External Environment Ford Motor Company Term Paper

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[. . .] Whether current low interest rates trump high unemployment and low consumer-confidence rates in terms of an indication of how the economy is likely to fare in the future is not clear; generally economists are fairly sanguine about the future while also being puzzled as to the lag in employment and consumer confidence.

Social-Cultural and Environmental Factors

The social-cultural factors that affect Ford vary (by definition) from one country to the next. Certainly one of its weaknesses as a company is its very low profile in Asia, with the exception of its ownership of Mazda. However, this ownership has done less for its overall penetration into Asian markets than expected. It has also had unexpected problems integrating Mazda production and marketing into the established company and these problems have not yet been entirely worked out. One of its long-term weaknesses may well be its inability to become more of a presence in the Asian market. Porter's value-chain argument (1985, 1998), which is summarized below, suggests that one of the reasons for these particular problems faced by Ford is the lack of sufficient attention to marketing and sales in certain regions of the world.

Primary Value Chain Activities

Inbound

Logistics > Operations > Outbound

Logistics > Marketing & Sales > Service (http://www.quickmba.com/strategy/value-chain/)

It is also weak in a number of niches in the European car market. Although as a whole it does better in Europe than it does in Asia, there are still important categories in which it remains unrepresented (or practically so) in Europe, such as the cheap sports car. Hamel and Prahalad (1994) warn against ceding entire segments of a market such as Ford has done in this case.

The reasons for such poor showings in other countries reflect both economic and cultural factors: Ford may fail to do well in Europe because it is such a quintessential (and even aggressively) American name. This may also have slowed its entrance into Asian (especially non-Japanese) Asian markets, although clearly in this latter case all American companies have had problems because of the high tariffs levied against non-Asian car companies. Ford's small moves into Thailand are likely to help it in the future in Asia, although the fact that GM and BMW have made similar moves will limit to some extent the competitive of Ford's attempt to use Thailand as a way to springboard itself into the general Asian market (http://www.businessweek.com/2000/00_19/b3680166.htm).

While Ford may be suffering from being "too American" to succeed in Europe, it is connecting at home with the demands of many Americans who are perfectly happy to buy home-made goods if those products are also good for the environment.

Technological Elements

One of the key questions in concerning the technological environmental that Ford finds itself in is the extent to which the technology it is using allows for its products to be made both more cheaply and/or to a better standard of quality than cars by other companies.

It has made important gains in this respect, including its recent implementation of a new intranet-based production system:

Dubbed C3P, the system is a Product Information Management (PIM) knowledge database that unites three computer-aided tool sets -- design, manufacturing and engineering -- for improved productivity, quality and communication (http://www.internetwk.com/case/study102698-2.htm).

Chrysler and GM, however, have similar systems, so Ford's adaptation of such a system has served merely to keep it competitive rather than giving it a competitive advantage.

Ford's Current Strategy

Among the key elements of Ford's current strategy is its push to add Hybrid Electric Vehicle to its line of offerings, having debuted the Escape this spring. HEVs are an especially important addition to the Ford line-up (as they would be to the line-up of an manufacturer) because they offer a substantial amount of the environmental benefits of a fully electric car with none of the range-of-driving restrictions that a fully electric vehicle has.

Although HEVs are not as "green" as fully electric cars, their presence in the Ford stable of offerings is an important strength for the company. Given that many people want a more environmentally responsible car but are unable or unwilling to change driving habits that make a fully electric car feasible, the HEV may well be the next generation of car that many if not most Americans choose to buy. Such a car offers a relatively low element of risk and uncertainty with an accompanying high degree of acceptability given the favor in which an important segment of the car-buying market holds environmental standards. Given that the technology to produce such cars already exists and can be implemented with relatively little disruption to other elements of Ford manufacturing, this strategy should be seen to have a relatively high level of feasibility as well.

By getting in near the beginning of the HEV generation of cars, Ford has the opportunity to establish itself as one of the key companies that consumers look to when purchasing their next (and next after that) environmentally responsible car.

Beyond its front-line position in offering alternative fuel cars (and its near-future position of being able to offer even more options), Ford enjoys a number of other market strengths. It has a high degree of name recognition amongst American consumers (in part because of its longevity) as well as benefiting from the fact that many Americans want to buy items - especially high-ticket items like cars - that are manufactured in the United States.

Ford also offers a wide range of different types of vehicles, having found a good balance between specialization of product and diversity of offerings. It offers both behemoths for those who like their vehicles to be bigger than anything else on the street except for the buildings all the way through small, economical cars.

Finally, Ford must count among its major strengths in this area the fact that it can offer to its customers that indefinable thing called "style." While its cars are not rated as the most efficient or reliable (although its ratings in these areas are certainly not terrible either), it can offer something that many people find lacking in many of its competitors (especially its Japanese competitors in the smaller vehicle range such as Honda and Toyota), which is a sense of styling that transforms its cars from mere vehicles, from simply a way to get from one place to another into personal statements of style.

A modest change that Ford might make at this point is to increase the number of HEV vehicles that it makes, especially in terms of the larger vehicles. While it faces a fairly high level of competition in terms of environmentally friendly small cars, it would face almost no competition at all in for larger, environmentally friendly vehicles: A HEV SUV would appeal to those who actually use their SUVs to take camping and would face no significant competition.

A far more radical change that Ford might make - and one that company officials have discussed in the recent past - is to offer fully electric vehicles. With the recent demise of the EV-1 - all of which were leased to consumers, and the last of which were recalled this summer - a fully electric vehicle (http://www.electrifyingtimes.com/GM_yanks_EV1.html).The technology is available and GM's experience with the EV-1 should in fact encourage rather than discourage further ventures into the fully electric, or even fuel-cell, market.

Ford's Strategic Options

At the moment, using Porter's 1985 analysis, we can see that Ford's key strength and weakness is its very-much-middle-groundedness of the company. This quality allows it to appeal to a number of different kinds of consumer. But it also vitiates consumer loyalty. People will buy Fords (in general) because they are good enough and priced well enough for a person's current requirements - but this is not the kind of ringing endorsement a company can thrive on. Ford would eliminate one of its major weaknesses if it could engender among its customers the same kind of loyalty that is felt by the buyers (on the luxury end) of Jaguars or (on the more modest end) of Volkswagen Bugs.

Given this fact, it seems (following the analysis of Johnson and Scholes in chapter 6) that the best strategy for the company to pursue would be one of differentiation. Being generally good enough is certainly not a bad thing - but it is hardly an enviable market position either. The company has to move to differentiate its products; this would be the most advantageous choice at this point to sustain the competitive advantages that it has as well as to increase that competitive advantage.

This differentiation may require some degree of diversification in terms (as noted above) of being able to offer additional lines of environmentally friendly vehicles, including trucks and SUVs. It may also include adding cars that are fully electric or based on fuel-cell technology. At the same time, Ford may wish to trim… [END OF PREVIEW]

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