General Motors Company Analysis - Term Paper Example

?Introduction The purpose of this study is to evaluate one of the most prominent auto makers (i.e. Ford Motor Company) along with the microeconomic principles associated with the recovery in the auto market. In order to accomplish the purpose of this study, variety of economic principles is taken into consideration to evaluate the recovery of the company in the auto market. In addition, the microeconomic principle of competition has separately been taken into consideration as it would significantly help in identifying the recovery of the company in comparison to other American automakers. Ford Motor Company Ford Motor Company (Ford) is one of the leading auto makers in the global automotive industry. The company operates firmly in two sectors i.e. the automotive industry and the financial services. The company is known to manufacture and distribute the vehicles across six continents. During the year 2012, the company sold approximately 5,668,000 cars in the automotive segment (The New York Times, 2013). As a result, the company was provided with an opportunity to earn $126,567 mn in revenues. The two most prominent brands that the company has to offers include Ford and Lincoln. In addition, the F-series trucks have also played an essential in the growth and success of the company in the local and international world (Ford, 2012). The mission statement of the company clearly states that Ford aims to provide the customers with quality cars across the continents. This has significantly helped the organization in providing satisfaction beyond the imagination of the customers. To provide the customers with best quality cars, the company maintains mutual relationship with the essential dealers, suppliers and other business associates (The New York Times, 2013). Microeconomic Principles Needs and Wants Ford is one of the leading vehicle manufacturing organizations that focus highly on meeting the needs and wants of the customers. To effectively do so, the company design, build and sells cars along with utilities and trucks to provide the global customer base with vehicles that could satisfy the needs of the customers. Customers are the most crucial factors for the survival and growth of the organization across the globe due to which the needs and wants are taken into consideration in all the products and services offered by the company. Moreover, the company has always focused on meeting the needs of the customers by designing vehicles that cover the full spectrum of global automobile requirement. This significantly helps in attracting the customers towards the brands that Ford has to offer. As a result, the company is constantly provided with an opportunity to meet the needs and wants of the customers through variety of cars, utilities and trucks in the domestic, national and international market (Ford, 2012). Profits Profit is the foremost consideration of Ford. In earlier years of financial and economic crisis in United States, the company’s profit level declined significantly. With the passage of time, the company was consistently provided with opportunities to enhance the level of profits by attracting and selling the customers with quality cars, utilities and trucks (Ford, 2012). The company aims to enhance the performance of the company across the globe which will provide the company with significant opportunities to enhance its profit levels. Due to the constantly rising demands of the cars, utilities and trucks in the local and international market, the company reported significant increase in the level of profits. In the year 2010, the company reported net income of $6.6 billion in comparison of $2.7 billion in the year 2009 (Esch, 2011). The method of intra-platform price discrimination is one of the prominent methods used by Ford to optimize the profits of the company. The company is continually providing the customers with fuel efficient cars to enhance the financial strength of the company. This has significantly allowed the organization to attract the customers in the market which will eventually help the company to enhance the level of profits once again. Supply and demand To promote a healthy supply base, the company has focused on reducing the number of suppliers from 3,300 in 2004 to 1,260 at the end of 2012. This significantly implies that the company is reducing the number of suppliers in the local and international market so that the company could work with its suppliers in effective ways. The demand for the quality cars, utilities and trucks offered by Ford is constantly on the rise due to the price discrimination method taken under consideration by the company. In order to meet the demand of the customers in the local and international market, the company has established a network of dealers at the right location. This has significantly ensured that the current and the future demands of the customers could be effectively satisfied. Baby boomers play an essential role in the success of the company as the demand of cars in this generation is the greatest in comparison to other age groups (Eisenstein, 2013). Meeting the demands of baby boomers in the domestic and international market is essential for the growth of the company due to which Ford focuses on meeting the demand by effectively supplying the required vehicle to the right destination at the right time through well-established dealer network (Eisenstein, 2013). Furthermore, the company is constantly focusing its attention on the recently developed and emerging market such as Brazil, India, China and Russia. As the demand of the cars, utilities and trucks in these markets are constantly rising; the company has provided these markets with utmost attention and importance. Joint Ventures are taken into consideration to meet the rising demands of the customers (Eisenstein, 2013). Oligopoly Ford Motor Company operates in oligopoly marker structure. The numbers of competitor in such structure are limited. This indicates that Ford has limited competitors in the market. The two most prominent competitors of Ford in the domestic market include General Motors (GM) and Chrysler. Both of these organizations are the fiercest rivals of Ford but the company surely has competitive advantage over both of the organizations in the domestic and international market. The cars, utilities and trucks offered by Ford in the domestic market are perceived to be of greater quality and are more valuable in the eyes of customers over other competitors in the market. To revamp the sales and to win the attention of the customers, Ford has always focused on its product differentiation. As a result, the company has continually been provided with an opportunity to survive in such cut-throat market and to make economic profit. Products Ford is a prominent name in the automobile industry due to the variety of products offered by the company to meet the need and demand of diverse global customer base. The most prominent product line of Ford includes; Cars Utilities Trucks Lincoln With the help of such wide variety of cars, the company has gained the trust and confidence of the customers in the market. Each of the vehicles designed at Ford covers the full spectrum of global automobile requirements. This has significantly helped in satisfying the needs of the customers beyond their expectation. Price The level of competition in the automobile industry is quite severe due to which the automobile companies rarely reduce the price of the products offered. On the other hand, Ford has provided its diverse global customer base with lucrative incentives to take optimum advantage while they can. In the year 2003, the company offered its customers with zero percent financing. This significantly allowed the organization increase the level of sales of vehicles offered by Ford. Competition General Motors and Chrysler are two most prominent competitors of Ford in the domestic market. The products offered by General Motors and Ford are nearly the same but Ford has competitive advantage of differentiation over General Motors. Ford operates in value territory but with the changes in the customer’s needs and desires, General Motors have also focused its attention on moving into the same territory. On the other hand, Ford has been provided with significant opportunities to win the attention of customers through the variety of products (Hargreaves, 2013). As a result, the customers perceive the cars offered by Ford to be more valuable and of better quality in comparison of the competitors in the domestic market. Recovery in the Auto Market Compared to Other American Automakers The economic and financial crisis in United States had severe impact on the automobile industry. But with the passage of time, Ford was able to work towards its recovery in United States. The rapid recovery of Ford provided it with an opportunity to gain stronger position than its archrival General Motors. Reaching sustained profitability until 2011 was quite difficult for the organization but the customer’s confidence and trust allowed the organization to post net income of $2.3 billion (Szczesny, 2009). On the other hand, the rising demands of the cars, utilities and trucks offered by Ford allowed the organization to witness net income of $6.6 billion in the year 2010. In addition, the pickup trucks offered by Ford remained in the spotlight for the company. The increased consumer confidence and the upticks in the construction and energy sector allowed the pickup trucks to lead the segment in the domestic and international market (Insider Monkey, 2013b). The F-Series line of pickup trucks witnessed increase in sales by 24 percent which was the best sales figure since 2006. On the other hand, General Motors was able to accomplish second position in the automobile market in 2012 with 9.29 million vehicles sold. Although, the sales figure of the company are quite gigantic but the company witnessed decline in profits (28 percent) for the quarter (Insider Monkey, 2013a). In addition, the other geographic operations also witnessed lower earnings. Meanwhile, the revenues dropped 2.4 percent to $36.9 billion. Furthermore, the utmost attention to the developing markets in China, Brazil and India provided the organization with variety of opportunities to enhance the sales figure along with the level of profits and revenues. Similarly, the General Motors is ahead of Ford in the US automotive industry as the company holds 18 percent of the market share while Ford’s market share accounts for 16.4 percent (Insider Monkey, 2013c). Both the companies have witnessed increase in sales figures along with growth in the local and international automotive industry. This signifies that Ford along with its competitors in United States have significantly recovered from the financial and economic crisis which led to the decline of the industry for some time. Conclusion Ford is a leading automobile company in the domestic and international market that provides the customers with quality cars, utilities and trucks designed to meet the needs and wants of the customers. Despite the financial and economic crisis, the company was able to recover significantly and strongly in comparison to the archrivals in the automobile industry. The prominent economic principles that significantly helped in the recovery of the company include meeting the needs and wants of the customers effectively in the market; providing the customers with quality cars to enhance the level of profitability; meeting the demands of the customers in the domestic and international market through establishing effective dealer networks; providing the customers with innovative and unique products with values; providing the customers with rebates and zero financing ability to attract the customers to increase the level of sales along with tackling competition in the market through effective product differentiation. With the significant opportunities in the market, Ford was able to recover effectively from the financial and economic crisis. Whereas; the prominent competitors i.e. General Motors had to face serious difficulties in its recovery. References Esch, J. (2011). Ford Motor Company CEO: Recovery Slow but 'On Right Track'. Third Age, Retrieved July 26, 2013 from http://www.thirdage.com/news/ford-motor-company-ceo-recovery-slow-but-on-right-track_09-23-2011 Eisenstein, P. (2013). Baby Boomers Are the Key to Automotive Recovery. CNBC, Retrieved July 26, 2013 from http://www.cnbc.com/id/100784648 Hargreaves, R. (2013). These Three Stocks All Offer Different Plays on the Recovering Auto Market. Retrieved July 26, 2013 from http://beta.fool.com/ruperthargreav/2013/07/16/these-stocks-offer-three-different-plays-on-the-re/40603/ Szczesny, J. (2009). For Ford, Going It Alone Looks Like a Good Strategy. Time, Retrieved July 26, 2013 from http://www.time.com/time/business/article/0,8599,1923084,00.html#ixzz2a8DkBw20 Insider Monkey. (2013a). Ford Motor Company (F), General Motors Company (GM), Toyota Motor Corporation (ADR) (TM): The Automotive Industry Is Coming Back. Retrieved July 26, 2013 from http://www.insidermonkey.com/blog/ford-motor-company-f-general-motors-company-gm-toyota-motor-corporation-adr-tm-the-automotive-industry-is-coming-back-156525/ Insider Monkey. (2013b). Auto News Roundup: Ford Motor Company (F)’s Sales Soar, General Motors Company (GM)’s Big Reveal, Toyota Motor Corporation (ADR) (TM) Taunts Tesla Motors Inc (TSLA) and More. Retrieved July 26, 2013 from http://www.insidermonkey.com/blog/auto-news-roundup-ford-motor-company-fs-sales-soar-general-motors-company-gms-big-reveal-toyota-motor-corporation-adr-tm-taunts-tesla-motors-inc-tsla-and-more-189528/ Insider Monkey. (2013c). General Motors Company (GM), Ford Motor Company (F), Toyota Motor Corporation (ADR) (TM): A Performance Review of the US Auto Industry. Retrieved July 26, 2013 from http://www.insidermonkey.com/blog/general-motors-company-gm-ford-motor-company-f-toyota-motor-corporation-adr-tm-a-performance-review-of-the-us-auto-industry-191598/ Ford. (2012). Annual Report. Retrieved July 26, 2013 from http://corporate.ford.com/doc/ar2012-2012%20Annual%20Report.pdf The New York Times. (2013). Ford Motor Company. Retrieved July 26, 2013 from http://topics.nytimes.com/top/news/business/companies/ford_motor_company/index.html Read More