(Solved): "What are the primary components of Fords value chain? List and explain" I am looking for an ...

"What are the primary components of Ford’s value chain? List and explain" I am looking for an answer using the attatched case study as a source, thank you!

CASE 4 Ford Motor Company: Will the Company's Strategic Moves Restore its Competitiveness and Financial Performance? Marlene M. Reed Baylor University A report by Road Show on CNET, dated June 5, 2019, suggested that the Ford Fusion 2020 model would be the last car Ford would pro- duce. The discontinuation of the Fusion was said to be a part of Ford's shifting strategic focus away from passenger cars toward crossovers and SUVs-many with electrified powertrains. Observers wondered if Ford could essentially abandon the market for Rochelle R. Brunson Baylor University automobiles as car sales had been its lifeblood since 1908 when Henry Ford revolutionized passenger trans- portation with production of the Model T. Industry analysts also wondered if the American love affair with the SUV and trucks would continue if the price Copyright ©2021 by Marlene M. Reed, Baylor University and Rochelle R. Brunson, Baylor University. All rights reserved. EXHIBIT 1 History of the Ford Motor Company 1896-Henry Ford built the Quadricycle, the forerunner of the automobile. 1899-Henry Ford joins a group that founded the Detroit Automobile Company. 1901-Henry Ford defeats the top racecar driver of the era in his 26. The victory led to Sweepstakes. The victory led to Ford's second short-lived attempt at auto manufacture-the Henry Ford Company. 1903-The Ford Motor Company is incorporated with an initial 12 investors and 1,000 shares. The company had spent almost all of its $28,000 cash investment by the time it sold the first Ford Model A on July 23. By October, the company had turned a profit of $37,000. 1904-Ford Motor Company of Canada is founded. The plant was built in Windsor, Ontario, across the river from Ford's existing facilities. The company was created to sell vehicles not just in Canada but also all across the British Empire. 1907-Ford introduces the scripted typeface of its trademark. 1908-Ford introduces the Model T. Ford sold 15 million of this model before ceasing production in May 1927. It became the most famous car in the world. 1913-Ford introduces the integrative moving assembly line to auto production. This innovation reduced the Model T's chassis assembly line from 12.5 to 1.5 hours and brought about a revolution in manufacturing. 1914-Ford institutes the famous "$5 Day." This wage payment to Ford's employees was double the existing rate for factory workers. The company also reduced the workday from 9 to hours. The day after this wage rate was announced, 10,000 people lined up hoping to be hired by Ford. C-44 PART 2 Cases in Crafting and Executing Strategy 1917-Ford produces its first truck. The truck was called the Ford Model TT based on the Model T car but with a reinforced chassis and rear axle. 1919-Edsel Ford succeeds Henry Ford as president of the company. 1922-Ford acquires the Lincoln Motor Company. 1925-Ford begins production of the Ford Tri-Motor airplanes. The "Tin Goose" was the first airplane used by America's early commercial airlines. 1927-Ford begins selling the 1928 Model A. The company closed plants all over the world to spend six months retooling factories and perfecting the design of the car. 1936-Ford begins selling the Lincoln Zephr line. Lincoln Zephr's sleek, aerodynamic shapes helped make the brand a sales success, but when auto production ceased during World War II, the Zephr name was dropped as well. 1941-Ford begins producing Jeeps for the U.S. military. 1942-Ford halts production of automobiles in the United States to produce military equipment. 1948-Ford produces the F-Series line of trucks. The company ceased building trucks on car platforms and used a purpose-built truck platform instead. 1954-Ford introduces the Thunderbird. This car would become a classic. 1956-Ford becomes a publicly-traded company. 1959-Ford Credit is established. The company offered loans and leases to car buyers. 1964-The Ford Mustang goes on sale. The car was a huge success and has remained one of the fastest-selling vehicles in history. 1965-Ford-Philco engineers unveil the Mission Control Center used to put a man on the moon. 1976-Ford of Europe introduces the Ford Fiesta. 1986-Ford introduces the modular assembly line at its St. Louis assembly plant. This made use of automated ancillary assembly lines to produce vehicle subassemblies. 1990-Ford introduces the Explorer. With this model, Ford helped launch the SUV market. This became one of Ford's most successful models. 1996-Ford introduces the Ford Ranger Electric Vehicle. This was a forerunner of today's electric vehicles and hybrid energy systems. 1998-The Lincoln Navigator is introduced and spurs rapid growth in the luxury SUV segment. 2011-Ford discontinues the Mercury line to concentrate all of its efforts on the Ford and Lincoln brands. 2016-Ford Mobility, LLC is created. This focused on changing the way the world moves. Ford Smart Mobility was designed to take the company to the next level in connectivity, mobility, autonomous vehicles, the customer experience and data analytics. of gasoline began to escalate as the United States, Russia, and the United Arab Emirates. engaged in tactics to alter energy prices around the world. Exhibit 1 below outlines key milestones in the history of the Ford Motor Company. Ford's Strategic Situation in 2020 By 2020, Ford employed over 200,000 people world- wide in 70 plants producing midsize cars, SUVs, and pickup trucks. Since the recession of 2008, the company's revenues had rebounded due to increased. disposable income levels, falling unemployment, and a renewed demand for big-ticket purchases. However, the company reported falling sales in some of its established markets in 2019 and 2020-partially due to the spread of the COVID-19 virus in early 2020. Exhibit 2 pres- ents Ford's stock performance between April 2015 and April 2020. The company's consolidated income state- ments for 2017 through 2019 are presented in Exhibit 3. Ford Motor Company's consolidated balance sheets for 2018 and 2019 are presented in Exhibit 4. EXHIBIT 2 (a) Trend in the Ford Motor Company's Common Stock Price 16 Stock Price ($) 14 Percent Change (April 2015 = 0) 12 10 8 6 4 +45% +30% +15% +0% -15% -30% Performance of Ford Motor Company's Stock Price, April 2015 to April 2020 -45% -60% -75% www 2016 Aqu m (b) Performance of the Ford Motor Company's Stock Price Versus the S&P 500 Index +60% Ford Motor Company's Stock Price 2017 2016 CASE 4 Ford Motor Company 2017 Ford's New Product Strategy William Clay Ford, Jr., Executive Chairman of Ford, suggests that 115 years ago, when the company began, the company's mission was to make people's lives better by making mobility accessible and affordable. By 2020, the company was moving toward manufac- turing "smart vehicles for a smart world." The world plan focused on four pillars: (1) A winning portfolio; (2) new propulsion options; (3) a high-level autono- mous business built on the most trusted self-driving 2018 Year 2018 Year 2019 S&P 500 2019 2020 2020 C-45 systems; and (4) cloud-based mobility experiences that deliver recurring revenue. The winning portfolio in 2020 was envisioned to be the Escape, Expedition, Explorer, Ranger, F-150 Hybrid, Bronco, and the Mustang Shelby GT500. The Ford Bronco was produced between 1966 and 1996 and was discontinued when the smaller two- door Bronco II suffered from a tipping problem. The reintroduced Bronco will be modular with a remov- able top and doors. C-46 EXHIBIT 3 Consolidated Income Statements for the Ford Motor Company, 2017-2019 ($ in millions except per share amounts) 2017 Revenues Automotive Ford Credit Mobility Total revenues PART 2 Cases in Crafting and Executing Strategy Costs and expenses Cost of sales Selling, administrative, and other expenses Ford Credit interest, operating, and other expenses Total costs and expenses Operating income Interest expense on Automotive debt Interest expense on Other debt Other income/(loss), net Equity in net income of affiliated companies Income/(Loss) before income taxes Provision for/(Benefit from) income taxes Net income Less: Income attributable to noncontrolling interests Net income attributable to Ford Motor Company Earnings per share attributable to Ford Motor Company common and class B stock Basic income Diluted income Weighted-average shares used in computation of earnings per share Basic shares Diluted shares Source: Ford Motor Company 2019 10-K. ASSETS Cash and cash equivalents Marketable securities Ford Credit finance receivables, net Trade and other receivables, less allowances of $94 and $63 Inventories Assets held for sale Other assets Total current assets $145,653 $148,294 12,018 11,113 10 26 156,776 160,338 131,321 11,527 9,047 151,895 4,881 1,133 57 3,267 1,201 8,159 402 7,757 26 $ 7,731 $1.94 $1.93 2018 3,975 3,998 136,269 11,403 9,463 157,135 3,203 1,171 57 2,247 123 4,345 650 3,695 18 $ 3,677 $ $0.93 $0.92 EXHIBIT 4 Ford Motor Company Consolidated Balance Sheets, 2018-2019 ($ amounts in millions) $ 16,718 17,233 54,353 11,195 11,220 2019 3,974 3,998 3,930 114,649 $143,599 12,260 41 155,900 134,693 11,161 9,472 155,326 574 963 57 (226) 32 (640) (724) 84 37 47 $0.01 $0.01 December 31, December 31, 2018 2019 3,972 4,004 $ 17,504 17,147 53,651 9,237 10,786 2,383 3,339 114,047 C-46 EXHIBIT 3 Consolidated Income Statements for the Ford Motor Company, 2017-2019 ($ in millions except per share amounts) 2017 Revenues Automotive Ford Credit Mobility Total revenues PART 2 Cases in Crafting and Executing Strategy Costs and expenses Cost of sales Selling, administrative, and other expenses Ford Credit interest, operating, and other expenses Total costs and expenses Operating income Interest expense on Automotive debt Interest expense on Other debt Other income/(loss), net Equity in net income of affiliated companies Income/(Loss) before income taxes Provision for/(Benefit from) income taxes Net income Less: Income attributable to noncontrolling interests Net income attributable to Ford Motor Company Earnings per share attributable to Ford Motor Company common and class B stock Basic income Diluted income Weighted-average shares used in computation of earnings per share Basic shares Diluted shares Source: Ford Motor Company 2019 10-K. ASSETS Cash and cash equivalents Marketable securities Ford Credit finance receivables, net Trade and other receivables, less allowances of $94 and $63 Inventories Assets held for sale Other assets Total current assets $145,653 $148,294 12,018 11,113 10 26 156,776 160,338 131,321 11,527 9,047 151,895 4,881 1,133 57 3,267 1,201 8,159 402 7,757 26 $ 7,731 $1.94 $1.93 2018 3,975 3,998 136,269 11,403 9,463 157,135 3,203 1,171 57 2,247 123 4,345 650 3,695 18 $ 3,677 $ $0.93 $0.92 EXHIBIT 4 Ford Motor Company Consolidated Balance Sheets, 2018-2019 ($ amounts in millions) $ 16,718 17,233 54,353 11,195 11,220 2019 3,974 3,998 3,930 114,649 $143,599 12,260 41 155,900 134,693 11,161 9,472 155,326 574 963 57 (226) 32 (640) (724) 84 37 47 $0.01 $0.01 December 31, December 31, 2018 2019 3,972 4,004 $ 17,504 17,147 53,651 9,237 10,786 2,383 3,339 114,047 C-48 PART 2 Cases in Crafting and Executing Strategy Two years before the Bronco was discontin- ued, the automobile gained a great deal of atten- tion when Al Cowlings drove O.J. Simpson down a Los Angeles freeway after Simpson was charged with the murders of his ex-wife and her friend. More than 95 million people across the United States watched the two-hour pursuit on television while crowds gathered on overpasses to cheer on the NFL football legend.² Ford Credit Company Although the company experienced profitability dif- ficulties in 2018 and 2019, its financial arm, Ford Credit Company, posted its best results in 2019 of the past nine years. Their profits jumped to $3 billion before taxes. The result was that this arm of the com- pany accounted for 50 percent of Ford's profits. This was up from 15 to 20 percent in the past. Ford Motor Company had, thus, been able to subsidize Ford's losses and allowed the company to maintain a high dividend yield. Unfortunately, data released by the New York Federal Reserve Bank in late 2019, indi- cated that the volume of 90+ days delinquent loans had risen sharply. The value of the overall auto loan and lease balances had surged to $1.33 trillion that year. In addition, subprime loans reached $66 billion in the final quarter of 2019.³ There were several risks for the company in the 2020s regarding the Ford Credit Company. One risk was that this financial arm of the company could experience higher-than-expected credit losses, lower- than-anticipated residual values on higher-than- expected return volumes for leased vehicles. Another risk was that Ford Credit could face increased com- petition from financial institutions or other third par- ties seeking to increase their share of financing Ford vehicles. Finally, Ford Credit could be subject to new or increased credit regulations, consumer or data protection regulations or other types of regulations. Challenges for 2020 The automotive industry is affected by macro- economic conditions over which the companies have little control. Vehicles are durable goods, and con- sumers exert strong choices about when and if they will buy a new car. This decision is influenced by such factors as slower economic growth, geopolitical events and other factors such as the COVID-19 virus threat in 2020. Some of the greatest challenges to Ford in 2020 identified by management included the following: 1. Acceptance of new and existing products by the market. 2. Sales of more profitable larger vehicles, especially in the United States. 3. Increased price competition resulting from indus- try excess capacity. 4. Fluctuations in commodity prices, foreign exchange rates, and interest rates. 5. Global macroeconomic factors such as protec- tionist trade policies and other events including Brexit. The company's ability cost structure. maintai a competitive 7. Pension and other post-retirement liabilities. 8. Defects that result in delays in new model launches. 9. Operational systems could be affected by cyber incidents.4 Ford and the Coronavirus Pandemic. In early 2020, a new virus called the coronavirus or COVID-19 began to cause serious illness and death around the world. Because of an increasing incidence of this disease in the United States, many states declared a "shelter in place" order intended to prevent the spread of the virus by forcing people to work from home. Ford, on March 31, stated that it was delaying the restart of a car plant in Mexico as well as four truck, SUV and van plants in the United States "to help protect its workers." This postpone- ment came just two days after President Donald Trump extended the national social-distancing guide- lines through the end of April 2020. The shutting down of the economy resulted in the loss of more jobs than had occurred since the Great Depression and the stoppage of purchasing non-essential goods. Because of a shortage of ventilators to treat coronavirus patients, Ford and General Electric's Health Care Division announced on March 30 that they together planned to produce 50,000 ventilators over the next 100 days. Ford planned to use a plant in Rawsonville, Michigan, and about 500 workers to EXHIBIT 5 Global Automobile Product Cars Industry Products and Services Segmentation, 2018 Cross utility vehicles (CUVS) Pickup trucks Sports utility vehicles (SUVs) Other Total Percentage of Market 36.6% 32.1% 10.8% 6.9% 13.6% 100% Source: Oelkan, Ediz (February 2020). Ibisworld.com, Global Car & Automobile Mfg. make 30,000 ventilators a month. GE had licensed the design of the ventilator from Airon Corporation of Melbourne, Florida. The device works on air pres- sure and does not need electricity. Both Ford and GE announced that Ford would help increase produc- tion of another ventilator based on a design from GE Healthcare. Global Automobile Status A survey of the range of products and services pro- vided by the global automobile manufacturing indus- try is shown below in Exhibit 5. Although the production of cars accounts for 36.6 percent of global industry revenue, this was lower than its production volume because cars normally sell at a lower price than SUVs and com- mercial vehicles. Therefore, they contribute less to revenue on a per-unit basis. The car segment had been growing as consumers opted for more fuel efficiency. Ford sales in the United States, however, showed a lower total sales of cars than trucks or SUVS-see Exhibit 6. Generally, Germany, Japan, the United States, and Canada are expected to be the world's largest exporters of cars and automobiles (SUVs, trucks, etc.). On the other hand, Germany, China, the United Kingdom, and Belgium are expected to be the largest CASE 4 Ford Motor Company EXHIBIT 6 Trucks SUVS Cars 2018 U.S. Retail Sales Volume Segregated by Product Type U.S. Retail Sales 1,139,079 872,215 486,024 Total C-49 Percentage 45.6% 34.9% 19.4% 100% Source: Annual Report of the Ford Motor Company, 2018 destinations for automobile products. The historic methodology for manufacturing automotive vehicles was to assemble cars at a domestic plant and then export them to their final destinations. However, the supply chain has become more complex. The shift has been toward manufacturing cars close to their final destination to save on logistics costs. Another part of this strategy is to focus on very specific brand- ing devices to appeal to the customer. An example of this is the logo "Made in America." A Future Strategy By 2020, the Ford Motor Company Board had some difficult decisions to make. Although the developing economies of the world primarily demanded smaller automobiles, the developed economies preferred the larger crossovers, SUVs, and trucks. The com- pany had already made a decision to discontinue the Ford Fusion, its largest automobile, and the public wondered if they would drop selling all of their cars except for the Mustang in the United States. Another question that arose was: What would happen to large vehicle sales if the price of petroleum rose to alarming rates again? That had seemed to be a remote possibility until the United States, Russia, and the United Arab Emirates decided in the spring of 2020 to limit the daily production of petroleum. There was also the question of what would happen if people began financing their vehicles at some place other than Ford Credit, and what could they do about that? The Board had much to think about as they put their strategic plan together.