Ford the World Automobile Industry 2012

Case Analysis: Ford & the World Automobile Industry in 2012

Issues:

* Case issue: As Ford’s new chief financial officer, Bob Shanks must evaluate how the profitability of the company will fare through the challenging forces of the automobile industry: emergence of new technologies, a fickle economy, and environmental matters.

* Structural problems of the industry. The industry as a whole provides certain disadvantages to its long-time players with the progression of time. In the early 1900s, there was little competition, production was low, and the demand for automobiles had skyrocketed as it became the standard for transportation. Ford was an early player in the industry and naturally overpowered the US market with its famous mass production capabilities. However by 2012, the market is now maturing and the demand for automobiles has declined because, as opposed to the old days, there are now more people who own cars and many try to maximize on their investment by keeping them for a good number of years. This has led to excess capacity in production facilities, with high fixed and variable manufacturing costs hurting the profitability of a capital-intensive industry. Reducing excess capacity was also challenged by governmental resistance to closing manufacturing plants and insistence on opening new plants in countries with emerging markets. With changing technologies and consumer interests, the manufacturing processes had also transitioned from mass to lean productions to reduce wastes and inventory storage. Furthermore, Customers were becoming more individualistic and no longer wanted to drive the same car and model as everyone else. The industry then had to invest in developing new products and models to meet these needs, which cost around $2 billion - $6 billion at a time. Finally, competition was an intense force that pushed the industry to become multinational. The emergence of Asian companies like Toyota posed a high threat to countries all...