Organizational Change in Ford Motor Company
Today, the US auto industry experiences problems caused by economic decline and financial crisis. Therefore, because innovation is all about creating new realities, change must deal first and last with sight. Many critics admit that the US auto industry will not be able to survive without innovations and new trends in technology as a driver of change. Financial investments are seen as “unrealistic” because of the impaired sight of the state (Daft, 2003). The greatest validation of any change and innovation process is when those involved admit, It is assumed that the strategic intention not only informs all changes in car industry, but it also adjudicates it, thereby providing almost instantaneous responsive changes–time and place specific. Change presupposes a purpose, an intent; change is continuous creative energy. But change is energy used without specific intent; it is the continuous dissipation of energy.
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Ford Motor Company is a leading American car producer with annual sales of about 146.277 billion (2008). In order to complete with Japanese manufacturers, the US industry and Ford Motor Company should introduce innovative technologies based on green technological solutions and energy saving technologies. In such a situation, the mission of car manufactures will change from profit-making companies to innovators and unique designers. Thus, it will be crucial to introduce changes in every operation and management processes within the system! Anything about the current process and production that cannot be thus transformed must be abandoned. And anything not existing that is needed to complete the production must be created–from within the production itself. For example, in an auto company, one of the most basic, routine activities is production of car parts; the specifics of the transaction may change from time to time, because of innovation and technological improvements, but it is still production. In actual practice that is the case; the change process seldom reaches to the basic operational aspects of the company. But in whole-context organization, the change is given a new meaning by being cast into a completely new context (Ivancevich, 2007).
The American economy has witnessed fundamental shifts from a production orientation to a consumer orientation, from an economy of scarcity to an economy of abundance, from an agricultural to a mature industrial economy, and from concern about not being able to produce enough goods and services to becoming fully capable of satisfying basic needs through the availability of more than adequate production capacity. In this transition, necessities are now taken for granted, former luxuries become necessities, and expensive, luxurious items, previously unattainable, fall within reach (“Capitalism and the auto crisis” 2008). In such an economic environment, marketing factors become important ingredients of economic growth. In a very real sense, marketing faces a number of increasing challenges in the United States. Although we have developed productive and technical capacities to the point where they are increasingly effective, both outstrip the economy’s marketing capabilities (Ivancevich, 2007). The market-focused economy now challenges society to develop a marketing capacity that will match its physical productive resources. Marketing is a phenomenon of mass systems, reaching its highest form and most efficient development in the creation of mass markets. Mass production can exist only in association with mass distribution, for production does not automatically create its own demand. Automation, for example, is predicted on the belief that mass markets can be created to absorb continuing supplies of products (“Capitalism and the auto crisis” 2008).
The main trends in car industry are sales decline and low prices aimed to meet income and needs of consumers. Since Ford Motor Company is in serious decline, emphasis should be on understanding the characteristics of completely new, non-templated, natural systems that continuously create themselves as they aggressively appropriate technological, economic, and social possibilities. Innovation in designs and technologies will change the industry. Exactly how this exploration is conducted is, of course, the prerogative of the chief executive, but a wise planner will ensure that especially the most radical ideas are given serious consideration (Ford Motor Company 2009).
It is important to assume that if this change process is properly planned and prepared, it can be accomplished in extended changes. Like Ford Motor Company, many car manufactures choose a retreat environment for what should be a casual but no-holds-barred examination of possibilities (Ivancevich, 2007). All of those who are to be active in the development of strategy should be invited to participate. Throughout this extended discussion, one thing must be made clear: the strategic planning process, not to mention the plan, will leverage the entire organization into an entirely new way of doing business (Levy and Merry, 1986).
The idea to introduce innovative solutions and designs is explained by the fact that car industry evolves and requires new ideas to prosper. It is a misleading and dangerous view that car production facilities are made better through internal competition, and an even more deceptive adage that each department serves internal “customers.” If either of those suppositions are the basis of internal relationships, the car company is in terminal trouble (Ivancevich, 2007). The only clients are those outside of the company who represent new revenue, not other companies that vie in the shuffling of resources. The fact is, every aspect of a company has a vested interest in all of the others (Ford Motor Company 2009). Here again, it is extremely unfortunate that most union contracts do not lend themselves to this kind of venture in common interest; nor, for that matter, do the profit-sharing schemes of corporations. In Ford Motor Company the commitment must be to the best interests of the client, assuming that is the purpose of the system’s existence. For Ford Motor Company, the question is simply whether those participating in the process will make all decisions based on the best interests of the student. It is significant that the singular form of the noun is used; “students” would weaken the commitment and would conveniently ignore the inherent problem of the individual vis-à-vis the group. All of the teams in the planning process, as pointed out earlier, will be obligated to make decisions by complete agreement (Senior, 2001).
It is important to note that the status quo approach, proposed by some economists, is a trap for car industry. It is not that people fear change they actually seek it–but they do fear loss. Only if they see some benefit accruing to them, something better, will they respond positively to strategic planning. Perhaps the most important consideration in preparing for planning is the organization’s capacity not only to develop a truly creative plan but also to actualize its plan. Surprisingly, many corporate as well as educational systems out plan their ability to manage their own creation. The result is worse than no planning at all. False promise always leads to frustration, disappointment, cynicism, and most of all, loss of credibility on the part of investors or clients (“Capitalism and the auto crisis” 2008). Often the immediate and extensive effect that the strategic plan, or a single strategic decision, will have on the total organization is drastically underestimated. Recently, industries developed a plan that produced so much new business that the back-room operations could not keep up; and one on-line service provider almost swamped itself by a seemingly innocent decision to lower its rates. This is the only danger implicit in strategic planning; that is, the planners do not count the costs in advance. The nature of strategy demands a radical transformation of the system. If a company can implement its strategy with the organization that developed the plan, then it does not have a strategic plan (Senior, 2001).
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Both purchasing situations and the decentralization of authority affect pricing policies at Ford Motor Company. Prices may vary by the quantity purchased, and the purchaser’s geographic area, trade position, and the functions he performs, as well as by the method and timing of purchases. In large, decentralized companies featuring profit-center accounting, intra-company pricing and transfer pricing, (prices charged by one company unit to another) can influence product prices and raise significant conflicting problems. Obviously, regardless of economic models, it is difficult to establish an optimum price because demand and costs change over time. The attention usually settles on current profit maximization rather than on the long-run maximization; the whole life cycle of a product and the total product line, rather than a single item, must be considered in pricing; and price must be considered from the perspective of the total marketing mix. The concepts of price or demand elasticity refers to the sensitivity of buyers to price changes. When small variations in price bring about relatively large variations in buyer reaction, the price elasticity is high. The situation is reversed for low elasticity. Since various customers react differently to price changes, knowledge of demand elasticity helps to set prices. But the major problem is that detailed data are not available (Senior, 2001). Yet, several techniques can be used to approximate elasticity, including market tests, statistical techniques of historical or cross-sectional analysis, and surveys (“Capitalism and the auto crisis” 2008).
New-product pricing adopted by Ford Motor Company presents different problems from those of pricing mature products. New products place the manufacturer more or less in a monopoly position, but one that will erode. They also create situations in which price reactions are largely guesswork. Two general pricing strategies are used here — skimming or penetration pricing. It encourages new competitors to enter the market because of attractive margins. The value characteristics of products should also be considered. Valuable items such as jewels and precious metals can bear these costs more easily than can low-value items such as lumber and coal. Variations in product lines and such features as packaging, color, size, style, and variety place a heavy burden on the distribution system (Senior, 2001). Now more products have to be handled with lower volume per item and higher costs of storage, inventory, and handling (Ivancevich, 2007). Transportation and handling costs, distant locations, and time are barriers to the development of markets. Thus, the characteristics of both production and markets shape the design of the logistical system. The interrelationship of production patterns with market patterns, coupled with company resources, will establish guidelines for choosing particular forms of inventory, transportation, distribution, and handling activities (Schien, 2000).
In order to introduce change, Ford Motor Company should develop a leadership approach which meets the needs of the industry and modern business environment. The three leadership styles applied to the car industry will be situational, transformational and charismatic leadership (“Capitalism and the auto crisis” 2008). Situational leadership will be the best approach to transform and redesign car industry. Situational leadership is influenced by motivational factors and intellectual capital. Shifting leadership function can often lead to confusion, which should be avoided with the effective management of team communications. Effective communication ensures that the team will know who is in charge and glues the team together (Schien, 2000).
As a result, in an economy of abundance a heavy burden moves from the physical production of goods to their marketing. It must be expected that costs of marketing products will increase relative to the costs of physically producing them. Marketing opportunities, innovations, research and development, and other progressive activities stem from imperfections in the marketplace. In reality, our competitive scene is often one of price confusion and not of price clarity, as is assumed by the idea of perfect competition (“Capitalism and the auto crisis” 2008). Perfect knowledge does not exist, non-price competition is important, and there are fewer and bigger buyers and sellers, contrary to the assumptions of the economist’s hypothetical competitive matrix. Technological advances, the growth of mass national markets, and the increasing resource requirements of research and development have an inevitable outcome — mass-marketing organizations. In such a setting, innovation, research and development, and advertising become significant variables; and intensely competitive situations erode even short-run monopolies (Ford Motor Company 2009).
The main issues generated from innovation will involve new corporate culture and new understanding of the car industry itself. The initial examination of resource capacity and human resources should not be a detailed analysis of the various components of the system based on correct assessment methodologies or comparison and contrast with other best companies. That would only encourage simulation and would, in fact, mire the business in the past. Rather, it should begin with an examination of the current and emerging ideologies regarding human resources–from the traditional corporation-model to the emerging natural business environments. That is to say, the employees of the company must reflect all segments and all aspects of the community. The stage of transformation will include business, governmental agencies, and other related groups (“Capitalism and the auto crisis” 2008).
In sum, in Ford Company there is a critical need to address radical change, personal inconvenience, and new accountability. The process of innovation and change itself will be instructional including decision making and problem-solving elements. Innovations will indicate the range and the method of involving persons within (and outside) the car industry in the planning process. The change process is how the plan is developed–the means, the methods, and the sequence of change activities. Typically, the change process takes approximately years of transformations to complete and follows a rather rigid, linear course from beginning to end. But unlike the transformations, which are altered only at the threat of seriously weakening the plan, the inter-organizational change often must be adapted to local conditions and requirements in order to achieve best effect. Yet, even so, the change process must never sacrifice its necessary time-on-task, results-oriented behavior and transformations. In addition, every demographic aspect of the society must be mirrored-age, gender, race, ethnicity, political and religious philosophies. New technologies and designs should be oriented to needs and expectations of modern society and new generation of people.
Capitalism and the auto crisis. (2008). World Socialist Web Site. Web.
Daft, R. L. (2003). Organizational Theory and Design. 9th Edition. South-Western College Pub; 8 edition.
Ford Motor Company (2009). Web.
Ivancevich Michael T. Matteson John M. (2007). Organizational Change, Ashford University.
Levy, A., Merry, U. (1986). Organizational Transformation: Approaches, Strategies, Theories. Praeger Publishers.
Senior, Barbara. (2001). Organizational Change, Capstone Publishing.
Schien, E. H. (2000). Organizational Culture and Leadership. Jossey-Bass.