Nowadays, to successfully deal with uncertainty in the external environment and achieve strategic competitiveness, all the firms must be aware of and clearly understand their external environment. The external environment of a company can be broken down into 3 segments, which are general environment analysis, industry analysis and competitor analysis. General environment analysis is to support the managers to identify firm’s opportunities and threats in the industry. Industry analysis focused on the determinants that will affect a firm’s profitability by all its decision made while competitor analysis is to analyse the competitors’ within the same industry in order to create an effective competitive strategies to compete with them in the market.
General environment can be classified into 6 environment segments which are political, economic, sociocultural, technological, environmental, and legal. Although Ford cannot directly manage all these segments in its general environment, but Ford can gather the relevant information needed through this PESTEL analysis in order to take the actions such as development and implementation of management strategies that suit the company. In this chapter, we focused on the general environment analysis of Ford.
As a company that operating internationally, political has become an important factors that Ford need to manage as it is risky than other factors. A stable political environment could bring a lot of benefit to a country and even increase the sales of the company that incorporate in that country. For example, Asia Pacific region has a stable political environment compare to other region during the past years. By operating their business in these countries especially in China, India and Southeast Asia, Ford is able to achieve an excellent financial performance.
According to the news in Shanghai, Ford has surpassed 1 million of sales in August 2016 in Asia Pacific region. Besides, the sales in this region also increase by 22 percent and the market share increase 4.1 percent. Thus, this proved that a stable political environment would bring the increase of sales for the business operates in their country. In contrast, countries in Europe have less stable political environment compared to the countries in Asia Pacific, and so the financial performance is less satisfactory.
If the politic is not stable for a country, the problems such as disturbance of supply chain and distribution network will arise and affect the business’ operation. Besides, political instability also having many hidden risks and the uncertainty always remains. On the other hand, it would increase the confidence of the foreign companies to invest in those countries with stable politic and economic environment. There are many factors that would influence the profitability of Ford such as rules and regulations of the business environment, and also the local government’s perspective towards the foreign investment and corporation. Furthermore, most of the government would support the companies like Ford which are doing business globally to promote innovative, fuel efficient and environment eco-friendly vehicles.
In order to compete and perform well in the industry, Ford must be aware of the nature and direction of the economy. Economic factors is crucial for a firm as it let the firm to compute the market and profitability performance. In the financial crisis in 2008, automobile industry has suffered deliberately due to the economic decline. However, this situation has become better since then.
By expanding into the developing countries such as India, China and Southeast Asia, Ford is able to increase the company’s sales and market performance in the automobile industry. These countries are able to revive the economy that suffering recession as they perform well and adapt good trading strategies. The economic growth in these countries has caused many foreign brands enter to the Asian market and partner with the local brands. As the result, the employment rate is increase and the local workers has a higher dispensable income. Besides, this will positively affecting the customer purchasing intention since they have more income to buy the expensive goods such as automobile. Thus, this indirectly produce an opportunity for Ford to increase its growth and profitability.
Employment rate is one of the crucial factor that affect Ford in terms of economic. Beside employment rate, the other factor that will affect the sales of Ford is oil prices. As customers are price sensitive, oil prices will affect the customers distinctly. Customers definitely would not buy a car that has a large fuel consumption as the price of oil is expensive. Thus, Ford has put a lot of effort to create fuel-efficient vehicles and vehicles that run on alternative energy such as electric car to satisfy customers demand and increase profitability.