Ford Motor company is a global automotive brand which was incorporated in Delaware in 1919. The company is based in Dearborn, Michigan. 2018 has turned out ot be a financially disappointing year for Ford. However, in terms of the redesign of the company, Ford achieved some critical milestones. The company achieved wholesale sales of around 6 million vehicles in 2018. However, this was lower than 2017. The revenues of Ford Motors rose in 2018 but the net income fell compared to the previous year. Ford is trying to strengthen its product portfolio by introducing more fuel efficient vehicles and reducing emissions. Its business is organized into three segments that include automotive, Ford credit and mobility. The automotive segment of Ford mainly includes the sale of Ford and Lincoln vehicles, service parts, and accessories globally. The automotive segment is further divided into regional units – North America, South America, Europe, Middle East & Africa, and Asia Pacific. In 2018 Ford had a global network of 11,534 dealerships which sold substantially all of its vehicles, parts and accessories. Now, Ford’s focus is on acquiring leadership position through investment in technology and innovation and particularly in fuel efficient vehicles. It is why, the brand has increased its focus on electric vehicles and hybrids. Ford is also entering a partnership with Volkswagen in 2022 for developing commercial vehicles and midsize pickups for global markets jointly.
Read more about the strengths and weaknesses of Ford Motors in this SWOT analysis.
Brand equity is an important strength for any large and global brand. With increased competition in the automotive industry, brand equity is all the more important to retain sales, revenues and leadership position. As a leading automotive brand, Ford has maintained strong brand equity. The company has got a large customer base around the world and it is a brand trusted by millions. Apart from focusing on technology, product quality and customer experience, the brand has also built its leadership position through branding and marketing. Globally, it has also maintained a strong dealership network which is critical to sales and customer service. Strong brand equity has resulted in consistent performance as well as strong competitive advantage.
Ford is a global automotive brand with headquarters in Dearborn, Michigan, United States. The company has got a strong sales and distribution network which included 11,534 dealerships as of 2018. The company is also working on growing its global network of distributors through new partnerships while working on redesigning its business model. Strong global presence of Ford motors has resulted in a large and strong customer base as well as profitable growth over previous several years.
Strong supply chain:-
Strong performance of an automotive business depends upon a strong supply of raw materials. Ford Motors has managed a strong global network of suppliers. Apart from managing strong relationship with its suppliers the company also focuses on sustainability and human rights in its supply chain. Its global supply chain has suppliers from a large number of countries in regions including the Americas, Asia, Europe, Middle East & Africa. While a strong supply chain is good for manufacturing, it also plays a very important role in the overall performance of any automotive brand.
Varied product mix :-
The varied product mix of Ford Motors is also a critical strength. The company makes and sells vehicles in several categories including trucks, SUVs and cars. Moreover, in the recent years, its focus on product innovation has grown stronger. The company is focusing on bringing more environment friendly, electric and hybrid cars. With growing focus on fuel efficiency, Ford has decided to replace most of the existing models in coming years. The brand is focusing on creating a fresher and more targeted vehicle portfolio. To carry out its strategy, Ford plans to have replaced 75% of its existing models sold in US by 2020. Its all new Ford Ranger is a critical step in this direction which is also attracting strong consumer interest. Working on its lower emissions strategy, the company has already introduced its 2020 Ford Explorer Hybrid, the first of Ford’s next-generation hybrids which offers a blend of no-compromise capability and efficiency.
Strong position in US market :-
US is the biggest market of Ford Motors. Traditionally, its sales in the US market has remained strong. Sales declined in 2018 but across two categories- trucks and SUVs the sales of Ford Motors in US grew stronger. US, apart from being Ford’s leading market is also the largest source of revenue for the brand. Ford’s revenue from US in 2018 was $97,546 million which was around 60% of its entire revenue.
Focus on research and innovation:-
In the recent years. Ford’s focus on research and innovation has grown intenser. Apart from lowering fuel emissions, the company is also investing in autonomous driving and bringing more fuel efficient and electric vehicles. Its research and development costs rose to 8.2 Billion in 2018.
Declined net income :
Net income of Ford Motors went through a major decline in 2018 versus the previous year. Ford’s net income declined from $7,757 million in 2017 to $3,695 million in 2018. The fall in net income could be attributed to several reasons including currency headwinds and growing prices of raw materials as well as decline in overall unit sales. Higher commodity costs, unfavorable exchange rates as well as higher spending due to product recalls also caused this decline in net income.
Highly dependent on US market:-
United States is a leading market for Ford Motors. It accounted for around 60% of the net revenue of Ford motors in 2018. However, that also leaves it highly dependent on the US market. China’s position as the leading automotive market has continued to grow stronger. However, Ford’s position in Asia is not strong enough to reduce its dependence on the US market still.
Declining sales in China:-
Weakening position of Ford Motors in China is an important concern for the brand. China has become the leading automotive market of the world. However, over the past three years, the position of Ford Motors in the Chinese market has continued to weaken as sales have continued to fall in this market. Vehicle sales fell from 1.3 million units in 2016 to 1.2 million in 2017 and then to 0.8 million in 2018. Continuously falling sales in the leading automotive market of the world presents a grave concern before Ford Motors.
Digital marketing :-
Digital marketing offers great opportunities for the vehicle brands. Automotive companies can use digital technologies for marketing and branding as well as for customer engagement. It can help with driving sales as well as strengthening the customer connection. Ford can use it to deepen its customer connection. Apart from that digital technology can also be used for staff engagement as well as for supply chain management.
Autonomous driving :-
Autonomous driving is a hot area currently for the automotive brands. Ford and several other brands are also investing in autonomous driving to make it an early possibility. Autonomous driving is full of opportunities and can offer a profitable option to Ford for growing sales and profits faster.
Asian markets :-
China has become the leading automotive market of the world. India is also seeing growth in demand for automotives. Ford must focus on growing its sales in the Asian markets to grow its profits and net income. Its sales in China have fallen and its position in India is competitively weaker. Focusing on the Asian markets will offer additional growth opportunities for the brand.
Partnerships for expansion :-
Partnering other brands can also help Ford extend its global presence and its sales and distribution channels throughout the globe. The company has decided to enter a partnership with Volkswagen in near future. This will offer opportunities to increase its production of select models. Similar partnerships with local brands could help Ford grow its sales and competitive position in the Asian markets as well.
Competitive pressures :-
The automotive industry has grown highly competitive and there are several leading players battling for market share globally. All the major competitors of Ford are investing heavily in research and innovation as well as marketing. As a result the market share of Ford in several important markets including China has shrunk.
Economic fluctuations in key markets :-
In 2018, Ford’s financial performance was somewhat disappointing. Net income of the brand took a huge dip. This was partly attributable to economic fluctuations in several key markets. Moreover, fluctuations in currency exchange rates also affected the Net income of Ford negatively.
Rising prices of raw materials:-
Commodity prices are growing every year. In 2018 their direct effect was felt on the net income of Ford Motors. The company faced a heavy decline in its Net Income and it could be attributed partly to the rise in commodity prices.
Regulatory pressures are also affecting the level of sales and profitability of Ford Motors. The company is facing huge challenges because of the rising regulatory pressures in the international market. Moreover, rising regulatory pressures are leading to compliance related pressures and causing profits to decline. Trade wars between US and China are already causing heavy pressures and have led to reduction in sales and profits.
Ford is a leading manufacturer and seller of automobiles with a strong supply chain and distributor network globally. It is an innovative brand whose focus is on bringing more fuel efficient and safer vehicles to the market for its customers. In 2018, the company however, suffered a major decline in its net income which was caused by several factors including drop in sales in China and rising commodity prices. Declining sales in China are a major concern for Ford since it s the leading automobile market of the world. Apart from that by strengthening its position in the Asian markets, the brand could also reduce its dependence on the US market. To find faster growth Ford must focus upon innovation and growing its presence in Asia. Partnering local brands in the Asian markets could help it find faster growth.