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Marketing ManagementBUSS576 Case Study
Presentation Ford Racing to the Internet
Presented by Team 2 27 September 2002
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Group Member

• Name Student No
• Cheng Pui Ting, Ting 02428884G
• Lee Siu Ka, Sarah 02708427G
• Lau Wai Kei, Patrick 02438750G
• Wong Yun Wah, Wallace 02409600G
• Chan Tak Kuen, Benedick 02716359G

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Agenda

• Background of Ford Motor Company and Ford.com
• Autos Industry Development in USA
• New Distribution Model
• Competitive Advantage Study
• Conclusion

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Background of Ford Motor Company

• Founder Henry Ford
• Year Founded 1903
• Headquarter
• 1 American Rd., Dearborn, Michigan 48121-1721,
  USA
• Sales Revenue 162.4 billion as at December 21,
  2002
• Ford Automotive Operations 131.5 billion
• Ford Financial Services 30.9 billion
• Management
• William Clay Ford, Jr., Chairman CEO
• Nick Scheele, COO
• Carl Reichardt, Vice Chairman
• The worlds second largest automotive company

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Fords Business

• Manufacturing
• Design and manufacture of automobiles and trucks
• Services
• Sale and service of cars and trucks, renting and
  leasing of cars and trucks and renting industrial
  and construction equipment.
• Finance
• Vehicle-related financing, leasing, and insurance

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Introduction of Ford.com

• Launched in 1998
• Umbrella Website
• US website Fordvehicles.com
• Links Brands under Ford Motor Company, USA
• Lincoln lincolnvehicles.com
• Mercury mercuryvehicles.com
• Mazda mazda.com
• Volvo volvocars.com
• Jaguar jaguar.com
• LandRover landrover.com
• Aston Martin astonmartin.com

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Fordvehicles.com
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Sales and Revenues(in millions / US)
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Autos Industry in USA

• 1900 1950
• Automakers developed the Franchise System
• The Agreements gave automakers power over the
  dealer through the control of product supply, as
  well as the right to grant and revoke franchises
• Automakers used this powers to force dealers to
  hold bloated inventories of cars and parts, and
  contribute to national advertising funds that did
  little for local sales

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Autos Industry in USA ..

• 1950 -1960
• The Courts shifted power to dealers
• The Automobile Dealers Day in Court Act of 1956
  was passed
• Automakers in the US are not allowed to sell
  their vehicles directly to end users.
• Sales has to be channeled through dealers

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Autos Industry in USA ..

• 1960 1990
• The industry matures
• The automotive distribution did not change

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Traditional Purchase Experience

• Traditionally, customers can only purchase new
  car from the dealer near their locations under
  the legislation
• Customers need to contact different dealers if
  they want to compare the price of the same car
  model
• Customers need to contact different parties on
  car purchasing and financing
• Customer usually make purchase from existing
  stock since lead times on custom orders ranged
  from many weeks to several months, depending on
  the make and model

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Disadvantage of the Practice

• Inefficiency of the mechanism leads to
• High cost of finished goods cached in dealer lots
  across the country
• Frequent mismatch of individual customers desire
  with locally available inventory options
• Frequent discounting required to clear the dealer
  lots of model with unwanted configurations
• The total cost of distribution system was high
  (nearly 30 of vehicle price) because the supply
  chain inventory was usually for a few dayss worth

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Disadvantage of the Practice

• Inefficiency of the mechanism leads to
• Customers have no say on the design of the car.
• Different parties on car purchasing and financing
• Lack of comprehensive information

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Opportunities for New Distribution Model

• State franchise laws and manufacturer
  relationship inhibit automakers from dealing in
  the new car market
• Widespread dissatisfaction with the vehicle
  purchase process
• eBusiness appeared

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New Business Concept

• CarMax
• Dealer
• Opened in Richmond, Virginia, in 1993
• Offered a wider selection, and employed a
  no-haggle pricing strategy
• Sales representatives received a salary and a
  bonus based on unit sales and customer
  satisfaction, not dealer margin

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Online Auto Retailing Business

• Auto-By-Tel.com
• Autoweb.com
• Autovantage.com

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Auto-By-Tel.com
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Auto-By-Tel.com
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Autoweb.com
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AutoVantage.com
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AutoVantage.com
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AutoVantage.com
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Auto Manufacturers on the Web

• First Mover
• General Motors
• GMBuyPowers.com
• Second Movers
• Ford Company Limited
• Ford.com
• DaimlerChrysler Corporation
• Chrysler.com
• Toyota
• Toyota.com

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GM.com
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Chrysler.com
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Toyota.com
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Second Mover Ford.comTarget Audience - I

• Generation Y-ers
• are born between 1977 and 1995
• are aged 7 to 25 in 2002
• number 60 million and make up 21 of the
  population
• The percentage of Generation Y-ers in the total
  population are expected to increase at twice the
  rate of population until 2010, and by 2020 this
  percentage will have reached 32
• impact on e-commerce will be 1.3 billion in 2002

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Second Mover Ford.comTarget Audience I

• Generation Y-ers
• Attributes
• Optimistic
• Idealistic
• Ambitious
• Committed
• Confident
• Traditional
• Passionate
• Empowered

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Target Audience - II

• Women aged 25 to 49
• Control 85 of all personal and household goods
  spending
• Consumer more media than men per day (8.8 hours
  versus 8.2 hours)
• Solve real problems actively
• 77 of women go online primarily to explore
  information and 86 of them find information that
  helps them get through their daily lives
• Average household income is 55,000
• Married
• Employed full-time
• Have attended college

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Target Audience - III

• Internet Users
• Estimated to reach approximately 320 million by
  the end of 2002
• Worldwide commerce revenue on the Internet is
  expected to increase to more than 425 billion in
  2002

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Target Market

• Market Size 120 million
• Age 20 -54
• Median Household Income 41,994
• Mean Earning 56,604
• Internet Users
• Early Adopter

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Strategic Alliance

• Digital Entertainment Network
• Creates original entertainment programming for
  Generation Y
• iVillage.com
• Website for woman
• CarPoint
• Dealer website

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iVillage.com
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iVillage.com
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Carpoint.com
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Carpoint.com
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Carpoint.com
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Competitive Advantages of Ford Business Strategy
by Ford.com

• Four Criteria of Competitive Advantages
• Valuable
• Rare
• Costly to Imitate
• Non Substitutable
• Strategic Intent of Ford Motor Company
• to become the worlds leading consumer company
  for automotive products and services
• One of Strategic Actions
• Deliver automotive products and service to end
  users with cooperation of dealers via Ford.com

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Intensive Growth Strategies Matrix
Product
Present
New
Market Penetration
Product Development
Present
Market
Market Development
Diversification
New
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Market Development Strategy

• Increasing sales of current products in new
  markets.
• Generation Y
• Via Strategic Alliance Digital Entertainment
  (DEN) and MSN to compete in youth market
• Women
• Strategic Partner iVillage.com

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Product Development Strategy

• Increasing sales by improving present products or
  development new products for current markets.
• Custom-ordered Autos
• TH!NK Neighbor with hill-climbing abilities and
  can be used in patrolling large campuses or
  industrial complexes.
• TH!NK City an electric car with rechargeable
  battery. It has two seats, designed to be used in
  and around cities.

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Diversification Growth Strategy

• New products are developed to be sold in new
  market
• Horizontal diversification strategy by Ford Motor
  Company, not Ford.com
• E.g. Car Financing, Care insurance
• Integrated diversification
• Special Buying Program
• Conglomerate diversification
• E.g. T-shirt, Ford Money Market Account,

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Ways of Achieving Competitive Advantages

• Building more products to order than its
  competition
• By developing products suited to the tastes of
  specific target markets
• By reducing time it takes to build deliver a
  custom-ordered car to customer

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• Achieve
• Sustainable
• Competitive
• Advantages?

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• Achieve
• Sustainable
• Competitive
• Advantages?

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Report Third-Party Auto Sites Vs Car
Manufacturers Sites

• A report from Jupiter Media Metrix in September
  2001 showed that
• Car shoppers would use the Internet for research,
  spending an average of more than 10 minutes on
  automotive sites every month.
• The traffic to third party auto sites were 20
  million while that of car manufacturers sites
  were only 8.2 million in the previous year.
• Consumers tended to visit third-party auto sites
  which were thought to be more impartial and
  innovative, offering tools, chat rooms and
  various links to services.

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Report Third-Party Auto Sites Vs Car
Manufacturers Sites

• Third party auto sites like Kbb.com,
  Carpoint.com, Autotrader.com, Autovantage.com and
  Edmunds.com claimed the top 5 spots in the
  automotive category in terms of unique visitors,
  while sites of car manufacturers such as
  Ford.com, Toyota.com and BMW.com ranked 11, 19
  and 31, respectively.

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Implications for Ford on Internet
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Industry Comparison (I)

• Business concept is borrowed from Dell Computer
• Mass Customization and Direct Sales to achieve
  product differentiation and cost leadership
• Attributes of PC Industry
• Short Lead Time
• Short development period and product life cycle
• PC comprised by highly standardized modules
• Efficiency in sales and supply chain

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Industry Comparison (II)

• Product Automobile
• Long Lead Time
• Long development period and product life cycle
• Comprised by highly-integral product
• Franchised dealer with extensive legal right to
  exclusivity play a major role in car distribution.

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Industry Differences

• Ford is much complexity for receiving specific
  order by Internet than Dell
• Long development period
• Difficult to make the dream car for consumers
• Indirect sales channel

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Impacts and Results

• Less than 1 percent of customers who buy new
  automobile through Internet. (From Salon Readers
  Guide Nov. 8, 1999)
• Customers are not able to get the right price on
  internet
• Ford.com quotes average-level price only
• Dealers are afraid of change
• Legacy systems are used by dealers
• Negotiation price margin is narrowed
• Reduce incentive for sales representatives
• Earn less commission than before

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Mission Statement of Ford
We are a global family with a proud heritage,
passionately committed to providing personal
mobility for people around the world. We
anticipate consumer needs and deliver outstanding
products and services that improve peoples lives
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Our Advised Mission Statement
Ford Company Limited aims to be the premier
consumer company for automotive products and
services. Ford is dedicated to building
long-term relationships with customers, business
partners and stakeholders through quality
products, services, supports and training, and to
being known as the industry leader in the
worldwide market. The goal is steady expansion,
achieving a superior return on equity for
stockholders
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• The End !!!!!
• Q A Session