Ford Motor Company in American Multinational Corporation - Term Paper Example

Ford Motor Company Analysis I. Business Profile A. Background Ford Motor Company is an American Multinational Corporation founded in 1903 by Henry Ford, together with several investors, which included John Francis Dodge and Horace Elgin Dodge. Over the years, it has managed to survive economic strains both in America and worldwide and has even branched out towards automotive financing via Ford Motor Credit Company. This subsidiary provides financing and leasing services to retail and fleet customers, and is US’ number one auto finance company (Yahoo Finance 2007). Ford Motor Company has always been constantly ranking number 2, next to General Motors Corporation and later on in 2006, to Toyota. In 2006, Ford was able to sell 6.8 M vehicles and employed more than 280,000 people worldwide (Yahoo Finance 2007). Ford boasts of achieving advertising success and increased sales leads with a more effective advertising strategy and standardized customer relationship management solution. This new strategy has increased sales and productivity and this solution generated more than 50,000 qualified leads to date. (Case Study: How Ford Motor Co. Got Back on Track. 2007) Moreover, it has improved customer service with faster, tailored responses to queries; enabled coordinated cross-border marketing campaigns across Europe; and provided better tracking of marketing campaign effectiveness. The company managed to overcome its lows, experienced in the early 2000s, when it invested in facilities that aim to “put Internet on wheels”. The management then launched strategies that would allow consumers to use their cars as Net portals, ready to tap into the information super highway from the road. It also sold cars online via auction and began retailing cars online, bypassing its dealer and their high mark ups. In 2003, after earning the disapproval of angry dealers and retailers and violating a few state franchising laws, Ford decided to turn over its Internet related marketing strategies to its dealers. At present, it continues to overcome the wrong management decisions made in the past by investing in marketing tools that aim to both lower production costs and increase profitability. It maximizes its pool of IT professionals to design, develop and product vehicles that are largely appealing and cost efficient, without sacrificing the traditional Ford image. B. Location Ford models were sold at the United States area at first. However, Ford was able to penetrate major global markets, which include Europe, Australia, and Japan, among others. It has also reached the Asia Pacific area where it was able to garner a steady set of followers and fanatics. After over a century of producing quality vehicles, Ford is widely known around the world. C. Products and Market Ford Motor company’s primary marketing strategy has been squarely aimed at the American male population. Rugged advertising themes, such as those of the Ford F-150 Pick UP and the Ford Explorer advertising campaigns are good illustrations of this strategy. While the F-150 and Explorer continue to be the number one selling vehicles in their class, Ford needs to tap new customers and the US market is becoming increasingly saturated. Ford Motor Company and its subsidiaries design, develop, manufacture and distribute service cars, trucks and parts worldwide. The company operates through two sectors: Automotive and Financial Services. The Automotive sector sells cars, trucks and parts under Ford, Mercury, Lincoln, Volvo, Land Rover, Jaguar and Aston Martin brand names. This sector markets its products through retail dealers in North America and through distributors and dealers outside of North America, In addition, it sells cars and trucks to dealers for sale to fleet customers, including daily rental car companies, commercial fleet customers, leasing companies and governments. This sector also provides a range of after sales vehicle services and products, maintenance and light repair, heavy repair, collision, vehicle accessories, and extended service warranty. The Finance Services sector offers various automotive financing products to and through automotive dealers worldwide. It offers retail financing and other financing services such as making loans to dealers for working capital, improvement to dealer facilities, and the acquisition and refinancing of dealership real estate. This sector services the finance receivables and leases that it originates and purchases, makes loans to affiliates, purchases receivables and provides insurance services related to its financing programs. The company was founded in 1902 and is based in Michigan D. Distinctive Features Ford gives particular attention to technology and safety. In keeping synch with the Internet technology, it produces vehicles that enable customers to enjoy connectivity on the road. It boasts of a product line that caters to technology-conscious individuals. An example of Ford’s efforts to improve its line up would be the dynamics performance of the Ford Focus, Mondeo, Fiesta, and most recently, the S Max. These products embody Ford’s thrust to make driving fun and at the same time, promote efficiency in all of its models. II. ANALYSIS PEST A. POLITICAL ANALYIS Since the 60s, laws and government regulations have always affected the automotive industry. Regulations arise from consumers who have explicitly expressed environmental and safety concerns. The first safety act passed by Congress was in 1966 and was dubbed the National Traffic and Motor Vehicle Safety Act. This law forced the manufacturers to find ways to improve the safety for passengers, the visibility of drivers and ensuring the efficiency of car brakes. It also mandated that manufacturers should publicly announce any car model recalls to prevent consumers from encountering any defect. Concerns were not limited to passenger safety at this point. Environmental concerns were raised as well. In 1965, the Vehicle Air Pollution and Control Act was passed. This was the first act to set standards for automobile pollution. Soon after, US Congress passed the Clean Air Act that demanded a 90% decrease in automobile emission within the following period. The worldwide oil crisis in the 70s caused another Act to be passed. The Energy Policy and Conservation Act of 1975 provided that all automobiles must meet a certain mileage per gallon. The act mandated that all automobiles had to meet the standards for automobile pollution. B. ECONOMIC The automobile industry contributes hugely to the US economy, being the major buyers of parts such as computer chips, textiles, aluminum, copper, steel, iron, lead, plastics, vinyl and rubber. This industry also allowed an increase in employment rate, having given jobs in factories and showrooms. In 2001, gross sales were 3.7% of the nation’s gross domestic product. C. SOCIAL Baby boomers were largely the main target market for the type of automobiles being manufactured by Ford. However, as this target market is already considered old, the automobile industry is looking at the younger generation as their target market. This results to a more hip and innovative automobile products line up, that aims to cater to the children of baby boomers who, by now are already in their 20s and 30s, and have the purchasing power to choose their vehicles. It has become a trend that those belonging to this age group are more interested in purchasing bigger vehicles such as pick-ups and SUVs. This is probably due to the convenience these models give them, in the sense that these cars may be used for their functionality or their looks. Studies reveal that minivans and SUVs have increased in sales every year. At present, society is conscious about the type of automobile one drives. This gives the automobile manufacturers the drive to continuously innovate in the type of model and technological merits of their products. Manufacturers are largely aware of what society implicitly dictates and so produces automobiles by these thoughts. Another cultural concern is the need to adhere to environmental standards for fuel-efficient vehicles. This is why manufacturers are also conscious about meeting these standards ensuring that their products maintain their level of fuel requirements, consequently appealing to this sector of the market. D. TECHNOLOGICAL The Internet has become a widely known sales channel for vehicles. IT has been proven that consumers rely heavily on the Internet in determining their choice of cars, up to actual purchase of these products. This is why companies are ensuring the maximization of this sales channel to reach a wider range of market. Websites have been created and consumers may make purchases online. Business-to-business marketplaces have given the industry many opportunities because of the Internet, such as more efficiency and lower cost. Ford, GM, and Daimler Chrysler announced in 2000 their plans to create a global online exchange for suppliers and the original equipment manufacturers. Concerns for the economy and global warming have caused the automobile industry to develop alternate fuel vehicles. In the beginning, automakers did not want to look into the development because of the high cost and the many risks involved. Because of new legislation, they had no choice but to come up with the technology to make the fuel-efficient cars. At the end of the 1990’s manufacturers was coming up with the technology to produce internal combustion engine with an electric motor. SWOT ANALYSIS A. STRENGHTS Ford Motor Company ranked 4th on the Fortune 500 List (U.S. only) and 4th on the Global 500 List. Further, it ranked k39th on the Best Companies for Minorities List. The Ford product line up may be considered one of world’s best-known brands. It is widely known in the whole world to be one of America’s top brands and has gained popularity over the years. Maximizing the opportunities that the Internet technology brings, Ford’s Web strategy has cut car build costs by as much as $380 per car. Further, in response to the heed of environmentalists calling for action for a more environment-friendly alternative to fuel requirements, Ford has already invested heavily in alternate fuel sources One of Ford’s strengths is their continuous support in activities that have social causes. For one, Ford gave generously after the September 11 attacks, aiding in the rehabilitation and assistance for the victims. They also support other projects by giving generously to Help Fight Breast Cancer. Ford also support racing teams, NASCAR, Formula One, among others. B. WEAKNESSES One of Ford’s major blunders would be Firestone Tire recalls which caused Stock Price to Suffer--$14.70, its lowest in years. Consumer’s confidence went down due to this incident, resulting to a decline in its stock values. In early 2000s, a major management problem also arose with CEO Jacques Nasser and Chairman Bill Ford Jr.’s conflicting ideas. This conflict in management led to a lag in some major decision making requirements. This situation resulted to Bill Ford taking over as CEO. Mismanagement of funds caused Ford to suffer financially. Also in the early 2000s, cash reserves have sunk to $4.1 Billion. Furthermore, its Internet related projects caused an estimate of $13 Billion on Acquisitions. Tire recalls also cost the company an estimate of $ 3.5 Billion. Image-wise, although Ford has always maintained an image of being elite, quality and stylish, it also can be perceived as “safe” and “boring” due to the traditional models. C. OPPORTUNITIES At present, Ford has a chance to become more environmentally friendly with cleaner engine emissions and by working with environmental groups to help. They have explicitly expressed their desire to serve more by introducing environmentally friendly fuel alternatives in its quest to support groups for a cleaner environment. With this strategy, Ford has won the support of cause-oriented groups. As part of this effort, Ford has already started investing in Solar Power, and has a chance to become a market leader in this field. They continue to conduct research towards this goal and manifest all developments through the latest models being carried. Ford’s edge in the Internet technology enables them to use their Web strategy to cut costs further. They have the tendency to maximize the Internet to produce sales and invite consumers to take part in conceptualizing new models through the interactive manner by which they present their products. Another opportunity for Ford is that they can take advantage of their perceived generosity by giving to more charities, and using the fact in their targeted advertising. D. THREATS There is fierce competition in the market with the continuous development of other products from manufacturers in Japan and even in the US. Consumers now do not only think of image when purchasing an automobile, but more importantly, its cost efficiency in terms of operations and maintenance. This should prompt Ford to continue giving priority on product research and development to be able to keep on track. Rivalry is getting intense nationwide. Ford should also overcome its internal problems such as management conflicts and disagreements as Internal strife will definitely hurt the company. Environment-wise, the threat of substitute products such as Natural gas, Electricity, could decrease the competitiveness of some products. As mentioned, Ford should be able to maintain its efforts to keep pace with the changing demands of the market. Political conditions could be considered as one of the threats in the automotive industry global-wise. These conditions result to a decline in every country’s economy, causing industries to fall. III. Evaluation In January 2002, Ford launched a major revitalization strategic plan with three key elements: A strong focus on products. An emphasis on cost reductions. A commitment to right-sizing the business. The plan is to improve their quality and rationalize capacity in North America from 5.7 million units to 4.8 million. It includes the closing of five plants and the elimination of four low-margin vehicles by mid-decade. By then they will be introducing 10 new and 10 freshened models annually in North America. In Europe, the strategy includes 45 new or significantly improved products over a five-year period, (and in Europe it has already improved market share and returned Ford of Europe to profitability.) Ford has been right in focusing on their products, as their brand name is their big strength, but their policy does not go far enough in preparing for the future, in terms of alternate, greener, fuels. The importance of this sector will become paramount, especially if the situation in the Middle East deteriorates and an oil crisis develops. Japanese competitors such as Honda are well advanced in developing "hybrid" engines and new fuel sources, and in retrenching to cut costs and focusing inwards, Ford are in danger in missing out on the bigger world market picture. Also, the recent politics at board level have led the public to see Ford as a company in turmoil. An inward looking strategic policy won't help. In this regard, it is but right to put more emphasis on emerging technologies, and stress Ford’s position as a leading world company, at the forefront of development of a greener, cleaner, future. This would also help to negate somewhat the "boring" image people have of the company, and would also divert attention from the recent history of in fighting. A high profile ad campaign emphasizing Ford’s "supportiveness" would also help in this regard Ford Company has to overcome the many difficulties that the automotive industry has faced through the years. It has also gone through major management blunders, wrong marketing strategies and misallocated funds. But Ford would continue to thrive and survive in the market simply by the legacy and image it has established since it started a century ago. It would capitalize on the fact that Ford represents quality and taste and would always appeal to the captured market. With its current thrust to implement cost cutting in terms of operational cost, Ford would most likely regain its footing and even manage to give Toyota and General Motors a fierce competition, especially now that it has started creating models similar to Asian-made ones – small, easy to manage and cost-saving. It strives to address quality challenge through its use of high-tech quality verification system, which enables to quality check all vehicles leaving the factory. Its focus on its brands would give management the leverage to compete with new vehicles that appeal to the more cost-conscious market of the present time. It has transformed that used to be a weakness – the use of Internet Technology – into a strength by establishing a well-rounded IT group. Ford’s utmost commitment in Customers Relations Management also Gives the company a chance to know and understand the market’s needs and eventually address them sufficiently. Works Cited “Ford Motor Co.. ” Yahoo! Finance. November 20, 2007. http://finance.yahoo.com/q/pr?s=F “GM Plots Digital Turnaround” Case Study: How Ford Motor Co. Got Back on Track” http://www.cioinsight.com/print_article2 Read More