The Ford Motor Company

Abstract

In this paper, I have provided an economic analysis of the US automobile industry, with a particular focus on the economic environment that the Ford Motor Company operates in. The paper commences with a brief company overview, before exploring the impacts that recent conditions in demand and supply have had on the automobile giant. Then, the paper explorers Ford’s production costs and core competitive advantages. Also, the paper factors in the risk of new entrants and substitute products within the auto industry. I have also explored the market shares held by Ford and other firms in the auto industry, and the general market structure of the industry. Ultimately, I have given recommendations on what the Ford Motor Company ought to do to be able to predict its future.

Introduction: The Ford Motor Company

The Ford Motor Company is a global automobile company headquartered in the US, founded by Henry Ford in 1903. The organization commercializes their vehicles and automobiles under the banner of popular Ford, Volvo, and Mercury brands, while the Lincoln brand is used for the larger proportion of luxury vehicles. In the recent times, Ford Motor has released classic models such as Ford Mustang and Ford GT, which have made the organization stand out as one of Detroit’s big three. Although Ford may not have been so dominant in previous decades, with a capital of $50129.9 million, a total of 199,000 individual employees, and a total sales volume of 6.6 million automobiles in 2015, Ford remains to be a key player in the auto industry (Pereira, 2017). In this paper, I will explore various aspects within the economic environment of The Ford Motor Company.

Impact of Recent Supply and Demand Conditions on Ford

Following the recent 2007-08 financial crisis, the international automobile industry saw a decline in demand for cars. As a result of the crisis, automobile sales plunged to a low that had not been witnessed for around three decades. Albeit, the US government intervened and provided financial assistance to local automotive manufacturers. However, Ford did not apply for a financial bail-out. The condition was even more severe considering that the prices of fuel had as well risen. The increase in fuel cost compelled ordinary consumers to change their automobile demand, and henceforth no longer preferred to purchase larger vehicles such as SUVs, which have a tendency to consume more fuel. At this juncture, Ford found itself confronted by harsh economic times given that the company is a popular producer of pick-up trucks and SUVs. Since then, Ford embarked on an ambitious plan to deliver to its consumers electric and hybrid vehicles as a solution to cope with the tough fuel economy, and to reduce the impact of oil on the environment.

Again, in 2016, Ford was compelled to decrease its production following a decline in the general demand for new vehicles in the US market. Essentially, in the automobile market, consumers are given a wide scope of products to select from. There are many vehicle manufacturers such as Toyota, Honda, GM, among others, and hence the supply for input products decreases. As a result, once the cost of supplies increases the prices for automobile products increases proportionately. For instance, during the 2007-08 global crisis, the cost of supplies escalated, which prompted automakers, such as Ford, to raise their prices, while the customers’ purchasing power weakened to an extent that the company’s profitability was affected negatively.

Entry Barriers for New Firms Wishing To Join the Industry

In spite of the somewhat consistent transformations within the auto industry, the look of fresh commercial opportunities and the broad scope of commodities that are available to the customers make the vehicle manufacturing sector one of the world’s most densely concentrated market. In 2013, the big five automakers: GM, Ford, Toyota, Volkswagen, and Hyundai, claimed a 49 percent share of the market (Kallstrom, 2015). Such a situation can best be explained through the presence of a stron