Essay on Industry Mapping

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Pages: 10
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Identify the Industry Ford Motor Company (F) CIK 0000037996
Industry Overview

History
Henry Ford began the company in 1899, but soon had a falling out with his financial backers and in 1902 left the company and they soon changed the company into Cadillac. Ford joined with Alexander Malcomson, a coal dealer, to help finance the new endeavor. They quickly ran out of money and decided to incorporate. On June 16, 1903, the company incorporated with a total of 1000 shares between 12 investors. The company was the first to develop the assembly line and mass production in 1913. Employee turnover increased, but was subsided by doubling pay to$5 a day. Ford acquired Lincoln on February 4, 1922. The company faced hard times during the depression and war. They had to downsize and lost valuable employees. The Mercury division was introduced in 1939 to fill the void between the economical Ford models and the luxury Lincoln’s. Ford increased its sales throughout the years until 2006 when it reported a loss of $12.7 billion. Ford is considered to be one of the world’s largest automobile manufacturers today. It still manufactures Ford and Lincoln models, but has ceased production on Mercury in 2010. It sold Volvo in 2010, but still holds a small stake in Mazda. This company has 70 plants worldwide, but most of its sales are generated from North America. (Hoover's Inc., 2012)

Factors that affect growth
The global economy grew by 4% in 2010, but decreased by 3% in 2011. This has slowed growth throughout the automobile industry. The estimated economic growth for 2012 is 3% which is still contributing to the debt crisis and weak economic growth. High foreclosure rates and excess housing stocks are hampering the housing recovery, but it is starting to stabilize in some of the worst hit markets. The external environment is considered to be volatile toward vehicle sales. However, the industry is starting to show improvements of approximately 2 million units per year. Excess capacity of vehicles has also caused negative pricing pressures and that is expected to continue until reductions in capacity take place. This is positive for consumers because it is keeping manufacturers from increasing prices in order to remain competitive.

Commodity and energy prices, such as oil, have increased between 2010 and 2011. Even though these prices have declined recently, it will still affect growth.

Vehicle Profitability is dependent on the vehicle line. Larger vehicles usually have larger price tags and are more profitable than smaller ones. As we execute our One Ford plan, we are creating best-in-class vehicles on global platforms that contribute higher margins, and offering a more balanced portfolio of vehicles with which we aim to be among the leaders in fuel efficiency in every segment in which we compete.

Smaller vehicle sales are increasing and Ford is taking advantage of these emerging markets in Brazil, Russia, India, and China. It is expected that vehicle sales in these areas will increase at a faster rate than in the mature markets. Ford is increasing production capacity either directly or in joint ventures to accommodate this growth. The smaller and more fuel-efficient vehicles are seen to have a strong future in North America and Europe, but these vehicles have a lower margin than the medium and large vehicles.

The exchange rate in most markets are market-determined, and are impacted by an enormous amount of macroeconomic and policy factors. High inflation in emerging markets and capital flight has caused local currencies to crash and has increased the debt crisis. The exchange rates will remain volatile because of these factors. Higher government deficits and debt along with higher long-term interest rates causes a higher cost of capital over the planning period. This will reduce real growth in gross domestic product and decreased vehicle sales over the planning period. (Yahoo!
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