Strength of Ford Company - Assignment Example

Question Hitt seven external segments The seven external segments of the general environment by Hitt include global, technological, physical environmental, demographic, political, economic and sociocultural. Demographics It is believed that Americans have shifted their priority of choosing vehicles in terms of size. Not only younger generations, but also the boomers are interested to purchase larger vehicles. The sale of the car manufacturer is based on geographic location and certain segment of people. Economic The economy of United States can be heavily affected by the automobile industry. According to the University of Michigan, the car industry is viewed to be as major user for rubber, vinyl, plastics, textiles, computer chips, aluminum, lead, iron and steel. The study also proves that autoworkers creates opening for seven other jobs in other firms. Global A new trade association named the Alliance of Automobile Manufactures is being created by multinational car industries like BMW, Volkswagen, Ford Motor Company, General Motors, Toyota, Daimler Chrysler, Nissan Motor Company, Mazda and Volvo. One of the prime purposes of the association is to replace the Automobile Manufacturers Association of United States. The goal of the trade association is to seek global regulatory values and provide credible industry information. Technological The advent of internet has created huge impact towards United States car industry. J.D. Power and Associated conducted study on new vehicle buyers of above 26,000. The study revealed that 60 percentage of new vehicle use internet as a source of reference before buying any new vehicles. The rapid growth of concerns on global and economic warming has led to the development of alternative fuel efficient vehicles. From the year 1999, the car companies Honda and Toyota introduced hybrid vehicles. The first gas electric hybrid car of America named Honda Insight was launched in the end of 1999. The application of hybrid technology was enhanced by introduction of civic Hybrid by Honda. Political Since 1960s, the governmental regulations and laws have severely affected the business purpose of car manufacturers. In the year 1966, the Motor Vehicle Safety and National Traffic Safety Act were passed by Congress for safety of customers. This forced United States car manufacturers to improve driver visibility and safety of the passengers. In the year 1970, the Energy Policy and Conservation Act were passed for oil crisis. This act forced companies meet mileage per gallon. Physical environmental The biggest challenges of US automobile industries are emission, pollution, fuel economy, etc. this led to the increase of demand of environmental friendly vehicles. The physical environmental factors enable companies to introduce automobiles based on state infrastructure and different perspectives. Sociocultural Some of the variables of sociocultural external segments include social responsibility, influence of consumer movement, population and cultural differences. These variables directly affect the US automobile industry. Every customers have different perception and taste of car. These thoughts enable manufacturers to launch any new automobile and target their markets. Customer’s preferences and taste can change rapidly. Therefore, it is vital for three bug car companies in United States Chrysler, Ford Motors Limited and General Motors to meet demand and needs of the customers. The rapid alteration is the economy of United States of America has severally affected the income of individuals. This led to the rise of unemployment rate in U.S. this forced customers to change their taste to more economic vehicles. Rating in terms of three-point scale 1. Most important- Political, economic and demographics. 2. Important- Global, technological and physical environmental. 3. Limited important- Sociocultural. Political, global and economic external segments effectively evaluate the opportunities and the treats in the U.S. car industry. The political and legal regulation of government can determine the introduction of global partnership and alliances. The creation of job can help to nullify any future threats of inflation in the industry. Question 2 Porter’s five forces of competition analysis The famous five forces of competitive analysis by Michael Porter is a framework to analyze and assess the position and competitive strength of a firm or organization. It enables to determine the industry profitability and competitive intensity. The company selected to analyses the car industry in United States is Ford. The five forces of competition include intensity of rivalry, product substitutes, power of suppliers, threat of new entrants and power of buyers. Intensity of rivalry The effect of scale economics and globalization, have effectively increased concentration in United States auto industry. The recent state of inflation has declined market share of car industry. This has created difficulty new firms to make discount offers to the consumers. This resulted in to rise of car price by 3 to 4 percentage. During the time of recession, the automotive sector of Japan has seen mega profits. It is believed that most of the Japanese car manufactures have resisted widespread economic weakness and lengthy recession. The Japanese firm such as Honda and Toyota has added strong lead on European and United States peers. The intensity of rivalry for Ford Company is very high. The rivalry becomes more intense, as most of the competitors in car industry have similar general focus. Some of the factors that are focused by Ford Company are durability, quality and price. These factors are taken into reflection by most competitors to gain competitive advantage. Power of suppliers There are different kinds of suppliers for electrical system, cooling system, fuel supply system, braking system, engine, classics and frame in automobile industry. It is believed that UK car supplier industry is facing restructuring process. Moreover, the ongoing process of outsourcing and concentration of car manufacturers have created new challenges for suppliers. In case of Ford Company, the power of suppliers is relatively low. The different parts used in automobiles make importance of having several suppliers at utmost level. Therefore, it is vital for Ford Company to make their consumers happy. Furthermore, most of the revenue is dependent upon consumers. Power of buyers The rental companies and private companies are two major buyers in US car industry. In the advent of digital advancement, buyers are surfing the net and are more informed to find best car. In case of Ford Company, the power of buyers is regarded as fairly high. The purchase output is heavily dependent upon consumers. This resembles the fact that consumers are pivotal part of manufacturers. Threat of new entrants It is true that the prime focus of the car industry is brand loyalty. It becomes difficult for any new firm to enter into the car industry conveniently. The multinational car companies like BMW, Mercedes and Ford, etc. have an advantage to invest heavily in their existing auto firms to win customers. In case of Ford Company, the threat of new entrants is viewed to be as low. It is primarily because it is difficult for other companies to enter in to established market. Furthermore, there is a requirement of high level of capital to manufacture automobiles. Additionally, it is vital for manufacturers to have capability to mass produce. This can benefit company create affordable automobile for consumers. Product substitutes In automobile industry, the demand for a substitute can be increased by rise of price of one vehicle. For example, if there is a rapid upsurge of gas, then consumers tend to select car based on less gas consumption. The recent decrease of rate of car prices should reduce the demand for use of second hand car and increase demand for new car. The threat of product substitute for Ford Company is high. The additional forms of transportation such as public transportation, riding a bike and walking create ample options for consumers. This makes customer loyalty vital in car industry. Rating in terms of three-point scale 4. Most important- Product substitutes and intensity of rivalry. 5. Important- Buyers power 6. Less important- Threat of new entrants and supplier power. SWOT analysis This planning method helps to analyze and evaluate the strengths, weaknesses, threats and opportunities in a business. Strengths One of the prime strength of Ford Company is second largest car manufacturer in United States. The most profitable vehicles of Ford Company have sturdy commercial vehicle market and great reputation. The ECOnetic initiate of Ford has helped the company to produce fuel efficient engines by use of new hybrid engines in automobiles. The sound financial performance of the company has made Ford Company only car manufacturing company in United States to not need government bailout. The profit margin of the company is high in comparing with other car competitors. There is a significant growth in Chinese market. The execution of One Ford approach has benefited the company to drive their record profitability. Weaknesses The application of One Ford approach lead to substantial rate of cost reduction. Furthermore, it is revealed that the company has high cost structure. The poor environmental record has been one of the prime weaknesses of the company. According to University of Massachusetts Amherst, the Ford Company is rated as seventh worst air polluter. The unprofitable European operation has also been one of the weaknesses. Opportunities The creation of strategic partnerships and alliances can help Ford Company to gain new skills, access new markets and drive R&D costs down. The new emission standards regulations have positively affected the position of Ford Company in car industry. The company has gained some success by introduction of ECOnetic models of Ford Focus and Ford Fiesta. The positive attitude towards introduction of green vehicles is an opportunity of the company. Threats The fluctuating exchange rates and intense competition from other competitors are some of the primary threats of the company. Moreover, some analysts states the extraction of shale gas can lead to the reduction of future fuel prices. Additionally, this will increase the prices of raw materials. Rating in terms of three-point scale 1. Most important- ECOnetic initiative, green vehicles and strategic partnerships. 2. Important- Focus on European operations, growth in China and introduction of fuel-efficient cars. 3. Less important- Strong position in the market, One Ford approach and effective financial performance strengths are less important. Question 3 Growth-share matrix The growth-share matrix helps to analyze product lines and business units of corporations. The business units of a company are classified in to dogs, cash cows, stars and question marks. Furthermore, this portfolio planning model is based on combinations of market share and market growth. The Ford Motor Limited can be effectively valued and measured b application of a growth-share matrix. The balance and attractiveness of business portfolio is determined by the use of market growth and market share criteria. Stars This area of business unit consists of high market share in the emergent market. This unit provides opportunities for multinational automobile firms like Ford Motor Limited to make enough cash. The Ford Mustang is the product of Ford Motor Company based on II generation of North American Ford Falcon. This brand of the company is in top market position with high profit and high market share. In the year 2010, it has been revealed that 40 percentage share of retail sports car section was occupied by Ford Mustang. On December 2013, the sixth general of Ford Mustang was unveiled in Spain, China, Australia, New York, Michigan, Shanghai and Barcelona. The Mustang brand is viewed as most successful product lunched by Ford Motor Company. The Lincoln is another division of the Ford Company with high profit and market share. Question mark The question mark area of business unit consists of low relative market share and high market growth rate. The introduction of Ford EcoSport is viewed to be in a state of question mark segment. It is a mini sport utility vehicle originally built by Ford . The global product developmental processes developed second generation of Ford EcoSport. This brand is in direct competition with other competitors brand like Nissan Terrano, Renault Duster and Fiat Avventura. The market share of the company is still in question mark position. But researchers believe that there is a radical shift of taste and preferences of Asian market. It is considered that it can achieve high market growth in future. Cash cows The cash cow segment consists of low market growth rate and high relative market share. The Ford Fiesta was mini car launched by the company in 1976. Ford Transit Connect and Fusion has seen overall rapid growth in sales. John Felice, the vice president of Ford Motor Company stated that Ford Fusion and Ford Transit Connect continued to keep their momentum on market share. The Ford Ikon was another brand of the company which considered as sedan version of the Fiesta. These products are focused on people of economic class. Therefore, it has high market share. Dogs The dog business unit consists of low relative market share and low market growth rate. In 1938, the Mercury was launched by the Ford Company to enter in to luxury car segment. In 2011, the Brand Mercury by Ford Motor Company was phased out. This forced the company to refocus their engineering and marketing effort towards the Lincoln and Ford vehicle brands. This brand is viewed is dog segment. This is because the brand is at higher level of going extinct. Hence, it becomes critical for the company to change their marketing efforts towards other brands. The Jaguar car was part of Ford Company. The company faced severe issues towards generation of profits. The loss of profit generation forced Ford Company to sell their products to Tata Company in the year 2008. Relative Market Share High Low Works Cited Tyson, Laura. American Auto industry and competition. New Jersey: Pearson, 2004. Print. Read More