Ford Motor Company Strategic Analysis: Electric and Driverless Futures

Introduction: Ford's Changing External Environment

Ford Motor Company is facing the challenge of a changing external environment over the long run. In the short run, business will continue more or less as usual, but in the medium to long run the company faces technological changes that will make electric cars mainstream and will introduce driverless cars to the roadways — a transformative development for society that might only be a few years away (Hars, 2016). Furthermore, the costs associated with burning fossil fuels are likely to escalate, particularly through the potential for carbon taxes, consumer rejection of carbon-intensive transportation, and a gradual shift in the first half of the 21st century toward different models of transportation. Ford will need to examine the long-run impacts of these trends on its business and seek to find the right long-run strategy to build around for the future.

Scenario and Market Context

Ford Motor Company is a leading producer of automobiles. Operating globally, Ford has one of the world's most widely recognized brands. However, the company has enjoyed much of its recent success with larger vehicles such as its pickup trucks and crossovers (Morningstar, 2016), and it is an industry laggard when it comes to electric vehicles and driverless technology. Ford needs to examine what its role will be in the automobile industry in the 21st century and begin taking steps to position itself in that desired role. Part of that process requires determining how sustainable its current business model actually is.

SWOT Analysis

Ford has a number of strengths on which to draw. It operates globally, producing and selling in dozens of countries. Its 7.6% global market share ranks it fourth in the world in a fragmented market (Statista, 2015). The company has one of the world's most powerful brands, ranked 38th globally by Interbrand and 5th among automakers (Interbrand, 2015). These strengths derive largely from historic eras, however, when Ford was a dominant player in the United States and expanded around the world. In more recent years, these strengths have been eroded by the growing number of new players in the automobile market. The company still holds dominance in one segment — pickup trucks in North America — and that base of strength has kept it afloat through some otherwise difficult years.

Ford also carries a set of weaknesses that pose significant challenges. First, it is highly leveraged, and its income and profits are volatile (MSN Moneycentral, 2016). This creates a degree of financial uncertainty around the company. While it can borrow at low rates today, it is vulnerable to increases in interest rates, as were expected in the near term at the time of this analysis (Robb, 2016). Another weakness is that the company has historically been slow to adapt to changing circumstances. In recent years, Ford has sought to address this weakness, as a lack of innovation was cited as one of the reasons the company entered financial crisis in 2009. While innovation remains a relative weakness, its severity has been diminishing through the company's efforts to improve its innovative capabilities (Enderle, 2016).

There are a number of opportunities in the market. Increased wealth in many developing nations brings with it growing demand for automobiles — an opportunity Ford can exploit. Furthermore, Ford can leverage its distribution channels and brand equity to acquire firms that are already innovating; buying innovation may help Ford close the gap more quickly than developing it internally. A third opportunity is that Ford still has cash cows in its product roster, and it may benefit from continuing to milk those revenue streams while investing in future capabilities.

There are several significant threats to Ford as well. The global automotive marketplace has brought Ford opportunities to expand overseas, but it has also introduced many new competitors into both U.S. and foreign markets. Ford trails Toyota and Volkswagen significantly in global market share, and it must contend with a wide range of major competitors from Europe and Asia, as well as General Motors. Another threat comes from technological change: if electric or self-driving cars — or both combined — go mainstream, Ford is presently not well positioned to capitalize on that shift and could lose market share rapidly. Lastly, Ford remains threatened by rising interest rates or other economic disruptions given its high leverage.

References

Enderle, R. (2016). How Ford's approach to innovation could help Apple. CIO Magazine. Retrieved May 20, 2016 from

Ford.com (2016). Model: Focus Electric. Ford Motor Company. Retrieved May 20, 2016 from http://www.ford.com/cars/focus/trim/electric/

Hars, A. (2016). Driverless car market watch. Driverless Future.com. Retrieved May 20, 2016 from http://www.driverless-future.com/

Interbrand (2015). Top global brands: Rankings. Interbrand. Retrieved May 20, 2016 from

Morningstar (2016). Ford Motor Co. Morningstar. In possession of the author.

MSN Moneycentral (2016). Ford Motor Co. Retrieved May 20, 2016 from http://www.msn.com/en-us/money/stockdetails/financials/fi-126.1.F.NYS?ocid=qbeb

Robb, G. (2016). Fed open to hiking interest rates in June. MarketWatch. Retrieved May 20, 2016 from http://www.marketwatch.com/story/most-on-fed-ready-to-hike-rates-in-june-if-economic-data-strong-minutes-show-2016-05-18

Statista (2015). Global market share of the world's largest automobile OEMs. Statista. Retrieved May 20, 2016 from http://www.statista.com/statistics/316786/global-market-share-of-the-leading-automakers/