A Value Chain Analysis of Ford Motors
Ford Motor Company is headquartered in MIchigan, United States. It is among the world’s leading automobile manufacturers with a strong global presence. The company offers a wide range of products including cars, SUVs and trucks as well as electric vehicles.
Ford also owns the luxury car brand Lincoln. The company has divided its business into three segments that include - Ford Blue, Model E and Ford Pro. The Ford Blue segment focuses on the production and sales of gas powered and hybrid vehicles while the Ford Model E segment focuses on the production and sales of electric vehicles. The Ford Pro segment on the other hand is dedicated to the manufacturing and sales of commercial vehicles. The company employs around 177000 people worldwide. As of 2023, the approximate number of Ford dealerships worldwide was 9,527. Over the past three years, the company has been experiencing growth in sales. In 2023, it sold more than 4.4 million vehicle units worldwide.
In this post, we are going to conduct a value chain analysis of Ford Motors. The concept of value chain was given by Michael E Porter of Harvard Business School and includes all the value adding stages from the planning to production, marketing, sales and after sales service. It includes two types of activities - primary and support activities. The primary activities are directed at value creation while the support activities mainly support the primary activities in the value chain. Optimizing the entire value chain ensures smooth performance and better productivity.
Primary Activities in Ford Value Chain
Following are the primary activities in the value chain of Ford Motors:
Inbound Logistics
Inbound logistics refers to the inward flow of goods. It refers to the activities and processes involved in receiving, storing, and distributing raw materials, components, or finished goods being delivered to a company. The focus of inbound logistics is on the efficient handling of incoming goods to ensure smooth production or operations.
Ford has partnered with external providers to handle inbound logistics. Its main logistics partner providing it with logistics services in various parts of the globe is the leading logistics firm DHL. Ford has a vast manufacturing network that is spread globally. The company also works with a few other logistics firms in several parts of the world including Asia. However, DHL is its lead logistics provider, which has played a key role in helping Ford maintain its European supply chain.
Outbound Logistics
Outbound logistics refers to the outward flow of goods from the manufacturer. It refers to the activities and processes involved in storage, transportation, and delivery of finished products from a company to its customers. The focus of outbound logistics is on the efficient distribution of products to meet customer demand.
Ford uses a mix of transportation solutions to transport assembled vehicles from its manufacturing and assembly plants to the dealerships. It ensures higher efficiency as well as reduced road miles and sustainable practices. It partners with industry experts as well as its logistics partners to ensure that the environmental impact of transportation in its supply chain remains low.
Operations
Ford is a global brand with operations and assembly plants in various countries across the globe. Its largest market is the United States. Other significant markets include Canada and the United Kingdom. However, the company has managed a global sales and distribution network which included more than 9,527 dealerships in 2023. The company has transmission and assembly plants in Michigan as well as forging, stamping and engine plants and offices in more than a dozen countries around the globe. Ford also managed a global supply chain network that includes supplier partners located in several countries across the world.
Marketing and Sales
With increased competition in the automobile sector, the focus on marketing and sales as well as customer experience has increased a lot. Companies spend a large sum each year on advertising and promotions. In 2023, Ford Motors spent around $2.5 billion on advertising and promotions compared to around $2.2 billion in 2022. The company uses both online and offline channels for marketing and promotions. It also uses social media channels for marketing and promotions and to engage its fans and followers worldwide. The company also places a strong focus on customer experience along both the online and offline channels.
Products and Servies
Ford offers a vast range of vehicles including cars, SUVs and trucks that cater to different customer segments around the globe. While it caters mainly to the middle class and upper middle class consumers through the Ford brand, the company has also introduced the Lincoln brand of higher end vehicles that cater to high end consumers. Ford also invests a huge sum each year in research and development to continuously improve its product models. In 2023, the company spent $8.2 billion on research and development compared to $7.8 billion in the previous year. Apart from Ford Mustang and Ford Explorer several of the pickup trucks made by Ford are also very popular in the US market. Ford Motor company also provides financial services through Ford Motor Credit Company LLC (“Ford Credit”).
Support Activities
Here are the support activities in the value chain of Ford Motors:
Technology
Technology has become the key driver of growth and competitive advantage in the automobile sector. Companies are heavily investing in modern technologies such as digitalization, AI, electrification and autonomous driving. Ford has also invested heavily in technology to acquire strong capabilities that enable higher productivity and superior performance. Ford is also investing in digitalization to strengthen its manufacturing and supply chain capabilities. Apart from that, it is also investing in software defined mobility as well as autonomous driving. The company has also developed some electric car models as the demand for electric cars is rising globally.
Infrastructure
Infrastructure also plays an important role in the operations, management and growth of a business. Ford is led by its CEO James D Farley, Jr. Ford Motor company manages its business on both regional and global bases. While it operates globally as one Ford, the company also has regional heads leading the regional operations across various geographic segments. The management of the company is also divided on a functional basis. The entire management is divided into various functional segments like poperations, marketing, sales, manufacturing, product design, government relations etc.
HRM
Human resource management is also integral to the growth and development of an automobile business. Qualified employees are essential for large businesses like Ford to maintain its growth momentum. Ford invests in the career growth of its employees through training and education. It offers them financial and nonfinancial rewards and runs employee education and engagement programs. The company employed around 177,000 people as of 2023.
Procurement
Managing procurement is crucial to maintaining the efficiency of production and supply chain network. Ford motor company obtains raw materials from suppliers located in various corners of the globe. While it helps the company secure a regular and continuous supply of good quality raw materials for production of high performance vehicles, on the other hand, it also helps the company to contribute to local economies and encourage entrepreneurship across various corners of the globe.
Conclusion
Ford is a global automobile brand and also one of the leading US based automobile manufacturers. The company has a strong international footprint and has established a vast manufacturing as well as sales and distribution network. The company has optimized its value chain for highest efficiency and continues to optimize it to improve its productivity. A few years ago, it reorganized its business into three major segments including Ford Blue, Model E and Ford Pro. This has helped the company increase its productivity and grow its sales. It has also increased its investment in innovation to strengthen its competitive advantage and cement its position in the automobile sector.