Ford Motor Company Strategic Analysis and Recommendations
This paper presents a strategic analysis of Ford Motor Company, examining the key competitive pressures and financial metrics that defined the company's performance around 2014–2015. The analysis reviews Ford's annual report data, including revenue declines, shrinking operating margins, and shifting market share across global regions. It situates Ford within the context of the broader American automotive industry, comparing its position relative to General Motors and Chrysler (FCA), while also addressing safety recall risks, fuel economy regulations, and increasing globalization. The paper concludes with recommendations focused on customer retention, flagship model expansion, and filling gaps in Ford's luxury and performance lineup.
- Introduction: Ford's market position and competitive challenges
- Key Strategic Issues: Recalls, globalization, regulation, and competition
- Financial and Sales Analysis: Revenue, margins, and regional sales data
- Competitive Position Among American Automakers: Ford vs. GM and Chrysler-Fiat ownership comparison
- Recommendations: Customer Focus: Addressing why consumers choose rival brands
- Recommendations: Expand on Flagship Cars: Lincoln lineup and performance model gaps
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What makes this paper effective
- Grounds its strategic claims in specific, quantified data drawn directly from Ford's 2014 annual report, such as revenue figures, operating margins, and regional sales trends.
- Connects internal financial metrics to broader external forces — government regulation, globalization, and consumer behavior — giving the analysis meaningful context.
- Moves logically from problem identification to concrete, actionable recommendations, making the argument feel complete and purposeful.
Key academic technique demonstrated
The paper demonstrates effective use of primary source evidence — specifically a corporate annual report — to support strategic business analysis. Rather than relying solely on secondary commentary, the author cites page-level data from Ford's own disclosures, lending credibility and specificity to claims about financial performance, risk acknowledgment, and product strategy.
Structure breakdown
The paper opens with an introductory overview of Ford's market position, then identifies key strategic issues including regulatory pressures, recall risks, and globalization. The central analytical section focuses on financial and sales data drawn from Ford's 2014 annual report, followed by a comparison of Ford's standing among the traditional Big Three. The paper closes with two targeted recommendation sections addressing customer focus and flagship product expansion.
Introduction
Ford is a car company that has endured many challenges and travails over the years, not unlike General Motors and Chrysler in this regard. While Ford has generally been less battered than the other two members of the traditional "Big Three" — and remains one of only two that is still entirely American-controlled — it is not dominating the market by any means. Overall sales figures are rising in terms of volume, but market share and many important financial metrics reflect flatness or decline rather than growth. Ford has certainly learned hard lessons since the Ford Pinto scandal of the 1970s, and some other companies are now suffering recall problems in more recent years while Ford has largely avoided similar crises. Even so, Ford is not keeping up with the market and needs to address that urgently (Ford Motor Company, 2015).
Ford is certainly trying to stay ahead of the curve. With 24 model refreshes in 2014 and another 15 planned for 2015, the company is not allowing its lineup to go stale. However, other automakers continue to encroach on Ford's territory, and the company faces increasing pressure — just like its competitors — from tightening government regulations, more discerning consumers, and the accelerating globalization of the automotive industry. Indeed, only true exotics and high-end luxury cars are still manufactured in their home countries and exported to destination markets. Moreover, so much of what drives car purchases hinges on culture, trends, and fuel prices. Gas prices in particular have been especially volatile, though they are low at the time of this writing. To put it concisely, Ford is losing market share — albeit fairly slowly — and needs to make a significant strategic move to reverse the trend. The company has models that perform very strongly, but it also has a relatively weak luxury line and lacks a vehicle that directly competes with the Corvette (Ford Motor Company, 2015).
Key Strategic Issues
When it comes to the automobile industry, several factors and developments are unfolding that Ford must be mindful of. Even though Ford has mostly avoided the pitfalls of other automakers, it would be wise to guard against them at all costs. This is especially true given the Ford Pinto debacle of the 1970s, in which several hundred people died in car fires at least partially attributable to fuel tanks that would rupture and ignite even in relatively low-speed collisions (WFU, 2015). One issue worth examining is Ford's unique position relative to the other two members of the "Big Three." Only two of the three can now claim to be wholly owned and operated as American companies, and the other one besides Ford required far greater federal assistance. Another factor Ford must keep in mind is safety-related recalls. The company learned a painful lesson from the Pinto situation, but more recent examples of similar corporate missteps have emerged — albeit with less deadly consequences — at companies such as General Motors, Toyota, and, most recently, Volkswagen (Liker, 2015).
Another shift Ford must navigate is the decreased centralization and increased globalization of the automotive industry. While exotics and many other high-end vehicles are still manufactured in their home countries and imported at great expense to the United States and other markets, it would be false to suggest that only Chrysler, General Motors, and Ford manufacture cars in the United States. Toyota, Kia, and Hyundai, among others, produce large volumes of vehicles domestically. Many manufacturers that do not build in the United States do so in nearby Mexico or Canada. Lastly, Ford must balance the consumer desire for high-powered engines with the growing demand — from both government regulators and the general public — for fuel-efficient vehicles and cars that employ alternative technologies such as fuel cells and electric batteries. The Great Recession and the rise of fuel-efficient competitors including Toyota and Tesla have significantly raised the bar (Edelstein, 2015). This paper also includes an assessment of Ford's financial structure and performance.
Financial and Sales Analysis
Although finances were mentioned last in the preceding section, they are the first focus here and will serve as the primary lens for this analysis. In reviewing Ford's 2014 annual report, several concerning numbers emerge. Overall revenue in 2014 came to $135.8 billion, down from $139.4 billion in 2013 — a decline of approximately 2.5%. While not catastrophic, this is not a positive sign. Ford's overall operating margin in 2014 was 3.9%, falling from 5.4% in 2013. Operating-related cash flow dropped by nearly half, from $6.1 billion in 2013 to $3.6 billion in 2014. One bright spot is that pre-tax profit remained nearly flat, with a slight gain from $1.8 billion in 2013 to $1.9 billion in 2014. However, net income tells a more troubling story: it fell from $7.182 billion in 2013 to $3.187 billion in 2014 — a decline of more than half. Despite this, dividends paid per share actually increased, rising from forty cents in 2013 to fifty cents in 2014 (Ford Motor Company, 2015).
Ford's operations span the globe, including North America, South America, Europe, the Middle East, Africa, and the Asia-Pacific region. At the wholesale level, the company sold approximately 6.3 million vehicles worldwide in 2014. Ford and Lincoln together maintained roughly twelve thousand dealerships globally, with the vast majority being Ford-only. Slightly over one thousand dealers sell Lincolns — either exclusively or alongside Ford vehicles. Despite the revenue decline noted above, Ford performed quite well in its home market and surrounding region. Its annual report shows that sales in the United States, Canada, and Mexico all climbed steadily from 2012 to 2014, with North American sales increasing by approximately 2.4 million units over that period. Ford lost some ground in South America (specifically Brazil and Argentina), Turkey, Russia, India, and the ASEAN region. However, gains were recorded in Germany, the Middle East and Africa, and China. Australian sales held flat for three consecutive years at approximately 1.1 million units (Ford Motor Company, 2015).
Even though unit sales are generally rising, market share trends in many regions tell a different story. Ford made progress in the United States in 2013, moving from 15.2% to 15.7%, but then fell to 14.7% in 2014. In Canada, share has been declining by several tenths of a percent per year, dropping from 16.1% in 2012 to 15.5% in 2014. Brazil improved in 2013 and then held flat in 2014. Argentina saw strong gains. European results varied by country but have generally declined by about a tenth of a percent per year over the past three years. On the employment side, Ford's global headcount rose significantly, from 181,000 in 2013 to 187,000 in 2014. Europe reduced its workforce by approximately three thousand employees, while North America added six thousand and Asia-Pacific added approximately five thousand (Ford Motor Company, 2015).
Ford also acknowledges in its own risk disclosures that sales volume has been hurt by recessions, financial crises, and related economic disruptions. The company recognizes that it has lost market share and that there has been "lower-than-anticipated acceptance" of its products. Fuel price volatility — though prices are currently low — has had a pronounced effect on consumer purchasing decisions and timing. Ford further acknowledges that intensified competition has contributed to its market share erosion. Balancing performance vehicles with the demands of fuel-conscious consumers and evolving regulatory standards has proven to be a costly and precarious challenge (Ford Motor Company, 2015).
Legal risks are also an ongoing concern. While General Motors, Toyota, and a few other companies have faced high-profile legal problems in recent years, Ford has been largely unaffected. Nonetheless, Ford's annual report identifies potential liabilities including asbestos in brake components, environmental compliance matters, and general product liability exposure. The report also references class action litigation — a mechanism by which groups of consumers alleging the same defect file a consolidated lawsuit. One such class action in Ohio involving certain Ford trucks resulted in an initial award of approximately $4.5 million; however, following legal proceedings, Ford succeeded in having the action reversed and dismissed (Ford Motor Company, 2015).
Ford is also investing heavily in product renewal. The company launched or relaunched a total of 24 vehicles in 2014, including its flagship F-150, the Mustang, the Escort, the Ka, the Transit, and the Lincoln MKC. It plans to continue this momentum in 2015 with another fifteen new or refreshed models across its global lineup. Ford articulates a product vision centered on bold and emotive exterior design, engaging driving dynamics, high-quality interiors, strong fuel economy, immediate brand recognizability, and exceptional value. As part of this strategic realignment, the company is consolidating from 27 global platforms down to just eight (Ford Motor Company, 2015).
References
Edelstein, S. (2015). Tesla buys supplier, new car fuel economy, hybrid & electric car sales: Today's car news. Green Car Reports. Retrieved 26 September 2015, from http://www.greencarreports.com/news/1098200_tesla-buys-supplier-new-car-fuel-economy-hybrid-electric-car-sales-todays-car-news
FCA. (2015). FCAGroup — Home. Fcagroup.com. Retrieved 26 September 2015, from http://www.fcagroup.com/en-US/Pages/home.aspx
Ford Motor Company. (2015). Ford Motor Company 2014 Annual Report. Ford Motor Company. Retrieved 26 September 2015, from http://corporate.ford.com/content/dam/corporate/en/investors/reports-and-filings/Annual%20Reports/2014-ford-annual-report.pdf
Kimbrough, B. (2015). Editorial: Did Ford take bailout money too? Yes they did. Chevy Hardcore. Retrieved 26 September 2015, from http://www.chevyhardcore.com/news/editorial-did-ford-take-bailout-money-too-yes-they-did/
Liker, J. (2015). Assessing the sins of Volkswagen, Toyota, and General Motors. Harvard Business Review. Retrieved 26 September 2015, from https://hbr.org/2015/09/assessing-the-sins-of-volkswagen-toyota-and-general-motors
WFU. (2015). The Ford Pinto case. Users.wfu.edu. Retrieved 26 September 2015, from
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