External Analysis: Ford

MBA-FP6024 Organizational Strategy

Tiawan Fagan

Capella University

Executive Briefing Report: Ford Motor Company

Summary/Introduction

As one of the leading and greatest names within the automotive industry, Ford Motor Company, produces a plethora of products that caters to a multitude of consumer needs globally. To meet this need, Ford’s corporate and business strategy is comprises of many factors that aid Ford in maintaining their advantage competitively. The external environment is of these many factors. The industry along with environmental factors that affect Ford’s business strategy will be analyzed using a PEST analysis along with Porter’s Five Forces model.

Ford Pest Analysis

A Pest Analysis defined, PEST Analysis is a measurement tool which is used to assess markets for a particular product or a business at a given time frame. PEST stands for Political, Economic, Social, and Technological factors (Economic Times, 2018).

Political Factors for Ford include: Governmental encouragement and support innovation and technological advancement. Rise in global agreements for trade and elevated governmental attempts for the creation of infrastructure in countries that are developing. Ford’s business must address the political aspect as an external influence (Rowland, 2017).

Economic Factors for Ford include: Us economy growth, higher rate of growth for markets that are developing and strengthening of the American dollar.

Social Factors for Ford include: the rise in demand for electric and hybrid vehicles, elevation increase in wealth gap and an average attitude about consumer attitude and value.

Technological Factors for Ford include: increase in the use of mobile computing, the increase use in online services of fulfillment and restricted alternative network for fuel stations.

Porter’s Five Forces Model

Porters‘s Five Forces design is derived from and identified after Michael Porter, in this model as defined by Investopedia, Porter’s Five Forces is a model that identifies and analyzes five competitive forces that shape every industry, and helps determine an industry’s weaknesses and strengths. Frequently used to identify an industry’s structure to determine corporate strategy, Porter’s model can be applied to any segment of the economy to search for profitability and attractiveness.

Five Forces analysis for Ford displays the aggressive/zealous competition as the most notable force externally within the automotive sector/environment. The below are the powers/intensities influencing Ford business according to the five forces.

Competitive competition or rivalry: Ford has tough competition with its competitors such as Toyota and GM. These firms are aggressive, barriers of high exit, meaning that firms would rather stay in business and compete with Ford instead of closing their business. Also, the moderate/average amount of firms in competition with Ford, and especially larger ones such as General Motors.

Bargaining capacity of consumers/buyers: The customers of Ford have significance influence on the automotive market. Factors which aid in their bargaining power are switching costs that are moderate, purchase sizes of individuals that are moderate and moderate accessibilityof replacements.

Bargaining capability of suppliers: Suppliers also have a moderate influence on Ford within Porter’s model. Ford should examine the important although restricted outside factor related to its suppliers. The moderate overall supply and moderate population of suppliers give suppliers significant but limited bargaining power on firms like Ford. Also, most of these suppliers have low forward vertical integration, which means that they do not own or control the distribution and sale of their products to Ford. The suppliers’ bargaining power is further weakened because of Ford’s backward vertical integration through the Ford River Rouge Complex (Ferguson. 2017)

Threat of substitutes or substitution: Ford is also affected by substitution to their products. Availability of substitutes such as bicycles and public transportation. The extent to which the substitutes harm or threaten the industry environment and firms such as Ford are switching cost that are moderate, substitutes provide performance that is low along with average availability of replacements.

Threat of new entry or entrants: Effect of new introductions within the automotive sector can and is felt by Ford, impact of new entries is examined in this characteristic of the model, it includes, significant cost related to development of the brand, significant cost of doing business along with significant capital costs.

External Analysis

Key Findings: PEST analysis

Key findings from the PEST analysis include, Ford has significant opportunities to improve based on possibilities within the distant or macro setting of business. Based off the PEST analysis, Ford must address the political aspect, external influence. For instance, globally, developing countries and their distant/macro-setting allow Ford to capitalize on increased demand for Ford vehicles within these environments, therefore, allowing Ford the opportunity to expand globally. This aspect of PEST analysis displays that external political factors can generate meaningful possibilities for Ford’s expansion and growth.

Economically, Ford must always be aware of shifting economic conditions. Ford has the possibility to grow in its biggest market which is the US. Ford also can in developing countries with high potential, due to its limited presence. Another key finding from the PEST analysis, is that socially, Ford has the potential to expand by producing commodities that tackle the need and want for hybrid and electric vehicles. Additionally, technically, a key finding, with the increase in use of mobile technology, an opportunity is created for Ford capitalize and grow thorough marketing mobile and grow their mobile support services.

Key Findings: Five Forces analysis

Key findings from Porter’s Five Forces model includes, Ford must emphasize, most important the Five Forces, for this examination is displayed as aggressive rivalry. For long-term viability in the automotive industry environment, Ford must prioritize strategic solutions to develop competitive advantage. For example, innovative products can boost the company’s sales performance. As such, Ford must prioritize R&D investment to maximize innovation processes (Ferguson, 2017).

Other key findings from Porter’s Five Forces model include, the influence that Ford’s customers have within the market, even a minor change in demand by consumers can have a significant impact on the automaker. Along with that the availability of moderate replacements give consumers the means and opportunity to distance themselves from Ford. Therefore, Ford should maximize consumer satisfaction to tackle this external factor within the scenario of this analysis. Another key finding, Ford among other companies commit to spending large for the maintaining and establishing of facilities and business. The cost associated with this create a barrier for entry, which in turns weakens the threat posed by new entries into the market. For new entrants it can become costly to create a brand that is strong and comparable to Ford. This barrier makes it hard for new firms efficiently and effectively go against giants in the industry such as Ford. This aspect of the analysis, is factor external.

Summarize key findings/results for both models.

Summary of the key findings and results for both models are as followed, the strategies of Ford and the challenges that it faces within the automotive industry is reflected and identified per the PEST analysis. Ford’s as a business should address and consider the political characteristics as an external factor of influence. Ford also need to alert and focus on conditions economically that are forever shifting and changing. Ford must capitalize on technologies that will enable and help Ford to reach its potential while competing in the distant/macro setting.

Porter’s five forces analysis of Ford indicated that Ford has powerful place across many categories. Be it consumers or suppliers, neither are in a complete and/strong area as to where their impact will negatively affect Ford. Ford, has continued to moderate and adapt from the impact/threat arising from competing brands and substitutes. Latest brands. generally, are finding it hard to enter the market, as large funds are needed. Difficulty can arise when trying to create, erect and build a brand with a powerful image along with other important capabilities. These factors suggest strong positioning of Ford within the automotive sector. industry.

Recommendations: Strategic actions for leadership

Recommendations for Ford based from the PEST and Porter’s Five Forces model include:

Improvement of business efficiencies to capitalize and maximize possibilities/opportunities that are available in global markets (PEST)

Ford’s intensive strategies for growth should focus more on innovation of products to satisfy shifting consumer choices and tackle the external sociocultural factor related to its business (PEST)

Focus on improving service and enhancement to technologies to they are operating competitively, despite opposition within its distant macro setting (PEST)

Ford needs to maximize consumer satisfaction (Porter)

Ford must take into account the important yet, restricted external factor contributed to the effect of the suppliers on the business (Porter)

Address the suppliers as a second-priority external threat (Porter)

Conclusion

In conclusion, changes in the macro-environment factors can have a direct impact on not only the Ford Motor Company but also can impact other players in the Auto Manufacturers – Major. The macro-environment factors can impact the Porter Five Forces that shape strategy and competitive landscape. They can impact individual firm’s competitive advantage or overall profitability levels of the Consumer Goods industry. PESTEL analysis provides detail about operating challenges Ford Motor Company will face in prevalent macro environment other than competitive forces (Fernfort University, n.d). Ford motor company is positioned to remain a competitive industry giant despite the competitive market in which it resides. As long Ford continues to recognize and address the needs and the ever-shifting challenges described in the PEST and Five Forces models, along with generating and enacting strategic business solutions to meet these needs, Ford will remain an industry leader for another 100 years.

References: Supporting evidence

Ferguson, Edward, (2017)., Ford Motor Company: Five Forces Analysis (Porter’s Model)., Panmore Institute., Retrieved on May 2, 2018., http://panmore.com/ford-motor-company- five-forces-analysis-porters-model

Fernfort University., (n.d)., Ford Motor Company PESTEL & Environment Analysis., Retrieved on May 2, 2018., http://fernfortuniversity.com/term-papers/pestel/nyse4/648-ford-motor- company

Investopedia., (n.d)., Porter’s 5 Forces., Retrieved on May 2, 2018., https://www.investopedia.com/terms/p/porter.asp

Pestle Analysis Definition., (2018)., Definition of ‘Pest Analysis’ The Economic Times., Retrieved on May 2, 2018., https://economictimes.indiatimes.com/definition/pest- analysis

Rowland, Christine., (2017) Ford Motor Company PESTEL/PESTLE Analysis., Panmore Institute., Retrieved on May 2, 2018., http://panmore.com/ford-motor-company- pestel- pestle-analysis