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BSc
Programme
BIP-1
Module name
February 2020
Schedule Term

Student Reference Number (SRN) BP0234000

“How can Ford motors increase their revenues using the

Report/Assignment Title
opportunity of increased demand during spring in the
presence of ongoing trade war between US and China?”
Date of Submission 28/04/2020
(Please attach the confirmation of
any extension received)

Declaration of Original Work:

I hereby declare that I have read and understood BPP’s regulations on plagiarism and that this is my
original work, researched, undertaken, completed and submitted in accordance with the
requirements of BPP Business School.

The word count, excluding contents table, bibliography and appendices, is 2452 words.

Student Reference Number: BP0234000 Date: 28/04/2020

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BPP Business School

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 “How can Ford motors increase their
revenues using the opportunity of increased
demand during spring in the presence of
ongoing trade war between US and China?”

BIP-1

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Executive Summary:

The provided document has been formulated in order to identify the impact that seasonality
has on a business. The company discussed in the following report is Ford Motors that have
been seeing a growth in their sales during the season from March to June (Spring). However,
in the recent years a major downfall has been seen in the growth of Ford, despite trying to
avail the seasonality due to the war trade between US and China. For the following purpose a
business question has been derived that states that “How can Ford motors increase their
revenues using the opportunity of increased demand during spring in the presence of ongoing
trade war between US and China?” For identifying the outcome to this question, the report
focuses on internal and external analysis of Ford that include VCA model and PESTLE
analysis. On the basis of the findings, relevant conclusion has been narrated and possible
recommendations for overcoming the implemented losses have been established.

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Contents
Executive Summary: ................................................................................................................ 3

Context of the Report .............................................................................................................. 6

Introduction of the company .................................................................................................. 6

Seasonality in Business:......................................................................................................... 6

Changes in the Business......................................................................................................... 7

Purpose of the Study:............................................................................................................... 8

Evaluation ................................................................................................................................. 9

Value chain Analysis: ............................................................................................................ 9

Primary Activities .............................................................................................................. 9

Supporting Activities: ...................................................................................................... 10

PESTLE ANALYSIS: ......................................................................................................... 11

Conclusion .............................................................................................................................. 12

Recommendations:................................................................................................................. 13

References:.............................................................................................................................. 14

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List of Figures
Fig. 1………………………………………………………………………………… 6
Fig. 2………………………………………………………………………………… 8
Fig. 3………………………………………………………………………………… 9

List of Tables
Table 1………………………………………………………………………………… 7
Table 1………………………………………………………………………………… 7

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Context of the Report

Introduction of the company

Ford motors is known to be a US based multinational that has an operational headquartering

Michigan, US. The company was founded by Henry Ford in 1903 (Ford, 2020). Ford motors
is known to be the seller of commercial vehicles, automobiles and luxury cars. In addition to
that, Ford is known to have its joint ventures in various countries such as China (Changan
Ford), Thailand, Russia and Turkey. Ford is known to be the second largest automobile
manufacturer in US and 5th in the world. Ford is ranked at 11th position of the largest growing
companies in US as per Fortune 500. Currently, Ford has 190,000 employees retained and net
income of 84 Million (Annual report, 2019).

Seasonality in Business:

The automotive industry is one of the most important and productive industry in the world.
However, a massive growth in the sales is often recorded during specified seasonality every
year. For the automotive industry, a raise in the demand of vehicles is seen to rise for around
15% during the months of autumn and spring. (Melanie, 2018) This justifies the attempt for
automobile companies to bring out new models during this season.

Figure 1: (Equity Clock, 2019)

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 Referring to the sales trends of Ford motors, they tend to experience seasonality in their
operations like other automotive brands. Ford motors has an extensive product line to offer
customers in terms of their vehicles. In order to exploit these opportunities based on
seasonality, Ford Motors usually applies sales events during spring in order to gain
customer’s attention (Boyertown, 2020). As per the records of vehicle sales during Q2 for
Ford are recorded, an increase in the sales is recorded in all the types of vehicles.

Commercial Vehicles Increase of 2.7%

Ranger Pickup Increase of 8.2%
Ford Focus Increase of 9.2%
Ford S-max Increase of 11.1%
Ford Galaxy Increase of 37.9%
Table 1: Reference: (Roelant de Waard, 2020)

Changes in the Business

Referring to the overall scale of profit generation, a massive downfall is being reported in the
sales and revenue of Ford motors, despite making profits in the seasonality peaks. As per the
recent findings attained, a 3% decrease in the revenue has been reported from last year due to
a shift from 160.3 billion USD to 155.9 billion dollars while a massive decline in the net
income was reported from 3.6 billion USD to 47 million USD (Shadburne, 2020).

Change in Change in Change in

2016 2017 2018 2019
percentage percentage percentage
Net income
(USD in $2.437 $7.731 68.47% $3.677 (52.44%) $0.047 (98.72%)
Billions)
Table 2: Reference: (Macrotrends, 2020)

One of the most prominent and highlighted reason for the massive decrease in the sales can
be recorded due to the implementation of trade war between the government of US and
China. As per this war, both US and china have implemented tariff and import taxes on each
other that has resulted in businesses falling apart (Wayland, 2019). As a result of this tariff
impact, Ford has suffered a cost of 1 billion USD and a major downfall in its sales. As per the
reports, a 25% Ford has faced a 25% tariff on the steel and 10% tariff is recorded on the
import of aluminum as the trade war has impacted the market on a large scale (Ferris, 2018).

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In addition to that, china is one of the biggest export markets for Ford Motors and the export
from US to china is also having a huge tool on the profitability of Ford motors (Bunkley,
2019).

Purpose of the Study:

Seasonality is that time frame for a company where they

experience profits or loss every year with a predictable level of
growth or downfall respectively. Moreover, the predictability and
repetition of this period helps businesses in gaining maximum
profits or allows them to make certain contingencies to overcome
losses. As per the changes recorded in table 2 regarding the net
income of Ford motors, it can be spotted that the trade war has
played an impact on the overall profitability of Ford motors
(Staff, 2019). As a result of the impacted trade-war, a strong
implementation on tariffs have been implemented from both ends
where both the countries are implementing and increasing the
tariffs in and against one another (Taylor, 2019). Fig 2: (BBC, 2019)
With the implementation of the trade war, Ford has been facing difficulties in their efforts to
get pushed from both end customers that can be reported through the massive loss incurred in
their profits solely due to imposed tariffs. As china is considered to be one of the biggest
markets of Ford Motors, the impact on Ford can evidently be seen due to the trade war. This
implementation is resulting in Ford not being able to avail advantages out of their seasonality
and in general, thus failing the opportunity to gain profits.

The following report focuses on discussing the impact of seasonality on Ford motors sales in
context to their increased demand during spring (2nd quarter of the year) and how the
company can avail this opportunity despite the ongoing trade-war between US and China.
For the analysis of the purpose, the question of the report can be derived stating:

“How can Ford motors increase their revenues using the opportunity of increased demand
during spring in the presence of ongoing trade war between US and China?”

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Evaluation

Value chain Analysis:

Value chain analysis is the framework used in order to perform analysis of the internal
organizational activities. It can be useful in helping organizations in identifying the loopholes
to gain maximum profitability and competitive advantage. Despite being actively open in the
market during the peak season, Ford motors is still not being able to gain profits due to the
imposed trade war, thus, this model will be useful in understanding the possibilities to work
around to gain profits.

Fig 3: (Marivi And Vanessa, 2015)

Primary Activities
Inbound logistics:

Ford motor’s manufacturing network is diversified on a global scale with its plants for
manufacturing and assembly across the world. Ford is known to collect raw materials from
global suppliers. Moreover, these raw materials are delivered through help of DHL as third-
party logistics. Ford motors has form alliances with DHL as their logistics partner for
handling their supply chain movements of prototype parts from suppliers to R&D facilities of
Ford (Ovez, 2017).

Outbound Logistics

Logistics are known to play a major role in the success of operation of Ford’s supply chain.
In terms of outbound logistics, assembled vehicles are globally shipped to dealers from
various manufacturing plants. A balanced mix of transport solutions for the reduction of road
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miles and increased efficiency has been used by ford. Ford collaborates with the industries
and logistics partner to make betterment in the supply chain and provide products to the
customers (Lawaspect, n.d.).

Operations:

Ford is known to be a global brand has increased levels of sales across various regions of the
world. In addition to that, multiple assembly plants, offices, franchises and dealership outlets
are operating on a global scale. The business has been divided in to 5 segments based on
geographies: Europe, south America, north America, Africa & middle east and acia pacific.
Ford is known to substantially own all its facilities within and outside US. However, Non-US
based distribution centers are connected based on leasing and vendor ship. As per 2019, Ford
is known have 55 manufacturing plants and 8 R&D centers (Pratap, 2020).

Marketing and Sales

With the increasing automobile industrial competition, companies are focusing on investing
money on their marketing and various sales channels. A large amount of investment is made
by Ford motors on their sales promotions and advertisements on annual basis. For the past
few years, approximately $4 billion were being spent on the advertising annually, however, a
lesser amount was spent last year due to lack of profits gained. In addition to that, ford is
known to advertise their brand by being a part of auto shows and events (Light, 2019).

Product & Service:

Ford is known to bring a wide range of products and services to the customers. The company
is known to introduce better products while continuously focusing towards R&D. Apart from
direct products, Ford, is known to sell Lincoln brand products in order to capture high-end
consumers. A total of approximately 5.3 million of vehicle sales have been reported
worldwide (Pratap, 2020).

Supporting Activities:
Technology:

Technology is one of the most important factors for growth in automobile industry at the
moment as it helps in gaining competitive advantage against competitors and gain market
dominance. Ford is known to build strong technological capabilities that help in driving high
level of productivity and strong supply chain networks. Moreover, efforts are being made to

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enhance the production efficiency of technology by implementation of updated and up to date
IT system. A large amount of investments is made towards the R&D department
(Vijayenthiran, 2007).

Infrastructure:

In order to have a remarkable infrastructure, business operations are handled on both global
and regional level. Each region is being led by a different CEO, VP and head who are
responsible for the growth of that region. In addition to that, management of Ford Motors has
been segregated based on functionalities; i.e. sales and marketing to production, public and
government relations, product design, HR and finance etc. (Ford, 2020).

Human Resource:

Currently a total of 1.9 lac individuals have been employed at Ford Motors. Keeping
employees as a major source of competitive advantage, Ford motors focuses on the strategic
HRM and investing for the development of the human capital by rewarding customers for the
efforts to minimize retention and providing them training for the growth. Moreover, during
high demand, they tend to hire seasonal employees based on contracts to help in serving for a
specified amount of time to meet the customer demand (Pratap, 2020).

Procurement:

As discussed above, Ford motors tends to purchase their raw material from various suppliers
globally. This global procurement helps Ford’s focus on global procurement contributes in
gaining advantages from local economies and promoting new businesses on global scale.
Moreover, it allows the brand to gain continuous supply of goods and services including raw
material from reliable sources (Ford, 2018).

PESTLE ANALYSIS:

Pestle analysis helps organizations in analyzing and identifying impact of various external
factors i.e., political, economic, social, technological, legal and environmental factors, and
their impact on the progression on the organization. In order to identify various factors that
are causing hinderance to the increase in revenue of the Ford, we will be looking in to some
of the factors that have direct impact in terms of the trade war.

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Political factors:

International political scenarios can be a major cause of threats or opportunity for Ford.
Currently, ford is facing various political scenarios that are all proving to be threat for the
company. One of the highlighted political scenarios is the trade war between US and china.
Along with the European and American markets, Ford motors expects china to be one of the
biggest markets for the business as maximum profitability is attained from the market
(Ramkumar, 2019). However, due to the escalating trade war, the increased amounts of tariffs
overshadow the profits. Other than that, Brexit is also creating a major negative impact on the
business. However, free trade agreements in emerging markets can be an opportunity to grow
such as in South America and Asia (Farooq, 2019).

Economic Factors:

A global slump in the number of automobile sales has been recorded globally. Along with
US, many other developing markets such as India have recorded a downturn in sales of
vehicles. This can be imposed as a threat that might lead towards recession. However, with
the value of dollar getting stronger and increase of demand in different regions of Asia, Ford
has the capacity to fulfill the demand (Pratap, 2019).

Technological Factors:

Ford focuses on incorporating high level gadgets and equipment to their vehicles that can be
in the trend and have a longer life span so that it doesn’t get outdated. Moreover, in order to
gain customer attention and gain competitive advantage (Pratap, 2019).

Legal Factors:

With the ability to perform on a global scale, ford has to insure the various legal laws of the
country it is operational in. In the light of current trade war, Ford has been charged a fine of
24 million USD as a result of antitrust violation due to their retaliation for tax implementation
(Goh and Sun, 2019).

Conclusion

Based on the question identified for the following report which states that, “How can Ford
motors increase their revenues using the opportunity of increased demand during spring in
the presence of ongoing trade war between US and China?” the above conducted analysis has

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been presented. Based on the Value chain analysis, all the operations are being performed
effectively by Ford motors. In order to overcome the identified issues, ford motor’s R&D
needs to identify the possible methods for increasing their profitability by identifying more
sources of outbound logistics, connecting with more retailers globally to expand their sales in
the areas where the tariffs are low, save costs and increase productivity by bringing
automation to the operations, evolving HR practices to identify loop holes where costs can be
reduced. Moreover, gaining competitive advantage in the market by producing low cost, high
performance and customer focused products to gain more profitability. Moreover, on the
basis of the PESTLE analysis, it can be concluded that where the economic conditions are
causing this major loss in the company, profitability can be gained by availing the
opportunity of capturing markets that are offering free or minimum trade tariff. Moreover,
cost cutting, and customer attention can be taken into account through the technological
implementations. With the strong dollar value and R&D, ford can investigate opportunities
other than china in order to gain profits. However, it is required for Ford to obey the legal
laws of china, as the fine can be evolved into permanent ban of trade between china and ford.

Recommendations:

In order to overcome the current situation, Ford can focus on the following recommendations.

1. Instead of trading parts and vehicles in and out of China, ford can setup a
manufacturing plant within china in order to make processes effective. In order to do
that, the company can easily avoid the tariff charges that are being incurred by the
company and can help in capturing the Chinese market (Bloomberg, 2018).
2. Another possible recommendation can be for Ford to connect with developing
countries in order to procure raw materials from them on a lesser rate (Lowinger,
1976). In doing so, Ford will be able to generate more revenue by paying less taxes
and gain cost efficiency.

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References:

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Bloomberg, 2018. Trade War: Ford Looks At Making More Cars In China To Beat Tariffs.
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Ovez, 2017. DHL Wins Global LLP Contract Of Ford Motor Company - Österreichische
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