Ford Motor Company is one of the largest automotive companies in the world. They had total sales of over 5.6 billion cars worldwide in 2011 and have over 16% of total market share in the United States alone ("Market share and sales," 2012). Maintaining a presence of this magnitude requires a substantial network of supply for both parts and labor. It is also essential that they be able to sell their products throughout the world, not just in the United States, so a global presence and supply chain must also be maintained. Pressure to increase sales and extend brand recognition has caused increased pressure on the supply lines, while the ongoing economic conditions have made it more difficult to continue to improve revenue. In spite of these existing external and internal pressures, Ford continues to produce some of the best known models in the world, including the Mustang and Focus.
Supply and Demand Issues and Market Structure
When the recession hit in late 2008 and early 2009, the automotive industry was one of the hardest hit and the three largest U.S. manufacturers, Ford, Chrysler and GM, were in danger of going bankrupt. With the economy in turmoil and most Americans fearful that they would even have jobs for the foreseeable future, purchasing a new car seemed to most people to be an unnecessary luxury that they simply could not afford at the time. The immediate impact of all this was a sharp decline in automotive sales that led the "Big Three" to Washington, D.C. In search of an economic bailout. Ford accompanied the other companies in 2008 to petition Congress to step in even though they had already secured private financing before the economic collapse happened, so they did not need federal money. Ford believed that all the companies had to be saved in order to preserve the industry supply chain and ultimately GM and Chrysler received federal funding for a managed bankruptcy and emerged stronger than before (Healey, 2012).
The ability to avoid federal funding helped Ford in several other ways, aside from simply preserving their well-established supply chain. The general public perception of the company was that it was the only one of the "Big Three" that had managed to avoid bankruptcy and, as a result, must be the best managed of the major car manufacturers. There has been a general backlash against the bailouts with many consumers turning towards Ford who never had considered them before, simply because of the fact that they eschewed federal money. AT the very least Ford has been positioned as the strongest U.S. auto manufacturer for the time being.
However, as Chrysler and GM emerge from bankruptcy, they are seeking to re-establish their position as major automotive companies and recapture their market share. To do this they have implemented tough cost-cutting measures and introduced major purchasing incentives, such as steep discounts and favorable financing. Though Ford has tried to resist slashing prices and matching the other companies' buyer incentives as much as possible, they have also had to cut tougher labor deals with their unions and shutter some dealerships that were redundant within their dealer system (Vlasic, 2009). These changes have allowed them to remain competitive while not having to tighten their belts as much as their main competitors have.
A major blow to the supply chain of all manufacturers, including automotive, was dealt when an earthquake struck Japan and inflicted a large amount of damage to that nation's manufacturing capabilities. This earthquake highlighted a flaw in the automotive industry's supply chain strategy. The loss of a single manufacturer of electronic sensors forced Ford and other companies to temporarily lay off workers at several plants (Lee & Pierson, 2011). This also led to a decrease in inventory which was exacerbated by the industry's tendency to only provide just-in-time inventory that allows manufacturers to better manage supplies (Lee & Pierson, 2011). This disaster exposed the flaws in the supply chain that could potentially cause problems in the future. Globally disseminated manufacturing may decrease costs, but the loss of any single part can shut down the entire manufacturing process.
The domestic automakers have always had to battle with many cheaper alternatives from foreign competitors, such as Toyota and Honda, and needed to alter their strategies to compete, often by improving fuel economy. Recently some new competitors have emerged in the automotive industry to challenge the existing oligopoly. Of these, Tesla Motors is presents the most direct challenge to the "Big Three," offering a fully electric car that consumes no gasoline....
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