Ford and Toyota Case Study

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1a.Describe the history of Ford, its current business, operating sectors, and reportable segments. Ford Motor Company was incorporated in Delaware in 1919. They acquired the business of a Michigan company, also known as Ford Motor Company, which had been incorporated in 1903 to produce and sell automobiles designed and engineered by Henry Ford. They are one of the world’s largest producers of cars and trucks. They and their subsidiaries also engage in other businesses, including financing vehicles. They have two operating sectors: automotive and financial services. Within these sectors, their business is divided into reportable segments based upon the organizational structure that they use to evaluate performance and make decisions on resource allocation, as well as availability and materiality of separate financial results consistent with that structure. Automotive segment is divided into “Ford North America”, “Ford South America”, “Ford Europe”, “Ford Asia Pacific Africa”, “Volvo”. Financial services consist of two reportable segments, “Ford Motor Credit Company” and “Other Financial Services”. 1b. Describe the factors affecting Ford’s profitability and factors affecting the automotive industry in general. (P4) The profitability of their business is affected by many factors, including: * Wholesale unit volumes;

* Margin of profit on each vehicle sold; which in turn is affected by many factors, including; * Mix of vehicles and options sold;
* Costs of components and raw materials necessary for production of vehicles; * Level of “incentives” and other marketing costs;
* Costs for customer warranty claims and additional service actions; and * Costs for safety, emissions and fuel economy technology and equipment; and * As with other manufacturers, a high proportion of relatively fixed structural costs, including labor costs, which mean that small changes in wholesale unit volumes can significantly affect overall profitability. The worldwide automotive industry, Ford included, is affected significantly by general economic conditions over which they have little control. The decision whether to purchase a vehicle may be affected significantly by slowing economic growth, geo-political events, and other factors (including the cost of purchasing and operating cars and trucks and the availability and cost of credit and fuel).

1c. Compare the nature of Ford’s history, business sectors, and reportable segments to those of Toyota. Toyota Motor Corporation is a limited liability, joint-stock company incorporated under the Commercial Code of Japan and continues to exist under the Corporation Act. Toyota commenced operations in 1933 as the automobile division of Toyota Industries Corporation (formerly, Toyoda Automatic Loom Works, Ltd.). Toyota became a separate company on August 28, 1937. In 1982, the Toyota Motor Company and Toyota Motor Sales merged into one company, the Toyota Motor Corporation of today. As of March 31, 2010 Toyota operated through 522 consolidated subsidiaries and 226 affiliated companies, of which 56 companies were accounted for through the equity method. Differed from Toyota, Ford turned into the Corporation of today by acquirement. Toyota has three business segments. Besides the two which Ford has, Toyota’s third segment is “all other operations”. Additionally, Toyota has a more detailed division of the business sectors. Therefore, they have more reportable segments. Toyota’s automotive operations include the design, manufacture, assembly and sale of passenger cars, minivans and commercial vehicles such as trucks and related parts and accessories. Toyota’s financial services business consists primarily of providing financing to dealers and their customers for the purchase or lease of Toyota vehicles. Toyota’s financial services also provide retail leasing through the purchase of lease contracts originated by Toyota dealers. Related to Toyota’s automotive operations is its...
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