Competitive Market Analysis

Competitive Market Analysis

Student’s Name

Institution’s Name

Date

Competitive Market Analysis: Ford Motor Company (Fiesta)

Introduction

Ford Motor Company is an American based global mobility and automotive company which was incorporated on 9th July 1999. The business of the company include servicing, designing, marketing, and manufacturing a line of Ford trucks, cars, Lincoln luxury vehicles and sport utility vehicles. Ford works in four segments that include central treasury operations, ford smart mobility LLC, financial services and automotive. Ford’s vehicle brands include Lincoln and Ford (Shareholder.ford.com, 2016). This paper provides a competitive market analysis of the new Ford Fiesta model or brand in the market. Fiesta is one of the oldest Ford products since the establishment of the company. The supermini car came to the market in 1976 and has since been modified in more than seven generations. The brand is globally manufactured in South Africa, Europe, Thailand, Brazil, India, Argentina, China, and Mexico. The newest Fiesta model was introduced in 2017, and thus, it is currently being marketed.

Type of Market

Ford Motor Company operates in automobile industry in the United States and the world market. Automotive industry acts as the best instance of oligopoly market. Oligopoly refers to a market structure where in a few companies control the large part of the market share (Tucker, 2008). To fit this definition, the automotive market in the United States is characterized by a few big companies that include Ford Motors, General Motors and Fiat Chrysler. The companies dominate the US automotive market, and only experience great pressure from a few foreign companies with similar operational magnitude in their local market. The three companies have been demonstrating high ability to compete with similar foreign companies and have in a number of instances outshined them. The three companies serve the entire US population and other customers across the globe.

The oligopoly influence of the automotive market can be clearly illustrated by the product prices and the manner in which new products are introduced in the market. The three companies compete among each other, with the competition process being mainly based on the introduction of new products it the market, to counter high competitive ability of the rival company, following any recent development. Normally, each company fight to improve their product in a similar manner in the market, where the counter product is characterized by employment of similar or even more improved features. However, the latest production from any of the three companies act as a lead to the next productions in the other two companies, but with slight improvement in term of appearance, or technology employed. The new production also defines the product price and how the new counter products from other competing companies will be priced. The same trend is also experienced in the global market, where the companies compete based on the products improvement. Pricing is also done based on the level of product development compared to that of competitors.

Comparative Advantages and International Trade Opportunities

Ford comparative advantage is the use of Six Sigma to reduce the production cost. The company employs customer-driven strategy of Six Sigma which entails regular evaluation of scorecard metrics to notice performance trends. The company’s team of Six Sigma addresses both the environment and cost issues and simultaneously uncovers the anticipated solution to the production process or the design aspect of the company’s products (Asq.org, 2011). This gives the company a high competitive advantage since it can manage to reduce the production cost and hence presenting its newly developed products in the market at reduced prices compared to its competitors.

The company is widely known in the world market. It has developed manufacturing plants for Fiesta in different parts of the world as stated in the introduction. Thus, the company has managed to access wide global market for the product which at the moment includes the Northern America. This extensive distribution of the company’s manufacturing plants increases the company’s ability to trade at international level. This also enhances the company’s supply chain by ensuring that products are easily accessible to the consumers.

Factors Affecting Demand, Supply and Prices of the Product

Fiesta demand is highly influenced by its pricing where high prices compared to those of similar competitors will reduce the product demand and lower or fair pricing will increase the demand. The demand will also be influenced by the quality of the product based on the employed technology and the level of oil consumption and safety and whether there is a new offering (new model) in the market which has embraced more advancement in the development. Other aspects include the customer financial ability since car products are considerably expensive, as well as the available financing options or plans. Marketing and advertisement also influence the demand of a particular product over the other. Effective advertisement of Fiesta will increase its demand compared to less marketed competitive products. The demand is also influenced by other economic factors that include consumers’ income, and the economic situation of a country (Shepherd, Bonsall & Harrison, 2012).

The product supply is influenced by a number of factors which include the cost of production that is measured based on the cost labor, raw material, machinery and production time among other input costs. The price of the product in the market also influences the supply. Higher prices encourage the company to give more units in the market. In an oligopoly market, prices of one product play a great role in influencing prices of a competitor product. Decline in the prices of competitor product with equal rank as Fiesta will shift the demand to the competitor company, forcing Ford to reduce its prices, and hence its level of supply (Ford.com, 2017). Supply is also influenced by the company’s accessibility to the latest forms of technologies that play a part in the development of a more customer attractive product. The supply is also influenced by the company’s dealer level of extendibility. Wide distribution of dealers encourages high supply. This is also influenced by the financial ability of the company to supply huge volumes of goods. The manufacturer distribution across the globe also plays a great role in determining the level of supply of a product. In this case, the Ford has manufacturers in different parts of the world who manufacturer Fiesta. This means that the company supply maybe high due to wide manufacturing area.

Fiesta prices may be influenced by a number of factors. These include the cost of production, the form of unique advantage employed and that offer extra advantage to the customers, the level of demand and the competitors prices. High cost of production and inclusion of advanced technology will initiate high prices. A decline in the cost of competitive products with similar quality and level of technology advancement will push the company into reducing the prices of this product in the market (Ford.com, 2017). Increase in the product demand may as well initiate an increase in its prices in the market, while decline in demand will force the company to lower the prices of this product in the market. The new model of Fiesta has a high ability to compete with competitors’ products globally. The product has been costumed to address the changing consumer needs, legal measures and environmental requirement globally.

Factors Affecting Total Revenue

The company gets its revenue by selling its products in the world market. The level of the collected revenue is highly influenced by a number of factors which include the price elasticity of demand. When the prices are low Ford company experiences higher level of Fiesta sales, and when they are high, the level of sales reduces. This affect revenue such the company is highly likely to record high revenue when the prices are considerably low. The company’s revenue is also influenced by the cost of production (Shareholder.ford.com, 2016). High production cost translate to high products prices I the market, especially immediately after the product has been launched. However, this is not the only factor that determines the level of sales, new launched can still record high level of sales even with high prices. This is because the sales of new launched is also influenced by how well it has addressed the customers changing demands and the level of inclusion of other technological advantages that cannot be found in the similar existing products.

The company revenue is also influenced by the currency exchange rate in different countries. The company operates globally and hence the sales are made in different currencies. Sometimes the company may loss some of its revenue based on the currency strength against the US dollar. The company revenue is also influence by political and economic environment in some parts of its global market. For instance, the recent Brexit influenced the company level of sales and hence revenue in Britain. Government policies in different parts of the world, especially on aspects related to environmental issues. Other aspects influencing revenue is the level of competition in the market (Shareholder.ford.com, 2016). High level of global competition also influences the level of sales of the company’s products. Ford products compete with Toyota, Volkswagen AG Group, and Honda Motors among others. The revenue from Fiesta is also influenced by the customers’ preference. Some customers may prefer other Ford products over Fiesta and thus, reducing the sales of Fiesta compared to other products.

Recommendation on Profit Maximization

Ford is already a known brand in the market that is distinguished by many due to its ability to produce products of high quality. However, the company receive high level of competition in the global market especially due to high prices compared to some of its competitors especially Toyota. This influences its ability to maximize on profits. To counter this, the company should consider employ well defined marketing strategies which will assist in selling its brand to the targeted customers. Wide marketing enhance product awareness. In this case, the company should focus on displaying specific design features that add value to its products to attract new customers. The customer should also consider developing products for specific products which include low and middle class customers. This will increase its market extensibility and hence increase its marketability. The company should also consider the product oil efficiency and the level of emission in all its products. This will ensure that the company captures all customers who consider environment conservation as their first priority while purchasing any product. The company should also remain competitive in the automobile industry in the world to act as the price leader in both the local and global automotive market. This will give the company a chance to earn good returns from new productions, before similar technology is adopted by other competitors in the market.

References

Asg.org. (2011). Ford team uses Six Sigma to reduce costs while improving environmental impact. Making the Case for Quality. Retrieved from < http://asq.org/public/wqm/ford-team-reduce-costs-environmental-impact.pdf >

Ford.com. (2017). Explore 2017 Fiesta. Retrieved from < http://www.ford.com/cars/fiesta/2017/>

Shareholder.ford.com. (2016). Ford Motor Company 2016 annual report. Retrieved from < http://shareholder.ford.com/~/media/Files/F/Ford-IR/annual-report/2016-annual-report.pdf>

Shepherd, S., Bonsall, P., & Harrison, G. (2012). Factors affecting future demand for electric vehicles: A model based study. Transport Policy, 20, 62-74.

Tucker, I. (2008). Microeconomics for today. Cengage Learning