Archive for the ‘Business Strategy’ Tag

The virtue of strategic consistency

“Adapt or die” may be one of the most over-hyped business phrases of the last decade. The reality is that most firms don’t face disruptive threats. And seasoned leaders understand the serious business risks of poorly designed transformations.

Fortunately, there is another way to ensure competitiveness and growth. Companies that stay true to a winning corporate strategy over the long run can be very successful. How do you do this, especially when unforeseen internal and external events test your convictions?

In an ideal world, leaders craft and follow a clear, compelling and multi-year strategic plan. Realistically, this approach often doesn’t survive more than a few quarters. Headwinds such as slowing customer demand, rising costs, or competitive moves often spur managers on to increase spending, or to make deep cuts. In essence, leaders overreact to short-term noise instead of focusing on the long-term market.

Furthermore, organizational dynamics can lead to management prematurely hitting the panic button. These include:

  1. Some leadership practices have a built-in bias towards quick reactions at the expense of deliberation and patience;
  1. The need to hit short-term metrics to meet goals creates incentives to do things at any cost;
  1. Without the anchor of an existing strategy or priorities, it’s easy for companies to zigzag with no clear direction.

All of this can lead to operational distraction, wasted investment, high employee turnover and a compromised brand image.

Staying the course

Consistency pays off over time. And companies that stick with a good plan will become more efficient and develop better relationships with customers and partners. Importantly, there is no trade-off between speed and deliberation in a strategically consistent business. Staying the course also enables quicker decision-making and follow-through.

Canadian telecom provider Telus Corp. has successfully used strategic consistency. Telus’s focus on service, brand and culture helped it outperform its rivals during the last 15 years, according to a strategy+business article published on Aug. 31. During this time, the Vancouver-based company’s revenue more than doubled to $12 billion and it returned 351 percent to shareholders, making it a global leader in the sector, the article stated.

Staying the course is particularly important in business services, where clients measure performance over years, or decades. For example, the investment-servicing company CIBC Mellon built profitable market share by remaining true to its goals of focusing on clients and reliability.

“Consistency over the long term has been critical to earning the trust of our clients,” said Claire Johnson, senior vice president, strategic initiatives. “Choosing the right strategy and supporting it through ever improving products and services is the key to long-term market success and customer satisfaction.”

Becoming strategically consistent

Any organization can maintain strategic coherency. Here’s how Telus and others have made it work:

1. Define values

Leaders need to define the winning strategic values (i.e. how the company competes and with what capabilities) that work for their firm and use these to guide important decisions and actions over the long term.

2. Take a long-term view

Compensation programs and reporting tools should prioritize long-term shareholder value creation and reflect the performance of key strategic values.

3. Encourage clear leadership

Every employee, supplier and shareholder takes his or her cue from what leaders say, and more importantly, do.  When short-term emergencies arise, managers need to have the patience, support and fortitude to focus on what is truly vital.

4. Understand the relationship between time and change

New events, competitive moves, or technologies often encourage a short-term overreaction at the expense of more deliberate thinking and prudence. Remember what Bill Gates said: “We always overestimate the change that will occur in the next two years and underestimate the change that will occur in the next ten.”

Mitchell Osak is managing director, strategic advisory services at Grant Thornton LLP

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Is it time for professional boards?

Existing approaches to corporate governance are being questioned as a result of recent developments.  The 2008 financial meltdown plus some famous corporate implosions over the past decade – WorldCom, Tyco and Enron to name three – has focused government and academic attention on how shareholders and the public are being safeguarded.  Secondly, senior management is being challenged by growing business complexity arising from increasing globalization, the impact of new technologies and growing consumer activism.     

The Sarbanes-Oxley Act was supposed to improve governance by bringing greater financial transparency and management & director accountability to public corporations.  Despite its promise, SOX by itself was insufficient to prevent the financial crisis and loss of public confidence.  In reality, all of the troubled Banks were more than compliant with SOX’s stringent regulations.  Clearly, regulatory compliance is not a substitute for prudent financial, strategic and risk management.

One way to improve corporate governance is by professionalizing the Board of Directors, says Robert Pozen in a recent article published in the Harvard Business Review. Pozen,  a senior financial services insider and Harvard Business School lecturer, believes that governance failures arise from a lack of director expertise as well as the behavioural dynamics that influence their actions.

Pozen asserts that many Boards suffer from three basic weaknesses:

  1. Lack of expertise – Many Boards are populated with independent and “generalist” directors who do not possess the necessary skills and industry experience to effectively execute their role.  This skills gap can be especially problematic for Boards in complex, risk-laden sectors like energy, financial services and pharmaceuticals.
  2. Lack of time – Many Board members do not devote enough time to deal with the complex demands of their organizations. According to Pozen, a typical Board member in Financial Services might put in only 200 hours of part-time effort per year spread across Board meetings, telephone calls and prep time.  Moreover, generalist directors, especially those engaged in other pursuits, are often challenged to maintain the required knowledge of the business and industry.
  3. Lack of manageability – With an average size of 10-20 members, many Boards are too big and unwieldy to be effective decision making and oversight bodies. Within groups of this size, individuals often engage in what psychologists call “social loafing”: Members resist taking personal responsibility for the group’s actions and rely on others to take the lead. Furthermore, large groups are challenged with consensus building and open communication, both vital requirements for effective Board governance. In general, the more members there are, the harder it is to reach agreement.  As a result, fewer decisive actions are taken.

To address these challenges, Pozen recommends that Boards become “professionalized” through the following changes:

Reduce the size of the Board

Effective deliberation and decision making can be achieved by making Boards smaller or by creating a more focused sub-group within a larger Board, tasked with specific oversight or strategic responsibility. 

Research on group dynamics suggests that a team of six or seven individuals is the ideal size for effective decision making.  Smaller groups enable all members to take personal responsibility for the group’s actions.  Additionally, small groups can often reach a consensus in a reasonably short time.

Require higher levels of expertise

Boards could be required periodically to undergo an external talent assessment to identify key skills gaps and develop plans to fill them.  Firms have a number of options to augment Board expertise including recruiting more senior industry experts (versus Generalists) as independent directors or periodically educating existing directors on key facets of the Company or industry.  Part of this effort could involve a new director “boot camp” so that additions are quickly brought up to speed on key business and industry issues.

Demand greater time commitment

Directors should be required to invest more time than they currently do understanding the business, meeting key stakeholders and executing their responsibilities. For example, companies could stipulate that independent directors, who are now allowed to serve on the boards of four or five public companies, should be restricted to just two.

The above recommendations could go a long way in creating a dedicated and expert class of professional directors who would strengthen the current governance model and help rebuild the public’s confidence.

For more information on our services and work, please visit the Quanta Consulting Inc. web site.

Stress test your strategy

Thousands of managers have just completed or are in the process of delivering their yearly strategic plan.  Unfortunately, many of these plans will fail to meet management expectations resulting in missed opportunities, wasted capital and reduced competitiveness not to mention senior executive career risk.  The business plans will miss the mark for many good reasons such as unforeseen competitive actions or supply chain disruptions.  Yet many plans will also fail as a result of fundamental strategic errors due to flawed assumptions, management bias and poor analytics.   

To reduce their downside and maximize the upside, prudent CEOs and Boards would be well advised to “stress test” their plans by asking a variety of probing questions, three of which include:

Do we really know and target the right customers?

One important strategic consideration is the decision of who is the primary customer.  Many companies fail to identify and focus on the largest and most profitable customer segments for their value proposition and business model.  In reality, many firms resist choosing just one customer type either because their value could appeal to many segments (i.e. “Who doesn’t want lower prices?”) or because they just can not properly identify and segment their high potential customers.  Poor choices around customer selection typically results in strategic confusion and missed opportunities.  

As well, numerous companies assume their customer’s needs are relatively static on a yearly basis.  In reality, customer needs, perceptions and habits shift over time, due to changes in demography, fashion, social-economic profile and general economic conditiions. Recognizing and addressing these changes can make the difference between plan success and failure. 

Do key business drivers get enough attention?

Countless managers embrace metrics and scorecards, following the old adage that “you can’t manage what you can’t measure”. All too often, strategists utilize so many metrics (e.g., customer satisfaction, loyalty, trial, Net Promoter Score etc)  that they can not manage the forest through the trees.  The result is often conflicting priorities and strategic confusion.  Having too many metrics also compromises one of management’s scarcest resources, attention, and will stifle innovation by reinforcing incremental thinking.

In other cases, organizations will focus on metrics that are not linked directly to what drives the business. Poor metrics will also illuminate symptoms of a problem while masking the root causes.  As a result, managers will often adopt the wrong strategies and tactics.

Is scare capital and focus optimally allocated?

Devising the right business strategy does not guarantee plan success.  Organizations need to make sure that their scare capital, attention and capabilities are deployed in the most effective and efficient manner.  Too often, sufficient investment is not directed at the strategies that address the highest potential opportunities. Instead, managers are often unable to prioritize strategies or feel internal pressure to spread the investment around. To ensure congruence between goals and means, senior managers must ensure that key priorities cascade down and across the organization and that major initiatives and strategies have formalized capital commitments. 

No panacea that can minimize all the risks associated with a strategic plan.  However, firms can improve their odds of success by asking some important questions about the accuracy of the data, the practicality of the plans and the validity of the assumptions. 

For more information on our services or work, please visit the Quanta Consulting Inc. web site.

Back to the Future – The Revival of Vertical Integration

Is vertical integration as a business strategy back in vogue?  Perhaps if you see some recent corporate moves as the beginning of a trend. A number of bellwether firms have reversed outsourcing mandates and begun to  take key operations in house.  Two recent examples are Oracle’s purchase of hardware vendor Sun Microsystems  and PepSico’s acquisition of two of its bottling operations. PepSico and Oracle join other industry leaders such as ExxonMobil, Apple, Reliance Industries, American Apparel and Google who leverage vertical integration to drive competitive advantage. 

Obviously, a small number of corporate decisions do not portend a global trend.  And, there are still many firms that will continue to focus on core competencies and outsource non-core activities.  Yet, there are sound reasons to reconsider vertical integration as a core business strategy, especially when the firm has strong cash flows and ready access to capital.  Some of these reasons include:

Drive cost reduction

A difficult climate is forcing companies to challenge conventional wisdom around outsourcing and creatively think about how to cut costs and reduce complexity.  In many cases, outsourcing has not delivered target cost objectives and has too often led to significantly higher  indirect costs in areas like relationship management and travel.  Properly executed, vertical integration enables firms to deliver significant cost reduction by achieving higher scale economies and recapturing economic rent (i.e. the outsourcer’s profit).  Where some operations are outsourced as well as provided internally, vertical integration helps ensure suppliers deliver services at the lowest possible cost and highest quality. 

Improve supply chain responsiveness

Working with outsourcing partners has many benefits but high speed, flexibility and control do not rank near the top.  Redesigning outsourced operations, particularly fragmented and global ones, is nigh impossible in the short to medium term, especially under conditions of rapidly changing client tastes and fluctuating demand. Furthermore, once long term, fixed cost outsourcing deals are signed, the outsourcer often has little inclination or incentive to pass along efficiency improvements or innovation to their client.  

Enhance the customer experience

Improving your customer experience is one of the few areas that firms can generate sustainable differentiation.  To build a winning experience, companies need a high degree of control over their delivery model including a common vision, stable operating processes plus feedback mechanisms. Unfortunately, this is very tough to achieve when disparate firms are involved in the value chain.  As well, troubleshooting is often a challenge due to outsourcer process complexity and hidden employee turnover.

Reduce business risk

In dynamic markets, there usually is no problem in securing access to raw materials and specialized labour.  However, when economic or political turmoil occurs or markets become less competitive, companies run the risk of losing access to key inputs or operations.  Vertical integration can reduce business risk by ensuring these critical ingredients are available to the organization as needed.

It remains to be seen whether the actions of a few firms reverses 30 years of corporate orthodoxy around outsourcing’s superiority.  However, a number of trends may be creating a ripe environment for vertical integration including ever-shortening product lead times, continued economic turmoil and insecurity around access to specialized materials or skills. Should current economic conditions continue, we will likely witness  more firms seeking to control their value chain through vertical integration.

For more information on our services and work, please visit us at Quanta Consulting Inc.

Leveraging Your Core Competencies: Know Thyself…

…was inscribed at the temple of Apollo at Delphi.   The ancient Greeks could teach the modern corporation a thing or two about running an enterprise.  In the context of business strategy, knowing thyself is the process of understanding your firm’s core competencies so you can compete more effectively and reduce risk.  A Core Competency is a deep and unique proficiency that enables a company to perform better than competition and deliver unique customer value. Strong competencies are always embodied in an organization’s culture, collective skills and shared experiences;  they ultimately will deliver market leadership and industry-leading profitability. 

Global leaders like Cisco, P&G, Goldman Sachs, Toyota, Google and Walmart regularly examine and leverage well-honed core competencies that sustain their competitive advantage.  Examples of their strengths include:  uniquely managing a complex supply chain (Walmart, Toyota); regularly bringing winning innovations to market (P&G, Goldman Sachs) or; seamlessly integrating acquisitions & technologies into the core business (Cisco, Google).  These firms not only understand their strengths and weaknesses; they also relentlessly augment and leverage their competencies through investment, employee recruiting and knowledge sharing.

There is considerable strategic and organizational value to understanding your firm’s Core Competencies, including:

  • Developing competitive and differentiated market positions and strategies that capitalize on corporate strengths;
  • Unifying the company’s lines of business and functional groups through a common market position;
  • Improving the transfer of knowledge and skills across the company;
  • Deciding and aligning around priorities and resource allocation;
  • Supporting decision making around outsourcing, divestment and strategic partnering;
  • Creating new markets while quickly enter emerging markets;
  • Enhancing the brand image and building customer loyalty.

I have worked with a number of firms who were challenged to define in concrete terms their strengths and weaknesses.  To assist them, we utilized an analytical framework that gathered and synthesized the collective learning within the organization as well as external best practices.  Our methodology includes the following steps:

  • Identify the firm’s key abilities and redefine them in terms of easily-understood, organization-wide strengths;
  • Benchmark the firm with other companies with the same skills to ensure that it is developing unique capabilities while acknowledging strategic gaps;
  • Uncover what capabilities its customers truly value, and invest accordingly to develop and sustain valued strengths;
  • Create a strategic road map that sets goals for competence building;
  • Encourage communication and involvement in core capability development across the organization;
  • Preserve core strengths even as management expands and redefines the business;
  • Outsource or divest noncore capabilities to free up scare resources that can be used to deepen core capabilities.

Understanding your company’s strengths and weaknesses is often easier said than done.  Many firms lack sufficient data to analyze their business.  There is often a reluctance or inability to share information between functional groups and divisions. And, some companies display institutional biases towards certain activities or plans.  In other cases, many organizations are unable to strategically focus or to adopt the steps necessary to transform their business. 

Recognizing what you do better than your competition may be the most important factor in consistently generating growth, maximizing financial returns and minimizing business risk.

For more information on our services and work, please visit www.quantaconsulting.com

Optimizing Corporate Social Responsibility Efforts

Today, few large companies have the luxury of going about their business without regard to how the local, national or international communities feel about them.  As a result of globalization, the rise of non-governmental organizations (NGOs) and the growing awareness around environmental and political issues,  the public eye is now focused on how corporations, regardless of domicile, impact society and supports its values.  In response to this activism, a growing number of independent stakeholders, from NGOs to investment research firms, now formally measure firms in terms of how they impact their communities – aka Corporate Social Responsibility – on a list of social, governance, financial, environmental and political dimensions. Poor rankings, whether deserved or not, can often lead to bad publicity, falling share prices, employee discontent, poor recruiting or government intervention.   Clearly, how firms perform with regards to CSR has a bottom line impact.  

Not surprisingly, managing CSR has become a corporate priority for many companies, especially in “sensitive” sectors like Oil & Gas, Retail, Pharmaceuticals and Financial Services.  For example, many CSR budgets are in the millions of dollars as firms look to generate goodwill by supporting charities; audit their supply chains to ensure child labor law compliance or; reduce their carbon footprint through proactive “green” initiatives. In addition, many firms support significant CSR initiatives by encouraging employee involvement during work time. Finally, many employees and executives are naturally interested in CSR activities, seeing it as a tangible and important corporate manifestation of their own core values.

In many circles, however, corporate CSR efforts have gotten a bad wrap, tracing to:  a lack of integration with corporate strategy; a short term, public relations bias and; poor execution.  Moreover, there is a cynical perception that CSR programs are a nefarious form of corporate meddling or as a sop to interest groups, vocal employees and government. Fortunately, there are now best practices that can improve the effectiveness and efficiency of CSR efforts.

Like any major initiatives that cut across departments and stakeholder groups, astute firms have established clear CSR strategies to plan and manage their efforts.  Some of these steps include:

  1. Understand your CSR impact – Analyze and rank the dimension(s) of CSR that have the biggest negative (business & brand risk) and positive (brand-building, revenue) impact on your business.  Prioritize your CSR efforts against the most significant risk areas while leveraging CSR successes through marketing messages.
  2. Know where you stand – Benchmark your organization against key competitors and related firms across your relevant CSR dimensions.
  3. Develop a company-wide CSR strategy and message – Be clear, transparent and truthful about what you stand for, while ensuring all employees and functional groups are aligned. 
  4. Identify and communicate with key stakeholder groups – Maintaining honest and regular dialogue with the key research firms, NGOs, customers, suppliers and media contacts is critical to be seen as a proactive and supportive member of the community.
  5. Institutionalize CSR within the planning process – Consider CSR issues as part of the evaluation criteria for major initiatives and investments.
  6. Take a long view – Many CSR initiatives (e.g., increasing diversity in senior ranks) may take years to implement and should not be evaluated on the same time horizons or ROI criteria as other programs.

For more information on our services and work, please visit www.quantaconsulting.com

Business Strategy Influencers – General Erwin Rommel

Many military thinkers, including Sun Tzu and Napoleon, have provided strategic insights for business leaders.  One of my favorites was perhaps the most skilled German general of World War II.  Among his many successes, Erwin Rommel’s tank division was the first German unit in the 1940 attack on France to reach the English Channel. Moreover, Rommel’s 1941-42 leadership of the Afrika Corps has served as a classic example of maneuver and indirect warfare.  Throughout his service, Rommel developed a number of maxims on military strategy that have a direct bearing on how business leaders formulate and execute strategy.  Here are a few of his pearls of wisdom:

1.         See for yourself

Rommel regularly operated near the front so as to clearly understand the battlefield situation and to make immediate decisions when the tactical conditions changes. 

Management Learning:  Too often, executives do not spend enough time in the field talking with customers, channels and suppliers to get accurate, unbiased facts. In addition, being on the front lines often improves employee morale and generates goodwill with clients.

2.         Concentrate your force at the decisive point

Despite usually having numerically inferior forces, Rommel understood that if he concentrated his power at his adversary’s vulnerable point he could gain an overwhelming advantage. Splitting the Allied forces in this fashion enabled him to destroy them piecemeal at different times of his own choosing.

Management Learning:  Focusing resources at a competitor’s blind spot or weakly defended market (as opposed to their strongholds) can quickly lead to market penetration and the establishment of a defensible position. This strategy may also reduce your business risk as competition may not be prepared or able to counteract your moves.

3.         Surprise and speed are everything

In every campaign, Rommel endeavored to achieve tactical surprise, hoping to catch his foes disorganized and unprepared.  Once surprise was achieved, Rommel’s aim was to quickly exploit the advantage with highly mobile forces.  It was not an understatement that one of Rommel’s units was known as the Ghost division.

Management Learning:    Attaining first mover position enables new entrants to preempt an immediate and possibly lethal response while potentially building a sustainable advantage.  Furthermore, decisive executives understand that slow or poor execution is expensive, risky and fraught with opportunity cost of foregone revenue.

4.         Protect your supply lines

Rommel recognized that a high tempo, rapidly mobile army requires a flexible yet uninterrupted supply line.

Management Learning:  Rapidly growing and profitable markets requires supply chains that are reliable, scalable and efficient. In knowledge-intensive industries, prudent executives recognize the importance of maintaining their ‘human capital’ supply chains including effective recruiting and training.

5.         Outsiders often are more effective than insiders

Originally trained in the Alps as an infantry officer, Rommel went on to become a leading practitioner of tank warfare, both in the lush, rolling hills of Europe and the bleak deserts of North Africa.  As such, Rommel was not a prisoner of a static frame of reference, conventional wisdom or inherent bias.   His expertise lay in the mastery of many generalist skills including a genius for improvisation, a follow-me leadership style and a propensity for thorough research & planning.

Management Learning:   Rommel’s experience supports the view that effective leaders can come from outside of the home industry.  Possessing traits such as the ability to understand key customer & market drivers, being a creative problem solver and a passionate leader may be just as important as domain expertise.

AOL’s AWOL Strategy

I recently read an excellent NY Times narrative that looks back at the trials and tribulations of AOL since 1998.  (In the interests of full disclosure, I briefly worked at AOL back in 2005)  Trials and tribulations is putting it mildly.  AOL’s purchase of Time Warner in 2000 for $165B has been an unmitigated disaster for shareholders and employees not to mention many disgruntled customers. What was once touted as a new economy colossus has now become an instructive case study in what not do strategically.

I have outlined some of these lessons below:

1.         With acquisitions, you can’t just talk about delivering revenue synergies through cross-selling services and content sharing.   Although AOL understood the potential, they were never able to realize many synergies tracing to overly autonomous business units, poor technology and executive performance metrics that did not align with the greater good.  Management needed to prioritize these mandates, allocate sufficient resources and maintain a sustained commitment to reap all the potential. 

2.         Properly integrating different cultures is critical to achieving a higher performance entity.  AOL has always been distracted by internecine warfare between AOL and Time Warner executives.  Furthermore, there have been ongoing problems integrating the unique cultures, from the renegade, “change the World” types at AOL and CompuServe to the button-down, old economy world at Time Warner.

3.         Large legacy businesses make Companies vulnerable to disruptive products, changing consumer behaviors and new business models.  For example, by being too dependant on their lucrative dial-up franchise, AOL was unable to move quickly enough to build leadership share in the broadband market, not to mention penetrate the digital download, file-sharing and VOIP businesses.  

4.         Its tough to compete against well-focused and well-capitalized foes across all product categories in all segments.  Despite its size, it is not likely AOL could have effectively competed against Comcast, AT&T, Google, Apple, Skype, Microsoft and Yahoo not to mention countless others.  AOL may have been better off to spin out some of their businesses to improve competitiveness or to pull out of them totally (VOIP for example) to save capital. 

5.         Consistency and realistic forecasting is a prerequisite for success.  The article elegantly documents the twists and turns of a schizophrenic corporate strategy and the embattled executives that had to execute it. Moreover, it should be abundantly clear by now that over-hyping your business is a recipe for disaster.

For further information on our services and work, please visit www.quantaconsulting.com

Cultural Studies…P&G

P&G Brand Management was my first job after graduation  At the time, P&G was known for, among other things, it’s highly developed (some would say elitist) culture. During 4 years of service, I was inculcated with the P&G way of thinking and doing things. 

Fast forward, I often work with executives on defining the key ingredients needed to germinate and implement cultural change. Much of my analysis is based on what has worked in other firms and industries, customized for the client.  More often than not, the lessons I learned at P&G, most of which are now considered ‘best practices,’  is what I  would recommend and deploy  In essence, the corporate culture defines how an organization thinks and acts based on its people, values, history and practices.

The following is my top 10 list of key P&G practices and values that have helped build its strong and vibrant culture. 

  1. Establish a common creed – P&G embraces and lives certain axioms like the ‘Consumer is Queen’;
  2. Lead by example – The CEO and executive teams personify the culture and consistently reinforce it through their actions;
  3. Hire and train right – The right people, properly developed and led , will develop a unique esprit de corps geared to high performance;
  4. Establish clear roles & responsibilities – Transparent authority, direct reporting lines and delineated responsibilities leads to faster execution and reduced politicking;
  5. Communicate regularly up, down and across the organization – Breaking down silos ensures everyone is aligned and has access to the relevant data to make better decisions;
  6. Focus on innovation – P&G was and remains one of the most innovative global firms across all areas of activity including product development, marketing and structure;
  7. Maintain organizational flexibility  – Structure and process reflect corporate priorities, not the other way around;
  8. Make data-driven decisions – Decisions carry a lot of credibility and rapid buy-in since they are based on comprehensive financial, consumer and strategic rationales as well as multi-functional input;
  9. Leverage internal and external best practices – P&G quickly leverages what works in other businesses and geographies
  10. Promote from within – Well understood expectations, evaluation criteria and mentoring requirements ensures consistency and human capital development while reducing politicking.

P&G’s culture is not without its fault and strains.  However, most firms would be doing well to check off half of these points.

For more information on our service or work please visit www.quantaconsulting.com

Ford’s Strategic Choices

I recently took delivery of a new Ford SUV.  Apparently I am not alone.  Ford has registered solid market share gains in 2009 driven by new competitive products and pricing plus attracting the “Loyal Domestic” segment from GM (Government Motors) and Chrysler. Many of these customers share a newfound respect for Ford, given that did not take any government bail-out money or seek bankruptcy protection. 

So things are looking up for Ford, or are they?  In the short term, Ford is caught between an automotive rock and a capital hard place.    One threat is their newly streamlined Big 2 rivals, recently retooled from a $62B bailout and bankruptcy protection.  On the other side are the more financially secure (yet also challenged) Japanese, South Korean and German competitors who continue to deliver excellent products and are now are also expanding their distribution and marketing footprints. Worryingly, the German and French governments have identified Fords’ main competitors as “national champions” worthy of strategic support.  Finally, the entry of some new  players like Tata (India) and Cherry (China) with new, low cost models could pose significant market share and margin risks to Ford’s core North American market.  Overlying all of this is an estimated 10-15% in excess capacity globally and the continued recessionary impact on consumer spending.

There are a number of strategic options for Ford, some of which are-

  1. Reposition the company & brands away from the wreckage of the Big 2, as a revitalized green, design and technology-focused car company. Ford’s latest ads seem to be signaling this.
  2. Mimic the successful Renault-Nissan tie up by seeking strategic partnerships with complementary firms to secure greater scale, technology and market access. Potential partners include PSA Peugeot Citroen, Mitsubishi or Hyundai;
  3. Build some “home field advantage” in Europe to secure strategic government assistance. The UK could serve as a home base as Ford already is number 1 in market share and has been operating there for over 90 years;
  4. Do a better job of leveraging European technology and design into North and Latin American models.  Traditionally, Ford has been very poor at this.  

So far, Ford has won some key battles but will they win the war?

For more information on our services and work, please visit us at www.quantaconsulting.com