Ford Motor company

CASE

Ford is a large company by any standard. Its 1989 sales of $96.1 billion made it one of the five largest industrial firms in the United States and one of the ten largest in the world. It is also the world's second-largest automobile company, holding about 14 percent of the worldwide market in 1989. Ford is also highly involved internationally. The company began operations in 1903 and exported the sixth car it built. By 1911 the company boasted that a man could drive around the world and stop every night at a garage handling Ford parts. By 1930 Ford was manufacturing or assembling automobiles in twenty foreign countries and had sales branches in another ten. In 1989 about 41 percent of Ford's car and truck vehicles were produced and sold outside of the United States, up from 35 percent three years earlier. Yet as large and internationally involved as Ford is, it must allocate its limited financial and human resources to maintain emphasis on those markets and production locations that are most compatible with corporate expectations and objectives.

Although foreign expansion was a stated objective at Ford's first annual meeting, the company initially was passive about where the emphasis would be. Ford's first foreign sales branches and assembly operations, such as in Canada, England and France were established because people in those countries made proposals to Ford.

Ford also made international expansion decisions on a highly decentralized basis. Much of the European expansion was handled through the English operation and the British Commonwealth sales through the Canadian company. Where sales grew most rapidly (e.g., in Argentina, Uruguay, and Brazil) Ford established assembly operations in order to save on transportation costs by limiting the bulk of shipments. Much of Ford's early expansion, therefore, was not based on scanning the globe to choose the best locations. Instead, Ford took advantage of opportunities as they came along.

Ford's pattern of international activities also has been influenced by policies that the company's management considered essential. One of these policies stated that Ford would not manufacture or assemble anywhere without a controlling interest. The concept of control in Ford's case went beyond that of voting shares. In 1930, for example, a Ford group inspected potential production sites in China and reported back to Henry Ford that the title for any Ford purchase of land in China would have to be in the name of a Chinese citizen because a foreigner can't own land in China. Henry Ford's response was simply, "No." In the 1950s and 1960s Ford extended this concept of control to the point that nothing short of 100 percent ownership was acceptable. This further influenced Ford's geographic area of emphasis, causing Ford to expend resources to buy out a minority interest in the British company. It also meant abandoning production in India and Spain in 1954 (Ford recommenced Spanish production in 1976 and no longer adheres to the 100 percent policy) because the governments of those countries insisted on sharing ownership.

Political conditions also have helped to forge Ford's foreign investment pattern. For example, during World War II the French facility was bombed and was not replaced. Assembly facilities were seized by communist gov­ernments in Hungary and Romania in 1946. Not until 1977, however, did Ford establish a separate department to evaluate the external political environment. Changes in governmental regulations often have caused Ford to commit a high proportion of its resources to a given area during a given period. This occurred, for example, when Mexico required a higher portion of local content in vehicles, thus forcing Ford to increase its Mexican investment or lose sales there.

Despite the extended and heavy commitment to foreign operations, Ford's production and sales are highly concentrated in a few countries. Even though Ford sells in over 200 countries and territories, Fig. 16.1 shows that about 80 percent of Ford's unit car and truck sales are in just four countries. These same four countries comprise only about 49 percent of world demand. Because of the heavier commitments in some countries than in others, Ford's competitive position is much stronger in some markets than in others. In the United Kingdom and Canada, where Ford has large investments, its market share in 1989 was 27 percent and 23 percent, respectively. But in Europe outside the United Kingdom, the market share was only 8.5 percent.

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