Business Strategy Report: Ford Motor Company
Strategic analysis
Overview of the automotive industry
The automotive industry has been in the markets for over 150 years, supplying both commercial and personal car models. In the US only, the sector accumulated up to 2.7% of the gross domestic product (GDP) (Carmo, Neto, & Donadone, 2018). It reduces unemployment rates by supplying over 17.9 million employment opportunities to the people globally, which reflects a significant revenue-generating industry. It is further estimated that the worth of the sector is over $2 trillion, with an aggregate growth rate of 3.5% GDP for the global economies. Currently, passenger cars sales are over 50 million units, which is a slight decline from 79.6 million three years ago (Carmo, Neto, & Donadone, 2018). The major markets for automobiles include China, the US, and recently Africa, whereas major motor producing firms include Japan, the US, India. Etc The automotive industry is characterized by continuous innovation, research & development, and engineering. The trade entails tremendous computerized operations to manufacture, assemble, and install different automobiles for people’s global consumption. The industry has seen continued growth and expansion even in the face of economic crisis as experienced in the 2008-2010 global crises.
According to Dess, et al., 2019, the structure for the automotive industry is defined by four elements: – barriers to entry and exit, level differentiation for products, concentration levels and economies of scale. The automotive industry has high limits for joining and exiting; thus, fewer firms have the capacitation to join. The technological innovativeness and control required of the sector are overly high; thereby, fewer firms can access to sustain the operations. There are varying ranges of differentiation for the existing automotive firms such as leadership in the technologies: Toyota motors conquered the high-tech and also provided ample persuasion and available after-sale packages for all clients. Ford, GM and Toyota motors have attained lower production costs due to their abilities to engage in mass production and sales. Upcoming automotive firms are unable to keep up with the structural makeup, thus end up downsizing or merging such as Tata group which merged with Ford.
The underlying success for the industry is the customers need to use and maintain new and trendy brands of cars globally, especially in the US markets. The market for vehicles is especially for governmental use, personal use, commercial services such as uber and general transportation (Tan, & Carrillo, 2017). Globalization and innovation in the global markets have seen the industry develop complex models such as the hybrid and electric-powered models currently. There are few industry players compared to other sectors due to the high operational costs, barriers to enter the industry, personnel top skills and competency levels.
Profile of Ford Motor Company
The automotive and transport industry has evolved over the years with businesses such as Ford Motor Company. Tfirmirm has four business streams and has majorly focused on manufacturing, assembling, and selling different motor vehicles, aircraft and spare parts for the two. Over the years, tfirmirm has had successful sales and acted as the market leader with high profitability and overriding competitive advantages. The firms’ shares are listed on both London Stock Exchange under the ORD share price (OP4F) and New York Stock Exchange using the symbol F (NYSE: F), and the ISIN is US3453708600 (Wong, 2019). Tfirmirm has been deteriorating in the last decade, but the leaders and owner family members are making efforts to regain its position with lower impacts. Tfirmirm is currently suffering from competitive disadvantages, as will be discussed in the paper.
Since its launch by Henry Ford in the year 1906, Ford Motors has successfully supplied the US market with a range of motor vehicles such as Ford Fusion, SUVs, Tracks and military models as well as aeronautical brands (Lambert, Theis, & Cavataio, 2018). The industry has grown to open doors for other competing firms like General Motors, Chrysler Motors, Hyundai Motors, Toyota Motors, and BMW, among others. The industry’s’ market shares are as follows; Ford Motors has 14.1% of US markets and 7% in the European markets (Pereira, 2017). The consumers for Ford Motors products include governments for military trucks, a luxurious class for the Lincoln brand, and female for the Volvo brand, as well as air companies for the aircraft for various uses. Ford has been successful due to its strong market base in the US markets where it is based and its ability to utilize economies of scale to manufacture and market different models. For these reasons, Ford has provided employment opportunities to over a million staff and maintained high tech skills and competencies.
External and Internal Analysis
An understanding of the environment of a firm and industry influences its operational success. PESTEL is a model used for the external analysis of firms, and it entails all factors outside the control of tfirmirm (Anthony, 2019). They involve Political factors such as safety regulations for the production of cars and aeroplanes. The industry is bound to manufacture vehicles that are safe for use environmentally; the models should have safety belts, low privity to accidents, and adhere to the emissions regulations for peoples’ safety. The second factor is the economic factors such as disposable incomes of customers and spending powers of the target markets. Currently, the parity of the people has grown, which in turn has significantly impacted the automobile industry for the production of more vehicles of eco-friendly and flexible models. Thirdly are the sociocultural factors which result from peoples’ cultural affiliations and friendly influences from one another. In the modern world, the popularity to drive has grown, thereby prompting people to acquire personal cars for pleasure and satisfaction.
Technological factors that derive from hi-tech innovations and adjustments also affect the external industry environment (David, & David, 2019). The elements in the automotive industry entail the advancement of hybrid cars, self-driving cars, and cars fitted with airbags for extra safety of the passengers. The automobile industry has invented models with emergency systems for the brakes and alerts, which ease the chances of accidents or collisions. The last factor is Legal factors such as copyright, trademarks, and patents, which bind the manufacturers to incorporate certain features in the cars. Therefore, all automobile firms are under the strict laws and regulations during their production and sale of different brands. The final factor is the environmental factors such as emissions of carbon from trucks or motor vehicles.
The internal environment of a firm is controllable using different measures. The Internal factors that affect the automotive industry entail research & development, innovation and competitiveness, marketing, the hierarchy of the organization structure and the financial standpoint of tfirmirm (Kreutzer, (2019). The ability of firms to conduct continuous market research and create a customized product to fit the customers’ preferences enables the firms to thrive. The automotive industry has varying levels of strengths in its strategies to optimize its internal aspects to be able to compete favourably. The inner strengths enable tfirmirm to develop overall objectives which in turn result in the distinctive competence, thereby a firm stands out from competitors.
Organizational purpose of Ford Motors
The primary purpose of Ford Motors has been to provide people in different markets with a trustworthy brand that is easily accessible and very affordable for the customers. Currently, tfirmirm aims to produce smart car models for the smart people in the world through its creative and innovative processes of marketing its brands (Aaker and Joachimsthaler, 2012). Ford operates with three core values which are People, Products, and Profits. Ford has been working through an excellent improvement process from its processes and thus has received loyalty from the personnel and high growth rates in the market shares and profits.
According to the process management theory, a firm’s success is vested on its ability to manage its processes and resources from raw processing until marketing (Doppelt, 2017). Ford, as a global automobile firm, had lived up its organizational purpose until recently when it suffered from product recalls. Also, the brand is not well spread compared to the Toyota and GM brands due to its high costs for procuring the models. Other models are relatively affordable compared to Ford’s models and the evolving need for the customized brand as promised for the smart world.
Ford’s competitive disadvantages
Ford Motor Company is suffering from competitive disadvantages and has been overtaken to be 5th position in the automotive industry. Initially, Ford was the leading automotive manufacturing business using its generic strategy of cost leadership through low-cost production and affordable models to the clients. Ford was overtaken by GM, which adopted a differentiation strategy, and consequently, however, Ford lagged with diversity. Currently, Ford has adopted a One Ford Plan, where its approach is the innovation for its products to regain its competitive position. However, other firms like BMW, Toyota, and Honda have innovative brands on sale.
After the death of the founder Henry Ford, the family business has suffered from leadership instability, which has impacted its financial position and profitability. Tfirmirm faces challenges due to its concentration on the US market; thus, its profits have been lowered tremendously. The US is an overly developed country with myriad tastes and preferences for products; therefore, the competitor firms have successfully managed to increase sales from diverse product offerings of motor-vehicles.
Strategy development
Ford motor company is a multinational business firm with business streams and strategic goals. The business streams entail Ford Motor Credit Company, Ford Europe Customer Service Division and other globally distributed manufacturing and assembly points (Enkhbayar, 2018). Ford has embraced both corporate and generic strategies to propel its competitiveness and attractiveness as will be discussed using the BCG matrix and SWOT matrices. The intensive strategy entails penetration to new markets; development of the markets, incorporation of IoT in its assembling process for the development of its products. On the other hand, the generic strategies by Ford entail a focus on both cost reduction & maximizing potential and differentiation of its brand to propel its popularity and sales.
Ford has made several strategies, especially since William Clay Ford Jr., took up leadership. Some of the strategies entail penetration to new markets, development of its products through innovation, redesigning its product and manufacturing processes as well as reducing the structural costs. Ford Junior leadership also seeks to improve financial performance by exiting unprofitable markets or reinventing the slow-moving brands. The resource-based theory suggests that a firm can plan and do forecasting for all resources to be able to increase its competitiveness (Chang, 2016). The priorities taken by the firm should align with the interests of its shareholders to avoid mismatch and crashed during decision making and implementation. With the consideration of the theory, the strategies by Ford to seek its competitiveness will not impact the business but the industry through sustainability. The primary reason for Ford’s downfall was poor leadership and improper alignment of plans that not only affected its sales but the reputation of the family firm.
The relational leadership model has put across various policies to enhance the motivation levels of employees instead of adopting basic cost cuts. Therefore, Ford can engage the personnel by developing strong bonds with them and using different incentives to entice them to incorporate innovative ideas for manufacture and sales. Together with the resource-based theory, firms can plan for all of its financial and human resources strategically. Ford should, therefore, refrain from downsizing as seen in its strategies but instead develop the human resources since they possess competitive skills and adept long-term competencies that can be tapped instead in the marketing and sales departments.
The AMO theory assumes that three work structures that are Ability, Motivation, and Opportunity should be independent to ensure maximum employee success in their work performance (Hrebiniak, 2013). Thus, the only factor that has weakened Ford was human resources first evidence in the poor leadership and second structural redesign of th However, the AMO theory explains the need to allow all employees to contribute to the growth and development strategies by utilizing the market feedback and generating ideas based on previous experiences in the firms’ success.
The strategic competition-based theory is a profit-optimization approach that is flexible for various businesses (Doppelt, 2017). According to the theory, firms can gain priority over their competitive rivals by incorporating sustainable strategies in their marketing research and development. As such, the intensive strategies by FORD to penetrate untapped markets such as Asian, Pacific and exceed its border outside the Europe and US markets are sustainable. But again, the firm should try to customize the products to fit the particular demands since different markets have divergent needs that require specific product satisfaction. The strategies on the market and product development are appropriate to achieve the firms’ competitiveness; however, the innovations should be ahead of time, not after other competitors have already saturated the market with innovation brands. The redesigned products and product development will help the firm to counter the challenges of frequent product recall, which has negatively impacted its reputation and sales.
According to Rothaermel (2017), competition-based dynamics are best understood using the SWOT matrix. Ford enjoys strengths such as a global brand name where its products are well-known in all markets across the world. It also offers different models that range from SUVs, tracks, racing cars, military models, luxurious cars, commercial vehicles and all other consumer requirements. Tfirmirm has vast networks derived from its long-span leverage in the industry; thus, it can easily and quickly adapt to new markets. The current leader should incorporate the strategies and focus on the strengths that the firm enjoys building strong dynamics for its brand. Ford has diverse opportunities that allow for its flexibility and survival in different economies. For instance; it manufactures eco-friendly models like the Max and Fusion Hybrid, thus can incorporate the market ideas to deliver more brands. Ford also enjoys a strong customer-orientation; technological innovations in marketing and product development, these opportunities are unique to the automotive industry, thence, optimization of each one will be an added advantage to the firms brand image and profitability.
According to the survival-based theory, a firm should streamline its strategies to survive from the competition (Rothaermel, 2017). Different demands and ideas spur from the various stakeholders who try to influence the firms’ position to recover losses and tore back to the right course. However, the success of a firm is in its ability to recognize its weaknesses and threats, then try to minimize their influence. Ford has suffered from several products recalls, poor fallback plans, especially in its succession policy and high reliance on the US markets whereas there are a myriad of emerging markets in India and China. The threats experiences by Ford motors entail stiff competition, untimely increase in prices of some raw products and stiffer regulatory measures especially in new markets. All these threats and weaknesses can be flattened by the adoption of survival strategies through optimizing the strengths and opportunities at hand.
According to Ruff (2015), The BCG matrix is an opportune strategy for firms to capitalize on its strong brands and resolve to either harvesting or turnaround strategies for poor brands. FORD Motors operates a business with products such as automobiles and automotive parts. Tfirmirm also offers services such as automotive finance under the brand name of Ford Motor Credit Company (LLC), Ford Motor Land Development Corporation as well as vehicle leasing and vehicle services (Stocker, and Shaheen, 2017). Currently, the Mustang brand is a sporty car with a high market share and sales, which is Ford’s star. The brand is classified as a start due to its high market share at 40% and high profitability. Ford’s products especially automobiles and automotive parts are stars are they account for the main source of profitability for the business. A cash-cow is a product with high market share and low shares in the market growth rates. There is high demand for Ford’s fuel efficient brands which entail diesel driven cars and the eco-friendly cars with low emissions. A question mark in the BCG matrix features products with low market share and growth rate that is high. For instance, the Ferrari brand is only popular among the rich class but it derives high sales revenue, thus FORD has the capacity to use digital marketing and effective marketing strategies to increase the popularity of the lowly rated product and grow it to be a star. Finally, a dog is a product or brand with low market share and low growth rate such as the former Jaguar and Volvo brand. The product rated as dog has low chances of survival as it only depends on the stars and cash cows to sustain its manufacturing and marketing operations. The only solution for stars is mergers, acquisition or other harvesting strategies. For instance, Ford sold off its newly acquired Tata group brand as it generated low revenues and had low chances for growth.
Strategies for recommendation
- Ford should incorporate technologies such as AI (Artificial Intelligence) and IoT(Internet of Things) to be able to develop self-driven and autonomous vehicles.
- Ford should incorporate the Toyota’s lean strategy for product differentiation, this is necessary for it to be able to promote product development and customize its brand to specific markets.
- Ford should also embrace cost reduction strategies by embracing efficient manufacturing processes and adjusting through personnel development that will generate splendid and innovative ideas for growth to befit the new markets.
- Ford should collaborate with Alphabet Corporation and Uber apps which will aid in the digital marketing agenda of tfirmirm to grow its market shares.
Strategic implementation
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