SWOT Analysis - Ford Motor Company

SWOT Analysis Figure 1 shows the internal and external factors influencing the market opportunities for Ford Motor Company. This SWOT analysis highlights some of the main factors that may be affecting the profitability of the company, and will be discussed in detail in this section. Figure 1. SWOT Analysis for Ford Motor Company Internal Strengths Global Brand   Equity  Strong Market Markets  Position Research and China  Development   Global Supply Income  Chain Operational   Network Pickup Sales  Adaptability  External Opportunities  New Automotive Technologies  Digital Marketing  Expanding Markets  Partnerships Ford’s Strengths - Internal Strategic Factors Weaknesses Product Recalls Dependence on U.S. Declining Sales in Declining Net Poor Reputation Heavy Reliance on Threats  High Competition  Increased Prices of Raw Materials Regulation and  Compliance 1. Global Brand Equity – Ford is a well-known brand in the automobile industry and is also recognized in the global markets because of its success in marketing and advertising. Its brand value is $18.5 billion according to a recent annual report on the world's most valuable and strongest brands ("Brand Finance Global 500", 2020). Strong brand equity has resulted in consistent performance as well as a strong competitive advantage. 2. Strong Market Position – An established market position enables the company to secure opportunities in the market and meet customer demands. The United States is the biggest market for the Ford Motor Company, and its sales in this region have remained strong. The company generated over $98 billion in revenue in the 2019 fiscal year from conducting business in North America, up from around $96.6 billion in 2018, while revenue declined in markets outside North America, most notably in Asia and the Pacific region (Wagner, 2020). 3. Research and Development – Ford’s research and development is one of its key strengths because the company is committed to developing new products, and trying to improve the performance of their vehicles, including fuel, efficiency, safety, and customer satisfaction. In recent years, Ford’s focus on research and innovation has grown more intense, investing in autonomous driving and electric vehicles. Its research and development costs rose to $8.2 billion in 2018 (Pratap, 2019, April 16). 4. Global Supply Chain – An automotive business depends upon a strong supply of raw materials, and Ford has a strong global network of suppliers that support its operations around the world. Its global supply chain has providers from a large number of countries in regions including the Americas, Asia, Europe, Middle East and Africa. In addition, the company focuses on sustainability and human rights in its supply chain. 5. Operational Network – Ford manages manufacturing and assembly facilities, warehouses, distribution centers, sales or administrative offices, and engineering centers in 62 countries across the world ("Ford SWOT analysis", 2019). These substantial operational network and strategic partnerships enable the company to expand its reach and reduce costs. Ford has a network of 9,800 dealers worldwide, giving it true global sales and service capability. 6. Adaptability - Ford has a wide product and services portfolio which gives them strong leverage and less dependency on just one product range. Their products include small, medium, large, premium sedan cars, trucks, buses, vans, full-size pickups, sports utility vehicles (SUV), and vehicles for the medium/heavy segments. Ford’s Weaknesses 1. Product Recalls – Product recalls and other operational issues add costs to the company and affect its reliability and brand image. Ford has faced huge losses from a variety of issues, including recalling 830,000 Ford and Lincoln vehicles in 2016 to replace faulty side door latches, and Takata airbags due to safety failures the following year. In September 2018, Ford recalled approximately 2 million F-150 pickup trucks to fix a seat belt defect that could actuate vehicle fires. “These recalls affect the crown jewel of Ford's lineup and are expected to cost approximately US$140 million for the company” (“Ford Motor Co”, 2018). 2. Dependence on U.S Markets – Ford is highly dependent on the U.S market, accounting for around 60% of the net revenue of Ford motors in 2018. Experts predict that the majority of future car sales will come from emerging markets such as China and India, however, Ford’s position in Asia is not strong enough to reduce its dependence on the US market. 3. Declining sales in China – China has become the leading automotive market of the world, and the weakening position of Ford Motors in China is an important concern for the brand. Over the past three years, sales of Ford vehicles in the Chinese market have continued to fall, from 1.3 million units in 2016, to 1.2 million in 2017, and then to 0.8 million in 2018. Continuously falling sales in the leading automotive market of the world presents a grave concern for Ford (Pratap, 2019, April 17). 4. Declining Net Income – Net income of Ford Motors went through a major decline in 2019 versus the previous two years. Ford’s net income declined from $7.73 billion in 2017 to a mere $47 million in 2019 (“annual income statement", 2020), which could be attributed to several reasons including currency headwinds and growing prices of raw materials as well as decline in overall unit sales. “Higher commodity costs, unfavorable exchange rates as well as higher spending due to product recalls also caused this decline in net income” (Pratap, 17 April, 2019). 5. Poor Reputation – Ford has a poor reputation compared to its European and Japanese rivals. “Lincoln, in particular, is considered an inferior brand as compared to English and German luxury car brands” ("Ford SWOT analysis", 2019). 6. Heavy Reliance on Pickup Sales – Pickups have limited appeal outside the North American market ("SWOT Analysis of Ford Motor Company", 2016). Ford’s Opportunities – External Strategic Factors 1. New automotive technologies – such as self-driving or autonomous cars. These could increase demand for new models and sales, and the publicity-generated could also increase interest in car purchases. In 2017, Ford invested $1 billion in artificial intelligence company, Argo AI, to develop its self-driving technology (Biggs, 2017). 2. Digital Marketing – Digital marketing offers great opportunities for the vehicle brands, and Ford can use digital technologies for marketing and branding as well as for customer engagement, as well as for supply chain management. This could also be used to increase e-commerce, which could grow the demand for light commercial vehicles that are used for delivery, such as the Transit Connect work van. 3. Expanding Markets – Ford should focus on growing market share in other regions, particularly in expanding economies like India, China, and Mexico. 4. Partnerships – Partnering other brands can also help Ford extend its global presence and its sales and distribution channels throughout the globe. Ford’s Threats 1. High Competition – The company operates in a highly competitive environment, and Ford is already facing cut-throat competition from its rival companies like Toyota, Tesla, General Motors, and Honda. Industry overcapacity has led manufacturers to offer incentives on vehicles to maintain and grow market share, and all the major competitors are investing heavily in research and innovation, as well as marketing. 2. Increased Prices of Raw Materials – The fluctuations in the prices of raw materials could increase the cost of operation at Ford, affecting its financial performance. Ford uses steel, copper, lead, aluminum, resins, and platinum group metals as raw materials. In addition, the company’s manufacturing facilities rely on natural gas, electrical power and other energy sources. 3. Regulations and compliance – The compliance and regulatory threats for automobile brands have increased in the past years because of environmental improvements. The company’s operations are subject to safety, fuel economy, emissions, and other regulations, and Ford can face serious challenges if it fails to comply with the new regulations.