Ford Motor Company started its operations in Delaware in 1919 by acquiring the business of a Michigan enterprise by the name Ford Motor Company which was in the business of producing and selling automobiles designed and engineered by Henry Ford. Currently, the company is based in Dearborn Michigan. It has close to 201,000 employees and 62 automobile plants worldwide. The core business of the company is to design, manufacture, market and service cars, SUVs and Lincoln Luxury vehicles. The company is expanding its business model by aggressively pursuing emerging opportunities by heavily investing in electrification, mobility, and autonomy. The company also provides financial services through its credit company (Ford Motor CO, 2016).
According to Burns (2013), businesses have different objectives and therefore, “to make more money, now and in the future” for all organizations is a noble goal as it ensures continuity and sustainability of business operations. It diverts the company’s focus from short term operational goals to long term goals that aims at satisfying all the stakeholders. However different companies should pursue their unique objectives that depend on the vision and mission of the business as well as the goals of the management.
Delegate your assignment to our experts and they will do the rest.
According to an article in the New York Time published on June 20 th , 2017, Ford Motor has decided to move its operations from Mexico to China. The company has agreed to build its small next-generation cars in China and not in Mexico or USA. The company has been contemplating moving its operational activities to a new plant in Mexico citing high production costs in its current facility. Ford had to shelve its plans following strong opposition from the president who has criticized ford for creating employment in Mexico rather than in America. The company recently said that shifting the company's operation to China would save it a whopping $1 billion. The company would then concentrate on expanding American Plants that manufacture Trucks and SUVs (Vlasic, 2017, June 20).
From the company's recent decision, it is necessary to evaluate the following three choices. What would be the impact of the decision on the amount of money generated by the company? What would be the impact of the decision to relocate operations on the operational expenditures? What will be the impact of the decision on the amount of money captured in the company? (Corbett, 1998).
A decision to relocate the small production cars to China will increase the amount of money generated by the company from offshore activities and operations in the USA. The company will be able to compete by cost and therefore manage to its cars at a lower price to its targeted market. Such a strategy implies that the company can attract more price sensitive customers who desire to own an automobile at a lower price. The company will also realize better returns in its US production plant as it will be able to concentrate its efforts on the valuable brands, the cost savings can be used to conducts aggressive marketing for the different automobile brands boosting the company's sales and revenues (Burns, 2013; Corbett, 1998).
The company's expenditures will drastically decline as it relocates its production operations to China. Labour constitutes a sizeable amount of the variable costs of a group. Therefore, managing to cut the production costs will enable the company to reduce its production expenses. The savings from such an action can go a long way in boosting the business overall cost structure (Burns, 2013; Corbett, 1998).
Ford Motor decision to relocate its operations to China will have a ripple effect on the money that the company captures. Ford will not only make cost savings from the relocations but will also benefit from cost leadership strategies for the small cars enabling it to obtain a wider market which will increase the revenues of the company from this market segment. Investment in profitable plants in the US will also allow the company to realize improved performance as all efforts will be focused on enhancing customer satisfaction. The company can implement programs that build loyal customers, strengthen the image of the company and focus on environmental concern (Burns, 2013; Corbett, 1998).
References
Ford Motor CO, (2016, February 11). 10-K: Ford Motor CO 2016. Retrieved December 04, 2017, from https://www.marketwatch.com/story/10-k-ford-motor-co-2016-02-11
Burns, J. (2013). Management accounting . Berkshire.: McGraw-Hill Education.
Corbett, T. (1998). Throughput accounting: TOCs management accounting system . Great Barrington, MA: North River Press.
Vlasic, B. (2017, June 20). Ford Chooses China, Not Mexico, to Build Its New Focus. Retrieved December 04, 2017, from https://www.nytimes.com/2017/06/20/business/ford-focus-china-production.html
