External Audit The external audit is an effective way for Ford to locate areas that their company can improve. These areas are called opportunities and threats. In order to create an external audit, Ford will need to look at several key external forces that play an important role in the company’s future. Ford will need to look for forces that include: Economic Forces, Social, Cultural, and Demographic Forces, Political, Governmental, and Legal Forces, Technological Forces, and Competitive Forces.
Once these forces have been located, they will be placed into a category of opportunity, which will help the Ford, or it will be placed in the Threats category, which can hurt Ford. Opportunities Companies should always capitalize on opportunities because they are the forces that will help the company obtain more revenue, or increase their industry market share. Opportunities are the positive external forces that Ford will need to develop strategies in order to continue the company’s success. Below are the opportunities Ford needs to capitalize. Refusing Bailout Money
When the economy took a down turn many companies started having cash flow problems. Several automakers like General Motors and Chrystal, took bailout money in 2008 from the United States government in order to keep their company from financial ruin. These companies took 24. 9 billion dollars in bailout money. Ford was the only American automaker that did not take money from the government in order to combat the worst sales downturn in recent years. Industry Shifts towards Hybrids and Small Vehicles With gas prices sky rocketing, consumers are looking for more fuel efficient vehicles and cars the run on electric instead of fuel.
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Ford has heard consumer concerns and has been improving their cars fuel efficiency. Ford now has several hybrid cars, like the Fusion, and SUVs. Along with smaller more fuel efficient cars like the Focus with 28 MPG in the city and 20 MPG on the highway. Toyota’s 4. 4 Billion Dollar Loss One of Ford biggest competitors Toyota seemed unstoppable until the company began having major issues with one of their most popular cars the Prius. The problems with the Prius and the economic downturn caused Toyota to reported their first every net loss of 4. 4 billion dollars in 2009.
Toyota also warned that might fall deeper into debt in 2010. Ford and BP Join Forces to Produce Hydrogen In 2004, BP and Ford joined forces to try and bring the United States closer to having a hydrogen economy. In order to accomplish this task Ford will be building 30 hydrogen-powered Focus Fuel-Cell Vehicles. The vehicles will be split between three cities, and BP will be building hydrogen fueling centers to help evaluate the cars each time they refuel. Ford and BP continue working to improve this technology. There is talk of having hydrogen cars available to consumers in three years. 010 Fusion Sets Records for the 5th Month Ford’s Fusion car has been their top selling vehicle since its introduction in 2006. The Fusion continues to improve with options of the hybrid model. The vehicle has received awards like the Most Reliable Family Car –from independent reliability and owner satisfaction survey data, Most Dependable Midsize Car – J. D. Power and Associates, Motor Trend’s 2010 Car of the Year – a highly coveted industry accolade, and the 2010 North American Car of the Year – awarded by a jury of top automotive journalists.
Sales of the Fusion continue to be on the rise. Sales have risen to 219,219 for an 11. 9 percent share of the industry, giving Ford an increase in sales of 54 percent in 2010, while Toyota Camry has a 27 percent decline in sales and Honda Accord sales dropped 20 percent. Threats Threats are the negative external forces which could hurt the company. Companies will always need to minimize threats as they are the forces that will hinder a company’s goals and could hurt the company’s bottom line. Below are the threats that Ford will need to minimize. Economic Crisis
In 2008 the economy starting having issues because of rising oil prices and unemployment, increased unemployment, a decline in dollar value, global inflation, a horrible housing market, and terrible mortgage crisis. Many companies started to have cash flow problem. Many companies like Ford had to close several manufacturing plants, laying off thousands of individuals, which hinders the improvement of the economy. Consumer Confidence is Low Recent car accidents have led to low consumer confidence in the auto industry. These accidents have caused the lowest consumer confidence in 40 years.
The entire auto industry needs to be concerned with consumer confidence since this will hurt their profits. Rising Gas Prices With gas prices are on the rise, people are looking for ways to save their money. Since 2000 gas prices have gone from 1. 51 to 3. 85 with no end in sight. Consumers are every concerned that all their money is going to fuel up their vehicles. The United States government has stepped in to require the auto industry to improve their vehicles miles per gallon. Foreign Automakers Market Shares are high In the past most foreign cars have my luxury vehicles created by Mercedes, BMW, and Lexus.
Recently Toyota, Nissan, and Honda have been able to take a larger share of the industry by creating practical and affordable vehicles. Toyota has the held the second spot in the auto industry for 2008 and 2009. Honda held the fourth spot from 2008 through 2010. Both companies are tough competition for U. S. automakers. Ford has been in tough competition with Toyota for the second share of the industry. Competitor with Luxury Hybrid Hybrids have become very popular in the last couple of years since the price of oil has skyrocketed.
Recently companies that specialized in more luxurious car models have been coming out with a luxury hybrid. U. S. News has ranked the best luxury hybrids with Mercedes, BMW, and Porsche taking all the top spots. EFE Matrix The external factor evaluation matrix helps companies, like Ford, to understand and evaluate their external opportunities and threats from nine different categories. The categories include: economic, social, cultural, demographic, environmental, political, governmental, legal, technological, and competitive information.
If a firm has taken advantage of all opportunities and minimized all threats, then the company current strategy would be working as they had hoped. However this is not always the case. The EFE Matrix is a great way for companies to evaluate how their strategy is working for external opportunities and threats and to make improvements when necessary. To create an EFE Matrix a company must find the key factors, opportunities and threats, that will show what the company has encountered. First the company will need to find the key opportunities and then the threats.
Next, companies will need to decide how to weigh each of the key factors. All of the key factor weights must add up to 1. Then the key factors will need to have a rating of 1 to 4. Rating indicates how well strategies are working. A rating of 1 indicates a poor performance, while a rating of 4 indicates a superior performance. After figuring out the weight and rating, companies need to multiply the weight by the rating to find the weighted score. Once that step is complete, add all the weighted scores together and find the total weighted score also known as “the magic number”.
The highest magic number possible is 4 with the lowest being a 1. Ford Motor Company’s EFE Matrix is shown below. EFE Matrix for Ford Motor Company OpportunitiesWeightRatingWeighted Score Refusing bailout money5%30. 15 Industry shifts toward hybrids and small vehicles2%10. 02 Toyota 4. 4 billion dollar loss20%40. 8 Ford and BP joint forces to produce hydrogen power4%20. 08 2010 Fusion set records for 5th Month1%10. 01 Threats Economic Crisis30%41. 2 Consumer confidence is low5%30. 15 Rising Gas Prices30%41. 2 Foreign automakers market shares are high2%10. 02
Competitor with first luxury hybrid 1%10. 01 (1) Poor, (2) Average, (3) Above Average, (4) Superior Total Weighted Score100%3. 64 Ford’s EFE Matrix total weighted score is a 3. 64. Meaning the Ford’s strategy is helping them take the majority of opportunities presented to them, while doing a great job of dealing with threats. One of the opportunities taken by Ford was Toyota losing billions of dollars during their Prius difficulty. Ford also did a smart thing by not taking any bailout money from the government. Most customers appreciated this move, meaning Ford was able to capitalize on this opportunity.
However to improve their magic number Ford will need to readdress their strategy related to industry shifts and continue to have their vehicles set records. When looking at Fords threats, Ford has had a good strategy for dealing with the economic crisis by cutting costs, which meant closing several manufacturing plants. This was not a popular decision but it needed to be done for Ford to survive the economic downturn. One of the ways to show that Ford dealt with the economic crisis well is their refusal to take bailout money. Ford faced another challenge head on with rising gas prices.
When gas prices started to rise Ford started creating more fuel efficient cars like the Ford Focus and Fiesta, and began working on improving the gas mileage in their truck line. Ford also began putting smart technology in their vehicles. However, several threats still need to be addressed by Ford. Ford needs to be concerned with foreign automakers like Kia and Hyundai taking more and more of the market shares. Ford also needs to combine fuel efficiency with luxury to compete with their competition. Overall EFE Matrix shows Ford’s Strategy is working and only needs to consider a few changes.
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