Tool Analysis Ford
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Ford Motor Company External Environment Analysis
Ford Motor Company External Environment Analysis
Company Overview
Ford Motor Company is an American transnational corporation headquartered in Dearborn, Michigan. Henry Ford and 11 other shareholders founded the company in 1903 to manufacture and sell automobiles. Since its inception, the company has become a global firm that designs, manufactures, promotes, and sells a full range of utility vehicles, Lincoln luxury vehicles, Ford trucks, and cars (Christensen, 2021). Ford Motor Company has a strong management structure that is anchored on the corporate hierarchy, regional geographic divisions, and global functional groups that are strategically placed to support its global operations. The company's data show that as of 2021, it had 183,000 employees and it generated a revenue of $ 136,341Million. Comment by Kathy Frisbie: Solid overview supported by company research.
The Industry for Ford Motor Company
Ford Motor operates as Ford Credit, Mobility, and Automotive. The Ford credit section is principally involved in offering leasing activities and vehicle-related financing to the company's dealers. On the other hand, the Mobility section is primarily focused on designing and building mobility services. At the same time, the Automotive is engaged in selling Ford and Lincoln vehicles and accessories. The three segments vary in size, operation, and revenue generation. According to the company’s annual revenue report in 2021, the performance of the three segments in terms of revenue generation is presented in the graph below.
Based on the above revenue figure, the automotive segment accounts for more than 90% of the company’s revenues; thus, Ford Motor Company primarily operates in the Automobile industry. Comment by Kathy Frisbie: Agreed! Good support here to justify your determination.
The Automobile industry is one of the largest global markets dominated by huge multinational companies that compete on various fronts (Mergent Inc. nd 2014). The industry is dominated by companies that engage in the designing, manufacturing, marketing, and selling various automobile products such as passenger vehicles, commercial automobiles, sport utility vehicles, among other products. The global automobile industry has been estimated to be $ 3.8tr as of January 2022, with the major players being Ford Motors, General Motors among others. Comment by Kathy Frisbie: Citation formatting. See Dr. Kathy’s Notes for Week Two for how to cite Mergent.
PESTEL Analysis
PESTLE is a fundamental tool of analysis that managers rely on in critically assessing and evaluating the impacts of the macro environment on the performance of their business in particular and the industry in general(Mergent Inc nd 2014). The PESTLE analysis traverses the large external environment to give insight on the impacts of factors such as political, economic, social, technological, environmental, and legal aspects on the business. Comment by Kathy Frisbie: Is this the correct citation for this definition?
Elements of PESTLE Analysis
P – Political Factors: The political aspect lends itself to the impact of government policies measures on the performance of the businesses (Mergent Inc. nd 2014). Factors such as tax policies, tariffs, changes in trade limitations, and stability of the government shape and influence the direction to be taken by the companies Comment by Kathy Frisbie: This is not the correct citation for the definition of PESTEL. You may be attempting to cite the course’s eBook. If so, see Dr. Kathy’s Notes for examples of how to cite and reference our course’s eBook.
E- Economic Factors: The economic conditions shape the performance of the business in many ways. Factors such as inflation rates, consumers' disposable income, interest rates, unemployment rates, and the overall dynamics of the economy determine the revenues earned by the companies (Mergent Inc nd, 2014). For instance, the global economic meltdown of the 2000s was detrimental to many enterprises worldwide.
S-Social: The generational changes and demographic factors such as ethnic mix, the size of the population, age, and cultural dynamics are the tenets of social structure. These factors dictate what the producer should produce and sell; for instance, in the United States, the increased demand for Salsa at the expense of Ketchup explains how generational change affects the operation of businesses. Comment by Kathy Frisbie: Support from course materials needed for this definition.
T- Technological: Technological factors focus on developing new techniques that help improve the quality of products and services. The technology components include increased automation, novel products, and the advanced service sector. Technological factors create a huge opportunity for the organization to grow; for instance, the increased use of the internet and online sales has been a game-changer for companies like Apple. Comment by Kathy Frisbie: Support from course materials needed for this definition.
E- Environmental: The environmental factor entails the physical conditions in which a business operates. The aspects of the environment, such as pollution, weather patterns, and natural calamities, have a considerable impact on the organization's sustainability. For instance, in the USA, the water pollution risks have influenced the operation of bottled water companies through increased sales and threats of environmental concerns on the disposal of plastic bottles. Comment by Kathy Frisbie: Support from course materials needed for this definition.
L- Legal: The legal factors are primarily concerned with the impacts of the legal system, such as courts, in shaping the activities of the businesses. Legal aspects include antitrust laws, employment laws, discrimination laws, intellectual property rights, and safety and regulation laws. For instance, China has stringent intellectual property rights laws; thus, any organization operating in that country must observe these laws. Comment by Kathy Frisbie: Support from course materials needed for this definition.
Ford Motor PESTLE analysis Comment by Kathy Frisbie: Remember this PESTEL analysis should focus on BOTH the company and the industry. This analysis focuses largely on the company.
Political factors: The Asia-Pacific has remained peaceful and stable during the last few years, creating reliable market. The political leaders in the Asian countries are increasing supporting companies that are highly innovative such as Ford Motor For instance, in 2021 the company sold more than 649,000 vehicles in the Chinese market. Comment by Kathy Frisbie: Support from company or industry research needed for this factor.
Economic factors: Economic variables heavily influence market behavior and the profitability of the environment for brands. In Asian countries, Ford has found very encouraging and quick sales. Economic progress has led to an infusion of multinational businesses teaming with local brands to break into Asian markets in these places. Comment by Kathy Frisbie: Support from company or industry research needed for this factor.
Technological factors: The Ford Corporation has invested massively in innovation to tap from Technological opportunities. In most countries, including India, where automobiles are regarded as more of a luxury than a need, current technology for battery-powered vehicles is prohibitively expensive for most people (Zeng & Lee, 2022). The company has collaborated with Holoride and Universal Pictures to give a virtual space ride, using basic technology like Wi-Fi connectivity and automated parallel parking.
Legal factors: Legal elements influencing Ford's growth are global environmental standards requirements, labor legislation, and intellectual property rights. For instance, quality and safety rules are fundamental to Ford. Carbureted engines, airbags, and transmissions have been problematic with Ford automobiles however it has concentrated on being legal and ethical compliant in recent years. The company must also keep track of policies governing staff working hours and the minimum pay paid to its personnel in these in countries it operates. Comment by Kathy Frisbie: Support from company or industry research needed for this factor.
Social-cultural factors: Ford operates in various international markets with various cultures and organizational structures. As a result of these differences, the orientation to the market must be adjusted. For a sustainable automotive, the corporation has focus on manufacturing more eco-friendly automobiles to attract the current generation. Ford has establish itself as a critical participant in the hybrid car category, given the growing interest in environmentally friendly and fuel-efficient vehicles. Comment by Kathy Frisbie: Support from company or industry research needed for this factor.
Environmental factors: Ford has taken important measures to ensure it is sustainable. To acclimatize to the dynamic climate, the firm has executed several measures and legislation across the world. For instance, Ford has embraced autonomous driving and it seeks to convert half of its global sales into EVs by 2030. Comment by Kathy Frisbie: Support from company or industry research needed for this factor.
Six Trends in the Automobile Based on PESTLE Analysis
The trend is the general direction in which a variable or something changes or moves over time (Mergent Inc. nd 2014). Most of these changes are influenced by macro factors forcing the organizations to adjust and operate in tandem with the prevailing market demands. Some of these trends in the automobile industry include: Comment by Kathy Frisbie: This information is not from Mergent!
Political trends: Many political economies are increasing, reducing protectionist measures, and embracing trade openness which is likely to open and increase the global auto-market, especially as the world heals from Covid 19. Comment by Kathy Frisbie: Support from industry research needed here.
Economic Trends: Covid 19 hurt the automobile industry due to reduced sales. Many companies have been forced to cut down on the cost reflect on the current economic conditions. For instance, during Covid 19 pandemic Ford Company slashed its cost by reducing work schedule and compensation to its employees. Comment by Kathy Frisbie: Support from industry research needed here.
Social Trends: Most customers in the automobile are gravitating towards social networks to engage and benefit from their peers' insight before deciding to make a purchase. Before making an order for the dream car, most of the customers closely follow topics about their brand cars in terms of functionality, which forms the basis of making an order for the ideal brand. Comment by Kathy Frisbie: Support from industry research needed here.
Technological trends: The automobile industry is experiencing an unprecedented technological shift as many companies are embracing the new technology focused on the production of autonomous vehicles (Jang, 2022). The technology aims to make public transport safer by reducing the need for human drivers, which often leads to accidents as a result of fatigue. Environmental Trends: The increased demand for environmental sustainability has forced big Automobile sector companies to think about the paradigm shift to carbon-free automobiles. Major players in the industry have already invested heavily in the production of EVs, which is a major solution in achieving increased environmental advocacy. For instance, Ford Motor Company spent $ 7.6billion in R&D in 2021. Comment by Kathy Frisbie: Support from industry research needed here.
Legal Trends: To protect the software, which has become an important component in developing the autonomous vehicle. The vehicle software developers are currently required to satisfy the ISO 26262 requirements, a critical functionality standard. Comment by Kathy Frisbie: Support from industry research needed here.
Ford Motor Company Technological Trend
Ford Motor Company has invested heavily in research and development to enable it to shift and embrace trends in the industry, which is gravitating towards the demand for safer driving and environmental sustainability (Jacinto, 2021). Due to environmental concerns, many customers are looking for safer driving and eco-friendly automobiles; thus, to ensure that it capitalize on this emerging trend Ford plans to increase its investment in the development of electric vehicles to $ 30billion by 2025. Comment by Kathy Frisbie: Nice job on this section, Matt.
Technological Uncertainty Comment by Kathy Frisbie: All sections require support from company research and/or course materials.
Even as the Ford Motor plans to convert half of its global sales into EV by 2030, it is still uncertain if it will meet the heavy technological investment that is ideal in achieving these plans. The events of Covid 19 disrupted the company's revenue, leading to slashing of costs, which has an impact on the pace of technological paradigm shift. Comment by Kathy Frisbie: Consider also that one of the uncertainties of technology trends stems from the fact that consumers could abandon the use of your technology at a very rapid pace (The Saylor Foundation, 2014, p. 79). Consider also that one of the uncertainties of social trends is that these trends often arise from unexpected, and largely unpredictable, sources (The Saylor Foundation, 2014, p. 79).
Strategy Analysis of Ford Motor Company
Strategies are techniques used by the company executive to enable the organization gain a competitive advantage in the industry (Mergent Inc. nd 2014). This process involves planning on the strategic moves, devising the plots to outwit the competitors, remaining consistent, positioning in the sectors, and, more importantly, the general executive perceptive about the industry competitiveness. Ford’s strategic focus is governed by its vision, mission, and objectives. The company's mission is to improve people's lives by making cost-effective and affordable transport to all people. This mission statement component of improving people's lives is a major strategic plan for handling the company's accessibility and affordability plans (Valeri, 2021). The company's objectives of making transport affordable, which is linked to cost-effectiveness, is in tandem with the company's competitive advantage strategy. Comment by Kathy Frisbie: This information is not from Mergent! It is from the course material.
On the other hand, Ford Motor Company’s vision is to become the global most trusted company in designing safer and smart vehicles (Christensen, 2021). The aspect in the company's vision statement of becoming a global smart vehicle manufacturer is in line with its strategy of creating a global brand image which is the major driver of the company's revenue as provided in the financial reports of 2021 in which the automotive segment earned $ 126, 150million. Comment by Kathy Frisbie: Consider also the following: A mission statement should state the reason for the organization’s existence and answers the question “who are we” (The Saylor Foundation, 2014, p. 41). A vision states who we hope to become in the future (The Saylor Foundation, p. 40). Mission and vision should be in the same direction (The Saylor Foundation, 2014, p. 42). Are the objectives SMART goals (The Saylor Foundation, 2014, p. 43). Consider also the need to identify your primary customer (Simons, 2010). Also does the mission or vision demonstrate that the company has prioritized who is most important, the customer, shareholder, or employees (Simons, 2010)? Is the language in the goals, vision and objectives too broad (Rumet, 2011, para. 3)? Does the language contain too much “fluff”, buzzwords, or restatement of the obvious (Rumet, 2011, para. 20)?
Conclusion Comment by Kathy Frisbie: All sections require support from company research and/or course materials.
In summary, the external environment of the business has a great influence on the success or failure of the organization. Managers of the companies are expected to closely monitor movement in political, economic, technological, and legal factors, among others. If left unchecked, these factors can have far-reaching impacts on the organization.
References Comment by Kathy Frisbie: Matt, good company and industry research here. It is noted, however, that none of the course materials were used for support for this project. To improve your grade in the next project, consider using ample course materials to support general definitions and concepts, company research to support information on the focal company, and industry research to support information on the automotive industry. Also, note Mergent is not listed in this Reference list. See Dr. Kathy’s Notes for Week Two for how to reference Mergent.
Cheng, D., & Trebino, A. (2021). Early twentieth-century American exceptionalism on wheels: the role of rapid automobile adoption in economic development. Letters in Spatial and Resource Sciences, 14(2), 211-221.
https://link.springer.com/article/10.1007/s12076-021-00273-6
Christensen, L. K. (2021). Between Denmark and Detroit: Ford Motor Company A/S and the Transformation of Fordism 1919-1966. Aarhus Universitetsforlag.
https://pure.kb.dk/en/publications/between-denmark-and-detroit-ford-motor-company-as-and-the-transfo
Jacinto, P. M. M. (2021). A paradigm shift in the automotive market: how will premium brands deal with the numerous challenges they face? Current strategy overview (Doctoral dissertation).
https://run.unl.pt/handle/10362/131511
Jang, S. J. (2022). FLYING CAR-RELATED TECHNOLOGY TRENDS. European Journal of Engineering and Technology, 10(1).
Valeri, M. (2021). Organizational Studies: Implications for the Strategic Management. Springer Nature.
Zeng, F., Lo, C. K. Y., & Lee, S. H. N. (2022). Will Communication of Job Creation Facilitated Diffusion of Innovations in the Automobile Industry? Sustainability, 14(1), 36.
https://link.springer.com/article/10.1007/s12076-021-00273-6
Ford Motor Company 2021 Revenue per segment (Million)
Ford Motor Company 2021 Revenue per segment Revenue( Million)
Automotive Mobility Ford Credit 126150 10073 118 Ford Motor Company 2021 Revenue per segment Segment
Automotive Mobility Ford Credit
Segment
Revenue