What are some of the benefits Ford has achieved through reorganizing its product line?

What are some of the benefits Ford has achieved through reorganizing its product line? What are some examples of Ford’s product line extensions? What are some examples of Ford’s product line contractions

In 2006, as the United States was nearing one of the worst economic recessions in its history, Ford Motor Co. was best known for big brawny pickups, gas-guzzling SUVs, and the all-American Mustang. That year, Ford posted a $12.6 billion loss. In 2007, it posted a $2.7 billion loss, and U.S. and global economies dove into a three-year recession. During that re- cession, Ford’s major U.S. competitors (General Motors and Chrysler) suffered such losses that the U.S. government gave them massive bailout loans and both companies filed for bankruptcy. Ford, however, executed a series of key strategic maneuvers, asset divestitures, cost-cutting initiatives, and layoffs to weather the storm without bailouts. The result is a very different company and brand.

A major part of Ford’s strategy involved significant changes in the products it had to offer. For years all the Detroit automakers had largely ignored the market for small cars, but the oil shock of 2008, increased regulatory pressure, and changing consumer demand made it clear that the focus had to change. Understanding the shift in consumer demand when he became CEO in 2006, Alan Mullaly started a massive consolidation of Ford’s product lines. One of Mullaly’s goals was to have a stable of prod- ucts clearly defined for each market segment around the world—small, medium, and large cars, utilities, and trucks. Mullaly set a goal for Ford: reduce the existing 97 name- plates in its portfolio to between 25 and 30 nameplates by 2013.

Mullaly began by selling off many of Ford’s non- core brands, including Aston Martin in 2007, Jaguar and Land Rover in 2008, Volvo in 2010, and Mercury in 2011. Divesting noncore brands allowed Ford to focus on re- charging the Ford brand and making it great. For example, Mullaly discovered that the once-popular Taurus model had been discontinued because a weak design had not been well received. Mullaly then asked his design team, “How many billions of dollars does it cost to build brand loyalty around a name?” Because the Ford Taurus name

had great brand loyalty and name recognition, Mullaly im- mediately brought the Taurus back and set about reviving the brand name with a new, cooler design, rather than lose the valuable brand equity.

Along with changing the Taurus, Ford revamped the Fusion and Focus lines and reintroduced the Fiesta from global markets. The changes have reaped awards: Ford’s revamping of the Ford Fusion resulted in the mid-size sedan being selected as the 2010 Motor Trend Car of the Year. The new Fiesta was ranked number one by U.S. News Rankings and Reviews in the affordable small car category at the beginning of 2011.

One way that Ford has been able to quickly bring about success is by building different models with the same or similar excellent components all over the world. The Focus and Fiesta lines use a single platform for each worldwide market. Ford will still offer five Focus variants based on that one platform—four-door, hatchback, SUV, minivan, and commercial vehicle. The cost savings allow Ford to produce hybrid and electric models more afford- ably. In fact, the Ford Focus Electric, released in 2012, is one of five electric vehicles that Ford intends to release over the next two years. Ford is also exploring alternative fuels such as hydrogen and increasing the efficiency of existing gas and diesel engines.

But a vehicle is more than its engine, and Ford un- derstands that the entire consumer experience is what builds loyalty. Ford engineers invest great care and cre- ativity in the design and safety features of their vehicles. For example, the integrated tailgate step and assist bar on Ford F-series trucks make it easier to climb into the truck bed. Ford’s curve control technology in the Ford Explorer can automatically reduce the vehicle’s speed by 10 mph in one second if it senses the driver is taking a curve too recklessly.

Now that the economy is showing signs of growth (though very slow growth), Mullaly is confident that Ford

CASE STUDIES 1

will continue to produce solid profits and even improve on its performance from the past year. And he believes in the new product strategy: “You make less money on smaller cars, but we can make a return,” he says. This will certainly be key to Ford’s continued success.

Sources: Matthew Dolan, “New, Lighter Ford Explorer Boosts Mileage,” Wall Street Journal, July 19, 2010, http://online.wsj.com/article/SB10001424052748704196404575375553077856116.html (Accessed November 8, 2012); Joseph B. White, “Detroit’s Woes Make for Better, Smaller Cars,” Wall Street Journal, January 19, 2011, http://online.wsj.com/article/SB10001424052748703954004576090061509442764 .html (Accessed November 8, 2012); Lauren Abdel-Razzaq and David Phillips, “Mercury Rolls into History with Build of Final Grand Marquis,” Autoweek.com, January 4, 2011, www.autoweek.com/article/20110104 /cArNeWS/110109982 (Accessed November 8, 2012); Lou Ann Hammond, “How Ford Did It,” CNNMoney, January 13, 2011, http://money.cnn.com/2011/01/12/autos/Bill-Ford-Alan-Mulally-carmaker.fortune /index.htm (Accessed November 8, 2012); Alex Taylor III, “Fixing up Ford,” Fortune, May 25, 2009, 44–51; Kaveri Niththyananthan, “Ford CEO Expects ‘Solid Profit’,” Wall Street Journal, September 27, 2010, http:// online.wsj.com/article/SB10001424052748704654004575517523508773954.html (Accessed November 8, 2012); Jeff Bennett, “Ford Picks Battery Supplier for Electric Focus,” Wall Street Journal, July 13, 2010, http:// online.wsj.com/article/SB10001424052748704518904575365253704759106.html (Accessed November 8, 2012).

Q u e s t i o n s 1. What are some of the benefits Ford has achieved

through reorganizing its product line?

  1. What are some examples of Ford’s product line extensions?
  2. What are some examples of Ford’s product line contractions?
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