Issues and Case Analysis

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Abstract:

This paper presents an analysis comparing and contrasting the strategic position and future plans of Ford Motor Company and the Honda Motor Corporation, two giants of the automobile industry. It also presents the SWOT analysis of the two companies proposing strategies for the two multinational enterprises.

Introduction:

Ford Motor Company is an American multinational automobile corporation based in Dearborn Michigan and founded in 1903. The company operates under two sectors, financial services and automotive sectors. The automotive sector mainly offers vehicles under the Lincoln and Ford brand names while the financial sector provides various automotive financing products to and through automotive dealers (Ford Motor Company, 2010). Honda Motor Company on the other hand is a Japanese multinational automotive Corporation founded in 1946 and based in Tokyo Japan. The company through its subsidiary produces automobiles, motorcycles and power products. The two companies are almost similar in size and revenues and have experienced equal success in the hybrid vehicle market. Ironically the largest customer base for Honda Company are in the U.S. while the biggest customer base for Ford Motor company are in Asia (Honda Motor Company, Ltd., 2010). Though these companies are similar in size and revenue, each have their own strengths that have enabled them to survive in the current economic climate and weaknesses that have affected their efforts and abilities to grow aggressively and vigorously as they should. This paper presents a comparison on the strategic positioning and future plans of the two companies, looking critically at their strengths, weaknesses, opportunities and threats and presenting strategic recommendations for both companies.

Compare and Contrast Ford and Honda:

Comparing the performance of the two companies in the year ended 2010, it can be noted that while Honda sells about 30% of its vehicle in the local market in Asia (Honda Motor Company, Ltd., 2010), Ford on the other hand sells about 20% of its vehicles in the American market (Ford Motor Company, 2010). the largest market for the Ford market has been in the Asian Pacific region with the company increasing its market share in that region overtime as compared to the US market from 2005 to reaching a sales ratio of 2.5:1 in 2009. Honda on the other hand sells most of its automobile to the US market, though in recent years this has dropped from its previous average of 30% of sales to less than fifteen percent (Honda Motor Company, Ltd., 2010; Ford Motor Company, 2010). This implies that while Ford has been extending its global reach and expanding its market in Asia/pacific region and Europe, Honda's market base in the US and Europe on the other hand has been shrinking over recent years.

While the two companies both manufacture trucks and cars, it can be noted form the annual reports that that Hondas market share in the U.S. was 10.8% in 2009 as compared to Ford's 15.3%. This implies that though Honda with a 6.5% car market share may sell more cars in the U.S. market as compared to Ford's 5.5% car market share, Ford considerably sells more trucks with a 9.8% as compared to the 4.3% truck market share for Honda (Honda Motor Company, Ltd., 2010; Ford Motor Company, 2010).

The two companies also own their own manufacturing facilities with Ford having facilities locally and in 25 other countries Japan excluded and Honda owning facilities locally, in the U.S and in eleven other countries. Both these companies have extensive distribution networks for their products numbering in thousands world wide (Honda Motor Company, Ltd., 2010; Ford Motor Company, 2010). As at end of 2010, Honda had about 1.8 billion shares trading at the New York Stock Exchange at $ 30 per share with fords share being about twice Honda's at 3.3 billion shares trading at the same market at six dollars per share. Honda's shareholders are under Japanese law and do not have similar rights as when under U.S securities law (Honda Motor Company, Ltd., 2010). In this sense, Japanese courts would not be willing to enforce the same liabilities that may accrue to Japanese companies as would U.S courts enforce under the U.S. Securities legislation. Since Honda is a Japanese company then it does not have the same SEC reporting requirements as does Ford Motors and it primarily works for the benefit of the company and its employees and not shareholders as is the case of Ford Motors who put their shareholders interest in the forefront. Though the two companies have almost similar number of employees standing at 176,815 for Honda and 198,000 for Ford, Honda lists 38 corporate officers with the parent company and a total of 178 including those in subsidiary companies unlike Ford's 57 in the parent company and 466 in the other subsidiary companies. This implies that Honda has a more streamlined management structure that Ford Motor (Hoovers, 2010a).

In 2010, the two companies recorded almost similar annual sales with Ford recording about $118 billion in sales and Honda recording slightly lower at about $93 billion. Honda's gross margin though was higher standing at 27.3% as compared to Ford's 19.3% (Hoover, 2010a). This performance can probably be attributed to the greater diversity in automotive products offered by Honda most notably in the motorcycle sector. The main success factor of both companies mainly rests on their ability to continually be in the forefront of offering consumers hybrid vehicles and in their continued dedication to research and development to alternative fuel sources that has resulted into more fuel efficient automobiles.

Ford Perspective:

Ford has its own strengths that has enabled it to survive in the current economic climate and weaknesses that has affected its efforts and abilities to grow aggressively and vigorously as it should

Strengths :

Growth in brand: though the brand value in the car category dropped in the 2010 by 15%, the Ford brand value gained globally by 19% in the same year. This was mainly because Ford was the only company not to receive bailout money after the late 2000 recession (Schept, 2010). Ford is the only American automobile American company to be recognized by BrandZ, a brand publication, for their global brand strength. Being among the top three major automobile manufactures in the U.S., their brand is a strength that has ensured their success (Ford Motor Company, 2010).

Globalization: Ford' main strategic focus is to produce automobiles closer to the markets they are to be sold. This can clearly be noted with the production of the Focus Ford, a globally produced car, which has seen the drive towards this strategy. The company has also positioned and restructured itself to be a manufacturing hub for automobiles with plants in London, Shanghai and Detroit (Schept, 2010).

Marketing: The Company has a wide and extensive distribution network, employing the use of online marketing tools to reach out to the technologically savvy market base. Last year it used social media to promote the Fiesta in Europe where it gave away 100 cars to bloggers for commenting on the car and this generated more that fifty thousand information request from possible customers (Schept, 2010).

Collaboration and embedding technology: Ford has been collaborating with some companies in order to improve its products and their customers experience and this can be clearly noted in its collaboration with Microsoft to "deliver a voice activated information and music system called AppLink" which connects the drivers Smart phone to their car. The company have additionally collaborate d with other companies to produce vehicles on a common platform (Hoovers, 2010).

Financing: Ford Motor Company has a wholly owned credit finance company that ...