Ford Motor Company Elasticity/Consumer Behavior and Market Competitiveness

Topics: Ford Motor Company, Automotive industry, Ford Mondeo Pages: 5 (2358 words) Published: June 15, 2011
Consumer behavior or elasticity is a consumer’s response to a change in price of a good or service. Consumer behavior allows a consumer to rank and prioritize purchases according to their elasticity of certain goods and their dependence on others (Managerial Economics, 2010). When consumers recognize a change in price and respond strongly, they can adjust their consumption and therefore have their demand for that item become elastic. Automobiles tend to have elasticity in them in regards to make, model, and features that the consumer is willing to pay for. Basic models and good fuel mileage become important as income goes down and elasticity for automobiles goes up. Merriam-Webster defines competition in business as "the effort of two or more parties acting independently to secure the business of a third party by offering the most favorable terms." In a market with a declining demand for luxury items, such as vehicles, automobile makers must stay on top by enacting initiatives that will attract consumers. The following analysis will show how Ford has used consumer behavior/elasticity to create a product line that not only meets customer demand, but has given Ford the competitive edge in the auto industry. They are called the “Big Three” of the automotive industry; Ford, General Motors, and Chrysler. While GM and Chrysler flounder financially, Ford continues on a progressively successful road. This is based on smart managerial decision making processes and creative marketing techniques. Consumers are voting with their money and in an unstable economy, Ford has quickly become the vehicle of the people, while the other two fight to survive. Ford has decoded the key of elasticity and consumer behavior to again become a formidable competitor in the automobile industry. Ford’s characteristics of reliability, fuel economy, and “world class dependability” have made it easy for consumers to choose Ford (Valdes-Depena 2010). Ford’s strategic decision making has increased their market competitiveness and is evident in their prestigious awards and continuous increased market share. Ford is also endlessly looking for ways to reduce their carbon footprint and has promised to make affordable, environmentally friendly vehicles. With impending bankruptcy crisis looming and uncertain times ahead, Ford made a strategic move and committed themselves to not taking the government bailout money. By doing this, Ford’s credibility and their public image rose by 22 points (Kiley 2009). Reputation plays a large part in consumer behavior decision processes and Ford has been improving theirs over the last few years. Ford increased its market competitiveness by declining the handout and proposing a viable solution to take care of them. Ford saw the economy for what it was and was able get rid of two of its major auto lines, Jaguar and Land Rover, which created enough liquid leverage to support them for the short term. Ford was the only U.S. automaker to gain market share in 2009. This allowed Ford to maximize its profits elsewhere and dedicate more money to building on its vehicle fuel economy and green initiatives. In 2009, Ford invested $550 million to transform its Michigan assembly plant, formerly large SUV factory, into a new global small car and electric plant. Ford is making a commitment to its customers to produce eco-friendly vehicles. In addition to electric cars and fuel economic vehicles, Ford is taking advantage of the “Reduce, Reuse, Recycle” program and have launched a marketing campaign called “The Blue Jean Campaign.” This campaign uses recycled jeans in the interior cloth of their vehicles. Ford is going full speed on an eco-friendly campaign to produce better fuel mileage, cleaner energy, and eco-friendly vehicles. Violet Marley (Ford Spokesperson 2011) says that the Ford Explorer is made of 85% recyclable material. Ford uses Soy-foam, recyclable plastics, and metal on the exterior, and will now use recycled material on the...
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