Discussion Case 5 Ford Motor Company
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Discussion Case #5: Ford Motor Company
1.
Key Drivers: The two main drivers influencing this industry are what consumers like and how much they’re willing to spend on fuel. Every consumer has unique preferences, whether it’s the kind of vehicle they prefer (car, truck, van), the brand they favor, or even the paint color they like. The oil industry also contributes heavily. During times of high gas prices, consumers might lean more towards a fuel efficient or even electric vehicle.
a.
Five Forces Analysis:
b.
Threat of New Entrants: Weak – In the automative industry the threat of new entrant is weak because it is extremely hard to begin an automotive company so the barrier is high for new entrants. Additionally, with already intense rivalry and high entry and startup costs, the market is unfavorable for new entrants.
c.
Competitive Rivalry: Strong – In the automotive industry, competitive rivalry is strong with so many competitors in this industry. Almost everyone needs an automobile and there are not a lot of major differentiations between major companies. As a result, competition between companies is very strong as they have to rely on marketing and brand loyalty. d.
Competition from Substitutes: Moderate – The threat of substitutes in the automotive industry is moderate as there are some substitutes for automobiles like
bikes, motorcycles, public transit (trains, planes, buses), walking, etc. These are also more inexpensive ways to get around that could affect consumers buying automobiles.
e.
Buyer Power: Strong – Buyer power is strong because consumers have bargaining
power which means that they can switch brands at no cost or go to a different dealership in search of better prices and deals. Buyers have the power to take their
business to other brands or dealerships and have some bargaining power on price when trying to buy a car and have the ability to lower the price in some ways. f.
Supplier Power: Weak – Of course, producing cars needs support from a dependable manufacturer, but most car parts a pretty similar. If one supplier asks for more, most companies can just switch to another, so supplier power is weak. 2.
SWOT Analysis: Ford's strategic decisions have weakened its standing in the worldwide automobile industry. The company focuses heavily on selling its pricier and larger models
such as SUV’s and pickup trucks. However, current trends show that customers lean towards more fuel-efficient vehicles. Finally, Ford’s limited global brand recognition hampers its ability to increase sales internationally.
a.
Strengths: One of Fords strengths is the variety of Ford vehicles they offer. They offer many different kinds of vehicles from trucks to SUVs, to cars, to electric vehicles. This expands their reach and provides an option for everybody. Another
one of their strengths is brand recognition and their early and well-established presence in the US market. b.
Weaknesses: One weakness is that Ford only has a presence in the US and does not have any presence internationally which is a missed opportunity for them possibly. Another weakness is that they are relying/dependent on the sales of certain car models which is hurtful in the long run as preferences changes and so does technology. c.
Opportunities:
Ford can make a car that is better for the environment and does not
cause as much pollution. Making vehicles that can run on a variety of different kinds of energy could boost sales. Ford should take advantage of consumer interest in electric or hybrid vehicles and discontinuing outdated or unpopular models could help with their costs and look into other avenues.
d.
Threats: Competitive rivalry is a threat as products are not very different between companies so a consumer can easily go to a different company. High gas an oil prices is also a threat. And finally, environmental laws can pose a threat to the automobile industry as public authorities could attempt to add guidelines for electric and hybrid vehicles to help the climate. 3.
Financial Ratio Analysis:
Profit Ratios:
2017
2018
2019
Gross Profit Margin
16.24%
15.01%
13.60%
Operating Profit Margin
3.11%
2.00%
0.37%
Fords gross profit margin has decreased from 2017 to 2019 from 16.24% to 13.60% respectively.
This is a pretty low gross profit margin and coupled with the fact that it has a downward trend, this is very concerning for Ford and something that needs to be addressed. The operating profit margin has also decreased from 2017 and 2019 and is very low to begin with and is a problem that also needs to be addressed.
Liquidity Ratios:
2018
2019
Current Ratio
1.2
1.16
Working Capital
19,080
15,915
Ford is in a good position for their current ratio of 1.16 in 2019 when it is ideal to be above 1.0, showing they have the ability to pay current liabilities using assets that can be converted to cash. However, the current ratio has decreased a little but from 2018 and Ford should keep an eye in this to ensure a downward trend does not continue. Leverage Ratios: 2018
2019
Debt-to-assets Ratio
0.86
0.87
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