Ford Case Analysis

Ford Case Summary

In this case, the Ford Motor Company (Henceforth referred to as Ford) is engaged in a business where the environment is competitive, and new technologies and practices threaten disruption in the industry. The founder of the company, Henry Ford, was an innovator – and he was famous for making ‘a car for the masses’. He was responsible for the introduction of multiple systems and methods innovative in his time. And like its founder, the company needs to disrupt once again if it is to have a competitive advantage in the industry.

Ford executives have been mulling the ‘Direct Model’ created by Dell Computer Corporation (Henceforth referred to as Dell). Ford executives find it appealing that Dell has been able to speed up inventory velocity in a manner that at any point of time, it has 11 days of inventory on hand and inventory turnover rate of 30 times per annum. As per Michael Dell’s (Founder of Dell) term ‘Virtual Integration’, clients often confuse third party service providers as Dell’s own – such blurred are the lines between supplier, Dell, and client.

In order to examine if virtual integration can work at Ford, it is important to examine congruency of Dell and Ford, and understand similarities and differences.

Similarities

1. Cars and computers are consumer items

2. Suppliers for both Dell and Ford are located close to manufacturing facilities

3. Number of suppliers are small

Differences

1. Customers prefer to touch and feel a car, hence showrooms are preferred. In case of laptops, most functionality is not visible outside hence showrooms are not needed

2. Safety is a major concern in terms of automobiles. The same is not the case for laptops

3. A car model is made up of generic + custom (Dashboard, upholstery) parts. Laptops are made up mostly of generic parts

4. In the case of Ford, some suppliers are completely dependent on them. Dell does not have such suppliers

5. Ford has a large inhouse and independent dealer network. All sales for Dell are direct

6. Ford has a vast range of cars. Dell has limited range of laptops with narrow variations

Analysis

- Key to Dell’s strategy is that it outsources all its manufacturing. It merely acts as the assembler and packager. This allows suppliers to make investments in technology, and not economically depend on Dell. This aids JIT requirements of Dell

- For components such as tyres, windscreen wipers, and electricals which are sourced from large supplier, Ford can pursue strategy of ‘virtual integration’

- On