SWOT Analysis for the Ford Motor Company

Pioneering the modern assembly line, the Ford Motor Company has held a competitive lead for over a century. The cutting-edge manufacturing process offered by Henry Ford allowed personal mobility to be afforded by the masses, as long as the masses were happy with their vehicles being painted black. Since its inception, the Ford Motor Company has become a leader in reliable and efficient internal combustion-driven motor vehicles.

In this article, we dive into the company’s strengths, weaknesses, opportunities, and threats.

Strengths

1. Ford Motor Company has enjoyed a strong brand value since the Model T.
The Ford Motor Company enjoys the position of the pioneering firm of the modern automobile. Its market entry, earmarked by its innovative manufacturing process, allowed the masses to afford to purchase the low-cost Ford Model T, commanding a market lead. This aggressive market penetration ensured a strong brand valuation that continues to this day, with cost-effective, efficient and reliable imperatives at the brand’s core.

Ford’s brand value as of 2020 sits at $10.07 billion. (Statista)

2. The Ford Motor Company retains a commanding market position.
With a strong sales position in North America and China, and as the leading manufacturer of light commercial vehicles, Ford’s position is currently robust. Market forces are beginning to change the landscape of the automobile industry, with a greater emphasis being placed on emission standards, as well as alternative fuel vehicles. Ford will need to ensure that it pivots to accommodate these trends and retains its competitive market position.

Ford commands 5.59% of the global automotive market share. (Statista)

3. Strong research and development underpin Ford’s corporate strategy.
As consumer tastes change buying patterns and government regulations reshape markets, Ford needs to ensure that it stays ahead of the curve. The company’s research and development department is one of the most advanced in the industry. Its focus has historically been concentrated on improving the efficiencies of internal combustion engines, making some of the most efficient engines in the world. It will now need to focus on innovation for electric and autonomous vehicles, as well as alternative fuel vehicles.

Ford spends $7.1 billion on research and development. (Statista)

4. Product and market diversification ensure dispersion of risk for the Ford Motor Company.
Ford offers a wide range of vehicles for varying consumer requirements in both passenger and commercial vehicles. This ensures that a downturn in one segment has a limited impact on the overall profitability of the group. Furthermore, Ford has embarked on a diversification into industries outside that of mobility and automation by investing in manufacturing capabilities of medical devices and other non-automotive initiatives.

Ford is looking at developing three different medical products. (Endeavour Business Media LLC)

5. Ford’s core values of performance and efficiency ensure a strong light commercial market share.
Ford’s drive to attain a more reliable and efficient engine has given it a competitive edge in the world of commercial vehicles. Known for a good combination of efficiency, reliability, performance, and low cost of ownership, vehicles like the Ford Transit have become a staple in fleet purchase orders.

Ford dominates the market for light commercial vehicles in North America with a 40% market share. (Reuters)

6. Its global supply chain ensures that the Ford Motor Company adequately services the markets where it operates.
With manufacturing facilities present in most markets, adhering to the philosophy of “make where you sell’,” Ford has a robust supply chain to cater to most international markets. The localized supply chain ensures that its purchasing activities bolster local economies and ensures a quick turnaround time for most parts required in the various manufacturing processes.

Ford’s supply chain consists of 1,400 tier 1 suppliers. (Thomas Publishing Company)

Weaknesses

1. Recalls have mired the reputation of Ford for a number of years.
Recalls are an expensive exercise for most vehicle manufactures, especially when the recalls are a result of a deadly incident involving the manufacturer’s products. Ford has had its fair share of recalls, including one of the world’s largest recalls of 15 million vehicles from a fault causing its vehicles to ignite, even when not in use. The result of these incidents is not limited to recalls, but can lead to lengthy and costly class-action lawsuits.

Ford has been affected by a recall of the second-highest number of vehicles, with 14.9 million units recalled due to faulty cruise-control functions. (DriveTribe)

2. A regionally diversified product lineup leads to an expensive manufacturing setup.
While product diversification is certainly a strength of Ford, it is also a weakness. The company offers products to a diverse group of markets and sectors. This has led to an expensive international manufacturing process. The company has acknowledged this weakness and has begun to cut down on its product offerings and manufacturing facilities in order to streamline its offerings.

Ford will cut five engines from its 17 that it produces to drop capital expenditure. (Endeavor Business Media, LLC)

3. Ford has relied too heavily on the North American market, while gains can be obtained elsewhere.
While the Ford Motor Company enjoys a leading position in its home market, North America, other markets are developing at a rapid rate. The company has moved quickly on China’s rise, in which it enjoys a strong market presence. However, other markets are still relatively untouched by the company. South America, Middle East and Africa still offer great expansion opportunities.

Ford has achieved a 73% increase in sales in China. (The Motley Fool)

4. Slow innovation has resulted in Ford losing out on the market share of new mobility solutions.
With companies like Tesla becoming one of the most sold vehicles in the United States within a short number of years, the automotive industry is experiencing an upheaval that it hasn’t experienced since Henry Ford’s innovative manufacturing process over 100 years ago. These innovations are leading to alternative offerings for Ford Motor Company’s core market, which is leading to a smaller market capitalization. Other vehicle manufacturers are answering the challenge of alternative fuel vehicles, but Ford has been slow to react.

In 2019, Ford announced an investment of $11 billion into the development of electric vehicles, compared to one of its competitors, Volkswagen, announcing an investment of $91 billion. (Investopedia)

5. Ford faces stiff competition in the markets in which it operates.
It has competition from competing vehicle manufacturers, alternative fuels, alternative mobility solutions and public transportation. This leads to a shrinking market. A shrinking market share in a depleting market has a compounding impact on the value of a brand.

Ford Motor Company’s North American market share decreased from 14.9% in 2017 to 13.87% in 2020. (Statista)

6. Market saturation will continue to be a weakness of Ford without significant innovation.
The Ford Motor Company has experienced an enviable expansion over the last century, with its vehicles available in over 200 countries worldwide. This offers little opportunity for growth within its traditional markets. Ford should pivot its offering to address changing markets rather than becoming more competitive in a segment that is becoming increasingly weakened.

Ford Motor Company sold 4,187,000 vehicles in 2020, down from 5,386,000 in 2019. (Statista)

Opportunities

1. As the world moves toward low environmental impact initiatives, eco-friendly vehicles offer great opportunities.
In response to a global imperative to lower emissions and more eco-friendly mobility solutions, Ford has focused more on the efficiency of its internal combustion engines than expansion into alternative mobility solutions such as mass transport and alternative fuels. These new markets will detract from traditional mobility solutions and offer great opportunities for companies who adequately address this demand.

Ford plans on building the world’s largest electric vehicle charging point network, with 35,000 charging stations across North America. (Thomas Publishing Company)

2. Self-driving vehicles are an area that Ford well-positioned to target.
Along with the innovation in fuels, self-driving vehicles are a segment that is seen to be one of the next big opportunities for vehicle manufacturers. This bodes well for the existing market of light commercial vehicles in which Ford Motor Corporation enjoys a leadership position. The ability to offer self-driving vehicles is attractive to the large number of companies seeking to cut payroll costs.

Ford has created a $4 billion unit to develop autonomous vehicle technology. (VentureBeat)

3. Better usage of digital advertising to target a younger audience may unlock further market share.
A leading brand will benefit greatly from a well-pointed marketing plan. This is especially true for targeting a younger client base who is more tech-savvy and responds well to digital advertising campaigns. Furthermore, digital marketing campaigns offer more efficient and cost-effective targeting compared to more traditional advertising methods.

Ford spends $2.28 billion on advertising. (Statista)

4. While Ford focuses on the United States and its neighbors, markets outside North America offer further expansion.
The Ford Motor Company will find it difficult to gain further market share within its core market of North America due to market saturation as well as the activity of strong competitors. Developing markets outside of North America, such as South America, Middle East and Africa, offers an opportunity for expansion.

The United States accounts for 40% of Ford’s sales volumes, at 2,590,000 units annually. (Business Quant)

5. Other e-Mobility offerings and alternative fuels indicate where global mobility trends are moving toward.
Consumers are moving away from the traditional model of vehicle ownership and toward a shared vehicle environment. Cities are becoming more congested, meaning vehicle ownership is becoming increasingly onerous and cumbersome. Consumers are moving more toward e-mobility, micro-mobility and public transport for their mobility needs. Furthermore, consumers who are still interested in vehicle ownership now have an increasing preference for more environmentally responsible products, like electric vehicles.

Ford purchased e-Mobility venture, Spin, for $100 million. (Vox Media, LLC)

6. Fuel prices will continue to rise, allowing Ford to capitalize on its position as a market leader in efficient internal combustion engines.
In the short term, Ford’s position as a market leader in fuel-efficient engines will allow the company to enjoy strong demand in the internal combustion segment. This will allow the company to capitalize on its research and development of internal combustion efficiencies while it pivots toward a longer-term focus on alternative fuels.

Ford is part of a $10 million program to develop more efficient internal combustion engines. (Motor1.com)

Threats

1. Increasingly strict government regulations pose an external risk to the entire automotive industry.
Changes in government regulation have a great impact on the investment of a manufacturer in its operations. A move toward stricter emission controls generally leads to a redesign of an engine configuration, as well as the configuration of the manufacturing plant itself. This poses a financial risk to the entire industry.

Vehicle Manufacturers will need to invest $297 billion to comply with tougher guidelines and regulations. (Endeavour Business Media LLC)

2. Strong competition in Ford’s core markets makes market share incredibly valuable.
With an increased offering for alternative mobility solutions, the size of the market for new vehicles will experience continued pressure. This brings out increasingly stiff competition from established players in the industry. Without expanding into other markets, the Ford Motor Company will need to expand faster than the market is shrinking in order to experience any real growth within its traditional markets. This is why it is imperative for Ford to continue to innovate in new markets.

Ford Motor Company’s revenue dropped from $98 billion in 2019 to $80 billion in 2020. (Statista)

3. Ford’s heavy debt exposes the company to financial risks.
Still trying to recover from debt imposed on it from the 2008 financial crisis, Ford’s debt has increased over the last decade, exposing it to increased financial risk and exacerbating the impact of any economic downturn. A focus on stabilizing its debt will strengthen the company’s position going forward.

The Ford Motor Company’s debt levels have risen from $99 billion in 2011 to $161 billion in 2020. (Statista)

4. The alternative fuel vehicles market is expected to take greater market share away from internal combustion-driven vehicles in the future.
A risk experienced by most players within the traditional internal combustion segment comes from alternative fuels. Internal combustion engines have historically enjoyed a dominant market position, with alternative fuels too expensive to produce and own. With a change in market sentiment toward these fuels, as well as innovation in manufacturing capabilities, and growth in supporting infrastructures, alternative fuel vehicles have become a strong alternative to internal combustion engines.

The size of the global alternative fuel vehicle market in 2019 was $392 billion and is anticipated to grow to $1.2 trillion by 2027. (GlobalNewswire, Inc.)

5. As a global brand, Ford is largely exposed to the risks of global recessions.
An economic downturn has historically impacted large, international firms more than regional firms. The Ford Motor Company has a large international corporate presence, which exposes the firm toward market fluctuations and changes in market demand. Ford has taken large strides in decreasing its international operations by closing manufacturing plants, and decreasing its product offerings, thereby decreasing its risk in a financial downturn.

Ford is still struggling to pay down a Congress-initiated $6 billion loan from the 2008 global recession. (Gannett)

6. The automotive industry is experiencing a decline in sales volumes caused by a change in consumer preferences.
With an increase in quality, availability and reliability of public transportation, as well as a change of consumer preference away from vehicle ownership, a shift away from private vehicle ownership will continue to impact the passenger vehicle segment. Ford will need to address these risks to ensure that it maintains its position in moving the world’s population and its goods. By harboring innovation in its corporate strategy and attacking new segments, Ford will engrain its position as a leader in mobility.

Global passenger vehicle sales were down from 68 million units in 2018 to 56 million units in 2020. (Moneyweb Pty Ltd.)

Entering into a new era of low (or zero) emission mobility, Ford will need to reinvent itself to adapt to market trends. This will move the company away from its historically competitive position in internal combustion vehicles to try to gain market share in an already competitive market of alternative fuel vehicles and its associated infrastructure.

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