Marketing plan development and implementation strategies

¶ … External Environment

Ford Motor Company is - according to its financial statements for the last year - in relatively good financial shape, especially if one considers the current weak state of the economy, the past recessionary months and the still extremely shaky state of the recovery. This paper analyzes the current strengths and weaknesses of the company as it moves toward increasing globalization.

A useful tool in analyzing the external environment in which Ford is presently situated can incorporate Michael Porter's Five Forces model, which is graphically summarized below: (http://www.marketingteacher.com/Lessons/lesson_fivefoces.htm)

Ford is vulnerable to the threat of both new entrants (in terms generally of new car models as well as specifically of new environmentally friendly cars) as well as the threat of substitute products from other car companies eager to attract the same consumers that Ford wishes to attract. Honda, for example, is likely to become one of Ford's primary competitors for small, eco-friendly cars (and has indeed made a number of gains in this area in just the past year.

Honda also has a fairly wide range of products, with a growing emphasis on environmentally friendly vehicles.

Although our name is most often associated with automobiles, we are much more than that. We manufacture a wide range of products, including motorcycles, ATVs, generators, marine engines, lawn and garden equipment and automobiles. Historically, Honda has been a leader in fuel-efficiency and low-emission technology. With all of our products, we work to balance your desire for fun and performance with society's need for clean air and water (www.honda.com).

One strength in terms of its ability to overcome competition that Ford has (and this is of course true of other car manufacturers as well) is that while established car manufacturers can (and do on an annual basis) come out with new car models, it is extremely difficult (given the staggering capital amounts required) for new companies to enter the car manufacturing business. It is also expensive for even established car manufacturers to come out with radically new models. This tends to protect those companies, like Ford, that are already established.

The bargaining power of buyers vis-a-vis Ford's products is fairly high and is likely only to become greater as more and more companies move into the car submarkets that Ford has itself targeted. However, balanced against the fact that buyers are free to go to Ford's competitors is the fact that for most Americans and indeed for many people across the world a car is an economic necessity. People in many situations have to buy cars, which certainly limits their ability to bargain and may lead to a state of quasi-monopoly among large car manufacturers.

The bargaining power of suppliers varies greatly from one to another (given the range of suppliers to the auto industry) but the largest supplier - which is steel - has a far more advantageous position selling to Ford and other American firms than to foreign firms due to recent tariff changes by the Bush administration. This does not protect Ford from competition from other American car makers, but given that its chief competitors for environmentally friendly cars are Japanese firms, the advantages to steel companies to sell American are likely to help Ford.

Strengths

Among the most important reasons that the company is showing such a currently healthy financial picture is its commitment to environmentally responsible vehicles. Among the most important of these products for the company are the EV Ranger, which is the best selling electric vehicle in the United States today, according to the company (http://www.ford.com).The company has also just been the recipient of the largest single electric vehicle order in history, with the United States Postal Service having placed an order for 500 electric postal vehicles, with an option for an additional 5,000 additional postal vehicles to be based on the current Ford Ranger EV (http://www.ford.com).

Weaknesses

Much of the weakness that the Ford Motor Company faces comes not from its competitors but from its own internal structure, something that is intelligently - and fascinatingly - described by Mary Walton's in her 1999 book Car, which is a lengthy discussion of the development of the Taurus but is more generally a description of the ways in which Ford does business.

Despite the fact that it has modernized its business methods in many ways over the past generation (often borrowing ideas from its Japanese rivals). Ford's management style remains rooted in outmoded ideas about the important of hierarchy and chains of command, as Johnson & Scholes culture web model (2002, pp. 230-6) suggests.

Of course, the company is still making money: Profits in 1999 hit an all-time high. But those profits resulted mostly from truck sales, and were made mostly in the United States and Canada. Elsewhere, Ford is sagging" notes one analyst in explaining the company's current substantial industry over-capacity, the fact that its stock is now trading at a rate of less than 10 times its earnings, and the even more important weakness that worldwide demands for its products are essentially fl at: (http://www.fastcompany.com/online/33/ford.html).

Another basic sign of weaknesses in the company is that much of the demand for its vehicles consists of demand for its trucks, a less stable market than that for passenger vehicles and one more likely to be affected by any possibly dramatic upswing in oil prices that might well come about due to unrest in the Middle East as well as in Venezuela.

Threats

The primary threat to the company is that other companies may be able to move into this niche faster than Ford has been able to, given its sluggishness in this area over the past year and its primary weakness, which is the company's internal organization. Yet, due in large measure to the overall strength of the automotive industry both in the U.S. And globally, the company remains in a position to take advantage of the opportunities to create new products and move into new markets.

Ford is attempting to address fundamental management structural problems through a current extensive program of leadership and initiative training. Such training may prove successful or it may not - and even if it does prove to be successful in creating a fundamentally new and more innovative management style at the company then such changes may come too late to keep the company from falling behind both domestically and globally. However, as Johnson and Scholes (2002) model of company core competences suggests, Ford has been reluctant to institute the degree of change that is needed to be effective.

Other important weaknesses that the company must work to overcome are its weaknesses in the premium car line. It currently has no important premium car (since the failure of the Scorpio) and this lack has a ripple effect on consumers. Even those customers who are not themselves interested in buying a premium car tend to judge a company on its top models, and the lack of such a "headliner" may well discourage customers from buying other Ford models.

Opportunities

As noted above, the greatest opportunity that Ford has at the moment is to move into the alternative fuel cars, perhaps including not only hybrids (which actually might be seen as only "semi-alternative" cars) but such genuine alternatives as fuel-cell cars. However, this window of opportunity is rather quickly closing: General Motors (for example) this summer announced its intention to pursue the development of a fuel cell car.

PESTEL Analysis: Political and Legal Environment

The political environment has a substantial influence on the manufacturing world both in terms of governmental regulation of the type of business as well in terms of government policies that in many ways guide the spending habits of both individuals and other businesses.

In the first category, Ford is currently in a relatively strong position because the current administration in Washington is highly unlikely to increase the regulations on any industry, especially the car industry (because of its connections to the oil industry). If a more liberal administration takes office in 2004, Ford will still be in a relatively strong position because its push toward environmentally responsible cars should help it then. Even the Bush Administration is giving something of a nudge toward fuel-cell cars, which might benefit Ford, although GM is generally ahead of Ford in the development of a fuel-cell car and so might well benefit more (http://www.wired.com/wired/archive/10.08/fuelcellcars.html).

However, in terms of how political policy will affect the spending habits of consumers, the current administration in Washington is likely to damage Ford's prospects: With the economy still soft, consumer confidence falling nearly every month and unemployment at levels that have not been seen since the Great Depression, people are less likely to buy large-ticket items if they can possibly avoid doing so.

Economic Factors

As noted, the unemployment rate (which is in key ways related to political decisions such as changes in the tax structure) is an important part of the economic picture that Ford is currently facing.

On the plus side, Ford is (like other care companies and indeed other businesses) currently benefiting from interest rates that are lower than they have been in generations. Whether current low interest rates trump high unemployment and low consumer-confidence rates in terms of an indication of how the economy is likely to fare in the future is not clear; generally economists are fairly sanguine about the future while also being puzzled as to the lag in employment and consumer confidence.

Social-Cultural and Environmental Factors

The social-cultural factors that affect Ford vary (by definition) from one country to the next. Certainly one of its weaknesses as a company is its very low profile in Asia, with the exception of its ownership of Mazda. However, this ownership has done less for its overall penetration into Asian markets than expected. It has also had unexpected problems integrating Mazda production and marketing into the established company and these problems have not yet been entirely worked out. One of its long-term weaknesses may well be its inability to become more of a presence in the Asian market. Porter's value-chain argument (1985, 1998), which is summarized below, suggests that one of the reasons for these particular problems faced by Ford is the lack of sufficient attention to marketing and sales in certain regions of the world.

Primary Value Chain Activities

Inbound

Logistics > Operations > Outbound

Logistics > Marketing & Sales > Service (http://www.quickmba.com/strategy/value-chain/)

It is also weak in a number of niches in the European car market. Although as a whole it does better in Europe than it does in Asia, there are still important categories in which it remains unrepresented (or practically so) in Europe, such as the cheap sports car. Hamel and Prahalad (1994) warn against ceding entire segments of a market such as Ford has done in this case.

The reasons for such poor showings in other countries reflect both economic and cultural factors: Ford may fail to do well in Europe because it is such a quintessential (and even aggressively) American name. This may also have slowed its entrance into Asian (especially non-Japanese) Asian markets, although clearly in this latter case all American companies have had problems because of the high tariffs levied against non-Asian car companies. Ford's small moves into Thailand are likely to help it in the future in Asia, although the fact that GM and BMW have made similar moves will limit to some extent the competitive of Ford's attempt to use Thailand as a way to springboard itself into the general Asian market (http://www.businessweek.com/2000/00_19/b3680166.htm).

While Ford may be suffering from being "too American" to succeed in Europe, it is connecting at home with the demands of many Americans who are perfectly happy to buy home-made goods if those products are also good for the environment.

Technological Elements

One of the key questions in concerning the technological environmental that Ford finds itself in is the extent to which the technology it is using allows for its products to be made both more cheaply and/or to a better standard of quality than cars by other companies.

It has made important gains in this respect, including its recent implementation of a new intranet-based production system:

Dubbed C3P, the system is a Product Information Management (PIM) knowledge database that unites three computer-aided tool sets -- design, manufacturing and engineering -- for improved productivity, quality and communication (http://www.internetwk.com/case/study102698-2.htm).

Chrysler and GM, however, have similar systems, so Ford's adaptation of such a system has served merely to keep it competitive rather than giving it a competitive advantage.

Ford's Current Strategy

Among the key elements of Ford's current strategy is its push to add Hybrid Electric Vehicle to its line of offerings, having debuted the Escape this spring. HEVs are an especially important addition to the Ford line-up (as they would be to the line-up of an manufacturer) because they offer a substantial amount of the environmental benefits of a fully electric car with none of the range-of-driving restrictions that a fully electric vehicle has.

Although HEVs are not as "green" as fully electric cars, their presence in the Ford stable of offerings is an important strength for the company. Given that many people want a more environmentally responsible car but are unable or unwilling to change driving habits that make a fully electric car feasible, the HEV may well be the next generation of car that many if not most Americans choose to buy. Such a car offers a relatively low element of risk and uncertainty with an accompanying high degree of acceptability given the favor in which an important segment of the car-buying market holds environmental standards. Given that the technology to produce such cars already exists and can be implemented with relatively little disruption to other elements of Ford manufacturing, this strategy should be seen to have a relatively high level of feasibility as well.

By getting in near the beginning of the HEV generation of cars, Ford has the opportunity to establish itself as one of the key companies that consumers look to when purchasing their next (and next after that) environmentally responsible car.

Beyond its front-line position in offering alternative fuel cars (and its near-future position of being able to offer even more options), Ford enjoys a number of other market strengths. It has a high degree of name recognition amongst American consumers (in part because of its longevity) as well as benefiting from the fact that many Americans want to buy items - especially high-ticket items like cars - that are manufactured in the United States.

Ford also offers a wide range of different types of vehicles, having found a good balance between specialization of product and diversity of offerings. It offers both behemoths for those who like their vehicles to be bigger than anything else on the street except for the buildings all the way through small, economical cars.

Finally, Ford must count among its major strengths in this area the fact that it can offer to its customers that indefinable thing called "style." While its cars are not rated as the most efficient or reliable (although its ratings in these areas are certainly not terrible either), it can offer something that many people find lacking in many of its competitors (especially its Japanese competitors in the smaller vehicle range such as Honda and Toyota), which is a sense of styling that transforms its cars from mere vehicles, from simply a way to get from one place to another into personal statements of style.

A modest change that Ford might make at this point is to increase the number of HEV vehicles that it makes, especially in terms of the larger vehicles. While it faces a fairly high level of competition in terms of environmentally friendly small cars, it would face almost no competition at all in for larger, environmentally friendly vehicles: A HEV SUV would appeal to those who actually use their SUVs to take camping and would face no significant competition.

A far more radical change that Ford might make - and one that company officials have discussed in the recent past - is to offer fully electric vehicles. With the recent demise of the EV-1 - all of which were leased to consumers, and the last of which were recalled this summer - a fully electric vehicle (http://www.electrifyingtimes.com/GM_yanks_EV1.html).The technology is available and GM's experience with the EV-1 should in fact encourage rather than discourage further ventures into the fully electric, or even fuel-cell, market.