Ford cuts North American Production, cuts profit goal

Ford cuts North American Production, no longer expects profit by 2009 as gas prices hurt sales.

Due to fast rising gas, Ford Motor Co. dropped its goal of becoming profitable by 2009 and said it will cut production of trucks and other vehicles through the rest of this year. This was a situation that warned U.S auto industry which is facing its worst sales in the previous years.They will release more detail about its cost-cutting efforts soon and is forecasting light vehicle sales this year to between 14.7million and 15.1 million. This is down from 17 million as recently as 2005. If sales drop as low as 14.7million, it would be the slowest year for U.S since 1993. Ford will cut North American production by 15 percent in the second quarter and this will affect pickups and sport utility vehicles. These have seen sales fall in recent months due to rising gas prices. The automakers’ revenues will hurt from the production cuts because the companies book vehicles as sold when they leave the factory. The President of Ford said that the most important thing we can do for the long-term success of the Ford Motor Company is to deal with this problem.

Ford was doing well at the first-quarter by making 100 million and a billionaire investor Kirk Kerkorian was about to by 20 million shares of Ford stock because of their potential growth. However, the shares dropped to 64 cents which remained 7.16. From this, some experts said that it was a good strategy to respond to the challenging market. Lately, Ford was trying their best to prevent inventories from building up at the dealers and has been very cautious on production.

Looking at their competitors, General Motors Corp. forecast their cuts in the second-quarter production in North America by 5 percent. GM has less pressure on cutting and will have no additional cuts because their motor business was not as serious as Ford’s. Chrysler cut North American production by 16 percent in the beginning quarter of this year. Also, Toyota and Nissan have cut North American production to meet lower demand.

An expert said that the greatest challenge for Ford will be maintaining its U.S market share at 14 percent. But Ford remains heavily reliant on the kinds of large vehicles that have been struggling in the current market. Their F-series trucks were down 16 percent through April. They are trying to improving on fuel economy and is not considering dropping any trucks or SUVs from its lineup.

In my opinion, I think the way Ford had decided to cut the production was a right choice to make during their recession. During their hard time in sales, they made a great judgment on minimizing their loss and searching for new business strategy. They should stop any deteriorates and problems that bothers their business and should be more aware of improving their products to meet the customer’s demands. As it is mentioned in the last paragraph, they should get out of their idea of producing old products and produce innovative commodity to gain more shares in their market.

www.newsweek.com/biz

20620042 entry #11

Johnson & Johnson's innovation about its design

I read about changes in J&J's design process. The innovation brought from Chris Hacker, the design director of J&J. He was hired 2005 and did many successful works. When he firstly came to J&J, he found that J&J don't have any independent design process. He insisted that they have to create something for their own design and he changed the design process completely. Now, J&J's revenue is tripled compared to that of 2005. Amazingly, the costs of design declined and the quality of design improved. But the tasks were not easy. At first, they experienced many obstacles. Originally, J&J's design is done by outsourcing companies. Accordingly, the contractions between J&J and these companies were huge problems. Also, the management didn't like the change because the innovation was so costly at that time. But Chris persuaded them and achieved great results.

Then, what are the points of his success? He didn't waste resources in J&J. Even though J&J's old products looks bad and the contents are not different those of competitors, he tried to redesign the products and also reduced production costs by establishing stirct design process. Of course, it was very succesful. In the view of business, old products are just pains in the neck. Because the products don't have large market share and the growth potential power is very low. However, if we can derive something new from old one, we can achieve completely new results. Secondly, Chris knew the brand portfolio of J&J. Generally, design specialists focus only on his products, but he investigatied all of J&J's brands and tried to find out the core problems of J&J. If you don't know much about your company, you are doing wrong in your performance, even though you did your own work completely. You know the success of japanese companies. How they can achieve high revenues in America? It's because of the loyalty of employees. Japanese employees think the company as their lifelong place, and they did their full efforts to their company. I think the corporation culture of Korea is also a good one, but the real loyalty don't exist in the korean companies. If we need loyalty from employees, we have to innovate ourselves completely.

Chris also wanted to change the concept of sustainability. In current global world, one of the most positive words is 'sustainability'. All of the resources and advantages can be written as sustainable resources or sustainable advantage. And in the area of design, the words used as 'sustainable design'. Chris insisted that the sustainability is not a object of a company. Of course, sustainability can be a key to success, but it can be achieve in the process for results. In other words, the sustainable advantage or design can be achived if companies try to achive high performance in the market. His opinion is reasonable and we need to change our companies' concept of objectives. In korea, companies often insist that sustainability is very important. But they don't know how to achive it and instead they throw away their chance to achive these advantages. I think if we can realize these factors, we can improve greatly, and can dominate the market. We already dominate global market by innovative technology, but if we can achieve these innovative concepts, we can be a real great country.

Author: Mark Lamster

Title: Johnson & Johnson's Big Design Challenge

Date: May 21, 2008, 3:11PM EST

Page: 1

reference: http://www.businessweek.com/innovate/content/may2008/id20080521_194730.htm?chan=innovation_innovation+%2B+design_top+stories

entry #11 20700067

Not So High-Speed Broadband in the U.S.

          Even though the Internet itself first started in the states, compared to many other countries who are adopting high-speed broadband access fast, the U.S. is falling behind when it comes to speed. According to the article, "...the U.S. ranked 15th among the 30 members of the Organization for Economic Cooperation & Development in terms of broadband availability" (businessweek).

          Denmark is ranked in the first place followed by other European countries and Asian countries, including Korea. Even though the rate of Americans who have access to broadband service rose 20% in 2007, it's still only 73 million which amounted just 23 of every 100 residents.

          Officials argue that it's due to the geographic difficulty that prevents the U.S. to improve its speed and distribution of accesses to people compared to other smaller countries. In fact, saturated population over small geographic area is easier to distribute higher speed broadband service with lower cost. That explains why some of low-population states in America still have comparably low quality internet service.

          However, many experts critics that lack of competition in the U.S. market is the main cause for such insufficient broadband service because few major internet service providers share the market and charge more than any other leading countries. Verizon Communications, AT&T, Time Warner Cable, and Comcast are dominating their markets without sharing their lines with competitors which has been the entry to barrier for many new entrants.

          Many people are now asking FCC to step forward about these major companies’ behavior to lower the price which would allow many new companies to jump into the market. However, new concern has been raised as Verizon and AT&T acquired the license for the new wireless spectrum lines, their manipulating over the industry might get stronger.

          Now a day, the Internet is essential for all businesses and the cost for using the network for the company takes a great portion on their expense. While other developing countries offer same or faster internet service with lower rate, if the U.S. continuously has higher price for the such service, it would automatically become their competitive disadvantage which would hurt a lot in global market. Also, high quality broadband internet access increases the productivity and save time resulting more efficiency. I believe only way to solve this problem in the U.S. is to have more new company entering the industry; therefore, have a competition over price.


Reference;
Holahan, Catherine. "The Sad State of U.S. Broadband" BusinessWeek. May 22, 2008.
http://www.businessweek.com/technology/content/may2008/tc20080522_340989.htm?chan=rss_topStories_ssi_5

20601008 - 11th Entry

Korean banks rushing to Dubai

I recently read an article about the rush of Korean banks to Dubai. It was quite interesting because I’ve never heard of our national banks – Woori, Shinhan, and such - operating in other countries. And, I’ve never thought of Dubai as the financial center of the Islamic world, and of course, I’ve never thought that our national banks would rush to go there. This situation really gave me a desire to study about it.

The reason why Korean commercial banks are rushing to move into the Dubai International Financial Center in the Middle East is because DIFC has emerged as a financial center of the Islamic world, with oil dollars pumping into the area in the wake of skyrocketing oil prices. Korea Exchange Bank recently filed an application with the Dubai financial authorities to open shop in Dubai. Woori Bank also plans to open an office in Dubai to seek to meet demand in Dubai in conjunction with the operation of its Bahrain branch. Shinhan Bank is also set to submit an application this week to win approval to open its Dubai branch. These movements of our national banks are very impressive because they’re trying to take the opportunities that exist, by actually doing something to take it. In addition, this situation is also an opportunity for Dubai, too.

There are some reasons why the movement of Korean banks to Dubai is an opportunity for both them. First, banks need money to operate. No matter what they do to make lots of profits, they certainly need money to do something. Even though Korean national banks are having enough money to operate, it would be a good chance for them if they can make lots of money in Dubai to be deposited in the accounts that they are taking care of. They would have to leave Korea and open offices in Dubai, which is something not so easy. But then, why not? Why wouldn’t they leave Korea if they can get lots of money to take care of in Dubai? Second, lots of people or organizations in DIFC can also regard this situation as a chance to increase their money. Even though they already have enough money to spend in their entire lives, however, they will lose the value of their money if they don’t put it into bank accounts due to inflation. And concerning this, as far as I’m concerned, Korean banks are somewhat the best dealing with customers’ money. Therefore, this can be a good opportunity for DIFC’s riches.

The rush of Korean banks to Dubai reminded me of a simple truth. As we all know, “Business is all about money.” I really don’t think there are any good reasons to persuade me that business is something which is beyond earning money. There may be some other factors that are important. However, no one can deny that business is to make money, and to make our lives more wealthy.


Reference : http://news.naver.com/main/read.nhn?mode=LSOD&mid=sec&sid1=108&oid=014&aid=0001964761


20700273 – Entry 11