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Ford Motor Company. Design and Governance of the End User Interface Spring 2000 BA 266: 2000-3. Ford Decisions & Generalizations. Channel Design Options Determining EUI Value-Added Trade-offs Pooling the EUI Product Assortment Controlling Competition among EUI Governance Options

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Ford motor company

Ford Motor Company

Design and Governance of the End User Interface

Spring 2000

BA 266: 2000-3

Ford decisions generalizations
Ford Decisions & Generalizations

  • Channel Design Options

  • Determining EUI Value-Added Trade-offs

  • Pooling the EUI Product Assortment

  • Controlling Competition among EUI

  • Governance Options

  • Applying Pressure

  • Dismembering Channels and Conflict

  • Inventory Risk and Governance

  • Old Chinese Proverb

Eui design options
EUI Design Options

  • Return to smaller dealerships

  • Ignore service problem, continue shift to larger dealer/service centers

  • Separate, localized service locations

    • Operated by dealers

    • Third parties (sub-franchisees, contractors)

    • Operated by Ford

  • Warehouse channel to hold dealer inventory

Eui v a trade off
EUI V-A Trade-off

  • Increasing the distance of the EUI to the end user diminishes the V-A provided, ceteris paribus

    • Closeness to the end user enhances access, but will reduce market size available to the EUI

    • Holding assortment constant, product turnover decline

    • Broader assortment V-A is more feasible as the EUI distance to EU increases

  • Corollary: There is a trade-off in the provision of assortment and access services by an EUI

Ford motor company

The Evolving Auto Channel?



S&S Dlr.

S&S Dlr.

S&S Dlr.

S&S Dlr.

S&S Dlr.



S&S = Sales and Service

Pooled eui product mix
Pooled EUI Product Mix

  • The auto dealer provides a pooled mix of products (new & used cars) and repair services

  • For early dealers, there was a match in end user access requirements and mix components

  • With growth in supplier product line, TV advertising, there is a separation

  • Corollary: Maintenance of a product mix with different end user V-A needs damages the channel equilibrium for products and service

Eu service needs
EU Service Needs

  • What benefits do end-users seek in their selection of an auto-service center?

    • Role of cost/price

    • Role of service quality (right the first time, fast)

    • Role of assortment, service capability (complexity)

    • Role of personal treatment by sales personnel

    • Role of distance

  • How effectively can these services needs be satisfied within a centralized facility?

Ford motor company

Two Alternate EUI Designs




S&S Dlr.



S&S Dlr.

S&S Dlr.

S&S Dlr.



Competition among eui
Competition Among EUI

  • Increasing the distance between EUI and the end user reduces the number of dealers and reduces intra-channel price competition a la Saturn

  • Competition among EUI is an important factor driving channel price toward cost despite some EU dislike

  • Corollary: Higher EUI prices damage channel equilibrium, opening opportunities for new channels unless politically blocked and/or brand demand is powerful

Ford motor company

Some Governance Options

  • Separate service operations from product sales and decentralize improve consumer access

  • Enhance dealer interest in service by increasing profitability

  • Increase pressure upon dealers by stronger enforcement of service quality standards

  • Buy out service operations from dealers and operate directly

  • Reduce pressure on dealers for volume; enhance product quality

Governance constraints
Governance Constraints

  • What constraints limit supplier influence over dealer service quality

    • Limited power because of state legislation making dismissal difficult

    • Propensity of many consumers to bargain creates a unique transaction environment

    • Service is not seen as a strong profit center

    • Ford’s culture of strong sales orientation

Applying pressure
Applying Pressure

  • Application of pressure for conformance:

    • generates conflict where dealers do not perceive requirements to be fair or just

    • Is difficult to enforce because legal and historical position of the dealer has reduced supplier power

  • Carrots continue to do better than sticks

    • Dealers must be shown that good service enhances their dealership, profits

Pooled service sales
Pooled Service & Sales

  • Is there benefit to a common or pooled operation of service and sales in the same establishment?

  • Is there benefit to a common ownership of service and sales, but not necessarily location?

    • To the new car dealer, end user, sale of used cars

  • Would independent service facilities generate conflict within the channel?

  • Change within a channel where power is closely balanced, benefits are unevenly distributed, and there is a lack of trust will generate chaos

Warehouse channel inventories
Warehouse Channel Inventories

  • Who will be responsible for inventory control?

    • The individual dealer?

    • The supplier?

  • Both options create obstacles.

    • Dealers could not be individually responsible

    • If supplier were responsible, losses for cars not sold in timely fashion would generate losses

  • Inventory risk is best controlled by channel member that controls turnover

Ford s perception of the service sales linkage
Ford’s Perception of the Service-Sales Linkage

  • Product characteristics are perceived to be increasingly less significant in determining end-user choice

  • What are the factors that determine dealer choice?

    • Model availability

    • Assortment

    • Price

  • Consultants are prone to lead clients down paths they want to travel (old Chinese proverb)