Introduction
The corporation has generally adopted a broad product approach as its primary strategy. However, under the supervision of a new chief executive officer, the company is transforming its strategy from selling several vehicle lines, including passenger cars, to one that concentrates on developing sports cars and trucks. The issue is exacerbated because while Ford focuses on a niche market, its rivals work to fill it.
The chosen topic of this paper aims to determine the direction of growth and development of Ford Automobiles Company, with a primary focus on what the company will not do. Thus, based on the organizational context, it is possible to identify the firm’s critical problem: selling new passenger cars of small and medium class, SUVs, pickups, commercial vans, and electric vehicles. This report provides a comprehensive analysis of Ford Automobiles Company’s strategic activities and planning in the market, considering its potential, opportunities, strengths, and weaknesses.
Literature Review
According to data analysis, Ford’s overall growth strategy combines elements of leadership and cost differentiation to achieve superior growth. The company targets a broad base of middle—and upper-middle-class consumers worldwide. However, the company has also successfully differentiated its brand from competitors, resulting in increased popularity and business success.
Maximizing operational efficiency helps keep production costs and product prices low, which is crucial for achieving higher sales in a highly competitive environment. The company evaluates its products at competitive prices to maintain its market share and leading positions in key segments. However, its range is not limited to conventional cars and SUVs; thanks to the Lincoln brand, the company has maintained a valuable presence in the luxury car market.
Differentiation is a key overall growth strategy that almost all leading automotive brands worldwide use. The primary differences between car manufacturers are technological innovation, product innovation, and marketing. Car companies also use marketing to differentiate their products and brands from those of their competitors. Ford’s branding strategy has played a crucial role in enhancing the brand’s popularity and reliability worldwide, while distinguishing it from its competitors.
As a leading automotive brand, Ford pays excellent attention to passenger safety, fuel efficiency, and the environmental impact of its products. In addition to its exclusive and differentiated models of cars and SUVs, Ford is even more distinguished from its competitors by its presence in the luxury car segment. The luxury brand Lincoln, owned by Ford, manufactures and sells SUVs, cars, and crossovers in the luxury car segment.
Ford is using a combination of several intensive strategies to increase its market presence and expand its market share. The company primarily employs product development and market penetration strategies to expand its market share in the automotive industry. Additionally, the company employed a market development strategy to expand its global customer base during the early stages of market expansion.
Product development is one of the most intensive strategies in the automotive industry. Most leading brands use it to increase sales and market share. It involves introducing new products to customers and existing markets.
Although technological innovation has become even more critical due to growing competition in the automotive industry, it is also essential for automotive brands to continually improve their existing products to increase customer interest in these products. Ford is an innovative car brand that invests heavily in research and development every year. In 2019, the company spent about $7.4 billion on research and development. Ford’s primary focus in research and development is to enhance customer convenience, safety, and fuel efficiency, while also reducing the environmental impact of its vehicles. Additionally, product development has helped Ford increase the popularity of its products and make its product range more appealing to existing customers.
Market penetration is a strategy aimed at increasing sales to existing customers in their current markets. It is also one of the leading growth strategies employed by car manufacturers and other vehicle manufacturers seeking to achieve faster growth. To expand their penetration into existing markets, automotive companies, including Ford, employ various marketing and sales strategies, including digital marketing and other customer interaction methods, such as developing a comprehensive sales and service network. The United States of America is Ford’s largest and most popular market. Ford’s other leading markets include Canada, the UK, and Germany.
Market development is a strategy that involves entering new markets and identifying new customers for products and brands in previously unexplored regions. Ford has maintained its global presence thanks to its extensive production, distribution, and sales network. The company has eight regional design, research, and development centers, as well as 55 manufacturing and assembly plants. The United States of America is Ford’s largest market, with the most cars sold. In 2019, the company’s sales volume reached 5.5 million units worldwide, and its global market share in the automotive industry was approximately 6%. Ford’s retail sales in the United States amounted to 2.4 million units.
Methods/Approaches
A thorough study of relevant literature sources and statistical data enabled the student to conduct a PESTLE analysis and evaluate the internal and external activities of Ford Automobiles Company, the primary approach employed in this paper. In other words, qualitative and quantitative research methods were used in practice. These methods were chosen based on the competent and correct data collection, analysis, and interpretation, which appeal to trustworthiness, relevance, and reliability.
Most of the information gave a complete picture of the essence, nature, and content of the phenomena and processes studied in strategic management within the organization. However, it should be recognized that these approaches are directly related to the topic from the perspective of providing the most complete and thorough disclosure of the company’s strategy. Accordingly, the process undertaken considered conducting a literature review to understand the context of the issues and problems under study.
These essential tools have played a significant role in gaining knowledge for planning and decision-making when the necessary hypotheses about consumer behavior have already been formed. This circumstance allowed for the expression of opinions, assumptions, and the exact quantitative values of the studied indicators. Based on the results, it is possible to calculate the necessary production volumes and profitability from the price and product parameters, find unoccupied market niches, and much more. In particular, the student focused on understanding, explaining, and interpreting empirical data as a source of forming hypotheses and productive ideas. Nonetheless, projective and stimulating techniques were widely used – unstructured, non-directive ways of asking questions that helped the researcher to uncover the main elements most closely associated with the brand’s products.
Findings, Analysis, and Discussion
Corporate Strategy
Ford Motor Company (Ford) unveiled its new corporate plan, “Ford+.” The growth pillars of the plan include electric cars (EVs), linked technologies, and the commercial vehicle industry. Ford expects to sell over 40 percent of its worldwide sales volume in EVs by 2030 (Wayland, 2021). Ford Pro will be the name of the company’s new commercial vehicle business segment (Wayland, 2021). It aims to develop a business model that sells commercial vehicles and continues to offer services such as charging and maintenance.
In 2021, Ford sold 1,892,000 cars in the United States, representing a 6.8% decrease from the previous year (Wayland, 2022). Ford’s first mass-market electric vehicle, the Mustang Mach-E, along with the new Bronco and Bronco Sport SUVs, all contributed to a rise in sales. Their contribution was minimal, however, as sales were down from the previous year.
The reason might be traced to the cessation of manufacturing the vast majority of passenger vehicles and production cutbacks resulting from semiconductor supply problems. Ford (2022) forecasts a 10-15% increase in wholesale volume. The company’s focus is on introducing new EV models and improving semiconductor supply.
Except for the Mustang, the corporation is eliminating low-profitability passenger cars and concentrating on SUVs and pickup trucks to offer new models in the United States. The business will add a midsize Ranger in 2022 and an off-road Bronco Pickup in 2024 to its lineup of pickup vehicles. The business will no longer produce the compact EcoSport and the midsize SUVs. The business will release a new Escape in 2025, a new midsize SUV manufactured in Mexico in 2023, and a new full-size Expedition in 2024.
As part of the company’s electrification strategy, the Mustang Mach-E SUV was introduced in 2021. In 2022, the E-Transit commercial van and the F-150 Lightning full-size pickup truck will replace this model. These vehicles demonstrate Ford’s aim to electrify its most recognizable models. The business expects to release an EV version of the Explorer midsize SUV and EV versions of three additional Lincoln SUV models in 2025.
Ford’s worldwide EV introduction strategy will require a battery cell manufacturing capacity of around 240GWh by 2030 (Ford, 2021). In addition to building its own battery manufacturing capacity, Ford is also collaborating with various battery manufacturers. Through a joint venture with battery maker SK Innovation, the firm intends to construct two factories by 2025, producing 129 GWh of batteries annually (Ford, 2021).
Ford will reduce expenses in Europe by implementing restructuring initiatives, including simplification of its production system. Ford is concurrently developing its inventory of commercial vehicles, a competitive strength, and electric cars, such as hybrids, for which demand is growing. In China, sales have been declining, and significant imbalances persist. Ford has expanded its partnerships with local partners and introduced a rapid succession of locally made SUV models beginning in 2019. Since the beginning of 2020, the revitalization of the product line has resulted in a recovery trend in sales and profitability.
The decline in worldwide demand in the first half of 2020, related to the pandemic, substantially influenced Ford’s global profitability. However, profits increased during the third quarter (July to September). This was made possible by the economic improvement in each area, and the firm has increased its profitability prediction for 2020. Overall, the United States and China are expected to drive the company’s growth, while manufacturing in Europe is anticipated to shift from Western to Eastern Europe.
Business Strategy Evaluation of Past and Present Approaches
The company’s business strategies can be evaluated using a PESTEL analysis. PESTLE analysis examines the external variables political, economic, socioeconomic, technological, legal, and environmental that impact an organization the most. This research identifies key company decisions in response to the external variables that guide the company’s business decisions. Consequently, it is evident that in certain aspects, the company underperforms in its business strategy.
Political
Despite its earlier, well-known disputes with the US president, the political landscape seems positive for the corporation. Tax reform and political stability are favorable factors. However, the prospective changes in trade policy may pose future issues for Ford. Political stability in China, Europe, and North America will probably help the corporation. The newly approved US tax reform may benefit corporations since it reduces their tax burden.
Additionally, it permits the corporation to repatriate a significant portion of its international income at a reduced cost. This modification will result in the manufacturer paying less in taxes. However, these payments will be offset by the company’s deferred tax assets, as it was unprofitable in the US during the previous decade’s recession, resulting in an effective tax rate comparable to that of the prior year (Butters, Welch, & Naughton, 2018).
The change in US trade policy may be challenging for businesses, as it could lead to higher manufacturing costs. For example, the US president’s termination of the TPP deal reduces a possible advantage by isolating specific trading partners. On the other hand, it is not anticipated that the recent and ongoing political disputes between China, Russia, and the United States will continue to escalate, as any escalation would generate considerable economic difficulties for all parties concerned.
Economic
The US economy benefits corporations, particularly when recently adopted tax reforms are implemented. Most economic indicators point to a substantial expansion of the US economy. Moreover, recent trends suggest that the substantial growth in disposable income is expected to continue. However, low unemployment rates in the US may result in a rise in Ford’s human resource expenses, even though the company’s use of machines and automated manufacturing may mitigate this effect.
In contrast, the Eurozone’s unemployment rates are much higher (The Economist Editorial Unit, 2017). The combination of a reduced tax rate, a rise in disposable income, and a strengthening economy indicates that the company’s fortunes will improve. Additionally, Ford anticipates strong international growth following record sales in China in 2016. Confederation of Independent States sales are up more than 15% to 50,630 units, while Association of Southeast Asian Nations (ASEAN) sales are up more than 12% to 117,780 units (Ausick, 2017).
Sociocultural
As population shifts occur worldwide, Ford’s cultural aspect raises several issues. Positively, the group under 18 will soon be of purchasing age and may examine some of Ford’s entry-level passenger automobiles if the business remains in the market. This is an issue since SUVs and trucks are typically more expensive cars out of reach for first-time owners.
Conversely, the baby boomer generation may soon profit from the company’s anticipated completely autonomous car. Globally, consumer preferences are obscure. The connection between brand, place of origin, and client choice might impede the development of a business. Ultimately, the United States’ new political posture has proven unpopular in some of the world’s most significant markets.
Technological
Ride-sharing, car electrification, and autonomous driving are the most critical technologies driving the automotive industry. However, the company’s preparation in these areas is insufficient. First, Uber and Lyft have a strong position in the ride-sharing sector, but Ford’s efforts to join the market via Ford Smart Mobility LLC and the purchase of Chariot are failing miserably. In addition, Tesla Automotive is a leader in the electrification of automobiles, closely followed by Toyota and General Motors, which also offer hybrid vehicles.
In contrast, Ford is having difficulty marketing the Ford Fusion midsize vehicle. Tesla Automotive is the frontrunner in autonomous driving, followed by European companies such as Audi, BMW, and Mercedes, which have developed substantial product features. In fact, a portion of their goods is semi-autonomous. In comparison, Ford only offers parking assistance on a few models. Ford’s goal of producing a completely driverless, electric car by 2021 appears to be a pipe dream, given that its competitors are significantly ahead.
Environmental
The environment plays a crucial role in the contemporary global economy. The currently occurring global-scale climatic changes compel businesses to seek more effective methods for environmental care. Ford, for example, has made significant advances to create more efficient cars, including the use of aluminum bodywork in its best-selling F-150 pickup. This move aims to produce a lighter truck with improved fuel economy, reduced CO2 emissions, and lower consumption of fossil fuels. Likewise, the corporation continues to distribute hybrid automobiles with enhanced fuel economy. Ford maintains a responsible stance on environmental concerns, but its disaster preparedness strategies are unclear.
Legal
At this time, the future of NAFTA (North American Free Trade Agreement) is in doubt, as the president of the United States is concerned about its sustainability. Consequently, the effect on Ford and the car industry is unpredictable. However, the corporation may be compelled to seek new suppliers, which could impact its output and profitability. In addition, the regulatory structure for the driverless vehicles that Ford plans to manufacture remains in its infancy. This necessitates that Ford and its rivals be adaptable and willing to adapt to or contribute to a legal framework that is being developed, despite the inherent uncertainty at this point.
Functional Strategy
The company’s strategy shifts from producing passenger cars to focusing on trucks and sport utility vehicles, which may be a double-edged sword, as lowering its presence in the passenger car category allows new competitors and alternative products to fill the void. In addition, the industry is mature and cyclical, meaning that the market will ultimately swing back in favor of passenger vehicles when fuel costs rise or when new technology, such as the new electrified technology models now in production by its rivals, reaches the market. Overall, it represents a considerable departure from the firm’s origins and creates significant risks for the company and its stakeholders, as even though current market trends seem to support the move, it is a myopic and reactive solution to a long-term issue. The firm confronts three primary obstacles. These are a substantial rise in competition, the loss of market share, and the resulting erosion of profits.
Ford faces enormous problems due to the recent and significant growth in the competitive factors that impact it. Historically, General Motors, Chrysler, and Toyota were Ford’s primary competitors, with Toyota rapidly becoming its chief rival. There has been a substantial change today as more rivals adopt new technologies, such as electrified motor trains and automated driving. For example, Tesla, a producer of electric vehicles, is entering the passenger car industry with an entry-level offering that may easily steal Ford’s early adopters. Nonetheless, this is not the only firm that has built an electric car, as more and more companies are transferring manufacturing to these new vehicles.
Customer preferences are in flux. Introducing electric cars is a permanent trend, and Ford is not a key participant in this market. The financial company Baird anticipates that Tesla will sell more than 500,000 Model 3s annually. That would place it among the best-selling automobiles in the country (Marino-Nachison, 2018). This amount does not account for the fact that Toyota and General Motors are strengthening their market positions.
Profit Decline
Like many other manufacturers, Ford Motor Company has experienced economic difficulties in recent years due to the pandemic. The corporation acquired $15.4 billion of extra cash on the balance sheet, borrowing from two credit lines (Ford, 2020). The company opted for a dividend suspension to conserve funds and provide greater flexibility, as well as withdraw corporate guidance for its 2020 financial performance during the COVID-19 pandemic (Ford, 2020). Three-month payment deferment for qualifying US new-car purchasers, plus three additional months funded by Ford, for up to six months of financial stability (Ford, 2020).
These initiatives were launched to strengthen the company’s financial position, maintain strategic flexibility for its team and customers, and differentiate itself from competitors (Ford, 2020). Nevertheless, most financial experts have a negative outlook on Ford’s shares, and the market prefers more efficient rivals. This puts the corporation in a challenging position at a time when it should be investing in new technologies that might make or break it in the future.
Vision and Mission Statements
Ford’s mission statement has changed continually since its inception at the turn of the past century. Instead of a mission statement, the firm promotes a vision in its most recent version: “People collaborating as a lean, global organization to improve people’s lives via automotive and mobility leadership.” This demonstrates Ford’s desire to maintain a worldwide presence and be a “lean” business.
Nevertheless, the notion of “making people’s lives better via automotive and mobility leadership” is ambiguous and perhaps complex for the majority of its personnel to implement. It appears that Ford aims to eliminate the distinction between automobiles and mobility products. Although a vehicle may be a mobility solution, it does not need the involvement of automobiles, making its business model unclear. In other words, Ford is shifting away from its primary business, which has been delivering mass-market automobiles.
Company Evaluation
Today, the Ford business must decide on the company’s future development. It is well-known that strategic adjustments can lead to new markets, but it is also well-known that faulty assumptions pose a significant danger. Introducing electric automobiles is shaking up an industry long controlled by unions and conventional manufacturing techniques. In contrast, new rivals have bypassed conventional retail channels entirely by creating direct and internet sales platforms that circumvent existing dealer networks.
The company is making significant efforts to revitalize its sales following the pandemic and increased market competition. However, certain attempts seem premature, considering the competitors’ advantage in the industry. Namely, the company’s attempt to expand its EV sales is challenging due to its competitors’ research and development superiority (Tesla, BMW, Audi).
Nevertheless, the company has sufficient financial resources to enter the market, but projections for the first year of implementation are expected to be negative. Consequently, the company will face enormous challenges along the way. However, considering the fossil fuel limits and increased environmental concerns of the population, this might be an essential transition for the company in preparation for long-term stability.
Assuming Ford provides a clear vision for the future, a global corporation with numerous markets should employ various tactics based on cost leadership. Domestically, Ford should maintain its cost leadership approach while offering a limited number of differentiated goods, such as the Ford GT and other high-performance automobiles. However, for this to be successful, Ford must further enhance its efficiency.
Additionally, utilizing partnerships can help reduce R&D expenditures by serving as a testing ground for new technologies and evaluating market demand. Alternatively, the quick development of electric or hybrid vehicles will boost the company. Ford should retain a short-term differentiation approach in Asian countries, where customer demand for the brand is excellent, while striving to boost the company’s efficiency to transition into a cost leadership position.
Recommendations
Recommendations that could lead to the best effect are mainly expressed through the prism of implementing new and creative ideas, taking into account the values and mission of the company. However, one should be skeptical of all new ideas and demand proof of correctness, since this is better than chasing every new concept in a continuous thought cycle. Skepticism coinciding with caution is the compass of civilization, and such a view warns of the possibility of unjustified risk, sometimes bordering on adventurism. At the same time, there is no idea that it is good just because it is old or bad because it is new. An old idea that has justified itself has strong proof because practice is the best criterion for an idea’s usefulness, correctness, and effectiveness.
It should also consider the presence of a clear goal since doing business based on pure profit is a hazardous enterprise. Moreover, confidence in what is planned and confidence in the products produced are vital aspects. First, one must understand what to make and be sure that the calculations are correct, that there are the necessary materials, and that the products produced are of good quality and competitive.
The continued application of new ideas, constant changes in production technology, the need to have alternative solutions, and much more are what the company’s strategy should ideally be based on. If the idea turns out to be really good, or at least opens up new opportunities, then it should be tested. Analyzing product contact with the consumer is essential, allowing the entrepreneur to form the right marketing policy. It is also essential to know about the correlation of “man and machine”, which emphasizes the importance of using effective production technologies corresponding to the organization.
However, one should also consider the need for planning activities and feedback – these are basic management principles. To ensure the success of the products produced by the consumer, it is necessary to ensure the quality, price, and their further maintenance, particularly repair. One cannot stop searching for ways to improve management activities. It is necessary to work on the management methods used in real management constantly, as well as how the head of business is conducted. The cars created by the company have been constantly improved and continue to improve, and the volume and scale of production are steadily growing.
References
Ausick, P. (2017). Ford Global Annual Sales Slip 1% (NYSE: F). 24/7 Wall St.
Butters, J., Welch, D., & Naughton, K. (2018). Trump Did GM and Ford’s Foes a Major Favor by Cutting U.S. Taxes. Bloomberg.
Ford. (2020). Ford takes action to address effects of coronavirus pandemic; company offers new-car customers six-month payment relief. Ford Media.
Ford. (2021). Ford commits to manufacturing batteries, to form new joint venture with SK Innovation to scale NAbattery deliveries. Ford Media.
Ford. (2022) Ford’s Q1 demand strong, supplies limit product shipments; affirms full-year adjusted ebit guidance of $11.5-$12.5 billion. [Press release].
The Economist Editorial Unit. (2017). Euro-area GDP growth outpaces America’s – Speeding up. The Economist.
Marino-Nachison, D. (2018). Tesla: Here’s the Long-Term Case for the Model 3. Barron’s Next, Digital.
Wayland, M. (2021). Ford UPS EV investments, targets 40% electric car sales by 2030 under latest turnaround plan. CNBC.
Wayland, M. (2022). Ford’s 2021 sales fall 6.8%, but automaker ends with strong fourth quarter. CNBC.