IFE Matrix Slide 2018

FORD MOTORS IFE MATRIX CASE STUDY FROM STRATEGIC MANAGEMENT BY DAVID

1. I 1 THE INTERNAL FACTOR EVALUATION MATRIX [ IFE MATRIX ] CHAPTER 6 : THE INTERNAL AUDIT PREPARE BY GROUP 10 : NURHIMA ZULPADHLI ASYSYUARAH

2. Textbook: According to Fred R. David , the strategic management process consists of 3 stages , which is Strategy Formulation , Strategy Implementatio n and Strategy Evaluation. However, the process of identifying or determining internal strengths and weaknesses factors of an organization is included in the Strategy Formulation. A summary step in conducting and internal strategic-management audit is to construct an Internal Factor Evaluation (IFE) Matrix . It allow strategies be conducted 2 INTRODUCTION I Fred R. David introduces the IFE and EFE Matrix in his book ‘Strategic Management’.

3. Purposes of IFE Matrix To summarizes and evaluates the major strengths and weaknesses in the functional of business. Provides a basis for identifying and evaluating relationships among those areas. 3 Cont.. When developing an IFE Matrix, intuitive judgments are being required. Intuitive judgment means a decision reached based on subjective feeling. The authors also claims that a thorough understanding of the factors included is more important than the actual number .

4. 4 5 STEP DEVELOP IFE MARIX 01 List Key Internal Factors 02 Assign The Weight 03 Assign Rating 04 Multiple Each Factor Weight 05 Sum The Weighted Score 4 START END

5. 5 List 20 Key Internal Factors As Identified In The Internal-audit Process. The 20 internal factors, includes the listing of 10 strengths & 10 weaknesses factors of an organization. The list of the factors should be specific as possible , it may using percentages, ratios or comparative numbers In addition, the factors included should be ‘Action-able ’ and divisional as possible. 01

6. 6 Category: Strengths Production Sales Management Marketing Advertising Service CSR Finance Finance Weaknesses Finance Operation Service Customer Service Finance Marketing Service Customer Service

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8. 8 Assign A Weight That Ranges From 0.0 (Not Important) To 1.0 (All-important) The weight assigned to a given factor indicates the relative importance of the factor to being the successful in the firm’s industry . The Factors considered to have greatest effect on the organization performance should assigned the highest weight. Both strengths and weaknesses can received high weights. Moreover, the summation of all weight must be equal to 1.0. The weight given is actually an industry-based. 02

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10. 10 Assign Rating Between 1 To 4 To Each Factor Assigning the rating to each factor to indicate whether that factor represents: - A major weakness (rating = 1 ) - A minor weakness (rating = 2) - A minor strength (rating = 3), or - A major strength ( rating = 4). Note that strengths must receive a 3 or 4 rating and weaknesses must receive a 1 or 2 rating. Ratings are thus company-based. 03

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12. 12 Multiply Each Factor’s Weight By Its Rating To Determine A Weighted Score For Each Variable. Weight X Rating = Weighted Score 04

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14. 14 Sum The Weighted Score. Sum the weighted scores for each variable to determine the total weighted score for the organization. Regardless of how many factors are included in an IFE Matrix, the total weighted score can range from a low of 1.0 to a high of 4.0, with the average score being 2.5. Total weighted scores well below 2.5 characterize organizations that are weak internally, whereas scores significantly above 2.5 indicate a strong internal position . The total weight score, determine: 05 1.0 2.0 2.5 3.0 4.0 (Low) Average (High) Organization Weak Internally Organization Strong Internally

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16. Analysis 16 This store receives a 2.5 total weighted score, which on a 1 to 4 scale is exactly average/ halfway, indicating there is definitely room for improvement in store operations, strategies, policies, and procedures . The IFE Matrix provides important information for strategy formulation . This retail computer store might want to hire another checkout person and repair its carpet, paint, and bathroom problems . The store may want to increase advertising for its repair/services, because that is a really important (weight 0.15) factor to being successful in this business

17. 17 Constructing IFE Matrix For Ford Motor Co.

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19. 19 Key Internal Factors Weight Rating Weighted Score Strengths 3 or 4 1 Largest manufacturing expansion in over 50 years by increasing capacity in six US plants and by opening two new plants in Asia and one each in South America and Europe. 0.07 4 0.28 2 Since 2005, Ford’s warranty repairs have declined 66% for vehicles in the first three months of service with average warranty costs falling 54%. 0.08 4 0.32 3 The new F-150 comes with a 2.7-liter V6 Eco Boost engine, giving it the same power as a V8, with much better fuel economy. 0.07 4 0.28 4 To improve safety, Ford now include Blind Spot Information Systems, lane alerts, and rear parking assistance. 0.10 4 0.40 5 In 2014, Ford launched more vehicles than ever before. Ford proud of offering its new Mustang for the first time ever in select markets in Europe and Asia. 0.04 3 0.12 6 In 2013, Ford sold over 85,000 hybrid or all electric, plug-in automobiles, up 150% from 2012 as the company attempts to produce ‘Tesla’ for the average person. 0.04 4 0.16 7 Ford derives approximately 60% of its revenues from the USA, Canada, and Mexico. Virtually all the company’s profits in 2014 came from these countries. 0.05 4 0.20 8 Labor expenses were reduce after labor unions agreed to concessions. 0.01 3 0.03 9 The Ford Explorer has recently been shift to become more of a SUV style along with several other popular SUV models. 0.07 4 0.28 10 The Ford Fiesta and Ford Fusion are excellent cars in the small- and mid-size categories respectively. 0.04 3 0.12 Step 1: List Key Internal Factors 01

20. Key Internal Factors Weight Rating Weighted Score Strengths 3 or 4 1. Largest manufacturing expansion in over 50 years by increasing capacity in six US plants and by opening two new plants in Asia and one each in South America and Europe. 0.07 4 0.28 20 Internet: Ford add close to 3,500 hourly jobs to meet customer demand for the company’s best-selling vehicles . Ford add an additional 200,000 units of annual straight-time capacity this year after increasing annual straight-time capacity by 400,000 units in the region last year . Ford shorten its summer shutdown from the traditional two weeks to one week for a majority of North American assembly plants, increasing production by an extra 40,000 units 02 03

21. Key Internal Factors Weight Rating Weighted Score Strengths 3 or 4 2. Since 2005, Ford’s warranty repairs have declined 66% for vehicles in the first three months of service with average warranty costs falling 54%. 0.08 4 0.32 21 Internet: Ford Motor Company's steady vehicle quality improvement in recent years is beginning to translate into significant savings for the company and fewer repairs. Save cost for covering warranty claim from customer . Global warranty repairs have fallen 66% from 2005 to 2013. Over the same period, global warranty repair cost per unit has improved by 54%, including improvements of more than 70% in Asia Pacific Africa, more than 60% in Europe and South America, and about 45% in North America . 02 03

22. Key Internal Factors Weight Rating Weighted Score Strengths 3 or 4 3. The new F-150 comes with a 2.7-liter V6 Eco Boost engine, giving it the same power as a V8, with much better fuel economy. 0.07 4 0.28 22 Internet: First Ford truck engine with automatic stop/start capability. Specifically tuned for truck customers, this technology shuts off the engine when the vehicle is at a stop (except when towing or in four-wheel drive). Once the brake is released the engine restarts quickly. Base on the chart, Ford F-150 2.7L EcoBoost was on top 3 where it consume 1 gallon of fuel for 23.8mile/ 38.3km It shows that the engine can save oil consumption and good for customer because they can save on fuel . 02 03

23. Key Internal Factors Weight Rating Weighted Score Strengths 3 or 4 4. To improve safety, Ford now include Blind Spot Information Systems, lane alerts, and rear parking assistance. 0.10 4 0.40 23 Internet: This is apparent in the approach they take to ensuring the safety of their vehicles, and the customer that drive and ride in them . Ford’s has always considered the safety of their customers to be one their most important jobs. Such features greatly help the driver to drive safer and it is perfect for customers who are not good at driving . 02 03

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26. Key Internal Factors Weight Rating Weighted Score Strengths 3 or 4 5. In 2014, Ford launched more vehicles than ever before in a single calendar year, including a new Mustang and F-150. Ford is especially proud of offering its Mustang for the first time ever in select markets in Europe and Asia. 0.04 3 0.12 26 Internet: The all-new F-150 launched in the fall of 2014 is the first mass-market pickup truck with an aluminum-alloy body, which improves fuel economy. In addition, its stronger steel frame contains more high-strength steel, which enables the F-150 to tow even heavier loads . 02 03

27. More than 8,000 Mustangs sold in Europe, customers show preference for fastback body style, 421 PS 5.0-litre V8 engine, and Race Red and Magnetic Grey colors 27 Aggressive new car launches these past two years, including the launches of the F-150, Mustang and Edge , succeeded in setting new business performance records for Ford in the second quarter of 2015. Ford reported its highest quarterly profit in 15 years , with a pre-tax profit of USD 2.9 b and net income of USD 1.9b.

28. Ford F-150 28 2014 Ford F-150 2018 Ford F-150 2019 Ford F-150

29. Ford Mustang 29 2019 Ford Mustang 2018 Ford Mustang 2014 Ford Mustang

30. Ford Motor Co Financial R esult 30

31. Key Internal Factors Weight Rating Weighted Score Strengths 3 or 4 6. In 2013, Ford sold over 85,000 hybrid or all electric, plug-in automobiles, up 150% from 2012 as the company attempts to produce what one executive called a Tesla for the average person. 0.04 4 0.16 31 Internet: Calendar year 2013 hybrid market sales saw the Prius “family” decline from 2012 totals. This was presumably due to new competition, particularly from Ford.   The huge increase in sales means that Ford is now second only to Toyota concerning hybrid vehicle sales in the US. In addition, Ford’s share of the US hybrid market is continuing to grow . 02 03

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34. Ford has attributed the Big Increase In Sales to the strength of its new array of Electrified Vehicles : 34 2013 Ford C-Max Hybrid $8,771 2019 Ford C-Max Hybrid $10,071

35. 35 2013 Ford Fusion Hybrid 2019 Ford Fusion Hybrid 2013 Ford Lincoln MKZ Hybrid 2019 Ford Lincoln MKZ Hybrid

36. Key Internal Factors Weight Rating Weighted Score Strengths 3 or 4 7. Ford derives approximately 60% of its revenues from the USA, Canada, and Mexico. Virtually all the company’s profits in 2014 came from these countries. 0.05 4 0.20 36 Internet: Ford Motor Company was one of many companies able to benefit by optimizing its manufacturing operations without the distortion of tariffs and other customs barriers . The North American Free Trade Agreement (NAFTA) entered into force on January 1, 1994, eliminating most barriers to free trade between the United States, Canada, and Mexico . 02 03

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38. The country has a relatively skilled and low-cost labor force 38 There are several benefits to Ford of manufacturing in Mexico: Well located geographically to ship to the U.S. or South America Has wide-ranging trade agreements, and has government policies promoting exports Increasing number of Mexican graduates from engineering and technical schools, which have expanded the pool of skilled labor Allows for duty-free importation of raw materials, components and equipment needed in the manufacture of goods for subsequent export.

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40. Key Internal Factors Weight Rating Weighted Score Strengths 3 or 4 8. Labor expenses was reduce after labor unions agreed to concessions . 0.01 3 0.03 40 Textbook: Wages, the second-largest expense, historically have been about $70,000 per employee in the US and account for 5% of total revenue expenses. Higher commodity prices and wage expenses forced GM and Chrysler to reach similar cost-cutting labor agreements in concessionary deal with United Auto Workers. Finally, Labor expenses were reduced after labor unions agreed to concessions. Internet: The UAW agreement, which includes concessions, intended to reduce operating costs and a change in the way Ford funds a union-aligned healthcare trust, aimed at making Ford competitive with the U.S. operations of foreign carmakers. 02 03

41. Key Internal Factors Weight Rating Weighted Score Strengths 3 or 4 9. The Ford Explorer has recently been shift to become more of a SUV style along with several other popular SUV models. 0.07 4 0.28 41 Internet: The Explorer helped define the SUV segment and sales in the U.S. peaked at 445,000 in 2000. Nearly 7 million have sold since the SUV debuted in 1990. Ford will rethink to make it more fuel-efficient and nimble to drive. Explorer has been a popular and successful vehicle. Ford Explorer has become one of the nation's most popular police cruisers. It just crossed the 50% market share threshold for the first time since it introduced in 2012. 02 03

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43. Key Internal Factors Weight Rating Weighted Score Strengths 3 or 4 10. The Ford Fiesta and Ford Fusion are excellent cars in the small- and mid-size categories respectively. 0.04 3 0.14 43 Textbook: Subcompact Cars on Market Share The smaller cars popular include the Ford Fiesta, Chevrolet Sonic and Toyota Yaris which can start as low as $15,000. Midsize Cars on Market Share A lso extremely popular, taking much of the market share away from larger vehicles. E.g. cars Ford Fusion, Chevy Malibu, and Toyota Camry. 02 03

44. 44 Small/Subcompact Cars on Market Share

45. 45 Midsize Cars on Market Share

46. Key Internal Factors Weight Rating Weighted Score Weakness 1 or 2 1 Ford reported EBT of negative $1.1 billion in both Europe and South America in 2014. 0.06 1 0.06 2 Ford is in the midst of a $400 million restructuring program in Europe and anticipates Europe will become profitable sometime in 2015 or 2016. 0.02 2 0.04 3 Net income dropped by 56% in 2014. 0.02 1 0.02 4 In 2013, Ford only enjoyed a 5% Chinese market share. 0.04 2 0.08 5 Ford planned to invest $6 billion between 2013 and 2016 to shift automobile production to the USA. 0.04 1 0.04 6 The US EPA has linked Ford to 42 toxic waste sites and the firm continues to be criticized for producing gas guzzling large vehicles. 0.05 2 0.10 7 Ford recalled over 220,000 vehicles in January 2015 for faulty door handles and seat belt fasteners. 0.09 1 0.09 8 In 2014, Ford’s revenue and net income decline dramatic. 0.05 1 0.05 9 Ford currently has $374 million in current pension liabilities and $9,721 million in non-current pension liabilities. 0.03 2 0.08 10 Ford Cancels a $1.6 Billion Mexico Plant. 0.03 2 0.06 TOTAL 1 2.79 46 Step 1: List Key Internal Factors 01

47. Key Internal Factors Weight Rating Weighted Score Weakness 1. Ford reported EBT of negative $1.1 billion in both Europe and South America in 2014. 0.06 1 0.06 47 Internet: Pretax earnings is a company's income after all operating expenses, including interest and depreciation, have been deducted from total sales or revenues, but before income taxes have been subtracted. Also known as pretax income or earnings before tax (EBT). 02 03

48. 48 Base on charts, full-year pre-tax loss was $ 1.2b. This happened was caused by unfavorable exchange, higher costs (primarily driven by higher inflation), and lower volume, offset partially by favorable net pricing. The full year loss includes $426 million of adverse balance sheet exchange effects, related primarily to the devaluation of the Venezuela bolivar in the first quarter

49. 49 Base on chart, Ford pre-tax loss show improvement where it decrease from $1.4 billion to $1.1 billion The improvement in pre-tax results is more than explained by higher volume and lower cost, offset partially by Russia and other factors, including lower component pricing and parts and accessories profits.

50. Key Internal Factors Weight Rating Weighted Score Weakness 2. Ford is in the midst of a $400 million restructuring program in Europe and anticipates Europe will become profitable sometime in 2015 or 2016. 0.02 2 0.04 50 Internet: Ford Business Restructuring - Europe The plan included the closure of two U.K. facilities an assembly plant in Southampton, and a stamping and tooling plant in Dagenham in 2013, and a major assembly plant in Genk, Belgium by the end of 2014. Ford current estimate of total separation-related costs for the U.K. and Genk facilities is approximately $1 billion, excluding approximately $200 million of pension-related costs. This restructuring program cost Ford a lot of money. 02 03

51. Key Internal Factors Weight Rating Weighted Score Weakness 3. Net income dropped by 56% in 2014. 0.02 1 0.02 51 Internet: Ford net income dropped from the previous year, primarily because of higher costs, lower volumes and a series of surprising setbacks . Industry analysts said that Ford’s 2014 results were mostly because Ford is investing heavily in revamping its product line-up, launching 23 vehicles in 2014 Ford Motor Co. posted a 56-percent drop in net income in 2014 to $3.2 billion, bogged down by the cost of introduction of 22 new vehicles globally as well as by a drop in its share of the United States auto market. Heavy investment to expand Asian operations and restructure its troubled European division at the same time it was grappling with poor economic conditions in South America and Europe . 02 03

52. Base on income statement, it clearly show that net income dropped from $7,182 billion in 2013 to $3,187 in 2014 .

53. Key Internal Factors Weight Rating Weighted Score Weakness 4. In 2013, Ford only enjoyed a 5% Chinese market share. 0.04 2 0.08 53 Internet : Reason why ford market share in china still small : C ompete with the $9,500 Chevrolet Sail Ford cars are expensive. In a market where 70 percent of vehicles sold cost less than $14,500, Ford's cheapest car is the Fiesta, which starts at $13,300 . Ford's development costs are also steep compared with competitors' because it still does much of the research and design for Chinese vehicles at its headquarters in Dearborn, Michigan, where costs are relatively high . 02 03

54. Key Internal Factors Weight Rating Weighted Score Weakness 5. Ford planned to invest $6 billion between 2013 and 2016 to shift automobile production to the USA. 0.04 1 0.04 54 Internet: Automotive assembly compensation is approximately 80% lower in Mexico then in the United States and low wages. 02 03

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56. Low production costs and low tariffs due to the broad reach of Mexico’s Free Trade Agreements (FTAs) made it possible for the country to emerge as a prime export base. 56 Mexico: Exports from Mexico to 44 countries are exempt from tariffs, including the 10% tariff the European Union assign to imported motor vehicles.

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61. Key Internal Factors Weight Rating Weighted Score Weakness 6. The US EPA has linked Ford to 42 toxic waste sites and the firm continues to be criticize for producing gas guzzling large vehicles. 0.05 2 0.10 61 Internet: In 2006, The Upper Ringwood’s residents sued Ford in a New Jersey state Court for properly damage and personal injuries, citing the improper disposal of waste from the Mahwah plant.   Ford failed to tell more than 600 residents how dangerous, the waste was and that Ford has yet to properly clean it up. 02 03

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64. Key Internal Factors Weight Rating Weighted Score Weakness 7. Ford recalled over 220,000 vehicles in January 2015 for faulty door handles and seat belt fasteners. 0.09 1 0.09 64 Internet: The Dearborn automaker is recalling 205,000 2010-13 Ford Taurus, Lincoln MKS and Ford Police Interceptor sedans due to an issue with the spring that controls the interior door handles . Ford said the door could become unlatched in a side-impact crash, increasing the risk of injury . 02 03

65. 65 Ford Lincoln MKS Ford Police Interceptor Ford Taurus

66. Ford is also recalling 16,100 2014 Ford Transit Connect Vans for a potential issue with safety belt fasteners that may not have been tightened properly. 66

67. Key Internal Factors Weight Rating Weighted Score Weakness 8. In 2014, Ford’s revenue and net income decline dramatic. 0.06 1 0.06 67 Internet: Ford’s net income fell to $52m, largely due to an $800m charge from Venezuelan currency, controls and constraints on what it can build and sell in the country. In South America, Ford’s losses ballooned to $1.2bn as the company ware hit by import restrictions in Argentina and a weaker economy in Brazil . Ford spent heavily to introduce a record 24 vehicles worldwide, including a redesigned Mustang and the new aluminum-body F-150 pickup truck. Ford struggled with higher warranty costs, including a $500m charge for the recall of 850,000 vehicles with defective air bags. Ford cut its full-year pre-tax earnings forecast from $8bn to $6bn. The company ended up hitting that lower target earning $6.3bn in pre-tax profits 02 03

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69. Key Internal Factors Weight Rating Weighted Score Weakness 9 Ford currently has $374 million in current pension liabilities and $9,721 million in non-current pension liabilities. 0.03 2 0.06 69 Internet: The term pension liability refers to the amount of money that a Ford’s has to account for in order to make future pension payments. Ford’s long-term strategy is to reduce the risk of Ford’s funded defined benefit pension plan. The strategy reduces balance sheet, cash flow, and income exposures and, in turn, reduces our risk profile. 02 03

70. Key Internal Factors Weight Rating Weighted Score Weakness 10. Ford Cancels a $1.6 Billion Mexico Plant. 0.03 2 0.06 70 Internet: Ford cancel plans unveiled to spend $1.6 billion to build the new plant in San Luis Potosi, Mexico due to market demand  there is no volume & the demand that Ford’s expected for that plant. Ford has seen small cars markedly decline. After look at Ford’s capacity and forecast for demand. It became very clear that Ford’s did not need this plant. Minister of Economy, Mexico claimed that it regrets Ford’s decision and has ensured that the company will reimburse San Luis Potosi state for any costs associated with the investment 02 03

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72. Step 4: Multiple each factor's weight 72 04

73. 73 Step 5 : Sum the weighted score 05 Total Weighted Score = 2.79

74. Analysis : Ford have strong internal organization. Overall , Ford Motor Company in 2015 receives a 2.79 total weighted score, which on are 1 to 4 scale is exactly above average. This is indicates that a lot improvement need to do by Ford’s. Based on weakness key internal by Ford the most problems occur in their product is door handles and seat belt fasteners (weighted of 0.09 ). This IFE Matrix provide important information for strategy formulation such as Ford might want to do intensive R&D on their product or want to find other alternative to settle this problem.

75. THANK YOU FOR YOUR ATTENTION ANY QUESTION? 75

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78. 78 Key Internal Factors Category Strengths 1 Largest manufacturing expansion in over 50 years by increasing capacity in six US plants and by opening two new plants in Asia and one each in South America and Europe. Production & Operation 2 Since 2005, Ford’s warranty repairs have declined 66% for vehicles in the first three months of service with average warranty costs falling 54%. Warranties 3 The new F-150 comes with a 2.7-liter V6 Eco Boost engine, giving it the same power as a V8, with much better fuel economy. R&D 4 To improve safety, Ford now include Blind Spot Information Systems, lane alerts, and rear parking assistance. R&D 5 In 2014, Ford launched more vehicles than ever before. Ford proud of offering its new Mustang for the first time ever in select markets in Europe and Asia. Marketing & Production 6 In 2013, Ford sold over 85,000 hybrid or all electric, plug-in automobiles, up 150% from 2012 as the company attempts to produce ‘Tesla’ for the average person. R&D, Marketing &Production 7 Ford derives approximately 60% of its revenues from the USA, Canada, and Mexico. Virtually all the company’s profits in 2014 came from these countries. Finance 8 Labor expenses were reduce after labor unions agreed to concessions. Management & Finance 9 The Ford Explorer has recently been shift to become more of a SUV style along with several other popular SUV models. R&D & Marketing 10 The Ford Fiesta and Ford Fusion are excellent cars in the small- and mid-size categories respectively. Pricing & Production Weakness 1 Ford reported EBT of negative $1.1 billion in both Europe and South America in 2014. Finance 2 Ford is in the midst of a $400 million restructuring program in Europe and anticipates Europe will become profitable sometime in 2015 or 2016. Finance & CSR 3 Net income dropped by 56% in 2014. Finance 4 In 2013, Ford only enjoyed a 5% Chinese market share. Finance 5 Ford planned to invest $6 billion between 2013 and 2016 to shift automobile production to the USA. Management & Operation 6 The US EPA has linked Ford to 42 toxic waste sites and the firm continues to be criticized for producing gas guzzling large vehicles. R&D 7 Ford recalled over 220,000 vehicles in January 2015 for faulty door handles and seat belt fasteners. Warranties 8 In 2014, Ford’s revenue and net income decline dramatic. Finance 9 Ford currently has $374 million in current pension liabilities and $9,721 million in non-current pension liabilities. Finance 10 Ford Cancels a $1.6 Billion San Luis Potosi, Mexico Plant. Finance & Management