Launching a new product or service is one of the most important and at the same time, most nervous moment for any company. It requires the company to analyze all the environmental factors, the global factors and organizational factors (Nienaber and Schewe 2014). Companies that aim to launch products outside their home country in particular face many issues regarding the launch of any product. The reason is the different business environment confronted by internal companies. However, companies launch new products in countries abroad in order to increase sales and earn profits as well.
The present report will discuss the concerns, issues and problems faced by companies while launching a new product in a foreign country while analyzing the case of Ford Motor Company. Founded by Henry Ford in late 1890s, the company was incorporated in 1903 with the help of 12 investors and 1000 shares (Corporate.ford.com 2018). It has since been one of the giants in the world of motor companies launching new and innovative cars over the years. The company had announced that it would launch 50 new vehicles in china by the year 2025. Out of the 50 vehicles, 15 would be electrified vehicles. The report will follow a systematic approach while analyzing the case of Ford. In the beginning, it will provide an overview of the case study followed by the chosen concern that the company needs to address. Then, the report will provide justification for the concern chosen. The justification of the chosen concern will be followed by a critical appraisal of the decision made by the company to launch new vehicles in China.
The case study, as already mentioned in the introduction part, is about Ford Motor Company’s decision to launch 50 new vehicles in China. The announcement was made in 2017 at an event held in Shanghai (Reuters.com 2018). As per the reports, the automaker company is looking at various options in its China endeavor as a part of its strategy rethink under CEO, Jim Hackett. The sales graph in China for the company has seen decline over the past few months. Further, the company is also struggling to comply with the stern quotas presented by the Chinese regulations. The regulations demand new energy vehicles or NEVs that include electric and hybrid vehicles, which the company is struggling to come up with and hence it is undertaking an extensive review of its operations in China (Ft.com 2018). These concerns led the think tank of the company to focus on creating electric and commercial vans for its China market.
The new, tough quotas set by China for the NEVs that will be introduced next year that is in 2019, are troubling the automaker companies around the world (Wsj.com 2018). The decision by China to focus on stricter rules governing the launch of NEVs in the country led to Ford announcing an electric vehicle (EV) joint venture with Anhui Zotye Automobile Co Ltd, a Chinese automaker. Ford has also announced that it will be siding with China to lead the EV development in the world and bring “electrification into fruition” (Reuters.com 2018).
The main concern for that Ford needs to address is making electrified vehicles in China amidst the country’s newly introduced strict regulations regarding NEVs. The announcement to launch 15 electrified vehicles among the 50 vehicles in China by 2025 was made under the company’s rethink strategy. According to the report published in Bloomberg, China has revealed a comprehensive set of emission rules under which, automakers have to obtain a new-energy vehicle score. Under this score, the automakers must achieve a minimum of 10 percent emissions score by 2019 and 12 percent by 2020 (Bloomberg.com 2018). The rule also states that companies who import or manufacture traditional vehicles of more than 30000 annually must buy credits or face fines if they fail to meet the standards. The report also stated China has delayed the credit-score program linked to the production of electric cars owing to increased pressure from the major automakers. The program was previously announced to be launched in 2019 but many automakers objected stating it as an excessively ambitious move from China. The Ford Motor Co thus has some time to strategize over its decision to launch NEVs in the country.
Ford’s plan to launch NEVs has met with some criticism from experts around the globe. In article published in Forbes, the author raised concerns regarding the company’s latest move as it would mean going back to the “bad old ways” when the company was on the brink of failing completely (Forbes.com 2018). According to the author, shifting away from the streamlining strategy of Alan Mulally, the former CEO would prove disastrous for the company. The reasons put forward by the author include Ford’s climb back to the top following Mulally’s streamlining strategy in 2006 of “not accumulating too many vehicles to the lineup”. With the announcement of launching 50 new vehicles, Ford might face similar problems as it had prior to 2006. However, it must be noted that the business environment has changed significantly since 2006 and the changing landscape in China demands new strategies (Economist.com 2018). The main concern for Ford is to think of ways to introduce NEVs in China that could meet all the strict standards of the country.
The company however, has however witnessed success in reducing emissions through manufacturing of different components like LED lights and updating paint operations. It has in fact, achieved its CO2 Manufacturing Emissions Reduction Target eight years prior to the set target (Media.ford.com 2018). The objective was due to be achieved in 2025 but the company managed to reach the milestone 30 percent emissions reduction in 2018 itself. It shows that the company has the capability to produce low emissions NEVs as promised.
The chosen concern is justified because the current trend in the automaker industry indicates that most companies are looking to up their sales by introducing NEVs in the world’s largest automaker market. It is important to note that Ford is yet to achieve a feat in the electric vehicles production is Ford Focus Electric being the only complete electric car. The Focus Electric too is a compliance car that was transformed from the gas-powered version. It is thus visible that the decision to launch NEVs that too in the world’s largest automotive market is a huge risk. The concern chosen is justified further owing to the inexperience of the company in the field of new electric vehicles (NEVs) manufacturing. In addition, the changing automotive industry landscape in China could also be an issue for the company as it is already facing weak performance in the country.
The IBIS World industry report concerning China’s Alternative-Fuel Car and Automobile Manufacturing demonstrates strong development of the industry owing to huge government subsidies and friendly policies. One of the key things the government has done in this industry is that it has introduced policies that give increased attention to environment protection. This is reflected in the announcement of introducing sterner rules dictating manufacturing of electric vehicles by leading automakers operating in the country (Ibisworld.com 2018). With a view to promote NEVs, the government has also taken steps like reducing R&D and production costs. China’s commitment towards producing more and more NEVs could be seen from the rise in the production from 2013 to 2016. The production grew from around 17,500 units to 517,000 units in 2016 (Statista.com 2018). Pundits from across the industry are of the view that the focus of the Chinese automaker industry in NEVs is not just about environment protection but also about competing globally with manufactures specializing in internal combustion engine. Therefore, it is going to be a concern for Ford to meet up to the expectations of the Chinese automaker industry while it works on its own NEV units. The company has to pay attention to its home country conditions as well before deciding to launch new vehicles in China. The U.S. industry analysis reveals that it is most likely to continue to experience volatility resulting in inevitable decline in revenue. The trends in the last five years also indicate that production has slowed remarkable due to depressed sales of vehicles especially during the second half (Ibisworld.com 2018). Ford Motor Co therefore has to make sure that its decision to focus majorly in its overseas markets does not dent its local market hold.
Producing electrified vehicles targeting the Chinese market is a justified concern, which Ford Motor Co has to consider because it has had a miserable experience in the past. The only electrified Ford vehicle Focus Electric had been unable to give any success to the company. Therefore, the management has to be extremely careful in launching the vehicles this time. Moreover, with the Chinese automotive industry tightening the noose around foreign companies, it is going to be an uphill task for the company. Wu et al. (2017) talk about the total vehicle population in China while focusing on the on-road vehicle emissions control. As China has always been faced with the issue of severe air pollution owing to growing vehicle population, state the authors, awareness regarding the production of low emissions vehicle has also peaked. The authors further mention that due to the lack of sulfur fuels, scams related to compliances in production and in-use inspection tests, China has taken stricter steps when it comes to vehicles production. According to them, China is about to reach 400-500 million in terms of vehicle population by 2030 and this has led to growing pressure “to accelerate the progress on vehicle emissions reduction” of which the China 6, released in May 2016 is a notable example (Wu et al. 2017). The China 6 regulation is stricter than even the Euro 6 regulations are. Hence, the officials working on launching the NEVs at Ford have the daunting task to meet these standards while at the same time ensuring efficiency on all aspects.
In order to evaluate whether Ford’s decision to launch new vehicles in China is good or bad, it is important to analyze its business strategies, strengths and weakness and most importantly its core competencies and business intelligence.
When in 1903, Henry Ford founded the company his main aim was to produce an affordable automobile for the people of his country but that required the development of more accurate machine tools that would allow compatible parts. In order to boost production, Ford then instituted his own scheme of production. During the 1980s and 1990s, the company redesigned its process of manufacturing based on Toyota’s lean production strategy that reduced the significance of scale economies. This strategy resulted in huge profit for the company but the economic turbulence during the initial phase of the 21st century; it had to face unprecedented loss. Then in 2006, Alan Mulally took on the responsibility to rebuild the company and introduced the One Ford plan that enabled the company regain its lost position (Fortune.com 2018). However, with the new rethink strategy proposed by the new CEO Jim Hackett, the company is shifting again towards its old strategy to boost its sales in China and stay ahead of competition.
An analysis of Ford’s strengths and weaknesses reveals that the company has global supply chain as one of its main strengths especially its One Ford plan. On the other hand, it has as its main weakness, a slow process of innovation. The slow innovation process has cost the company to lag behind some major rivals including General Motors and Toyota. Despite have one of the strongest global supply chain, the company is still playing catch-up in terms of responding to new and emerging trends. In China for instance, the company is not even in the top five in the list of biggest automobile companies. Apart from that, Toyota has also announced that it would introduce ten NEVs by 2020 in China thus raising further competition for Ford (Express.co.uk 2018).
When it comes to core competencies, Ford has its brand name and brand image as its main driving force. In addition to that, Ford’s manufacturing and distribution network, its customer service and quality assurance, marketing campaign and diversity in the finance section act as the company’s core competency. Further, its strong initiative on environment protection is another core competency that sets it apart from other companies. Moreover, the company has a strong strategy in terms of striking alliances with rival and other companies. The distribution network of Ford is spread across over a hundred countries throughout the globe making it one of the giants in the business. When it comes to customer service and quality assurance, the company offers services like Global Product Development System, Quality Operating System and New Model Launch amongst others that ensure top quality service (Corporate.ford.com 2018). The marketing campaigns developed by the company are also unique from others as these mostly focus on diversity and sustainability. Commitment to environment protection by meeting objectives well before the set deadline proves that Ford is amongst the best in the business in this regard. In order to make its core competency even more competent while keeping up with sales, it made the decision to introduce NEVs in China.
Ford Motor Company uses big data analytics to manage its business operations that include blueprint for mobility and the One Ford plan that are part of its business intelligence. Business Intelligence or BI refers to the “applications, infrastructure, tools, and best practices that enable access to and analysis of information to improve and optimize decisions and performance” (Sangar et al. 2015). As D’Aveni (2017) notes, the company made excellent use of the BI tools like data gathering and analytics for focusing on sustainability. It was an excellent move on the company’s behalf because, as the authors state, most customers nowadays look for products that are environment friendly. The company has invested great amount of time and money to utilize the analytics tools to initiate plans such as the Ford Fleet Purchase Planner. It has been designed to allow customers to buy Ford vehicles in large fleets so that they could choose a set of models that are fuel-efficient (Reich et al. 2015). Moreover, the new vehicles that are being designed or set to be designed also possess the capacity to produce live data that reverts to Ford’s network to strengthen analytics projects in the future.
After assessing all the components especially the core competencies and business intelligence of Ford Motor Co, it could be said that the decision to launch new vehicles in China is a good move if some areas are addressed. Firstly, as discussed earlier, the company is facing a sales crisis in China and it has to come up with a solid plan that could start the process of rebuilding quickly. Secondly, it must not forget the disaster of Ford Focus Electric because repeating the same mistake could be catastrophic (Dobryden et al. 2017). Lastly, it must make sure that the tariffs imposed in China due to which it faced lower sales are duly considered prior to the launch.
Another important thing to consider is Ford’s decision to tie-up with Anhui Zotye Automobile Co Ltd for EV is an excellent move by the company. The reason for this is the increasing craze for joint ventures in China by other companies since the major shift in the industry policies. The management was quick enough to strike a deal with the Chinese automaker.
Conclusions
An assessment of the issues and concerns associated with Ford’s decision to launch NEVs in China is a good strategic move by the company. However, some recommendations could be suggested with which the company could make certain that its strategy works.
At first, Ford should realize its areas of strength that include its use of BI tools like analytics tool and understand the popular demand in China.
Second, the company must learn from its past mistakes and do not introduce too many vehicles rather, it should focus on producing best quality vehicles.
Third, it should run a trial prior to the launch of vehicles in China to make sure that the electrified vehicles to be launched are perfectly ready for sale.
In conclusion, it must be added that launching the NEVs in China by 2025 is a feasible move by the Ford Motor Company. The report provided an elaborate discussion on the topic and reached this conclusion. The report focused on Ford Motor Company’s announcement made on November 2017 in Shanghai regarding the launch of 50 new vehicles in China starting 2019 until 2025. The report shed light on the various concerns and issues as identified from the case study. These included Ford’s weak sales in the past few months in China; its struggle to meet the terms of strict quotas imposed by the Chinese government with regards to production and sales of NEVs. The chief concern chosen for further discussion was the production of NEVs that could meet such strict regulations. The report then provided justification of the chosen issue followed by some recommendations that could ensure success of the decision.
References:
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