BUSINESSENVIRONMENT AND STRATEGY
(FORD)
PRINCIPLES OF BUSINESS MANAGEMENT
Bruno Bertomeu Quevedo
3086 WORDS
Ford Motor Company has been one of the most important businesses in the car industry since its
creation. On July 23, 1903, Ford sold its first car. To arrive at this point, they had 12 investors,
1000 shares and around $28000 invested. A couple of months later, on October 1, 1903, Ford
Motor Company had already made a profit of $37000.
10 years after their first sale, in 1913, with the introduction of the Ford Model T. Henry Ford, Ford
Motor Company’s founder, implemented a new model of mass production called Fordism. This
model consisted on chain-based production. It consisted on a big chain of workers in which each
worker had a unique, simple task that had to be done repeatedly. The sum of all the steps made
by every worker would result in the product. With this model, the assembling of the Model T
chassis changed from 12.5 hours to 1.5. The increase of the production rhythm also allowed ford
to lower its prices.
Thanks to this new mass production Ford managed to sell around 15 million units of the Model T
until ending its production in 1927. This made this model one of the best-selling cars in history.
Nowadays Ford is the Top 392 company in the world with a market value of 48.8 billion dollars
according to Forbes and Fordism is still reflected in their production and in the whole car industry.
Instead of each step being done by a person, it is done by a machine.
Our history (Corporate Ford, 2021) https://corporate.ford.com/about/history.html
2021 global 2000 (Forbes, 2021) https://www.forbes.com/lists/global2000/#ef73f95ac042
To determine in what position is ford, it is necessary to do an external environmental analysis.
The tool we use to make this external evaluation is PESTEL. It is constituted by political, economic,
social, technological, environmental and legal aspects in the surroundings of the company.
For starters, the main political issue that affects Ford is the conflict between USA and China and
the trade war it is going on. The USA accused China of unfair trading practices and intellectual
property theft. Consequently, the increase in import taxes made the prices of products imported
from both countries rise. This directly affects Ford in the way that costs of the materials used to
assemble their vehicles have increased and therefore, the profit margins also. On the other hand,
the political relationship between the USA and Taiwan is getting stronger. This has a huge positive
impact in the USA, and as a consequence, in Ford. This relation is so important because of the
relevance of the Asiatic country in the chip industry.
Moreover, from the technological point of view, as it is a main participant in the chip industry
thanks to TSMC, the most important chip manufacturer in the world, the consistent relation the
USA is achieving with Taiwan gives a clear advantage in technological advances. Not only is the
USA having good ties with Taiwan, but also the EU is looking for a good-terms relation with the
technologically influential country. This is good for Ford. Why? Because the more relations
Taiwan has, the bigger and richer it will get and as a consequence the more help it will be able to
give to its associated countries. Taiwan is playing a huge role in the chip industry also due to the
chip shortage. As TSMC is so big, they are able supply consistently. Another aspect in technology
is the shortage of workers that will be explained in the social analysis leads to a new opportunity
in the development of a new platform to manage cargo arrivals and departures. This type of
platform is already being used in Europe by big companies in the port of Rotterdam (Europe’s
biggest).
Environmentally, these last two years have been dominated by the Covid-19 pandemic. This
situation has led to a huge number of lives ruined caused by death, poverty and limitations of
liberty due to restrictions. This has had a huge impact on the worldwide economy during 2020
and 2021. All non-essential businesses were not able to open and lots of them vanished from
existence. Luckily, as a result of Covid-19 vaccines developed quit quickly, countries are able to
start reversing restrictions and businesses are starting to recover from these two devastating
years. Ford for instance was affected by the pause in production due to the supply weakening
and the cease of sales due to economical-related panic over population. Another environmental
issue affecting ford is the steel shortage. There has been an increase in demand and the supply
does not meet it. This caused inflation which means there has been a rise in prices and bigger
wait lists for steel orders. The supply of this material is greatly important in the manufacturing of
automobiles, and it affects the company directly.
Due to the pandemic, the main economic aspect affecting Ford and all companies in general is
globalization. What happens in a country now affects the rest of the world much more. We can
look once again to Taiwan. As now many more countries have a dependence on the chip leader
TSMC, a slight problem in this company related to anything, for example logistics, would cause a
series of delays and lack of supplies that would result in a huge list of market crashes. Global
shortages in supplies have also been noticed all around the globe. Another result of the pandemic
has been the increase in poverty. People with businesses that had to be shut down and people
that became unemployed because of the closing of these businesses were very much affected
economically. This also originates a decrease in the demand in some less affordable industries
such as the car industry, directly affecting Ford. During the Covid pandemic, the home-office
method has become very popular, this results in less need and demand of cars, affecting Ford
hugely.
There is a big shortage of workers, both in the USA and the EU. The lack of truck-drivers and
warehouse workers is heavily affecting entire industries. There are being continuous delays in
transportation and distribution of goods. As the logistics have a lot of steps in transportation,
every delay adds up to the one before and the one after and this, combined to the disastrous
pace of warehouses results in a huge delay that, as already mentioned, affects entire whole
industries. Another social factor to have into account is the change in demand due to the
pandemic. People started to figure out ways to coexist with the pandemic and started demanding
different types of products such as 5G technology or Artificial Intelligence.
These last two years have also been hard to develop for companies due to legal restrictions and
regulations Covid-related. Businesses could not open to the public unless they were considered
essential. Because of these, car dealerships were not allowed to open. This made selling and
delivering cars much more complicated. Another legal aspect that affected a lot to the USA and
therefore, to Ford was caused by the USA-China conflict. The trade war caused much more strict
inspections in customs, which made transportation much more difficult.
Business Environment and Strategy (Hiscock, 2021)
Following the external analysis, an internal environmental analysis should be done to identify the
Strengths, Weaknesses, Opportunities and Threats (SWOT) Ford Motor Company could have.
STRENGHTS
The main strength seen in Ford is its legacy and history and therefore, its status. Ford started
with the mass production model Fordism which allowed them to produce and sell more than
nearly anybody in the market. Ford is such a big company that 5 out of the 15 most sold cars in
history are theirs. Top 2: Ford F-Series (40 million units sold); Top 5: Ford Escort (20 million units
sold); Top 9: Ford Model T (16 million units sold); Top 11: Ford Fiesta (15 million units sold) and
Top 15: Ford Focus (13 million units sold). There is not another company with more models in
this ranking, this describes the importance and history of Ford.
The 20 most sold cars in history (El Motor from El País, 2020) https://motor.elpais.com/actualidad/20-coches-masvendidos-historia/93864/image/93865
Another strength shown by Ford is the versatility they have and the number of markets it covers.
It has from affordable small cars such as Ford Fiesta and Ford Focus to high performance sports
cars such as Ford Mustang or Ford GT. It also has family models such as Ford Smax to SUV such
as Ford Kuga or Ford EcoSport. There are also Pickup trucks like the Ford Ranger and commercial
vans like Ford Transit. It is now also focusing on Hybrid and electric cars with models like Ford
Puma or Ford Mustang Mach-E. The point exposed is that Ford has models to fit any person with
any necessity.
(Ford, 2021) https://es.ford.com/
The last main strength I see in Ford is their experience in the industry. Ford has already been in
this industry for more than 100 years. In so many years, they have had the opportunity to make
many mistakes and to learn from them. The knowledge they have and have had about the
different markets inside the car industry is obvious and represented by their sales figures.
WEAKNESSES
The weakness that stands out the most is the decrease in total annual revenue Ford has been
suffering the last few years.
Table showing total revenue and revenue growth during the years 2017-2020 (Stock analysis, 2021)
https://stockanalysis.com/stocks/f/financials/
As you can see in the graph above, during the las two years Ford has had a decrease in the annual
revenue. The first decrease is in 2019 which is relatively low, -2,77% (5 billion dollars
approximately) but the second year, in 2020 the decrease is of –18,45% (Nearly 30 billion dollars)
which is a high loss.
Another weakness we see in Ford is their dependence on the USA and EU markets. Ford struggles
to compete in new emerging markets in Asia and relies uniquely in the USA and Europe. One of
the main reasons of this happening is lack in supply of components such as semiconductors.
OPPORTUNITIES
The first and main opportunity that Ford and other car companies are taking advantage of are
eco-friendly vehicles. The hybrid and electric cars markets are increasing quickly and will continue
increasing without any doubts. Ford is already producing Hybrid vehicles such as Ford Puma or
Ford Kuga as well as fully electric models such as Ford Mustang Mach-E. This opportunity is so
important because of the negative effects gasoline has on the environment as well as the fact
that this type of fuel is limited. On the other hand, electricity can be continuously produced. In
order to live on a healthier planet, all vehicles will end up being electric, or at least, not powered
by petrol. Therefore, the more Ford focuses on producing electric and hybrid vehicles, the greater
the advantage they will take against the competition.
In the graph below it is shown the evolution in sales of hybrid vehicles in China, Germany, the US,
the UK and globally. As you can see there is a clear rising evolution which is clearly not going to
stop anytime soon.
Graph showing the evolution of electric car sales from 2010 to 2020 (The Guardian, 2021)
https://www.theguardian.com/environment/2021/jan/19/global-sales-of-electric-cars-accelerate-fast-in-2020despite-covid-pandemic
Another opportunity Ford could develop is self-driving technology. Really successful companies
like Tesla are already developing this type of technology. The reason why this could be a
revolutionary characteristic in cars is safety. In 2020 there were more than 42000 deaths caused
by car accidents in the USA. “Autonomous vehicles can be trained to be safer than humancontrolled cars. With sensors and cameras, they can enhance the safety of a driver as well as
pedestrians by eliminating human error.” [Kia]. Big companies like Kia or Tesla believe that selfdriving cars will make a much safer circulation possible. The catch is kind of technology needs to
be perfectly developed to ensure safety and car companies are not at this point yet. This is why
this opportunity is very important, not only for the benefit of car companies like Ford but also for
society.
In 2020 more than 42000 persons died in car accidents in the USA (EFE news, 2021)
https://www.efe.com/efe/usa/sociedad/en-2020-murieron-mas-de-42-000-personas-accidentes-viales-eeuu/50000101-4480125
Are self-driving cars safe? (Kia, 2021) https://www.kia.com/dm/discover-kia/ask/are-self-driving-cars-safe.html
THREATS
The car industry is in high competition. A lot of companies competing at high stakes to win the
majority of the Market shares in every market they can. The main competitors that ford has are
Toyota and Tesla because of their investments in eco-friendly vehicles. Tesla is a purely electric
car company. Toyota with time has adapted all their models to hybrid.
Another big threat Ford is currently having is the shortage of semiconductors and other
components in India. This is caused by supply chain breaches. Ford claimed that manufacturing
vehicles in India became unsustainable and had accumulated losses valued in more than 2 billion
dollars during the las 10 years.
Ford stops making cars in India, the third U:S: vehicle maker to exit (Forbes, 2021)
https://www.forbes.com/sites/nramakrishnan/2021/09/13/ford-stops-making-cars-in-india-the-third-us-vehiclemaker-to-exit/?sh=1e59a60a6e68
Raises in raw material prices. As explained in the text, there is a shortage in steel supply. This
makes its price increase considerably and makes it hard to access. Moreover, the price of petrol
is continuously increasing. For example, in the UK there is a huge problem with petrol. It is scarce
because of the lack of trained truck drivers to deliver it to gas stations. Brexit is a contributing
factor to the problem. It is estimated that out of the 100000 of shortfall drivers, a 20% left the
country after the result of the vote to leave the EU.
Britain’s
gas
crisis,
explained
(The
New
York
https://www.nytimes.com/2021/09/28/world/europe/why-uk-fuel-shortage.html
Times,
2021)
Once the external and the internal analysis are done, it is important to evaluate what competitive
forces can impact or affect negatively to the company. We do this by using Porter’s Five Forces
model.
The first force analyzed will be the threat of new entry. This force consists on the potential impact
companies that are new to the industry can have on Ford. In this case and in the automotive
industry this threat is low. The reason why this threat is low is that setting a new business inside
this industry requires a really big investment. It is high cost and at the beginning, very low profit.
Cars are really expensive to produce, especial equipment and materials are needed as well as a
good design and years of development with profits near to zero. In order for a new car company
to survive, it is needed a huge investment and a lot of time. This is why the threat of new entries
to the industry does not threat Ford heavily.
The next force will be the threat of substitutes. This force is medium. The main substitutes we
could see for Ford’s cars would be public transport and motorbikes, maybe bicycles also. This
threat is medium because of the commodity and security moving by car gives you. Usually, going
by car is much faster than by public transport. On the other hand, although going by motorbike
can be faster than going by car, it may not be as secure or comfortable to the user. In case of an
accident, the biker would have higher chance to have injuries. And having a car is much more
comfortable in the way that there are fewer external aspects such as weather affecting you.
Next, the bargaining power of consumers will be analyzed. Ford is a renowned automotive
company with a global supply chain. The company's clients include both individual buyers and
rental buyers, who have different bargaining powers in this context. Ford buyers can influence
the company's prices to some degree, which affects the company's profitability. However, they
cannot exercise significant control over pricing decisions. This medium bargaining power of
customers allows Ford to make some price revisions but cannot commit to a significant price
increase to maintain vehicle demand in the market.
As far as suppliers are concerned, the bargaining they own is relatively low, probably medium.
The large number of different suppliers in the industry gives limited power to each of them. The
high competition between suppliers makes them have highly competitive prices and does not
exert a lot of pressure on car companies. On the other side of the coin, demand is as high as
supply and consumers (car companies) cannot exert high pressure on suppliers neither because
these can bail out of their agreements and supply other companies.
To finish Porter’s analysis the competition between rivals will be discussed. This force can have a
high impact in Ford. The existence of a lot of very big car manufacturers establishes high
competition in the industry. The minimum error from one manufacturer will undoubtedly be
taken advantage of by the other leading companies. It is important for Ford and, all car
manufacturers in general to continuously differentiate from their competition to try and own the
biggest market share possible.
Ford Motor Company: Five Forces Analysis (Panmore Institute, 2017) http://panmore.com/ford-motor-companyfive-forces-analysis-porters-model
Porter’s Fie Forces of Ford (Porter Analysis, 2019) https://www.porteranalysis.com/porters-five-forces-porters-fiveforces-model-of-ford/
Ford has a Growth Strategy based on product development. They perform this strategy by having
a large number of different vehicles which suit different markets. As shown above, in the SWOT
analysis, Ford has sports cars, familiar cars, SUVs, pick-up trucks, vans, small affordable cars,
hybrid and electric cars. This helps them have market shares out oof many different markets,
more than the competition. The main advantage this strategy gives is the wide target consumers
the company has and this leaves to anyone being able to identify with the brand. A clear
disadvantage this strategy gives is the lack of focus in a certain market. Ford does not control
totally any market because they have to share their attention and resources in many different
markets.
If we compare it Toyota, they both have the same strategy. Toyota also has market shares in a
lot of different markets. They manufacture small affordable cars, SUVs and crossovers, trucks,
minivans and sports cars. This helps the cover a large number of markets and has a lot of different
target consumers. Toyota have developed much more efficiently the hybrid technology, on the
other hand, they haven’t got any fully electric vehicles like Ford have. Another strategy that I did
not mention before that can be seen in both of these companies is differentiation. This strategy
is given by the fact that they manufacture more “ecofriendly” vehicles than their competition.
This strategy gives a big advantage over their competition with all the concern it is going on
nowadays about how cars pollute due to the emissions of CO2.
The two main opportunities Ford should take advantage of in the future are the development of
self-driving technology and the development which is already quite advanced of hybrid and
electric powered cars. I believe these are very important opportunities. The first one to ensure
the security of the car users in the future and the second one to ensure the health of our planet
which is really important. Ford should focus strongly in these two opportunities because
otherwise the competition will win advantage over them, which leads us to the main threat in
the future. I believe the competition rivalry is the main threat to any company in the sector. It is
important to all the companies to continue developing and innovating. Evolve or die as they say.
BIBLIOGRAPHY
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Are self-driving cars safe? (Kia, 2021) https://www.kia.com/dm/discover-kia/ask/are-self-drivingcars-safe.html
Britain’s
gas
crisis,
explained
(The
New
York
Times,
2021)
https://www.nytimes.com/2021/09/28/world/europe/why-uk-fuel-shortage.html
Ford Motor Company: Five Forces Analysis (Panmore Institute, 2017) http://panmore.com/fordmotor-company-five-forces-analysis-porters-model
Ford stops making cars in India, the third U:S: vehicle maker to exit (Forbes, 2021)
https://www.forbes.com/sites/nramakrishnan/2021/09/13/ford-stops-making-cars-in-india-thethird-us-vehicle-maker-to-exit/?sh=1e59a60a6e68
(Ford, 2021) https://es.ford.com/
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Graph showing the evolution of electric car sales from 2010 to 2020 (The Guardian, 2021)
https://www.theguardian.com/environment/2021/jan/19/global-sales-of-electric-carsaccelerate-fast-in-2020-despite-covid-pandemic
In 2020 more than 42000 persons died in car accidents in the USA (EFE news, 2021)
https://www.efe.com/efe/usa/sociedad/en-2020-murieron-mas-de-42-000-personasaccidentes-viales-ee-uu/50000101-4480125
Our history (Corporate Ford, 2021) https://corporate.ford.com/about/history.html
Porter’s Fie Forces of Ford (Porter Analysis, 2019) https://www.porteranalysis.com/porters-fiveforces-porters-five-forces-model-of-ford/
Table showing total revenue and revenue growth during the years 2017-2020 (Stock analysis,
2021) https://stockanalysis.com/stocks/f/financials/
2021 global 2000 (Forbes, 2021) https://www.forbes.com/lists/global2000/#ef73f95ac042