Company overview: Ford Motor Company is one of the largest automobile manufacturers in the world which Henry Ford is the founder. The company manufactures and distributes automobiles in over 200 markets across six continents. The companys strong brand portfolio gives it a significant competitive advantage. However, less vehicle production in developed markets would reduce demand for the companys products, and have negatively impacting its financial performance.
The Situation Analysis
The US auto market was saturated, faced the decrease in product demand and increased competition from foreign manufacturers. Japanese cars such as Toyota, Nissan, and Honda had come and took market share in US market. Because of the rising gasoline price, the demand of customers had shifted from US manufacturers to more fuel efficient car like Japanese car. The economic downturn in US had also affected Ford to face loss. These made Ford sales decrease. Then, Ford has to reduce the cost. Ford has lay off workers, close assembly plants, reduce vehicle models, and restructuring plan. Ford reduced the number of retail outlets from almost 4,400 to 3,424.
GM reduced its dealer to 4,500 and Chrysler reduced to 2,311. Most of Fords cuts were from larger metropolitan markets and the elimination of the Mercury brand. Also, cut approximately 35% of its Lincoln dealers. Ford also implements ONE Ford plan and its mission is ONE Ford, ONE Team, ONE Plan, and ONE Goal. In order to increase sale, Ford has develop marketing strategy by provide large amount of information about the car such as price, quality and style on the internet for the customers to access to those unlimited information to compare products and choose the vehicles that meet their needs.
The General environment
Economic: Economic crisis in 2006 that affected all the auto industry. Many of the company had to bankruptcy or close the business. Ford also had to close many factories, lay off workers, and reduce the dealership to save cost. Rising of gasoline prices make it more expensive for consumers. That makes Fords sales decline and less revenue returns. Even the economic in US is decrease but because of globalization. It increases the international opportunities to Ford mostly in emerging market such as China and India. Technology: Ford has invested heavily in the development of premium technology to better serve its customers and to improve the safety, security, fuel efficiency, and design. These technologies will help company to save cost, increase reputation, build good image, serve customers want, and can compete with competitors.
The Industry environment
Five Forces Analysis
1. Threat of new entrants
There are many factors that restrict new comers to entry the industry. Being in the automobile manufacture, it required high capital to invest. The companies have to invest a lot in research and development to create new technology all the time. For example; Ford invested $135 million to design, engineer, and manufacture key components for its hybrid, plug-in hybrid and battery electric vehicles. The companies such as Ford, GM, and Chrysler are all has the reputation in the name itself. And those three are called as the Detroit Three, they claimed about 50.1% of the US auto market in June 2011.So, it is difficult for new rivalry to build the name and compete with. Moreover, they have more experiences and can produce vehicles that more closely matched consumer needs. Even thought, Japanese cars had come to take market share due to the rise up of gasoline price and environment concerns. So, some consumers had turn to them.
2. Threat of substitute products
As the population increases and global warming problem, people have found alternative transportation methods such as trolleys, Dial-A-Ride, taxis, bicycles, and walking. Enhancing public transportation systems such as rail systems and subways is to develop urban areas. These might lead private car less necessary to people. Also, we have to be careful of the environment. Therefore, it creates the hybrid engine and fuel saving motor.
3. Bargaining power of suppliers
Many suppliers had been close due to the recession. And because suppliers have to cooperate with automobile industry, when automobile companies sales reduce suppliers will also affected. Therefore, there are highly competitive in suppliers. Ford chose to make a long term agreement with select strategic global suppliers to obtain best technologies and materials.
4. Bargaining power of buyers
The gasoline price is affected the customers to purchase cars. And their preferences are design for car produced and sold. Ford has to concern about the customer living life, style and what they want. So they can provide a car that answer the customers want to satisfy them the most. Buyers have power to control the price and design. Ford had used many media methods to reach the customers including newspaper, radio, television advertising, as well as social media. Buyers also make the price competition in industry. Ford had to produce at low cost to sell at low price.
5. Rivalry among competing firms
There are high competitions in automobile industry in both domestic and international. There are many competitors in this business. Even, The Detroit Three took a biggest share in market the industry is still growing very fast due to new technology development. The competition from foreign manufacturers such as Toyota, Nissan, and Honda makes its more intense. It forced Ford to compete with others by maintain quality standard, new innovation, energy-efficient in order to increase the revenue and reduce cost.
Internal Analysis (SWOT)
Ford has strong brand recognition as they are one of the biggest companies in industry. Ford has huge investment in research and development to create new technology and has capability for engineering. Ford operated business over six continents and has large group of customers in both domestic and international. Ford had wide network of distributors and dealers. The company change to use pull strategy to give higher priority in customer satisfaction and driven by customer demand and preferences. Moreover, Ford gets many awards about technologies they had invented. We can see the success of Ford from the global sales of the latest generation model Fiesta, available on five continents that sold more than 1 million.
Ford had recalled about 300,000 cars because of the possible fire danger from engine overheating problems. This might affect the image of Ford and the perception of customer toward company.
Even the demand for vehicle in US had fell but it can replace by globalization. Ford has made attentions to emerging market in China and India. These two markets expected to grow very fast and become ranking to first three largest markets which have China, India and US. In addition, Ford has joint venture with many companies in foreign to create more strength. The population is now increasing rapidly so demand for car will be higher. And because there are trend of saving fuel, environmental, economic issues and increasing demand for dual fuel vehicles, Ford new hybrid vehicle model will gain a lot of interest.
Asian car had come to take market share in US market. The prices of Asian cars are obviously lower. The demand for Japanese car has increase. This made Ford to reduce the price to maintain the market share and had to reduce the cost of production. Economic slowdown in US and Euro zone was also one factor that created Ford net losses. Competitors environment