Ford has established a prominent position in the automobile manufacturing industry. The following discussion highlights the dynamics of Ford as a leading player in the automobile industry.
Threat of New Entrants
Threat of new entrants as a force in the porter’s model represents the emerging businesses that intend to join an industry. The decision to be a part of automobile industry is taken after analysis of factors such as ease of entering and exiting the market, as well as the supportive factors such as government’s favorable policies. Ford faces low threat of new entrants because investing in a startup in automobile industry has high barriers to entry because of the capital investment for purchasing auto-parts, raw material, and managing the production line. Ford has a global presence, requiring a significant amount of investment to keep smooth production and supply of vehicles as per the market demand (Ford Motor Company, 2017). The new entrants will find it hard to match the effectiveness and efficiency demand, unless they are able to acquire investment to reduce barriers to entry. Changes occurring in the automobile industry necessitates to upgrade the vehicle models and develop new ones to maintain market dominance. The management has made plans to invest in the development of electric vehicles in the next 4 years (Carey & White, 2018).
Bargaining Power of Buyers
Ford is a well-established automobile company, having its supply chain spread across the globe. The customers of the company include individual buyers as well as the rental buyers, who have difference bargaining power in this context. The buyers of Ford can have influence on the company prices to some extent, effecting the profitability of the business. However, they can’t exert a significant degree of control on the price decisions. Due to this moderate level of bargaining power of the customers, Ford is able to make some revisions in the price, but can’t engage in a significant price hike to maintain vehicle demand in the market. The company has also made some changes to its production plan, by indicating the decision to discontinue manufacturing of Sedans in North America (Scimecca, 2018).
Bargaining Power of Suppliers:
The suppliers in the automobile industry include the firms engaging in business transactions pertaining to automobile parts as well as the raw materials such as iron, aluminum, glass, rubber etc. The suppliers providing these materials to the automobile companies need to offer a competitive price to the buyers to ensure securing a long term business agreement. At the same time, the buyers can’t exert a great deal of control on pricing as the suppliers can opt out of the business agreement and form supply contract with rival companies. The large scale of the company benefits in reducing the bargaining power of the suppliers, but the presence of alternate buyers strengthens the supplier position in the industry, leading to moderate level of bargaining power.
Threat of Substitute Products
Ford Company faces moderate level of threat from substitute products. The substitute products in case of automobile industry comprise other modes of transportation besides automobiles such as public transportation, and bicycles. Besides these substitutes, other vehicle manufacturers offer alternative means to travel, adding to the threat. Since the buyers are able to get similar prices from other automobile companies, they are not likely to experience a major difference in terms of expense. The component of quality and design can be a decisive factor when it comes to selecting a substitute, which has been a focal point for Ford, providing it an edge (Ford Motor Company, 2017). Therefore, it can be seen that Ford faces moderate level of threat from substitute products.
Competitive Rivalry
The automobile industry is signified by a high level of competition among the leading manufacturers, including Volkswagen, General Motors, Toyota and Daimler. The presence of such huge automobile producers makes it challenging to maintain market dominance. The company supported by the history of designing quality vehicles, Ford is able to respond well to the competitive pressure from the rival companies by illustrating cost awareness and emphasis on quality (Smith, 2007). To further deal with the competitive pressure, Ford has decided to develop electric vehicles along with the fuel based automobile to address the demand for environment friendly cars.
References
Carey, N., & White, J. (January 15, 2018). Ford plans $11 billion investment, 40 electrified vehicles by 2022. Reuters. Retrieved from https://www.reuters.com/article/us-autoshow-detroit-ford-motor/ford-plans-11-billion-investment-40-electrified-vehicles-by-2022-idUSKBN1F30YZ
Ford Motor Company (2017). Annual Report. Retrieved from https://s22.q4cdn.com/857684434/files/doc_financials/2017/annual/Final-Annual-Report-2017.pdf
Scimecca, A. (April 26, 2018). Discontinued Ford Sedans Through the Years in Photos. Fortune. http://fortune.com/2018/04/26/ford-no-longer-making-sedans/
Smith, C. G. (2007). Ford, Regaining Their Competitive Edge: a study of the strategic management. USA: iUniverse.