Widespread globalization has resulted in an array of challenges and opportunities. Survival and growth in such an environment depend on a company’s ability to formulate and implement effective strategies that will maximize the opportunities while suppressing threats. Like most automobile companies, Ford Motors entered the international market to increase its market share which translated into a fair competitive advantage. Ford’s strategy has been cost leadership as the firm aims to incorporate all components of efficiency to produce quality products at mainstream prices. In the global market, Ford maintains tactic(s) aimed to strike a balance between customization and standardization to treat every domestic market as a unique entity from the international market. For Ford to explore the benefits of the international market, it is essential to identify effective tactics. Therefore, the paper analyzes the reason behind Ford Motor’s foreign subsidiary strategy as well as the benefits of global sourcing versus the export strategy. Lastly, the paper compares Ford’s international strategy to Toyota, one of its competitors.
Although Ford has had a good track record since its establishment, the market in the 1950s caused the company its competitive advantage which translated into low sales and reduced profit margins. The firm response was internal managerial reforms, but it was not long before changes in foreign markets forced Ford to make other modifications to align their operations with the targeted market. The company opted for a strategy that specialized and rationalized worldwide operation on a regional basis by developing a network of subsidiaries meant to increase the organization’s international linkages (Noguez, 2005) . Note that foreign-owned subsidiaries are companies whose major stocks are owned by another company called the parent company. Thus the subsidiaries can operate independently, but they are under the control of the parent company.
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Ford opted to pursue a foreign subsidiary strategy as it offers an array of advantages that offset the high risks that it possess to the organization. For instance, foreign subsidiaries allow Ford to maintain total control over the operations. Ford has managed to balance the need to standardize and customize production to suit a specific market entity. Such a tactic allows the company to maximize efficiency throughout the manufacturing process which results in relatively low production costs that allow the firm to maintain its cost leadership marketing technique. Ford Motors employs a unique operation model whereby certain products are only designed for a specific market (Basu, 2018) . For example, muscle cars and trucks are manufactured for North America but are not part of the company’s portfolio elsewhere. In other words, Ford focuses on the specific market needs and align operations to meet them. Another reason for the employment of foreign subsidiaries technique is the protection that the tactic provides to Ford’s intellectual property. In essence, all subsidiaries benefit from image and reputation of the parent company which increases the overall success rate in the foreign market.
Other than foreign subsidiaries, Ford can employ other techniques like global sourcing or export strategies. As the name suggests, global sourcing encompasses all practices of obtaining good and services across geopolitical borders with the intention of exploiting international efficiencies in services and product delivery (Kotabe & Murray, 2015) . On the other hand, exporting strategy define practices meant to explore foreign markets that is mapping out the most efficient methods that can be used to sell, deliver and, market a company’s products in a different country. Companies need to weigh the benefits of the two tactics to settle for the one that offers the firm a competitive edge. In the automobile industry, global sourcing offers the advantage of minimizing the overall expenses because most foreign suppliers and manufacturers in low-cost regions offer services/products at competitive prices. Therefore, once a company devises plans to bypass factors like high transportation, communication and, administration expenses, the firm can maximize its bottom line. In contrast, reliance on export strategy poses significant risks to any automobile business because buyers and distributors often have a bargaining advantage that might force the company to sell the products at lower prices which will harm the bottom line.
One feature associated with internationalization is an immense competition that threatens the company’s relevance and its survival and growth. Ford’s main competitor is Toyota. The two companies share major markets like Brazil, Argentina and, India. However, Ford and Toyota employ varying approaches to gain and maintain a competitive edge in the international market. Ford utilize foreign subsidiaries that allow the firm to maintain full operation in the foreign market. Essentially, the company treat each market as a separate entity and align operations to suit the needs of the specified clientele. On the other hand, Toyota employs the KAIZEN that is a continuous improvement to maximize efficiency which translates into quality without necessarily increasing the prices. In general, the two companies use different approaches meant to achieve a common goal that is cost leadership in the automobile industry.
In general, Ford’s survival and success can be attributed to the effectiveness of the foreign subsidiary strategy as the company has managed to suppress the threats and maximize all their opportunities. Additionally, the discussion has established that an alternative strategy to a foreign subsidiary is global sourcing as it offers more benefits compared to export strategy. Lastly, just like Ford’s subsidiary tactic, Toyota is using the KAIZEN strategy to compete for the same market share meaning that Ford might have to consider other tactics to maintain its competitive edge.
References
Basu, C. (2018, June 25). The Advantages & Disadvantages of a Wholly Owned Subsidiary. bizfluent . Retrieved from https://bizfluent.com/info-8627934-advantages-disadvantages-wholly-owned-subsidiary.html
Kotabe, M., & Murray, J. Y. (2015). Global sourcing strategy and sustainable competitive advantage. Industrial Marketing Management , 7-14.
Noguez, M. I. (2005). Ford and the Global Strategies of Multinationals: The North American Auto Industry. Abingdon, UK: Routledge.
