Ford Motor Company PESTEL/PESTLE Analysis

Ford Motor Company PESTEL PESTLE analysis, political economic sociocultural technological ecological legal external factors case study
A Ford Edge plug-in hydrogen hybrid. Ford Motor Company’s PESTEL/PESTLE analysis indicates major opportunities for global growth based on various external factors. (Photo: Public Domain)

Ford Motor Company’s strategies reflect the challenges the firm faces, as identified in this PESTEL/PESTLE analysis. A PESTEL/PESTLE analysis identifies the most significant opportunities and threats, based on the external factors in the company’s remote or macro-environment. Ford’s environment refers to the global automotive industry. Each external factor presents an opportunity or threat that the business must address through strategic action. As one of the top five players in the global automotive market, Ford ensures that it addresses the issues in its PESTEL/PESTLE analysis. These issues are a direct determinant of the organizational development trajectory of Ford.

Ford Motor Company’s PESTEL/PESTLE analysis shows that the firm has significant potential for improvement, based on opportunities in its remote or macro-environment.

Political Factors Affecting Ford Motor Company’s Business

Ford’s business must address the political aspect as an external influence. Governmental impact on firms’ remote or macro-environment is considered in this component of the PESTEL/PESTLE analysis. The following are the political factors significantly affecting Ford:

  1. Governmental support for technological innovation (opportunity)
  2. Increasing international trade agreements (opportunity)
  3. Increasing governmental effort for infrastructure in developing countries (opportunity)

Governments are increasingly supporting technological innovation to enhance economic conditions. This situation provides opportunity for Ford to use governmental incentives for innovation, environmentally friendly products and sustainability. Ford also has the opportunity to expand its operations based on trade agreements, which make it easier for companies to enter foreign markets. In addition, high-growth developing countries are improving their infrastructure, including transportation infrastructure. This remote/macro-environment condition contributes to the increasing demand for vehicles in these countries, thereby giving Ford Motor Company the opportunity to grow internationally. This component of the PESTEL/PESTLE analysis shows that the political external factors create significant opportunities for Ford’s growth and expansion.

Economic Factors Important to Ford

Ford must always keep an eye on changing economic conditions. This component of the PESTEL/PESTLE analysis identifies the influence of the economy on the firm’s remote or macro-environment. The following are the economic external factors significant to Ford:

  1. Growth of U.S. economy (opportunity)
  2. High growth rate of developing markets (opportunity)
  3. Strengthening U.S. dollar (threat)

Ford has the opportunity to grow based on the slow but notable growth of the U.S. economy, which is the company’s biggest market. Ford also has the opportunity to grow in high-potential developing countries, where the company still has limited presence. However, the strengthening U.S. dollar is an external factor that reduces profit margins and the attractiveness of Ford’s products, considering that many of the firm’s raw materials and automotive parts are produced in the United States. Such remote/macro-environment condition indicates that Ford must improve business efficiencies to maximize the opportunities in foreign markets identified in this component of the PESTEL/PESTLE analysis.

Social/Sociocultural Factors Influencing Ford’s Environment

Ford Motor Company’s remote or macro-environment is subject to the influence of social conditions. The impact of sociocultural trends is considered in this component of the PESTEL/PESTLE analysis. The following are the social external factors most important to Ford:

  1. Increasing demand for hybrid and electric automobiles (opportunity)
  2. Moderate attitude about customer service (opportunity)
  3. Increasing wealth gap (opportunity & threat)

Ford can grow by providing products that address the increasing demand for hybrid and electric automobiles. Ford also has the opportunity to improve its services, especially aftersales services to attract more customers. However the increasing wealth gap is a remote/macro-economic environment condition that threatens Ford’s Lincoln automobiles, which are luxury products with high prices. Based on this component of the PESTEL/PESTLE analysis, Ford’s intensive growth strategies need to emphasize more on product innovation to satisfy changing customer preferences and address the sociocultural external factors in its business.

Technological Factors in Ford’s Business

Technologies enable Ford to develop its potential and compete in the remote/macro-environment. This component of the PESTEL/PESTLE analysis deals with the technological changes and conditions that affect firms. The most significant technological external factors in Ford’s business are as follows:

  1. Rising use of mobile computing (opportunity)
  2. Increasing use of online fulfillment services (opportunity)
  3. Limited network of alternative fuel stations (threat)

The rising use of mobile computing is an external factor that creates opportunities for Ford Motor Company to grow through mobile service support and mobile marketing. Also, the firm can improve its performance through enhanced online fulfillment services. For example, Ford parts can be delivered to customers through these fulfillment services. On the other hand, the company’s potential growth in providing alternative-fuel vehicles may suffer because of the limited alternative fuel stations. Thus, based on the technological component of the PESTEL/PESTLE analysis, Ford needs to focus on service improvement and technological enhancement to ensure competitiveness despite challenges in its remote or macro-environment.

Ecological/Environmental Factors

Ecological concerns partly determine the conditions of Ford’s remote or macro-environment. Issues regarding the natural environment are considered in this component of the PESTEL/PESTLE analysis. The most significant ecological external factors in Ford’s business are as follows:

  1. Climate change (opportunity)
  2. Low-carbon trend (opportunity)
  3. Declining oil reserves (opportunity)

Climate change is an external factor that creates opportunities for Ford to grow through products that help in environmental conservation. The same effort could take advantage of the low-carbon trend. Also, Ford can offer new products that use alternative fuels or electricity to address the impact of the declining oil reserves on the remote or macro-environment of auto firms. Thus, based on the ecological component of the PESTEL/PESTLE analysis, Ford must emphasize product innovation to improve its business performance.

Legal Factors

Ford’s business must satisfy legal requirements. The effects of regulations on the remote or macro-environment are identified in this component of the PESTEL/PESTLE analysis. The following are the legal external factors notable in Ford’s business:

  1. Environmental protection regulation (opportunity)
  2. Increasing safety regulations (opportunity)
  3. Increasing intellectual property laws worldwide (opportunity)

Ford can improve its business sustainability to address the effect of environmental protection regulation. Also, Ford can improve product design to take the opportunity based on safety regulations. Moreover, increasing intellectual property laws are improving the remote/macro-environment of Ford by creating more protection for their intellectual properties and rights. This component of the PESTEL/PESTLE analysis shows that Ford can grow based on changes in the external regulatory landscape.

Ford Motor Company’s PESTEL/PESTLE Analysis – Recommendations

Ford has major opportunities for growth and improvement, as shown in this PESTEL/PESTLE analysis. Ford can enhance its product innovation to address various opportunities linked to climate change, demand for hybrid and electric automobiles, and related external factors. Ford’s international remote/macro-environment also offers opportunities for growth through expansion, especially in high-growth developing economies. Thus, Ford must implement strategies to globally expand based on these opportunities.

References
  • Ford Motor Company Form 10-K, 2014.
  • Gillespie, A. (2007). PESTEL analysis of the macro-environment. Foundations of Economics, Oxford University Press, USA.
  • Housing Industry Association (2011). An Introduction to PESTLE Analysis. HIA Ltd.
  • Murphey, M., & Gause, R. (1974). UCF Research Guides. Industry Analysis. PESTLE Analysis. Business Horizons17(5), 27-38.
  • Roper, K. (2012, November). BIM Implementation: PESTEL Drivers & Barriers (Cross-national Analysis). In World Workplace 2012. IFMA.
  • U.S. Department of Commerce (2015). The Automotive Industry in the United States.