Ford Motor Company

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  • Ford Motor Company

    1. 1. Ford Motor Company Design and Governance of the End User Interface Spring 2000 BA 266: 2000-3
    2. 2. Ford Decisions & Generalizations <ul><li>Channel Design Options </li></ul><ul><li>Determining EUI Value-Added Trade-offs </li></ul><ul><li>Pooling the EUI Product Assortment </li></ul><ul><li>Controlling Competition among EUI </li></ul><ul><li>Governance Options </li></ul><ul><li>Applying Pressure </li></ul><ul><li>Dismembering Channels and Conflict </li></ul><ul><li>Inventory Risk and Governance </li></ul><ul><li>Old Chinese Proverb </li></ul>
    3. 3. EUI Design Options <ul><li>Return to smaller dealerships </li></ul><ul><li>Ignore service problem, continue shift to larger dealer/service centers </li></ul><ul><li>Separate, localized service locations </li></ul><ul><ul><li>Operated by dealers </li></ul></ul><ul><ul><li>Third parties (sub-franchisees, contractors) </li></ul></ul><ul><ul><li>Operated by Ford </li></ul></ul><ul><li>Warehouse channel to hold dealer inventory </li></ul>
    4. 4. EUI V-A Trade-off <ul><li>Increasing the distance of the EUI to the end user diminishes the V-A provided, ceteris paribus </li></ul><ul><ul><li>Closeness to the end user enhances access, but will reduce market size available to the EUI </li></ul></ul><ul><ul><li>Holding assortment constant, product turnover decline </li></ul></ul><ul><ul><li>Broader assortment V-A is more feasible as the EUI distance to EU increases </li></ul></ul><ul><li>Corollary : There is a trade-off in the provision of assortment and access services by an EUI </li></ul>
    5. 5. The Evolving Auto Channel? End-users Supplier S&S Dlr. S&S Dlr. S&S Dlr. End-users Supplier S&S Dlr. S&S Dlr. S&S = Sales and Service
    6. 6. Pooled EUI Product Mix <ul><li>The auto dealer provides a pooled mix of products (new & used cars) and repair services </li></ul><ul><li>For early dealers, there was a match in end user access requirements and mix components </li></ul><ul><li>With growth in supplier product line, TV advertising, there is a separation </li></ul><ul><li>Corollary : Maintenance of a product mix with different end user V-A needs damages the channel equilibrium for products and service </li></ul>
    7. 7. EU Service Needs <ul><li>What benefits do end-users seek in their selection of an auto-service center? </li></ul><ul><ul><li>Role of cost/price </li></ul></ul><ul><ul><li>Role of service quality (right the first time, fast) </li></ul></ul><ul><ul><li>Role of assortment, service capability (complexity) </li></ul></ul><ul><ul><li>Role of personal treatment by sales personnel </li></ul></ul><ul><ul><li>Role of distance </li></ul></ul><ul><li>How effectively can these services needs be satisfied within a centralized facility? </li></ul>
    8. 8. End-users Supplier S&S Dlr. S&S Dlr. S&S Dlr. Warehouse End-users Supplier Service S&S Dlr. Service Two Alternate EUI Designs
    9. 9. Competition Among EUI <ul><li>Increasing the distance between EUI and the end user reduces the number of dealers and reduces intra-channel price competition a la Saturn </li></ul><ul><li>Competition among EUI is an important factor driving channel price toward cost despite some EU dislike </li></ul><ul><li>Corollary: Higher EUI prices damage channel equilibrium, opening opportunities for new channels unless politically blocked and/or brand demand is powerful </li></ul>
    10. 10. <ul><li>Separate service operations from product sales and decentralize improve consumer access </li></ul><ul><li>Enhance dealer interest in service by increasing profitability </li></ul><ul><li>Increase pressure upon dealers by stronger enforcement of service quality standards </li></ul><ul><li>Buy out service operations from dealers and operate directly </li></ul><ul><li>Reduce pressure on dealers for volume; enhance product quality </li></ul>Some Governance Options
    11. 11. Governance Constraints <ul><li>What constraints limit supplier influence over dealer service quality </li></ul><ul><ul><li>Limited power because of state legislation making dismissal difficult </li></ul></ul><ul><ul><li>Propensity of many consumers to bargain creates a unique transaction environment </li></ul></ul><ul><ul><li>Service is not seen as a strong profit center </li></ul></ul><ul><ul><li>Ford’s culture of strong sales orientation </li></ul></ul>
    12. 12. Applying Pressure <ul><li>Application of pressure for conformance : </li></ul><ul><ul><li>generates conflict where dealers do not perceive requirements to be fair or just </li></ul></ul><ul><ul><li>Is difficult to enforce because legal and historical position of the dealer has reduced supplier power </li></ul></ul><ul><li>Carrots continue to do better than sticks </li></ul><ul><ul><li>Dealers must be shown that good service enhances their dealership, profits </li></ul></ul>
    13. 13. Pooled Service & Sales <ul><li>Is there benefit to a common or pooled operation of service and sales in the same establishment? </li></ul><ul><li>Is there benefit to a common ownership of service and sales, but not necessarily location? </li></ul><ul><ul><li>To the new car dealer, end user, sale of used cars </li></ul></ul><ul><li>Would independent service facilities generate conflict within the channel? </li></ul><ul><li>Change within a channel where power is closely balanced, benefits are unevenly distributed, and there is a lack of trust will generate chaos </li></ul>
    14. 14. Warehouse Channel Inventories <ul><li>Who will be responsible for inventory control? </li></ul><ul><ul><li>The individual dealer? </li></ul></ul><ul><ul><li>The supplier? </li></ul></ul><ul><li>Both options create obstacles. </li></ul><ul><ul><li>Dealers could not be individually responsible </li></ul></ul><ul><ul><li>If supplier were responsible, losses for cars not sold in timely fashion would generate losses </li></ul></ul><ul><li>Inventory risk is best controlled by channel member that controls turnover </li></ul>
    15. 15. Ford’s Perception of the Service-Sales Linkage <ul><li>Product characteristics are perceived to be increasingly less significant in determining end-user choice </li></ul><ul><li>What are the factors that determine dealer choice? </li></ul><ul><ul><li>Model availability </li></ul></ul><ul><ul><li>Assortment </li></ul></ul><ul><ul><li>Price </li></ul></ul><ul><li>Consultants are prone to lead clients down paths they want to travel (old Chinese proverb) </li></ul>

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