Ford Company on the Edge?

Ford Motor Company on the Edge?

External Environment of Ford Motor Company

Exponential Rise in Fuel Cost

Ford Motor Company has recently been hit hardest by the rising price of oil on the world market. The increasing price of oil has led to an astonishing rise in prices at the pump. Currently, the average price at a United States gasoline station, for regular gasoline, is approximately 4.55 per gallon. The increase in oil can be attributed to various factors, such as the current “War on Terrorism” as well as natural disasters such as Katrina in 2005. Ford Consumers are straying away from the large sports utility vehicles and trucks and looking for more fuel efficient vehicles. Ford’s way of thinking, in which “Bigger is Better”, is now being replaced by mottos such as “less is more”. Consumers can no longer afford to drive vehicles that average 14-16 miles per gallon. A Ford F-150, Fords leading truck model, has a 25 gallon tank and costs the average consumer nearly $110 dollars to fill their tank. The average middle-income Ford consumer can no longer afford to pay $110 dollars to get to and from work. They are having to make careful decisions regarding their spending patterns, and are thus look for more fuel efficient alternatives such as hybrids.

Changes in Consumer Demands and Behavior

The “Go Green Movement”, has played a major role in changing consumer behavior. Consumers, specifically those in the United States, are beginning to notice the importance of sound environmental decisions. Major movie productions, news broadcasts, and even political activists have brought the issue of a deteriorating environment to the attention of consumers. Consumers are now looking for vehicles with a lesser impact on the environment. Moreover, the previously discussed rise in fuel is also pushing consumers to go forgo the gas guzzler for the more echo-friendly vehicles. The “Go Green Movement” encourages consumers to try hybrids, drive less, and car pool. Unfortunately for Ford, their most popular vehicles are considered gas guzzlers and harsh on the environment and pocket book. The Ford F series trucks and Ford Explorer have been Ford’s major profit earners. In light of the recent Green Movement and high gas prices, these vehicles are not considered economic or environmentally sound decisions.

Another major factor affecting consumer behavior and buying patterns is the current rise and availability of automobile technology. Consumers are now demanding GPS, back up cameras, and MP3 compatibility as standard items. Foreign automakers have embraced these requirements and often offer these items in their most popular vehicles. Ford, on the other hand, has been slow to adapt to these changes as has thus loss some of its repeat buyers to foreign automakers.

Increased Competition

In recent years, Ford has seen its market share deteriorate as other automakers find more cost effective ways to run their business and better respond to the needs of today’s demanding consumer. Because of the surge in gas prices, consumers are looking for a vehicle with better gas mileage. They are less concerned with the size of the vehicle and more concerned with its ability to save them money at the pump. In response to this trend, Chevy one of Ford’s direct competitors, has made plans to introduce the Chevy Volt in 2011. The Volt will run off a lithium-ion battery and will be able to get up to 600+ mile per gallon running off bio-diesel, and E-85 ethanol. Ford’s fiercest foreign competitor, Toyota, has also released the first and most popular hybrid car the Prius. This car has been a major success with its Toyota Synergy Drive providing customers with the ability to get up to 60 miles per gallon. Refusing to be left out of the hybrid trend, Honda has introduced the popular Civic in a hybrid version. Their car is capable of getting up to 45 mpg, and although it is not as impressive as the Prius, it is still superior in gas mileage to the average Ford vehicle. Ford has not only lost market share to the hybrids, but also in areas it once dominated. The Ford Ranger, once the most popular small truck, was overtaken by the competition along with the once mega-popular Ford Explorer. Ford is now battling in every area of their business to maintain market share.

Internal Environment of Ford Motor Company

Ford Motor company’s internal environment is characterized by increasingly lower profit margins and increasing costs. The ford crossover vehicle “Edge”, on track to sell over 100,000 vehicles, is still not enough to