Industry analysis: Ford Case Study
The auto industry is one of the industries that is affected hugely by economic conditions and this is exacerbated by the fact that organizations rarely have control over this factor. This is reinforced by the fact that during the great depression of 2009, leading companies in the sector such as General motors and Chrysler had to apply for emergency government loans to avoid closing its operations. Since its inception, Ford had been recording exceptional number of sales because of its innovative practices that led to the production of highly desirable vehicles at very affordable rates.
Technological innovation is one aspect of that define the environment with which companies in the automotive industry operate in. The level of technology in the sector has expanded enormously, and it because in 2015, Tesla Motors is focusing on coming up with advanced electric cars. Failure to adopt an innovative model, let to the severe decline of Ford Motor Company’s market share from 24.8% in 1999 to 18.6% in 2005, losing more than $1.6 billion, worth of profit.
Since the industry is very dynamic, and largely affected by various economic factors, a great leader is essential in the management of a firm. In the case of Ford Motors company, it took a new approach by looking for a CEO. For a company that was recording a higher level of losses, it was crucial that the company adopted a new organizational culture and strategy. Mullaly’s successful turnaround of Ford profitability shows the impact that a great leader with vision can increase a company’s productivity levels.
In the struggle to increase its market share, Ford faced competition from Toyota which had adopted a continuous innovative and improvement method. It also struggled against General motors, but the failure to reduce on operational cost while increase the levels of productivity impacted negatively on General Motors. In terms of its consumers, the new CEO, Mullaly adopted best mix of brands, which led to the development of vehicles that were accepted and adapted to customers globally. From 2011, Ford embarked on an ambitious program of substituting and replacing some of its models, but the addition of more models came at a cost as more assembly lines had to be opened further pushing up its sales. Despites its dependability, of for example its F-series, the company has not been able to match its performance level of its products with consumer perceptions. Through its globalization strategy, the company required to limit its suppliers, while delivering more cars. Ford for example, planned to reduce its supplier base from 1150 to 750, but this can be very costly as recorded when Japanese airbag manufacturer had a problem, which forced Ford to recall more than 850,000 vehicles costing more than $500 million.
Analysis of Ford’s total sales and the market share for the year 2014 and 2015, shows that the company has been improving progressively. The number of sales in the US market increased from 153,494 units in 2014, to 177,441 vehicles which led to an increase in Ford’s market share from 15.2% to 15.4%. The performance enabled Ford to retains its second position in terms of market share. The other statistics reflects the same findings showing that is second with a market share 14.9%. The effect of economic factors on the number of new vehicles sold in the US is shown by the fact that global downturn of 2009 affected the number of sales of new cars and the impact was not until 2014, when substantive number of sales was recorded. It is worth noting that unstable oil prices, have also been impacting the number of sales of vehicles as it affects customer preference of vehicles.