Master Project Business Proposal

Pages: 14 (3942 words)  ·  Bibliography Sources: 10  ·  File: .docx  ·  Level: Master's  ·  Topic: Business

Business Problem Proposal

Proposed Company: The Ford Motor Company

Business Related Problem

The automobile industry and in particular, the Ford must devise methods to remain competitive and increase market share. Current market analyses indicate competition is not just other automobile industry companies, but the global market for automobiles experienced an unhealthy growth over the past five years. Looking forward, while the pace of market expansion is anticipated to slow, annual growth will become more stable.

The Ford Company will maintain or improve its current industry dominance with research. By applying linear regression, the company can correlate market and financial statements, utilize multiple regression to interpret the output, and leverage the use of time series analysis and forecasting to make business decisions. Will annual revenue continue its current growth pace? The following research questions will provide a guide for this study. The motivation and purpose for this study and related research questions are also presented within the business proposal.

1) Will revenue increase with increased direct marketing efforts focused in the growth sectors of the automobile industry?

2) Will Revenue will increase by a greater proportion if the marketing efforts include a global span?

Purpose of the Study: Does Ford Motor Need to be More Competitive and Financially Stable

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Revenue is the overall earnings of a company and for a large company such as Ford Motor, there are always competitive and strategic practices that are needed to increase revenue.

Business Proposal on Master Project Assignment

However, marketing activities have focused on financial solvency and how to increase the consumer base and more importantly increase revenue. The crux of the paper is to get a clear understanding of how direct marketing efforts focused on growth can increase revenue. Similarly, there is the notion that global expansion to include areas such as China or other Asian nations can increase revenue exponentially.

Motivation of the Study

Ford Motor Company is the fourth largest automaker in the United States. The company is based in Detroit Michigan and began in 1903 with founder Henry Ford. The brands of Ford now include popular cars such as Lincoln, Volvo, and Mercury. Ford has been one of the largest family-owned enterprises and was one of the few companies to survive the Great Depression in the 1930s.

Ford has established clear objectives that include:

- Grow the value of our existing brands and expand their product portfolio

- Confront ongoing market challenges that have limited the growth. These challenges ? created by changing consumer tastes and an evolving traveling environment

- Seize share of this growth by achieving our goal and creating better balance in our portfolio.

- Work with affiliates and other services to seek opportunities for new brands and products.

The mission of the Ford can be summarized within the strategic principles outlined by the company below:-

To guide this effort, Ford's leadership team has identified three strategic priorities:

Strengthen brand portfolio by growing the value of existing brands and significantly expanding product portfolio;

Transforming the market model and improve efficiency and effectiveness;

Establish a winning, inclusive culture as Ford attracts, develops, and retains a talented and diverse workforce.

Ford Motor Financial and Strategic Analysis -- Background to Ford's Problem

The market place characteristics which make the research question suitable are:

> Stringent quality control systems in every plant

> 440,000 customers

> Consumer response mechanism in every country

> 84,000 suppliers

> Supplier Guiding Principles Program

Strategic Weaknesses and Threats

Within the automobile sector Ford Motor has outlined a strategic objective of increasing loyalty and profitability of customers by directly providing products that are useful to the organization.

The bargaining power of buyers is highlighted by the fact that Ford Motor wants to increase brand loyalty, hence the strategic marketing activities, which reinforces elements of the marketing mix and helps to alleviate the bargaining leverage of the buyer. In the automobile industry demand is highly elastic since there are many substitutes, Ford Motor minimizes the threat of the buyer power, by making demand more inelastic since they offer a wide array of products across different categories of goods and products that are different from competitors, this is unique and lessens the threat just being a similar product in a vast market and creates a unique product differentiability for Ford.

Based on the analysis of the buyer power above, it is clear that ideally the threat of substitutes exists, but Ford Motor minimizes this creating brand loyalty via their strategic business process which is the idea behind focusing on the investor only and removing the conflict of interest typical within the industry.

There are no serious barriers to entry in this market structure. This explains Ford Motor's integration of a strategic process, so that they can maintain their profitability from new entrants. There are very few absolute cost advantages, the inputs needed are not difficult to acquire, capital requirements are minimal, and Ford Motor's to distribution channels is easy. Ford exists in a market that has freedom of entry, hence they have to continually improve and maintain a competitive advantage.

More importantly, the analysis and research questions are grounded within the financial aspects of the company. As such there is a need to analyze the financial position of the firm to determine the motivation and purpose for the study and as well as the reason for analyzing a revenue equation.

Financial Woes of Ford

Ford Motor faces almost one-to-one current ratio; with 0.96 and 0.88 in 2009 and 2008 respectively. This is not surprising in a sector that has a lot of its assets in capital equipment and machinery -- however when compared to the industry average, it seems that Ford Motor will have problems with their short-term obligations.

The accounts receivable ratio fell slightly between 2008 and 2009, even though the overall sales/revenues increased. By maintaining accounts receivable, Ford Motor can indirectly extending interest-free loans to their clients. This high ratio implies either that Ford Motor operates on a cash basis or that its extension of credit and collection of accounts receivable is efficient.

The average collection period for Ford Motor is unfavorable since it takes customers 43 days in 2009 to pay their bills (up from 41 days in 2008), indicating the effectiveness of credit and collection policies of Ford Motor.

Inventory turnover is unfavorable. However the increase in inventory level from 2008 to 2009 may be unhealthy since it represents an investment with a rate of rerun of zero and it opens the Ford Motor up to trouble should prices begin to fall. However, the turnover statistics implies good sales and some level of effective buying.

Given that Ford Motor is in a more capital intensive industry the debt to equity ratio that is approximately 2 is unhealthy for Ford Motor. If a lot of debt is used to finance increased operations (high debt to equity), Ford Motor could potentially generate more earnings than it would have without this outside financing. If this were to increase earnings by a greater amount than the debt cost (interest), then the shareholders benefit as more earnings are being spread among the same amount of shareholders. However, the cost of this debt financing may outweigh the return that the company generates on the debt through investment and business activities and become too much for the company to handle. This can lead to bankruptcy, which would leave shareholders with nothing.

Similarly, the long-term debt to total assets implies that the company's reliance on debt for asset formation is not that risky and Ford Motor is less likely to have a repayment burden.

The times interest earned based on the trend from 2008 to 2009 is not stable, since the earnings before interest and taxes in 2009 was negative (a loss). However in 2008 the times interest earned was 2.2. This might be indicative of the fact that the creditworthiness of Ford Motor is depleting over time, especially in wake of the fact that they faced a loss in 2009.

The total margin comparison is done across industries rather than over time, given the analysis within the industry Ford Motor's currently operates faces similar percentages.

Return on assets and return on equity is unfavorable in 2008 at 2% and 9% in 2008. However, in 2009 with a net loss for Ford Motor, then the ratios are negative and this is similar across industries, as companies engage in expansion strategies that will benefit the industry overall but affects the measure of how well the companies used reinvested earnings to generate additional earnings.

The earnings per share in 2009 was unfavorable when compared to that of its major competitors. The significant drop in the price/earnings ratio has been associated with the new product lines that have attracted investors to the company.

FINANCIAL STATEMENT ANALYSIS WORKSHEET

2009

2008

Current Ratio

0.97

0.88

Quick Ratio

0.76

0.68

Comments: Ford Motor has a relatively high measure of liquidity, which indicates that the company may have some problem meeting its short-term debt. This becomes even clearer when inventories are included and the quick… [END OF PREVIEW] . . . READ MORE

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