Ford Company Overview:
Ford Motor Company is an American multinational automaker founded by Henry Ford in 1903. The company manufactures luxury, sports, and economy cars with principal manufacturing plants in Dearborn, Michigan; Oakville, Ontario; and Chongqing, China. Ford also holds a minority stake in Mazda of Japan. It has been the second-largest automaker in the United States since 2007 and is the fifth-largest in the world based on 2010 vehicle sales. Ford was the fifth-ranked overall American-based company in the 2018 Fortune 500 list, based on global revenues in 2017. In 2008, Ford produced 5.532 million automobiles and employed about 213,000 employees at around 90 plants and facilities worldwide. Let’s now go over Porter’s Five Forces Model Analysis of Ford.
Ford Competitive Rivalry:
For the last number of years, the auto industry has been drastically changing. As a result, Ford is facing increasing pressure from other competitors in both new and used car markets due to more competition from foreign automakers. In 2013, the company faced growing competitive pressures from foreign automakers such as Volkswagen and Toyota Motors which led to a decrease in market share from 26.4 percent to 24.1 percent in 2014, as well as a major decrease in the number of cars sold from 2.59 million to 2.53 million.
Ford Bargaining Power Of Suppliers:
As an American multinational automaker, Ford is dependent on foreign supplies and trade deals around the world to maintain their competitive edge and keep costs low. While Ford is not wholly dependent on foreign-made materials, it still relies on international trade agreements to ensure its competitiveness in the global market. Without access to these externalities, Ford would lose some of its competitive edges and be unable to maintain profitable operations.
Ford Bargaining Power Of Buyers:
The power that buyers hold is also an important factor in the success of companies. Ford, they have low bargaining power against its customers considering that buyers value the affordability and quality of Ford vehicles over other brands. As such, where buyer preferences reside at high price points or high-quality product lines, Ford has to compete with other automakers in order to stay relevant. With its vehicle line consisting of both economy and sports cars, Ford has to keep its products affordable enough so as not to lose buyers spread across the entire spectrum.
Ford Threat Of New Entrants:
The threat of new entrants is relatively low for Ford considering that it holds a significant portion of the automotive market share within the United States alone. However, with the announced acquisition of Volvo by Geely Automobile Holdings, Ford will be facing an increased threat from Chinese automakers in the near future. The reasoning behind this is that Chinese automakers have been trying to break into foreign markets for a number of years and going through a relatively slow process due to different rules and regulations across borders.
Ford Threats of Substitutes:
The threat of substitutes is high for Ford as it applies to both personal and public transit. The idea behind this is that one would be more inclined to purchase a vehicle that offers short-distance transportation, such as a motorcycle or scooter, than purchasing a mid-size vehicle like the 2015 Ford Mustang. Although there are an increasing number of individuals who are starting to rely on public transport instead of owning a vehicle, the threat of substitutes is low for Ford because they have been able to maintain their competitive edge by being one of the few automakers that currently manufactures mid-size vehicles.
Ford Porters Five Forces Conclusion:
Ford uses a relatively low amount of foreign materials to manufacture their vehicles, which is a major reason why the bargaining power that suppliers hold over Ford is low. However, with recent trade deals and negotiations that have been going on between countries such as Canada and Mexico for example, this could potentially turn against them in the future if they are excluded from these agreements.