Ford and the World Automobile Industry in 2012 - Case Study Example

Ford and the World Automobile Industry In Affiliation: Ford and the World Automobile Industry In Introduction Ford Motor Company is a fully-fledged automobile company that was formed in 1919 and manufactures different types of vehicles as well as automotive parts. Being among the first automobile companies in the USA, it has gained dominance in the US market and the Europe continent although it has also expanded to other continents. Ford actively competes for market share and dominance with other large automobile companies such as Chrysler group, General motors and Toyota. Key Issues and Problems Having being in operation for many years, Ford had been enjoying a large market share but with the growth of other companies, the level of competition had significantly increased. Their other problem was manufacturing technology whereby since customers were demanding recent car models with better technologies. Competitive pressures Threat of entry The automobile manufacturing sector has a lot of restrictions to new entrants. The governing bodies in the industry employ significant barriers to entry into the market. The industry operates under fixed costs, and new entrants are hindered by the influence of brand names and dealership models. The Ford Company, therefore, did not have any threat caused by new entries in 2012. They had a strong brand due to their large economies of scale. Ford had a lot of experience in the market, and their accumulated profits were enough to draw away new market entrants due to the fear of high competition. Their only threat was from the existing manufacturers since all the companies were attempting to increase their market share. Threat of substitutes Over many years, the automotive industry was dominated by a few companies and they produced products with high similarity. The competing companies, therefore, based their competition on model of vehicles and price of vehicles. Each competitor was developing new models of vehicles with better aesthetic properties. Between 1997 and 2010, The General motors Company and Audi Company produced new models of vehicles in USA, which attracted many customers (Tremblay, & Tremblay, 2012). This led to reduced sales by the Ford Company, which had not developed any new models in this period. Their production of vehicles remained constant, but the market demand reduced significantly and hence the companies reduced yearly returns. In the last decade before 2011, various motor companies had united and shared their production techniques. Therefore, most competitors had devised new low-cost production techniques. Such companies invested the saved funds in new technologies, dealerships and marketing and hence outdoing the Ford Company in terms of sales. Most customers changed from Ford products to other brands of vehicles. Toyota, VV and GM Companies, the biggest Ford competitors, recorded a significant increase in profits in 2000-2009 as opposed to losses by the Ford Company. This major drift was caused by vehicle price reduction and improved manufacturing technologies by other major competitors. Buyer power Ford had managed to meet the demands of the customers since its initiation. Between 1994 and 2000, they recorded the highest sales and profits among all the competitors. They had achieved product loyalty by most of their customers. Other companies reacted by improving their products whereas Ford continued to produce their existing products instead of improving them more (Wright, 2000). They did not improve their production technologies and hence their market prices stagnated (Tremblay, & Tremblay, 2012). Their competitors such as the Audi Company and Toyota designed new vehicle models prompting a change of taste by the Ford customers. The immediate counter effect in two years was reduced sales by the Ford Company. Their vehicle yards remained stocked and hence the losses experience in 2000 to 2009. However, the company responded to the loss by investigating the consumer’s tastes and preferences, and hence they developed new models of vehicle in 2009 and 2010 while led to booming sales and profits in 2011. The company also made a significant strategy turns over so as to respond to the market pressures, and this contributed to their success in 2010 and 2011. Supplier power The Ford Company had a lot of support from its supplies since it owns an iron ore and rubber plantations in the amazon basin. This makes Ford Company have a supplier power over its competitors. Due to this, they possess an advantage by posing a supplier threat to their competitors (Hitt, Hoskisson & Ireland, 2013). The Ford Company hence has an impact on the stability of the supply chain in the USA. In 2010 and 2011, the company focused on reducing the suppliers of materials and hence they dominated the market in terms of having the cheapest materials. This significantly reduced their costs of production and hence their booming profits in 2011. Ford Company relied on car dealers to supply their products to the market up to 2009 (Tremblay, & Tremblay, 2012). However, their new management in 2010 changed this strategy, and they began supplying their products through specific dealers who only sold Ford product. Due to this change, the company experienced more sales and hence the profits in 2011. Market Rivalry Ford Company posed a great threat to its competitors in 2011 due to their sudden increase in profits. Due to this, they faced a lot of rivalry within the USA market from companies such as GM, Toyota and Chrysler. All the rival companies had grown in terms of high-quality products and low costs of production. Their rivals had also developed small vehicles with low fuel consumption. Consumer taste had changed from big vehicles to small vehicles and hence they had to employ new strategies in order to fit the market. This had contributed to the companies reduced sales and losses in 2000-2009 (Tremblay, & Tremblay, 2012). However, in 2010 and 2011 the company moved their focus to manufacture of small vehicles with low fuel consumption and hence was able to keep up with the market rivalry. Their rivals developed new models of vehicles, which fitted consumer likes and preferences, and this prompted the Ford Company to manufacture of new model vehicles. Alternative Courses of Action The level of contention in the industry is expected to continue increasing since each automobile company is looking for market dominance. Although originality is vital to maintaining a product brand, the Ford Company should invest more in design of new models of vehicles with properties that suit the market needs. This will ensure that they maintain and attract new customers. This will offer them a competitive advantage over their rivals. The company should also look forward to expanding their market to other countries so that they can stop over depending on the USA market. The company should invest more in new manufacturing technologies, which will ensure that their cost of production is lowered (Hitt, Hoskisson & Ireland, 2013). Low cost of production places the company in a position to enjoy a price advantage in the market. Ford Company should look for new sources of raw material at cheaper prices and hence their cost of production will reduce. Excellent marketing skills should be implemented to ensure that they win customers in the market. Course of Action Some of the above courses of action are long term while others are short term. To respond to the problems at hand immediately, the Ford Company should perform research on the market needs in terms of vehicles design and technology. This will form a guideline on the best design of the vehicles to produce in order for them to remain competitive. Expanding to new markets is a long-term strategy that requires large amounts of capital. Employing such a strategy to face competition would not produce immediate positive results and should hence be done after becoming competitive in the current markets. The company is currently experiencing reduced sales and hence looking for cheaper materials would not be alter the sales by far. Therefore, in appropriate to invest on searching for cheaper materials before first identifying the customer demands and responding appropriately. Action Plan The company should therefore carryout a market research to identify the consumer needs and preferences with regard to the products they are producing. After identifying the customer needs and responding appropriately, the results of the research should be verified through a follow-up research to determine whether the vehicles produced fit the needs of the customers. If the result turns out positive, the company should continue producing the new models, and if negative, they should redevelop again. After achieving the required model, the company should then focus on reducing the cost of production and improving their marketing skills so that they can dominate the market. References Hitt, M. A., Hoskisson, R. E., & Ireland, R. D. (2013). Strategic management: Competitiveness & globalization : cases. Mason, OH: South-Western, Cengage Learning. Tremblay, V. J., & Tremblay, C. H. (2012). New perspectives on industrial organization. New York: Springer. Wright, M. (2000). Managing competitive crisis. Cambridge, U.K: Cambridge University Press. Read More