PESTLE Analysis of Ford Motor Company - Case Study Example

PESTLE Analysis: Ford Motor Company xxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxx Name xxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxx Institution xxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxx Lecturer xxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxx Date Introduction Being a global leader in the automobile industry, Ford motor company has its 90 plants spread all over the world (Windecker 2004b). Ford motor company has opened up job opportunities for many people as it currently has 201, 000 employees. It is involved in the manufacture of commercial vehicles and cars and operations in seven continents namely; Caribbean, Africa, Middle East, Latin America, Asia Pacific, Europe and North America. The company has partnered with companies such as Adventure Island and Water country USA, Roush, Sony, Microsoft and BP so as to improve its products quality. PESTLE Analysis The PESTLE analysis will represent the organization’s (in this case Ford) political, economic, legislative, social, technical/technological and environmental factors. (Worthington & Britton 2009) Political factors Ford benefits free trade flows, favourable oil prices and favourable exchange rates. These factors result in lowered production costs hence attracting consumers to invest on the vehicles. In addition, Ford has benefited from regulations allowing foreign ownership of land even if sometimes it is on lease through governmental intervention (Mackintosh, 2004b). There has also been flourishing technological cooperation between countries and thus Ford has not had to import labour which is more expensive (Mackintosh, 2004a). The labour unions have a great impact on the success of Ford. These unions play a major role in the production process as well as ensuring that employees are paid their due and respected. A strike instituted by the union thus has serious consequences on the company. Bordenave (2003) cites British Labour Unions as the major cause of increased labour cost. The existence of an investor climate has acted as a boost to Ford resulting to its growth and development due to flourishing good political relationships in the counties of operation (Windecker 2004a). As more people enter the distribution channel, a wide coverage is achieved and hence increased sales. In countries which are constantly in war such as Iraq, business is low as investors are not ready to take the risk. Economic factors The purchasing power of target customers dictates the growth of the market. The higher the purchasing power of target customers, the higher the growth rate of potential market. Having this in mind, Ford has opted to increase its investments in Brazil, India and America where growth rate is likely to be higher in comparison to other countries (Worthington & Britton 2009). This is based on increasing demand for vehicles as indicated in the diagram below (Nieuwenhuis & Wells 2003) The business has flourished in these countries due to the market size. As the GDO growth rate increases, the consumers’ purchasing power also increases resulting to a higher demand for luxury or premium vehicles. This is attributed to by economic development. In addition, emergency of new markets and new unions and economic blocks has increased the overall growth rate of the company (Niewenhuis & Wells 2003). The growth in market is also being realized in Asian tigers, India and China. Lastly oil price fluctuations and inflation rates also influence the sales made by Ford Company. As the oil prices increase which is the case at the moment, the rate at which luxury/premium cars are sold goes down as cost conscious customers avoid those cars that provide low mileage. In the same way, sales rate decreases with increased inflation as customers have less disposable income to spend on luxurious products. These economic factors impact on strategy of pricing vehicles, investment return rate, operations’ margin costs and growth of potential market. Social factors These factors include consumer beliefs, demographical and attitudes with regard to the product. Ford consumers’ social factors differ from one geographical region to another. For instance, while Brittan consumers opt for commercial vehicles with small engines and cars, US consumers opt for commercial vehicles which have a large engine. The consumer attitude determines the model of a car selected with majority of Ford customers purchasing normal cars based on their concern for safety and fuel. Ford also puts into consideration the travel habits of its target consumers when designing its cars. The fact that it provides cars for both middle and upper class clients has resulted to increased sales. Lastly, the increased educational level among consumers and environmental concerns results preference of quality vehicles and hence increased sales for Ford (Fitzgerald 2004). Technological factors Ford motor company has been on the lead in technological innovation resulting to increased customer satisfaction and hence the number of sales made. In addition, the company has well developed supply chains though collaboration in more than thirty countries and high operations capability. This increases customer satisfaction and loyalty as ordered products are delivered on time. In all its plants, Ford maintains the production of high quality vehicles (Clark 2000). Ford has also developed its online services where customers can view cars and make orders online (Eisenstein 2003). Lastly, Ford has concentrated on the provision of products based on their customer needs (Palmer & Hartley 2009). This has resulted to the development of a culture of innovation. Legislative There are new business laws aimed at protecting the customers from counterfeits and low quality products. Though this laws required changes be made in Ford’s existing rules and regulations, they protected its products too and reduced competition from counterfeit goods which are likely to at a low price (KPMG 2004). This has resulted to maintenance of high quality products. High legal costs are incurred including indirect costs resulting from increased tension with the government as a result of pressure from Labour Unions. Regulations by the labour unions therefore have a great impact on Ford. Ethical For d motor company sponsors many sports held throughout the globe. This attracts the sponsored teams and their fans to join the customer list. It also sponsors sports facilities for instance Ford Field and Ford Center thus contributing to community’s well being. Tension with the government which may be as a result of pressures from labour unions due to low pays or unfavourable working conditions is detrimental to the company (Mintel, 2004). References Bordenave, J 2003,  Ford of Europe, 1967-2003,  Université Montesquieu Bordeaux IV Working Paper no. 2003-11, September Clark, A, 2000, Organizations competitions and the business environment, first edition, New Yolk: Pearson Education Limited. Eisenstein, A, 2003, Case Study: How Ford Motor Co. got back on track a much better idea?  CIO Insight, 14/01 Fitzgerald, C, 2004, Getting serious about quality: automotive industries, Jul, Vol. 184, Iss. 7, pp. 45-46 KPMG 2004, KPMG's Automotive industry survey: momentum in the automotive industry Mackintosh J, 2004a, Jaguar factory to close despite warning, The Financial Times, 17/09,  Mackintosh J, 2004b, Jaguar hopes to break even in 2007, The Financial Times, 02/11 Mackintosh J, 2004c, Jaguar likely to close Coventry factory as part of shake-up, The Financial Times, 15/09 Mintel, 2004, Cars - UK – September, Mintel Group, Sep. Nieuwenhuis, P & Wells, P 2003, The Automotive Industry and the Environment: A Technical, Business and Social Future, Cambridge: Wood head publishing. Palmer, A, & Hartley, B, 2009, The Business Environment, Sixth edition, New Yolk: Mc Graw- Hill Higher Education. Windecker, R 2004a, Jaguar Score Card: Up 605, down 21, Automotive Industries, October. Windecker, R 2004b,  Upsize and Upscale Lead the Way,  Automotive Industries,  June, Vol. 184,  Issue 6, p. 18. Worthington & Britton, 2009, The Business Environment, Sixth Edition, New Yolk: Pearson Education Limited. Read More