Ford: Company Analysis

ABSTRACT

Ford Motor Company have been around since 1903, and although in the past they lost market shares due to production and marketing scandals, they remain robust in 2005. This paper has been written to thoroughly analysed Ford through PESTEL analysis to comprehend the macro environment in, Porter’s Five Forces analysis to determine the competition and lastly SWOT analysis to depict the micro environmental factors of the company in question. It has been concluded that due to the fierce competition in the industry, and due to the changes in the environmental factors, Ford Motor Company needs to concentrate on improving on its weaknesses in order to avoid and overcome the threats.

COMPANY ANALYSIS: FORD MOTOR COMPANY

Introduction

Ford Motor Company was founded in 1903, in the United States of America, by Henry Ford and eleven other investors. By 1919, the business began to prosper. Following disagreements with the other investors, Henry Ford and his son, Edsel Ford bought the shares of the investors and became the sole owners and decision makers of Ford Motor Company (Brinkley, 2004).

Today, William Clay Ford Junior is the leader of a company with a well established product portfolio of cars, trucks, vans and Sport-Utility Vehicles under the following brands; Ford, Lincoln, Mercury, Mazda, Volvo, Jaguar, Land Rover and Aston Martin (Ford 2005; BBC, February 2002).

The world’s largest car manufacturer in the world by volume is General Motors Corporation, followed by Ford which is then followed by DaimlerChrysler (Reuters, 2005; Yahoo Finance, 2005).

This paper will be thoroughly analysing Ford through the use of various analytical tools, such as PESTEL analysis to comprehend the macro environment in which Ford operates in (Campbell et al., 2002), Porter’s Five Forces analysis to determine the competition (Clegg et al., 2004) and lastly SWOT analysis to depict the micro environmental factors of the company in question (Stone, 2003).

PESTEL Analysis

Political Factors

• The September 11th terrorist attack which had occurred in the US reduced the sales of automobiles in the US, and specifically Ford’s sales by 10% (Ford Annual Report, 2001).

• The economic recession in Argentina in 2002 adversely affected car sales in Argentina, production volume fell from 57,200 units to 31,000 units. (BBC, January 2002; Ford, 2005)

• The Iraqi war affected Ford adversely as their US sales declined by 7% (Ford Annual Report, 2003). The war has had a similar affect on other firms operating in the industry also.

• The United Nations World Forum for Harmonisation of Vehicle regulations introduced a global technical regulation in 2004 regarding door locks for vehicle safety, which manufacturers must abide by (Key Note, 2005).

Economic Factors

• Rising petrol prices make it more expensive for consumers to drive petrol fuelled cars which consequently means that consumers are inclined to change their cars which operate using diesel. (The Guardian 2005)

• Ford’s SUV’s (Sport Utility Vehicle) sales declined due to rising gasoline prices, in turn their share prices also declined (Reuters, 2005)

• The rise in the demand for Japanese cars which consume less petrol than most American cars has meant that automobile manufacturers have needed to reduce their prices in order to sell their vehicles and to maintain their market shares.

Social Factors

• Cars are viewed as a status symbol (Key Note, 2005). The brand choice of a car influences the way a person is perceived by the public.

• The demand for luxury cars are on the increase in the EU. Ford entered the luxury cars market in the EU with Cadillac in September, 2004. (Ford, 2005)

• Smaller, city cars are also in demand in the EU to facilitate access in busy city centres, to allow for easier parking and also due to their lower consumption of petrol (Key Note, 2005)

• Although the Japanese cars are a success in the US, the public in the US demonstrate a hostile approach towards them. Since the Japanese cars entered the US market, the American companies such as Ford and GM have been losing market share. (BBC, November 2005)

• Women drivers and cars for women attract many stereotypical viewpoints. Ford has