Macro Environment and PESTL Analysis of Ford Car Manufacturing ltd

Its performance over 5 years and its business Changes over 5 years.

Presented

By

Chandrakanth. Dhanekula.

Table of Contents

Industry definition

Introduction to Industry

Industry at current scenario

Literature review of PEST

PEST analysis of Ford

SWOT Analysis of Ford

Porter five force analysis of Ford

Competitors Analysis of Ford

Strategy of Ford

Performance of Ford

Conclusion

Recommendations

References

Executive Summery

In Global markets among different Industries i found Automobile industry because the scope of the automobile industry is high when compared to the other industries. In today’s life automobiles became necessary. In that automobile industry i choose the Ford motor company to analyze their Macro and Micro Environment. This paper is focused on PEST Analysis of FORD, SWOT Analysis, Porter five force analysis, competitor analysis, strategies, and its performance in share market and sales.

I focused more on the Political, Economical, Social and Technological Factors which are playing a major role business environment of Ford.

Industry Definition-

Automobile can be defined as the vehicle which runs on two, three, four or more tyres, the purpose may be to travel on the roads by people or to carry the loads from one place to another place.

Introduction to Automobile Industry-

First Automobile is a three wheeler which was invented by Nicolas J. Cugnot. Initially invented automobile is made by steam engine and later it was designed by fuels which are currently available in the market. At present few Automobiles are running based on the renewable energies like Solar and Bio Fuels. Some cars are designed to run on Electricity.

From the past records we can identify that America is dominating in automobile Industry. Currently countries like India and Brazil are presenting their growth rate in the global markets of automobile industry.

Present scenario of automobile industry –

Global rescission influencing most of automobile manufacturing companies to stop their production due to lack of demand in the market. This can be detailed from the fallowing statement.

In the automobile industry by 2008 the sales are declined by 8% and in 2009 sales are rapidly declined up to 20%.

Introduction to Ford-

Ford motor company is a global leader in automobile industry, which is founded by Henry Ford. It is performing its business in 7 continents and 90 plants are speared worldwide. It employed 201,000 people in their business. Ford manufactures Cars &Commercial vehicles.

Ford operating its business in fallowing continents

North AmericaEurope Asia PacificLatin America Middle EastAfricaCaribbean

Ford is partnering with some of the companies to produce better optional vehicles. Ford is partnering with companies like, BP, Microsoft, Sony, Roush, Adventure island & Water country USA.

PEST Analysis-

Pest analysis represents Political, Economical, Social and Technical factors of an organization.

Political factors explain about taxation, employment laws, internal trade regulations and competitor trade regulations.

Economical Factors explains about economic growth by industry, policy towards unemployment, inflation and influence of exchange rates

Social Factors explains about income distribution, labour, life style changes, health & welfare, attitude to work and living conditions.

Technical Factors explain about Technological efficiency, technological transfers, rate of spending in R&D, Energy use cost and New Innventions.

Source – The Business Environment By Adrian Palmer & Bob Hartley 5th edition

Ford pest Analysis-

Political Factors-

Exchange rates, oil prices & free trade flows which influence the consumer to invest on the vehicles.

Foreign ownership regulations and technological cooperation’s between countries helping the ford in raising the funds and building the advanced models which can cope with the current scenario.

Introduction of new business laws Impacts the ford to change its rules and regulations which are necessary to producing a quality vehicle.

Forced Groups (Labour unions) who plays a major role in the production of a vehicle in a ford manufacturing organization. The labour unions should work according to the rules and regulations amended by the business laws.

Investor’s climate- In most of the company’s investors had a premier role to play in the growth and development of the company.

Economical Factors-

Growth potential of target market - The growth potential of target market will determine the purchasing power of the buyer. That is the major reason ford is operating in the countries like America, India and Brazil where the growth potential is high when compared to the other markets.

Adopted from Nieuwenhuis & Wells

Based on the above geography of demand for vehicles, we can state that ford is operating its business in the potential target markets.

Target Market Size – Again the sales of the ford was influenced by the Market size where it is operating its business. When the target market GDP growth is high the consumers will show more interest to have a premium or luxury vehicle.

Economic Development – Economic development is the major part which will determines the development of a particular economy as a whole and which will influence on individual GDP.

Oil Price Fluctuations- The oil fluctuations influence the sales of the ford company. If the oil prices are more it will difficult to sell the premium and luxury cars. Cost conscious customers may not show interest to buy the cars which provides low mileage.

Altogether the mentioned economical factors will determines the growth of the potential markets, margin cost of the operations, return rate on the investment, and strategy to provide the price of the vehicle.

Social Factors

Social factors plays a role in trend in demand based on the various factors like attitudes, demographical, beliefs of the consumers in that particular market region Some of social factors of Ford are given below

Geographical Changes - The consumers of ford had changed from one geographical region to another geographical region

Eg- The US for consumers will use the cars or commercial vehicles which have large engines. But the Brittan consumers are habituated to use the cars or commercial vehicles which are designed by small engines.

Adopted from Windecker

Consumer Attitude – Consumer attitude plays a role in selecting car model and design, If the consumers are favour about sport they will select the sports model car for their usage. But if the consumers are cost and safety concerned them probably will choose a normal car which will provide mileage and better safety.

Travel Habits – The ford company is designing the cars based on the travel habits of the consumers. Ford is a medium cost car which can be affordable by the medium class people. It is providing the facilities based on the travel habits of the whole family.

Technological Factors

Technological factors of the ford motor company are very advanced when compared with their competitors. The technological factors of the automobile company will influence on most of the things like sales percentage of the cars, consumer satisfaction which leads to the automatic growth in the sales figure.

Supply chain collaboration – It is the Initial and too crucial factor in the ford motor company, because the consumers of car are more concerned about the ordering and when the company is going to deliver the car. The Ford Company is having strong supply chain collaboration which is in more than thirty countries.

Operations Capability – Ford Operation are more capable to provide the better service to consumers. Ford motor company is operating its manufacturing in more than 30 countries, so Ford operations are very efficient so it is able to providing quality vehicles at right time.

Technological Improvements in distribution – Ford motor company is one of the automobile companies which is providing the car view and specification in online through its website named a www.ford.co.uk . One more advanced technological thing is consumer can customize the materials what he requires inside as well as outside of the car. The Customer will get the delivery after min 1 month and max 2 months. If the ford is having the booked car in the assess they will deliver within one or two weeks.

Product Development – Ford Motor Company is providing the consumer to customize the car and its needs. So ford had gained a chance to innovate a new car based on the most of the customer’s selection and preferences. The ford company cars manufacturing will be influenced based on the consumer customization needs.

Swot Analysis of Ford Motor Company

Strengths of Ford –

Brand Image- Ford brand is well-known in automobile industry. Its brand image is well know in the global markets due to huge marketing & advertising.

Online Marketing capability - Ford is one of the well-known automobile company which is providing the online consumer selection of cars through its website. In online the consumer is allowed to customize the engine, colour, interiors and exteriors.

More consumer choices – Ford is one of the automobile company which is providing the consumer more variety of cars and commercial vehicles. Ford is manufacturing fallowing kind of vehicles.

CarsCommercial Vehicles (Jeeps, Vans, & Trucks)Heavy Vehicles.

Operations and distribution efficiency - Ford is the rich in its operations and distribution because it is operating its business more than 30 countries and it enhances its manufacturing process more than ninety plants.

Relations with high profile companies - Ford Company is maintaining the relations with high profiled companies like Suzuki and Isuzu Motors Company to develop qualitative vehicles and in the part to technological aspect for motor company is maintaining relation with Toyota and Honda motor services.

Employee are assert - Ford motor car company recruits a qualified and skilled employees in all its functions. Ford will maintain good relation with the employees by paying them better wages in automobile industry. Ford is more concerned about the working environment and safety aspects of the employees.

Weakness of Ford –

Sales Decline - The sales figure of the ford company was declined from the year 2008 to 2009 due to global recession in the world financial market. Recession is one of the major factor for decline of sales and one more important factor is ford will manufacture the standard cars which are not able to cope up with current market automobiles.

Huge unfunded pensions and other obligations - Ford is one of the automobile company which takes more responsibilities in the health and safety of the employee. Ford invests more money on maintaining a good working environment.

Low productivity - Ford expanded its business operations in diversified geographical areas, so management is missing focus on some lines performance and it influence the ford to cause the low productivity.

Weakening operations in North America – In the North America part ford operations has been declined due to the huge competitors like GM, Toyota etc. The revenue of Ford was declined by 2.4%.

Opportunities of Ford –

Production of the fuel efficient cars – At present ford is producing the cars with low mileage and pick up. Ford is having a great opportunity to produce fuel efficient cars and commercial vehicles. The automobile industry is having one more fuel efficient types like, cars which can run on renewable energies like solar power and bio fuels.

Production of Hybrid Vehicles - Ford had one more option in designing the cars and commercial vehicles based on electric engines. If the cars are designed based on electricity engines the consumers will show more interest to buy the cars, the reason is the car maintenance charge will low when the car is run on electricity. Opportunities in India and China markets- Ford is having the market opportunities in India and china countries because two countries are having huge geographical market and population. The most of the people in these two countries are more interested to own a four wheeler for their family. That is the reason ford fiesta is a most successful car in these two markets.

Threats to ford-

Price Rise in raw material prices – Raw material prices like hard steel and rolling steel cost will influence the margin price of the car. As a whole it will influence the profit margin of the ford because of low margin price.

Rapid growth of competitors - Ford growth and development may effected by rapid growth in no of competitors in the automobile industry. From the beginning America demanded automobile industry. Ford’s main competitors are General motors, Toyota, Honda, BMW, etc.

Less Capital spending - Ford is spending low on its operations and research development activities, when compared to its competitors. The competitors are spending huge amount on R&D programmes.

Porters Five Force Analysis -

Source – The Business Environment by Worthington & Britton, Sixth edition

Threat of new entrants – Threat of new entrants will be low for the ford because the ford is one of automobile which is providing the best services with low cost of price, ford provides customers to choose their vehicles. Ford is having cost advantage because it is providing the vehicles with low cost when compared to the other competitors.

Bargaining power of suppliers – Ford motor company enhances the relations with sixteen new suppliers to gain the bargaining power of suppliers. Ford is having good relations with suppliers for the output of quality cars.

Bargaining Power of customers – Customers of Ford are comfortable with ford way of providing the vehicles customization and way of delivering the products within the specified time. The bargaining power of customer is low when compared to the other automobile.

Threat of substitute – Substitutes for ford motor company are less but their are some substitutes which the cars are running on the electricity and other bio fuels. eg – riva one small car which runs on electricity.

Rivalry among existing companies - The important competitors of Ford motor company is Genral motors, Toyota, Honda and BMW. All the above mentioned forces will lead to the rivalry among these companies to provide the customer with competitive advantage and provide the customer with quality cars and commercial vehicles.

Competitor Analysis –

Source from - www.usnews.com

The Core Competencies of Ford are it is very innovative in using the high technology in the manufacturing the cars & commercial vehicles. Ford is more concerned about safety and more over ford is gave the opportunity to its customers to customize their interiors and exteriors of Cars.

The important competitive advantage is ford is the first motor company to come with active park assist, which can help the driver to park with a touch of a button.

Source – www.ford.co.uk

Comparing the sales of top automobile companies like General Motors and ToyotaThe sales of these companies are from the year 2004 -2009. General Motors sales are high among these automobile companies. Ford is performing good even in recession time because the ford motor vehicles are not too costly when compared with competitors. Overall ford sales are good when compared to general motors and Toyota.

Source – www.bbc.co.uk

Strategies of ford –

I am going to analyze the strategies of ford through Bowmen’s clock

Source – Marketing strategy by Mercer. D

Ford Motor Company implements the Hybrid strategy to perform well in the automobile industry and to provide the competitor edge.

As a part of Hybrid Strategy – ford motor company is providing the customers with low prizes when compared to the others. Ford is providing the small engines with high pickup and mileage.

Ford manufactures vehicles under several names under standardized procedures with a high quality.

Ford is providing the customers to choose their design of the car and their interiors through online sales. Ford attracted eleven millions people per annum

Ford manufactures cars with small engines and mostly it is for focused group like a family. Ford manufactures the some models like CRV, SUG for the people who are interested in using premium and luxury cars.

Pure battery electric vehicles - In future ford is coming with cars which will run on bio fuels and electricity to attract the cost concerned customers.

Overall we can conclude that Ford is concentrating on product approach rather than customer approach. It focuses more on new technology and innovative products.

Performance of Ford

Performance of Ford in Share Market

Source - http://www.ford.com/doc/2008_annual_report

The performance of Ford is declining in the share market due to recession in global market. But the ford performance in share market was not too declined when compared with the general motors. The performance of ford in the year 2009 was increasing, the share value of ford according to 2009 market it was increased by 12%. Now ford shares are increasing due to loyal customers and increased satisfied

Sales Performance of ford

Summary of vehicle unit sales

Source - http://www.ford.com.

From the above chat we can interpret that sales of ford from 2003-2007 went well some fluctuations but in the year of 2008 the sales of ford was declined due to various reasons like Recession in the global markets, huge competitors who are providing better competitive edge.

Conclusion –

Ford automobile company is performing well in the aspects of political, economical, social, and environmental. But ford suddenly facing the problem in 2008 sales due to the economical problem. (decline of markets and GDP’s).

Global economic conditions are improving but remain fragile. Recoveries in some markets are modest due to weak labor markets and tight credit

Recommendations-

Ford should concentrate more on revenue growth by manufacturing premium and luxury cars and should use the focus group strategy.

Ford have the opportunity to manufacture cars which can run of electricity, solar energy and bio fuels. It will helps the organization to develop in environmental factor.

References –

Adrian palmer & Bob Hartley, 2006, The Business Environment, fifth edition, Mc Graw-Hill Higher Education, UK.

Andre Clark, 2000, Organisations competitions and the business environment, first edition, Pearson Education Limited, UK. Adrian palmer & Bob Hartley, 2009, The Business Environment, Sixth edition, Mc Graw-Hill Higher Education, UK.

Worthington & Britton, 2009, The Business Environment, Sixth Edition, Pearson Education Limited, UK.

www.economywatch.com, 2007, History of automobile industry, (online), Available from URL-

http://www.economywatch.com/world-industries/automobile/, Accessed on 25th-03-2010.

www.businessweek.com, 2006, GM & Ford – Roadmaps for Recovery, (Online), Available from URL-http://www.businessweek.com/investor/content/mar2006/pi20060314_416862.htm, Accessed on 27th-03-2010.

www.ivoryresearch.com, 2008, The Analysis of Strategic Rationale and Implications of ford uk plant closure,(Online), Available from URL- http://www.ivoryresearch.com/sample3.php, Accessed on 30th-03-2010.

www.mba-tutorials.com, 2009, Ford Motors Swot Analysis, (Online), Available from URL- http://www.mba-tutorials.com/marketing/342-ford-motors-swot-analysis.html, Accessed on 4th-04-2010.

www.ford.com, 2008, Ford Market Sales and Shares, (Online), Available from URL-http://www.ford.com/microsites/sustainability-report-2008-09/economy-data-market, Accessed on 9th-04-2010.

Ted Reed, 2010, Ford Stock Feels The Love, (online), Available from URL-http://www.thestreet.com/_yahoo/story/10727277/1/ford-stock-feels-

the-love.html?cm_ven=YAHOO&cm_cat=FREE&cm_ite=NA, Accessed on 14th-04-2010.

http://finance.yahoo.com, 2010, Ford- Europe’s Top Selling Brand in March, (Online), Available from URL- http://finance.yahoo.com/news/Ford-Europes-TopSelling-Brand-prnews-4090456575.html?x=0&.v=1, Accessed on 14th-04-2010.

http://finance.yahoo.com, 2010, Ford now has industry’s highest customer satisfaction with quality, (Online), Available from URL- http://finance.yahoo.com/news/Ford-Now-Has-Industrys-prnews-2389427271.html?x=0&.v=1, Accessed on 14th-04-2010.