The Engineering Management

Executive Summary

The following report focuses on Ford Motor Group Worldwide analysis. The automobile industry is viewed by many analysts as inherently interesting owing to its massive and competitive nature. Due to changes in the global trends and oil reserves, the automobile industry should be re-structured. To this end, “Porter’s Five Forces” business model has been used in this report to help in deeper understanding of Ford Motor Group (“History of the Automobile”, 2005).

The industrial growth and expansion of the Ford Motor Group are majorly influenced by vehicle components, fuel innovation, market changes, societal infrastructure, business structures, suppliers, and manufacturing practices. For instance, the recent consumer empowerment and increasing sophistication trends have prompted the automobile makers and dealers to search for new markets, which are specialized, among the ones that are already saturated with customer diversity bases. A good example of such a market is the one in the United States. Therefore, it is important to venture in the newly emerging markets, especially in the Latin America and South East Asia (“History of the Automobile”, 2005). This will promote the automobile dealers to establish production facilities in the overseas. Therefore, such establishments will in turn lead to business strategic partnerships and global alliances with foreign automobile dealers.

Business Model

Michael Porter came up with five major forces, which influence the industrial performance. Moreover, the forces identified are barriers to entry, supplier power, and degree of rivalry, buyer power and threats of substitutes. Considering other industries that operate under the free market and capitalistic economy, analyzing the automobile industry through the use of Porter’s Five Forces Model is very important to understand the market dynamics (Freyssenet & Shimizu, 2003). However, in this discussion, the main focus is on the analysis of the barriers to entry that exist in the automobile industry.

The automobile industry has high entry barriers that only allow fewer firms to enter in the market. In fact, there are small numbers of firms that dominate the automobile industry since there are several barriers to entry. In such business environments, there are high economic rents, which make the automobile industry attractive to many investors, both the local and foreign. However, firms such as the restaurants have few entry barriers due to low economic rents, which make them less attractive to the potential investors. The analysis presents some entry barriers that exist in the automobile industry (Freyssenet & Shimizu, 2003).

Every newly established company faces the threat of startup capital. It is such substantial barriers that are evidenced in the automobile industry. The working capital that is required in order a new company to set up a manufacturing capacity, which helps in achieving the intended level of production, is prohibited. Therefore, it is not easy to attain the minimum efficient scale of production. The limitation can be attributed to the nature of the automobile industry that has a very specialized manufacturing facility. In case the automobile manufacturing facility fails, it is not easy to re-tool it. It is only possible for the new companies to enter the automobile industry through mergers, acquisition and strategic partnership arrangements (Hiroaka, 2011).

The startup capital is tied for the daily operation of the business, and this money is not invested elsewhere. Thus, it is difficult for the small and up-coming companies to get enough money to finance their daily operation (Evans & Lindsay, 2007). This can force them to rely on borrowings from various financial institutions that offer loans at high interest rates.

The economies of scale that exist in the automobile industry create a high barrier to entry. Firms that operate in the automobile industry must meet the required scale size. Though, the firms can achieve the economies of scale, they do not enjoy the associated learning curve benefits in the short run. It is a difficult task for the firms to prove the existence and probably the non-existence of the economies of scale, which is not tangible in nature (Freyssenet & Shimizu, 2003).

It is a big challenge to the small firms in the automobile industries since their brand identity is still very low. For instance, the automobile buyers often make buying decision based on the company’s brand identity. This presents a major entry barrier in the industry (Freyssenet & Shimizu, 2003). In such cases, the small companies tend to incur a lot of expenses against the sales revenue. Such a downward trend on the revenue earning discourages other small firms from entering the market.

Focusing on absolute cost advantage, legal constraints such patents and copyrights in the automobile industry which present a very high barrier to entry, and these are created by the legislation of the government (Freyssenet & Shimizu, 2003). These government documents create monopoly in the industry, thus barring the new entrants.

Innovation and Development

Ford Motor Group Worldwide has been greatly successful due its strategic approach and innovation of luxurious cars. Indeed, this has enhanced the company’s growth/development, organisational strategic capability and promoted the stakeholder expectations about the company products. Through the company’s strategic policies, adoption of technological ways of manufacturing cars, Ford Motor Group has been able to produce high quality cars, which meet the consumer demand (Evans &Lindsay, 2007). This has also helped the company to minimise the impacts of external environment on the strategy.

Ford Performance Vehicles (FPV)

These vehicles include tractors, heavy trucks, automobiles, and buses. The company manufactures luxury automobiles such as the Lincoln marque. However, the company stopped selling its Mercury brand in 2011, because of generated poor sales revenue (Hiroaka, 2011). Ford Motor Group has been manufacturing Ford Transit jumbo van in Europe that is convenient for transporting goods and services, because it carries a maximum load of 2.265 tonnes (Hiroaka,  2011).

Business Review

Ford Motor Group is the multinational company, meaning that it has outlets in many countries around the globe. For many years, since its inception, the company has witnessed tremendous growth, with sales turnover of about 1.28 million cars in 2010, posting an increase of 18% from the previous year (Hiroaka, 2011).   

Internal Analysis

SWOT Analysis

Strength

Ford Motor Group Company is the leader in the global premium car market. Basically, it draws its strength from the revelation that the premium products will continue to stay in the global market. The second strength is that those high quality products such as the Ford Motor Group cars will maintain and possibly increase growth internationally. The other factor that strengthens the operations of Ford Motor Group is increase of the rate of growth of premium cars compared to the ones of demanded in mass market. The company has various product ranges to offer. Moreover, it places special importance on technological development of the various segments such as the cars and big vehicles (Hiroaka, 2011). Ford Motor Group thrives on innovation, because the company  has well-developed marketing strategies. The company management is experienced in the car manufacturing sector, thus it gives hope for its development.

Weaknesses

The prices of the products are on the higher sides, consequently blocking other interested buyers living in the lower income category. The economic conditions in the Europe, America and Asia, which constitute the largest and primary market, have deteriorated in recent years due to unprecedented financial crisis. Indeed, such changes have affected the operations at the company, and have contributed to its weaknesses. The company has not been able to promote its other products other than the small cars segment, thus not been able to attract a larger market from the business communities using large trucks (Evans & Lindsay, 2007).

Opportunities

The high-class population in the Europe, United States, Asian and the rest of the world is increasing, therefore the company is sure to receive pressure due to probable increase demand the product in the coming years. Technology in the company has also developed indicating that the organisation will benefit from promotion. The emerging world market provides a great opportunity for the business on a global platform. The company’s incubation of efficiency dynamics presents and opportunity for future growth. In addition, the company has established market in many parts of the world that forms its security and opportunity for further development. Since the world grows towards low carbon dioxide cars, the company has opportunity for future growth because its cars low emission of carbon dioxide (Evans & Lindsay, 2007). Moreover, customers always demand luxury, and since most of the company cars depict this quality, it has possibility for further growth and development. 

Competitors

The external environment that affected the operations at the company included the competitors, customers, suppliers’ attitudes and the government influence. Major competitors of the company are Toyota and Mitsubishi. Toyota exited the global market because of its cheap cars, which interfered with the internal operations of Ford Motors Group (Hiroaka, 2011). For instance, since Toyota cars are cheap, they have dominating the market.  However, Ford Motors Group brands are still globally recognized brands because of their high quality and unlike Toyota; the company manufactures a range of luxurious cars to suit the high class in society.

Threats

The rules and regulations of the car industry have changed, and provides a challenge for the company. There has been a rise in regional and international competitors such as Toyota, Mitsubishi and others (Hiroaka, 2011). The price of raw materials for manufacturing cars is expected to rise in the future, thus threatens the company operations. In summary, the other threats to the company include lifecycle factors, global economic downturn, international depression and financial crisis among others.