: BSTR573
Case Length: 16 Pages 
Period: 2014-2018   
Pub Date: 2019
Teaching Note: Available
Price: Rs.400
Organization : Ford Motor Company
Industry :Automobile
Countries : Americas
Themes: Disruption/Innovation
Case Studies  
Business Strategy
Marketing
Finance
Human Resource Management
Technology
Operations
Economics
Leadership & Entrepreneurship

`Smart Vehicles in a Smart World`: Can Ford`s New Strategy help it Fight Disruption?

 
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EXCERPTS

FORD STRUGGLES

 

The auto industry was facing three big innovations – car sharing, electric engines, and autonomous vehicles. While ride-hailing services such as Uber and Lyft threatened to change people’s attitudes toward car ownership, tech giants like Google and Tesla were investing heavily in AVs that would further push the concept of ride access over car ownership. The challenge for traditional automakers like Ford was to quickly adapt to the evolving trends and technology in the auto industry that were set to alter the dynamics of the way people commuted. Ford’s rivals like General Motors (GM), Nissan, and Volkswagen were already making some big moves to adapt to the rapidly changing auto market. In January 2016, GM partnered with Lyft to develop driverless cars while Volkswagen planned to launch up to 30 new electric vehicle models...

 
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SMART VEHICLES IN A SMART WORLD

Hackett believed that with changing consumer tastes, increasing costs, and new competition offering innovative products, Ford’s model of the past was no longer tenable. Therefore, he decided to adjust the company’s strategies to embrace disruption. Reportedly, Hackett used his first 100 days at the helm to evaluate Ford’s business. His four goals for the first 100 days were to: Re-evaluate revenue opportunities, Evaluate the fitness of the company, Re-evaluate capital deployment, and Renew focus on innovation.
 

RESULTS

Ford posted weaker results for Q4 2017 while warning investors that its profits in 2017 and 2018 would miss investor expectations due to the investments made in transforming the company. In 2017, the company’s revenues were US$156.7 billion compared to US$151.8 billion the previous year. Ford’s 2017 net income totaled US$7.6 billion. But the company’s pre-tax profit dropped US$1.9 billion from a year ago to US$8.4 billion
 

CHALLENGES

Though Ford had diverted its investments toward disruptive and innovative technologies, some analysts said that there was a long way to go for its Smart Mobility segment to become profitable. In the first quarter of 2018, Ford reportedly lost US$102 million on its Smart Mobility segment and about US$300 million in 2017. Some experts felt that Ford’s Smart Mobility should have been an integral part of the company rather than being a distinct entity.
 

THE ROAD AHEAD

Ford expected revenues in 2018 to be flat or modestly higher over 2017, and flat to lower profits from its automotive business. Analysts warned about the possibility of additional pressure as the company was investing in new products and technology that might not generate profit in the early years. However, Ford was still optimistic about its future and believed that such plans needed time to show results. As its Chief Financial Officer, Bob Shanks, said,
 

EXHIBITS

Exhibit I:Market Share of Selected Automakers in the US (2017)
Exhibit II: Ford Motors Company Consolidated Income Statement
Exhibit III: Ford Adjusted Pre-Tax Profits (in billions)
Exhibit IV: Ford’s Performance under Former CEO Mark Fields
Exhibit V: Stock Comparison of Ford and Tesla
Exhibit VI: Tesla vs Ford vs GM
Exhibit VII: Smart Vehicles in a Smart World
Exhibit VIII: Ford Motor Company-Consolidated Income Statement
Exhibit IX: US Electric Vehicles Sales Share
Exhibit X: Ford’s Performance under CEO Jim Hackett