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Ford Company is a renowned worldwide leader in the auto industry. However, in the past few decades, the company has faced drastic decline in its market share. This forced it to cut down on the operational costs by closing down three major factories in UK which saw 5,700 people lose their jobs. The political pressure regarding global warming, weak US economy and increase in the fuel prices are the main challenges that Ford Company has to face. It is expected that the auto industry is likely to experience growth. Eighty percent of the projected growth is expected to come from emerging markets. The emerging markets like China and India are likely to be a potential opportunity for Ford. Ford Co. needs to have knowledge and expertise in alternative vehicle technologies required to propel company growth. The characteristics of alternative vehicles include low fuel consumption, ability to use more than one tank fuel, electric and hybrid.
PESTEL analysis refers to a framework that explores the macro-environmental factors that affect strategic management. PESTEL analysis is a very critical tool in determining business options, potential of operation, market decline or growth, and direction of operation. This shall explore the macro-environmental factors that are relevant to Ford. Ford is the world’s fourth largest multinational automaker located in Dearborn, Michigan.
Despite the change in the political landscape of US, Ford has been able to maintain its image as a workers truck. Through its expensive and luxurious vehicles, the company has been able to attract the attention of different socio-economic groups. Ford has managed to attract employees and customers from all background irrespective of the political affiliations.
Just as the rest of the auto industry, Ford was hardly hit by 2008 US economic downturn. Companies like General Motors and Chrysler sough government funding. However, Ford was able to sail through without government aid. This was achieved by the shutting down of the three major European factories which saw the company record an annual savings of over $500 million. However, it was significantly affected by the changes in the US and global market which saw it records a decline in sales. This forced them to adjust with such changes in the market, hence the birth of ONE Ford. ONE Ford is subdivided into three sections: teamwork, planning, and goal. It is worth noting that the ONE Ford strategy enabled the company to improve its overall productivity.
Ford has intensified advertising so as to inform their clients of the capability and the sleek design of their cars. One of the major strategies that they employ is the need to go green. Much of the advertisements have focused on the new drivers and the parents to the new drivers.
The recent technological advancements have seen Ford improve on the quality of their cars. As a company, Ford has taken the lead in terms of technology in the car. The venture between Ford and Microsoft has seen the former introduce ‘smart cars’ that are able to understand the types of music that appeals to the drivers as well as be able to read text and voice messages. In summary, in 2006, the company restructured its operations to embrace the emergent technology that are fuel efficient as well as environmentally friendly.
Ford has taken into consideration all the regulations and precautions so as to ensure that their vehicles are ratified by federal government of US. They have also ensured compliance with the dynamic regulatory agencies that are constantly being made.
The new lines of car produced by Ford meets the threshold for environmental safety. Ford enjoys the ability to have cleaner engine emissions. Ford aims at achieving electrical transmission. This is set to be realized by the incorporation of hybrid electric vehicles which has internal electric power to slow or start the vehicle. The growing concern among many people on going green has inspired Ford to change its technology so as to survive in the current market as well as in the future. Ford has in turn put in place a science-based strategy so as to reduce greenhouse emissions.
Challenges and Opportunities
Since its inception, Ford has encountered numerous challenges which required capable leadership and critical management. Ford Company has undergone financial distress through huge bottom line losses. Another potential challenge for Ford is the projected decline in the automobile sector. This is based on the need to conserve the environment. As a result, investors are slowly losing interest in the equities of Ford. According to a report from CNN Money, the company has failed to pay cash dividend for three consecutive years, 200, 2008, and 2009.
One potential opportunity that Ford enjoys is the ability to have cleaner engine emissions. Ford aims at achieving electrical transmission. This is set to be realized by the incorporation of hybrid electric vehicles which has internal electric power to slow or start the vehicle. The company has a potential opportunity for the company in the release of vehicles that run on fuels such as gasoline and ethanol. Such vehicles are known as Flex-Fuel vehicles. Another opportunity is on cars that can run on more than one fuel tank. That is, a hybrid car that can run of a combination of propane and gasoline.
Future of Ford
The future holds drastic transformation for the auto industry. This is due to the high prices of oil and the increase concern for environmental protection against effects of global warming. This implies that auto industry must come up with alternative fuelled cars. Ford stands a chance to be successful in the future since it has embraced to need to reduce greenhouse emissions. Despite Ford almost running into bankruptcy, the ONE Ford strategy campaign authored by its CEO has put company on a better position recover from losses. The strategy fosters teamwork among suppliers, dealers, employees and customers which in turns breeds loyalty. Nevertheless, Ford still has to develop strategic plans that will allow it to effectively address the projected trends in the auto industry. Once the emerging markets in China and India are fully operation, there will an acute shortage of fuel. Ford should look at this as an opportunity expand and increase their market share and eventually become the world leader in the auto industry.
Q.2 The market structure of new car sales in the UK in which Ford operates
The market structure of new car sales in UK in which Ford operates is oligopoly market structure. In such market structure sellers are few and buyers are many. In this type of market structure, competition is very high since the sellers are trying to attain monopoly. Oligopoly market structure falls between monopoly and perfect competition. The firms jointly control the market share. In summary, oligopoly is characterized by three main traits; few large firms dominate, products are either identical or differentiated, and there are many entry barriers which gives firms a window of opportunity to exercise market control. In UK, the major auto companies include Ford, Volkswagen (Including Audi, Skoda), Vauxhall, BMW (Including Mini), Nissan/Renault, and Peugeot/Citroen. Among these companies, Ford has a market share of 13.7 percent which is 4 percent down from the leading company. The implication here is that the market share of UK auto industry is majorly controlled by Ford, Volkswagen, and Vauxhall.
Oligopoly has major automotive companies to enjoy broad market share. This is because, competition is highly minimised. Oligopoly also ensures high economies of scale. Market share in an oligopolistic market structure is particularly prized. This is because the largest producer usually gets a relatively larger share of total industry profits.
However, this market structure is facing a possible face out due to overseas competition. Factors such as increased oil costs and the need for environmental conservation have made oligopoly irrelevant. This means that Ford has to strategize on how to survive. The emerging markets like China and India are likely to be a potential opportunity for Ford. Ford Co. needs to have knowledge and expertise in alternative vehicle technologies required to propel company growth. the characteristics of alternative vehicles include low fuel consumption, ability to use more than one tank fuel, electric and hybrid.
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