The Challenges and Opportunities Facing the Ford Motors Company - Essay Example

Ford Motors: Company Analysis Ford Motors is a U.S. automaker and is among the leading automakers in the world. Ford was incorporated in June 16, 1903 by its founder Henry Ford. The company’s headquarters is based in Dearborn, Michigan. Ford has emerged as one of the automaker giants in the world. For instance, the company ranks fourth largest automobile company globally and second largest in America according to annual sales volume. Ford sells in a variety of brand names such as Ford, Mercury and Lincoln. The company has also been the manufacturer of Land Rover and Jaguar, which were sold off to Tata, an Indian automaker. In the U.S. market, the company currently ranks second after General Motors, which is the world’s leading automaker (Ford Motor 2011, P.2). This paper will analyze Ford Motors through PESTEL analysis to identify the challenges and opportunities facing the company. The essay will also explore the U.K. Market structure in which Ford operates and discuss the impacts that the U.K. market structure has on the performance of Ford and its customers. Ford: PESTEL Analysis PESTEL analysis implies political, economical, social, technological, environmental analysis that helps in understanding the macro environmental factors that affects the operation of Ford. These factors are discussed hereunder: Political Politics of a country is very important as far as far as car manufacturing is concerned. The U.S. politics influences the legislations and laws by which car manufacturing companies like Ford operates. For instance, Ford’s operation has hugely been affected by the political pressure from the government of the United States regarding the global warming caused by greenhouse gaseous emissions. In this regard, the government has imposed certain measures aimed at limiting the level of gaseous emissions that a particular vehicle has to emit to the environment. This has threatened the operation of Ford because complying with some of these laws is not easy, as they require a total change of the manufacturing process (Ford Motor 2011, P.6). Ford is also required to comply with the tax policies imposed by the government. The changes in tax policies by the U.S. government particularly by increasing taxes on the automobile industry has affected the operation of the company in recent times where it service high taxes in order to be able to operate. For instance, the idea to introduce a road tax proportional to amount of gaseous emissions is affecting the company’s operations (Rubenstein 2001, p.14). The laws allowing for a level playing field among companies in the U.S. have been of huge benefits to the company. This is because the legislation allows every company to operate in the country without any interference from the government by giving any company undue advantage over others. Ford has taken advantage of this level playing field to offer considerable competition to other companies like the General Motors (Rubenstein 2001, p.14). The political stability of the U.S has also offered a secure and conducive manufacturing and operation environment for Ford to operate. A similar political stability is witnessed in other nations such as the U.K. and Japan where Ford has subsidiaries. Ford predicts that it will be able to expand its operation in many countries in the future following the fact that the relations between the U.S. and many countries have improved in recent years since President Obama ascended to power (Ford Motor 2011, P.6). Economical The economy of the U.S. is highly dependent of the automobile industry. Ford, for instance, contributes about 4% of the U.S. GDP due to its high usage of computer chips, steel, vinyl, and aluminum. The economic crisis that hit the U.S. in recently has impacted negatively on the company considerably. This is because it has affected the company’s sales, as many people could not afford to buy some of its cars. This has been coupled with rising fuel prices, which has kept away many potential customers from buying Ford cars. The economic hardships have forced Ford to reduce the prices of its cars, which has affected its position in the market. In addition, Ford had to lay off some workers as cost cutting strategy. To counter the economic hardship, the company has established in foreign nations like China and India. In addition, it operates subsidiaries in countries like the U.K. and Japan to boost its operations and maintain its competitive advantage. However, these challenges do present an opportunity for Ford to consider manufacturing fuel-efficient cars, reduce cost and manufacture vehicles that are economical and efficient to customers (Business CustomWire 2004). However, the economic recovered of the U.S. market is showing good future prospects of the company. The company has already begun making significant recovery as the economy recovers and expects to continue growing and compete favorably against other companies in the industry (Business CustomWire 2004). Social-cultural Socio-cultural environment does affect greatly the type of vehicles consumers purchase, as well as efficiency of cars with regard to mileage and environment. The company reports that its cars are culturally accepted by people from diverse cultures, which has given it competitive advantage over other firms. The company reveals that it s cars have been able to sell very well among people from all cultures. An example is China, which is the biggest market of Ford vehicles. The same applies to Africa, Muslim countries, India and Christian countries. The companies are also manufacturing cars in accordance with the taste and preference of individual customers (Ford Motor 2011, P.6). Technology Technology affects hugely the operating environment of a car. Research shows that a majority of potential buyers of car conducts research on cars online before making purchases. This has been brought about by technological advancements and the growth of internet usage. As such, Ford has considered technological trend and is currently operating car product display and marketing website from which potential customers can access the types of vehicles on display through e-commerce. In addition, Ford is currently in the process of manufacturing most modern cars based on the latest technology to keep up with the customer’s taste and preferences. For instance, the company is in the process of manufacturing different a variety of cars such as sport cars, tracks and personal vehicles that are fuel efficient, and green. Moreover, Ford has also introduced new technologies aimed at increasing the manufacturing efficiency (Ford Motor 2011, P.7). Legal Ford has ensured that its automobiles passes the inspection done by the U.S. federal government. The government of the United states has threshold related to safety and financial regulations that Ford must comply with. In this regard, Ford has always complied with the regulations in the industry, which has made it receive backing from the government to continue with its services. Environment The issue of global warming impacts greatly on the operation of car manufacturing industries because vehicles are the major emitters of greenhouse gases in the atmosphere. As a result, of the concerns, car-manufacturing companies are required to observe the emission levels of gases produced by cars. In this regard, Ford is struggling to comply with the new laws over environmental pollution from cars. The company has so far reduced considerably its level of gaseous emissions from the new cars it manufactures presently (Ford Motor 2011, P.7). The U.K. Market structure for Ford Operation The U.K. is among the European countries with the highest number of automobile companies in the world. This also implies that its economy is hugely dependent on automobile industries. For instance, the automobile industry registered a turnover of over £52.5 billon in 2008. The UK automobile market structure is an oligopoly. This is because, despite having many companies, it is dominated by just a few companies. An oligopoly is a market structure dominated by few firms in the market. The dominant automobile companies in the U.K market that makes the market an oligopoly include Ford, Toyota, Nissan, Honda, and Vauxhall (owned by General Motors). An oligopoly market structure is characterized high competition between the dominant firms for the customers available. This usually forces the few firms available to engage in intense advertising and promotion campaign in order to be able to remain relevant in the market. In such a market, a move made by one firm is always followed by the others in the industry. In addition, there is free entry and exit in the market. The market structure has compelled Ford to maintain quality of products and service delivery to its customers in order to remain competitive in the market. For instance, Ford has had to follow the moves made by other firms as well as engaging in intense advertising campaign in order to remain competitive. What is apparent is that Ford has maintained its market share, which has continued to grow despite the competition offered by other companies (Rubenstein 2001, p.16). The U.K. automobile industry is different from a perfectly competitive market in a number of ways. This is because in a perfectly competitive market, there are many firms competing for the customers available. The prices in such a market is determined by the forces of demand and supply. Competition is also very high in a perfectly competitive market structure. Further, there is free entry and exit of other firms in such a market. This is different from the oligopoly market structure of the U.K. in that under oligopoly, there are only few dominant companies in the market, the move made by one company is followed by another and competition is very high characterized by high advertising campaign (Rubenstein 2001, p.18). Since there is free entry of other firms in the U.K. market where ford operates, this is likely to affect its sales volume as a result of high competition. However, the competition offered will enable Ford improve the quality of its products and services, which will help it draw more customers to the company. The threat of new entry is currently offered by the emerging Chinese and South Korea automobile companies (BBC 2012). The challenges and opportunities facing Ford can be analyzed using SWOT analysis. SWOT Analysis of Ford Strength The major strength of Ford is that it has a popular brand known all over the world. Weaknesses The major weakness of Ford comes from its organizational structure is continually becoming more complex as the company continues to grow. Concerns over quality Financial problems Opportunities Ford has the greatest opportunity of developing cleaner engine emissions to ensure reduced greenhouse emissions. Expanding operations in the emerging Asian market Expanding in Americas luxury cars which has not been fully exploited Threats Competition from other companies is the major threat to Ford, which continues to increase with new entrance of other automakers in countries such as South Korea, China, and other automobile companies emerging from Eastern Europe. Liquidity problems Slow pace of brand recovery and the disapproval of Jaguars recovery by the company shareholders. Decrease in demand for various brands of Ford. Evaluation of Future Success of Ford The success of Ford is highly dependent on its ability to tackle the weaknesses, threats and take advantages of opportunities available for it. This includes competing up with the competition through adoption of the latest technologies and producing efficient and environmental friendly cars. Despite having incurred losses in recent times, Ford is in a good position to become successful in the future since Ford has developed strong strategies to cope with the future trend of the automobile environment. One such is the fact that Ford has adopted the most modern technologies in it manufacturing process, which has increased its efficiency. Furthermore, the company aims at manufacturing fuel efficient and environmental friendly cars to as a step towards mitigating environmental pollution (Rubenstein 2001, p.16). The company is also considering diversifying its cars from just relying on trucks to personal and sport cars. This will help boost its sales to different customers all over the world. The fact that the company operates globally puts it in a good position to explore international market, which certainly positions it for a large number of customers. Further, since the company considers lowering its prices despite maintaining quality gives it competitive advantage over other companies in the vehicle-manufacturing sector (Rubenstein 2001, p.16). Conclusion Despite competition and threats of entry of new automobile companies in the market where Ford operates, it is certain that Ford will still be able to dominate the market based on the strategies that the company has put in place. This includes improving quality of vehicles, improvement of customer services and manufacturing according to customer tastes and preferences. However, the company will need to go completely green if it needs to get more backing from all stakeholders due to the issue of environmental pollution. References AFP 2003, "GM, Ford, to export thousands of vehicles to China, " Agence France-Presse. BBC (2012), Ford unveils further investment in China. http://www.bbc.co.uk/news/business-17766900 (Accessed 6 Dec. 2012). Business CustomWire 2004, "Ford Reports Disappointing U.S. Sales,” Business CustomWire, London. Ford Motor 2011, Ford Motor and Auto Industry Analysis: Ford Motor Current Strategy, Ford Motor Company. Rubenstein J. 2001, Making and Selling Cars: Innovation and Change in the U.S. Automotive Industry, Johns Hopkins University Press, Baltimore. Read More