Based on information provided in the case, Ford has many strengths in the U.S. automobile industry, and few weaknesses. Ford’s size and strong recent financial performance are both strengths given Ford’s access to capital. However, it’s greatest strengths lie in customer loyalty, commitment to quality, and a superior ESP program. Ford has competitive customer loyalty rates, which are currently at 46%. This is likely due to Ford’s commitment to quality and productivity, which it prioritizes over gaining market share. According to market research, quality is the number one criterion that consumers base their purchasing decision on. Finally, compared to its competitors, Ford has a particularly successful ESP program, which contributed an additional $3.6 million to parts profits in 1986. Despite its
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For example, it can take advantage of the growing new-car ownership cycle and its current success with ESP by focusing further on ESP sales. It can also adapt its advertising strategy to evolving purchasing influencers by shifting the main focus of its advertising to its commitment to quality. Finally, Ford can adopt a “European” warranty program as a solution to its declining market share. These are all potential opportunities for Ford as it decides how to approach GM’s announcement (see Appendix A for SWOT table).
Recommendations
To decide how Ford should respond to GM’s improved warranty program, Ford should conduct a thorough analysis of each of its options. Market share and claims costs would be the main factors directly affected by improved warranty coverage. Cannibalization of ESP sales should also be considered, despite disagreement on whether it will actually be affected. Below is an analysis of the financial impact of the five options as described in the case (see Appendix B for calculations and assumptions).
Option 1. Do not respond. Maintain existing warranty
For example, it can take advantage of the growing new-car ownership cycle and its current success with ESP by focusing further on ESP sales. It can also adapt its advertising strategy to evolving purchasing influencers by shifting the main focus of its advertising to its commitment to quality. Finally, Ford can adopt a “European” warranty program as a solution to its declining market share. These are all potential opportunities for Ford as it decides how to approach GM’s announcement (see Appendix A for SWOT table).
Recommendations
To decide how Ford should respond to GM’s improved warranty program, Ford should conduct a thorough analysis of each of its options. Market share and claims costs would be the main factors directly affected by improved warranty coverage. Cannibalization of ESP sales should also be considered, despite disagreement on whether it will actually be affected. Below is an analysis of the financial impact of the five options as described in the case (see Appendix B for calculations and assumptions).
Option 1. Do not respond. Maintain existing warranty