Absorptive Capacity and Interpretation System's Impact - Case Study Example

FORD BUSINESS REPORT By: + Executive summary Ford is a company that many describe as very successful mostly in US especially due to its stability as well as having unique reputation. Currently, the company is placed second in the US in terms and recently there has been expansion outside the borders. The company did not need the government’s intervention when the disastrous financial crisis hit many countries. Instead of relying on the government, the company was stable enough to overcome the tumultuous time. Notwithstanding these accomplishments, some factors that have recently emerged could have an impact on the company. This paper has outlined some of the threats posed by other competitors, the unpredictable future especially on the issue of cheap fuel. The assessment has been done using the SWOT analysis in comparison with the competitors. By the end of this paper, one will understand the appropriate measures the company can take to deal with the competition, threats, opportunities and the stagnant European market, which has seemingly remained impervious to Ford. Contents Introduction FORD is an automobile company based in the US states but operates in other countries where it manufactures various types of vehicles. Apart from owning various kinds of vehicles, the company has also bought some shares in other companies. For instance, Wilkins (2011) reported that Ford currently has a 21% stake in Japan’s Mazda. Additionally, Ford in UK owns 8% of Aston martin and China’s Jiangling offers 49% to the same company. The company has other ventures where it has worked with other companies like in Russia, Thailand and Turkey Away from the ventures and acquisitions, the company has gone various hurdles including the 2008 recession that saw many countries’ economies suffer adversely. It is during this time that fellow competitors like GM and Chrysler suffered greatly and only the US government’s efforts saved them. Having survived the crisis, Ford registered encouraging results and in 21012, the company had a $134 billion revenue and $ 5,665 billion profit (Grant 2012). At this time, the number of employees in this company had hit the 164,000 mark making it one of the best companies in the US. The essence of writing this report is to highlight its current position and offer recommendations on how to deal with its weaknesses and threats. Assessing competition Like in any other business, Ford has a number of competitors who could be a threat to its profitability unless measures are put in place. In the US, the number of companies rivaling Ford in the automobile business is pretty big. Firstly, the General Motors (GM) is one that has been doing well since its revival after the financial crisis in 2008. Others like Chrysler have also competed with this company. This section seeks to assess the number of the competitors the Ford Company faces especially with other companies entering the US and the world market. General Motors Commonly abbreviated as GM, General Motors Company is a US company that just like Chrysler, faced bankruptcy in the 2008 crisis. Headquartered in Michigan, US, the company operates in 37 other countries using various brands like Cadillac, Opel, HSV to mention but a few. Outside US, the company prides itself for having a 96% stake in GM Korea and other ventures in Russia, Pakistan and India. Until 2007, the company had been in the lead from 1931but the crisis that hit many companies saw it drop in its sales and production (Isidore 2014) Ever since it emerged from the 2008/09 financial crisis, the company has been registering profits as evidenced by the $4.7 billion earnings in 2010. During this year, it was placed second in the US having produced over 8.5 million vehicles. In 2011, the company was ranked position one with a nine million sales worldwide and had an 11.9% market-share. Mostly, the sales came from the US and china where over 2.54 million units and 2.5 were sold in US and China respectively. However, recently, reports have emerged that the company’s profits have somewhat fell to around $107 million in 2014 (Pollock 2014). Toyota Toyota is one of the most successful companies in the world having spread across the world with many analysts estimating its revenue at 22 trillion Yens as of 2013 Fiscal year. Other have stated the company’s operating income to be around 1.3 trillion yens, profit at 962 Billion Yens the same year and an asset record of US $377 billion (Heller and Orihashi 2013)). The success of this company has been credited to various strategies and attitudes it portrays. For instance, Canis (2012) noted that the company tends to use a component of problem solving in its production of vehicle. This is evidenced by the company’s decision to produce low-carbon vehicles. Secondly, the company tends to have vehicles for almost every class thus bypassing other companies like Mercedes and Audi whose focus is luxury vehicles. Other sources reveal that despite the company’s source being Asian, then US provides it with the higher market share. As of 2013, the Northern America region was leading in terms of Toyota vehicles sold with 32% followed by Japan’s 25%. Europe was third with 14%, Asia had 13% while the Middle-east had 7% purchases (Jargosch and Jurich 2014). Clearly, it is one of the companies Ford competes with and if the latter is to withstand this competition, it is vital to analyze its strengths as well as weaknesses. Ford’s Porters Five Forces analysis Notwithstanding the success of these other companies, Ford has been able to remain successful despite the entrance of new players. However, it was noted that the company has experienced a decline in as far as equity is concerned. Between 1965 and 1972, the company had 10% equity but between 2000 and 2006, it stood at 4% (Grant 2013). This is why it is important to conduct this analysis in order to determine the company’s position. Competitive substitutes Recently, there has been a surge of various alternatives that members of the public could choose from including public vehicles, motorcycles or even train. The substitutes pose a challenge to Ford because even car-owners may decide not use their cars instead opt for other means. For instance, Davis and Dutzik (2012) noted that many people in the US are driving less and instead choosing the means of public vehicles as their way of transport. In light of this, it is vital that Ford rethinks its strategy in order to overcome this inevitable threat. New entrants Whereas new entrants do pose a threat to Ford, it is becoming somewhat difficult for them to compete because of the myriad requirements. For instance, the cost and the capital requirements are some of the issues new entrants have to consider before launching their automobiles in markets. Now, this is both an advantage as well as a disadvantage for Ford because it means it will need to have enough capital to expand. It is advantageous because it means its established markets are safe. However, Grant (2013) noted that the new entrants are creating low-cost cars, which are actually a threat to the major players. Existing competitors Currently, Ford prides itself for occupying the second position in the United States as the best company in this industry. However, its market share in the world is not as pleasant and this is posing serious threats to its expansion. This is mostly so in the European countries where it has failed to penetrate. It has been noted that Ford’s international strategy need to a recheck especially when it comes to the European market for it has stagnated significantly (Studer-Noguez 2006). In as much as the success of the Ford is evident in US the same cannot be said when it comes to its performance in the world especially when put against the likes of BMW, Mercedes and Toyota. This is a threat that requires a strategy to ensure the company is not taken into oblivion by the success of these companies. Buyers It is rather amazing that consumers could influence the selling trends at Ford because it is becoming apparent that customers have started to focus on price more than class. Grant (2013) noted consumers are preferring cars that not costly as evidenced by the purchases made on Nano model- a Tata motors car. As for Ford, there are plans to make a car that would be pocket-friendly and have it launched the same time in all parts of the world. The reason for this step is to try to ensure that all customers have it a supposed to launching it differently. Supplier Suppliers have also been influential in this industry and many companies are focusing on improving the relationship or changing them. Grant (2013) reported that Ford had created its own company in as far as supplying is concerned. Emergence of other business in the supplying area means that the major players have to keep manufacturing and avoid laxity. In other words, there is pressure that the suppliers are fronting against these players- Ford included. Competitive advantages Competitive advantage refers to a firm’s potential to earn more in comparison to others which always influenced by various factors. Ford has various attributes that make it remain competitive over others despite its position in the world. This section will seek to highlight some of these competitive advantages possessed by the said company. Due to the ever-rising competition couple with economic status, many players are finding it pretty hard to remain profitable and it is important to analyze the advantages that Ford has over others. Strong position in US As stated elsewhere, Ford is seen in US as one of the most important companies in the country and this gives it an upper hand. Mostly, the reputation the company enjoys has made its clientele continue trusting as it has not been involved in a scandal capable of bring it to its knees (Grant 2012). In terms of commercial sales, the company’s profits worldwide have increased meaning that the company could take this as a selling point. Currently, the company is ranked second in the US market as a result of profitability and production of vehicles. This, needless to say, has given it the competitive advantage because buyers prefer ordering products from reliable companies. ECOnetic Toyota came up with a brand Prius that was meant to be fuel-efficient but it has since been bypassed Ford’s Ford Fiesta, which is currently the best in the world in terms of fuel-efficiency. The company has severally been applauded for this initiative in a world where fuel is becoming expensive by day. In order to reduce needless expenses, the company prefers improving the current engine as opposed to creating new ones. Experts have been quoted saying Ford’s initiative is one that could see the company reap really big (Canis 2012) Growth in Asia While Ford’s growth in the world may not match that of Toyota, Heller and Orihashi (2013) reported that there was a 46%-increase in 2011in parts of China. This is interpreted to mean that the company’s expansion is imperative as it signifies a potential to grow. Further, by having branches in a country like China where Toyota is expected to thrive is a clear indication that the company could as well be established in the larger parts of Asia. The success of this growth has been greatly attributed to the reputation the company enjoys in the US. By continuing to rival the main players in the Asian continent, Ford’s chances of success are very high. Strong finances While the US government was grappling with the effects of the 2008 financial crisis, Ford hardly felt the impact. In fact, as the US extended its financial aid to the likes of GM and Chrysler, Ford did not need such assistance because of financial strengths. As a result of this many customers both in the US and other countries feel the company is stable, reliable and one whose future is bright. Analysts Mulally credited the outgoing CEO, Alan as the man whose efforts have transformed the company especially for enabling it withstand the effects of 2009. Conclusion To sum it up, Ford is viewed as a stable company due to various strengths it portrays one of which is solid financial capacity. Secondly, the company was able to withstand the financial crisis that befell most of the countries. Currently, the company has sought several mergers and ventures in a bid to extend profitability. Some of the strengths include being in forefront to have vehicles that are fuel-friendly. That is to say, people can buy these vehicles without having to worry about the high prices of fuel in any part of the world. Nonetheless, the company’s greatest threat is the entrance of new players and stiff competition from the already-existing companies like Toyota. Unlike Toyota, which has been able to penetrate almost everywhere, Ford is yet to dominate even in the US alone with records showing it comes second in the country. Secondly, the company faces the issue of expensive materials, though it is everybody’s worry. Recommendations Having painted the current picture at Ford, this section will give recommendations that the company ought to make in order to overcome its strengths, seize opportunities, and mitigate its weaknesses. Firstly, the company needs to take some drastic measures to reduce its structure and bloated workforce. The number of employees could be reduced in a bid to cut the cost. According to Carree and Thurik (2007), a company’s structure plays a role in the determination of profits because the more branches there is in a company the more salaries are needed. Secondly, the company ought to have strategies on how to penetrate the European market one of which is by utilizing its strength on low-carbon vehicles. Unlike other companies, Ford is known for vehicles that do not emit much carbon, which is a positive thing many European countries normally advocate. The company can use this as selling point to penetrate the market where BMW and Toyota seem to dominate. Further, the company has to address the threat of future cheap fuel, as it would easily lock it out of business. Instead of focusing on fuel-efficient vehicles alone, the company needs to start strategizing on how to handle this probability. Failure to address this issue at this time could be detrimental in case the fears are confirmed to be true. Bibliography Carree, M. and Thurik, A. (2007). The Lag Structure of the Impact of Business Ownership on Economic Performance in OECD Countries. Small Bus Econ, 30(1), pp.101-110. Canis, B. (2012). Why Some Fuel-Efficient Vehicles Are Not Sold Domestically. Congressional Research Service.Retrieved Dec. 1 2014. Donnelly, T. and Morris, D. (2013). Restructuring Ford Europe. European Business Review, 15(2), pp.77-86. Davis, B. and Dutzik, T. (2012). Transportation and the New Generation and What It Means for Transportation Policy. U.S. PIRG Education Fund. 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