Ford belongs to the automotive sector in the US, manufacturing a range of vehicles under the brand names of Ford and Lincoln. The PESTLE analysis of Ford includes discussion on the macro environment factors that can affect the sales and profitability of the company. These factors also suggests the growth prospects and barriers to the achievement of high revenue.
Company Background and Introduction
Ford Motor Company is an American multinational automaker founded by Henry Ford in 1903. It is one of the world’s largest automakers and produces a wide range of cars, trucks, SUVs, and commercial vehicles under the Ford brand.
Henry Ford revolutionized the automobile industry by introducing the moving assembly line in 1913, which allowed for mass production of vehicles at a lower cost and at a faster rate. This innovation made automobiles more affordable and accessible to the average American, and helped to make Ford one of the most successful and influential companies in American history.
Today, Ford is known for its popular models such as the F-150 pickup truck, Mustang sports car, and Explorer SUV. The company is also investing heavily in electric and autonomous vehicles, with plans to release several new models in the coming years.
In addition to its automotive business, Ford also owns other brands such as Lincoln and has a presence in the mobility industry through its subsidiary, Ford Smart Mobility. The company is headquartered in Dearborn, Michigan and has operations in numerous countries around the world.
Company Information
| Company Name | Ford Motor Company |
|---|---|
| Year Founded | 1903 |
| Founder | Henry Ford |
| Headquarters | Dearborn, Michigan |
| Industry | Automotive |
| Products | Cars, Trucks, SUVs, Commercial Vehicles |
| Brands | Ford, Lincoln |
| Revenue | $127.1 billion (2020) |
| Net Income | -$1.3 billion (2020) |
| Number of Employees | 186,000 (2020) |
| Website | www.ford.com |
Political Factors
One of the main factors that a company considers when making investment decisions in a region is the level of political stability. Manufacturing units are established in regions that are politically stable. The management at Ford had to reassess the investment plan for development of a factory in Thailand as the country was going through unstable political condition.
Supply of parts used for vehicle manufacturing is linked to political stability. A recent example of political instability effecting the supply operations for Ford is the Russia and Ukraine war. As a result of the conflict, the procurement of infotainment screen from Germany and Spain was interrupted, leading to its shortage (Gibbs, 2022).
The government plays a significant role in creating an environment that is conducive to organizational growth through adoption of suitable policies. Ford has been offered incentives by the government, with the aim to set up manufacturing units in different regions that would also boost economy. The tax implemented on the vehicles also effects the market response to Ford.
Economic Factors
Economic condition of a country defines the growth trajectory of an organization. Ford is effected by the different economic factors. When the economy of a country is facing recession, sales across different industries are negatively affected. High GDP indicates the possibility of growth for automotive segment while lower GDP negatively effects company sales.
In case of Ford, the 2008 financial crisis in the US has resulted in a loss of more than $ 14 billion (Vlasic, 2009). Inflation can increase the cost of manufacturing of the different vehicles as the raw material and automotive parts also experience price increases. Ford had to bear a $ 1 billion higher price as the suppliers implemented changes to their price structure.
Unemployment and income of people are also key factors that determine consumer spending in the automotive domain. Moreover, organization’s profitability and expansion of operations leads to purchase of new vehicles by businesses. When there is financial slowdown and businesses are experiencing crunch, the management cuts expenses and unemployment is on the rise.
Social Factors
The overall economic stability indicates a higher demand for the vehicles. During the US recession, the demand for new vehicles was significantly lower which has resulted in record low sales for the company. The cost of maintaining cars was more than what people could manage with poor job security and low income therefore, the consumer focus wasn’t on buying vehicles.
In addition, high inflation and rising fuel cost can divert the focus of people towards lower cost alternatives such as public transport or ride sharing services (Ford Motor Company, 2021). In order to balance the effects of inflation, the company has adjusted its price structure, which further discourages the people from buying cars due to affordability issues.
Pandemic was another major social factor that caused a decline in Ford sales, particularly in the commercial segment. The company also had to close some of the manufacturing units and make changes to the operations to adhere to the social distancing policies. Furthermore, the auction activities were impacted as the social distancing caused delays in the completion of process.
The trend of electric vehicles offers a growth opportunity to the company. Investing in the development of electric vehicles variants could help the company to take advantage of this social trend and capture a wider target market. The company has also developed Ford+ plan, using its strengths and insights about consumer demand to create vehicle designs.
Technological Factors
The automotive industry uses multiple forms of technology tools in the manufacturing of the vehicles. Technology also helps the company in its R&D processes, creating new vehicle designs and adding up to date specifications. From the use of sensors and smart technology to machine learning Ford has been using technological advancements to compete with the other companies
The use of robotics by Ford illustrates how technology can significantly improve efficiency of manufacturing operations. The integration of robots in the factories enables the company to handle its 3D printers and manufacture the parts with precision (Trop, 2022). The use of robots is also evident during the process of assembling the vehicles in the factories.
Another illustration of technology is the autonomous vehicles which is supported by the use of Artificial intelligence (Ford Motor Company, 2021). In addition, AI enables the management to ensure that high quality vehicles are being produced in the market. Ford has formed collaboration with other technology firms such as Argo AI to further advance its vehicle design.
Legal Factors
The company has to follow the safety regulations that have been developed by the government and design the automobiles accordingly. Quality testing is performed to ensure that the vehicles sold meet the safety standards (Ford Motor Company, 2021). Ford has been facing legal issues due to complain about its defected engine in EcoBoost.
Ford also needs to adhere to the employment laws, managing the workforce without discrimination and exploitation. The management needs to follow the labor laws, offering suitable compensation to the workers and leaves along with other perks and benefits such as health insurance.
Environmental Factors
The government also offers comprehensive guidelines about the vehicles and their impact on the environment. Ford needs to follow the protocols created by EPA and manufacture vehicles that have emissions within the specified range. The component of fuel efficiency and noise level is also important in this domain.
The company operations have to follow environmental standards as well. Some illustrations of sustainability initiatives by Ford include use of renewable materials in the manufacturing of the vehicles and making zero emission cars (Ford, 2022). It also includes reducing emissions across the supply chain and manufacturing operations.
Conclusion
Ford Motors is effected by the macro environment factors, such as political disturbances and economic decline. Changing social trends and technology offer innovation opportunities to the company while shift in consumer choice due to financial crunch decreases company sales. Legal and environmental aspects effect the vehicle designs and overall manufacturing process.
References
- Ford (2022). Integrated Sustainability and Financial Report Summary. Retrieved from: https://corporate.ford.com/content/dam/corporate/us/en-us/documents/reports/integrated-sustainability-and-financial-report-summary-2022.pdf
- Ford Motor Company (2021). Form 10-K. Retrieved from: https://s201.q4cdn.com/693218008/files/doc_financials/2021/ar/f42c2517-70ad-46b9-969f-bf057bf4c9cd.pdf
- Gibbs, N. (2022). Ford’s European output hit by Ukraine war. Automotive News Europe. Retrieved from: https://europe.autonews.com/automakers/fords-european-output-hit-ukraine-war#:~:text=Ford%20is%20experiencing%20a%20number,with%20an%208%2Dinch%20screen.
- Trop, J. (2022). Ford is now using robots to operate 3D printers without human help. Tech Crunch. Retrieved from: https://techcrunch.com/2022/03/16/ford-is-now-using-robots-to-operate-3d-printers-without-human-help/#:~:text=Ford%20is%20now%20using%20robots%20to%20operate%203D%20printers%20without%20human%20help,-Jaclyn%20Trop%40jaclyntrop&text=Ford’s%20Advanced%20Manufacturing%20Center%20has,of%20the%20production%20line%20autonomously.
- Vlasic, B. (2009). Ford Reports a Record $14.6 Billion Loss for 2008. New York Times. Retrieved from: https://www.nytimes.com/2009/01/30/business/30ford.html