Ford and the World Automobile Industry in 2009 Essay

Ford and the World Automobile Industry in 2009 - Essay Example Overview of the Company Ford Motor Company founded in 1903 by Henry Ford, an automotive and industrial pioneer remains today as one of the oldest firms within the industry. The automotive firm in Dearborn, Michigan and has so far grown into other nations. Ford established itself as a major player in the automotive industry in 1908 commanding close to 50% of the market share after sales of 15 million vehicles of Model T (Grant, 2010, p. 46). In 1950, Ford became a public company making it to grow significantly. Ford’s main products include cars, trucks, and SUVs with different types of brands such as Jaguar, Volvo, Ford, Mercury, Lincoln, Aston-Martin, and Land Rover amongst others. Ford also has finance division, parts and service department, and they own Hertz Corporation, being the largest car rental firm in the world. In 2003, Ford was second after a pre-tax profit of about $ 1.3 billion despite a $ 1.1 billion loss in North America. Nevertheless, the company experienced si gnificant losses between 2000 and 2008 attributed to rising costs of commodities, ongoing and rising healthcare expenses, lagging behind of sales of vehicles, and bailing out of major parts supplier from bankruptcy such as Visteon. Ford recorded huge losses in the fiscal years 2000 to 2008 as shown in fig. 1. The following is a Porter’s Five Forces analysis explaining this trend. Figure 1: Table showing return on Equity of various Automotive Firms Courtesy of Grant (2010) Porter’s Five Forces Analysis Various models used in industry and firm analysis to develop the right managerial strategy. Strategic management is a complex due to dynamism and turbulence in business environment. Nonetheless, through Porter’s five forces model, organizations are able to identify areas requiring overhauling for effective and efficient performance (Blake, Cucuzza, Rishi, 2003, p. 11). Like many other firms, Ford’s strategic management can be enhanced through a deeper insigh t into five forces that has been reducing their competitive advantage from 2006 to date hence recording such huge losses. Porter described competitive advantage as significantly influenced by five forces; bargaining power of buyers, bargaining power of suppliers, intensity of competition rivalry, threats of new entrants, and threats of substitutes. These same forces led to Ford’s current economical situation (Windecker, 2004). In each of the below forces, a conclusion regarding rating in a scale of 1 to 5, 1 being very weak and 5 very strong is provided. The full scale is as follows; Bargaining Power of Buyers There is high intensity of competition coupled with increasing demand for automotive products in major markets. Hence, consumers have a variety of firms to choose from unlike during the classical time when there were limited manufacturers. United States of America and European Union consumers have a high bargaining power necessitated by availability of information regar ding various products (Grant, 2010, p. 49). The buyers in automotive industry are powerful due to unavailability of grand proliferation of companies that manufacture automotives. In addition, the largest automotive manufacturers within US have approximately 90% value shipped hence additional value to the product. Another important feature of automotive industry in US is the fair standardization of parts used in assembling of products (Waraniak,