Ford Motor Company’s Competitive Advantage and Future

This paper provides the findings related to the analysis of Ford Motor Company’s current position in the industry and its competitive advantage. According to the results of the external and industry analyses, the competition in the U.S. and global automotive industries are strong, and it explains the company’s focus on addressing the impact of economic and technological factors. While referring to the internal and SWOT analyses, it is possible to state that Ford’s strengths are in concentrating on innovation, research, and technologies. The company’s competitive advantage is based on stable and high sales, brand image, customer loyalty, and innovation. Furthermore, Ford’s strategy that is grounded on the combination of cost leadership and differentiation is appropriate to respond to changes in the modern market.

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Many external and internal factors can influence the development of corporate strategies and affect the increase in companies’ profits. In this context, the automotive industry is one of the most competitive fields (Moreno & Terwiesch, 2015). Ford Motor Company is a Fortune 500 multinational producer of automobiles, and it is known as the leader in the U.S. automotive industry (Barry & Moss, 2016). To discuss Ford’s performance and strategies to improve its competitive advantage, it is important to conduct the external and internal analyses to determine Ford’s competencies which contribute to the company’s progress. The purpose of this paper is to present the analysis of the information related to Ford Motor Company at the market, industry, and corporate levels, provide the results of external and internal analyses, present the SWOT analysis findings, assess the corporate strategy, and evaluate Ford’s potential to increase its competitive advantage.

Company Background

Ford Motor Company was established by Henry Ford in 1903. Today, the company is headquartered in Dearborn, Michigan (Ford Motor Company, 2015). Ford takes a leading position in the U.S. market because of its prolonged history, reputation, and brand recognition. Currently, core business processes at Ford plants include designing and manufacturing popular vehicles that are known under the brand “Ford” and luxury vehicles which are known as “Lincoln” cars (Ford Motor Company, 2017). Thus, Ford products include commercial cars, sport utility vehicles, trucks, and electric vehicles among other types of automobiles (Ford Motor Company, 2015). The most popular models of Ford automobiles are Focus, F-150, Mustang, and Explorer (Barry & Moss, 2016).

Ford’s new products and services are released annually, and they are offered not only in the North American market but also in Europe, Central and South America, Africa, and Asia. Thus, in the early part of 2017, the net operating cash flow of Ford increased by more than 30% (Ford Motor Company, 2017). However, the company’s revenues decreased by 4% (Ford Motor Company, 2017). Even though the company’s performance has changed in comparison to the same quarter results in 2016, it is possible to state that Ford has preserved its leading position in the market.

External and Industry Analyses

External Stakeholders

To conduct external and industry analyses, it is necessary to focus on such external stakeholders and forces that influence the progress of Ford Motor Company as governmental entities, unions, and communities. Their impact can be determined concerning the PESTEL analysis where the focus is on assessing the effect of political, economic, social, technological, environmental, and legal aspects on a company. However, the impact of such stakeholders as competitors, vendors, suppliers, consumers, and the industry, in general, is also important, and it can be examined concerning the Five Forces Analysis.

PESTEL Analysis

The PESTEL analysis is an appropriate tool to examine external factors, barriers, and challenges that influence the position of Ford in the U.S. and global markets. A range of political, economic, social, technological, environmental, and legal factors can affect operations and sales of automobile producers concerning local and global tendencies. These factors need to be discussed in detail.

Political factors. Certain geopolitical events in Europe can influence trade relationships of the European countries with the United States, and the adoption of different policies in this area seems to limit the production and sales of automobiles in global markets. The political instability in certain countries makes them inappropriate markets for Ford automobiles (Barry & Moss, 2016). Thus, the problem is in concerns that “persist regarding the overall stability of the European Union” and Brexit (Ford Motor Company, 2017, p. 12). Furthermore, there is also a risk of imposing more sanctions on countries with which Ford Motor Company develops partnerships (Ford Motor Company, 2017).

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Economic factors. External economic factors that can influence the position of Ford Motor Company in the market are changes in oil prices and trends in the economic development of certain countries. For Ford, reductions in oil prices that are observed since 2014 are important because they influence the consumer capacity, and sales of automobiles increase (Barry & Moss, 2016). It is also possible to speak about positive changes in the economic environments of North American and European countries that allowed for matching the production of automobiles with consumers’ demands (Ford Motor Company, 2017).

Social factors. Economic crises in different developed countries have resulted in accentuating social problems. Therefore, risks of work stoppages at the facilities of Ford Motor Company are rather high. The problem is in worsening financial conditions for employees (Ford Motor Company, 2017). As a result, adverse effects on the production of automobiles are also possible. However, the development of social-aid programs for people in North American and European countries can potentially improve consumer capacity (Barry & Moss, 2016).

Technological factors. The automotive industry is characterized by the quick development of technologies and innovations to make automobiles more attractive to consumers (Fitzgerald, 2016). As a result, to compete in the industry, companies need to increase their research and development expenses. Also, much attention is paid to developing hybrid cars. Thus, for Ford, it is possible to expect high research and development expenses and investments in technologies to “reach $8B by 2021” in comparison to $7B in 2016 (Barry & Moss, 2016, p. 16).

Environmental factors. It is possible to focus on such environmental factors as the trend of using hybrid or low-carbon vehicles and reductions in producing and using gasoline. To address the tendencies of referring to environment-friendly or eco-friendly vehicles, Ford needs to change its production processes and propose new models of hybrid cars (Ford Motor Company, 2017). These changes require a lot of investment in research, development, and production stages.

Legal factors. Government regulations that are planned to be adopted in the United States to reduce harmful emissions associated with the use of fuel can have negative effects on the automobile industry. Thus, the U.S. Congress has focused on strengthening the Corporate Average Fuel Economy (CAFE) regulations to address the problem of harmful emissions (Ford Motor Company, 2017). The implementation of these regulations can lead to increased costs related to producing automobiles (Barry & Moss, 2016).

The Five Forces Analysis

Michael Porter formulated the principles of the Five Forces Analysis in the 1980s, and today, this approach is used to evaluate companies’ external environments and levels of competition within industries (Abolhassani & Jaridi, 2016). The key forces which are important to be taken into account to conduct the industry analysis are the bargaining power of consumers, the bargaining power of suppliers, the threat of substitutes, the threat of new entrants, and the rivalry among major competitors (Barry & Moss, 2016). To assess the role of these forces in influencing the automotive industry of the United States, it is important to discuss major factors that affect the competition in this industry.

The bargaining power of consumers. This specific force can be discussed as having a strong impact on the development of Ford Motor Company and other producers in the industry. The reason is that all changes in products, operations, and technologies are oriented to attracting consumers and making them buy automobiles (Ford Motor Company, 2017). The number of buyers and their capacity influence the market and sales directly. Thus, in 2016, Ford “sold approximately 6,651,000 vehicles at wholesale throughout the world,” and this fact influenced the company’s position in the industry (Ford Motor Company, 2017, p. 2). Therefore, it is possible to speak about a high power of consumers and producers’ intentions to attract as many buyers as possible.

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The bargaining power of suppliers. This power can be discussed as moderate. Although many components that are required to produce Ford vehicles are provided only by certain suppliers, the relationships of Ford with suppliers and vendors are regulated by contracts (Ford Motor Company, 2017). As a result, companies in the automotive industry choose to regulate relationships with suppliers strictly to avoid situations when production processes are affected by delays in deliveries or other adverse effects.

The threat of substitutes. In this industry, substitutes include public transportation, motorcycles, and bicycles, depending on the purpose for which vehicles are used by consumers. Still, this force can be discussed as weak or moderate since researchers note that such substitution is not influential, and other products and services are purchased by consumers because of factors that are not directly related to the automotive industry (Barry & Moss, 2016).

The threat of new entrants. This force is weak because new producers rarely enter the industry, and this phenomenon is associated with high production expenses, regulations adopted in the industry, and a range of other factors. Furthermore, much attention should be paid to the technological base required to enter the automotive industry. Currently, only companies focused on producing innovative eco-friendly vehicles have the potential to compete with automobile makers (Barry & Moss, 2016).

The rivalry among major competitors. The automotive industry in the United States and globally is characterized by a high level of competition because of a low number of rivals. There are no dominating producers in the industry, but the rivalry among competitors can be discussed as a strong force. The reason is that such companies as General Motors Company, Hyundai-Kia Automotive Group, Volkswagen AG Group, Fiat Chrysler Automobiles, Toyota Motor Corporation, Renault-Nissan B.V., Honda Motor Company, and Peugeot Citroen compete with Ford Motor Company in terms of the percentage of sales these companies have globally (Ford Motor Company, 2017).

Even though Ford Motor Company demonstrates a stable growth of sales in the market, and the company began to control more than 15.5% of the U.S. market in 2016, the rivalry among producers of automobiles is tough. Thus, Ford’s global market share reduced by more than 5% in 2016 in comparison to Toyota Motor Corporation’s and General Motors Company’s shares (Barry & Moss, 2016; Ford Motor Company, 2017). Hence, much attention should be paid to increasing Ford’s competitive advantage in this context.

Internal Analysis

Internal Stakeholders

The internal analysis of Ford’s capacities should be conducted concerning such stakeholders as the Board of Directors, the company’s shareholders, managers, and employees. Ford is a publicly-traded company, and its shareholders play a key role in determining the company’s market strategies to increase profits. Furthermore, the company is focused on building strong relationships with shareholders while strengthening communication with investors and motivating them to participate in annual meetings and conferences (Ford Motor Company, 2016). The company’s Board of Directors addresses shareholders’ expectations, and currently, Mark Fields performs as President and CEO in Ford, and William Clay Ford, Jr., performs as Chairman of the Board of Directors and Executive Chairman (Ford Motor Company, 2016). This approach allows for controlling governance and operations, as well as improving leadership. Management and employees should also be discussed in detail concerning the value chain analysis.

Value Chain Analysis

While conducting the value chain analysis for Ford Motor Company, it is important to focus on primary and support activities, as well as resources and capabilities which are used to add to the company’s value. Primary activities which influence the quality of Ford automobiles are operations and inbound and outbound logistics. Ford is focused on improving technological processes at facilities, increasing the efficiency of work in body shops, as well as improving the quality of engineering and design (Ford Motor Company, 2017). As a result of these activities, Ford competes in the market because of the variety of vehicles’ body styles (Abolhassani & Jaridi, 2016). Much attention is also paid to marketing vehicles while developing the brand image and addressing customers’ expectations. As a result, new models of vehicles are released regularly. Ford also supports price leadership and focuses on advertising.

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Support activities include infrastructure, human resource management, technology, and procurement. Ford’s infrastructure is associated with the work of marketers, IT specialists, and distributors among other stakeholders. Human resource management is responsible for promoting the principles of leadership and team-building. However, more attention should be paid to the role of technology in increasing Ford’s competitive advantage. According to Akdeniz and Calantone (2017), the recognition of the company’s brand depends on the quality of its products. Ford Motor Company guarantees the production of high-quality vehicles while referring to innovation, investments in technologies, and early prototyping (Gadde, 2013; Elverum & Welo, 2016; Mihola, Wawrosz, & Kotěšovcová, 2015). Procurement strategies in the company are associated with developing the chain of suppliers and distributors to guarantee that the services which are received or provided are of high quality.

SWOT Analysis and Competitive Advantage

SWOT Analysis

To conduct a comprehensive analysis of Ford Motor Company’s competitive advantage, it is essential to focus on SWOT (strengths, weaknesses, opportunities, threats) analysis. This approach is effective to determine possible advantages and disadvantages in Ford’s strategies and techniques. Therefore, each category should be discussed in detail.

Strengths. The main strengths are Ford’s position in the U.S. market and its significant share in the global market. The company remains to be one of the leaders in the global automotive industry. To add value, Ford is focused on increasing margins and using cost-effective strategies to balance profits and expenses (Ford Motor Company, 2017). The effective strategy related to the regulation of Ford’s capital allows for funding the research and development area, supporting new technology projects, and improving the production of automobiles. The focus on innovation guarantees increases in customer satisfaction and loyalty, especially, in the U.S. market (Barry & Moss, 2016).

Weaknesses. Ford’s profitability significantly depends on fluctuations in the U.S. economy and trends in the national market. As a result, declines in sales observed in the United States, European countries, and China can affect the company’s revenues considerably (Barry & Moss, 2016). Furthermore, the company’s dependence on suppliers which provide unique components is also high, and it creates barriers to the development of production lines. One more weakness is the frequency of recalls that can be addressed while improving the quality control system.

Opportunities. Ford’s research and development base allow for implementing new lines of models to respond to the latest tendencies in the automotive industry. Much attention is paid to producing fuel-efficient automobiles which are popular among consumers (Ford Motor Company, 2017). Moreover, Ford’s reputation of a company with traditions also contributes to attracting those consumers who are interested in buying high-quality automobiles.

Threats. One of the main threats is the necessity of rearranging the operation processes to provide more environment-friendly or hybrid cars. Another threat changes in regulations and standards adopted in the industry (Ford Motor Company, 2017). These changes will influence the operations and costs of production. Furthermore, potential threats also include increases in price competition among rivals.

Ford’s Competitive Advantage

Ford Motor Company’s competitive advantage depends on the identified strengths. Thus, Ford is focused on preserving its reputation and providing consumers with the most efficient and innovative vehicles. Currently, there are more than 20 configurations and specific body styles which are proposed by Ford in the context of vehicle variety (Abolhassani & Jaridi, 2016). Annually, Ford invests more than $6 billion in the development of technologies and engineering (Ford Motor Company, 2017). The company also increased its investments in fuel efficiency technologies to respond to market trends, and this approach also contributes to the company’s competitive advantage. The improvement of gasoline engines is also the purpose of the company’s Research and Development department (Ford Motor Company, 2016). Therefore, the development of technologies and the focus on innovations are key elements of the company’s competitive advantage.

Furthermore, much attention is paid to applying the strategies for overcoming financial crises and guaranteeing the stability of sales (Baker, 2016). Thus, Ford is also flexible while determining production costs and prices that are adjusted depending on circumstances (Fitzgerald, 2016; Moreno & Terwiesch, 2015). Price adjustments are possible because Ford has implemented the strategy of operational efficiency. Thus, the company’s turnover ratio is about 14 times to guarantee flexibility in operations and associated costs (Ford Motor Company, 2017). Furthermore, improvements in technologies and quality control have contributed to decreasing the number of recalls of Ford vehicles in comparison to competitors.

Business-Level Strategy

While following Porter’s discussion of generic business strategies, it is possible to state that Ford Motor Company applies the principles of both cost leadership and differentiation strategies. During a long period, Ford followed the principles of cost leadership while providing consumers with high-quality vehicles that met their expectations and addressed their needs. Prices determined for Ford vehicles were usually low in comparison to competitors’ propositions (Ford Motor Company, 2017). The principles of cost leadership are followed even today with the focus on promoting trucks and pickups. Furthermore, this approach is also applied when it is necessary to adjust prices to address negative trends in the market.

However, today, Ford is more oriented toward developing the differentiation strategy. Thus, the methods which are applied by the company to promoting its vehicles are different for trucks and commercial vehicles, which are viewed as “profit pillars”, and for luxury and small cars (Ford Motor Company, 2017). Ford is concentrated on strengthening leadership in the market of trucks with the focus on the F-150 series. Much attention will also be paid to improving performance vehicles and their recognition. It is important to transform production and marketing strategies for Lincoln to increase sales and to accentuate the efficiency of small and eco-friendly cars (Ford Motor Company, 2016). As a result, the business strategy followed by Ford can be described as the focus on customer satisfaction, provision of high-quality vehicles, differentiation to address customers’ needs, and the focus on a competitive price.

Recommendations

Even though Ford Motor Company is discussed as one of the leaders in the automotive industry of the United States, there are still areas and aspects in the company’s strategy which require improvement. For instance, Ford’s relationships with suppliers are highly regulated, but the company’s dependence on a single supplier that provides unique components can limit Ford’s operations (Ford Motor Company, 2017). Therefore, it is possible to recommend reconsidering the supply chain with a focus on this aspect.

Furthermore, it is possible to recommend Ford invest more in the Research and Development department, as well as innovation and technology projects because this sphere is associated with potential benefits for the company. According to Barry and Moss (2016), “moving forward into a changing automotive environment, Ford must continue to pursue new technologies and innovative solutions” (p. 12). Currently, Ford is implementing a range of projects oriented to increasing connectivity, mobility, and uniqueness of its products and services. Further steps in this area are important for the company to remain competitive. It is also possible to focus on the experiments which are associated with the further adaptation of product lines, services, and processes to requirements of the modern market and customers’ expectations.

Conclusion

This paper has provided a comprehensive analysis of Ford Motor Company’s strategies and processes to conclude the company’s competitive advantage and potential for further development. While referring to the results of the external and industry analyses, it is possible to state that the position of Ford in the U.S. automotive industry and global markets remain to be strong. The company is oriented to attracting more customers and gaining more profits. The internal analysis demonstrates what particular strengths can be used by the company’s leaders to develop the most effective strategies. Also, the analysis of the company’s business strategy and competitive advantage indicates what resources are used by Ford to compete in the industry. The provided recommendations are formulated to address the identified weaknesses in the company’s approaches and potential threats to its further growth.

References

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Akdeniz, M. B., & Calantone, R. J. (2017). A longitudinal examination of the impact of quality perception gap on brand performance in the US automotive industry. Marketing Letters, 28(1), 43-57.

Baker, C. R. (2016). Organizational change at Ford Motor Company in the face of international financial crisis. Recherches en Sciences de Gestion, 110(5), 23-35.

Barry, N., & Moss, A. (2016). Krause Fund Research report: Ford Motor Co. Web.

Elverum, C. W., & Welo, T. (2016). Leveraging prototypes to generate value in the concept-to-production process: A qualitative study of the automotive industry. International Journal of Production Research, 54(10), 3006-3018.

Fitzgerald, M. (2016). Building a better car company with analytics. MIT Sloan Management Review, 57(4), 1-12.

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Gadde, L. E. (2013). Moving corporate boundaries: Consequences for innovative redesign. Journal of Supply Chain Management, 49(4), 12-26.

Mihola, J., Wawrosz, P., & Kotěšovcová, J. (2015). Is the most innovative firm in the world really innovative? International Advances in Economic Research, 21(1), 41-54.

Moreno, A., & Terwiesch, C. (2015). Pricing and production flexibility: An empirical analysis of the US automotive industry. Manufacturing & Service Operations Management, 17(4), 428-444.

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