Swot Analysis

Ford Motor Company SWOT analysis
Strengths	Weaknesses
Strong position in US market ECOnetic initiative Sound financial performance ‘ONE Ford’ approach Significant growth in China	High cost structure Unprofitable Europe operations Low exposure to Asia-Pacific
Opportunities	Threats
Positive attitude towards “green” vehicles Increasing fuel prices New emission standards Growth through acquisitions	Decreasing fuel prices Rising raw material prices Intense competition Fluctuating exchange rates

Strengths

1. Strong position in US market. Ford is the second largest automaker in US; Ford has great reputation in its home market and strong commercial vehicle sales that generate maximum revenue.

2. ECOnetic initiative. Ford’s ECOnetic initiative is an effort to produce highly fuel-efficient engines by improving existing engines rather than new hybrid engines. The result of this initiative is the Ford Fiesta, currently the lowest emitting mass-produced car in Europe and Ford Focus ECOnetic that has better fuel consumption than Toyota Prius.

3. Sound financial performance. Ford was the only big US car company that didn’t need the government bailout and was the first to get investment status back. The firm’s profit margin is high compared to competitors with the highest liquidity ratio.

4. ‘ONE Ford’ approach. Ford has decided to produce single, streamlined global lineup of its models. The carmaker no longer produces customized vehicles for different regions but focus on designing and engineering the car that fits different regional tastes and regulations. It significantly decreases costs for Ford and drives record profitability.

5. Significant growth in China. Ford, although not the strongest player in the China has experienced the significant growth in the largest automotive market in the world for the 2012. It grew its sales by 46%, according to Ford press release. ^[7]

Weaknesses

1. High cost structure. Although ‘One Ford’ initiative led to substantial cost reduction, Ford still has a high cost structure, compared to other automobiles manufacturers. Ford’s costs are driven by its generous employee compensation and pension plans.

2. Unprofitable Europe operations. In 2012, Ford lost $1.75 billion in Europe and plans to experience losses in the region until 2015. ^[8]

3. Low Exposure to Asia-Pacific: Only 15.82% of Ford’s volume was derived from Asia-Pacific sales in 2011, the fastest growing segment of their business (7.52% growth from 2010 to 2011)

Opportunities

1. Positive attitude towards “green” vehicles. Cars that are Consumers are aware of the negative impact of fuel inefficient cars that emit large quantities of CO2 and negatively affect the environment. Ford has developed electrification strategy to reduce the carbon dioxide (CO2) emissions from its vehicle and make them more efficient.

2. Increasing fuel prices. Ford’s strong emphasis on engineering fuel-efficient vehicles (Ford Fiesta and Ford Focus ECOnetic) with flexible fuel and hybrid engines will pay off due to increasing fuel prices in the world.

3. New emission standards. A new wave for stricter regulations on vehicle emission standards would positively affect Ford position in automotive industry. Ford invests large amounts of money to produce fuel-efficient engines and reaped some success with its ford Fiesta and Ford Focus ECOnetic models.

4. Strategic partnerships. Ford has great experience in creating strategic alliances and partnerships with other automotive companies. Due to current competitive pressure, all companies are more likely to enter into such partnerships to drive R&D costs down, access new markets and gain some new skills.

Threats

1. Decreasing fuel prices. Some analysts forecast that future fuel prices will drop due to extraction of shale gas. This would negatively affect Ford as it focus on compact fuel-efficient hybrid and flexible fuel cars that are less attractive when the fuel price is low.

2. Rising raw material prices. Rising prices for raw metals will lift the costs for auto manufacturers and result in squeezed profits for the companies.

3. Intense competition. Ford faces more intense competition from other auto manufacturers more than ever, especially in small cars segment with hybrid engines.

4. Fluctuating exchange rates. Ford, including other largest automotive companies, may negatively be affected by fluctuating exchange rates as it earns more than half of its profits outside the US. The profits may be lower due appreciating dollar against other currencies.

Suggestions based on SWOT analysis-

1. The company should try to expand sales in the Middle East.

2. It should try to gain share in some major oil companies to tackle uncertain oil prices in future.

3. There is a lot of scope for ford to take advantage of the growing needs of public transports, utility vehicles as well as other vehicles that may find their use in some other industries. For example, manufacturing buses and trucks for India and African nations, oil tankers for oil producing countries, etc.

4. The company in order to gain public favor in Asia and China and to gain profits in recession hit Europe may try to reduce its cost structure for these countries as a short term plan.

5. The company may risk its sales in the US to cover the subsidy given in third world countries, but given the large size of potential customers in the target countries, possibility of profits in long term can’t be ruled out.

6. The company may resort to multiple raw material suppliers and may even try to set up its own unit for production of raw materials. This will reduce dependence and make company more competent with rapidly shifting raw material prices.

7. the production of cheaper motor vehicles in masses for mass sales rather than the making of luxury cars is a good option because this will offer a large market and there is safety in the numbers because of the large market share presented

8. Ther should be some more less degree of centralization than present standards with some more autonomy to regional heads to match different demands.