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Current Market Conditions Competitive Analysis – Ford Motor Company

Jamie Carbary, Michael Gwyn, Susan Lister, Robert Lozanovski

ECO 365

John Bayer

October 12, 2015

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Current Market Conditions Competitive Analysis – Ford Motor Company

Introduction

The Ford Motor Company was founded in 1903 with only 12 investors and 1,000 shares

(Ford Motor Company Timeline, n.d.). The Ford Motor Company not only sparked a major

industrial change but changed the course of history. Ford has become one of the largest vehicle

producers while still being the largest corporation that is mostly controlled by family

shareholders. The success of the Ford Motor Company was only possible because Ford

understood not only the factors that affected supply and demand, but that equilibrium prices had

a significant effect on the car manufacturing industry. The Ford Motor Company has continued

to have an advantage over their competitors by developing new and improved products that earn

themselves long-term profitability while remaining a top competitor.

Ford’s History

While working as an engineer for the Edison Illuminating Company as their chief

engineer, Henry Ford built his first gasoline-powered horseless carriage, the Quadricycle, in the

shed behind his home in Detroit, Michigan (Henry Ford, n.d.). Ford started the Ford Motor

company in 1903 in Dearborn, Michigan. Their first vehicle was the Model T car, which has

grown to be a representation of Americana history. After selling over 15 million Model T cars,

Ford ceased producing the vehicle, making it on of the best-selling vehicles of all time, and

arguably the most famous car in the world (Ford Motor Company Timeline, n.d.). Ford later

began building vehicles to support the government in World War II. By doing this, Ford made the

automotive companies vital to the U.S. economy.

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The Ford Motor Company has come a long way since the Model T. Ford now produces

not only cars but trucks, SUVs, commercial vehicles, hybrids, and electric cars. They have

invested billions to develop new technology that has kept them as one of the top three

competitors. The safety of all of its drivers is a primary focus for Ford, especially the safety of

young children and adults. Ford has developed a technology they call MyKey. This technology

helps parents inspire teenagers to drive conscientiously and responsibly. MyKey not only

prevents the car from starting but also disables the radio until seatbelts are fastened, allows

parents to limit a vehicle's top speed, blocks stations labeled as "explicit" by Sirius Satellite

Radio, provides an earlier low-fuel warning at 75 miles to empty rather than the standard 50

miles. They also offer driving aids such as Park Aid and BLIS (Blind Spot Information System),

audio volume limits, and AdvanceTrac, which limits tire spin (Ford MyKey Technology

Programming, Driving Modes and Benefits, n.d.).

Supply, Demand, and Equilibrium

The car market sales have slowly started to increase. The last recession had caused a

negative shift in the supply and demand of automobiles. Lately, an increase with the labor market

has created new demands for vehicles. Motivation and confidence in consumers have been the

driving force behind the demand increase. Most economists have a positive outlook for a full

economic recovery. The Ford Motor Company keeps their vehicles at competitive pricing. With

their standard features, such as the MyKey, rear-view camera, and BLISS, quality and extended

warranties from the factory have made purchasing a Ford vehicle a no-brainer. Consumers, since

the beginning of the recession, have become more diligent with purchasing American brand cars.

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American dealerships have begun offering low-interest rates and cash incentives to attract a new

group of consumers.

With the increase in demand, the supply of automobiles has begun in an increase. The

high demand for certain vehicles has caused the equilibrium prices to increase slightly. This is

found mostly in the hybrid and economy cars. Vehicle manufacturers have started making trucks

and SUV's more fuel-efficient in hopes that consumers will also start to purchase the higher end

vehicles.

Define the market for your chosen product

Market strategy for Ford is to be able to define the market for their vehicles and products

to appeal to all those who want reliable and safe transportation and all those who are sport and

muscle vehicle enthusiast. Fords market is looking for safety, reliability and fuel efficiency.

Fathers and mothers are looking for this and a sense of style this is offered in the Flex and the

Ford Explorer.

The market behind our workforce market includes carpool van and the truck with a

towing package with efficient fuel mileage and room for passengers and cargo this would include

the Ford F150, the Ford Super Duty. Ford Ranger for longer travels that also can transport cargo

and tools. The sports and muscle look to for market for their Mustang such as their remodel of

the old Mustang style Fords has created a high-performing vehicle like the new Shelby, Cobra,

and the reformed Ford GT.

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The commuters and long distance travelers for work also individual who are in retired

look for a smaller Hybrid vehicle to cut cost on their fuel bill and drive for a greener

environment by using the battery power system before turning on the power with fuel switch. All

of these upgrades has helped Ford stay on a top rated vehicle list, and their market sales both in

the United States and Europe are showing Ford to be the second best-selling vehicle. Ford

competitors General Motors, Toyota, and Honda stock pricing, are a higher selling rate thou due

to customer surveys Ford is one of the top selling vehicles today.

Effect of competitiveness

Ford Motor Company has made a resurgence as a profitable company and “has turned

itself around largely by cutting costs and introducing cars that consumers want to buy, rather than

to resort to deep discounts to lure shoppers into showrooms" (NYTimes.com, 2015). Ford

belongs in the automobile oligopoly — a market structure in which there are only a few firms

and firms explicitly take other firms' likely response into account. According to MJM Foodie,

oligopoly is a market space where only a few companies compete for business, and there are

relatively high barriers to entry (www.youtube.com/MJM Foodie, 2015). The ultra-

competitiveness of this industry as made the market very price elastic. Price elasticity the

percentage change in quantity is greater than the percentage change in price" (Colander, pg. 129,

2014). Additionally, such factors as the relationship between an amount of labor & capital

employed and the law of diminishing marginal productivity are challenging all car,

manufacturers. “This states that as more and more of a variable input is added to an existing

fixed input, eventually the additional output produced with that additional input falls” (Colander,

pg. 607, 2014).

The laws of diminishing marginal productivity shows us that instead of

continuing to increase the same output, it might be better to stop at a certain

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level, increase a different input, or produce an additional or different

product or service to maximize profit (www.investopedia.com, 2015).

“In economists’ current thinking, growth depends most on technological innovation. If

technology grows, capital can be found to develop it. Without growth in technology, investment

will not generate sustained growth” (Colander, pg. 607, 2014). In recent years, Ford has been an

innovative technological leader. As a result, their recent vehicles are more competitive and less

prone to the elasticity of the market segment. Their marketing and vehicle safety innovations

have helped them negate some of the price elasticity of the market. For instance, SYNC 3

(registered trademark) allows drivers to interact with their car and mobile device through voice

recognition. Another innovation Ford has focused on making is more sustainable vehicles. This

entails building vehicles with increased MPG’s that use less energy to get you farther, use of

recycled and renewable materials and reducing emissions were possible (www.ford.com, 2014-

2015).

Factors affecting variable costs

Factors that create variable cost consist of the worthy and cost of a new product

installment including the intervention of installing Wi-Fi and safety feature like side and front

collision sensors. Recalls could be a large effect on the supply and demand of labor in the area of

maintenance and repair labor would be enforced but the Ford organization would have to make

cut in another area in order to compensate for the variable costs and the market equilibrium.

Factors affecting fixed costs

Ford Motor Company has many fixed costs. There are some that will not be affected like;

monthly rent/mortgage payments, salary for management, and maintenance and depreciation

costs for owned manufacturing equipment. There are also factors that affect their fixed costs.

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Researching technology is a fixed cost however with Ford's push to deliver more technology, this

may raise their fixed costs to invent and develop new products for their vehicles. Marketing is

also considered a fixed cost, however, it can also be affected due to increased marketing of their

multitude of improvements and technological advancements.

Maximizing profit potential in the new market

The potential to maximize profit for a company is that they have to offer a product that

appeals to all different types of people and their needs. With vehicle manufacturers, they have

different models of vehicles with different options that can cater to a certain group of people

based on what they want. Covering every base at which point Ford would be offering a vehicle

that catches interest from all different types of people's needs will maximize profit alone. Since

Ford is a domestic manufacturer, trying to keep as much of the production of the vehicle in the

domestic market is a selling point all in itself. That fact is a lot of people a loyal to purchasing

domestically made products and when it comes to vehicles it is no different.

People are buying new vehicles every day so when someone goes to another

manufacturer that is profit that Ford had missed. With the electric car market booming in today's

world, Ford has touch on this with the recent release of the focus electric. This is a market that is

slowly being touch by all manufacturers so it only makes sense for Ford to make this business

decision by offering an all-electric vehicle for those looking for one. To own this market, they

need to offer a reliable long lasting battery powered vehicle that people can rely on. Expanding

on the electric technology onto other models may be a smart financial decision for Ford so

people can get more than just focus like an F150 or a Van.

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Conclusion

Ford is a top competitor in the field of manufacturers that offer vehicles across the world.

To stay at the top of that list, Ford needs to venture into new markets and new ideas. By offering

new options to customers to meet their needs and covering all different types of needs will

maximize the profit that is made. They will be covering everything that could appeal to all

different customer needs. Ford has been around for a long time, and it doesn't show any signs of

slowing down. Ford is not going anywhere anytime soon.

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References

Choosing More Sustainable Materials. (n.d.). Retrieved October 11, 2015, from
http://corporate.ford.com/microsites/sustainability-report-2014-15/environment-products-
materials-choosing.html

Colander, D. (2013). Using Supply and Demand. In Economics (9th ed) New York: McGraw-
Hill Irwin.

Episode 30: Oligopoly. (n.d.). Retrieved October 11, 2015, https://www,youtube.com

/watch?y=EIBF2D7IHAI&list=PL336C870BEAD3B58B&index=35

Ford Motor Company Timeline. (n.d.). Retrieved October 9, 2015, from

https://corporate.ford.com/company/history.html

Ford MyKey Technology Programming, Driving Modes and Benefits | SYNC Help | Official
Ford Owner Site. (n.d.). Retrieved October 9, 2015, from https://owner.ford.com/how-
tos/sync-technology/myford-touch/in-vehicle-settings/use-mykey-to-help-encourage-
responsible-driving.html

Henry Ford. (n.d.). Retrieved October 9, 2015, from http://www.history.com/topics/henry-ford

Law Of Diminishing Marginal Productivity Definition | Investopedia. (2013, September 14).

Retrieved October 11, 2015, from http://www.investopedia.com/terms/l/law-diminishing-
marginal-productivity.asp#ixzz3oIWNXZNE

Press, G. (2015, July 28). Ford profit surges as big vehicles soar. Retrieved October 11, 2015,
from http://www.usatoday.com/story/money/2015/07/28/ford-profit-surges-big-vehicles-
soar/30771445/

SUSTAINABILITY REPORT 2013/14 on October 9, 2015, from

corporate.ford.com/microsites/sustainability-report-2013-14/financial-data-market.html
retrieved October 9, 2015 from http://www.ford.com/green/fuel-efficiency/

Vlasic, B. (2009, November 2). Ford Posts an Unexpected Profit of $997 Million. Retrieved
October 11, 2015, from http://www.nytimes.com/2009/11/03/business/03auto.html

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