The Ford Motor company - Essay Example

Business Paper Table of Contents Table of Contents 2 Introduction 3 External Factors Analysis 4 Natural Environment 4 Societal Environment 5 Task External Environment 7 Internal Factors Analysis 10 Ford’s Strengths and Weaknesses 10 Ford’s Organisational Structure 10 Ford’s Organisational Culture 12 Ford’s Organisational Resources 13 Conclusion and Recommendations 14 References 16 Introduction The Ford Motor Company was started in the year 1903 with an initial start-up capital of 25000 US Dollars and is headquartered at Dearborn, Michigan in the United States (US). It is regarded is the second biggest company for automotive manufacturer and the fifth biggest manufacturing company in the world (Ford Foundation, 2014). The company functions in the international automotive industry which is known for manufacturing vehicles, distributing parts of vehicles along with accessories to the various parts of the nations. Ford together with its subsidiary companies and partners deals in cars, sport utility vehicle (SUV’s), trucks and numerous other products and services to the customers in all the six continents. Ford as well as Lincoln are the brands which are wholly owned by the Ford Motor Company. The company has established manufacturing and distribution units, research and development facilities, warehouses across South and North American, European, Asian along with African regions. The company also undertakes the business of car rental, leasing business, car finance and other activities related to finance (ABR, 2010). Correspondingly, the paper intends to describe the strategic business audit of Ford Motor Company which is very important to study the current situation of the company through a systematic approach. The main purpose for using the strategic audit approach in this paper is to provide an evaluation of the current strategies that have been used by the company to position itself effectively in the competitive market. External and internal factors of analysis have been used in this paper to clearly determine the strengths, weaknesses, opportunities and threats of the company that would provide an in-depth understanding of the position of the organization in the global domain. Qualitative research method has been used in this paper through the medium of secondary data in order to analyze the company. External Factors Analysis Natural Environment Ford Motors believes that change in the climate of natural environment poses major opportunities and threats to the company. The company concentrates on stabilizing the effects of greenhouse gas in the environmental atmosphere to a certain extent that would result in a minimal effect on the climate change through producing cars in which the level of carbon emissions is relatively lower. The company has also taken the initiative of producing fuel economic and lower carbon fuel cars on the global platform to achieve the objective of stabilizing the climate change. The threats and opportunities for the company in relation to the natural environment have been bifurcated into four aspects which include the following (Pearson Education, 2013) Markets: Rise in the fuel price has resulted in the shift of customer demands from large trucks to lighter vehicles and eventually to smaller vehicles such as car and other diesel based vehicles. It has been observed that people have raised their concerns regarding the protection of natural resources such as fuel and other resources. This is turn has created a good opportunity for the company as it has focused on producing fuel efficient vehicles which has resulted in the overall growth of the market share for Ford (Ford Motor Company, 2008). Regulations: The regulatory policies for greenhouse gas (GHG) emission have impacted the company in many ways that include manufacturing units and other factors of vehicle emission. Although these regulations have created certain opportunities for the company but these regulatory aspects pose certain threat to the company as well because it is bound to produce vehicles which fall under the emission level farmed by the European Union (EU). Moreover, if the company fails to manufacture vehicles within the specified emission level then there is a possibility that the organization might have to incur huge fines (Ford Motor Company, 2008). Investment Community: The investment made by investors and the individuals who are directly held responsible for using these investments in a socially responsible way plays an important role in positioning the company in the eyes of public. Moreover, providing relevant information to the investors regarding climate change is a significant aspect for the company to maintain the flow of capital. Therefore, it can be ascertained that natural environment can affect the investment community (Ford Motor Company, 2008). Physical Risks: Weather condition can act as an obstacle for the company in producing vehicles as it is required for the company to produce vehicles as per the demand. However, harsh weather conditions might bring about disruptions of supplying these vehicles on time as the production of vehicle would not be consistent in these weather conditions (Ford Motor Company, 2008). Societal Environment Political-Legal Factors: On 11th September 2001, there was a series of terrorist attacks that transpired in the US due to which there was a reduction in the sales Ford products wherein the sales of the company reduced by 10%. Moreover, the economic recession in the year 2002 at Argentina resulted in adversely affecting the production of the company wherein the production declined from 57,200 units to 31,000 units (Scribd Inc, 2014). Furthermore, in the year 2003, the Iraqi war affected Ford in a negative manner due to which the company’s sales dropped by 7%. These aspects provide evidence that the company faced major threats in its business function due to the political factors. Although these factors might have caused the downfall of the company but it was observed that the company significantly grew in the global market by making the most out of the smallest opportunities provided to the organization by the regulatory measures (Scribd Inc, 2014). Economic Factors: Rise in the fuel prices has resulted in changing the perception of the customers to purchase diesel cars instead of petrol cars, due to which there has been a decline in the Sports Utility Vehicle (SUV’s) produced by Ford. It has been observed that there has been a rise in demand of the Japanese cars as they consume lesser fuel as compared to Ford’s cars. Thus, the company had to ease their pricing policy on cars and sell it in a lesser price to retain the market share and survive in the market which acted as a huge threat for the company. Nevertheless, Ford was economically sound which resulted in an opportunistic factor for the company to diversify in the global market (Scribd Inc, 2014). Sociocultural Factors: Ford has taken the initiative of producing fuel efficient cars in which the carbon emissions are relatively lower. Therefore, it can be ascertained that the company is socially integrated into the environment. Consequently, the social factors did not have much of a negative impact on the company as polices set by the company helped it in getting an opportunistic advantage. There has been an increase in the demand of luxury cars in the EU. Ford is recognized for producing luxury cars therefore it has been revealed that the company increased its profit margins by selling a huge number of these cars. Ford also has recruited women car designers so that the specific needs of female group are fulfilled (Scribd Inc, 2014). Technological Factors: New technologies have been used by the companies in the production process which has resulted in reduction of man-power required and overall reduction in the cost incurred for producing vehicles. Primarily, Japanese companies have been using these advanced technologies to get a competitive advantage which has created a huge threat for Ford in reducing its cost of production. There has been an increase in pressure for the company to enhance its supply chain and cater the customized needs of customers. Consequently, it can be asserted that the company should use these technologies effectively in order to gain a competitive advantage against the Japanese companies (Scribd Inc, 2014). Task External Environment This environment consists of those factors with which the Ford Motor Company has to interact directly and these factors play a key role in ascertaining whether the company has the ability to attain its goals. This is owing to the fact that these factors have a direct impact on the company’s operations. Therefore, Porter’s five forces analysis has been undertaken in the following section to determine the external environment of Ford. Threat of New Entrants: Ford has a relatively lower threat of new entrants as it has already established its reputation in the market. However, new companies by developing new technologies can enter into the market as there has been a rise in demand of the electric cars and raised concerns regarding hike in the fuel price. Manufacturing cheaper cars by new companies can provide a threat of entry to Ford. Although huge investment is required to enter the automobile industry, companies with huge investment can enter into the market through research and development (Zielonka et al., 2014). Threat of Substitutes: It has been revealed that the threat of substitutes is quite high for the company as the people might use other modes of transportation in highly populated cities in which the traffic regulations are complex. At times, using cars might incur more cost as compared to other modes of transportation as the individuals will have to expend on fuel and other maintenance cost of the vehicle. Threat of substitutes for the company includes walking, using public transportation such as train or buses as well as using bikes (Zielonka et al., 2014). Industrial Rivalry: It has been observed that the industrial rivalry is quite high for the company. Most of the automobile companies have a common goal and are focused towards a common direction. Most of the rival companies to survive in the market use factors such as pricing, quality aspects along with durability to gain the competitive advantage in the global market. Key rivals of Ford Motors are Nissan, General Motors and Toyota (Zielonka et al., 2014). Bargaining Power of Suppliers: Suppliers power does not pose much of a threat to Ford Motors as there are numerous suppliers who manufacture automobile products and the parts used in the vehicle are quite different from each other. Therefore, there are numerous suppliers in the industry it is considered that the buyers would not have much power (Zielonka et al., 2014). Bargaining Power of Buyers: There is a huge threat to the company as the power of buyers is fairly high as compared to other industries. Buyers can have a huge impact on the company as they are the one who provide revenue to the business. Therefore, if Ford Motors cannot provide satisfaction to the consumers, there is a possibility that the company might lose its customers to the competitors (Zielonka et al., 2014). Internal Factors Analysis Ford’s Strengths and Weaknesses Strengths of the company involve that it has a strong portfolio of brands. The engineering capability of company is considered to be of a strong background as the technical staffs have gained excellence in their work and they are renowned for providing expert services to the company. Moreover, Ford has a wide distribution network which is a key aspect as the channel of distribution used is quite appropriate for the company to distribute its final products to the global market through its dealers. Furthermore, the employees in the company are result oriented wherein it has been revealed that employee’s productivity is relatively higher that turns out to be beneficial for the company to cater the market demands and supply the products on time. However, there are certain weaknesses that require to be considered by Ford Motors which include continuous decline in the company’s market share along with continuous product recall wherein the manufacturer is returned back the products that have been manufactured due to certain defects or safety issues. Besides, there has been a decline in the operating efficiency of the company due to certain unfavorable factors along with weak returns towing to increased competition in the market (Yousigma, n.d.). Ford’s Organisational Structure Ford Motors being an international organisation has a complex organisational structure that is mechanistic in nature. The classification in structure is based upon the function of each individual. The executives which include the Chief Operating Officer (COO), Chief Technical Officer (CTO), Chief Financial Officer (CFO), Executive Vice Presidents and the Group Vice Presidents function under the Chief Executive Officer (CEO) and the Chairman. The functions of COO include management of automotive risk, managing communications and global trading. Similarly, the functions of CTO involve managing the company’s operations all over Europe, undertaking engineering activities through sustainability and environmental awareness. CFO has the function of managing the financial activities and transactions in the organisation under which various executives carry out their function. The Executive Vice President deals with sales and service across Europe, America, Africa and Middle East along with managing Ford’s motor credit activities. At the same time, the Group Vice President has to carry out functions related to legal aspects, quality assurance, new product launch along with industrial and labour affairs. The figure below provides a brief idea regarding the organisational structure being used by the company (Slide share, 2013). Figure 1: Ford’s Organisational Structure (Cogmap, 2013) Ford’s Organisational Culture Ford Motors’ organisational culture provides a good idea regarding the organisational personality and its character. Ford Motors’ uses a participative organisational culture along with a system of open communication due to which it has a strong culture wherein the values of the company are shared widely. The culture followed by company can be clearly understandable through following factors which include: People Orientation: Ford Motors’ uses an adaptive nature in its company wherein the managers give attention to the interest of clients, employees and the shareholders. Employees in the company are regarded as valuable assets and their involvement is always encouraged. Ford Motors’ provides significance on creating future leaders through a program of leadership development that covers in excess of 2000 managers in the entire business unit (Seligman, 2005). Competitiveness: Ford Motors’ uses the plan derived through employee involvement and discussion that affects the competitive nature of the employees. Motivational factors for employees are identified and incorporated in the company along with appraising the top performers by providing them training to enhance their skills and performance. Therefore, it can be assured that competitive culture used by the company is the best approach to attain the company goals (Slide share, 2013). Team Orientation: Ford Motors’ provides emphasis on team work to gain competitive advantage. The culture of working together as a team would provide a major contribution to make the company the automobile industry leader (Slide share, 2013). Ford’s Organisational Resources The resources of the company have been categorised into two types which include tangible resources and intangible resources. Tangible resources have been bifurcated into two types which include physical resources and financial resources. Physical resources of the company comprise strong manufacturing capability in which Ford has four industrial segments all over the world which entail 10 plants for assembling the parts of vehicle and 24 powertrain along with plants component. The manufacturing facility is also quite standardised wherein the machines used are up-to-date that can be controlled numerically. Financial resources of the company reveal that it has sound capacity of borrowing and it can function effectively even during the phase of financial crisis. On the other hand, intangible resources include that Ford Motors is highly reputed and it is renowned as the second leading manufacturer of automobiles in the USA and the fifth largest company worldwide. Ford Motors has been trusted by the customers from several years and it has a good strategic coalition with its dealers and suppliers. It also has intellectual resources which provide a platform for manufacturing varied vehicles. Human resources of the company are the most valuable assets as they are experts in what they do and their competency level cannot be compared to any other organisational human resources (Jin, 2013). Conclusion and Recommendations It has been acknowledged that Henry Ford initially started the company with a capital of 25000 US Dollars in the year 1903. In the present day context, Ford Motors’ has become the second largest manufacturer of automobiles in the US and the fifth biggest in the entire world. External and internal factors have been taken into consideration in order to analyse Ford Motors’ present situation in the market. With the help external analysis, it has been revealed that factors such as natural, societal and task environment have created both opportunities and threats for the company. These threats entail that there is huge risk of substitutes to the company along with new regulatory measures that have created more pressure on Ford Motors to produce its products with a sustainable development approach. However, certain opportunities could be recognised from the external analysis, which include the company’s involvement in the society which has created brand value and trust for the organisation in the eyes of public. Moreover, through internal analysis it could be determined that the company is financially sound and it has been able to manufacture vehicles effectively during financial crisis as well. This provides evidence that the internal environment has rendered a competitive advantage and created a strong hold for the company in the global market. However, certain weaknesses could be derived from the analysis which involve constant decline in the market share along with low return on investments. In this regard, certain alternatives have been derived that would ensure that the company would get a competitive advantage in the global market. These alternatives consider that Ford should endure using their dealers for distributing and selling their products and improve their relationship with suppliers so that the products required for manufacturing are continuously supplied. The company also should improve its product cycle so that the customers get pulled or attracted to the products instead of the company pushing its product to the market. Therefore, it is recommended for the company to develop its supply chain, reduce its cost of production and understand customers’ requirements for introducing new products. Moreover, it is also considered that the company must improve its communication with the IT and research and development departments that would enable to effectively implement the recommended changes. References ABR. (2010). Ford Motor Company. Retrieved from http://www.automotive-business-review.com/companies/ford_motor_company Cogmap. (2013). Chart. Retrieved from http://www.cogmap.com/chart/ford-motor-company Ford Foundation. (2014). History. Retrieved from http://www.fordfoundation.org/about-us/history Ford Motor Company. (2008). Blueprint for sustainability. Ford Sustainability, 1-47. Jin, L. (2013). Introduction of Ford case. Retrieved from http://www.slideshare.net/luchunjin/introduction-of-ford-case Pearson Education. (2013). The strategic management process. Behind the book, 78-81. Scribd Inc. (2014). Ford’s case analysis. Retrieved from http://www.scribd.com/doc/25221842/Fords-Case-Analysis Slide share. (2013). A report on Ford Motor Company. Retrieved from http://www.slideshare.net/Harsh_BITS/report-on-ford-motor-company-pom Seligman, J. (2005). Building a systems thinking culture at Ford Motor Company. The Society for Organizational Learning Journal, 6(4/5), 1-41. Yousigma. (n.d.). Ford Motor swot analysis. Comparative Analysis, 1-2. Zielonka, E., McCann, B., Gaynor, M., Metcalfe, Z. & Hasanbasic, G. (2014). Ford. Retrieved from http://www.slideshare.net/Cowboyz209/ford-pp-11925017 Read More