SWOT analysis of Ford Motor Company: Leading US automobile brand
Ford Motor Company was incorporated in Delaware in 1919. It is a global company with its headquarters based in Dearborn, Michigan, United States. The company has divided its business into three main segments, the largest being the automotive segment. Apart from that, the other two segments include the mobility and Ford Credit segment. The company’s automobile business is divided into regional business units, including North America, South America, Europe, China (including Taiwan), and the International Markets Group.
Ford Motors company is among the leading global automobile brands based in the United States. The company sells a large range of product offerings targeted at various customer segments. Its product range includes cars, trucks, and SUVs as well as Lincoln brand luxury vehicles. Ford has also expanded its range of electric cars in recent years. The company invests heavily in research and development to maintain its market share.
The automobile industry is experiencing intense competition. Apart from that the pandemic also hurt automobile sales in 2020. Ford Motor Company experienced a sharp decline in automobile sales in 2020 compared to the previous year mainly caused by Covid-19.
In this swot analysis, we will analyze the leading strengths and weaknesses of Ford Motor Company and the opportunities and threats before its business.
Ford is a truly global brand with a strong global footprint. The company sells its products in 200 countries around the world. It has also established manufacturing plants and research and development centers in various locations globally. As of December 2020, the company operated 54 manufacturing plants and eight regional research and development centers. Ford’s global presence is bolstered by a large distribution chain and a large number of dealerships. The total number of Ford dealerships in 2020 was 10,717 which included Ford dealerships, Lincoln dealerships, and combined Ford and Lincoln dealerships.
Ford has achieved strong brand recognition through a focus on branding and marketing. Brand recognition is a strong driver of sales and helps the company maintain its competitive edge in the global market. To maintain strong brand recognition in all its leading markets, the company invests in product quality, customer experience, and marketing. It uses digital marketing channels and social media to grow brand awareness globally.
Large product range:
Ford has expanded its product range to suit the needs of various customer segments globally. The company sells a vast range of vehicles including trucks, SUVs, and cars. Globally, the demand for SUVs, and electric cars has increased a lot in recent years. Ford has introduced a nice range of SUVs, electricals and hybrids to meet the heavy demand globally. Apart from these, Ford also sells Lincoln vehicles.
Focus on research and development:
The automobile industry is experiencing heavy competition globally. Many automobile brands are competing for market share and maintain market leadership and demand requires companies to focus on innovation and marketing. Ford invests a large sum in research and development each year to grow its product range, improve the existing products and maintain demand globally. In 2020, the company spent $7.1 billion on research and development. The R&D expenses of the company declined in 2020 mainly due to the impact of the pandemic.
Supply chain management:
While the company has managed a large and global supply chain, it procures most of its critical parts and raw materials from just around 100 suppliers. The company invests in the development and support of its tier 1 and Tier 2 suppliers. Supply chain management is one of the key factors driving higher competitiveness in the global automobile industry. Companies focus heavily on supplier management and invest in digital technology to grow their supply chain efficiency. However, the most critical advantage of managing an efficient and resilient supply chain is that companies like Ford can continuously produce high-quality and high-performance vehicles.
HRM and organizational culture:
Apart from being a leading automaker, Ford is also an organization with a great work culture. The company places a heavy focus on managing its human capital strategically. The human resources of an autmobile brand are not just a critical asset but also a crucial source of competitive advantage for the brand. They are among the most fundamental drivers of an automobile company’s competitive edge in the industry. It is why Ford focuses on attracting and retaining the most talented people. The company strives to remain true to its values and offer its employees a creative work environment that helps the achieve the most in their careers. As of 2020, the company had approximately 186,000 employees globally.
Product recalls :
Globally, the number of rules and regulations affecting the automobile industry has grown, and companies face heavier pressure related to product quality, emissions, safety, and performance standards. To avoid many legal tussles, automobile companies have to make sure that their products do not have any fault, in case of any issue, companies also swiftly make recalls for replacing the faulty parts. Ford has also made several recalls in the past several years. These recalls, while on the one hand can be very costly for the manufacturing brand, on the other can also hurt brand image.
Ford recalled around 2.5 million vehicles in 2020 including the best-selling F-150 pickups in North America to fix door latches and a dangerous brake issue. Again in 2021, the brand had to make several recalls of Lincoln Aviator vehicles.
Weak presence in key emerging markets:
In several of the important emerging automobile markets, Ford’s presence is much weaker than its leading rivals. For example, in India, Ford’s sales are weaker than the other leading markets, including the North American markets. It sold only 0.1 million units in India over the last three years
Poor brand recognition of Lincoln:
Lincoln is a luxury brand owned by Ford Motor Company. Compared to the leading luxury brands like BMW or Audi, it enjoys weaker brand recognition and demand in the US and the other markets.
Dependent on the North American market:
Ford Motors Company is a US-based automobile brand. However, the company mainly depends on the North American market for most of its sales. More than half of the sales that the company achieved in 2020 were from North America. The company sold 2.3 million units in North America in 2020 out of a total of 4.5 million units it sold worldwide.
The market for electric vehicles is growing bigger every year. Even during the pandemic, the demand for electrical chars has continued to grow. Ford has also focused on expanding its electric car range in recent years. The company is also investing heavily in research and development to grow its line of electric cars and improve their performance.
The automobile industry is facing intense competition, and many automobile brands are competing for market share in the global automobile market. Automobile companies are trying new and more creative ways to market their brands and grow brand awareness. Digital marketing has become key to growing brand recognition and customer engagement. Apart from digital promotions, companies use social media for customer engagement. Ford Motor Company also invests heavily in digital and social media marketing. The company spent $2.8 billion on advertising in 2020. However, the company needs to focus its marketing efforts more on the emerging markets to find faster sales growth.
Autonomous driving and other technologies:
Autonomous driving and other latest technologies, including AI, drive higher popularity and brand recognition in the automobile industry. All the leading automobile brands are investing heavily in autonomous driving and other technologies that are set to change the future of the automobile industry. The company has invested in Argo AI, a developer of autonomous driving systems. According to Wikipedia, Ford and Volkswagen are the largest shareholders of Argo AI and each one owns a 40% stake in the AI company.
The company can find faster growth through strategic alliances and partnerships. For example, several companies in the automobile industry have formed alliances to carry out joint research and development of new models and bring new models to the market faster. Such alliances with other brands can help Ford become an industry leader.
Competition in the automobile industry has kept intensifying. Aggressive competition in the industry has led to a higher focus on product quality, passenger safety, and customer experience. To remain ahead of the others in the industry, companies are investing heavily in research and development. However, due to the intense competition, Ford Motors has to focus more on innovation and marketing, driving operating costs higher for the brand.
Globally, the regulation of automobile brands has kept growing higher. Apart from emissions-related regulations, which have kept growing stiffer worldwide every year, other areas like labor and product quality also see stiffer regulation. Companies have to be extremely careful in terms of the quality of the vehicles they are bringing to the market. If the chances of any fault or a dangerous drawback emerge, they have to make recalls to ensure passenger safety. Otherwise, they might have to pay hefty fines, which may range in billions.
Raw material and labor costs:
With each passing year, the costs of raw material and labor have kept growing. These things are driving the operating costs of Ford Motors higher. The company has to spend more on sourcing good quality raw materials and highly talented personnel to maintain its competitiveness.
Pandemic’s impact on industry demand:
The pandemic had severely hurt the automobile industry and several brands, including Ford Motor Company, experienced a sharp decline in sales and revenue in 2020. Apart from disrupting automobile supply chains worldwide, the pandemic also caused demand to fall heavily worldwide in almost all markets. In China, the recovery was fast, and therefore, Ford sales in the Chinese market remained stable there. However, the other markets, including Ford’s biggest market, the United States, experienced a very sharp decline. While demand has started surging in most areas since the pandemic, it might still take a few years before automobile demand worldwide could return to the pre-pandemic levels.
A few last words about Ford Motors
Ford has been through a challenging phase in 2020. While the pandemic has hurt the entire automobile industry, its impact has been severe on the sales and revenues of the Ford Motor Company. The company experienced a heavy decline in sales and revenues during the year compared to the previous. Its net revenues declined by around 18% falling to $127 billion in 2020 from $156 billion in 2019. For the first time in several years, the company has incurred net losses in its history. Its net loss for 2020 was $1.3 billion. However, in sveeral regions the market ahs rebounded since the pandemic. China was the first market to recover from the impact of the pandemic and therefore Ford sales in the market remained stable. In the US market, which is the largest market for Ford products, the company experienced a 17% decline in unit sales compared to previous year.
To reduce its dependence on the North American market and particularly the United States, the company must grow its focus on the emerging markets like India whch hold huge potential. Some of its leading competitors like Hyundai have maintained an impressive presence in the Indian market and it continues to attract automobile brands. Ford should also focus on digital marketing to grow its brand awareness in the emerging markets and find faster growth. The company needs to place a higher focus ion improving its competitiveness in the global automobile market. Apart from that, supply chain management is also a critical area and improving supply chain resilience can help the brand improve the resilience of its entire business and find sales growth. Overall, Ford is a strong automobile brand and a great company with a great culture. However, times have changed fast and the automobile indjustry has entered into a new era of mobility where apart from changed consumer preferences, the increased need for compliance is also an important challenge before the automakers.