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Ford Motor SWOT & PESTLE Analysis

Last Updated : 11 Jun, 2017

OVERVIEW

Name of the Company: Ford Motor

Business Sector: Automobile

Operating Geography: North America, USA, Global

About the Company: Ford Motor has been pioneer in global automotive industry since its inception in 1903 by Mr. Henry Ford at Dearborn, Michigan. Ford Motors’ core business includes designing, manufacturing, marketing and servicing a full line of passenger cars, trucks, SUVs as well as luxury vehciles. Ford motors employ close to 201,000 employees globally across its 62 manufacturing sites around the globe.

Revenue: $141.5 Bn – FY ending March 2016

SWOT & PESTLE Analysis

The SWOT analysis for Ford Motor is presented below:
Strengths
Weaknesses
1. Huge product portfolio and a total mobility solutions company
2. Strong focus on emerging opportunities and future trends and technologies
3. Strong line of credit for financing facility to the customers
1. Underperforming premium luxury vehicles under Lincoln brand
2. Lack of performance in developing markets as well as with small vehicles in various markets
Opportunities
Threats
1. Rise in e-commerce that pushes up demand for LCVs
2. New business opportunities due to future trends like electrification & autonomous driving technologies
1. Global financial crisis in domestic as well as many exports market creating excess capacity conditions
2. Emergence of cheaper Asian alternatives to mobility solutions
3. Protectionist measures in US
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Strengths

1) Huge product portfolio and a total mobility solutions company: Ford Motors has a huge product portfolio cutting across the various product lines- passenger cars, SUVs, commercial vehicles – trucks as well as luxury vehicles. Thus it commands a significant portion of the global automotive market share – 7.3% across the world as of 2016. Ford Motors has successfully launched 11 vehicles in 2016 and has plans to launch another 11 in 2017 including the likes of new F-150, EcoSport, Focus Electric, all-new Fiesta and Expedition, as well as an all-new Lincoln Navigator. Ford Motors has launched a subsidiary company – Ford Smart Mobility LLC to build technology platforms to support connectivity for both owned as well as shared businesses. Ford Motors has acquired Chariott application providing crowd shuttle service which is presently operating in Austin and San Francisco and is targeted to be expanded to eight cities by this year end with at least a city outside domestic market.

2) Strong line of credit for financing facility to the customers: Ford Motors through its wholly owned subsidiary – Ford Motor Credit Company LLC provides financing options to the consumers through its dealership network which and has a wide portfolio of credit facilities broadly calssified under consumer and non-consumer. Financing services mainly includes retail installment options, lease contracts for for leasing companies, fleet customers, government companies and daily rental companies. Ford Motors also provide wholesale loans to the dealers for bulk purchases to optimise inventory across dealer sites. Ford motor credit also gains through interest rate supplements and support payments to dealers as well as its subsidiaries. Due to wide gamut of financing operations Ford Motors Credit Company earned $1.9Bn as pre-tax profit.

Weaknesses

1) Under performing luxury vehicles under Lincoln brand: Ford Motors has not been able to perform in the luxury premium market with its Licoln brand vis-à-vis the already established brands – Mercedes, Audi, BMW etc. Lincoln sold nearly 112,000 units in 2016 which is much behind than 340,000 units sold by Mercedes. Lincoln is unable to perform in domestic market also as it bags only 5.4% in US luxury car market by volume.

2) Lack of performance in developing markets as well as with small vehicles in various markets: Ford Motors couldnot charter sustainable profitability business in the markets of Indonesia and Japan and thus had to exit the markets. Also Ford Motors has to improve in the markets of Latin America, Middle East, Africa as well as India and China. It is due to partly inability of producing of large volumes of vehicles thus not exploiting the benefits of economy of scale. Also there have been several low cost manufacturers in emerging markets of Asia and has been able to exploit significant economy of scale thus providing cheaper alteratives to the consumers and command a high maret share. Ford Motors has to improve on its competency on compact vehicles offerings even in the developed markets along with the emerging markets.

Opportunities

1) Rise in e-commerce that pushes up demand for LCVs: There has been huge business expansion in electronic commerce across the globe that is likely to push up the requirement of light commercial vehicles. Electronic commerce is expected to rise by close to 6% and the trend is likely to continue till 2020. Thus, Ford Motors can exploit the opportunity by forging business alliances with e-commerce logistics companies thus pushing up the topline for the company.

2) New business opportunities due to future trends like electrification & autonomous driving technologies: Ford motors is foraying into building future vehicle technologies - electrification of vehicles and has committed to launch 13 new hybrid versions in next vehicles including F-150 and Mustang, transit custom plug-in hybrid in Europe as well as a SUV that can deliver upto an estimated range of 300 miles. Ford Motors is also committed towards developing an SAE level 4 fully autonomous vehicle by 2021 which will have no steering wheel, brake and gas pedal to be ready for commercial operations.

Threats

1) Global financial crisis in domestic as well as many exports market creating excess capacity conditions: There has been prevalent economic crisis in global markets – US, China, Japan,Europe due to financial crisis. There gas been increase in government deficits coupled with high levels of debt which affects overall macroeconomic scenario of the markets bringing down overall sales volumes. There has been rise in global commodity prices and energy prices which affordability of the vehicles by mass consumer segments and thus also responsible for pulling down the sales volumes. Due to global slowdown of sales volumes, there has been excess capacity across various key markets – 7%, 21%, 48% in the markets of North America, Europe and China thus reducing overall profitability of the company. The excess capacity conditions is likely to prevail till 2021.

2) Emergence of cheaper Asian alternatives to mobility solutions: Cheaper alternative Asian companies – Hyundai, Maruti Suzuki, Nissan etc. are posing formidable challenge to expensive products from Ford Motors. Due to availability of cheap factors of production locally for the companies in the developing markets, Asian companies are able to deliver cost effective and highly affordable products to the various markets across the globe.

3) Protectionist measures in US: Ford Motors is facing huge challenge in keeping its products affordable in US as new presidential measures clamp down on the cheaper outsourcing facilities. Thus, the products are expected to be less price effective in recent years. Also, Ford Motors has to invest domestically to produce the previously imported models thus leading to more capital expenditure as well as reduced utilisation of production facilities abroad. This will lead to reduction in passenger vehicles sales as people will be tempted to use cheaper alternative public modes of transportation.

Ford Motors SWOT analysis has been conducted by Anindhya Sadhu and reviewed by senior analysts from Barakaat Consulting.

References

• https://www.statista.com/statistics/287620/luxury-vehicles-united-states-premium-vehicle-market-share/

• https://www.emarketer.com/Article/Worldwide-Retail-Ecommerce-Sales-Will-Reach-1915-Trillion-This-Year/1014369

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The PESTLE analysis for Ford Motor is presented below:
Political
Economical
1) Protectionist measures in US1) Surge in global economic growth by 3.5% in 2017
Social
Technological
1) Customer satisfaction
2) Assisted driving & and active safety
1) Involvement of software and semiconductors in automotive industry
2) Powertrain
Legal
Environmental
1) Regulations for lesser vehicle pollution and greater safety for the passengers1) Growing criticism towards environmental pollution created by vehicles
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Political

1) Protectionist measures in US: Ford Motors is facing huge challenge in keeping its products affordable in US as new presidential measures clamp down on the cheaper outsourcing facilities. Thus, the products are expected to be fewer prices effective in recent years. Also, Ford Motors should invest domestically to produce the previously imported models thus leading to more capital expenditure as well as reduced utilisation of production facilities abroad. This will lead to reduction in passenger vehicles sales as people will be tempted to use cheaper alternative public modes of transportation.

Economic

1) Surge in global economic growth by 3.5% in 2017: Global growth is expected to be 3.5% in 2017. Mostly driven by US economy which is expected to grow by 2.25% in 2017 due to various protectionist and domestic employment friendly measures taken by Mr. Donald Trump. Europe is expected to grow by 1.5% in 2017 which is consistent with labour market improvement for the last few years. Emerging countries although have mixed response, but barring few local markets, there is gradual recovery in the commodity market as well as industrial commodities and crude oil due to strengthening demand, coupled with growing productivity and efficient business processes are likely to boost economic growth. This will lead to higher employment and stimulate consumer spending. China expects to hit growth target of 6.5% in 2017. Europe is expected to grow by 1.5 % in 2017. It is mainly due to rising disinflationary pressures, reduced employment, easing fiscal policies. Thus, good fortune is expected for the automobile companies and thus, Hyundai can expect an improved demand for its products in Europe.

Social

1) Customer satisfaction: Today’s consumers are putting a lot of importance towards using products embedded with newer technologies. Newer technologies promise enhanced performance of the products, more safety and improved driving experience due to enhanced features and specifications.

2) Assisted driving & and active safety: With rapid advancement in technology, consumers are demanding for safer features in the vehicles along with performance. Assisted driving is gaining popularity due to less human involvement and safer driving. Electronic components with software intelligence has led to integration of radar, thermal, camera technologies with steering and braking activities owing to electrification of power-train is vying to eliminate the role of a human driver thus ramping up safety and assisted driving functions.

Technological

1) Involvement of software and semiconductors in automotive industry: There has been rising expectation and demand of improved telematics, on-board infotainment systems, and intelligence systems for safety, performance, reliability. It has been well supported by declining electronic components cost, improved safety regulations pertaining to electronic components and consumer expectations related to driving ambience. Recently, electronic costs set to rise to 40% of the total cost of vehicle sold from 20% in 2004.

2) Powertrain: There has been shift from diesel fired engines to gasoline powered to hybrid gasoline- electric powered engines to save fuel, bring down fuel emissions and saving on weight of engines. Towards development of fully electric engines there has been discussions on battery weight and safety, charging speed, safety due to interruption by electronic waves caused by various electronic components in the vehicle to achieve zero emission capabilities.

Legal

1) Regulations for lesser vehicle pollution and greater safety for the passengers: Various national governments are focusing on reducing environmental impact owing to the vehicle emissions. Various laws are passed in accordance to it. BS 3 vehicles sale has been banned in India with effect from April 1,2017 which has led to mandatory switch to BS4 technologies for the automobile OEMs in India. California air research board has adopted LEV III rules taking effect from 2015 which led to regulating tailpipe & emission standards in the country. In Europe Stage 6 emission standards are going to be adopted. Under the new emission standards, there are additional after exhaust treatment thus reducing CO2 emissions. Also on road emission tests are to be conducted using portable analyzers to complement laboratory tests. Cars sold after 2019 are mandatory to be fit with ABS which adds to the complexities of supply chain as well as manufacturing processes.

Environmental

1) Growing criticism towards environmental pollution created by vehicles: Criticism is continuously growing to the environmental pollution created by vehicle exhaust. BS4 and Euro6 standards are likely to get more implemented in India and abroad. This has posed challenge to OEMs to improve combustion and exhaust units which are likely to increase the investment and in turn the cost of the vehicles. Also, coupled with technological development of powertrain technology, there has been focus on developing electric powertrain which should be a concern for Ford R&D to stay competitive in the market.

Ford Motors PESTLE analysis has been conducted by Anindhya Sadhu and reviewed by senior analysts from Barakaat Consulting.

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