Auto Ford Motor Company Case Analysis

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1. Introduction 1.1 Global Automobile Industry The automobile industry is a pillar of global economy. Globally automotive contributes roughly 3 % of all GDP output. It historically has contributed 3.0 – 3.5 % to the overall GDP in the US. The share is even higher in the emerging markets, with the rates in china and India at 7 % and rising. China produces the highest number of automobiles followed by US and Japan (, 2015). The industry supports direct employment of 9 million people to build 60 million vehicles and parts that go into them (, 2015). Many other industries such as steel, iron, glass, aluminium, textiles etc. are associated with the automotive industry and resulting in more than 50 million jobs owed to the auto …show more content…

With about 187,000 employees and 62 plants worldwide, the company’s automotive brands include Ford and Lincoln (Ford Annual Report, 2014). In 2014, Ford automotive made revenue of USD 135.8 billion with a pre-tax profit of USD 4.5 billion (Ford Annual Report, 2014). Ford recorded highest Net Income & profit margins in 2011 the second most profitable year in the company's 109-year history as shown in Table 1 .But much of the profit was attributed to a non-cash gain, as it put a large tax credit from past losses on its balance sheet that will shield it from taxes in the future. Table 1 – Net Income (Source – Ford Annual Report, 2014) The Profit Margins of Ford was always at par or it has been much better compared to General Motors in the past as shown in Table 2 except in 2014. Table 2 – Profit Margin of Ford Vs Competition (Source –, 2015) The decline in Profit margin in 2014 was because of their less revenue in the North American market where they make good margins with their larger vehicles as shown in Figure …show more content…

The Capital investment, skilled and licensed labour force, technological advancements, working with good quality suppliers is considered big barriers of entry into this industry. The future requirement of electric cars and hybrid vehicles has opened this industry to some new entrants like Tesla. To explain the barriers of entry, let us take the example of America's best-selling SUV in 2014 which was the Honda CR-V, for the third consecutive year followed by Ford Escape. These two companies with their immense economies of scale are posing a high barrier to entry for their share of the market. Honda CRV is able to offer the better fuel economy and safety rating without incurring a loss and maintaining the majority of the market share. This makes it difficult for firms like Volkswagen who are leaders in Europe to enter this market. Due to the high market share and high barrier of entry, Honda and Ford have an oligopolistic relationship within the SUV market. These two companies tend to have similar prices against any other

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