Vertical Integration Study:Ford Motor CompanyMarketing II

Mr. Yates

Brief history of Ford Motor Company

The Ford Motor Company is an American multinational corporation based in Dearborn, Michigan, a suburb of Detroit.

The automaker was founded by Henry Ford and incorporated on June 16, 1903. In addition to the Ford, Lincoln, and Mercury brands.

Ford’s brands/relationships continued Ford also owns a small stake in Mazda in

Japan and Aston Martin in the UK. Ford's former UK

subsidiaries Jaguar and Land Rover were sold to Tata Motors of India in March 2008.

In 2010 Ford sold Volvo to Geely Automobile.

Ford will discontinue the Mercury brand at the end of 2010.

Backward or Forward Integration? Fairly balanced actually… Ford owns many of it’s means of production,

and distribution / retail networks

Backward Integration of Ford Ford tired of being held up by suppliers as he

scaled up production of cars with his assembly line and began to vertically integrate over the course of the 20’s.

He moved his plant nearer to resources in preparation of this move (from Highland Park to Rouge River MI)

Backward Integration Specifics His own railroad Control of 16 coal mines (carbon from coal +

iron makes steel) 700,000 acres of timberland Built a sawmill Acquired a fleet of Great Lakes freighters to

bring ore from his Lake Superior mines And a glassworks

A Day in 1927…(integration example) At 8 o'clock, just enough ore for the day would

arrive on a Ford freighter from Ford-owned mines and would be transferred to the blast furnaces and transformed into steel with heat supplied by coal from Ford mines in Kentucky.

It would continue on through the foundry molds and stamping mills and exactly 28 hours after arrival as ore would emerge as a finished automobile.

Integrated Systems Similar systems handled lumber for

floorboards, rubber for tires, and so on. At the height of its success Ford’s

holdings stretched from the iron mines of northern Michigan to the jungles of Brazil, and it operated in 33 countries around the globe.

Most remarkably, not one cent had been borrowed to pay for any of it. It was all built out of profits from the Model T.

Other integration efforts Ford experimented with a commercial rubber

plantation in the Amazon jungle Ford also built aircraft and aircraft engines

(during the world wars) which might have been used to ship materials

Interesting ventures… Ford long had an interest in plastics developed from agricultural

products, especially soybeans. He cultivated a relationship with George Washington Carver for this purpose.

Soybean-based plastics were already being used in Ford automobiles throughout the 1930s in plastic parts such as car horns, foam, in paint, etc.

This project culminated in 1942, when Ford patented an automobile made almost entirely of plastic, attached to a tubular welded frame. It weighed 30% less than a steel car and was said to be able to withstand

blows ten times greater than could steel. Furthermore, it ran on grain alcohol (ethanol) instead of gasoline.

Joint Ventures In 1912, Ford cooperated with Fiat to launch

the first Italian automotive assembly plants (After building successful plants in England

and Canada).