Ford Motor Company external threats analysis

Ford faces many threats. In terms of operational/strategic threats, the company faces intense competition in all of its markets. There is no product or geography where Ford does not face intense competition. This drives down margins and exposes Ford to the possibility of declining sales. The competitors in the industry are innovating at a rate faster than Ford generally is. This creates new and unique competitive threats. Ford is under threat from electric cars and self-driving cars, both of which threaten to completely transform the landscape for personal transportation in the coming years. Thus, Ford's position in the marketplace is very much threatened by new technology, and whatever competitors (old or new) that master the new technologies before Ford can expect to win market share away from Ford.

Vehicle emissions standards are occasionally a threat to Ford's business. These are not a major threat today -- but they were in the past when environmental awareness was just beginning. Today, however, tight emissions standards are the norm. California tends to be the leader, so Ford develops the technology for that market far in advance of needing to develop it for any other market.

There are a number of external factors that are an issue. The first one is political. Normally, Ford enjoys a stable political environment where laws are favorable to its interests. Yet, the election of Trump calls that into question, because of the fact that Ford relies heavily on NAFTA, and produces both in Mexico and Canada. Any threat to NAFTA is a threat to Ford (Reuters, 2016). The economy is a source of threat as well. A poorly-managed economy will often face recession, which is a threat to Ford. The company fared badly during the last recession and can ill-afford another one. The social climate is still quite positive for cars, and Ford has a wide range of vehicles. But there is a threat in the sense that many millennials are eschewing car ownership, a trend that if it continues to post-millennials means a long-term decline in U.S. automobile sales. Ford is responding to environmental/social issues by improving efficiency, reducing water use and other environmental initiatives (Ford, 2016).

As noted, there are technological threats. After many years of automobiles having a slow pace of innovation, the industry has become subject to a much faster pace of innovation in recent years, and the reality is that a slow-moving company like Ford has had to learn how to innovate. It is still at risk of falling behind new innovations because of the fact that it has not been accustomed to moving so quickly. There is still some evidence that senior management does not fully trust new technologies, which might cause the company to be slower to adopt new technologies that might be advised for the market needs today.

Financially, Ford has recovered somewhat from the Great Recession that almost bankrupted the company, but it is still in a somewhat perilous position. The company saw its profits decline 55% on a year-over-year basis last quarter, hinting that the company's profits remain unstable (Gardner, 2016). Ford is suffering because of investments in made in fuel-efficient trucks, which have run up against a major economic risk -- that the price of fuel will move in the wrong direction. The result of this is that Ford's strategy is wrong for the fuel price environment in which we presently live (Muller, 2016).

All told, Ford faces a number of risks. None are catastrophic, save perhaps the political risk related to a Trump presidency and NAFTA. That risk in particular would be massive for Ford, because the company has built its business around being able to produce at large, expensive plants located in all three countries. A change there would be more costly to Ford than just about anything else, save perhaps another recession.

References

Ford (2016) Ford aims to reduce water use by 72%. Ford Motor Company. Retrieved November 15, 2016 from https://media.ford.com/content/fordmedia/fna/us/en/news/2016/10/20/ford-further-reducing-water-usage-in-vehicle-production -- sets-lo.html

Gardner. G. (2016) Ford earnings fall to $1 billion in Q3. Detroit Free Press. Retrieved November 15, 2016 from http://www.freep.com/story/money/cars/ford/2016/10/27/ford-earnings-fall-1-billion-q3/92787426/

Muller, J. (2016) Ford made all the right moves in the recession. So why is GM reaping all the benefits? Forbes. Retrieved November 15, 2016 from http://www.forbes.com/sites/joannmuller/2016/11/08/ford-made-all-the-right-moves-in-the-recession-so-why-is-gm-reaping-the-benefits/#6a08e0e1534f

Reuters (2016) Ford Chairman meets with Trump over Mexico comments. Fortune. Retrieved November 15, 2016 from http://fortune.com/2016/10/05/ford-chairman-trump-mexico/