Ford’s CEO Designs a New Global Structure

Read the attached case “Ford’s CEO Designs a New Global Structure” and answer the following questions. You are encouraged to comment on others’ answers.Which worldwide structure did Ford use initially? What problems did the structure have? (5 points)How did the CEO restructure Ford? What is the rationale for the changes? (5 points)

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Part 4 Implementing Strategy
Ford’s CEO Designs a New Global Structure
Designing a global organization structure to operate efficiently across many countries is a critical issue
for multinational companies, as Ford has discovered
over time. Ford realized early in its history that a
major opportunity to increase its profitability was to
take its American car-manufacturing skills and apply
them in countries abroad. Over time, it established
car-manufacturing divisions in different countries
in Europe, Asia, and Australia. Ford decentralized
decision-making authority to each global division,
which controlled its own activities and developed
cars suited to the local market. The result was that
each division came to operate independently from
its United States parent company. Ford of Europe,
for example, became the largest and most profitable
carmaker in Europe.
Ford remained a highly profitable company until
Japanese carmakers began to flood the world with
their small, reliable, low-priced cars in the 1980s.
As car buyers began to buy the Japanese imports in
large numbers, Ford tried to draw on the skills of
its European unit to help build smaller, more fuelefficient cars for the United States market. But it had
never before tried to get its United States and European design and manufacturing units to cooperate;
this proved difficult to achieve because its decentralized global organizational structure did not encourage them to cooperate. In the 1990s, Ford embarked
on a massive project to create a new global-matrix
structure that would solve the decentralized task
and authority problems that were preventing it from
utilizing its resources effectively.
In the 2000 plan, Ford laid out a timetable of
how all its global carmaking units would learn to
cooperate using one set of global support functions,
such as design, purchasing, and so on. Country
managers continued to resist the changes, however,
to preserve their country empires and forced Ford
to redesign its proposed global structure again and
again. By the mid-2000s, Ford’s United States, European, and Asia/Pacific divisions were still operating
as a collection of different autonomous “empires.”
Ford had failed to lower its cost structure or design
and make a profitable “world car” that could be sold
to customers around the globe.
Once again, Ford decided to restructure itself.
It moved to a “world structure,” in which one set
of managers was given authority over the whole of
a specific global operation such as manufacturing
or car design. Then Ford began to design cars for
the global market. Its new structure never worked
to speed car design and production, even as it constantly changed global lines of authority and the
locations in which it operated to increase profitability. Ford went through multiple reorganizations
to try to meet the Japanese challenge, but nothing
worked. Losing billions of dollars, Ford announced
in 2006 a revamped “Way Forward” plan to turn
around its United States and global operations,
a plan that called for cutting 44,000 jobs; closing
16 plants; and freshening 70% of the company’s
Ford, Mercury, and Lincoln car lineup.
In October 2006, Ford also appointed a new
president and CEO, Alan Mulally, an expert in organizational design, to help turn around its operations.
Mulally, a former Boeing executive, had led that
company’s global reorganization effort. He began
to work out how to change Ford’s global structure
to reduce costs and speed product development. In
the structure Mulally inherited, Ford’s American
unit reported to the CEO, but its other global and
functional operations reported to the next two most
senior executives, Mark Fields, president of Ford’s
Americas operation, and Mark Schulz, president of
international operations. Mulally decided that Ford’s
downsizing should be accompanied by a major reorganization of its hierarchy, and he decided to flatten
Ford’s structure and recentralize control. At the same
time, however, he put the focus on teamwork and
adopted a cross-functional approach to handling the
enormous value chain challenges that still confronted
the organization.
The position of president of international operations was eliminated, and Mark Fields continues to
report to Mulally but so also do the heads of the
other two world regions: Lewis Booth, head of Ford
of Europe, and John Parker, head of Ford of Asia
Pacific and Africa and Mazda. Two levels in the hierarchy are gone, and Mulally’s new organizational
design clearly defines each global executive’s role
Chapter 13 Implementing Strategy in Companies That Compete across Industries and Countries
in the company’s hierarchy. Ford can begin acting
like one company instead of separate global units,
each with their own interests.33 In addition, the
heads of its global value chain functions also now
report directly to Mulally, not to Fields. These heads
include Tony Brown, global head of purchasing;
Nick Smither, head of IT; Richard Parry-Jones, chief
technical officer; and Bennie Fowler, head of quality
and advanced manufacturing engineering. Mulally’s
goal is to provide a centralized focus on using the
company’s global functional assets to better support
its carmaking business units.
At the same time, Mulally also took a major
restructuring step, announcing the creation of a new
position, global product development chief, who
is responsible for overseeing the development of
Ford’s entire global lines of vehicles. He appointed
Derrick Kuzak, head of product development in the
Americas, to head Ford’s new global engineering
design effort, and he also reports directly to Mulally.
Kuzak oversees efforts to streamline product development and engineering systems around the world.
As Mulally commented, “An integrated, global product development team supporting our automotive
business units will enable us to make the best use
of our global assets and capabilities and accelerate
development of the new vehicles our customers prefer, and do so more efficiently.”34
Mulally’s goal was to force a cross-functional
approach on all his top managers—one that he will
personally oversee—to standardize its global carmaking and allow functional units to continuously
improve quality, productivity, and the speed at which
new products can be introduced. But beyond streamlining and standardizing its approach, its new-product
development group must also ensure that its new
vehicles are customized to better meet the needs of
regional customers. All Ford’s executives now understand the company’s very survival was at stake; they
had to work together to accelerate efforts to reduce
costs and catch up to more efficient competitors such
as Toyota.
Despite the fact that in 2009 Ford was still losing
billions of dollars as the 2008 recession continued, its
new global organizational structure did seem to be
working. Ford was in the best competitive position
of any United States carmaker, and it had not needed
to borrow billions of dollars from the United States
government so that it could continue to operate. Only
time will tell, but Mulally remains confident.35
Case Discussion Questions
1. What kind of global strategy did Ford pursue at
the beginning? What kind of global strategy does
it pursue now?
2. In what main ways has Ford changed its global
structure to allow it to coordinate the production
and sale of its products more effectively around
the world? In particular, what different forms of
organizational structure has it adopted?

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