Perspectives from ISB

A family owned old economy manufacturing behemoth such as Ford is turning towards services as its new growth engine. It intends to generate a 20% return on its new mobility services, or more than twice the profit margin from its traditional business. As per Bill Ford, the great-grandson of Henry Ford, it is part of a plan to make the company less capital-intensive and less revenue-dependent on fixed-cost investments.

 As an example of this new initiative, Ford has acquired Chariot, a two-year old on-demand shuttle service in San Francisco. Chariot crowd sources its routes as well as its pickup and drop-off locations through a mobile app. Ford aims to sell transit vans to Chariot and capture some of the fees its riders pay. In a similar initiative, Ford is planning to collaborate with bike-sharing provider motivate. Thus the company is aiming to exploit emerging opportunities in the mobility space, such as ride sharing, self-driving cars and transportation services.

 The new plan is not without challenges. The barriers to entry in this segment are as small as a single idea executed and properly scaled. Moreover analysts argue that many on the non-manufacturing partners such as Uber, Lyft or even Chariot might become financially dependent on Ford’s manufacturing capabilities. Finally the customers might now change from individual customers to city, state or country. Providing customised solutions to each of these user groups may be a challenge.

 Source:, Oct. 8, 2016

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