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Knowledge Assets of Ford Motor Company
Knowledge Assets of Ford Motor Company
Knowledge Assets of Ford Motor Company
Knowledge Assets of Ford Motor Company
Knowledge Assets of Ford Motor Company
Knowledge Assets of Ford Motor Company
Knowledge Assets of Ford Motor Company
Knowledge Assets of Ford Motor Company
Knowledge Assets of Ford Motor Company
Knowledge Assets of Ford Motor Company
Knowledge Assets of Ford Motor Company
Knowledge Assets of Ford Motor Company
Knowledge Assets of Ford Motor Company
Knowledge Assets of Ford Motor Company
Knowledge Assets of Ford Motor Company
Knowledge Assets of Ford Motor Company
Knowledge Assets of Ford Motor Company
Knowledge Assets of Ford Motor Company
Knowledge Assets of Ford Motor Company
Knowledge Assets of Ford Motor Company
Knowledge Assets of Ford Motor Company
Knowledge Assets of Ford Motor Company
Knowledge Assets of Ford Motor Company
Knowledge Assets of Ford Motor Company
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Knowledge Assets of Ford Motor Company

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Boisot states that Knowledge Assets are a source of competitive advantage for the firms that possess them (Boisot, 1998). In this essay, we have identified the Knowledge Assets of Ford Motor Company …

Boisot states that Knowledge Assets are a source of competitive advantage for the firms that possess them (Boisot, 1998). In this essay, we have identified the Knowledge Assets of Ford Motor Company where we started our career when Ford was doing a major restructuring of its operations. We have discussed the competitive advantages the Knowledge Assets provide to Ford and also the transacting type and the form of learning that predominates in Ford. We have also plotted the Social Learning Curve for each of the Knowledge Assets and described the changes they undergo as they progress through the I-Space.

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  • 1. NANYANG TECHNOLOGICAL UNIVERSITY K6211-INFORMATION & KNOWLEDGE ASSETS KNOWLEDGE ASSETS OF FORD MOTOR COMPANY Term Paper ANTONY PRAKASH SRINIVASAGAM PRIYA LAKSHMI VENKATARAMANUJAM KANNAN 1
  • 2. TABLE OF CONTENTSINTRODUCTION............................................................................................................................. 3KNOWLEDGE ASSETS .................................................................................................................. 3 EXPERIENTIAL KNOWLEDGE ASSETS .................................................................................. 3 CONCEPTUAL KNOWLEDGE ASSETS .................................................................................... 4 SYSTEMIC KNOWLEDGE ASSETS ........................................................................................... 4 ROUTINE KNOWLEDGE ASSETS ............................................................................................. 4KNOWLEDGE ASSETS OF FORD MOTOR COMPANY............................................................... 5 KNOWLEDGE ASSET 1 - FORD’S BUSINESS STRATEGY ..................................................... 5 KNOWLEDGE ASSET 2 - FORD MOTOR COMPANY’S CEO ALAN MULALLY................... 7 KNOWLEDGE ASSET 3 - SUPPLIER RELATIONS ................................................................... 8 KNOWLEDGE ASSET 4 - FORD’S BUSINESS PLANS ............................................................. 8 KNOWLEDGE ASSET 5 - FORD’S CULTURE........................................................................... 9 KNOWLEDGE ASSET 6 - FORD’S TECHNOLOGIES ............................................................. 10KNOWLEDGE ASSETS AND ITS SUBSTRATE.......................................................................... 11I-SPACE ......................................................................................................................................... 11 BUSINESS STRATEGY IN I-SPACE ........................................................................................ 12 BUSINESS PLAN IN I-SPACE .................................................................................................. 13 SUPPLIER RELATIONS IN I-SPACE........................................................................................ 14 FORD CEO IN I-SPACE............................................................................................................. 15 FORD CULTURE IN I-SPACE................................................................................................... 16 TECHNOLOGICAL ASSET IN I-SPACE .................................................................................. 17TRANSACTION TYPE .................................................................................................................. 18 MARKETS ................................................................................................................................. 18 BUREAUCRACIES .................................................................................................................... 18 FIEF ............................................................................................................................................ 18 CLAN ......................................................................................................................................... 19 TRANSACTION TYPE AT FORD MOTOR COMPANY .......................................................... 19TYPES OF LEARNING.................................................................................................................. 20 SCHUMPETERIAN LEARNING ............................................................................................... 20 NEOCLASSICAL LEARNING ................................................................................................... 21 LEARNING AT FORD - SCHUMPETERIAN LEARNING ....................................................... 21 2
  • 3. INTRODUCTION Boisot states that Knowledge Assets are a source of competitive advantage for thefirms that possess them (Boisot, 1998). In this essay, we have identified the KnowledgeAssets of Ford Motor Company where we started our career when Ford was doing a majorrestructuring of its operations. We have discussed the competitive advantages the KnowledgeAssets provide to Ford and also the transacting type and the form of learning thatpredominates in Ford. We have also plotted the Social Learning Curve for each of theKnowledge Assets and described the changes they undergo as they progress through the I-Space.KNOWLEDGE ASSETS Knowledge Asset can be defined as the information collected, arranged, and preservedor skills transferred in the form conceivable and usable by humans(Dierkes, Antal, Child, &Nonaka, 2001). The knowledge assets form the integral part of human civilization. Itconstitutes learning. It paved the way for the development in art, science and technology. Inview of economic perspective the knowledge assets are the crucial thing to be preserved byany organization to sustain itself against the ever competitive nature of the modern world. Any firm is identified by the knowledge assets it possesses. Therefore it is mandatoryfor every firm to organize and manage its knowledge asset. For efficient knowledgemanagement, the knowledge asset of the firm has to be identified. Even though it is notpossible to exactly demarcate the different knowledge assets, efforts have been taken tosystematically classify the knowledge assets into four broad categories for easy and efficientknowledge management (Dierkes, et al., 2001). They are  Experiential Knowledge Assets  Conceptual Knowledge Assets  Systemic Knowledge Assets  Routine Knowledge AssetsEXPERIENTIAL KNOWLEDGE ASSETS Experiential Knowledge assets refers to knowledge gained by an individual throughdirect sharing of experiences among the members of firms or its members of firms and 3
  • 4. customers or members of firms and its affiliated institutions. The very implicit nature of thisexperience knowledge asset makes it not tradable and not transferable in its entirety. Theexperiential knowledge assets are specific to a firm and are difficult to be replaceable. Thefirms must establish their own methods for efficient management of experiential knowledgeassets.CONCEPTUAL KNOWLEDGE ASSETS Conceptual Knowledge assets are the outcome of experiential knowledge assets. Anexperiential knowledge asset when explicitly shared through any one of the humanconceivable forms such as images, symbols, languages, etc. becomes a conceptual knowledgeasset. Since the conceptual knowledge asset is transferred through the process ofexternalization it can be easily understood and are preserved for future.SYSTEMIC KNOWLEDGE ASSETS Systemic Knowledge assets are knowledge available in the ready-made form such asdocuments or any of the electronic media. Explicitly stated technologies, patents, licensesproduct specifications, manuals, documented information about customers and suppliers areexamples of such assets. As the asset can be easily available to any one utmost care should betaken for the preservation and distribution of systematic knowledge assets.ROUTINE KNOWLEDGE ASSETS Routine Knowledge assets are the information that becomes the part and parcel of theorganization that has been evolved throughout the course of its existence by the practicesfollowed by the organization. The practices are established as processes in due course of timeand are followed in the organization for delivering efficiency and quality. These processesisolate the top management from managing the knowledge assets and leave the role to beplayed by the middle managers. Though Knowledge can be classified and managed systematically, the ever changingnature of technological growth may demand neglecting the previously acquired and preservedknowledge assets and create a new one. This makes clear that the key assets are the peoplewho possess rich and varied knowledge. There is no immediate replacement for them in anyindustry. It takes a lot of money, time and effort to compensate or replicate the human asset.The firms should take utmost care to reduce the attrition rates among the human assets for itssustainability. 4
  • 5. KNOWLEDGE ASSETS OF FORD MOTOR COMPANY The Knowledge Assets we have identified for Ford Motor Company are: 1) Ford’s Business Strategy – ‘One Ford’ 2) Ford Motor Company’s CEO Alan Mulally 3) Ford’s Business Plans 4) Ford’s Culture 5) Ford’s Supplier Relations 6) Ford’s TechnologiesKNOWLEDGE ASSET 1 - FORD’S BUSINESS STRATEGY Historically, Ford Motor Company operated as four large separate automotivecompanies around the world: 1) A North American company 2) A South American company 3) A European company 4) An Asia Pacific Company Since each region was working as a separate company, they had their ownmanufacturing processes, product development systems, suppliers, etc. This structure wouldhave made sense during the initial stages of automotive industry when transportation,communication and other infrastructures were not developed. But continuing to operate in thesame manner even after the developments in communication and infrastructure led toinefficient and unnecessary duplication of work. For an enterprise as big as Ford, thecompany had also failed to realize the benefits of scale that would have been made availableby going global. In the last few decades, Ford acquired a few other brands and their portfolioincluded Jaguar, Land Rover, Aston Martin and Volvo. Ford found it difficult to manage allthe acquired businesses and as a result ended up neglecting the focus on the ‘Ford’ brand.The ‘Blue Oval’ was just a house of brands and failed to retain the historical supremacy thatwas traditionally associated with the symbol of Ford Motor Company. Ford got itself into a mess by designing cars separately for the Americas, a different setfor Asia Pacific and another set for Europe. This resulted in a lot of work and waste ofmoney. Ford realized their mistakes just before the economic recession of 2008 and began 5
  • 6. their efforts to fundamentally restructure the way they do business. They recognized the needto change their business strategy in order to put Ford on the path to long term viability. When Alan Mulally took over as the CEO of Ford Motor Company in 2006, he and hisleadership team started to work on the new business strategy to make Ford as a single globalorganization. They developed a new plan which can be summarized as(Company, 2008): “One Ford – One Team, One Plan, One Goal.” One Ford has firmly established the principle of one global company. The ‘One Team’and ‘One Plan’ is laser focused on delivering the ‘One Goal’ which is creating an excitingviable Ford Motor Company delivering profitable growth for customers, dealers andsuppliers. By implementing the new strategy, Ford focused on ‘One Ford’ and simplified thebrand structure by selling Jaguar, Land Rover, Aston Martin and the majority of theirownership of Mazda. They improved the brand image of Ford among customers byreestablishing Ford’s historical association with safe, affordable and sustainabletransportation for customers, offering the best value. They continued to improve theirvehicles to achieve leadership in fuel economy, quality, safety, convenience technology andinterior comfort, all further strengthening the Ford brand. The transformation from separate loss making entities to one global profitableorganization was possible because of the ‘One Ford Plan’. Ford has posed billions of profitsfor three consecutive years from making the worst loss ($14.6 billions) in 2008 in its 105 yearhistory. The most important thing to note is Ford’s two biggest American competitors,Chrysler and General Motors, who were bailed out with $80-100 billion of U.S tax-payerdollars, continued to struggle in 2009 but Ford has led the way by selling cars, not by relyingon government bail-outs. Ford proved that they are much better that GM and Chrysler inproviding superior quality products that people actually want. The turnaround of Ford Motor Company reiterates the fact that their competitiveadvantage is indeed its ‘One Ford’ Business Strategy and so we consider it as one of the mostimportant Knowledge Assets of Ford Motor Company. 6
  • 7. KNOWLEDGE ASSET 2 - FORD MOTOR COMPANY’S CEO ALAN MULALLY Alan Mulally is a living proof that an amazing leader with determination and visionreally can make all the difference in an organization. In 2006, when Bill Ford Junior washunting for someone to take over the role of Ford Motor Company’s CEO, he was notlooking for someone who was just a talented executive, but he was looking for someone whohad proved the ability to reinvent the whole organization culture (DeMatio, 2009). Bill Fordbelieved that, Alan Mulally (who was the Executive Vice President of ‘The BoeingCompany’), is the man he was looking for. Many observers in the industry were shocked tosee someone with absolutely no car experience has been appointed as the CEO of Ford. ButMulally wasted no time to prove his worth and he sensed that the automotive business wasabout to enter an extremely difficult phase. He sensed this even before the global financialcrisis of 2008-2009 and his first task was to ensure that Ford had enough cash to survive therecession, so he mortgaged all of Ford’s assets, including the Brand-Blue Oval and raised$23.5 billion. The reason we consider Alan Mulally as one of the important Knowledge Assets ofFord is, though he has not designed or built any cars(Taylor, 2009), he has:  Developed a plan that identifies clear goals for the company  Created a process that helps the company move towards those goals  Set up a system to ensure it gets there The two key decisions he took on becoming the CEO of Ford that played a major role inFord’s turnaround are described below.DISPLAY COURAGE IN THE FACE OF ADVERSITY(Donlon, 2011): When Alan Mulally took over as the CEO of Ford in 2006, he realized that Ford’sproduct line was in disarray(Donlon, 2011). He knew a recession was around the corner andso in order to protect Ford from unexpected events and bring it out of the mess it is alreadyin; he mortgaged all its assets and raised funds. When the Great Recession hit the automotiveindustry, GM and Chrysler had no choice but to get government bailouts to continue theiroperations, but Ford managed to survive on their own and it is now a badge of honour.FOCUS IS EVERYTHING (Donlon, 2011): Alan realised that Ford had spent more of its effort and money across too many brands.He made the Ford veterans understand that Ford can’t be world class doing a bunch of things. 7
  • 8. So they decided to focus on the Blue Oval- the Ford logo and motivated everyone to direct alltheir energies to what was really important. He and his leadership team decided to sell Jaguar,Land Rover, and Aston Martin and started concentrating on the Ford Brand by developing acomplete family of vehicles small, medium and large, cars and trucks in every market aroundthe world. This was a key decision which helped Ford to become profitable.KNOWLEDGE ASSET 3 - SUPPLIER RELATIONS Ford believes that having a strong relationship with their suppliers and dealers allowsthem to have a significant advantage over their competitors. Ford values their dealers andsuppliers and sees them as their extended family. This is the reason Ford has been anindustry leader in the development of minority suppliers and dealers. The support theyprovide to the dealers and suppliers position Ford in a much stronger position than itscompetitors. They sign long term agreements with their suppliers when compared to otherautomotive companies. As a result, the suppliers’ attitude towards Ford undergoes positivechanges and leads to increased openness and dialogue. This takes the supplier-buyerrelationship to the next level with Ford and Suppliers seeing themselves as Business Partners. Ford launched a framework in 2005 called “Aligned Business Framework (ABF)” andit is Ford’s strategic Purchasing Business Model(Compact). It establishes the workingbusiness models for Ford and its suppliers. Through ABF, Ford is taking steps in improvingits relationship with suppliers around the globe. This will make Ford work more closely thanever with suppliers and enable them to offer new technologies and innovative features in itsproducts. Ford earned the ‘2011 Automotive News Suppliers’ Choice Award’ for itsoutstanding work in bringing innovative technologies in their vehicles(Ford, 2011). Theaward indicates the continuous efforts that Ford takes to improve supplier relations byincreasing collaboration, transparency, sharing of product plans and technologies among itskey suppliers. Ford’s Product Development team and purchasing team believe that suppliersare an incredible source of new ideas that bring additional benefits to customers.KNOWLEDGE ASSET 4 - FORD’S BUSINESS PLANS Ford has big plans for the Asia Pacific region especially in India and China. As part oftheir expansion and growth plan for Asia Pacific region, they are investing in(Motors,2012a):  New plants to increase production volumes  Expanding Dealer Networks 8
  • 9.  Developing Supply Chain Ford believes that there is tremendous growth potential in this part of the world in thenext ten years and they estimate that China will be the biggest car market in the world in thenear future and India will be the third largest market in the next 5-10 years. Ford expects that70% of its growth will come from Asia Pacific and Africa region in the next 10 years. Ford’sbusiness strategy is based on the ‘One Ford Plan’ which is basically the global productdevelopment vision. The name says it all. The ‘One Ford’ Strategy that Ford wants to use toincrease its presence in all markets is based on the notion of ‘global customer’. It focuses ondelivering more vehicles across all markets from fewer core platforms which allows theincreased use of common systems and parts and thereby reduces the costs. They estimate that,by 2012, 80% of Ford’s vehicles will be built on 13 core platforms. Increasing partscommonality will help suppliers achieve higher economies of less and will lead to lowerdevelopment cost. What this means for customers is more economical and a higher qualityvehicle. The plan to focus on the Asia Pacific region and the global manufacturing strategygives Ford competitive advantage.KNOWLEDGE ASSET 5 - FORD’S CULTURE Ford has undergone a cultural transformation from the time it was started more than acentury ago. It embraces diversity as a core business value(Network, 2001). The key to thisstrategy is the creation and retention of a diverse work force. Ford has revised its policies andprocesses to integrate these values into business plans. The leadership team made sure that allthe employees had a common understanding about what diversity means at Ford operationsworldwide. Ford made a decision on the type of corporate culture they wanted to have in allFord organizations irrespective of where they are in the world. They created a workplace thatis fair and open to all and where employees are given opportunities to use their fullestpotential based on their skills and merits. All these efforts show Ford’s belief that only a diverse company can understand thediverse and complex global market and develop plans, generate ideas that will ultimately leadto the development of superior/innovative products and services. The employees of Fordbelieve that there are common threads that unite them as employees of Ford Motor Companyand they all want Ford to be profitable and produce cars that customers really want. Ford’s 9
  • 10. leadership team believe that a diverse work force and an open culture is the key to success fora company as big as Ford. In an industry where all the competitors have similar strategies, products and services,the one factor that provides a competitive advantage is the intellectual capital of anorganization(Network, 2001). It’s because of the Ford’s culture to embrace diversity, they areable to bring together a diverse set of minds and face challenges with creative thinking.KNOWLEDGE ASSET 6 - FORD’S TECHNOLOGIES In addition to providing safe, fuel efficient and quality vehicles to customers, Ford isalso constantly working on the technological advancements that can be made available intheir vehicles and in the process they are pushing the boundaries of what a vehicle can do.Some of the technologies and features they have implemented in their new vehicles are:  Drive Connected – Technology that allows customers to control certain features with simple touch and voice commands (SYNC, SYNC with MyFord Touch)(Motors, 2012b)  Drive Assured – Radar and ultrasonic sensors that alert/assist customer and provide them the confidence while driving (World’s first Inflatable Safety Belts)(Motors, 2012b)  Safe and Secure – Features engineered to help customers maintain vehicle control and provide peace of mind (Adaptive Cruise Control)(Motors, 2012b)  Smart Performance – Intelligent engine designs that combine performance with efficiency (Electric Vehicle, Hybrid Vehicle)(Motors, 2012b)  Style and Convenience – Intelligent features that simplify and elevate life(Motors, 2012b) The automotive industry is very competitive and a brand can be competitive only if itsvehicles have unique features. Ford is one company that combines creativity, design andinnovation into its vehicles. Ford has developed some of the highly rated vehicles across theglobe and it will continue to work towards meeting the needs of the customers byincorporating new designs and features into its vehicles. Ford has installed a few million Sync systems (voice-controlled communication andinfotainment system) and data shows that Sync is helping them sell vehicles and also improvetheir Brand image(Insideline, 2010). This is one of the significant milestone is Ford’s historyand puts more pressure on its competitors to keep the customers connected. Ford has 10
  • 11. delivered these kinds of innovations at a rapid pace in the past few years while theircompetitors have just started to catch up(Buss, 2011). Ford’s success in attracting thegeneration of customers who always want to stay connected is clearly a competitiveadvantage over other automakers.KNOWLEDGE ASSETS AND ITS SUBSTRATE The table given below shows the substrate on which each Knowledge Asset isembedded.I-SPACE The six stages in the Social Learning Cycle within the I-Space are:  Scanning  Problem-solving  Abstraction  Diffusion  Absorption  Impacting 11
  • 12. BUSINESS STRATEGY IN I-SPACE In the scanning stage, data and information is gathered from the revenue data of thecompany and the expenditure incurred for running its day-to-day operations. On analyzingthe financial data, it is found that the problem lies with the way the organization is currentlyoperating and that it has to relook how it is doing business. Based on a few key ideas, theCEO puts forth a new business strategy for the company in the abstraction stage. The strategyis communicated with everyone in the leadership level to bring everyone up-to-date with thenew strategy. In the absorption stage, the strategy is implemented across all of Ford’sbusiness units. The strategy is embedded is eventually into all of the company’s operations. 12
  • 13. BUSINESS PLAN IN I-SPACE The potential for growth is identified in the scanning phase and a new business plan iddeveloped in the problem solving phase. The plan does not have a scope for abstraction andhence the stage is skipped. In the diffusion stage, the plan is communicated to all theemployees and the plan is implemented in the absorption stage. The plan is an integral partfor all product development practices in the impact stage. 13
  • 14. SUPPLIER RELATIONS IN I-SPACE In the scanning stage, it is identified that the company can have an edge over itscompetitors by offering new and innovative features in its cars. The problem is solved bysigning long-term contracts with the suppliers. The company has to have strong relationshipwith its suppliers so that they can work together effectively to achieve this goal. In thediffusion stage, Ford came up with a framework called ‘Aligned Business Framework’ toimprove its relationship with suppliers and dealers. The framework was implemented in theabsorption stage and now it is an integral part of all contracts with the suppliers (impact). 14
  • 15. FORD CEO IN I-SPACE Ford was going through a difficult phase and incurring huge losses. In the scanningphase, it was identified that the current CEO lacked the vision to steer the company back to aprofitable one. The problem would be solved if they can find a new CEO who is a visionaryand guide the company in the right direction. It was also identified in the abstraction stagethat the CEO had to have a proven record of turning things around for a company and capableof restructuring a large organization. 15
  • 16. FORD CULTURE IN I-SPACE Ford values diversity as one of its asset. Earlier, Ford’s interests were mainlyfocused on the North American and European market. When it decided to restructure, it wasfound that having people from diverse background could prove to be a great asset and theywill be able to go beyond their traditional market and look at new emerging markets(scanning). In the problem solving stage, it was decided that having a diverse work force willgive the company a competitive advantage. Diversity was embraced by the company as animportant aspect of their culture in the abstraction stage and the importance of diversity wascommunicated to the employees in the diffusion stage. 16
  • 17. TECHNOLOGICAL ASSET IN I-SPACE Ford has always prided itself in being the first car manufacturer to make the caraffordable and available for the common man. Its commitment to provide the best in classholds good even today. A lot of technological development is now being done in cars andmost of these are only available in high end cars. However, Ford felt that technology shouldbe democratized and they also want to push the boundaries of what a vehicle can do(scanning). They have a dedicated R&D team that works on providing new and excitingtechnology and systems that make driving a pleasure, e.g., SYNC, cross alert traffic system(problem solving). The technology is then shared with the design engineers who incorporateit into the car design (diffusion). In the impact stage, the technology becomes a part of thecar, just like engine and the wheels. 17
  • 18. TRANSACTION TYPE Information flow in an organization depends on the culture of the organization. Theconcept of Transaction is used to describe how information exchange takes place in anorganization. There are four transaction types within which an organization can operate. Theyare:  Markets  Bureaucracies  Clan  FiefMARKETS An organization that has Market transaction type is one where the only binding factorbetween different parties is to do business. Each party is free to pursue an interest of theirown and the reliance is on public knowledge. There is enough information for each party todecide what information they want out of this type of transaction. The information is wellcodified, abstract and diffused.BUREAUCRACIES Bureaucratic organizations have a very hierarchical structure where the informationflow is controlled and selective diffusion of information is allowed as and when requireddepending on the situation. There are a set of rules which everyone has to follow strictly butthe rules can be modified as one move up the hierarchy. The involved parties are not allowedto pursue interests of their own as it might affect the interests of the organization. The level ofinformation available to an individual depends on where he is on the hierarchy level. Theinformation is codified and abstract and the relationships are impersonal. All decisions aresubjected to scrutiny by a higher authority.FIEF A fief transaction type can exist within small groups in organization that workindependently, e.g., research & development teams. The relationship between the members ofa group is personal and they have a sense of shared values and trust between them. This typeof transaction works best when it is done face-to-face rather than within teams that aregeographically distributed. 18
  • 19. CLAN A clan type of transaction is one where the members share the same beliefs and values.The relationship between the members is personal but non-hierarchical. Information diffusionis limited due to lack of codification of the information.TRANSACTION TYPE AT FORD MOTOR COMPANY Every organization has its own way of operating. Smaller companies tend to follow aClan transaction type. But as the company expands and more and more people join it, itgradually has to accept other transaction types that will suit the current needs of the company.Usually a company can have more than one transaction type. A large organization like Ford Motor Company which has its business interests in carsis more concerned about the processes involved in manufacturing cars and the internalfunctioning of the organization. Ford Motor Company operates on a very large scale andhence it requires a mix of both Market and Bureaucracy type of transaction. There are smallgroups of fiefs in the organization too. The Markets type of transaction is used for itsrelationship with suppliers who form a key part in the manufacturing process whereas theday-to-day business is of Bureaucratic type. Being a manufacturing company, Ford has large supplier bases who supply variousspare parts that are required to build a car. The suppliers could supply different items likeparts (tyres, screws, bolts, etc.,) or supply raw materials that are required for building a carlike steel, plastic, electronic devices, etc. Ford works with the suppliers to source thematerials it needs. The price of the items is fixed in a contract and both the participatingparties honour it. If there is a change and one of the parties does not honour the contract, thenthey look at other players in the market to do business with. The fief transaction type is most likely to exist within the Research & Developmentteams. They are teams of highly specialized skilled people working together for a commongoal. The relationship between the members is personal as the teams are small and everyoneknows what the other person is doing. This is also because they are working on advancedtechnologies and devices and their interaction with the rest of the organization is restricted toreporting their findings and putting forth their ideas in front of a committee to assess itsimportance for the organization. 19
  • 20. An organization which is operating on such a large scale needs some amount ofhierarchical structure of management to ensure that the organization is indeed doing what itshould be doing, i.e., manufacture cars and follow all the processes that are part of theorganization’s mandate. To ensure that all the rules and policies are followed by theemployees and also to check for compliance, the organization has various levels ofsupervision and each level of supervisor is responsible for the employees directly reporting tothem. Most of the decision making authority for a certain level is given to the supervisoritself so that he need have to refer with a superior for every decision that is taken. However,there are certain decisions which need to have an approval from the top level before adecision can be made.TYPES OF LEARNINGSCHUMPETERIAN LEARNING Schumpeterian concept named after the Austrian economist Joseph Schumpeter, laysemphasis on innovation and the learning of a firm throughout the course of its existence(Lam,2004). The innovation and hence the learning is promoted by the interest in the followingareas.  new products  new production methods  new markets  new forms of organization According to Schumpeterian concept, wealth is created when such innovation results innew demand. Based on this view, the role of an entrepreneur is defined as one of combiningvarious input factors in an innovative manner to generate value to the customer. This is doneon the belief that the generated value will exceed the cost of the input factors, thus generatingsuperior returns that result in the creation of wealth. This approach of Schumpeterian model makes it an ever evolutionary model. Thismodel is widely followed in the current economic model. Though there are various ways ofimprovement in technology, technological growth is mainly viewed over the point of wealthgeneration, resource utilization and conservation. Since it is evolutionary, the demarcationhas to be clearly laid out between the exploration and exploitation of new ideas. This is 20
  • 21. further determined by the changing environment, organizational diversity and competitiveadvantage.NEOCLASSICAL LEARNING In the Neo Classical view there should not be any third party intervention such asgovernment in between demand and supply. The markets should be made free, so thateveryone can compete with everyone. In many ways neoclassical (neo liberal) theory hasbecome a tool for the dissemination of public policies and international agreements thatreduce the role of government in shaping economic activities (including transactions) andpromote the power of transnational firms in shaping these same economic activities. In thissense, neoclassical economic theory is a weapon in the extension of a transnational firm-ledglobalization process.LEARNING AT FORD - SCHUMPETERIAN LEARNING Ford Motor Company was founded by Henry Ford and it is headquarters are located atDearborn, Michigan. The company has been around for over a century and they had a verytraditional approach to doing business. Once the company was established in the UnitedStates, it expanded into other markets in Europe, Australia, South America and Asia. Sincecommunication technology was not advanced those days, it was not possible for the differentoffices to work together. However, once the facilities for collaboration were available, thedifferent entities were hesitant to relinquish their power and work as one group. This resultedin high operating costs for the company since a lot of work was being duplicated across all ofits plants. When the company finally went to the point of becoming bankrupt, Mr. Mullalycame up with the ‘One Ford’ plan. This is the plan that changed the fortunes of the company.Though the old model of doing business had proved highly successful for Ford in its initialdays, the leadership team felt that the time has come to let go of its old ways and re-invent thecompany. Hence we feel that Schumpeterian learning is predominant in Ford MotorCompany. Ford has manufactured some very iconic cars like the Model T, F 150, Ford Mustang.In the late 1980s and 1990s, most of Ford’s revenue came from selling trucks. The companystarted to focus on selling more trucks and buying other car companies to increase theirproduct portfolio. By the start of this century, the company was in deep crisis. It was losing billions ofdollars, market share and the people had lost faith in the company. The old way of doing 21
  • 22. business did not work. They were still manufacturing trucks, which was their best seller inthe North American market. But the company was losing money steadily. What is it that theywere doing wrong? What went wrong with the cars and plan that worked so well for themover the decades? Since the company’s early days, each of its divisions in the various continents that itoperates in had its own way of doing business. There was a separate design team, Research &Development team, engineering team, IT team. The entities behaved as independentorganizations working under a parent organization. On the verge of bankruptcy, Ford recruited Mr. Alan Mullaly who took over as theCEO of Ford Motor Company in 2006. Traditionally, Ford Motor Company has been knownto promote its internal employees to the highest office within the company. Mr. Mullaly wasgiven the task of bringing the ailing giant back on its feet. He brought in a series of changeswhich was based on the ‘One Ford’ plan. SCHUMPETERIAN LEARNING AT FORDSeparate Ford One GlobalCompanies Organization Alan Mulally’s One Ford Plan 22
  • 23. One of the first tasks under his leadership was to combine all the entities of Ford towork as one single unit. The units in the various countries spanning four continents werealigned into a single organization. The re-alignment occurred across the various divisionswithin the organization. Earlier, there were separate design and R&D teams for different countries whichworked on car designs from the scratch for each of the markets. It was found that, at the endof the day, no matter where they are from, all that a customer expects from a car are: quality,safety and fuel efficiency. So the car designing and R&D was aligned to focus on buildingcars that catered to these three basic needs. The global platform for a car was initiated basedon this belief. It saved the company about $800 million to $1 billion a year on developing anew car from scratch in every country. Instead, 80% - 90% of the design is now commonwith slight changes to customize it to the needs of the market. The Ford Focus is one such carwhich is developed with a global platform and it is a success in both the European and NorthAmerican market. Having focused on manufacturing trucks for more than a decade, which was and stillis a profitable vehicle for Ford, they had lost sight of the changing trends in the industry. Dueto the middle-east crisis, there has been an astronomical rise in fuel price all over the world.The trucks consume huge amounts of fuel. Even though they have been an iconic feature inFord’s line-up, more and more people had started looking at smaller cars that do not use asmuch fuel. The competitors were concentrating on building fuel efficient cars and working oncars that can use alternate sources of energy such as electric cars that run on battery, solarpowered cars, and hybrid cars. Once Ford started to re-analyze their business strategy, they came across informationwhich suggested that due to the rise in fuel price and increased congestion in large cities,people choose small cars over large cars and preference is being given to those that are mostfuel efficient. So, instead of just trying to bail out the company by coming up with atemporary solution, Ford pledged all its assets - the manufacturing facilities and also theemblem of the company, the Blue Oval to come up with funds that will help the company todesign cars that its customers actually want. Today, Ford is on its way to former glory and it has been consistently showing profits.This has been possible largely due to a change in the way the Ford is doing business today. 23
  • 24. ReferencesBoisot, Max H. (1998). Knowledge Assets - Securing Competitive Advantage in the Information Economy: Oxford University Press.Buss, Dale. (2011). Has Ford Sync Lost Its Edge? Retrieved April 2012, from http://www.insideline.com/ford/has-ford-sync-lost-its-edge.htmlCompact, United National Global. Ford Motor Company: The Aligned Business Framework, from http://supply-chain.unglobalcompact.org/site/article/50Company, Ford Motor. (2008). Ford Motor Company Business Plan (pp. 6-10).DeMatio, Joe. (2009). 2010 Man of the Year: Alan Mulally, CEO Ford Motor Company. Automobile.Dierkes, Meinolf, Antal, Ariane Berthoin, Child, John, & Nonaka, Ikujiro (Eds.). (2001). Handbook of Organizational Learning and Knowledge: Oxford University Press.Donlon, JP. (2011). Six Things All CEOs Can Learn From Mulally Retrieved April 2012, from http://chiefexecutive.net/six-things-all-ceos-can-learn-from-mulallyFord. (2011). Ford Wins 2011 Automotive News Suppliers’ Choice Award Retrieved April 2012, from http://media.ford.com/article_display.cfm?article_id=34998Insideline. (2010). Ford Sync Hits 2 Million Mark Retrieved April 2012, from http://www.insideline.com/ford/ford-sync-hits-2-million-mark.htmlLam, Alice. (2004). Organizational Innovation. Brunel University Brunel Research in Enterprise,Innovation, Sustainability, and Ethics, 45.Motors, Ford. (2012a). Ford Motor Company 2010 Annual Report.Motors, Ford. (2012b). FordTechnology Retrieved April 2012, from http://www.ford.com/technology/Network, Ford Communications. (2001). Ford Motor Company Embraces Diversity Retrieved April 2012, from http://fordglobe.org/2001/02/27fcn/EmbracingDiversity.htmlTaylor, Alex. (2009). Fixing up Ford Retrieved April 2012, from http://money.cnn.com/2009/05/11/news/companies/mulally_ford.fortune/index.htm 24

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