Business, Management

Ford PESTEL/PESTLE Analysis & Recommendations

Updated on Updated on by Christine Rowland
Ford Motor Company PESTEL PESTLE analysis, political economic sociocultural technological ecological legal factors, automotive industry environment
A Ford Edge plug-in hydrogen hybrid. This PESTEL/PESTLE analysis of Ford Motor Company indicates major opportunities for global growth based on external factors relevant to the automotive business. (Photo: Public Domain)

Ford Motor Company’s strategies reflect the challenges that the firm faces, as examined in this PESTEL/PESTLE analysis. This PESTEL 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 players in the global automotive market, Ford ensures that it addresses the issues noted in this PESTLE analysis. These issues determine how Ford’s mission statement, vision statement, and related goals are achieved through strategies and organizational development.

This PESTEL/PESTLE analysis of Ford Motor Company shows that the firm has significant potential for improvement. The opportunities in the remote or macro-environment provide options for growing the automotive business in the international market. Success in addressing the PESTLE factors is achieved by aligning Ford’s generic strategy for competitive advantage and intensive strategies for growth. For example, technology-focused strategies can exploit the technological trends shown in this PESTLE analysis to optimize the company’s growth and competitive advantage over other automakers.

Political Factors Affecting Ford’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 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 an opportunity for Ford to use governmental incentives for innovation, environment-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 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 political component of the PESTLE analysis shows that the 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 analysis identifies the influence of the economy on the firm’s remote or macro-environment. The following are the economic factors significant to Ford:

  1. Stable and gradual growth and recovery of major markets (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 major economies, which are the company’s biggest markets. The automaker also has the opportunity to grow in high-potential developing countries, where the company has a 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 the firm exports automotive parts and cars from the United States. Such a remote/macro-environment condition indicates that Ford must improve business efficiencies to maximize the opportunities in foreign markets identified in this component of the PESTLE analysis. Strategies for these economic opportunities must account for the effects of competitors, such as Tesla, BMW, General Motors, and Toyota. These competing automakers are also targeting high-growth markets and the economic opportunities identified in this PESTLE analysis. The tough competitive rivalry illustrated in the Five Forces analysis of Ford is also present in these high-growth markets.

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 analysis. The following are the social factors most important to Ford:

  1. Increasing demand for hybrid and electric automobiles (opportunity)
  2. Moderate attitudes about customer service (opportunity)
  3. Socioeconomic disparities based on an increasing wealth gap (opportunity & threat)

Ford can grow by providing products that address the increasing demand for hybrid and electric automobiles. The company also has the opportunity to improve its services, especially after-sales service to attract more customers. However, the increasing wealth gap is a condition that threatens Ford’s automobiles. This wealth gap can reduce the buying power of the middle class, which is the company’s main source of revenues. Based on this component of the PESTLE analysis, Ford’s strategies need to emphasize product innovation to satisfy changing customer preferences and address the external factors in its business. Ford’s culture of effectiveness and excellence can meet the service expectations of customers based on the sociocultural context described in this PESTLE analysis.

Technological Factors in Ford’s Business

Technologies enable Ford to develop its potential and compete in the international market. This component of the PESTLE analysis deals with the technological changes and conditions that affect automotive firms. The most significant technological factors in Ford’s business are as follows:

  1. Rising use of smart technology (opportunity)
  2. Increasing use of online fulfillment services (opportunity)
  3. Increasing availability of charging options for electric vehicles (opportunity)
  4. Expanding but limited network of alternative fuel stations (threat)

The rising use of smart technology is an external factor that creates opportunities for Ford Motor Company to grow through innovation for its products’ integration with smart technology. 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. Moreover, the increasing availability of charging options can boost the sales performance of the company’s electric cars. On the other hand, the company’s potential growth in providing alternative-fuel vehicles may suffer because of the limited network of alternative fuel stations. Thus, based on the technological component of the PESTEL analysis, Ford needs to focus on service improvement and technological enhancement to ensure competitiveness despite challenges in its remote or macro-environment. These technological trends indicate the importance of innovation in the automaker’s operations. The innovation capabilities and other strengths identified in the SWOT analysis of Ford can support strategies for these technological factors in the automotive industry. This PESTEL analysis directs attention to innovation programs for enhancing the technological features of the company’s cars. Ford’s operations management influences the outputs of technological innovation. For example, the company’s operations quality management affects customer satisfaction in car features relating to the trend of smart technologies noted in this PESTEL analysis.

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 PESTLE analysis. The most significant ecological factors in Ford’s business are as follows:

  1. Climate change (opportunity)
  2. The 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, which favors sustainability and reduced carbon emissions. Also, the automaker can offer new products that use alternative fuels or electricity to address the impact of declining oil reserves on the business environment of car manufacturers. Thus, based on the ecological component of the PESTEL analysis, Ford must emphasize product innovation to improve its business performance. It is worth noting that the programs and initiatives included in Ford’s corporate social responsibility strategy facilitate the achievement of corporate citizenship goals relating to the ecological concerns in this PESTEL analysis.

Legal Factors

Ford’s business must satisfy legal requirements. The effects of regulations on the remote or macro-environment are examined in this component of the PESTLE analysis. The following are the legal 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, the car manufacturer can improve product design to take the opportunity based on safety regulations. Moreover, increasing intellectual property laws are external factors that improve the business environment by creating more protection for intellectual properties and rights pertaining to transportation solutions and mobility products. This component of the PESTEL analysis shows that Ford can grow based on changes in the external regulatory landscape.

Recommendations – PESTLE/PESTEL Analysis of Ford Motor Company

Ford has major opportunities for growth and improvement, as shown in this PESTEL/PESTLE analysis. Based on the political, economic, social, technological, ecological, and legal (PESTEL) factors, the recommendations for Ford are as follows:

  1. Enhance product innovation to address various opportunities linked to climate change, demand for hybrid and electric automobiles, and related external factors.
  2. The international industry environment offers opportunities for Ford’s growth through expansion, especially in high-growth economies. Thus, the automotive business must implement strategies for global expansion based on these opportunities.

References

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