Different forces or surroundings affect business operations. This constitutes the business environment. In other words, the business cannot exist in isolation and the same affects the manner in which the business operates. Customers, competitors, suppliers, distributors, industry trends, substitutes, regulations, government activities, the economy, demographics, and social and cultural factors are forces included in any business environment. Others such as innovations and technological developments may also be classified as forces that influence the business environment.
Other definitions may be as broad as to include the definition of business environment as the physical space or place where a business is conducted. This definition regards a business environment as an office where business operate, while the environment may be considered to include the surroundings and factors impacting influence on a business. The definition even expands to include the component of global operations. According to ICFAI center for management research, the global business environment is the environment in different sovereign countries, with factors exogenous to the home environment of the organization. These factors have influence on decision-making, resource use and capabilities including social, political, economic, regulatory, tax, cultural, legal and technological environments.
Analysis of microenvironment factors broadens the scope of competition shaping the industry. This is in turn positions the firm ahead of the rest in the industry as it remains informed and aware of market developments. The analysis focuses on five competitive forces namely direct competition rivalry, buyer bargaining power, supplier bargaining power, threat of substitute products or services and the threat of new entrants. The analysis is largely concerned with trends to reveal potential threats or opportunities. Impact rating scale is then utilized by this analysis to measure profitability. Potential profitability is scaled on zero (0) to three (3) signifying strong negative impacts; four (4) to six (6) neutral impacts, and seven (7) to ten (10) a strong positive impact on potential profitability.
Ford’s success is powered by a global commitment. It has 166,000 people working in plants and offices in country after country in turn maintaining an admirable international presence. FORD profitability is driven through current industry structure with a global presence and competitive landscape. Ford’s strategy focuses on long-term goals and avoids maximizing on short term pricing. While the threat of new entrants may be high, the extensive global existence minimizes impact of new entrants and reduces the possibility of intense rivalry associated with new entry activity. This generally imposes a very high barrier to entry. The IRS suggests 3/10 for potentially negative impacts on profitability. The threat of substitutes (products or services) is high, and a threat, because FORD provides a limited selection of products and services compared to numerous other retailers in the automobile industry who may also enjoy the advantage of operations. The IRS suggests 6/10 for potentially negative impacts on profitability. The bargaining power of suppliers is low, and an opportunity for pooled purchases. A decentralized purchase strategy can be followed to mitigate erratic global fluctuations. The IRS suggests 9/10 for potentially strong positive impacts on potential profitability. This bargaining power of buyers exists and is a threat emanating from choice from direct competitors. Shopping experience is also considered next to price when deciding to make a purchase by the customers. The IRS suggests 10/10 for very strong negative impacts on potential profitability. Rivalry among direct and indirect competitors is high as competition maintains strong positioning in the industry due to localized presences. The IRS suggests 3/10 for potentially negative impacts on profitability.
Global barriers are high and the threat of new entrants is high with positive impact on profitability. Buyer power, rivalry, and substitutes present the most potential for strong negative impacts to profitability.
Domestic barriers to entry are low and the threat of new entrants is high negatively impacting potential profitability. Supplier power presents opportunities of costs reduction and uniformity positively impacting potential profitability.
Value chain analysis helps to examine the strategic significance of the value chain for FORD. The deep value chain can establish the relative impacts of each business activity and provide linkages and cost reduction opportunities. Firm’s infrastructure, human resource management, technology research and development and procurement form the primary activities that receive support from the management. FORD’s primary activities include marketing, sales, service and support. The model of the value chain therefore examines interrelationships and linkages between business activities that may impact FORD’s long-term growth. The model, therefore, serves the primary goal to enable core competencies while reducing the negative impacts on business processes.
A snapshot of a firm’s relative performance, core competencies and customer centrism can be glimpsed through conducting a value chain analysis. FORD is customer driven. This allows unity for primary and support business activities to work enhancing stronger competitive advantage and thus profitability. In essence, corporation is relying on coordination of both sets of primary and support business activities.
On the other hand, a rating scale determines a company’s performance relative to industry rivals. A score of zero (0) to three (3) describes poor relative performance while four (4) to six (6) relative equal performance to industry figures. On the other hand, a score of between seven (7) and ten (10) describes outperforming industry averages, referenced against exemplar of best practices.
Ford retail sales grew 14 percent in 2013 with the retail market share went up a full percentage point to 8.2 percent. Commercial vehicle sales were up 6 percent in 2013. Overall 2013 market share was nearly flat and the corporation reclaimed its relative brand position to become position two among the best-selling brands in Europe.
Even in ASEAN markets, driven by Thailand, overall sales rose more than seven percent year-over-year to all-time best 95,906 units. This reflected strongly on Ford’s expanding showroom progress on its One Ford plan. Overall ASEAN volume in 2013; Ford was among the fastest-growing auto brands in Philippines, Vietnam and Malaysia while the entry to Myanmar expands regional footprint. Individual model performances recorded best-ever full-year sales for Ranger. Ford Corporation thus has product led transformation envisaged to dive sales momentum in 2014. Ford Thailand continued to lead the overall sales volume in ASEAN. It delivered full-year sales of 51,223 units, as it enjoyed continued popularity and success of the segment-defining all-new Ford Ranger pickup. It also continued to create a strong demand for the technology-packed all-new focus. This also was the case of segment-leading new Fiesta.
FORD’s sustainability focuses on community relations and a philanthropic focus towards education, societal and human services where FORD directly funds scholarships, for instance. All employees have equal opportunities and are encouraged to participate in FORD’s philanthropies.
FORD’s operations, marketing and sales, and support service activities function to gain cost advantages for interlocking skills and capabilities. Indeed FORD’s skills and capabilities activities outperform much of the firms in the industry since the human, technical, and financial skills and capabilities are integrated to enhance efficiencies in operations. FORD’s computerized capabilities effectively reduce losses resulting from risk of theft, produce quick sales accuracy and turnaround time.
For the sake of mapping future investments, identifying skills and capabilities is imperative. A skill resides in functionality and a capability derived from physical resources or assets. However, a skill is typically associated with individual persons. It is important to observe that the acquisition of skills and capabilities is a value chain activity.
FORD leverages against weaknesses by successfully exploiting strengths, skills, and capabilities in its value chain. This, in overall, reduces vulnerabilities and weaknesses while enabling improvements against competitors’ strengths, skills and capabilities. A focus on marginal profitability is, further, needed to maintain a competitive advantage.
FORD’s top three strengths may easily include firm infrastructure with a global presence, human resource management and support services. Its second tier of strengths focuses on competitive advantage in corporate social responsibility with the third tier of strengths rotating around R&D, operations, marketing and sales. A strong brand loyalty has been, therefore, created and associated with these strengths in overall spawning a global leadership serving millions across the globe. FORD’s focus on customer services provides excellent operational efficiencies and operational effectiveness giving a strong financial position.
FORD’s major weakness is a perennial average low profit margin, close to ten years, apart from its heavy reliance on US and UK operations to support global operations, apart from maintaining overall profitability. Slow global economic growth trends in the US and the UK, due to maturity, is a weakness that may tempt FORD to engage in price slashing to remain competitive reducing its profitability.
FORD has the advantage of business value adding activities and focuses to differentiate skills successfully to outperform competitor’s capabilities and achieve higher than industry averages across business activities. The Ford Corporations’ skills have a company culture that quickly adapts to customer needs and low employee turnover. FORD’s marketing and sales efforts (SG&A expenses) have continued for a three-year low; and are successful in eliminating the costs of frills and advertising. FORD’s gross profit margin is about 10%, better than industry average, but lowest amongst direct rivals.
FORD’s global capabilities receive cost and competitive advantages with its technical capabilities contributing to the development of increasing consumer focus activities. Currently, Ford is piloting new Siemens Software using Google Earth Technology. These technologies will virtually navigate Assembly Plants and enhance global inter-branch manufacturing collaboration Ford is reaping from suppliers by its Tier 1 Suppliers Source enabling more than $10 Million from MEDC Matchmaking.
FORD, however, in spite of its significant strategic innovations still continues to follow down the inevitable path of coping and competing with leading industry competitors. FORD is ranked 60 in the fortune 500. Ford Corporation is committed to innovation throughout out the vehicle lineup with emphasis on outstanding fuel economy, head-turning style and customer-focused technology. It, however, has a capability that includes low overhead operations in the over 80 countries it serves. The capabilities in question may empower FORD’s operational effectiveness in the short term, because they are open to easy imitation by rivals, particularly in the long run.
In conclusion, it may be observed that, in order to promote success, strategies must be matched with complementary environments and structures. When the environments are uncertain, and often they will be, the strategy of innovative differentiation is most likely to be pursued. This is correlated with the use of technocrats and liaison devices. On the other hand, the strategy of cost leadership is associated with stable and predictable environments. This will correlate with the use of controls. Use of liaison devices, however apply more to unfocused strategies. The relationships described here were more likely to be significant in groups of high-performing firms than in groups of poor performing firms.
FORD’s vision is aligned to its strategic planning to meet the performance goals. A sustainable future, programs and measures to further progress are well strived for by FORD with overseas expansion appearing to drive to future profitability. FORD’s global operations are expansive and seem unlimited by their specific interests in nations probably for consideration of GDP growth. FORD also has a set of very strict code of ethics when establishing partnerships and some countries do not have the same laws protecting FORD's vision. FORD seems determined to focus on keeping interest groups satisfied with CSR activities, product diversification and its global presence. However, it is for the senior management of FORD to steer future profitability and overall strength against economic, global and political risk in international environments. The Action Plan Analysis produced in this paper, can enable FORD’s profitability to increase marginally for the next five years. Already indications are positive with Ford’s first-quarter 2014 pay dividend being 12.5 cents per share, up 25 percent from the 2013 quarterly dividend rate of 10 cents per share. Equally, a strong balance sheet and increased liquidity will enable increase in positive business performance. As Ford continues to target sustainable, regular and growing dividend over an economic or business cycle, the whole is more than the sum of its parts. To enable a free expression of strategic choice in this paper, the study focussed on autonomous enterprise – the Ford Corporation. This was a purposeful choice over the strategic business units that are so often constrained by corporate policy. It was hypothesized that the strategy of innovation is positively associated with environmental uncertainty. The strategy of marketing differentiation attempts, through advertising, for corporation has completely differentiated its ranges globally and spends in advertisements in its global markets. The corporation has voiced its pursuit of superiority in design of its automobiles.
In this type of strategy, managers are required to have a good understanding of customer preferences and competing products. Ford has considered staff capability developments and training in the global business units in addition to prestige pricing and market segmentation, to create a unique image for a product. This is engaged in to uniquely appeal offerings and inspire buyer loyalty while reducing price elasticity.
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