Sector Matrix and Product Chain: Ford Company - Essay Example

Sector Matrix and Product Chain Sector Matrix and Product Chain Competition existing in both the international as well as domesticmarket has called up for the better understanding of the market. One of the methods that many organizations have applied in order to better understands the markets especially supply and demand is the sector matrix. The sector matrix often helps understand complex business activities and gives the organization a picture of how the market is looking. It is an incorporation of the Potter’s value chain as well as the commodity chain (Carbaugh, 2013). The sector matrix has the full capability to work in complex processes as well as products. The automobile industry is the best industry to examine when it comes to commodity value chains and the sector matrix, because it often produces complex products that have complex distribution channels (Plunkett, 2009). Further, it is also important to understand that the commodity price is very high in this industry. This paper through the use of Ford Company intends to show that a ‘sector matrix’ often gives better and strategic understanding of the product markets as compared to the concepts of product chains. Commodity chains It is important to note that the commodity chain has different value chain approaches. The value chain often describes that activities that usually take place in business and relates them to an analysis of the competitive strength of businesses (Bharati, 2012). The value chain analysis often identifies which activities should be undertaken by a big business and which one is best outsourced. The value chain is important as it gives a strategic understanding of the product markets (Carbaugh, 2013). The commodity chain is important as it also reveals a lot about the international configuration of production as well as the global economy. For this reason, it can be said to represent a distinguished field of study which helps in understanding the different products in the market (Nieman, 2006). Understanding significance of a commodity often represents a comprehensive approach as it includes an array of activities. For example, in the automotive industry, it often identifies the actors as well as the processes that often contribute to the inauguration of merchandise that is consumed by the market (Nieman, 2006). This includes raw resources, the assemblage of different parts and the distribution of the automobiles in the industry (Carbaugh, 2013). The automotive industry is very complex, for this reason there are several perspectives that are used to look at the industry and its products. The first perspective is the transactional perspective which often identifies the flows as well as the dealings that generate them. This is important as it often particularly concerns itself with the decision making process when it comes to the establishment as well as management of the commodity (Yemaneberhan, 2012). The comparative perspective on the other hand determines the relative competition of different elements that exists in the commodity chain in the perspective of added value (Consortium for Advanced Manufacturing-International, 1996). Finally, the functional perspective often identifies the physical processes that are involved in the movement of goods, the capacity constraints when it comes to distribution and the effectiveness of the system (Dess, 2012). The value chain model can be said to be centered mainly on organizational processes. This is because generally the manufacturing facility has its subsystems, and each subsystem has its own inputs as well as outputs (Caves, 1980). The efficiency of these activities that are aligned through the value chain in many cases determines the cost of production and consequently it is imperative when it comes to the profitability of the organization (Brinkley, 2003). It is common practice to group the activities in to primary as well as secondary support activities. In Porter’s Value chain, the five primary activities used are inbound logistics, operations, marketing and sales, outbound logistics as well as after sale services (Gereffi, 1994). On the other hand, the secondary activities often include human resource management, technological development, procurement and infrastructure (Yemaneberhan, 2012). The commodity chains can only be classified into two groups and that is producer driven and buyer driven. In the producer driven chains, the large companies like Ford often play vital roles when it comes to the co-ordination of different complex production networks. Therefore, in such cases, the commodity chains should always be observed as a capital and technology intensive systems. The automotive industry is a producer driven chain that is often characterized by what can only be described as a multifaceted production system. The industry has many firms and therefore, the commodity chain often suffers a setback in checking all the different commodities and suppliers that exist in the market (Brinkley, 2003). In the value chain the three major dimensions that exist in global commodity chains is defined through an input-output structure, corporate governance and territoriality. The organization often needs a well articulated and defined spatial dispersion networks that pertain to production and marketing and this should be able to employ various enterprise for this purpose (Haslam, 2000). On the other hand, territoriality is also important in value chain as it often determines the sales that an organization may be able to achieve through its marketing as well as sales activities. However, this is often tedious as there are many manufacturing companies (Haslam, 2000). Finally, the corporate governance activities are important as they adopt the company into shaping the authority as well as the distribution of power within the entire organization and deals with hierarchy for the organization. The automotive industry is very segmented and fragmented as it consists of many different suppliers (Koulopoulos, 2001). The segment pertaining to the auto parts in many cases is often divided between the original equipment manufacturers as well as the replacement market. Firms in many cases are generally known to be linear supply chains whereas different and diverse industries are in many cases conceptualized as firms that share a common technological platform in order to produce outputs that are similar. In fact, this can be said to be the basic premise that exists in the foundation of Porter’s value chain. Sector matrix When it comes to demand, the sector matrix often goes a notch higher in the analyzing of consumer’s disposable income as well as the overall household expenditure. When looking at the demand that exists in the automobile industry, it seen that it is very hard for a single company like Ford to get a clear picture of the entire industry because there are often very many companies as well as billions of consumers (Brinkley, 2003). The Sector matrix is an important analysis tool as it gives the responsible and interested parties information that is pertinent and which can effectively and efficiently determine the level of demand. For example, during the economic recession that took the world by storm in the year 2007 to the year 2009, the consumer’s purchasing power was drastically reduced. This therefore, means that companies had to decrease supply in a bid to fit the prevailing economic conditions that existed at the time (Hopkin, 1986). The sector matrix comes in at this point as it often ensures that the parties responsible have the information, for example, during the recession, the sector matrix looked at the disposable income that was available that existed in the economy and consequently determined that the demand was low (Kannegiesser, 2008). The automobile industry is very sensitive to fluctuations in the economy, this is because automobiles are often not bought daily and they are therefore, a luxury (Brinkley, 2003). This means that only a person that has the highest disposable income will be able to access the goods (Hopkin, 1986). The sector matrix in this situation is therefore, very essential as it is capable of providing such information to the consumers (San n.d). Further, it is imperative to understand that the type of information that is given from the sector matrix not only helps in understanding the demand but also comes in handy when it comes to the determination of which products to manufacture. For example, during the period of 2007 to the year 2009 where there was an economic depression, if Ford had realized that demand was decreasing, it could have designed cheaper cars that could have been bought despite the harsh economic conditions. Therefore, the sector matrix not only gives the organization information about its capabilities as well as its manufacturing costs it goes a step further and gives the management a vivid picture of how the market looks like (Koulopoulos, 2001). This includes giving the organization information on how certain products and consumers are likely to access at a given time. Further, with regards to cheaper and less complex products such as food stuff, the sector matrix is also important as it adequately shows the household expenditure. In the automotive company ford, the sector matrix is important as it helps the company determine the level of demand that exists in the market and consequently helps it to set the right pricing method (Porter, 1985). Ford is a highly diversified company and it is also vertically integrated and therefore, it consumes a significant portion of the value chain. Therefore, owing to this fact, the internal dynamics of the company can be said to play a very big role when it comes to the shaping of the value chain as well as the commodity chain and the sector matrix (Kannegiesser, 2008). And just like demand, the sector matrix is capable of helping Ford understand the level of supply that exists in the industry. In the 21st century, the modern day market can be said to be controlled by forces of supply and demand. However, it is often pertinent to look at the concept of economy especially in a business environment sense. In many cases, the supply maybe at times limited by the amount of activities that are ongoing in a certain industry as well as issues that are related to financial consolidation (Nieman, 2006). In this paper, the extended example is the automobile industry and in specific Ford company. In this industry, it is extremely important to understand that Ford has to have a clear understanding of the market, its products, demand and supply. This will help it understand the concept of supply as the industry is very complex given the fact that a car cannot often be fully assembly by products that are exclusively manufactured from the industry alone (Froud, 2006). The supply chain is often made up of different components that are manufactured from different subsectors and industries (Porter, 1985). It is extremely essential for the company to understand the financial position that the entire industry is in. This helps because when the costs are high, it often means that the production capability that exists in the entire industry is low and consequently it often limits supply. Further, as envisioned in the 21st century, the costs that exist in the industry can have varying across sectors. For example, Ford Company like Ford when it is in a poor financial position can often affect supply, and in many cases this is likely to hike the level of demand. From this it can be seen, that the sector matrix is important as one can be able to get the level of activities that exist within a select industry. In conclusion, sector matrix framework is between when it comes to the analyzing of complex interactions that exists between supply and demand which is prevalent in the market. Further, the sector matrix is also important as it shows the roles that the supply and demand play when it comes to the shaping of business polices (Froud, 2006). Sector matrix was also found to have a rise to a template of horizontal and vertical relations between supply interaction and demand substitution that is imperative in understanding of product markets. In industries that are highly complex need to use sector matrix because it is better than the commodity chain when it comes to analyzing product markets (Kaplinsky, 2000). This is because it looks into the continual alignment of the process of the organizations in order to better understand the demand and supply that exists in the industry (Gereffi, 1996). Therefore, in conclusion, the sector matrix is a more efficient tool when it comes to the evaluation the product markets as well as the aligning of the business operations in a bid to reduce costs of production and meet demands of the customers in an optimal way. References Froud, J., Haslam , C., Johal, S. and Williams, K. (1999) ‘Breaking the Chains: A Sector Matrix Analysis of Motoring’, Global Competition and Change, Vol. 2. Porter, M.E. (1985) Competitive Advantage. Creating and Sustaining Superior Performance. New York: The Free Press Gereffi. G. (1996) “Global Commodity Chains: New Forms of Coordination and Control Among Nations and Firms in International Industries”. Competition and Change, 1, 427-439 Gereffi,G., M. 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