Ford and the Automobile Industry

Topics: Automotive industry, Renault, General Motors Pages: 4 (1242 words) Published: November 9, 2013
Having survived the financial crisis of 2008/2009 as a robust competitive member of the world's leading car manufacturers, Ford is now trying to sustain its strong financial performance. To what extent this is dependent on the state of the world's automobile industry and what structural features of the global industry are driving competition and profitability will be analyzed in this paper, as well as the question on how the industry will evolve in the future and what the implications of these trends will be. The automotive industry is considered to be an oligopoly. There are few large firms capturing the majority of the market share. There are significant entry barriers and there is potential for product differentiation and imperfect availability of information. Being an oligopoly makes it a highly competitive market with immense price competition and therefor weak profit margins. Having used the Porter's 5 forces model (see Table 1), two main driver of competition could be identified. The convergence of technology and design within the industry led to an increase in competition. The former distinctive differences and the variety of technologies that once distinguished different cars from different manufacturers were now gone due to the promotion of global models. All large car manufacturers were now offering a more similar product concerning technology and design. The second driver of competition was a broader competitor base that accompanied the capture of emerging markets. Even though the entry barriers in the global automobile industry are high due to huge capital requirements, economies of scale and technological know-how, there were still companies who managed to enter the market. Above all, this was possible due to cheap labor cost in those regions. Especially Toyota, that introduced the Lean production system that later became industry standard was very efficient in cost saving. Having a regional advantage of producing at low cost and therefor being able...
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