FORD PESTEL ANALYSIS

PESTEL ANALYSIS OF FORD MOTORS




FORD PESTLE Analysis

The international business environment is full of risks and opportunities of all kinds. Every international brand has to deal with several forces and changes in the business environment that can be both abrupt and frequent. A PESTEL analysis helps understand some of the major risks businesses have to face when operating internationally.  Every such brand has to deal with political, economic and several other forms of risks that decide how favorable the situation will be for it in specific parts of the world. The situation is not even across the globe and while some countries may be more welcome to foreign brands, others may not. Some are more stable politically and economically, others are not. This is a PESTEL analysis of Ford highlighting its risks and opportunities in the global business environment. The situation has kept improving globally after the recession for the automobile brands.  Ford’s business has also kept flourishing.  This PESTEL analysis will provide in detail how these forces are affecting Ford at various levels.

Political factors:

Political factors constitute a major risk for a big brand operating internationally.  Political calm is good for businesses as turmoil can be highly disruptive and leads to losses. The Asia Pacific region has been politically stable during past years. Ford’s performance in these regions has been nothing less than excellent. It has sold its one millionth vehicle in the region in August 2016 only. Sales have risen fast in this region. Political stability in most cases also represents economic stability which is very good for business. In Europe, the situation has been less stable. So, performance of Ford has been somewhat less satisfactory and still good in Europe.

The Asian markets are ruling because of their political and economic stability. Political instability also results in disruption of the supply chain and distribution network which is bad for a business’ health. Volatile political environments represent various hidden risks. In nations where the situation is volatile and government changes more often, a situation of uncertainty always remains. Political stability inspires confidence.  Regulation of the business environment, government’s attitude towards foreign businesses and foreign investment, all these factors have an impact on the revenue and profitability of the international brands like Ford. Apart from it, things depend on how encouraging he government’s attitude is towards the innovative, fuel efficient and environment friendly vehicle brands. Governments are mostly supportive of such brands and products globally which is a plus point for Ford.

Economic Factors:

Economic factors have a major role in deciding how markets behave and how profitable the environment is for brands. The recession has passed and the situation has improved a lot since then. The Asia Pacific region is leading the global economic revival. Both China and India which are the trading economies of the region have kept performing well. Ford has seen highly encouraging and fast sales in these countries. Economic growth in these areas has resulted in an influx of foreign brands that are partnering local brands to hack into the Asian markets. Economic growth means better rate of employment and higher dispensable income. Both these factors are good for business brands. The better the purchasing ability of the customers, the more profitable is the environment for these companies. It provides opportunities for quick growth and higher profitability.   The better the outlook for the global economy, the higher will be Ford’s revenue and profits worldwide.

Social factors:

Social and cultural factors too have a deep impact on the business of the big brands globally. These global brands serve diverse markets that are different in terms of culture and society. Such cultural differences have an impact on the effectiveness of the marketing efforts of businesses and their sales. The freshest trends favour the brands that have low environmental impact and good social image. It is why most big brands are investing in CSR and environmental protection. Maintaining a good social image is important for businesses because it affects their popularity and their sales. In the recent years, the focus has shifted towards deeper engagement of the customers and improved customer service. It is because the brands that are more focused at customer service and more friendly to their customers and community have their sales and revenue high. Customers love such brands and like to shop for them. Cultural factors too are important to be understood for effectively targeting the customers and to better market your products. Consumers’ taste and preferences are also affected by their culture and society. Overall, these factors can have a deep impact on which cars and SUVs customers like in a given market.

Technological factors:

Given that passenger safety and environmental concerns have grown more important than ever, one can easily understand the importance of technological factors in the automotive industry. Car makers like Ford and Toyota are investing in technology to make their cars safer and more convenient for their customers. Technology affects the attractiveness of any automobile. The demand for hybrid cars is growing and people are looking for cars that are low on fuel consumption and carbon emission. The industry and customers are eagerly waiting for driverless cars to arrive.  News is that Ford has planned to invest above $1 billion in next five years to bring its fleet of driverless cars on road by 2021. Previously, it had planned to0 develop its autonomous vehicle in house. However, now it is investing in a new driverless car unit Argo which is fully funded and majority owned by Ford. Driverless car technology has caught the attention of all the major car makers and they are all investing in this area aggressively to bring their first to the market. The technology has created lots of excitement and the race to gain the first mover advantage is on between the big brands.

Environmental factors:

Environmental factors have grown more important than ever for businesses in the 21st century. Even the businesses whose environmental impact is zero are investing in environmental protection efforts. Vehicle makers are making EVs (Electrical vehicles) and HEVs (Hybrid electrical Vehicles) that are zero or low on environmental impact. Such vehicles are also being preferred all over the world for their environment friendliness. Ford has made a many attractive models of EVs and HEVs including CMax Energi, Focus Electric and Fusion  Hybrid.

According to Ford, “Ford hybrid and electric vehicles feature advanced fuel-saving technology. Whether they’re operating in electric mode, gas mode or a combination of both, these vehicles optimize efficiency. And simplicity. The plug-in hybrid vehicles can be recharged in under three hours using a 240-volt outlet. When you drive a Ford hybrid or plug-in hybrid, you’ll still stop at gas stations. But maybe just for coffee”.

Legal factors:

Laws also have an important effect on how profitably and freely businesses can operate in a specific market. There are several laws including product quality and safety, labor, environmental, taxes and other various laws related to business that can affect Ford. The focus on quality and safety has increased. Ford has faced a number of issues in the past related to faulty transmissions, airbags etc. the pinto faulty fuel system design case of 1978 is not forgotten yet. However, in the recent years Ford’s focus has remained on doing business ethically and being legally compliant.  Legal factors can have a big impact and apart from the legal tussle, fines in millions as happened in the Ford Pinto case can result in financial losses for businesses like Ford. Legal compliance and an ethical image have become indispensable in the 21st century.

Sources:

https://corporate.ford.com/content/dam/corporate/en/investors/investor-events/Press%20Releases/2016/Ford-Asia-Pacific-August-Sales.pdf

http://www.solomontimes.com/opinion/94

https://www.ft.com/content/3ab1fee8-efc7-11e6-930f-061b01e23655

http://www.ford.com/new-hybrids-evs/

Abhijeet Pratap

Abhijeet has been blogging on educational topics and business research since 2016. He graduated with a Hons. in English literature from BRABU and an MBA from the Asia-Pacific Institute of Management, New Delhi. He likes to blog and share his knowledge and research in business management, marketing, literature and other areas with his readers.