Apple - Individual Case Analysis

Individual Case Analysis of Ford Motor Company

Executive Summary

In this case I will provide an in-depth analysis of Ford Motors Company current business

performance and strategy. I will illuminate Ford’s vision and mission statements, along with a

description of its current resources and capabilities. I will then dive into an analysis of Ford’s current

position within the automotive market; this analysis will follow a “PESTEL” format. I will also provide a

“SWOT” analysis of Ford and provide Ford’s very own Porters 5 forces analysis. I will conclude this case

by describing Ford’s current strategies and possible future strategies.

Ford Motor Company was founded in 1903 by Henry Ford and 11 other associate investors. Ford

went public in January of 1956 and proceeded to grow into a multibillion dollar company. As of

November 23, 2018, Ford Motor Company was valued at $36.28 billion and continues to grow. Ford is a

respected brand in the automotive market and it continues to grow every year. Ford is also one of the

two American car companies to have never gone bankrupt; the other being its fierce competitor Tesla.

Vision & Mission

Ford Motor Company’s vision statement is “People working together as a lean, global

enterprise for automotive leadership” This vision statement focuses on three major points; the

first being global leadership, the second being emphasis on stakeholders, the third being lean

business.

Ford Motor Company’s mission statement is “One team. One plan. One Goal.” This

Statement is broken down into people working together as an enterprise to aggressively and

efficiently restructure to operate profitably at the current demand, while also delivering

profitable growth for all.

Resources & Capabilities

Ford Motor Company has many tangible resources but I will be focusing on its main physical

resources and financial resources. Ford’s main physical resources are its strong manufacturing capacity;

it has 67 plants around the globe. Ford also has State-of-the-art machinery and equipment such as;

flexible engine and transmission plants and modern numerically controlled machine tools. Ford’s main

financial resources is it strong borrowing capacity for operation which help the company from going

bankrupt during the 2008 financial crisis. Ford obtained access to $2.3 billion of temporary asset

account, borrowed $10.1 billion under secured revolving credit facility, and received $2 billion from the

European Investment Bank. These financial resources helped Ford survive the 2008 crisis and precede to

grow as a strong company.

Ford Motor Company also has valuable intangible resources, the most important of these being

their reputation. The Ford brand power is built on tradition and the legacy of being the fifth largest

automobile manufacturer in the world; Ford is also known for consistently providing an affordable and

reliable product. Ford also has valuable human resources in the form of engineers and executives as well

as a great organizational culture that provides Ford with a competitive edge.

Ford is also known for its ongoing capability to acquire high level talent and maintain an

excellent workforce composition. As well as exhibiting a flexible manufacturing structure and being able

to quickly respond and adapt to changing market needs.

General description of Industry using PESTEL analysis

• Political Factors

o Recent Tariffs on steel and aluminum, which are key inputs to Ford’s production

process will make its production of its products more expensive.

o Due to the current trade war, Asian carmakers and the Trans-pacific partnership is

predicted to alter the current tariff structure and possibly completely removing

them. This will in turn harm US-based operators.

o Recent reductions in regulation may help lower operating costs.

• Economic Factors

o The U.S. economy has been at a steady growth since the recovery of the 2008

crisis which should increase consumer confidence and spending.

o Fuel prices are predicted to increase over the next five years. This may result in

people not wanting to buy new cars and instead relying on alternatives like public

transportation and ridesharing.

o Industry employment is expected to decline as companies move towards more

efficient production processes thru automation.

• Social Factors

o An increasing demand for hybrid and electric automobiles can be opportunity for

Ford to focus more on these products and less on combustion engines.

o Increasing wealth gap also poses as an opportunity for Ford to focus on not only,

more affordable products but also, more luxury products to satisfy each end of the

demand spectrum.

o As interest rates continue to rise consumers will avoid to make big ticket

purchases.

• Technological Factors

o Rising use of mobile computing creates an opportunity for Ford to grow through

mobile service support and mobile marketing.

o Increasing use of online fulfillment services will allow Ford to deliver parts

directly to customers.

o The newest car factories are automated which saves automobile manufacturers an

ample amount of money in labor costs.

• Environmental Factors

o The rise of climate change has shifted consumer behavior to favor “green

products”.

o Low-carbon footprint trend also puts pressure on automobile manufacturers to

reduce their while also remaining efficient.

o Declining oil reserves globally make combustion engines less desirable; thus,

automobile manufacturers must shift towards hybrid and electric engines.

• Legal Factors

o Increasing safety regulation put pressure on the industry to produce safer products

each year.

o Automakers are also required to comply with recall laws which can result in a

detrimental recall of a vehicle.

SWOT

Strengths

Ford has a strong brand value which stands at $19.771 billion and is ranked 4th in the

automobile sector for brand value, according to a Brand Finance report. This strong brand helps

Ford maintain and grow a strong market share and consumer base. Ford also has a powerful

research and development department. Ford spends around $6.7 billion a year on research and

development which focuses on improving performance of its vehicles through fuel efficiency,

safety, and most importantly customer satisfaction. Ford also has approximately 38,500 active

and pending patents globally; the average life of patents is 5 years which gives Ford strong edge.

Ford also shows strength through its highly diverse product portfolio, this reduces its dependence

on a one product range. Their products include cars and trucks of all prices, models, and price

ranges.

Weaknesses

One of the major weaknesses that Ford has shown and experienced recently is product

fails. From the years 2013 to 2014 Ford had to recall approximately 271,000 Ford F-150

vehicles, because the brake master cylinder was malfunctioning. Also in May of 2015 Ford had

to recall more vehicles due to safety failures of the Takata airbags. These kinds of recalls greatly

harm the brand image of the company and reduces the faith of the customers of the brand.

Another major weakness of Ford is emerging markets. According to the break-up of the market

share Ford is not performing well in emerging markets which is a key opportunity to focus on,

given that these markets have a potential of high returns.

Opportunities

There is opportunity in the global automotive industry as a whole, which in turn is a new

opportunity for Ford. The industry is expected to grow at 6% by the end of 2019 and reach a

valuation of $1.5771 trillion. Also, the production volume is expected to grow to 189 billion

units by the end of 2019 as well. Also, the demand for electric and hybrid cars is expected to

reach 7.5 million units by the end of 2020. These both prove to be great opportunity for Ford to

pursue

Threats

The global economy is facing a recent slowdown and Ford must keep the prices of its

various vehicles in check. Currency fluctuations will be a strong mover in this situation. Also

with Ford having 67 plants around the globe they must be careful, because they have a lot to

support and even more to lose. Ford also face fierce competition from General Motors, Honda

Motor, Tesla Motor, Suzuki Motor, Toyota Motor, Renault-Nissan, Fiat Chrysler Automobiles,

PSA Peugeot Citroen, and Volkswagen.

5 Forces

New Entrants

Ford has a low threat of new entrants into the automotive manufacturer market for

multiple reasons. The first being the high barrier to entry it is extremely expensive and risky to

begin a new automotive manufacturer company, it is a very capital intensive business with

substantial fixed costs. These high fixed costs make it hard to turn a profit for a new company.

Also, the brand name in this industry has a strong influence on sales in this market and once a

brand is established, like Ford, it is hard to be a new comer and compete.

Threat of substitute products and services

Ford also has a substantially low threat of substitutes for one main reason; which is

imperfect substitutes. The main substitutes for owning your own automobile are public

transportation or ridesharing. Now if you live in a highly dense metropolitan area, like New York

or San Francisco where the public transportation is good and sufficient substitute then the need

for your own car is low. Also, in these metropolitan areas ridesharing options are more

affordable through options like “Uberpool” or “LyftLyne”. But for everyone else in the world

not living in cities where the public transport is sub-par and ride sharing is expensive they must

buy their own car to get through their every day job and routines.

The Bargaining Power of Buyers

Ford’s buyers have a moderate bargaining power for three main reasons; moderate

switching costs, mild prices of individual purchases, and a limited availability of substitutes.

Ford’s buyers confront mild switching costs because, it is relatively easily to transfer form one

firm to another, however automobiles are big-ticket items so most consumers rarely make

frequent automobile purchases. Each of Ford’s products have a moderate price in terms of

automobiles and contribution to Ford’s revenue. But even a small change of customer’s demand

can have significant effects on Ford. Lastly, there are a moderate selection of substitutes for

Ford’s products, therefore Ford must always maximize customer satisfaction.

The Bargaining Power of Suppliers

Ford’s suppliers have limited bargaining power because there is a significant of

population of suppliers in the market and decent amount of overall supply of Ford’s inputs. Also,

most Ford’s suppliers have low forward vertical integration which make them dependent on

distributers such as Ford. Lastly, Ford has some backward vertical integration through the Ford

River Rouge Complex. Through this complex Ford produces some of its own materials used in

production which further weakens the bargaining power of its suppliers.

Competitive Rivalry

Ford faces rigid and tough competition for three main reasons. The first being the high

aggressiveness of firms within the industry such as Toyota which fiercely innovates and markets

their products. Ford also competes in an industry with extremely high exit barriers that act as

incentive for firms to remain in the industry and compete rather than close their business and

move to a different industry. Finally, Ford competes with only a few large and powerful firms

such as General Motors which have large market share and well established brands that are not

leaving the industry any time soon.

Current Strategies

In Ford Motor Company’s annual report for 2017 they defined their improved current strategies

into 5 definitive goals. These goals aim to create smarter vehicles to hedge against congested cities, re-

allocating capital in logical ways, continuing to innovate and improving on their logistics. These are their

current 5 strategies listed below.

1. Rapidly improving our fitness to lower costs, release capital, and finance growth

2. Accelerating the introduction of connected, smart vehicles and services

3. Re-allocating capital to where we can win in the future

4. Continuously innovating to create the most human-centered mobility solutions

5. Empowering our team to work together effectively to compete and win

Works Cited

• Shanks, Bob. “FORD MOTOR COMPANY ANNUAL REPORT ON FORM 10-K For

the Year Ended December 31, 2017.” Corporate.Ford, Securities and Exchange

Commission, 31 Dec. 2017, corporate.ford.com/microsites/sustainability-report-2017-

18/doc/sr17-2017-form-10-k.pdf.

• “Ford Motor Company AMERICAN CORPORATION.” Edited by Encyclopaedia

Britannica, Brittanica.com, 1 Nov. 2018, www.britannica.com/topic/Ford-Motor-

Company.

• “Ford Motor Net Worth 2006-2018 .” Macrotrends.com, 23 Oct. 2018,

www.macrotrends.net/stocks/charts/F/ford-motor/net-worth.

• “Ford Motor Company Environment Analysis.” Fernfortuniversity.com, 12 May 2017,

fernfortuniversity.com/term-papers/pestel/nyse4/648-ford-motor-company.php.

• “Ford Our Company.” Corporate.Ford, 21 Oct. 2018, corporate.ford.com/company.html.