Public transportation would come first to most of people when thinking about the substitute of private cars. More and more people are willing to give up cars and use public transportation especially when the service of public transportation is better.
Besides, since there are increasing number of SOHO workers, many people choose to work at home by Internet. So they do not need a car to drive to work, thus the significance of owning a car is decreased.
. Car renting and Car Sharing
Today, the ever-rising petrol price becomes another factor that forces many people reduce the usage rate of their cars. Many people choose to rent a car for travel or share one car between friends instead of driving alone. As a result, demand of purchasing a car would be decreased and there is increasing demand for car rental especially now some rental firms have provided more complete and customerizedservices.
To summarize, public transportation, car renting and car sharing could be some of the substitute methods of owning private cars. All of these means have pressed threaten on the world auto industry.
2.2.5 Intensity of Rivalry Among Existing Competitions
Porter point out that rivalry occurs for the reason that one or more competitors feels pressure or sees the opportunity to improve position. In global automobile industry, rivalry among the competitors is very strong and the major competitors are closely balanced so that the rivalry is increasing intense. Besides old rivals such as General Motors, Ford, Volkswagen, those Japanese carmaker like Toyota and Honda now are gaining stronger power in this industry. Because there is little differentiation among the products, when deciding purchasing, one rival is always compared to another constantly in price, quality, durability, and many other aspects. As a result, in order to gain market share in the automobile industry, company should provide better product as well as better service so that it could take the market share from their competitors.
2.3 Strategic Group Analysis
To identify strategic groups which has similar strategic characteristics, following similar strategies or competing on similar bases can help to understand the most direct competitors and of any given organization and also can help identify potential opportunities and threats.
Strategic groups in automobile industry can be identified according to the product’s class and status such as those upper class manufactures such as BMW, Mercedes Benz, and up medium, medium and lower medium manufactures such as Honda, Ford and other market segment such as racing car and so on. In different regions, each groups’ power are vary. It is essential to Ford Company to identify different situation in different places all over the world, so that the business strategy can be chosen properly.
III. INTERNAL ANALYSIS
3.1 Resource Audit
Resource audit is useful in understanding strategic capability according to Johnson. To identify the availability of resource that can be used is important for a business. In the following, the resource of Ford Company would be examined.
The Ford Motor Company controls the many car marques wouldwide, such as Jaguar, , Land Rover, Lincoln, Mazda, and Volvo.
Through acquisition, Ford Company got control of some famous brands such as Land Rover, Jaguar and Volvo. Based on the customer knowledge and trust of those upper class brands, the sales of other segments and brands of Ford car had been promoted. By building the image of Combining solid refined design and the best new technologies available, the company becomes a powerful rival in the market, and the brand has widely accepted by many people.
3.1.2 Products and Market
Ford has numerous locations where Ford vehicles are developed, manufactured, sold or distributed. These plant and office locations work to provide a basis of the company’s leading position in car market for many years, which take responsibility in manufacturing vehicles and power products, technological developing, purchasing and distribution its products all around the world. Although with high cost-effective Ford models such as Transit, Fiesta and Focus that have become the best seller for many years, there would be a problem of shrinking of market and declining in profitability recent years.
According to Ford Company 2006 annual report, although the company is at loss during the year for the unsatisfied performance in North American market, the situation in Europe market is still profitable with the sales of vehicles that generated the major income and cash of the company’s automotive sectors’ revenue. In addition, the interest on finance receivables generated the primary income of the company’s financial services sector’s revenue. Based on its vehicles and financial service sales, the company has the ability to support some technology development or have some further investment such as diesel engineering.
Ford invests heavily in new technology. In Britain only, it spends around 450 million on automotive research and development annually. In Dunton Technical Centre, it has the largest automotive design and engineering facility in the UK and one of the most advanced facilities of its kind in Europe. The emphasis on technology enables the company have a solid basis of product development. As a result, competitive advantage through new technique, programmes such as digital in-vehicle system called Sync created with Microsoft that is turning out this summer is a good example.
In order to equip its employees with stronger capability, Ford offers well equipped learning resource centers and training programmes for all employees. These human resource management actions has not only trained sufficient qualified employees for the company, but also provided a base for producing conversations of company’s strategic change. On the other hand, recent bad performance forced Ford Company to shear its employees. It is said that a downsized Ford would shed up to 30,000 jobs and 14 factories by 2012 in order to be more innovative.
3.2 Value Chain Analysis
Value chain (see appendix III) analysis has been widely adopted as a way of understanding the relationship between strategic capability and organisation’s resources.
As to Ford Company, in its very early years, the company has controlled the entire value chain, now it endeavors to integrate its multi-tiered value chain which include chief elements such as real-time quality feedback from the market to tier, inventory reduction, transaction reduction, collaborative visual design studios, rapid customer feedback, accelerated time to market. Through those actions, the resource utilization is enhanced so there would be less resource is wasted during the production and transaction. Besides, the cost efficiency has increased by building the economies of scale, reducing supply cost and effective communications between suppliers and buyers. In addition, a carefully planned marketing mix and a better service would promote effectiveness, such as the efforts that the Ford Company put on CarsDirect and online selling.
IV. GENERIC COMPETITIVE STRATEGIES
4.1 SWOT Analysis
Company’s Large Scale
Ford Company is one of the largest automotive manufacturers in the world. It manufactures and distributes automobiles in 200 markets across six continents. The large size has brought the company economies of scale as well as name recognition and customer trust.
Through acquisition, Ford Company now has owned many world famous brands include Ford, Jaguar, Land Rover, Lincoln, Mazda, Mercury and Volvo. The company’s products has penetrated into every segments of auto industry and each brands has its own strengthens in different segment, such as Land Rover is famous of its 4X4 vehicle and Lincoln is a well know luxury car.
Profitable Financial Services Division
The financial services division, Ford Motor Credit, plays a key role in keeping the company afloat. Even the automotive division are reported at loss, there is evidence that the financial services still remain profit. As a result, the revenue made by financial services division would be a great help when its automotive sector is not performing well.
By cooperating with some strategic alliance, the company can benefit a lot from the advantages of their partners’. Ford has announced to start offering Sony-branded audio systems in Ford and Mercury automobiles and Microsoft software will be used for the Ford Sync radios. Besides, Ford Company also support racing teams such as NASCAR and it also participated in sport event such as formula one for many years and it is one of the leading manufacturer in automotive racing. This achievement has brought good reputation to the company.
Bad Proformance in US market
As an American car manufacture, Ford Company done badly in its domestic market recent years. The disappointing performance in the US market has affect the company’s operations to a great extend.
Decline in Profitability
The company’s profitability has declined in recent years. The company recorded revenues of $160,123 million during the fiscal year ended December 2006, a decrease of 9.5% over 2005 according to the 2006 annual report. In addition, the 2006 annual report also shows that the company’s average revenue growth during fiscal 2006 stood at negative of 9.5% which is lower than the industry average of 10.2% during the same period.
Decline in Market Share
Though Ford is the one of the biggest carmaker, its performance is not that satisfied, as it has lost its market share in the few years. Evidence shows that Ford may fall from 2nd to fourth place in market share in 2007 behind General Motors, Toyota, and Chrysler. The decline in overall market share would primarily due to decline in company’s retail market share in my opinion. As a result, continued declines in company’s market share would cause a substantial bad effect on company financial condition and its operations.
Ford has recalled a number of vehicles in 2007 owing to various reasons. It is reported that 37,400 has been recalled 2008-model-year F-Series Super Duty trucks with 6.4-liter diesel engines following reports of tailpipe fires and recalled nearly 527,000 Ford Escape from the 2001-04 model years because the antilock brake system poses a safety hazard. These products recalls has influenced the sales to some extent because customers would begin to doubt the quality and durability of the products.
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