Introduction
Ford Motor Company is one of the largest and most financially sound car manufacturers in America. The economic and financial crises caused the firm to face strategic and management challenges. The operations and functions of the firm forced it to liquidate assets and move toward bankruptcy. The analyst is of the view that the company will be free from government funding after its progression and the execution of proper strategic plans. Opportunities for revitalization exist for Ford Motor to flourish and dominate its competitors.
Discussion
The company was founded in 1903. Henry Ford was the founder, and his family has controlled the firm since its birth. With assembly-line production, the company developed vehicles and planes for Allied forces in World War II. Since 1904, Ford has been operating internationally, and it opened its network in Canada in the same year. Ford remained the dominant car manufacturer in the first half of the 21st century. In the second half of the century, Toyota shared the market by manufacturing cars and exporting them to the US market. The period was a turning point for the US economy, and it was also difficult to compete in the global market.
The company is significantly inhibited by substantial legacy costs from healthcare and pension benefits and by falling demand for lucrative vehicle lines. To streamline its supply lines, the company launched the ‘Ford 2000’ initiative in 1996 and coordinated its worldwide operations in a systematic way (Bals, 67). Despite certain successes, such as the Ford Focus model, the firm’s prices were higher than those of its competitors. The biggest loss in the company’s history occurred in 2006 and amounted to 13 billion dollars. The consistent deterioration of the company in the market provided benefits to Toyota and General Motors, which enlarged their shares.
In a decade, the company’s US operations plummeted from 25 percent to 15 percent. During this difficult period, Alan Mulally was hired as the chief executive officer of the company. A new restructuring plan was adopted and named ‘The Way Forward’ for the purpose of aligning capacity with demand. According to the new policy, seven assembly plants were closed along with a strategic reorientation of the business. The plan involved a standardized strategy and the creation of a standard Ford identity. Many automobile companies have adopted Ford’s policy. More focus was placed on Ford’s name. Ford mortgaged all its assets, which included intellectual and physical property.
The potentially desperate move and timely acquisition of capital positioned Ford as one of the most stable carmakers. During the crisis, the company also divested some of its non-Ford brands. Selling Jaguar and Land Rover to Tata Motors for 2 billion dollars was also a divestment (Becker, 45). Ford completed the sale of Volvo Cars in 2010 and discontinued the Mercury brand, so those brands should not be listed as part of its current portfolio. Ford’s 2025 Form 10-K reports approximately 169,000 employees worldwide and identifies Ford and Lincoln vehicles, Ford Credit, and the customer-focused Ford Blue, Ford Model e and Ford Pro segments.
The number remained stable during the past three years, with a slight change in the European region, which was twenty-seven percent. Financing for wholesale purchases is all done by Ford Credit (Chen, 340). The number is slightly below eighty percent. The automotive segments of Ford Motor Company manufacture cars, trucks, SUVs, and vehicle parts. The sector was divided into the regions of South and North America, Europe, and Asia Pacific Africa. Volvo was the only exception in this regard. It managed Volvo sales through worldwide business networks. The retail-sales dealership model involves dealerships signing contracts with the company to sell Ford vehicles.
There were nearly four thousand dealerships operating in the last decade. Half of the dealerships sold the brands Mercury, Lincoln, and Ford. The production of vehicles for the company takes twenty days from production to shipping. This means that Ford does not face a backlog and experiences little inventory buildup. In the spring and summer, due to high demand, production is particularly high in the first two quarters of the business. The company is one of the largest automobile service providers in the world.
The current market cap of Ford Motors is ten billion dollars. The past few years have been intimidating for shareholders of US automakers. The equity valuations of General Motors and Ford Motors have declined substantially (Dennis, 7). Ford stock traded above 14 dollars per share in the last decade. Ford was burning through cash on hand at an unprecedented rate and incurred huge losses in 2008. Estimates afterward predicted that the company would not face any more losses in the future. The company has been engaged in strategic downsizing for the past few years (Macdonald, 13). The approach was applied in the US market, ceding market share to its competitors. Management acknowledged that the company was not aligned with demand and divested itself of several businesses.
Ford Motor currently maintains around 15 percent of the US market share. Fourteen million cars have been traded in the United States in recent years. The estimates are bleaker than the past year, with predictions ranging from 10 to 12 million dollars. Sales were down by around 38 percent. Ford’s market share in the European region is currently ten percent. Strategically important markets include Russia and Turkey. The company has achieved above-average market saturation. Ford’s shares in Mexico and Canada are hovering near twelve percent. However, in China and India, the ratios are extremely low.
The financial condition of the company shows deterioration. Ford entered 2009 with fifteen billion dollars in cash on hand. In the same way, GM and Chrysler were also negotiating with the state to act as a lender and save the two companies from bankruptcy. The bailout package for the automakers provided them with loans and financial assistance. According to the policy of the bailout package, the companies were required to demonstrate viability. The repayment of the loans by Ford Company is a productive and strategic step toward securing long-term financial security (Macdonald, 15). Ford must strive to outperform its rivals, especially corporations operating in the eurozone and America.
The company must restructure its supply chain and change it according to advanced principles of strategic business management. The company has sixteen hundred suppliers, which could be reduced to half of the total number (Qi, 15). The current instability in the market, specifically the potential bankruptcy of competitors, increases the importance of reducing the supply chain. Ford’s supplier contracts can be reduced for the economic stability of the market. Aside from critical suppliers, the company must examine the overall performance and services of its suppliers. Those contractors should be given preference in distributions made by suppliers. Visteon is particularly important; it had business worth four million dollars during the last decade.
Ford is applying certain strategies to boost its business. The target audience for the strategy consists of two or more segments, with a marketing mix developed for each segment. The company has different types of cars for different consumers. Economy cars, vans, station wagons, trucks, sports cars, and luxury cars are some examples of Ford’s products. Focusing on young males and females, the company also has the Ford Fiesta car. Six Sigma is applied by Ford to control the system by eliminating data-driven defects. The company uses the DMAIC approach in its Six Sigma programs. This includes Define, Measure, Analyze, Improve, and Control.
To maintain its marketing edge over competitors, Ford is using different promotional strategies. Advertisements, attractive logos with taglines, and appealing designs are features that give the company an edge over the activities of its competitors. Below-the-line and above-the-line promotions are the two promotional strategies of the Ford organization (Reich, 415). The promotional strategy, according to Ford’s approach, involves building long-lasting relationships with previous and loyal customers. It also includes potential and new customers. Despite the fact that the company does not sponsor sports events and activities, it has an edge and exclusive opportunities in the challenging market.
Sponsorships helped the organization tap into its customers’ passion for sports and raise the company’s brand name and image in the eyes of customers and fans. This technique also allows it to handle the promotional side of the business with tactics to develop its brand name (Srinivasan, 641). Certain changes can be seen in the company’s strategy as it uses ‘pull’ strategies for new segments and ‘push’ strategies for traditional segments. In the company’s public-relations strategies, sponsorship plays an effective role. Two major objectives can be fulfilled through a public-relations campaign: the first is to build and reinforce brand recognition, while the second is to achieve good relations between customers and the company.
Ford’s pricing strategies include market-based pricing and pricing based on demand. The company is applying innovative plans that include the ‘Blue Tag,’ which means a reduction in the recommended list price of small and medium cars. It also includes reductions by dealers and discounts. A six-to-fifteen-percent price discount is offered on Ford Fiesta cars. The company uses two types of pricing: penetration pricing and skimming pricing. Penetration pricing is a tool that includes artificially low prices aimed at attracting a larger number of customers and influencing market share. In the presence of many competitors, the strategy is useful. Profits are mostly not the main concern in such kinds of plans.
The most important aspect of the pricing strategies is to get the product known before worrying about the profitability of the particular product (Steiber, 13). The company’s pricing programs for commercial and passenger vehicles are set to strengthen the appeal of brands for retail customers. They highlight benefits for the ultimate customers. Ford strives for a balance between technically advanced features and quality, which results in a reasonable price. For the low-income group, the company provides reasonable prices along with the capacity to save through low maintenance costs and fuel consumption (Tewari, 25). The requirement of the business is to minimize costs connected with software and the management of specific software in vehicles.
The reduced costs allow the company to come up with different ways of dealing with the business. An innovative way of testing, managing, and validating software content used in Ford vehicles is essential. This is an important aspect of future supply and affects the quality of products delivered by Ford. Reprogramming the controller is much quicker than replacing hardware, ultimately decreasing repair costs. The practice also decreases the risk of a part being out of stock. It helps the customer remain satisfied when leaving the car overnight.
By applying research techniques, Ford Motors classifies its cars as generous, elegant, and midsize. The use of the blue oval symbolizes the Ford brand along with the determined value added to and price of the cars. The Ford oval symbol has historical value for the company, and it is also one of the most recognizable logos in the world. The company’s US market position provides it with strength compared with its competitors. Since America is central to many markets, people from across the globe visit and belong to different professions. Those people also benefit the company’s profits and business.
The financial performance of the company gives it an edge over other companies. It has standing and value in the US business market (Qi, 15). The growth of the company also benefits and strengthens its position in different parts and regions of the world. Significant growth of Ford operations in China contributes to its strengths despite the company’s other weaknesses. However, there are certain weaknesses, such as the high-cost structure, which prevents the average customer from buying a car or other vehicle (Reich, 417). The European operations of the company are unprofitable, and there is insufficient growth to enlarge the business of the corporation. In the same way, the company lacks operations and business in the Asian region.
The Asia Pacific region is also an important business hub for the company if due attention is given to operations. A reasonable investment in this region has the potential to repay double the amount to the company. Green vehicles can enhance the opportunities and value of the company. An increase in fuel prices can also provide an opportunity for the company to boost and enlarge its business. Partnerships with other leading organizations can enhance the viability of Ford Company. Most of the company’s vehicles and operations rely on high fuel prices. If they go down, this will significantly affect the business.
The rising cost of raw materials is also a major challenge and threat for the company. Modifying and streamlining these materials will influence the financial issues of the company. The most important of all the challenges for Ford Corporation is fluctuating prices, which create uncertainty in the business market. Unstable prices in every business, including vehicles, pose risks to all investors (Srinivasan, 648). The company will have to tackle changing conditions in the stock exchange and declines in certain prices. The five-forces analysis of Porter’s model reveals that Ford maintains its position as one of the largest manufacturers of automobiles.
Michael Porter developed the five-forces framework for analyzing external factors in the industrial environment. The company faces intense competition in its business market. The analysis shows that competing firms influence the automobile industry (Greenspan, 11). The high aggressiveness of firms, the moderate number of firms, and the high exit barrier are external factors that contribute to the competitive challenge for Ford Motors. In the same way, certain external factors influence the bargaining power of the company. These include moderate switching costs, the availability of substitutes, and the moderate size of individual buyers.
Suppliers also have a moderate influence on the company. Overall supply, the moderate number of suppliers, and low vertical integration significantly affect supplier power at Ford. Similarly, substitution and the availability of substitutes affect Ford’s products. The low strength of substitution forces enhances the quality and reliability of Ford’s products (Greenspan, 13). Customers can easily switch to other companies because of the attractiveness of alternatives and the ease of switching, which could be a challenge for the company. In the industrial environment, the company feels that new entrants are influencing its business. Based on Michael Porter’s analysis, the company faces a weak threat from its competitors.
Ford Motor faces certain problems. After averting bankruptcy, the company’s main problem is demand, which has outstripped its production capacity. Despite increasing capacity by building plants, the carmaker is finding ways to increase production from existing factories located in North America. The company is reducing supplier bottlenecks and increasing assembly-line speed. It also started round-the-clock production to produce more vehicles per hour (Dennis, 11). The company’s rivals are also experiencing increased demand. Honda will invest two hundred million dollars to boost capacity in Ohio. One hundred eighty million dollars will be spent on the engine plant to speed up services.
Chrysler is also formulating developmental and reformative plans to compete in the automobile industry. It is adding capacity, which will ultimately create around three hundred jobs at the Michigan engine plant. Another competitor is General Motors, which is planning the launch of eighteen updated and new vehicles in the coming year. It has announced that the company will increase its investment by two million dollars in the Tennessee plant (Tewari, 25). The purpose of the investment is to build new midsize cars. Increased competition and challenges show that Ford Motor Company will have to devise a strategy that can effectively tackle rivalries in the business environment of the automobile industry. The corporation is trying to cope with the problem by launching multiple programs but needs to do more to remain competitive in such a complex environment.
Conclusion
In conclusion, Ford Motor Company is one of the largest and most financially sound car manufacturers in the United States. The corporation needs to reduce cash burn and bring prices down as quickly as possible in order to stay afloat in the difficult economy of the modern era. Similarly, carefully managed liquidation can influence the business of the company. Ford Motor must differentiate itself from its competitors by executing the One Ford vision. The company must not lose sight of the larger picture while trying to make the most of Chrysler’s and GM’s weaknesses.
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