Ford's e-business initiatives: new economy values for old economy icon

By C. R. L. Narasimhan

CHENNAI, MAY 1. The latest balance sheet of Ford Motor Company has the following quotation from its Chairman, Mr. Bill Ford, ``The Internet will be the moving assembly line of the 21st century.'' The buzz words are ``connecting, transforming and growing value.'' Those words are now heard everywhere in any organisation. But what are their special implications for the world's second largest automobile manufacturer, a company which by any reckoning has been most typical of the ``old economy'' ? Answers to that question are relevant in at least two contexts. First, in the background of the raging global debate over the stock market potential of the new economy stocks in relation to the old economy stocks. Second, in relation to India.

Until the recent Nasdaq-caused flutter in stock prices there was a growing conviction that the new economy stocks (admittedly not a perfect categorisation) can overwhelm the old economy ones in terms of market valuation. Indeed, they seemed to be doing just that: companies unheard of just a few years ago and having uncertain and unreliable earnings streams commanded a phenomenal valuation, while the older ones, having solid fixed assets and dividend record, lagged behind. This perception has changed dramatically over the past few weeks. Old economy stocks are back in the reckoning what with the volatile markets giving a new meaning to market cap and stock selection.

However, the stock market and its investors everywhere have come to recognise the potential of the new economy. A balanced view therefore is not ``either or'' but combining the features of both the old and the new economies. The Internet as a medium for commerce is here to stay and grow exponentially with myriad applications in the offing. Traditional brick and mortar companies such as Ford see a sure way of boosting their valuations by integrating the new technology into their everyday businesses. Ford's balance sheet says, ``That assessment (importance of e-commerce) is being brought to life through ConsumerConnect - Ford's global new business unit that is reinventing the company, from the way we interact with our suppliers to the way we interact with our consumers.''

Will that marriage between the old and the new work in India? For Ford's Indian operations the main business of selling a suitable car is only now getting into stride. The Ikon is not expected to give Ford India break-even volumes within India soon. Neither would exports of cars, even assuming that it is possible at all. Mr. Jacques Nasser himself discounted (in a conversation with The Hindu) the possibility of car exports being a viable proposition but he had also said development and export of IT enabled services was eminently possible. Evidently, by customising the software so developed for India-specific applications, Ford India too will benefit.

Mr. John Larson, Director, Asia-Pacific Operations (Process Leadership) of Ford Motor Company, told this correspondent recently that moves are afoot to develop India into an important IT base for the entire Asia-Pacific region. Initially, the focus is on setting up customer call centres, employing about 200 professionals and with an investment between $10 and $15 million. These call centres will primarily collect and analyse consumer data, which will be invaluable for the subsequent selling of cars. The call centres will function as a help desk and will render support services. Mr. Larson said Ford might form joint ventures with a few software companies in India and probably even take up an equity stake. The software so developed will be used worldwide.

At a global level, Ford is into what it calls customer relations management (CRM) in a big way. An Internet based strategy, CRM is being developed through a joint venture with another company called Teletech. Each country and each market needs to be addressed differently, says Mr. Larson, emphasising the need to customise software applications. There will be spin off benefits in India too but a monetary value cannot be put on those at this stage.

Would the net be used to sell cars directly? At this stage even in North America only a minuscule percentage of car sales can be sold online bypassing the traditional dealer network. Mr. Larson estimates that only 17,000 of Ford's cars will be sold this year through the web even in what has been the company's largest market. The Internet strategy then is to estimate consumer preferences, letting them exercise choice over as wide as an area as possible and ultimately persuade them to go to the dealer's showroom.

The dealer is an important intermediary and will continue, says Mr. Larson. Among other reasons, he says that many States in the U.S. have laws which make it mandatory for any vehicle sale to be routed through an authorised dealer.

Other customer friendly e-commerce initiatives include websites (ford.com,volvo.com) and a partnership with Microsoft in MS Carpoint, where customers can shop for a truck or a car online.

On the business to business initiatives, greater significance is attached to the virtual market place which Ford helped pioneer.

Now joined in by the other two big auto majors, General Motors and DaimlerChrysler, this Web based exchange venture allows manufacturers to electronically streamline the procurement processes, collaborate electronically with suppliers on component and product designs and lower transaction costs between buyer and seller. This venture will soon go public and is expected to command a huge valuation.

Interesting times are therefore ahead as e-commerce and in general computer applications gain wider acceptance. Mr. Larson feels that a basic issue concerns the mindsets - of the company as well as its consumers.

Both will have to change and adapt to the requirements of the new technology. That statement, of course, is valid for most other companies as well wherever located and in whatever business.

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