OB II PROJECT REPORT

Group 2 Section - E
Kinjal Shah PGP/21/274
P. JayaBharath PGP/21/284
Prachi Purswani PGP/21/286
Shagun Parmar PGP/21/293

Sourabh Biswas PGP/21/297

 Table of contents

1. Objective
2. Background of ford motor company
3. Issues related to the organization
4. Reason for choosing a specific issue
5. Analysis
a. Organisational Decline model
b. Griener model
6. Application of OB theories
a. Change in Global Expansion Strategy
b. Organizational Design
7. Potential solution to issue
8. Conclusion
9. References
OBJECTIVE
This report has been written on a research to provide a clear understanding the macro aspects of Ford
Motors and its relationship with surrounding stakeholders e.g. shareholders, employees, suppliers,
customers etc. We are analyzing Fords organizational structure and how it helped Ford in achieving a
key position as world 5th largest automaker in the world and one of the few companies to survive
the Great Depression in 1930s.
We are also looking at major events that took place both internally and in the external marketplace
which affected Fords position on a macro level. Using Organizational theories and models, we are
inspecting the internal structure of Ford and various issues that existed within the organization earlier
and how they overcome those issues. We are describing the organizational design, contingency factors
and also the strategy that Ford accepted to implement.
The report examines and focuses the management levels, span of control, duties and responsibilities
of top management, and the hierarchical structure of Ford Motor Company. This report also highlights
Fords design, competence, and technology aspects. One of the key drivers of Fords success is the
role of leadership and innovation. We are examining how the Ford sustained in the competition and
emerged as a key player in terms of innovation. We will also look at the Organizational life cycle of
Ford and various stages involved. Since Environmental factors directly affect an organization, we will
highlight various environmental forces and its dimensions that affected Fords operations. Fords
organizational responses in cases of Environmental uncertainties.

Background of Ford Motor Company

Ford Motor Company is an American automaker based in Dearborn, Michigan, a suburb of Detroit, the
automaker was founded by Henry Ford, on June 16, 1903. Ford is the largest family-controlled company
in the world. It has been in continuous family control for over 110 years.
Five years later, in 1908, the highly successful Model T was introduced. Demand for this car was so
great that Ford developed new mass production methods in order to manufacture it in sufficient
quantities. Ford introduced methods for large-scale manufacturing of cars and large-scale management
of an industrial workforce using elaborately engineered manufacturing sequences typified by moving
assembly lines. In 1911 he established the industrys first U.S. branch assembly plant and in 1913 he
introduced the worlds first moving assembly line for cars.
In addition to the Ford and Lincoln brands, 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 is the second largest automaker in the U.S. and the fifth-largest in the world based on annual
vehicle sales. Ford was the fifth largest automaker in Europe. Ford is the eighth-ranked overall
American-based company in the 2010 Fortune 500 list, based on global revenues in 2009 of $118.3
billion. During the automotive crisis, Ford's worldwide unit volume dropped to 4.817 million in 2009.
Despite the adverse conditions, Ford ended 2009 with a net profit of $2.7 billion.

Fords Vision
To become the world's leading Consumer Company for automotive products and services

Fords Mission
We are a global family with a proud heritage passionately committed to providing personal mobility
for people around the world. We anticipate consumer need and deliver outstanding products and
services that improve people's lives
Issue: Initial days
Henry Ford and Alexander Y. Malcomson, a partner and coal businessman started the partnership
"Ford and Malcomson" but later they fall short of finances. So in 1903, Malcomson wanted John S.
Gray, the president of the German-American Savings Bank to join the business. Gray was not
interested at first, but then they promised that he can withdraw his share at any time, so Gray
reluctantly agreed after that. Company became profitable in late 1903.
Both Malcomson and Gray had their own businesses; only Ford worked full-time at the company. The
issue came to a head when the principal stockholders, Ford and Malcomson, had disagreement over
the future direction and roadmap of the company. By early 1906 Malcomson was effectively frozen
out of the Ford Motor Company. Unexpectedly John S. Gray died in 1906, and Ford took the position
of president of the company soon afterward.

Social Challenges Early Development

Ford introduced the world's first moving assembly line that year in 1913 which reduced assembly time
from 12 hours in to 2 hours 40 minutes. These innovations were hard on employees, and turnover of
workers was very high.

Economic Challenges The Great Depression

During the great depression, Ford in common with other manufacturers, responded to the collapse in
motor sales by reducing the scale of their operations and laying off workers.

Ford in 21st Century

Till 2006 company had a lot of unprofitable factories and company was losing its position in the
market. There were other factors too involved including unprofitability on cars, more reliability on
SUV car sales which were declining over the period of time. By 2006, Ford lost 25% of its market
share since 1990 and its debt was at junk status. Labor cost were very high (~ $76/hr.). For top
management and shareholders started focusing on these issues when company lost $12.7 billion in
2007 and it was on the verge of bankruptcy.

Internal Issues
Before the tenure of Alan Mulally in 2006, Ford was facing lot of internal issues. There were silos and
turf battles within the automaker. Employees were not committed to the teamwork. The coordination
between departments and different units was missing.

External issues
Externally, there wasnt enough support and collaboration from suppliers and unions due to lack of
partnership. Due to decline in profitability and sales, investors were no longer showing their interest
in putting the money.

Why did you choose the specific issue?

One of the major reasons that encouraged us to take this issue was to learn about how a company
revives itself after facing a huge crisis followed by a failed restructuring attempt. The company under
its dynamic top leadership team devised the famous The One Ford strategy which turned the tables
around. Not only did Ford avoid taking US Government Bailout Funds but also made profits of $6.6
Billion in 2009 which was the biggest profits that the company had made in the last decade. Also, the
role that a leader can play in driving the organization through a tumultuous period has also been well
exhibited in this case

Revival

Leadership

Restructuring
strategy

ANALYSIS
Organisational Decline model
Even as Ford reeled under a series of adversities in 2006, around the time Alan Mullaly was brought in
to take over the reins of the company, there were certain ones among them that threatened a complete
shutdown of the company. Ford had lost a whopping 25% of its market share in the automobile sector.
Each one of the brands that Ford possessed, including Aston Martin, Jaguar, Land Rover and Volvo,
werent doing well, required massive amounts of capital just to remain competitive in the market. A
loss of control over labour costs saw it skyrocketing to $76/hour under its labour force. This situation
can perhaps be best elucidated by the Weitzel and Jonssonss model of organisational decline.
We know that turf wars and infighting within the massive organisations divisions and subsidiaries as
well as a lack of free flow of information within them started to lead to a decline. However, middle
managers remained blind to the needs of the company even as they continued to run their subsidiaries
like a fiefdom, where self-preservation rather than collaboration was the mantra. The company as a
whole was blind to the needs of the customers due to a general inaction among the employees and
managers due to a lack of innovation and imagination as far as their automobiles were concerned.
It was under such a circumstance, in Stage 3 of the model, when corrective actions were taken by Alan
Mullaly in order to bring Ford back on track. Through value based leadership and a restructuring of the
company, he was able to do just that.

Griener model

A natural repercussion, of delegating responsibilities and shifting of value addition activities to middle
managers of subsidiaries and divisions, is formation of silos. These are detrimental to a company in a
number of ways. Firstly, managers and heads tend to focus more on individual or division success rather
than that of the company as a whole. Secondly, this leads to hardening of stance which limits
information flow. Therefore even if an organisation has a core competency ( in case of Ford, automobile
manufacturing) it would never really be able to drive product innovation since information regarding
a particular component or process in one subsidiary will never reach another. Thirdly, top management
starts to feel that they are losing control over the vast array of operations and therefore there is vertical
acrimony as well. At this point of time, we have a full-blown crisis of control.
However, Alan Mullalys One Ford, One Team strategy brought about a significant level of
coordination, hitherto unseen in the company. It encouraged disparate regional divisions to work
together in order to create economies of scale and become an innovation hub. Capital expenditures
were carefully monitored with a renewed focus on profitability and return on investment. All in all,
the revolutionary stage of crisis of control gave way to the evolutionary phase of growth through
coordination, according to the Greiner model.

Change in Global Expansion Strategy

Global expansion strategy can be defined as a set of decisions or actions that aim to expand into overseas
markets and hence develop core competencies.
When Alan Mullay was apppointed as CEO, he realized rthat the company was making huge losses and
one of the major reason for this was its organization structure. With a highly decentralized set up and
duplication of efforts, Mullaly effectively reorganized Ford using TransNational Strategy

Each overseas subsidiary treated as an independent kingdom; semiautonomous

nature
Highly Decentralized with low integration and coordination
Ford of Europe and Ford of North america each developed different versions of the
same product leading to confusion
Bleeding money due to Duplicated effort
Multi Domestic Mutual Infighting between the units and self serving attitudes
Strategy

Consolidation of Production giving rise to economies of scale

Both centralized and decentralized with an objective to minimize costs and
maintaing local responsiveness
Reduce 27 different product platforms around the world into just 9 platforms
Focussed on corporate culture to be united and encourage strong accountabilty
and collaboration
Trans National Relatively flat structure; open communication and innovation
Strategy
ORGANIZATIONAL DESIGN

Size

Environment
Goals &
Strategy

Ford
Culture Structure

Technology

Goals
Goal of Ford is GLOBAL MOBILITY
To deliver our Ford Smart Mobility Plan, with a focus on emerging opportunities in mobilities

Culture
Initially from the starting Ford Motors seemed to have a mechanistic structure with features like
corporate hierarchy and regional geographic divisions. However, when Alan came to power, there was
a change in strategy and structure. During his tenure, we can say that the company had organic nature.
Also, according to the competing values framework it had a CLAN culture where the focus was on long
term development and the value drivers were commitment, communication and development. The
bottom line was simple and straightforward Do things Together

Technology
Ford Motors being an automotive company has a long-linked technology with sequential
interdependence
Alan not only focused on global unification but also prioritized innovation and an efficient
production line. He also emphasized on understanding the demands of the customer and providing
what they wanted. In essence we can see it has a type of Leveraging wherein they worked on the
development of existing products and markets. By putting technology on the top, Ford Motors was able
to regain its position as a market leader.
ORGANIZATIONAL STRUCTURE
Organizational Structure refers to the way an organization arranges people and jobs in order to meet its
objectives.
Ford Motors had a matrix structure and was in coordination with the transnational strategy brought
by Mullaly in 2006
Some of the features of the Matrix Structure were

Removed Duplication of effort by having highly specialized staff and equipment

Led to effective sharing of resources
In order to maintain its effectiveness, Alan stressed on the important of communication,
communication and communication

Pros of the transnational strategy adopted by Ford

1. Allowed the company to produce one car for all world markets
2. Knowledge sharing helped in reducing the product development costs
 3. Manufacturing of parts in more than one country helped in avoiding the risk of strikes to
operations
4. Adopting a global purchase system in terms of parts gave more bargaining power to the
company
5. Allowed the company to be closer to large markets as well as potential customers
6. Facilitated cooperation among the various departments resulting in synergies for the company

POTENTIAL SOLUTION (Our approach)

1. Increasing the involvement and engagement of employees and encouraging them to express
their ideas
2. Broadening employees interests and growth opportunities
3. Making the organizational structure changes non-threatening
4. Addressing legitimate concerns of the employees
5. Negotiating with those resisting change by offering incentives to them
6. Bridging communication gaps between the managers and the employees

CONCLUSION
Ford has gone through multiple changes over time handling issues in almost all the fields starting from
changes in leadership, workforce, internal issues [lacking teamwork, coordination between
departments] and external issues. In this report the major emphasis has been on analysing how The
one Ford strategy helped Ford to turn from the verge of bankruptcy to generating a $6.6 bn revenue
and to sustain in market while sticking to its core values, vision and mission. Organizational changes
that ford went through have been clearly analysed with the help of theories learned from the course.
REFERENCES
https://www.economist.com/blogs/schumpeter/2012/11/fords-management-changes

http://www.mainlandford.com/blog/the-way-forward/

https://www.forbes.com/sites/sarahcaldicott/2014/06/25/why-fords-alan-mulally-is-an-innovation-ceo-for-
the-record-books/#5cf3949b7c04

https://www.scribd.com/mobile/document/88992362/Organisational-Structure-of-Ford-Motor-Company

https://qz.com/431078/how-ford-ceo-alan-mullaly-turned-a-broken-company-into-the-industrys-comeback-
kid/

http://panmore.com/ford-motor-company-organizational-structure-analysis

https://www.google.co.in/url?sa=t&source=web&rct=j&url=http://panmore.com/ford-motor-company-
organizational-structure-
analysis&ved=0ahUKEwi6lfSIofPXAhUFLY8KHc1EB2cQFggkMAA&usg=AOvVaw0Lb2xW5PoJVEuttIzZTYJL