Ford in China and Industry Issues - Case Study Example

FDI Name: Course: Instructor: Institution: Date of Submission: Ford in China: Industry and Country Risk Analysis Introduction Henry Ford started the Ford Motor Company in 1903 and has since then developed as a recognizable brand around the globe. The automotive market in North America is considered the 2nd largest in the world where the Ford company is considered among the Big 3 automotive companies. The Ford company employs about 224,000 individuals in about the 90 manufacturing companies in the world. Some of the products that Ford develops include brands such as Mercury, land rovers, Volvo, Lincoln, Mercury and Aston Martin among others. Despite the success of the company, the Ford motor company does face challenges such as economic volatile issues and deteroriation in the markets among other crises. However, the project evaluates the performance and risk of country and industry it faces in the market of China. At the close of the year 2015, statistics reported that the automotive sector in China will slow down. There is increasing competition in the country due to a high supply of brands in the market. Despite the slow in growth in the country, over the last decade, the growth in the industry has been very considerable. Additionally, the automotive market in China is the world’s largest auto market and provides more profitability for the businesses. Since the year 2008, the car industry in China has been considered as the greatest automobile in the world. The annual production of the industry in 2009 was more than that of the European Union or U.S. or the Japan industry. The home market of China provides the automakers in the country a solid base and Chinese economic planners to build globally competitive auto companies. Statement of Scope and Opportunity of the Investment China’s household income is growing and improving the sustainable growth of the country. The policies to increase urbanization in the country have developed linked to the fact that the passenger vehicle segment is dominating by foreign brands. Thus, Ford investing in the country would benefit it financially. Though the commercial sector is dominated by domestic brands that have about 90% of the market share, foreign brands also have a share and perform well based on the high population and performance of the automotive industry. The Sports and multi-purpose vehicles in the country have been recording sales increases, which stipulates that the market share is is high and beneficial[Nag07]. Thus, it will be profitable for Ford industry to invest in the country. Thus, the following sectors will evaluate the risks and opportunities that the Ford Motor Company will face in China and the automotive industry of China. PESTILIED Analysis and Summary Findings The Ford Motor company is one of the most iconic automobile manufacturers in the world. In the entire world, Ford is ranked as the fifth most valuable automotive brand and the seventh largest car. Through evaluating the PESTLE analysis of the Ford in China, the risk of investing in the country will be determined. Political Factors The political factors weigh heavily on the automotive industry as environmental issues are considered in designing new vehicles. Thus, the development of new hybrid vehicles is in high demand in the country. The Chinese government has already waived the vehicle purchase tax to promote the purchasing of vehicles and low consumption of petrol to consider the environmental factors. More importantly, policies to support the automotive industry are developed while considering the technological developments such as energy saving vehicles. Thus, the government supports the development of the industry[CBB15]. Economic Factors In China, the economy has been facing numerous recessions to impact severely the industry leading businesses to various bankruptcy. Other factors such as inflation, exchange rates and market prices that influence the development and growth of firms in the country. Thus, the sustainability of the activities is improved. The market prices in the country dictate the shifts in consumer biases on brands or labels impacting the production decisions in the country. The economy of China has also improved and the economic stability brands it as a perfect country for foreign investments that supports Ford Inc. in the state[Nag07]. Social Factors The automotive firms face the critical threat of consumer biases on the quality of vehicles in the market, which influences the consumer buying decisions. The industry is subject to the changing buyer patterns and consumer demand shifts that pertain to the market forces in the country such as expansions or recessions. Additionally, China is one of the most populated countries. Thus, it will provide a ready and large market. The infrastructure in the country has improved as well and leads to socio-economic developments. Technological Factors It considers the technical capability of a country or company. In this case, the country under evaluation is China and Ford Inc. in the country. The Ford Company regularly modernizes its products when compared with the competitors. The advancements are linked to consumer loyalty and increase sales of the vehicles from the corporation. One of the primary factors that promotes the technological capability of the company is the availability of good suppliers that provide modernized products for the business. For instance, the Ford company customers have the capacity to alter vehicle components, inside or outside, when they wish. Consequently, such an advancement makes the company successful. On the other hand, in China, the market for cars continuously propels as the industry grows. The growth is linked to the developments in policymaking and trade-offs that support the growth of the economy while maintaining environmental quality. Mainly, international development plays a significant role in the development of the automobile industry in China. Thus, the country has the capability to support the technological advances of Ford in the country[Gal03]. Though in previous years the technological progress were hindered by the many factors, today, the country enjoys the benefits of technological expansions in the automobile industry. Legal Factors For the business to succeed in the China or any other economy, it must meet the legal requirements in the country. China has strict regulations that production operations must meet the environmental regulations. However, in China, this regulation is an opportunity for Ford Inc. since the company productions are linked to improving the sustainability and meeting corporate social responsibility. Also, the safety regulations in the country can be attained through improving the product design and improving the safety of their productions. Thus, Ford has the capability of growing in China. Moreover, the attainment of IPR is improved as foreign industries have the law on their side by ensuring the protection of companies intellectual properties. The legal factors do not pose a risk but an opportunity for growth. Ecological Factors The ecological factors are mainly the factors that influence the macro-environment of business or in a country. The key factors that affect the Ford business include the climate change, the low carbon trend and the globally declining oil reserves[Wag05]. That is; the climate changes affect the Ford company to develop products that assist in environmental conservation and safe in different climatic conditions. With the declining oil reserves, Ford has been developing products that use alternative fuels. Thus, the environmental factors in China support the growth of the business. However, to meet all the ecological demands in China, the company has to improve its products and increase success in the market. Industry and Competitor Analysis The core competencies that allow Ford Inc. to succeed globally is the capacity of innovation and consumption of high technology in production. More importantly, the productions of Ford are detailed with safety measures and customization opportunities of cars inside and outside of the cars. Thus, it has a chief competitive advantage that allows it to succeed in the market. The company also has a strong financial position that supports the innovation and improvement of its operations and products, thus meeting the advantages of competing effectively in the market[Bed15]. In the industry, the factors that drive its sustainability and success is the increasing globalization and technological factors among others[Afg16]. The automotive industry experiences robust growth though there are current issues regarding the fake components in the market. However, the suppliers of Ford Inc. are trusted, which provides the company a competitive advantage. Thus, the competition in the China will not affect the success of Ford with local manufacturers and brands. Thus, the IPR of all brands must be met to ensure that the public safety of the consumers is reached. Thus, the IPR increases the foreign investments in the country. The foreign investments such as those of Ford will, therefore, be attained highly. Thus, the industry and competitor factors do not pose a risk to the business in China. Summary of Country and Industry Risk ThE Ford company exists as a mature company. Therefore, the risk degree of the country may be high and critical. Ford’s success may be affected by numerous risks such as the great competition. The brand of Ford is recognized in the entire world due to high marketing and promotion, and quality of the company’s productions. Thus, the trademark recognition minimizes the risk of failure in the country and promotes success probability of the business in the state. The Ford Inc. provides vehicles to almost all categories of consumers. That is; it includes commercial transportation vehicles such as trucks, jeeps, and vans. It also has cars and heavy vehicles. Thus, the high demography it deals with provides a ready market for the company, stipulating that the risk of failure is low. Based on the PESTLE analysis above, Ford Inc. will succeed in China as it provides the largest automotive market and manufacturing country. The political factors and regulations are not so restricted and promote the success of international businesses in the country. The economy and social factors, as well as the legal and technological factors as presented above support the growth of Ford Inc. in the country. The risk of Ford Inc. succeeding in China is low. References Nag07: , (Nag, et al., 2007), CBB15: , (CBBC, 2015), Gal03: , (Gallagher, 2003), Wag05: , (Wagstyl & Boland, 2005), Bed15: , (Beddor, 2015), Afg16: , (Afghan & Khalid, 2016), Read More