Rapid globalization and technological advancement has made the business environment more complex than before. Firms are therefore forced to understand and adapt to the environment they operate to successfully retain their competitiveness. Such environmental factors are either internal or external and include the economic aspects, political framework, socio-cultural aspects, technological business ethics, management, corporate culture and legal aspects. These factors determine the location, nature, personnel policies, distribution systems and prices the firm is to charge for its products. It is therefore important for businesses to understand the environment they operate to avoid going bust.
Competition is continually changing the motor industry and companies such as Ford Motors has to keep on changing their strategies to fit the business environment. Ford Motors was founded in 1903 in Michigan, Detroit and is one of the oldest motor companies in the world. The company sells commercial vehicles, automobiles and luxury cars and has stakes in various companies across the globe, such as Jiangling in China, Auto Alliance in Thailand, Mazda in Japan, and Ford Sollers in Russia (Ford Motors, 2013).
Important to Ford Motors’ external environment is demographics, which determine how much vehicles the company can sell in the markets. The automobile makers are targeting the young generation of consumers who at the age of 20’s and 30’s as baby boomers get ready to retire and as their spending power diminishes. Further, the industry has experienced a surge of sales from these new consumers of up to 40 percent of the total car sales in the last five years from 2010. Moreover, the American consumer is choosing to buy larger vehicles as opposed to passenger size automobiles. However, the baby boomers are still active in their lives, thus they want to drive the same cars as their children to make life easier. Research is also indicating that the sales of sport utility vehicles, minivans and trucks are increasing annually.
The motor industry players are also targeting their sales to particular consumers and geographic location. This has forced the companies to market vehicles according to the climate as well as the purpose of the vehicle, for instance minivans and trucks are targeted to consumers who need to haul goods requiring a big space while convertible cars are not marketed to areas that are cold all over the year (Brinkman, Navarro & Harper, 2014). Ford Motors takes advantage of demographics to ascertain the markets to sell their vehicles, for example their convertible cars are popular in Paris and New York. Additionally, demographics provide an avenue for research to enable the company determine the products to launch into the market.
The industry is also affected by the changing technology in production as well as marketing and selling of cars. Consumers are turning to fuel-efficient cars from Japan, automobiles with enhanced safety while legislation is being made to force carmakers to produce vehicles that emit minimal amount of carbon dioxide to prevent global warming. Further, more and more buyers are turning to the internet to search for information about the vehicles they want to purchase in addition to ordering for the vehicles online. It is estimated that up to 60 percent of the recent car owners in the United States preferred the internet before making their purchase (Ford Motors, 2013). Moreover, 88 percent of those consumers visited the auto websites being they took a test drive of the vehicle they wanted to purchase. Ford Motors interacts with its customers via the website and the social media to educate and inform consumers on the new products and how to take care of their vehicles.
The company culture is critical to the internal environment of the companies in the motor industry as it determines the values and practices shared by the members of the firms, which is determine how business is to be conducted. At Ford Motors, the employees and management have shared values and practices that hold them together to ensure that they serve their customers well. Moreover, Ford’s culture is adaptive and aligned to the company’s goal of creating exciting and viable company that delivers profitable growth for all.
Ford motors is responding favorably to the five forces of competition, especially the intensity of rivalry with its competitors, such as Toyota, General Motors and Daimler Chrysler, as well as the bargaining power of buyers. Rivalry in the U.S. and the global market for automobiles is intense despite the high concentration ratios witnessed in the U.S market, which denotes lesser intensity of competition. Global motor companies, such as Toyota, Fiat, Tata, BMW and Mercedes Benz have entered the U.S. market, which was previously dominated by Ford, GM and Daimler Chrysler. Therefore, Ford Motors is not only competing for the global market but also the home market as competition diversifies their cultures and associated philosophies to intensify rivalry in the industry.
The market is also characterized by low growth especially in the established markets of Europe and the U.S. thereby forcing firms to compete for markets in the emerging economies hence increasing their market share. Ford has taken advantage of the emerging markets, such as China, Brazil and India and has established franchises in India and Brazil, acquired Jiangling in China, as well as bought stakes in other companies around the world to ensure presence of the Ford brand in the global market. Moreover, the intensity of competition in the motor industry is also fueled by the high fixed costs of manufacturing and the low switching costs as consumers prefer other models and makes (Ihlen & Roper, 2014). Ford has adapted to such rivalry by making a model for each consumer needs, for example Lincoln for the luxury-seeking consumer and trucks for the business-oriented consumer in addition to considering quality, durability and price.
The bargaining power of the buyers has also made the motor industry dynamic as the consumers dictate their terms to the motor vehicle suppliers since automobiles and their parts are standardized products used only for vehicles (Brinkman et al., 2014). Moreover, there are not many automobile makers in the U.S. thereby giving way for low switching costs for selecting one of the limited competing brands in the market. Ford seeks to exploit the opportunities provided by the large number of consumers by involving the consumers through surveys to ascertain what they want in the market since the consumer cannot integrate backwards and if they want a vehicle, they have to buy from the dealers.
To improve the ability to address buyer bargaining power and the intensity of rivalry in the industry, Ford Motors should strengthen its management as well as its global presence as competition moves to the emerging markets. Further, the company should shift to cheaper manufacturing materials to cut the cost of production considerably. It should also restructure its organization by closing down the poorly performing outlets and consolidating its manufacturing facilities to match the intensity of rivalry without incurring losses (Brinkman et al, 2014).
The Ford Motors Company should also reestablish its market share in the U.S. domestic market by launching vehicles that will appeal to the buyers thereby invigorating the Ford brand line. It should also position itself as the fuel-efficient vehicle-making leader to identify with the modern consumer who does not shy away from associating with low-maintenance vehicles. The company should also segment its market to feature products for the young generation to create a new base of loyal consumers.
Ford Motors is faced with various external threats that if not countered would weigh heavily on its business ventures across the globe. These threats include; decreasing fuel prices, which are expected to go down further as extraction of shale gas begins. This will affect Ford’s business due to its dependency on flexible fuel cars that are bound to become less attractive as the prices of fuel go down. The company can counter this threat by making hybrid electric cars, which are not affected by the prices of fuel. Secondly, the increasing cost of raw materials is another concern to the company, which is a threat to profitability (Rachet, 2014). Ford should invest in research and development to find new and cheaper materials to replace the conventional steel.
Increasing competition and fluctuating currency is also another threat to Ford’s business. More firms are making small cars with hybrid engines thus attracting consumers in the same segments Ford used to target. The company should improve its vehicles to affirm its position as a market leader. Conversely, Ford Motors has opportunities that can be exploited to turn the business around and they include; positive attitude towards green cars that are fuel-efficient with minimal emission of carbon dioxide therefore Ford ECOnetic is a welcome move by the company and should increasing research and produce more green vehicles for the consumers in the global market. Moreover, the company can benefit from the strategic partnerships with other firms in the emerging markets. This will ensure that Ford Motors cuts its research and development costs, gains innovative skills from players since they understand their local markets better (Rachet, 2014).
The strengths Ford Motors possesses include strong market presence and position in the U.S. as the second largest single market in the world. The company has a great reputation in the U.S. and Americans identify with it as the vehicle of the common American. Moreover, the company performs fairly well financially, which is a strength (Ihlen & Roper, 2014). The liquidity ratio of Ford Motors ensures that it has a high profit margin that competitors cannot match. Further, it is experiencing substantial growth in China at 46 percent thereby exposing its brands to over millions of potential consumers (Ford Motors, 2013).
In the dynamic environment motor vehicle manufacturers operate in, Ford Motors has found itself running unprofitable operations in Europe, whereby it has incurred losses over and over since 2012 and has not recovered since. This has been fueled by the struggling economies in the Euro zone. Further, poor environmental record has been a major weakness for Ford Motors. The United States Environmental Protection Agency found Ford culpable of 42 toxic waste sites leading the company to be categorized as the seventh worst air polluter in the United States by Amherst, a characteristic that does not augur well with consumers. Additionally, high cost structure is another weakness that is proving detrimental to Ford Motors as compared to its rivals as the company seeks to compensate its employees more due to stringent labor laws.
Ford Motors should market its products to the Chinese since that market has a great potential for turning its business back to huge profitability the company experienced in the yesteryear. The sound financial performance should ensure that ford sets aside money for research and development to invest in the future technologies that will drive rivals out of market and affirm Ford’s position as a market leader (Ihlen & Roper, 2014). The company should strive to erase the poor environmental record engraved in the consumers’ minds and engage in waste recycling and cleaning to conserve the environment and associate with consumers, who are striving for a greener planet. Moreover, the company should seek joint ventures with firms in Europe to boost the dwindling sales volumes in the region.
The resources, capabilities and core competencies of a company are what forms the basis for competitive advantage. Resources are meant to generate organizational capabilities, which form the source for the core competencies (Stadtler, 2015). The core competencies form the foundations of competitive advantages for firms. Further, resources and capabilities involve the choices made within an organization while designing the activities chosen for internal functions and the allocation, reconfiguration and exploitation of company’s resources and capabilities. The Ford Motors Company is exploiting its resources, capabilities and core competencies by making smaller cars, such as the Ford Fiesta and Ford Focus to transform its brand portfolio for fuel-efficient and high tech vehicles.
Moreover, Ford has diversified its production of small cars by making the Ford Figo for the Indian market. The car appeals for the young consumers who have the interests of the planet at heart since it is fuel-efficient and emits little carbon dioxide in addition to being high quality with enough space to carry more passengers or goods and is affordable. The firm’s financial resources basically come from its core business of selling vehicles and parts to dealers and distributors as well as interest on receivables. The company can improve its business by cutting costs of remunerations, materials and capacity.
The human resources involve the employees Ford Motors and its consolidated entities has. Ford employs over 300,000 employees with more than 18,000 of them being hourly workers (Ford Motors, 2013). Moreover, the physical resources include 108 plants globally in addition to a worldwide engineering release system that allows sharing of manufacturing and design information (Stadtler, 2015). Conversely, the intangible resources include strategic alliances and joint ventures with various firms around the globe, such as Mazda in Japan. However, the Ford Motor’s core competencies include brand management, which has enabled it market the products globally to new and emerging car markets. Moreover, Ford’s supply chain management has been instrumental in maintaining a steady flow of raw materials until the vehicle is assembled and delivered to the dealers and distributors. The company’s ability to move the assembly line as well as the outstanding inventory management play out to the company’s advantage. Product development technology is also another competency Ford has been able to exploit to churn out state-of-art vehicles that meet the needs of the consumers.
Ford’s value chain analysis, as tools that identify and lead to the achievement of the competitive advantage involve the help it implement the global strategy to enhance its competitive position in the motor industry. The company had not ventured into the global market until 1994 when the company management chose to first strengthen the U.S. market to ensure survival by creating a new strategy (Stadtler, 2015). The company analyzed the institutional and structural factors that determined its strategic response to the challenges posed by rivals. Some of the factors that apply to the company’s value chain include; urbanization, population growth, education and biodiversity to ensure that Ford Motors maintains its sustainable competitive advantage. Further, the company engages in value chain activities to maintain its public image in the eyes of consumers.