Another important factor that Ford must heavily consider to prepare itself for a future with profitability growth is how to remain competitive in a market that is saturated with competition and become more appealing to consumers. Automotive manufacturers must be stable enough to withstand strong pressure from competition (2. 4, 2. 7 and 3. ) by improving individual capabilities on all key success factors (7. 0). Ford’s highest scored areas include quality control, brand image/reputation, personalized customer involvement, clever advertising, distribution capabilities and product innovation capabilities.
The Framework for Competitive Analysis (6. 0) portrays the number of recalls performed by certain mainstream manufacturers and the brand perception of quality that is perceived by the consumer. When an automotive manufacturer performs a large number of recalls, consumers are sometimes obliged to believe the notion that the vehicles manufactured by hat company are less safe or of less quality thereby tarnishing that company’s brand image and reputation.
Due to Ford’s historical prowess and resilience during the 2008 economic recession, the company’s brand image and reputation continue to captivate many consumers. The issues concerning Ford’s future for profitability growth is dependent on how the company will maintain strong market share in existing and new demographic locations, embrace new innovative technologies and remain competitive in an industry that is saturated by powerful rivals. Alternative The alternative presented to Ford that will help promote a future for reparability growth is to increase investment in new innovative technologies.
Gains from increased investment in research and development will be; a) up- to-date with technological capabilities leading towards renewable resources to run engines, b) cater to changing societal concerns/attitudes leading to less pressure from customer bargaining power, c) increased government subsidies, d) ready to meet more stringent government regulations regarding emissions standards and e) becoming a more socially responsible firm thereby increasing brand reputation and image.
The losses associated with increased investment towards new innovative cosmologies are; a) opportunity cost of forfeiting certain expansionary projects in emerging markets, b) potential for fuel prices to decrease causing a consumer shift towards vehicles that are not fuel-efficient, and c) governments may impose barriers on highly efficient vehicles from entering the market. Recommendation It is recommended that the Ford Motor Company pursue an increase in investment towards new innovative tech analogies as it will benefit the company in its future for profitability growth.
Ford’s brand image and reputation remain solid among mainstream industry manufacturers. The many strives in many areas corresponding to key success factors and is equipped to withstand the driving forces behind the automotive industry. Its recent net profit margin (8. 1 ) for years 2012 and 2013 increasing from 4. 24% to 4. 87% indicate that the company is already on a path towards sustainable growth. Net return on assets (8. 1) from 2009-2013 also reflect Ford’s profitability growth.
F-rod’s working capital numbers have also increased within recentness of analyzed data, increasing from 81 ,302 (millions) in 2010 to 1 14,31 7 (millions) in 2014. The Ford Motor Company is in a position that is elatedly healthy with increasing working capital to strategically implement new innovative investment. Ford Motor Company External Assessment PESTLE Analysis . 0 Political Factors . 2 C] Political agendas weigh as a heavy factor for members of the automotive industry as environmental issues are heavily considered when automotive companies design new vehicles. Hybrid vehicles are in high demand and receive more support from government bodies- firms are charged greater tax rates if vehicles emit higher levels of CO. Economic Conditions 1. 3 C] Economic cycles such as recessions can severely impact the industry where mom firms are subject to bankruptcy. C] Inflation, exchange rates and market prices of fuel are greatly considered by the automotive industry when projecting future sustainability decisions. D Market prices of fuel may dictate shifts in consumer preferences of automobile selection and can heavily impact productions decisions made by industry firms.
Socio-cultural Forces . 4 C] Automotive firms will always face consumer biases on brands or labels. C] Industry is subject to changing buyer patterns and consumer demand shifts pertaining to market forces such as recessions or expansions. C] Automotive rims may experience greater incentives in establishing operations in developing countries where there are emerging markets due to a higher demand for automobiles. Technological Factors . 5 CLC Technological advances help automotive companies produce vehicles that are more fuel efficient, safer and better equipped with more accessories such as driver-assist systems.
Technology has also enabled the productions Of vehicles that can alternate between fuel systems (gasoline, electricity and hydrogen). Environmental Forces . 6 C] There is an increasing need to reduce pollution levels exerted on the environment by reducing exhaust emission levels produced by motor vehicles. CLC Motor vehicle producers are obliged to adhere to standards set by government bodies in regards to acceptable emission levels. These standards also serve to promote corporate responsibility. Legal and Regulatory Factors. C] Automotive firms are subject to changing labor laws and union pressures set in place to promote adequate compensation to appropriate workers. Automotive corporations must be in a position to comply with certain pressures to avoid potentially damaging operational failures and labor strikes. PESTLE Analysis Summary The automotive industry is heavily influenced by the six components of the macro- environment with each component weighing heavily on crucial decisions that must be executed by all automotive manufacturers.
Industry members must consider political agendas, economy status, societal changes, environmental impact and regulatory constraints when straightening company directives. Each automotive firm is bound by these pressures so that each component of the macro-environment is satisfied in their respective nature. Each member must conduct their operations in a socially responsible manner o adhere to adhere to the various stipulations. Dominant Economic Features. O Market Size and Growth Rater. 1 C] The global automotive industry represents manufacturers and sellers of automotive and contributes roughly 3% to global GAP.
C] Increasing demand for vehicles year after year; total number of units sold in North America increased from 60. 82 million in 2011 to 72. 12 million in 2014. This represents a yearly average increase of approximately 3. 92% and is forecasted to increase as population increases. Number of Buyers. 2 Large number of buyers across various demographic locations. Emerging markets are opportunities for growth. Buyer Needs and Requirements. 3 C] Constantly changing buyer needs and requirements where more emphasis is placed behind cost efficiency, reliability and safety. Number of Rivals. C] Large number of rivals that offer a breadth of vehicle options at significantly varying price points. Product Innovations. 5 L] Members of the automobile industry are obligated to continuously invest in research and development to innovate new vehicles that embrace a changing consumer mindset that promote efficiency and reliability. Pace of Technological Changed. 6 CLC Advances in technology enable automotive firms to stay competitive in the market by providing consumers with diverse options such as driver-assist functions, GAPS navigation and various comfort options.
Scope of Competitive Rivalry. 7 C] Many rivals in the market making the automotive industry extremely competitive with large number of options available to consumers. CLC Some rivals have a stronger brand/reputation perception than others. Dominant Economic Features Summary The automotive industry is a pillar in developing the macro-environment by providing millions of jobs on a global scale; nearly 5. 4 million people are employed by the industry in Japan which translates to about 9% of the total workforce.
The industry increases the standard of living for many countries by enabling mobility to its citizens in a safe and comfortable manner. Overall, the automotive industry contributes nearly 3% towards global GAP; in many cases this statistic is higher in emerging markets. Global population is exponentially increasing with consumer demand for vehicles also on the rise. Automotive industry members must be able to adapt to a changing consumer needs and embrace new innovative technology to remain competitive against the large number of rivals. Porter’s 5 Forces Analysis. O Competition from Rival Sellers. (Strong): Competitive pressures are high in the industry due to rapidly changing consumer demands. Rivals utilize differentiation strategies to increase customer traffic and raise brand awareness. Existing corporations in the industry are looking to expand their market reach by incorporating environmentally friendly technology and entering into new geographical areas with emerging markets. Competition from Potential New Entrants. 2 (Moderate): It is relatively difficult for new potential entrants to enter the market due to heavy industrial and overspent regulations.
New potential entrants encounter significant competition from existing members due to established brand reputation however existing companies in foreign markets may become a threat when entering a new market due to an establishment of strategic alliances. Competition from Producers of Substitute Products. 3 (Moderate): Comparable substitutes for automobiles are readily such as public transportation but consumers are subject to constraints and destination limitations when traveling. Supplier Bargaining Powers. 4 (Weak): Suppliers have low bargaining power due to low sots associated with industry members switching to different suppliers.
There are a vast majority of firms and facilities available to provide an array metals and vehicle components. Ultimately, industry members are major customers of suppliers and account for a large portion of suppliers’ sales. Customer Bargaining Powers. 5 (Strong): Customer bargaining power is high due to the large number of buyers in the industry. Customers also have significant bargaining power due to the vast number of options available in the industry. Consumers are leveraged due to the amount of information about the sellers’ laity of products, service, atmosphere and prices.
Porters 5 Forces Analysis Summary Porter’s Five Force Analysis provides an important overview of the various pressures that industry members are subject to. For instance, the automotive industry experiences strong pressure from competitive rivalry due to the large number of automotive firms competing for market share. Each firm provides a various vehicle line-up at different price points to provide consumers with options that will meet their needs and requirements. Industry members also receive strong pressure stemming from customer bargaining power.
The market size is immense and customers are not restricted to buying a vehicle from any one motor company over another. Customers are leveraged about the sellers’ quality of products, service, atmosphere and prices. The industry also experiences moderate pressures arising from competition of new entrants. New entrants face stringent industrial and governmental regulations that make it relatively difficult for a new member to enter the market however existing manufacturers in foreign countries may consider strategic alliances with domestic firms which will in turn facilitate a more competitive advantage.
An example of recent events would be to consider Fiat entering the North American market and merging with Chrysler. The industry also faces moderate pressure of substitute products as public transportation is readily available to many citizens of urban locations but may be subject to limited flexibility concerning destinations, seating, schedules and delays. Supplier bargaining power is relatively weak as industry members have greater bargaining power than their suppliers. Many supplier firms compete for large contracts and may include bulk pricing to make purchase agreements more attractable to automotive manufacturers.
Driving Forces Analysis. O increasing Globalization. 1 CLC Increasing demand in foreign markets and developing countries coupled with government actions to reduce trade barriers provide incentive for industry members to expand. Lower labor costs also provide incentive for automotive firms to establish production plants which may be essential to supply market demand globally. Technological Change and Manufacturing Process Innovations. 2 21 Technological advances can alter industry manufacturing processes such as harnessing alternative energy sources that eliminate the use of fossil fuels.
Changes in an Industry’s Long Term Growth Rater. 3 C] Industry long term growth rate is increasing due to increasing global population, development of better infrastructure and rise of emerging markets. Changes in Cost and Efficiency. 4 C] Changes in market costs of fuel and fuel efficient vehicles greatly alter industry production volumes. Rising costs will drive consumers to seek more fuel efficient vehicles and may result in surplus volumes of trucks and sport utility vehicles. Changing Societal Concerns, Attitudes and Lifestyles. C] Societal concerns have shifted towards a direction for minimizing the arbor footprint left on the planet and demand industry members to comply with socially responsible behaviors. Regulatory Influences and Government policy Changes. 6 C] Regulatory influences and government policy changes often mandate significant industry changes such as government injections in times of economic recessions. D International governments may impose barriers on foreign companies or invite international presence to accommodate growing demand.
Driving Forces Analysis Summary The driving forces behind the automotive industry are crucially considered when industry members formulate new strategies that promote market sustainability¶/. The most important driving force is increasing globalization. Expansion into emerging markets is a remarkably important option for automotive firms to consider and capitalize on. Not only do emerging markets provide an opportunity for the macro-development of that region but industry members are also able to increase market share penetration, take advantage of lower tariffs and labor costs associated with production operations.
Technological change/ manufacturing process innovation, changes in cost/efficiency and changing societal concerns, attitudes and lifestyles are all important driving forces behind the industry. Auto companies are continuously investing in research and development to cultivate new technologies that are environmentally friendly, more efficient and that meet changing societal concerns. Automotive manufacturers will in turn benefit from enhanced government subsides, gain substantial market position and strengthen their reputation.
Strategic Group Map. O The strategic group map below represents the position of commonly known industry members pertaining to two variables; Canadian market share percentage in 2014 and the number of models available in the 2014 vehicle line-up offered by each respective company. GM offers Canadian consumers he most number of vehicle models with that number being 38 whereas Suburb offers the least at 7. Honda/ Accuracy retain the majority of Canadian market share at nearly 13% and Suburb’s Canadian market share penetration is approximately at %1. 8.