The Ford Motor Company Manufacturing Plants Across Continents - Statistics Project Example

Strategies Ford Can Use to Expand to Nigeria No Table of Contents Introduction 2 Company and Environment Analysis 3 PESTEL analysis 4 SWOT Analysis 5 VRIO Framework Analysis 6 Porters Five Forces Model Analysis 7 Business Strategy 8 Summary and Conclusion 9 Recommendations 9 References 11 Introduction The Ford Motor Company is one of the largest and most influential motor vehicle manufacturers in the world. It was founded by Henry Ford in America in 1903 and has its headquarters in Michigan and exports its cars to all continents. Apart from the mother country, Ford also has manufacturing plants across continents to satisfy customer demand for its brands. At the moment, Ford has not established a manufacturing plant in Nigeria. This paper identifies Nigeria as a potential foreign market where Ford can exploit to increase its profitability by tapping into potential customers. Since1903, the company has produced motor vehicles in various categories such as cars, trucks, and even tractors. Through innovation and sustainable development, Ford has managed to stay afloat for a century and above while providing its clients with quality and affordable motor vehicles. It owns minority stakes in several other automobile makers. Apart from subsidiary ownership, Ford has also been able to buy and sell several other motor vehicle manufacturers over the years depending on its needs to expand its operations globally and maintain profitability. Nigeria, as the new target market has potential for success to Ford. Nigeria represents Africa’s largest economy with favourable demographics. Since Africa is still developing as a continent, expanding to Nigeria is likely to register success in the long run due to the purchasing power of its population. However, the country has had a tumultuous political past of civil wars. Currently, there is tension due to subversive activities by the subversive militia known as Boko Haram. Company and Environment Analysis Company and environment analysis will help in the making of better informed decisions especially with regard to risk assessment and management (Singla, 2007). The analysis consists of PESTEL, SWOT, VRIO framework and Porters Five Forces model analysis. The result of these analyses significantly influences strategy formulation that follows thereafter. PESTEL analysis Beginning with PESTEL, the political environment takes significance. Even though there is political disturbance caused by the militia group (Boko Haram), there are likely no unbearable circumstances as oil exploration, mining and trade continue. It indicates that Ford can launch its operations and expect success as the government supports businesses are able to operate. Secondly, the economy is excellent for Ford to expand to Nigeria. As the largest economy in Africa and still growing, economic stability will definitely ensure that interest and exchange rates are remain favourable. The inflation rate in the country is below 10 per cent and Ford can make adjustments to it to maintain profitability (CBN, 2014). Socially, the large population is likely to provide a stable market for Ford’s vehicles and drive up sales due to the purchasing power created by the oil business and its effect in the development of other industries. This ensures that Ford can effectively market its luxury brands as well as other brands as the consumers fall in all categories. Still, skilled, semi-skilled and non-skilled labour will readily be available. On the use of technology, Ford may not be able to have at its disposal the technology needed for its manufacturing. Fortunately, Ford can import the technology it needs to establish and operate at increased initial costs. This will be overcome by profits in the long run. In addition, infrastructural development will enable Ford to install its technological requirements conveniently and distribute its products. As long as Ford does its business in a sustainable manner and does not pollute the environment, it will be able to succeed as it will import most of its raw materials to the country. The government of Nigeria is keen on sustainability and Ford will have to keenly monitor its carbon footprint in its operations. Legally, the Constitution of Nigeria will govern the overall operations of Ford in the country as well as reasonable statutes that regulate trade and environmental pollution. Currently, there are 26 statutes that will directly act as a monitor of the activities of Ford in Nigeria. SWOT Analysis A SWOT analysis follows with incorporated factors from the above PESTEL. The strengths include a strong financial base that will enable the firm to establish operation in the new market without difficulty (Ford, Annual Financial report, 2015). With a strong culture to research and improve on its brands as well as keep prices favourable, Ford will be at par with other motor vehicle makers that sell their brands in Nigeria. If Ford creates good relationships with its clients, it will be able to capture the market and outshine its competitors. Despite the strong economic base that Ford boasts of, it has to be careful to avoid loss making as has happened recently. For example, the company had to recall cars manufactured from 2005 due to faulty ignition systems (BBC, Ford recalls over a million cars for faulty steering, 2010). Some of these cars had led to accidents causing deaths and serious injuries as well as loss of property. If the clients in the new market consider safety of paramount importance, they may avoid buying Ford cars due to the negative history. This can bring down the new venture as revenues will fall below the postulated. Opportunities abound in Nigeria for Ford. The high population and oil trade ensures that there will be ready customers for Ford cars. In addition, labour will be readily available as many Nigerians are educated in the various universities and colleges all over the country. The growing economy promises success in the long run as it is bound to translate to more sales. Even with the above strengths and opportunities, Ford will have to be conscious of the political environment especially the threat of sabotage by the militia. In addition, other motor vehicle manufacturers who import their vehicles to Nigeria at affordable costs will pose a serious challenge. In this regard, Ford can exploit its brand name to propel its vehicles to be of choice in Nigeria. It will eliminate the threat of competition. VRIO Framework Analysis The VRIO framework analysis suggests that Ford is in prime position to successfully launch operations in Nigeria. When considering Value in the framework, the company has enough resources to exploit the large market that exits in Nigeria. It is almost certain that there are already clients of Ford in the country. In addition, Ford can afford to invest in security for its premises so that political threats are warded off. Secondly, rarity of resources to produce motor vehicles is not a factor to consider in Ford’s expansion to Nigeria. Other manufacturers have full access to the raw materials and manufacture other established brands. In this regard, Ford has to be prepared to fight off competition. This can effectively be done by reducing operation costs by engaging suppliers who offer lower rates. Without it, Ford does not have any competitive edge with regard to raw materials. Regarding imitability as a factor of VRIO framework, Ford can be rest assured that it will have remedies against imitations of its products or duplicate parts. This is because of the existence of copyright laws in both municipal and international laws that would solve disputes in the case of detected imitation. Ford has the option of protecting its brands using the law of copyright and patents and gets compensation for damages arising as a result of imitation of their products as stated by Harrison (Harrison, 2009). Lastly on VRIO, the organization of Ford is good enough to manage the expansion. With already global network spanning continents, Ford staff has the experience of establishing new centers of business. The staff can therefore manage the expansion to profitability. The availability of adequate finances also supports organization of Ford. This facilitates the project as large capital is required to start operations in a new country far away from headquarters. The probability that it may take long before profits are realized is taken care of by the fact that the company can depend on sales from its other markets. Porters Five Forces Model Analysis Porters Model can be used by Ford primarily to study competition and react to it through strategic planning and management. Ford, being a brand name with global operation, can weather the challenge posed by new entrants. Even though profitability is bound to reduce especially if new entrants offer cheaper products, the quality of Ford motors and brand name is set to keep the company in profits (Morden, 2007). The availability of substitutes will increase the bargaining power of customers who would have a variety of quality to choose from. Ford can present its products as differentiated to reduce the effect of substitutes. Buyers are also likely to exercise their bargaining power due to sensitivity to prices. It is likely to see buyers switching brands due to prices and opting for cheaper alternatives (Gruber, 2008). In a similar vein, the bargaining power of suppliers may also yield significant results. However, Ford is likely to import most raw materials from its current suppliers as a result of the nature of its business. On the overall competition in the industry, Ford has competitive advantage due to a rich history of innovation and high quality vehicles that have earned admiration all over the world (Ford, 2015). The faith that Ford’s customers has on it gives the company the upper hand when entering new markets. If the company manages to implement its strategies accordingly, it can beat industry competition. Business Strategy The business strategy to be adopted by Ford in Nigeria is based on the above analyses and frameworks since Nigeria seems to be a viable business destination for the motor company. Should Ford elect to expand to Nigeria, it should pursue foreign direct investment as the best avenue to penetrate the market. Joining in the market as a merger or from a takeover cannot authoritatively establish Ford brands in the market. In joint ventures and mergers, focus may be on the different brands that need to be felt in the market thus leading to a market share (Ward, 2002)s. Ford should proceed to conduct thorough and regular market researches to gather business intelligence to act as a sound basis for its decision making in all its operations in Nigeria. This will determine the capital needed to start and run its operations, the amounts of raw materials needed and all other requirements. Market research should be followed by product evaluation against the market and possibly, innovations of new products tailored toward segments of the clients as identified in the market research (Ricardo Crescenzi., 2013). Business intelligence gathered will enable the firm generate new knowledge that competitors may not have access to this creating a competitive advantage in the face of stiff competition (Peasron Education, 2011). Ford should also engage in aggressive marketing at the beginning of penetration into the market. This will most likely boost the already strong brands that Ford sells in other countries all over the world. Most importantly, it will sensitize the potential clients that they now have more choices with the new entrant in the market. Ford can work towards minimizing the political risks by taking a variety of measures. Since losses due to political activities can be covered by insurance companies these days, Ford can insure its assets in the new country against political risks according to Singla (Singla, 2007). This can be expensive depending on the size of the venture but can pay off in the long run. In addition, Ford can cooperate with the government of Nigeria and do obey the laws set by the government. This entitles the company to protection against all risks that accrue to it as a legal entity in the country. These efforts can be augmented by contracting highly skilled security personnel to monitor the situation and give regular reports of risk assessments and advice on measures to take. Summary and Conclusion From the above exposition, it is clear from the analyses that Ford stands a fair chance and has an opportunity to expand to Nigeria. Even though there are weaknesses and threats, they do not outweigh the potential benefits in terms of business success. With good risk assessment and management, Ford can enter and capture the Nigerian car market as there is likely to be ready buyers for the categories of brands it has to offer. It is very important that Ford maintains the quality of its brands as a way of surviving in the industry where competition is very stiff (Ward, 2002). With the right attitude and determination to succeed, Ford should exploit the opportunity to leave a lasting impression on the face of car buyers and reap the hefty benefits. Recommendations It is recommended that Ford expands to Nigeria. The expansion should be done after the business strategy is reviewed and improved to ensure that it reflects the current market situation as much as possible. After the firm enters the market, it should exercise flexibility. This means the ability to monitor changes in the business and align strategies to respond to the changes (Harrison, 2009). The company should be conscious of every move the competitors make in order not to lose out on the consequences. The analysis of SWOT, PESTEL, VRIO and Porter’s Five Models should not cease after the firm enters the market or is established. The firm should from time to time evaluate its business based on the parameters set by the analyses to establish new weaknesses, strengths, opportunities and threats then evolve its strategies to reflect the same. References Barry, R. (2009). Fundamentals of Human Resource Management. Boston, MA: McGraw-Hill. BBC. (2010, May 29). Ford recalls over a million cars for faulty steering. London. BBC. (2014). Economies of Scale. London: British broadcasting corporation. CBN. (2014, November 13). Inflation Rates in Nigeria. Lagos, Nigeria. Ford. (2015, 1 21). Annual Financial report. Retrieved from Ford Motors: www.corporate ford.com Ford. (2015, 1 21). Ford Motors. Retrieved from Corporate Ford: http://corporate.ford.com/homepage.html Gruber, G. (2008). Pricing Strategies in Online & Offline Retailing. Vienna: Vienna University of Economics and Business Administration. Harrison, J. (2009). Foundations in Strategic Management. london: Cengage Learning. Morden, T. (2007). Principles of Strategic Management. Surrey: Ashgate. Peasron Education. (2011). Introduction to Business Intelligence. In Pearson, Business Intelligence: Instructors Manual (pp. 4-10). London: Pearson Education. Ricardo Crescenzi., C. P. (2013). Innovation drivers, value chains and the geography of multinational corporations in Europe. 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