Improving Business Operations: A Case Study of Ford and GM

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Introduction to Business Operations and Services
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Table of Contents
Introduction................................................................................................................................3
Company Background................................................................................................................4
Companywide Operations Improvement Strategy.....................................................................5
Implementation of Operations Strategies to gain competitive advantage over Toyota...........11
Conclusion................................................................................................................................12
Reference List..........................................................................................................................13
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Introduction
Every company conducts a variety of operations to bring the product and service ideas of the
company to life. A firm comes up with multiple ideas that allow them the opportunity to
create new products and services that will soon be launched into the market. However, this is
not enough as with the launch of new products and services invites new implications that the
firm will face. In order to allow the operations and services of the organisation to be
successful and profitable, various elements of the operations of the company like their supply
chain, distribution network, product management, and quality management needs to be
considered.
In this report, the operations strategy of MG and Ford will be explained to tackle the market
opportunity that have been presented to them due to the downturn faced by Toyota. The
implementation of this operations strategy will allow the firm to secure bigger market shares
in the automobile industry.
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Company Background
Ford is an American multinational automobile company that was founded by Henry Ford on
the year 1903. The company has two automobile brands under their name – Ford and
Lincoln. Ford specialises in selling commercially viable vehicles under its name, while
Lincoln specialises in selling luxury cars. Ford is a public company that is owned by the Ford
family who gave limited ownership (2 percent) but has the majority if the voting power (40
percent) in the business affairs of the organisation. They have an operating income of $3.4
billion Dollars, with production output of 6.6 million vehicles annually all over the globe
(Ford Motor Company, 2019).
General Motors (GM) is an American multinational automobile firm that manufactures and
distributes automobiles, and car parts for production and repair. GM has a reputation for
being one of the world’s largest automobile firms, along with being the largest automobile
firm in the USA. The company is also famous for their various vehicle subsidiary brands, like
Chevrolet, Buic, and Cadillac, two of the moist popular automobile brands in the world and
in the USA. The company has a production output of 10 million vehicles being manufactured
all across the world every year, with operating income of $12 billion Dollars (Gm.com,
2019).
As per the case scenario, Toyota is one of the world’s largest automobile firms, located in
Japan. The company is currently facing a down in their sales, which the two above-mentioned
companies can take advantage of and fain the market share. Previously, Toyota has recalled 9
million of their vehicles for maintenance, more than what they sold in the last three years.
This has presented Ford and GM an opportunity to capitalize on the situation and attain
bugger market shares, so that American made companies can re-establish themselves as the
market leaders.
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Companywide Operations Improvement Strategy
In order to improve the strategy of the firm in conducting their operations, they need to make
sustainable operations strategies so that they can manage their operations and make them
sustainable for at least a decade so that they can deliver value to the organisation efficiently.
Operations management incorporates many elements ranging from planning of the production
stage and cycle, implementing various factors of the business into the production aspect, and
supervising all the stages of the production life cycle. Operations management also includes
the supervision and management of the daily operations and tasks of the firm that allows
them to materialise their product and service concepts.
It is important for Ford and GM to create and implement the use of an operations strategy so
that they will be better able to understand and realise their goals. Laying down an operations
strategy will allow the company to set a path to towards the achievement of their goal. The
creation of a strategy allows the company to make objectives that need to be accomplished
for achieving the overall aim of realising the operational goal of the firm (Piercy and Rich,
2015). A strategy stresses the importance of the creation of short-term activities with the aim
of achieving the long-term goals of the company. Strategic decisions are required to be taken
by GM and Ford so that all the objectives of the company can be addressed. Operations
management is centred around the achievement of short-term goals while the operations
strategy is focused on creating and achieving long-term goals, which can only be achieved by
the completion of the easily realisable goals.
The main functions of the management of operations of an automobile company are:
 Product management: This involves the research and design of the product so that
the products can be made easily with the resources available to the firm. The product
design will also allow the firm to assess the various material requirements of the firm
that is required for mass production of the automobile products in question. Efficient
product management will ensure that the production costs of the company are as low
as possible, to ensure lower operating costs and higher returns for the number of units
sold (De Beer, 2018)
 Supply Chain Management: Supply chain management involves managing the
various suppliers of raw materials of the company and maintaining their supplies so
that raw materials are available whenever required. Managing the suppliers is
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necessary because maintaining good relations with the suppliers will allow the
company to avail discounted prices in bulk purchases from the supplier in question.
 Inventory Management: Inventory management is essential for businesses because
the inventory of the companies decide their operational strategies and requirements.
Depending on the inventory of the company, the raw materials required for
production of the vehicles can be ascertained and suppliers can be contacted
accordingly to provide the necessary raw materials for production. Inventory
management is also essential, as it is one of the most important elements of business
operations (De Beer, 2018). Firms like GM and Ford are required to measure the
number of automobiles they have with them at a certain point of time, after sales.
New vehicles are made as per the storage capacity of the firm and their expected sales
for a period.
 Scheduling: This allows for the setting of the dates and times for the various
operations and the activities of the business to start. This is done in order to allow the
operations and activities to meet deadlines (Upadhyay et al., 2019). Deadlines
activities are set for all activities so that completion of goals by that period will allow
the company to gain a competitive advantage in the market. Scheduling also allow the
operations to be organised effectively, so that no two activities clash together at the
same time. Scheduling also allows activities to be organised so that one activity at a
time can be completed, which maintains the focus of the employers at one particular
goal.
In order to create an operations improvement strategy for GM and Ford, the operations
improvement framework by Hayes and Wheelwright can be used for assessing the
contributions of the operations can be implemented to improve the overall performance of the
operations strategy.
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Figure 1: Operations Improvement Framework
(Source: Göleç, 2015)
This model incorporates the use of four stages to describe the capabilities of the operations
and the impact is has on the overall aims and objectives of GM and Ford.
Stage 1: Rectification of issues (Internally Neutral)
This is the first stage in the operations improvement process. This stage is centred on solving
the various issues that are faced by the companies during their production and manufacturing
phase. This stage ase4sses the negative potential of the organisation, present in their
manufacturing processes. This stage takes an “internally neutral” approach towards solving
the issues of the company. This process s called neutral because it is deemed incapable of
affecting the competitive advantages of the corporation.
It only seeks to remove any negativity that is present in the operations of the company related
to their production cycle. It is not expected by the company that the operations of the firm in
this stage will make any significant contributions to the overall improvement of the
operations management strategy (Furlan and Vinelli, 2018). The manufacturing aspect of the
company is kept flexible so that decisions can be taken to change them whenever necessary.
In the production process, lower skilled workers are employed, while experienced employees
are called in to take necessary decisions regarding the operations that are being conducted by
the organisation, especially internal operations systems so that the performance of the
operations can be monitored and production is increased.
Stage 2: Adoption of Preferable Practices (Externally Neutral)
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In the second stage of the operations management strategy, various important tactics and
methods are applied so that the firm can become externally neutral, or follow the industry
standards set by the competitors. This maintains the neutrality of the organisation in the eyes
of the competitors, so that a price war is not started. In order to align themselves with
industry practices, capital investments that are made by GM and Ford are recognised and
calculated so that the correct amount of capital is collected so that the operations of the
company can become better and more efficient, as per industry standards.
It is important for both the firms to follow the industry practice because it allows them to
know about the modern trends and practices that are being performed by competitors, to gain
an advantage in the market (Fan et al., 2017). This is considered where the contributions of
the operations are significant to allow the GM and Ford to gain a strategic and marketing
advantage over Toyota. The strategies that are developed and adopted by the firm here are
mostly done to reduce the operating costs of the company and increase the efficacy of the
production process of the firm.
Stage 3: Linkage of strategy with operations (Internally Supportive)
In the third stage, the strategies that are developed by GM and Ford are linked with the
operations of the company. This linking of strategies is done so that it can be ascertained that
the strategies will effectively improve the quality of the operations that are being conducted
by the firm. This is ascertained so that it can be proven that the strategies that are about to be
implemented by the organisation can be linked to the objectives if the firm, and help the firm
get a competitive advantage over their competitors. In this case, the approval of the strategies
will allow GM and Ford to gain a strategic advantage over Toyota. This stage is represented
as Internally Supportive as all the decisions of the firm taken now will provide the
organisation with a competitive advantage in the marketplace (Shenoy, 2019).
In this stage, the company is expected to take innovative and risky decisions for the
implementation of new strategies for improvement of operations of the company.
Technological progress should be ascertained here to measure the efficacy of the strategies
that are about to be implemented by the organisation. This will help GM and Ford to
ascertain the long-term effectiveness of the plan; to ensure that the strategy will be effective
for the organisation for the next decade. This stage is essential for the companies as it will
allow them to link their strategies to their overall operational and management aims for
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competitive advantage (Ungan et al., 2015). The linkage will support the strategy that will be
taken by the organisation.
Stage 4: Providing an operational advantage (Externally Supportive)
In the final stage of the framework, the operations managers are required to recognise their
own roles in the strategy that is about to be implemented so that they are better able to
provide their expertise in the implementation of this strategy. This allow them to implement
the operations is a way that it is aligned with the objectives of the company and provides a
competitive advantage (Muchiri et al., 2017). The future operational trends are also assessed
in this step so that the future trends can be anticipated. After that, the operations are changed
to suit the future needs that may arise in the next decade, along with the operational strategies
that can be implemented by Toyota to gain a competitive advantage. Therefore, the long-term
goals of the organisation can be assessed and justified with the operations of the company.
Manufacturing in this segment is considered as a core operation for the firms to gain a
competitive edge in the marketplace. This step is called externally supportive because it aims
at seeking a balance in reducing the operational and production costs of the company, all the
while seeking to provide better quality products to gain a competitive advantage (Krishnan,
2016).
Along with the aforementioned concept, Total Quality Management can also be
implemented to improve the quality of the operations of the company to achieve competitive
success in both the short and long terms.
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Figure 2: Total Quality Management
(Source: Ross, 2017)
In this model, the quality of the production aspect is kept in mind to improve the quality of
the products and increase the customer satisfaction level. The company should ensure that the
various factors present in their production cycle – the employees, the raw materials, and the
management of the operations – are to be improved to enable the improvement of the total
production process. In this process, the issues that are present in the operations of the
company are analysed (Aquilani et al., 2017). Therefore, MG and Ford need to analyse their
operations and review them, so that all issues are identified, and then prepare effective
strategies to resolve those issues. These issues are required to be present in the production
and other operational functions of the company. The production of the company needs to be
aligned with the various stakeholders of the company. This will ensure that the products that
are created will satisfy the various stakeholders of the company like the employees,
customers, and the investors.
The issues that can be identified should also be related to the supply chain of the
organisation. It is necessary for MG and Ford to maintain good relations with their suppliers
so that they can avail raw materials at lower prices. This will allow the firm to lower their
operating costs and incur a higher profit margin (Jiménez-Jiménez et al., 2015). Apart from
this, the processes for the operations also needs to be improved, this can be done by
effectively training the employees to work more productively. The production system of the
company should be standardised so that the produced automobiles are up to the standards,
which can be set after measuring the quality standard of the products sold by the competitors,
which is Toyota as per the case study.
Toyota is known for their high quality automobiles, which sets a challenge for Ford and GM.
The distribution network of the company also needs to be improved so that the automobiles
can be delivered to the customers on time. The various problems of the company can this be
solved by improving the various functional operations of the company related to the
production of the automobiles, allowing them to satisfy the customers more (Psomas and
Jaca, 2015).
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Implementation of Operations Strategies to gain competitive advantage over Toyota
GM and Ford can implement many operations strategies that will enable them to gain a
bigger market share and overtake Toyota in the competition. Following the model of Total
Quality Management, the companies can provide adequate training to the employees of the
organisation so that they can become better capable to handle all the production duties of the
organisation. This will enable the organisation to produce better automobiles that can
challenge Toyota in the automobiles race. Along with providing training to the employees,
the operations process of production can also be improved to provide better products that
provide the customer with more satisfaction. This is important for the firm in order to
generate more sales, more income, and retain the customers.
As per the supply chain of the organisation, better relations are required to be kept with them.
This will allow the company to earn discounts when they purchase supplies and raw materials
with them in bulk, which large automobile companies generally do. This will allow them to
avail discounts, reducing their supplier’s costs, lowering the suppliers bargaining power, and
getting higher quality supplies (Chiadamrong and Tham, 2018).
The tasks that are allocated to the employees should also be allocated as per their skill, so that
the work that is performed by the employees is of higher quality. This will also ensure that
the work is completed on time and is done effectively. Work allocation based around the skill
of the employee is necessary in modern automobile market. The employees should also be
recruited using a more stringent process, so that the most capable recruits are chosen to
become employees in the company. This will ensure that the organisation is staffed with the
most capable recruits, that will become an important asset for the company (Obeidat et al.,
2016).
Apart from the aforementioned factors, the aims and objectives of the company need to be
realised by the company. This must be done to ensure that all the employees and the
management are on the same page regarding the operations that are required to be conducted.
This will allow the operations to be relevant in the improvement of the competitive advantage
of the firm and increase their quality of the operations.
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Conclusion
It is necessary for business firms to manage their operations so that it is made more effective
by improving the various factors that help in conducting said operations. As per the case
scenario, if GM and Ford can get a bigger market share if they are able to aggressively
improve the quality of their automobiles if they can manage their operations well. The
various stages in production, from gathering supplies, to creating the automobiles, and then
distributing them effectively, all need to be managed efficiently for the most profitable
results. The production of high quality automobiles’ will allow Ford and GM to satisfy and
retain their consumer base and the automobiles market, allowing them to capture the market.
This will significantly allow American automobile companies to be the market leader in the
USA, beating out Toyota.
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