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Company Description and History

Ford Motor Company is an American automaker and the world's fifth largest automaker based on worldwide vehicle sales. Based in Dearborn, Michigan, a suburb of Detroit, the automaker was founded by Henry Ford, on June 16, 1903. Ford Motor Company would go on to become one of the largest and most profitable companies in the world, as well as being one of the few to survive the Great Depression. The largest family-controlled company in the world, the Ford Motor Company has been in continuous family control for over 110 years. Ford now encompasses two brands: Ford and Lincoln. Ford once owned 5 other luxury brands: Volvo, Land Rover, Jaguar, Aston Martin and Mercury. Over time, those brands were sold to other companies and Mercury was discontinued. (Wikipedia, 2017)

Ford Motor Company (Ford), incorporated on July 9, 1919, is a global automotive and mobility company. The Company's principal business includes designing, manufacturing, marketing, financing and servicing a line of Ford cars, trucks, sports utility vehicles (SUVs), and electrified vehicles, as well as Lincoln luxury vehicles. The Company operates in two sectors: Automotive and Financial Services. The Automotive sector includes North America, South America, Europe, Middle East & Africa, and Asia Pacific segments. Its Financial Services sector includes Ford Credit and Other Financial Services segments. Its vehicle brands include Ford, Ford-Lincoln and Lincoln. The Other Financial Services segment includes holding companies, real estate, and the financing of some Volvo vehicles in Europe. The Company has over 70 plants across the world. Through its wholly owned subsidiary Ford Motor Credit Company LLC (Ford Credit), it provides automotive financing products to and through automotive dealers throughout the world. (reuters, 2017)

Ford Business Model

Ford Motor company has approximately 213,000 around the world and have four different brands (Ford, Lincoln, Mercury, and Volvo). They have two main departments , Automotive and Financial services. They offer special vehicles financing for individual and dealers. Around forty percent of their sold vehicles in the United States were financed by Ford credit in 2008 and that number remained stable in the past three years. Ford credit also helped financing dealership to purchase real estate and other large capital expenditures by the company.

The other sector is the automotive design, manufacturers, services cars, trucks, SUVs, and vehicles parts. They divide this segment to different region: North America, South America, Europe and Asia. Ford has many dealerships that they deal with in order to sell their products by signing contract to have the permission to sell their vehicles. Around 2008, they operated around 3,800 dealerships around the United States. About half of the dealership sells only ford brands and another quarter of the dealership sell Ford, Lincoln and Mercury. Their production process takes around twenty days from taking the order of the production to shipping, which means that the do not have to have huge warehouses for inventory. Usually spring and summer is their high season demand, therefore the production is typically higher in the first two quarters.

Relevant Facts

One Ford plan which was implemented after the economic crises of 2008, had led to reduction on the total number of brands owned by Ford worldwide. By reducing the total number of brands and consolidating the number of vehicles platform that they built their models on would make them more creative and efficient. They finally decreased their brand and focused on specific brand that will satisfy customer’s needs.

Industry Analysis

The automobile industry consists of the companies that produce automotive vehicles including cars, trucks and other vehicles. It’s very competitive industry and companies usually differentiate themselves by offering different feature and quality to attract new customers. The United States has one of the largest automotive markets in the world and is home to many global vehicle and auto parts manufacturers. After vehicle production dipped below 6 million units in 2009, production more than doubled to over 12 million passenger vehicles in the United States in 2015. The United States is the second largest vehicle producer in the world, behind only China in 2015. U.S. vehicle sales declined to 10.4 million units in 2009. However, vehicle sales have steadily risen each year since and reached 17.4 million units in 2015. Overall, the United States is the world’s second largest market for vehicle sales. (Select USA, 2017)

Ford Motor Company has many product lines such as Ford Fiesta, Ford Focus, Ford Escape, Ford Ranger and other Ford products. They have many dealers around the world in order to make it easier for their consumers to find the closest dealer in the area. They always differentiate themselves in the automobile market by offering high quality cars with affordable prices. They target two or more segments and preparing marketing mix for every single one of these segments. They are attractive to many different costumer segment because they satisfy their needs by providing economy, sport luxury cars, station wagons, vans, trucks, and so on. (Ford, 2014)

OMPETITIVE ADVANTAGE

After the financial crises in 2008, Ford implemented new strategy which is increasing their market shares and increasing their revenue, in addition to start producing smart cars with fuel efficient system. The company started to concentrate more on the market opportunities locally and internationally by having centralized decision making system. This system allows the top management to be engaged in research and development of the new products in order to satisfy customers’ expectation in different markets. By implementing this system, company has enhanced their communication channel from the top management to the bottom workers.

The other competitive advantage is that they have implemented the strategy which allow them to have low production cost by cutting all excessive cost that are include in the operations. The huge expenditure on raw materials was cut down and the online manufacturing process was introduced that focus on the development of cars on one process rather than having different segments of engineering and production. By implementing this strategy, Ford gained competitive advantage over its competitors in term of lower cost and acceptable quality.

Ford’s Core Competencies

Core Competencies helps them to have a competitive advantage over their competitors like General Motors and other leading automobile firms. The main core Competency is their strong brand recognition. By being one of the top leading manufacturing in the automobile industry, has helped them to strengthen their brand recognition. Another core competency of Ford is its strong “One Ford” plan that helped it return from dismal performances from the 2007-2008 financial crisis. Lastly, Ford has the ability to build a good relationship with their rivals which help them with strategic alliances and joint venture and that allow Ford to integrate in emerging market and meet customer demand.

Porter’s Five Forces

Threat of new Entrants, in order to be able to enter to the automobile industry, businesses needs enormous capital investment for factory facilities, machinery, labor, and other technology. It is hard to either enter or exit the market due to the higher cost barriers associate with that. In order to enter to the market, company has to find dealership to sell their products, which make the entrants for new companies difficult and costly. The automobile industry is so massive and mature, new entrants would have to mass-produce their automobiles in order to reach the economies of scale of major competitors, thus raising the stakes of entering. Additionally, government regulation is one of the barriers that make it difficult to enter the market. However, foreign entrants into a new market could become a threat with strategic alliances, with help major manufacturer brand reputation. After evaluating automobile industry, the threat for Ford and automobile industry tend to be low/ moderate because it hard to see any new firm to the automobile industry.

Threats of Substitute Products or Services, if we take a close look to the global automobile industry, the number of substitute products or services is moderate to high. One of the main threat of substitute is public transportation. With the increasing gas prices in the recent years, people tend to use public transportation more due to the cheap and convenience prices. It is still limited choices for some customers, however it is not full time substitute.

Bargaining Power of Suppliers, in automobile industry, the Bargaining Power of Suppliers is very low, due to the availabilities of large amount of suppliers. Ford has the power to replace any supplier who fail to meet their requirement. Additionally, most of the company outsource part of the business due to the lower cost labor and material. Suppliers have no power on the automobile industry and to survive their business, they need to be able to meet firm’s expectations.

Bargaining Power of buyers, after evaluating Ford and the automobile industry, I found out that the Bargaining Power of buyers is very high. Even though there is a large amount of customers in the automobile industry, and there is a huge amount of vehicles based on quality, fuel efficiency, prices, and different services. Customers have the power to switch and choose between these companies due to the huge information available for them about the companies’ products. With sales expecting to grow, and new products being manufactured, customers are going to have a bigger variety of products to choose from, increasing their buyer power because firms are trying to meet customers’ changing demands. Ford realized the power their customers have and tried hard to meet their expectation by providing higher quality product and services with affordable prices. Lastly, because the barriers to exit are strong, companies face intense rivalry hoping they are able to compete and sustain profitability.

Porter’s Five Forces

Threats New Market Entrants

Low/ Moderate

· High entry barriers

Bargaining Supplier Power

Low

· Option for outsourcing

· Large number of suppliers

Bargaining Buyer Power

High

· Variety of choices of options and models

·

Industry Rivalry

High

· Many competitors

· Easy to switch with low cost

· Increase in Market Growth

Threats of Substitute Products or Services

High

· alternatives Fuel

· Public Transportation

Competitors Analysis

Ford believes that the environmental forces are uncontrollable and keep passive and reactive to the environment. They have many competitors like TOYOTA, HONDA and NISSAN. They have grown in market share largely as a result of their ability to deliver better products at lower prices, particularly for more fuel efficient smaller vehicles. Those compatriots are directly affecting ford by reducing their sales rate since they compete in very competitive market. In order for Ford to compete, it is producing a new model car which is FORD FIESTA this season of car is focus to attract young people and ladies. In addition to that, Ford focused more on creating effective business plan in order to produce great product that will meet this new generation. As part of organization plan, the company may continue to press forward to globalize automobiles platforms that can be adapted to meet specific regional needs. Flexible manufacturing capabilities make us to provide a product to the market with much greater speed and more efficiency than ever before. Some marketers define Ford company as an oligopoly competition in the market structure due to the fact that there are many substitutes but only one company offering for another.

1. The world auto industry has experienced a downward trend in profitability. What changes in the structure of the auto industry have caused that?

Probability in the auto industry has declined due to many factors. First, internationalization has reduced seller concentration on a local market, now there are many different player targeting others market. Even though that the total number of firms in the industry has declined, the competition between the existing firms have increased. Most of the time, internationalization had expended through foreign direct investment, all of the new plants have increased industry capacity, exacerbating problems of oversupply. Secondly, demand for cars in the industry has declined due to the fact that the cars last longer before customers will replace it with new car. That caused market saturation which is evident from the flat trend of automobile production, in the United States, Western Europe and Japan. Increasing production in addition to the low growth in the industry led to excess capacity. In the end, when the companies have excess capacity, they start competing aggressively by cutting the prices which only cover their variable cost and keep them in the business. Lastly, the product development cost has increased which does not necessarily reduce the margin, but the firm will pass the additional cost to the customer. The key, however, is what these costs mean for scale economies and therefore for competition. These cost of the new product development is a source of scale economies in the industry which in order to amortizing these cost required a large amount of sales by the company. As a result of the producer attempting to expand sales in order to cover the growing cost of product development, it led to intense price competition (discounts, low interest credit).

2. Any foreseeable changes in the structure in the next five years? Effects on competition and profitability.

There are many factors affect profitability of automobile companies in the next five years. In fact, the indicators in the past years showed the market shares for most of the leading automobile company has declined due to the increasing capital requirements technical complexity. Merger could help to boost the profitability for the company and help them to concentrate and reduce the excess capacity which will help to reduce cost and increase profitability. The other factor that could help to increase profit in the future is revival of demand, most of the global economics are growing slowly such as European economy, on the other hand, the United States economy is growing strongly which will help Ford to take advantage of and flood the market with its products. The last factor that could increase profitability in the industry is the huge opportunities for companied to differentiate their product in the market. Ford took advantage of these opportunity and started producing the smart and fuel efficient vehicles. In the end, the competition in the automobile industry has reach to the sky and in order for companies to compete and stay on the business, they have to differentiate themselves by providing quality product and superior services to satisfy the customers.

3. What are the KSF in the industry during the next years?

There are many KSF in the automotive industry during the next five years. It very huge industry and there is a huge number associated with this, it has become very competitive industry and big leading players have been striving to maintain their position and earn profit due to the high cost associated with the industry. Now in order for company to stay successful and competitive in the market there are many key successes that they should have.

First, auto companies should have a good brand image because their products considered as a high end product, they are associated with good amount of spending and their inherent nature and use is highly related to once own safety that why the decision making process of buying car is complex, involves lots of considerations by buyer and that is why this decision is dependent upon opinions of others as well. From her the good brand image play an important role in buying cars and considered as key success factors.

Second, automotive industry has very efficient channel of distribution. Sine cars most of the time are sold through third party, companies have no direct contact with the customers and companies rely heavily on a good channel in order to gain customer trust. The other side of the distribution channel is related to the supply chain and assembly line. Automotive company requires to have an efficient managed channel of their vendors who they trust them and can provide them with the material on time and good quality.

Lastly, productivity is one of the key success factors in the automotive industry. Manufactures have to meet the excess demand with less employees. Productivity play a huge role here and companies has to be productive in order to meet customer demand. As a result most of manufacturer looking for new and innovative ways for cost effective, efficient ways to update plants operations in order to gain extra productivity

4. What segments will offer superior profitability/value?

Since it’s a huge competitive market, it will be hard for companies to target specific segment and ignore all other segments. Automotive industry has many other variables upon which the industry can be segmented, by identify the product type and geographical regions, it makes easier for company to identify the right segment market. In the past, segments like luxury cars, minivans and sports cars used to have higher margin than other segment. In the end I believe that with the gas pieces’ increases, people will demand more fuel efficient and smart cars. Automobile companies should target different segment in addition to heavily focusing on the environment and pocket friendly options.

Future Trends

Even though automotive is very competitive industry, Ford is still dominating the industry and their business strategy is still quite strong for sustaining in the automotive industry.

The domestic market could be affected by the government policy that impose added burdens on the overall automotive industry which in the first place harm the domestic manufactures harder than foreign manufactures which will reduce the vehicles demand substantially. Despite the large amount of sales in the past, the demotic manufactures lost a huge market shares to Japanese automakers.