Ford has faced many crises throughout its history but has survived through strategic shifts. The global auto industry faces challenges to profitability from overcapacity, resistance to new plants, and rising costs of development. Factors that could increase future profitability include industry consolidation and revival in global demand. However, continued investment in new capacity, more industry entrants, and increasing buyer and supplier power may reduce profitability. The key to success is having a globally competitive cost structure, flexible manufacturing, outsourcing technologies, strong design aesthetics, environmentally friendly technologies, and good government relations. Choosing attractive industry segments based on products and markets is important for strategic decisions.

1. Ford and the World
Automobile Industry 2012
Presentation By:
Akshay Bansal
Manmohan
Mohit Garg
Shashank Joshi
Ritika Singla

2. Introduction
• Ford was founded in 1903.
• Ford Motor Company has encountered and survived a number of
crisis.
• The company has experienced massive strategic shifts as CEO Jacques
Nasser was ousted and replaced, first, by Chairman Bill Ford, and then
by outsider Alan Mulally.

3. Problem Summary
• To understand the factors that are influencing profitability in the
world auto industry as a whole.
• Future prospects for profitability in the world automobile industry.
• Dramatic fall in production capacity utilization
• Actual production of automobiles is significantly lower than what the
firm is capable of producing
• Resistance of National Governments
• Continual Investment in New Plants

4. The Evolution of the Industry since the late 1960s
• Internationalization
• Market saturation
• Increasing product development costs
• Rising supplier power

5. Threat of New Entrants
• Mature and Capital Intensive Industry
• Developing Cost very High
• Entry Barriers Rising due to increasing capital requirements &
technical complexity
• Producers from India & China entering the world market

6. Threat of Substitute
• Depends on Various Factors such as : Geographical locations, climate,
and availability.
• Generally weak, but rising congestion leading to increasing
competition from public transport.
• Alternative Transport Available.

7. Bargaining Power of Supplier
• Successful Component Business with high economies of scale
• Supplier can dictate their terms
• Component suppliers increasingly control technology

8. Bargaining Power Of Buyer
• Has no power over Auto industry Individually
• Retailers weak—dealership system allows manufactures to control
distribution
• Lower switching cost generates intense competition

9. Industry Competition/ Rivalry Plenty of
competitors
• Declining product differentiation as technologies and designs become
more standardized
• Massive excess capacity
• High exist barriers
• Increasing economies of scale
• High ratio of fixed to variable costs

10. Industry Profitability in the Future
Factors tending to increase profitability
Mergers.
Revival of world demand.
Potential of new firms of product differentiation.
Consolidation of Industry.
New Process technologies.

11. Industry Profitability in the Future
Factors tending to reduce profitability
Continuing investment in new capacities.
New entrants into international market.
Increase in substitute.
Increased Supplier Power.
Increase Exit barriers.
Increase power of buyers.
Fewer sheltered niches.

12. Scenario Analysis
• Continuity
• Environmental Shock
• Mercantilist

13. Key Success Factors
• Cost competitiveness will increasingly require manufacture at locations where
input costs are low (low labor costs in particular).
• Flexible manufacturing and new approaches to product development may
diminish the importance of scale economies.
• Increase outsourcing and greater reliance upon suppliers as providers of
advanced technologies may reduce the importance of technological capabilities.
• Design aesthetics become an increasingly important choice criterion for
consumers.
• Risks of environment shock confer advantage on producers with capabilities in
new, environmentally friendly technologies.
• Increased politicization of the industry environment gives advantage to firms with
good government relations.

14. Choosing Attractive Segments
Two Product Segments in Automobile Industry
Product Class
Geographical Market
Scenario 1: Suv’s or Pickup Trucks
North America (80s-90s).
Currently:
North America: Hybrid Autos
China: Increase in Demand.

15. Key Takeaways
• Global industries are more complex than domestic industries
• Internationalization increases competition by:
• increasing the number of firms competing in each national market,
• increasing the diversity of competitors, and
• increasing production capacity
• Predicting industry profitability requires dealing with two main problems:
• How will industry structure change in the future
• Where different structural changes are pulling in opposing directions
• Identifying Key Success Factors is difficult for an industry
• Segmentation (by country and by product type) provides the basis for more finely grained
strategic decisions.

16. THANK
YOU