Vertical Integration Study: Ford Motor Company

1
Vertical Integration StudyFord Motor Company

• Marketing II
• Mr. Yates

2
Brief history of Ford Motor Company

• The Ford Motor Company is an American multinationa
  l corporation based in Dearborn, Michigan, a
  suburb of Detroit.
• The automaker was founded by Henry Ford and
  incorporated on June 16, 1903. In addition to
  the Ford, Lincoln, and Mercury brands.

3
Fords brands/relationships continued

• Ford also owns a small stake in Mazda in Japan
  and Aston Martin in the UK.
• Ford's former UK subsidiaries Jaguar and Land
  Rover were sold to Tata Motors of India in March
  2008.
• In 2010 Ford sold Volvo to Geely Automobile.
• Ford will discontinue the Mercury brand at the
  end of 2010.

4
Backward or Forward Integration?

• Fairly balanced actually
• Ford owns many of its means of production, and
  distribution / retail networks

5
Backward Integration of Ford

• Ford tired of being held up by suppliers as he
  scaled up production of cars with his assembly
  line and began to vertically integrate over the
  course of the 20s.
• He moved his plant nearer to resources in
  preparation of this move (from Highland Park to
  Rouge River MI)

6
Backward Integration Specifics

• His own railroad
• Control of 16 coal mines (carbon from coal iron
  makes steel)
• 700,000 acres of timberland
• Built a sawmill
• Acquired a fleet of Great Lakes freighters to
  bring ore from his Lake Superior mines
• And a glassworks

7
A Day in 1927(integration example)

• At 8 o'clock, just enough ore for the day would
  arrive on a Ford freighter from Ford-owned mines
  and would be transferred to the blast furnaces
  and transformed into steel with heat supplied by
  coal from Ford mines in Kentucky.
• It would continue on through the foundry molds
  and stamping mills and exactly 28 hours after
  arrival as ore would emerge as a finished
  automobile.

8
Integrated Systems

• Similar systems handled lumber for floorboards,
  rubber for tires, and so on.
• At the height of its success Fords holdings
  stretched from the iron mines of northern
  Michigan to the jungles of Brazil, and it
  operated in 33 countries around the globe.
• Most remarkably, not one cent had been borrowed
  to pay for any of it. It was all built out of
  profits from the Model T.

9
Other integration efforts

• Ford experimented with a commercial rubber
  plantation in the Amazon jungle
• Ford also built aircraft and aircraft engines
  (during the world wars) which might have been
  used to ship materials

10
Interesting ventures

• Ford long had an interest in plastics developed
  from agricultural products, especially soybeans.
  He cultivated a relationship with George
  Washington Carver for this purpose.
• Soybean-based plastics were already being used in
  Ford automobiles throughout the 1930s in plastic
  parts such as car horns, foam, in paint, etc.
• This project culminated in 1942, when Ford
  patented an automobile made almost entirely of
  plastic, attached to a tubular welded frame.
• It weighed 30 less than a steel car and was said
  to be able to withstand blows ten times greater
  than could steel.
• Furthermore, it ran on grain alcohol (ethanol)
  instead of gasoline.

11
Joint Ventures

• In 1912, Ford cooperated with Fiat to launch the
  first Italian automotive assembly plants
• (After building successful plants in England and
  Canada).

12
(No Transcript)