Ford Pinto: New Product Development Processes and Failure

Abstract

The motto of this report is to discuss the new product development processes and the failure of Ford Pinto. In introduction of this paper will consider the background of the problem, rational of the research, scope, and limitation of this research and most importantly it will rise research questions. However, literature review will deal with hypothetical aspect of NPD but findings will highlight the critical issues of failure of Ford Pinto in Asian and Australian market. For example, this report will examine decision-making procedures, direct and indirect reasons for the failure of Ford Pinto, consequence of defective designing, ethical issues and so on.

Introduction

The selected product of the study is Ford Pinto, which was innovated and marketed by Ford Motor Company, a renowned multibillion-dollar carmaker, originated in U.S.A. The company is also globally recognized for its innovative approach in terms of introducing a number of new cars among which many have been successful and many have not. Being introduced in 11^th September 1970, the Pinto case can fall under the later criteria as the company’s first local North American subcompact car according to the recommendation of Lee Iacocca (Vice president of Ford during that period).

The Pinto was a four engine and bucket seated automobile initially priced at $1850 as one of the cheapest imported car in both Asian and Australian industry during that period, which was produced in Ontario, New Jersey, and California. Apart from 1973 and 1780, two engines, while during first five manufacturing years designed the car; four cylinder sequential engines have been delivered with an alteration of power ratings per year. However, the car is remembered as one of the most notorious vehicles of global automotive history because of designing it with so many defects creating the public safety threats in usage (Sherefkin, 2003).

Rational for the research

Since the malfunction rate for new products are more than 30%, a number of reasons can be identified for which such malfunctions occur. Although an idea is better, the market size would be overestimated, the actual design would not be matched with the desired level, incorrect market positioning, high pricing, poor advertisement, excessive development cost beyond than expectation and unexpected competitive pressure etc. By keeping all such issues in mind, the globally famous Ford Motor Company has been projected under the evaluation regarding the failure conception of its Pinto brand to gain a deep insight for that fallen back (Kotler & Armstrong, 2006).

Research question and objectives

The overall purpose and objective of conducting this study is to identify the basic reasons for which the company had become failed in Pinto development strategy along with other factors related with such situation. Three research questions are-

• What are main causes for which the Ford Pinto project had been failed to reach at intended corporate goals?
• What is the incidental, questionable and risk- benefit factors having potential influence over such situation;
• What is the negligence efficiency disputes affecting corporate decision and debate casing Pinto?

Scope and limitations of the study

New product development process is highly a challenging issue for any company because of understanding the optimistic or pessimistic chances of being successful in projected innovational risks. By conducting this study over Ford Pinto, it would be possible to realize a mega venture’s limitation in successfully generating and marketing of a new item along with strategically analyzing the different viewpoints relating with such confrontation. Some limiting issues of conducting the study are-

• Limited time and budget for conducting proper research work.
• Obstacles in conducting primary research.
• Clutter of unnecessary information in secondary sources.
• Complications in gathering information from corporate level.

Literature review

New product development

Kotler & Armstrong (2006) argued that the new product development is a chronological procedure in the area of business administration and market engineering that has summarized a comprehensive course in order to get market entry of new products or services. Traditionally, the NPD has been assembled by a couple of horizontal strategies, such as, idea generation and idea screening, product development and design, market testing etc., and the other side involves in business analysis, research and development ¹ of the desired products.

From the viewpoint of a company, the aim of NPD is to concentrate on the arrangement of new products and services commercialization process as well as the general strategic tools; during this guideline, the market share growth including the execution of the product life cycle was outlined.

New product development objectives

Cooper & Edgett (2008) pointed out the objectives of the NPD have mostly focused on the current demand along with transformation of consumers’ tests and it has gone through existing brands’ vast variations or by the new product innovation which is not exist in the current market. The NPD is essential to demonstrated market share since lifetime of a brand has not continued for a long time and hence new technology adoption has been flourishing in the market continuously.

While conceive a new product or service it has involved in a set of strategic attributes for instance product agenda while make public, assurance of health and hygiene, product variation catalog, announcement of opportunities, strategic development guidelines, financial support and manufacturing cost budgeting and so on and all of these would have to be under brand managers’ supervision. In case of NPD, aforesaid motivates have need to amendment during all of the major strategic areas like high health and hygiene guarantee than before, deduct the price level, spread out the availability of products and services, continuous development of the current features as well as adoption of new qualities.

New product development stages

Khurana & Rosenthal (1998) argued that accomplishment of competitive advantages has played behind of a company’s success where construction of the NPD is another crucial requirement as well as strategic progress of the product that has been including product life cycle (PLC) while illustrated the market share and growth of the company. A new product development stages or processes are divided into eight major stages that have sequentially illustrated bellow.

According to Hitt, Ireland, & Hoskisson (2001), first level of the NPD process has termed as “idea generation” where origin of the product or service has been outlined by means of entire employees of the company, strategic analysis of the rivals, consumers suggestions and feedback, investigation of overall supply chain management system for instance distribution, supply, manufacturing etc.

Kotler, & Keller (2006) expressed the “idea screening” phase of the NPD is an elimination round in order to take hold of the best idea for the desired product or service that would have feasible to assemble as well as cost effective for the company.

Hitt, Ireland, & Hoskisson (2001) stated that the “concept development and testing” level has dealing with the target consumers’ demand whether they would have accepted the selected idea or what competencies they would like to reflect on the potential product or services.

Cooper (1988, p. 238) agued that in the “marketing strategy development” stage of the NPD structured how would the selected product or service idea entered into a new market. In this area consumers have deserved a detail explanation of product for example product or service marketing mix strategies, market segmentation, target market, market positioning strategies, return on investment and sales, profit seeking approaches and so on.

Vellandi (2007, p. 1) illustrated the “business analysis” phase concisely where overall financial activities have examined. Key strategic enquiry of this part is to overlook the potentialities of long time financial existence. More specifically, execution of financial tasks has dealing with cost of production, cash flow analyses including cash inflows and outflows, growth rate of the market share, analysis of the product life cycle etc.

Kim and Wilemon (2002) addressed that the “product development” is the stage that presents a trial product that has finally produced and the trial product would undoubtedly go through out all the desired tests and survey while it would be represented towards the target market to measure customer’s feedback.

Kim and Wilemon (2002) also added that “test marketing” stands for examining the new product within a particular area of a target market and would be launched to analysing the marketing mix strategies that can be looked after where required as well as modified as needed before commercial marketing.

Kotler & Keller (2006) quoted that the “commercialization” is also defined as post stage of the new product development where the product or service would be introduced in the domestic market after the succeeded test marketing stages. It needed a set of dynamics to taking into account before the product would launched nationwide and thus a circle among time, place and market would be integrated.

Organizational supports

Kotler, & Keller (2006) explained that new product design and development strategies would endure upon the issue of organizational viewpoint that follows the preceding stages of building the business plans that practicing the principles of the conceptual framework of development. Necessarily the design and development strategies would help the organization to build a concrete product outline that guide to focus on significance of development phase when the strategic phase of design and development is more another diverse set of similar operations that varies upon product category where the primary design strategies included as bellow

• Cost Advantage
• Reducing the component, assemble time and overall production costs
• Design Prominence is the center point of supply chain management as well as innovative materials and concepts to deliver value for the consumers that generate products stability and bring emotional reactions within the distribution channel.
• Feature Leadership developed the product competencies
• Concentrated Application needed to be customize customer’s demand,
• Desirable Alternative would present the features the benefits inside the existing market within sales channel

Consumer adoption processes

Vellandi (2007) identified four major customer adoption tools for both in domestic and abroad as follow and furthermore reduce the micro-management development phase’s period.

• Renovative approach is focused on the existing product those have negligible limitations in order to retain potential consumers.
• Adaptive method of the customer adoption is required to technological development or transformation that would have an immense impact on the marketplace as well as consumer demand and distribution channels.
• Evolutionary technique has utilized existing technologies in order to design as well as enjoy optimal competitive advantages while adopt consumers.
• Discontinuous either have penetrated the products under the course of current commercial appliances or by the current technological infrastructures and more frequently make use of both.

New product development challenges

Mukthavaram and Ramani (2008) pointed that key vision of the NPD product or service design and development as well as evaluate the product life cycle² circumstances where it could be possible to discover each stage’s significance proposition moreover return on investment³. Following are the core challenges for each company during NPD.

• In terms of time, budget or financial support and resource allocation absent of realistic assumption affect the NPD project and a major cause of project failure.
• Poor idea generation, coordination in addition to implement scope of the NPD would slim the potential opportunities as well as complicated the overall course of action.
• In terms of elevated ROI the “burn out” of the target project would be donated since they have experienced to operate, multiple projects spent scores of overtime hours.
• Another reason to fall productivity is repeated amendment project standards such as work in process⁴, most significant, move forward or backward and so on.
• In sufficient capital, inflexible government policies, as well as social constraints, inappropriate market segmentation, high cost of production, thin PLC etc. are other core factors to fail the NPD projects.

Research Methodology

Malhotra (2009, p.10) stated that a brief clarification of the research objectives is the key purpose of assembling research methods. In this paper, the relevant literature presentation has involved in explaining and sketching out the essence of the New Product Development (NPD) as well as the reason of the project of Ford Pinto of being unsuccessful. The secondary data collection was from numerous sources like online or the Internet, recent annual reports of the Ford Pinto, marketing journals, or articles by expert researchers and authors, magazines and so on.

Alternatively, the primary research of this paper has focused on the course of innovative idea generation in order to evaluate the theme of the important issues preferred by the researchers. The vision of this course of action is to discover the attitude and perception, and furthermore, the required queries have been fluently exemplified to express the answers independently during the comfortable working atmosphere.

The most innovative team of Ford Pinto has instructed the study opinion poll and their key segmentation has featured through age limit, monthly, or annual income structure, geographical region, population density, car production because of the people’s demand, pricing strategy, marketing guidelines, market availability etc. The point to be noted is that the complete study does not focus only on a particular age limit buyer; for instance, 18 – 24 years old (the young generation) were the basis of the market analysis phase. The objectives of the study have been assembled through multiple potential sampling techniques like probability sampling, methodical sampling, non-probability sampling, and proportionate sampling and so on.

Limitations of the methodology

While completing this paper, there countenances a few limitation or constraints and therefore the outcome has imperfect as the Ford Pinto was not provide driving security for the car holder in Asian countries such as Bangkok. However, they have ensured a set of environment protection initiatives restricted but those have not make any demand or significance to the buyers. It has to be mentioned that this limitation is not generate from any type of biasness; it has resulted from the poor innovation of the Pinto. In this way, aggregate residents of the Asian countries have turned their face from buying of the Ford Pinto.

Moreover, the overall research approach has only competent to recommend what would be the potential initiatives to overcome accident but not could be able to evaluate the entire demand of the Asian population.

Alternatively, greater information or data have a scope of greater required of return. In order to complete the research, sample questionnaires have made by the interview f the top management, head of the branding, technicians, research teams and so on was involved in the project Pinto. On the other hand, customer or the buyers are another prime dynamics of the research that have featured or segmented by their income level as well as age limit.

Consequence of the point, interview questionnaire has mostly focused on existing cardholder or the potential cardholders rather than aggregate population of the Asian countries. Finally, in the concluding part of the research methodology have overlooked that all of the evaluations would be applied in the target region like Bangkok not have any impact or influence on market where the Ford Pinto was exist.

Findings and interpretation

Although the car obtained a top record in selling of approximately 100000 units regularly within January 1971, its fame had been negatively affected gradually because of the noted faulty characteristics confronting especially the product’s gas tank and safety. Therefore, corporate management had agreed on paying upon the financial compensations as $560000, $2.5 million, and the like to the suffered victims better than running on such defective cars.

Therefore, the overall consideration indicates that the design faults existing in Pinto model were a reflection of company’s negligence for which it had been pressured for paying to Richard Grimshaw who was one of the sufferers of Pinto fire regarding $127 million compensation and penalty amount. On the other hand, in terms of reputation perspective, while some other brands including BMW- 5 and Jaguar-XL series along with Mercedes S class have been recognized as well- engineered automobiles in that time. However, the Ford Pinto had pictured by different scenario as characterized as “The Hunk of Junk Hall of Fame” with numerous accidental records throughout its operational period over the world including the mega Asian and Australian markets (Nakao, 1972). Other critical issues are-

Potential identification of causes: There are a number of direct and indirect reasons, which are liable for the failure of Ford Pinto. The basic problem was the defective designing regarding fuel tanks over axels (Pasquarello, 2009), like-

Other problems incorporating the inadequate protection surrounding the tank and the cost- benefit effects for utilizing weaker bumpers, which had delivered unsafe measurement for the restriction of deformation. Similarly, corporate policy was also liable for lowering the development cycle and adopting the safety visions insignificantly. Because of facing intense competition from American Volkswagen and some Asian, especially Japanese companies during 1960, Ford had to make a hurry in introducing its latest Pinto car within 25 months which is a below standard time for developing a new automobile as 43 months. Additionally, the fuelling process would break up very easily in closely entire rear-end crash examination clashes while the top executives determined to produce those vehicles at an expenditure of $2000 weighted as 2000 pounds since the congressional- line equipment was already tooled under the management of Iacocca (Pasquarello, 2009).

Incidental, questionable and analytical facts: The consequent performance of the car during the after- marketing phases have been notified in terms of various accidents for which both corporate reputation and finance had been damaged widely in terms of generating so many civil suits. Similarly, according to our previous knowledge, the company’s placement of fuel tank was also being controversial which had made its design weaker emphasized by other characteristics of Pinto. There were 9 inches gap between tank and rear axle with defaulted placement of bolts. Separate fuel filler piping structure due to spillage of gas and fires had also accelerated potential risk (Leggett, 1999).

Public debate had also being fueled because of the company’s reluctance in correcting those defects after associating a risk- benefit assessment. Although the internal search has exploded the company’s effort in developing a sophisticated technology for improving automotive design for deducing the possibility of accidents, injuries and deaths, implementation of such technique would incur $11 each car as a signage of excessive cost that leaded Ford not to make final modification in existing Pinto model.

Eventually, the cost- benefit analysis in this purpose had been made under the governance of NHTSA (National Highway Traffic Safety Administration) in terms of promoting allocated efficiency confronting the human and emotional conditions as the indirect variables of such analysis. Thus, it had been estimated that total number of employees was perfect with unit cost of $11 for 11 million cars and 1.5 million trucks incorporating a total cost of $137 million. Predicted benefit was $49.5 million casing a lagging behind figure than overall costs while there were still a higher possibility in burning of 180 and death of 180 people (Leggett, 1999).

Faulty analytical approach: The failure of that car was not a single liability of its internal category but also the defective decision of the company itself. In introductory manufacturing and testing periods, it developed “limits for 2000” for the Pinto brand which imposed a restriction of that car in not encroaching 2000 pounds weight and $2000 expenses as an extra pressure on the manufacturing team. Crash examination had been started after a completion of core design, which evolved that a strike from rear 31 miles or more speed per hour busted the car’s gas tank and other damages by making the Pinto as a death chamber.

Among 11 tested Pinto cars, 8 had been resulted in such disastrous events. Although the company had adopted extensive advertisement effort, it had also being failed incorporating the personal belief of Iacocca as “Safety does not sell”. Additionally, the negative publicity on Pinto was too difficult to overcome; the designing and crash testing phases were not confronted by any litigation for altering the fuel system and corporate tendency for the wrong placement gas tank. Lastly, Ford discarded the design modification option according to the NHTSA estimation of $200000 cost as the “cost to society” conception (Leggett, 1999).

Imperfection in making decisions: Since the management committee had shown that the potential costs were 2.5 times greater than projected benefits, there were a clear rejection for adopting necessary modifications regardless any other factors, which could affect market acceptance and essential ethical values. Although the final decision had focused on an additional $11 cost, such amount would be lessened to $5 while cost reduction by $3.96 would led the company to reach at “break- even” point (Sherefkin, 2003).

The argument issues and Ford: From 1972, the company had originated the negligence- efficiency debate that can be used to evaluate some integral facts of Pinto. From ethical perspective, the case would be observed as a deliberate disregard for someone’s life while the public rights stated the company’s ignorance about public right with illegal fuel practice. The act utilitarianism focused on “harms” and “benefits” under those unreported cases, which would not be solved within a courthouse with a tremendous negative public attitude about Pinto within 1971- 1976 and more. Regarding health and safety regulations, the company had adopted inconsiderate decisions through negligence of ethical judgment.

The dollar valuation of cost and benefits caused difficulty in common valuation within an open market while basically the environmental policy accounting air pollution or human life cannot be measured through this way since those aspects are “priceless”. Other deficiency incorporates wealth maximization and externalities in which the company had become failed to minimize social costs of using the Pinto model in terms private costs with inappropriate measurement policy within the Asian context. Finally, since Ford had adopted negligence- efficiency, the victim groups were fallen into loss rather than actual compensation (Leggett, 1999).

Judgment of overall situation: Thus, the overall performance and corporate failure history can be summed up as negative value perception, inadequate safety, and consciousness, planning framework, worse incident, Thermo- Fluid incident, breakage/ spoilage, physical harm, death, corporate and economic defeat etc. In general, the company had done more or less mistakes in various phases of new car development involving idea screening, concept development and testing, business analysis and product development and test marketing while all such factors were been responsible for harmfully influencing some other success factors regarding cooperative marketing and commercialization (JSTA, 1972).

Recommendation

As the overall study has evolved a number of weaker points for which the Ford Company had not been successful in properly developing its new Pinto brand automobile, several recommending issues can be pointed out which would be potential enough in tackling that deficiency, such as-

• Ford needed to ensure safety in its all modeled Pinto cars. If the company could take this issue with highest priority rather than cost and prompts delivery, the number of total accidents and other unwanted events would be reduced greatly. For that purpose, the company had to engage the engineers posing adequate knowledge about safety environmental protection along with other technological skills.
• The company was also in need for adopting standard manufacturing period for each Pinto car with a flexible cost objective obviously more than $2000. Although Ford would not achieve short- term price efficiency and economies of scale through such policy, the company would gain long- run efficiency and comparative advantage better than other Japanese automotive brands in terms of well capturing of Asian market.
• Since the gas tank was problematic, Ford needed to make immediate correction by altering and strengthening the Pinto design regardless the predicted suggestion of cost/ benefit analysis. Similarly, it should adopt all other corrective actions, which would be able to eliminate various risky factors from the car throughout the development phase.
• Better quality ingredients had to be utilized as core components of the car.
• A modern and flexible corporate policy was too immediate to displace overall challenges facing by the Pinto.
• Corporate management needed to be conscious and cooperative enough to test the product carefully before commercialization.
• The company should pose a sophisticated corporate policy for properly valuing human lives and social responsibility.
• Finally, Ford should deliver more and effective marketing effort regarding acceptable advertisement and positive public relation programs for removing negative perception of the car from public mind.

Conclusion

At the early stage of this paper, it has quoted that the Ford Motor Company is an American automobile market leader that has expanded its market share multi-domestically at the beginning of its journey and it has pleased the target buyers in most of the cases. However, in case of Pinto, it has failed to demonstrate its efficiency. From this research outcome, it has evaluated that the NPD process had a greater breakdown in this case though there were 30 % excellent ideas and appropriate target market identification.

In this termination point, other prime reasons of the failure of Pinto included wrong market position assessment, inappropriate pricing strategy, poor advertising and promotional initiatives, high research and development charge, failure to meet up the buyer’s demand and test, low competitive advantages and so on. Considering all the limitations, it can be argued that being a global industry the Ford Pinto has failed to notice their efficiency as well as continuous development initiatives. More specifically, Ford has failed to establish its keen managerial skills during branding the Pinto. Alternatively, it was not competent to fulfill the corporate aspirations.

Reference List

Cooper, R. G. & Edgett, S. J., (2008) Maximizing productivity in product innovation. Web.

Cooper, R. G., (1988) Predevelopment activities determine new product success. Industrial Marketing Management. Vol. 17, No 2, pp. 237-248.

Hitt, M. A., Ireland, R. D., & Hoskisson, R. E., (2001) Strategic Management. 4^th ed. South-Western Thomson Learning.

JSTA, (1972) Ford Pinto Collision Fire. Web.

Khurana, A. & Rosenthal, S. R., (1998) Towards Holistic “Front Ends” in New Product Development. Journal of Product Innovation Management. Vol. 15, No. 1 pp. 57-74

Kim, J., & Wilemon, D., (2002) Accelerating the Front End Phase in New Product Development. Web.

Kotler, P., & Armstrong, G., (2006) Principles of Marketing. 11^th ed. Prentice-Hall of India Private Limited.

Kotler, P., & Keller, K. L., (2006) Marketing Management. 11^th ed. Prentice Hall.

Leggett, C., (1999) The Ford Pinto Case: The Valuation Of Life As It Applies To The Negligence-Efficiency Argument. Web.

Malhotra, N. K., (2009) Marketing Research- An Applied Orientation. 5^th edition. Prentice-Hall of India Private Limited.

Mukthavaram, S., & Ramani, R., (2008) Eliminating Challenges in NPD – A PPM Approach. Web.

Nakao, M., (1972) Ford Pinto Collision Fire. Web.

Pasquarello, G., (2009) Ford Pinto. Web.

Sherefkin, R., (2003) Lee Iacocca’s Pinto: A fiery failure. Web.

Vellandi, M., (2007) New Product Design Strategy. Web.

Footnotes

1. R & D.
2. PLC.
3. ROI.
4. WIP.