Ford Motor Strategy Management in Australia - Case Study Example

Ford Motor Strategy Management in Australia Name Professor Date Ford Motor Strategy Management in Australia Table of Contents Ford Motor Strategy Management in Australia 2 Table of Contents 2 4.0 External analysis 3 4.1 Opportunities 3 4.2 Threats 5 4.0 External analysis The External analysis of the Ford Motor Company focuses on key points of any companies which want to get a grip of a market and gain competitive advantage. For Ford Company it concerns how it can use its strengths and minimize its weaknesses in the Middle East automobile industry. 4.1 Opportunities According to Koenig Ford now has a positive approach towards “green” automobiles. Cars which are fuel wasteful and emit large amounts of CO2 strongly pollute air and affect the atmosphere1. Customers are responsive of this negative effect and are now preferring “green” automobiles which emit little CO2, and are fuel-resourceful. Ford can be easily accepted in the Australia because of its ECOnetic initiative. This initiative aims to produce extremely fuel-efficient engines by enhancing current engines and new hybrid engines. The initiative has led to production of Ford Fiesta, which is presently the car emitting CO2 in the air. Result of this initiative has also led to manufacture of Ford Focus ECOnetic with better fuel utilization than Toyota Prius2. Ford Focus ECOnetic and Ford Fiesta with flexible hybrid engines will be a good business because of rising cost of the fuel even in the Australia3. With the rise in traffic jams in the `Australian cities, individuals are moving towards small automobiles, which Ford Motors now makes gives the company a greater opportunity to market. According to company’s website, Ford Australia has an opportunity in producing electric vehicles both small and commercial4. The market is moving towards more fuel efficient and environmental friendly cars and electric car is currently the best project. Therefore, electric cars have become attractive to markets which try to mitigate pollution. According to IBISworld today, Australia has adopted pollution tax which imposes some tax on any person polluting beyond the recommended level5. Maintaining electric vehicles is easier because its uses no fuel and also as its moves battery charges itself. It’s even better than hybrid which partly produces emission into the atmosphere. Ford and Toyota Motors Companies signed a contract to share a patent that allowed Ford Motors to access hybrid technology which was a property of Toyota. Ford also permitted Toyota to use its some of its patents. The success of this agreement was market by launch of Ford Escape Hybrid in 20046. This vehicle became the first SUV made in hybrid electric form and the third hybrid electric vehicle in the market. Technology adoption by Ford, particularly in robotics presents a great opportunity for recurring pinpoint accurateness and faster delivery in the market. The company has also adopted technology in major department including supply, research, production and marketing. This provides a platform for which the company can link up with key suppliers and customers. It also provides a competitive advantage to the company. Technology advancement has enabled Ford Australia to improve its research and development so as to improve the corporation’s products to meet global standards7. 4.2 Threats According to IBISworld some market analyst’s projects that future fuel cost could drop owing to establishment of shale gas8. This would have negative impact on Ford since it focuses on flexible fuel and fuel-efficient hybrid cars which are not attractive when the fuel cost is low. In 2013 Jurevicius affirmed that Ford currently is facing a stiff competition in the Australia with other established companies like the Toyota, GM Holden and Nissan9. Intense competition is also in small cars segment with the hybrid engines. Unpredictable exchange rates in the world are another threat that Ford could face. Jurevicius argues that the profits might reduce due to appreciating US dollar against Australian Dollar10. The increasing cost of raw material could affect production and operations of Ford motor Company. IBISworld report of 2012 contends that the cost of raw metals may force a lift of the costs for auto manufacturer and lead to squeezed revenues in this market11. On the other hand it could compel the company to increase the price of its products, and in turn it could drive away customers. After the 2008 global crisis, many economies have not attained stability. Australian economy is still recovering but at a slow pace. The situation has affected auto industry a great deal as companies still record low sales12. This is the reason Ford Australia has moved from position three in terms of market share to position six. The company can only confront the situation by producing low-cost vehicles. However as stated earlier, the company also finds itself in dilemma because cost of raw materials have risen considerably. Rolling steel and hard steel used to manufacture vehicles have become expensive not only in the world market but also Australia13. Thus, the cost of production has gone up in the recent years. Such factors are strongly threatening the survival of Ford in Australian auto industry in future. One of the main competitors of Ford gets political patronage from Australia government. This makes it difficult for Ford to compete against it. The company has since surpassed Ford in terms of market share. IBISworld claims that in 2012, former Austrlian Prime minister Julia Gillard announced of $275 to improve its operation14. Tariffs and subsidies are the two perfect forms which governments employ for protection and the government of Australia has a long history entailing tariff protection of automobile Industry15. With the rise of Chinese and Indian automakers, is likely to decrease Ford’s sales16. In the past the company has also experience bad reputation with regards to environmental record. Ford Company has been condemned for poor attempts to reduce environment pollution. Koenig claimed that the University of Massachusetts Amherst has previously ranked Ford as the 7th worst polluter of air because of its producing plants17. Another institution, The Environmental Protection Agency of U.S also connected Ford to the 42 toxic waste companies18. However, Ford through ECOnetic initiative is currently rectifying its reputation. During global financial crisis of 2008, companies were forced to reduce their production due to low sales19. Ford is one the automobile companies which were affected. Today Ford Australian production is still low because of slow recovery. Reduction in production means reduction in number of product offered hence low sales. In 2004 Maxton, Graeme and John Wormald claim that the company has also been forced to reduce its product line to remain just with marketable ones20. In particular, the company now makes more Ford Falcon than any other model. The situation has made the company to lay-off some of its dependable employees which have led it famous over the years. The decision is likely to affect more than 1200 Ford Australian employees both in Geelong and Broadmeadows as they will be laid-off by 201621. This depicts high cost of operation which threatens to cripple this company. According Hitt, Ireland and Hoskisson the emerging market like China, South Korea and India is posing a threat to Ford China22. The Management failed to observe that the automobiles are becoming are cheaply manufactured in these countries. Hence the company must also venture into high quality low cost vehicles to match the stiff competition. IBISworld argues that there are high interest rates on loans in Australia which have affected the Ford’s cost sales due to high lending cost23. Cars are products which are sometimes bought on loans and when the rates on interest on loans are high it discourages people from taking loans. Bibliography Ford Australia. “Ford Australia Official Website” Accessed Dec 23 2014. http://www.ford.com.au/ Hitt, Michael, Ireland Dune and Hoskisson Robert. Strategic Management: Competitiveness & Globalization, Concepts. 10th edition, Mason: South – Western. Cengage Learning, 2012 p.130 IBISworld. “IBISWorld Industry Report C2311 Motor Vehicle Manufacturing in Australia. IBISworld”. Accessed March June 2012 http://elearning.sbta.com.au/www/content/lessons/2854/C2311%20Motor%20Vehicle%20Manufacturing%20in%20Australia%20Industry%20Report.pdf Jurevicius, Ovidijus. SWOT analysis of Ford. Accessed June 17 2013. http://www.strategicmanagementinsight.com/swot-analyses/ford-swot-analysis.html Koenig, Bill. Ford to Cut New-Car Greenhouse Emissions 30% by 2020. Bloomberg, 2008. Maxton, Graeme and John Wormald. Time for a Model Change: Re-engineering the Global Automotive Industry. Cambridge University Press, 2004. Read More