Cost Accounting of Ford Motor Company

Added on - 01 Mar 2020

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COST ACCOUNTING1
Table of contentsa) Introduction of Ford Motor Company.........................................................................................3b) Identifying and describing the value chain of Ford.....................................................................3c) Explaining the planning process in Ford Motor Company for the issues identified below........4d) Analyzing the controlling process in Ford for the issues identified below.................................6e) Providing two situations in which decision making is presented in Ford...................................9f) Summarizing the findings and recommendations......................................................................10References......................................................................................................................................112
a) Introduction of Ford Motor CompanyFord Motor Company is an American based multinational automaker company, founded on June16, 1903 by Henry Ford. The company sell economic class automobiles under the brand nameFord and sell its luxury cars under the brand name Lincoln. Ford also took over Australianperformance car and Brazilian SUV manufacturer, also manufactured tractors along withautomotive components. The company is listed in New York Stock Exchange and is controlledby the Ford family. It has 8% and 49% stake in Aston Martin, UK and Jiangling, Chinarespectively. The main aim of the company is to manufacture automobiles in large-scale. Thus, itmakes Ford the second largest car manufacturing company in United States and fifth-largest inthe world. The mission statement of Ford describes the strategies of the company that is used tocapture the worldwide market and retain its market position, also to counter the rivalries. Withrespect to this context, Ford’s vision statement mentions that the Ford has strong belief to reachhigher performance level throughout the globe. Looking forward, the management of thecompany expect another great year for our organization also, our investors in 2017. We expectour entire year results to be solid, however lower than 2016, driven principally by expandedinterests in developing open doors. We anticipate that productivity will enhance in 2018.b) Identifying and describing the value chain of FordThe concept of value chain separates wasteful activities from the activities that are useful. Acompany always focus on those activities that create values which benefits the company in manyways. For example, brand reputation, lower cost incurred in the process of manufacturing, thecompany will be able to charge higher prices etc. So by adopting the concept of value chain FordMotor Company has evolved itself as one of the major automobile companies in the world. Tostrengthen their individual identities the company will be integrating its marketing, sales andservice organizations into unified sales and marketing functions in combining two divisions ofFord and Lincoln Mercury brands. As per Steve Lyons the vice president of Ford Group, whilebeing efficient with resources, the company will be trying to reach customers in more focusedand smarter ways. This will form a new type of organization resulting in the development ofsingle-minded concentration to reach customers with better quality products. The companyprovides warranties for the delivered products usually for 60000 miles or 5 years along with theroadside assistance. When there is a increase in the price of petrol the demand for cars decreasesresulting less sales. Considering this Ford offered new cars in the market that are eco friendly,3
also the company produced all electric cars which consumes less fuel. And this again increasedthe overall sale revenue. These activities of the value chain which the Ford Motor Company willtry to integrate will result in selling of its products at higher costs than the costs incurred incombining the activities and thus the predetermined profit margin will be achieved.c) Explaining the planning process in Ford Motor Company for the issuesidentified belowIdentifying the business strategies adopted by the companyEvery company that achieve success has its own business strategies. Ford being one of thebiggest automobile manufacturing companies in the world has adopted intensive growthstrategies. The business growth of Ford is dependent on,1.Market Penetration:The first growth strategy of ford is market penetration. This meansselling of more products to the customers for the growth of business. Considering thisstrategy Ford increases the number of its dealership which will result in the increasedsales volume. Thus by highlighting the advantages of low cost Ford will attract morecustomers and will sale more of its products which will result the company to gain abigger market share.2.Product Development:This is the second business strategy that Ford uses to developand offer new products in the market for increasing the sales revenue. Ford applies thisstrategy to produce new products such as the Ford Focus Electric. The objective of thisstrategy is to increase the R&D investments for the innovation of products to improve thegrowth of business and competitive advantage.3.Market Development:This is not a major strategy, it's only a supporting strategy forFords growth. This strategy means providing new products in the market also thisstrategy involves entering into new markets. But Ford is already operating globally whichmeans this strategy is less used by the Ford as compared to early years.Thus the combination of all these strategies adopted by Ford helps in the production and deliveryof quality, reliable and innovative products in the market at low cost.Finding how the company positions itself among its rivals or competitorsHenry Ford in 1903 founded the Ford Motor Company. The company started the production ofplanes and vehicles during the World War II, since 1904 the company is operatinginternationally by opening a branch in Canada to retain the position in the market. Ford4
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