Executive Summary
The motor vehicle industry in America and worldwide is highly competitive with major players no longer enjoying the dominance that they had had before. Innovation and identification of trends in the industry are vital in staying ahead of competitors in the business. In that regard, Ford Motor Company identified electric and hybrid cars as a lucrative opportunity to exploit and increase its revenue. Currently, electric and hybrid cars account for less than 5% of Ford's sales (Hawkins, 2018). The prevailing situation is not reflective of the underlying potential of the electric cars industry. Implying that if the opportunity is fully utilized, sales can significantly increase within three years. Thus, by applying the right strategies to increase demand, sales will increase to account for up to 7% of Ford sales. Additionally, the innovative technology of electric and hybrid cars will enhance Ford's reputation as a leader in the motor vehicle industry.
Data
Ford’s revenue for the fiscal year ending December 31, 2016, was $145.7 billion (Ford Motor Company, 2018). This represented an increase of $4.2 billion from the previous year's revenue of $141.5 billion (Ford Motor Company, 2018). The pretax profits however dropped from $10.4 billion in 2016 to $8.4 billion in 2017 (Ford Motor Company, 2018). The company incurred extra costs in 2017b than in 2006, hence the reduction in profit.
Delegate your assignment to our experts and they will do the rest.
Ford intends to invest over $11 billion by 2022 in its electric cars section (Ford Motor Company, 2018). The investment will go towards research, design, and production of 40 models of fully electric and plug-in hybrid cars. Ford's current electric car sales account for less than 5% of its revenue.
The global market for electric cars has exponentially increased since 2010. The global stock for electric cars has increased from less than 100,000 cars in 20111q to over 2 million in 2017 (International Energy Agency, 2017).
I will use the total annual revenues and expenses of Ford Motors Co. support the observation that Ford has not sufficiently utilized the opportunities in electric cars industry. By displaying the highlighted 2016 and 2017 fiscal year financial reports, it will be apparent that the very little of the company’s revenue is from electric car sales. Again, the pretax profits for the two years will support the need to concentrate on electric cars to increase profits. The profits will display an increase in costs, hence the need to cut down expenditure on non-profitable ventures.
I will display the electric cars global chart from 2010 to 2017. The chart portrays a progressive display of the growth of the electric cars industry. It also supports the assertion that the electric cars industry is on an upward trajectory, hence the need for Ford to utilize the opportunity.
The Game Winning Move
Demand for Fords fully electric and plug-in hybrid vehicles needs to be increased through market research, car design, marketing strategies and cost reduction.
Market research
Extensive research will be conducted on the consumer requirements and preferences. The study will focus on existing markets and potential markets for electric cars. With a focus on areas such as car performance, distance and costs, Ford will be able to make improvements to its existing designs an also create new models. The research together with its findings will take the first three months of the project.
Car design
Car design will focus on two major areas:
• Performance
• Cost
Its battery capacity significantly determines the performance of electric cars. Current car batteries enable the cars to cover an average distance of 200 miles (Nykvist & Nilsson, 2015). Through technology, the battery performance can be improved to enable the car cover distances of up to 300 miles before recharge. This milestone will be achieved through collaboration with battery manufacturers. As part of the improvement plan, battery performance improvement should be achieved within the first six months.
Cost is a limiting factor in the demand for electric cars. Strategies to reduce production costs for electric cars include recycling of materials, innovative e technology, and mass production to enable economies of scale. Costs need to reduce the onset of the project.
Marketing Strategies
The Chinese market offers the best opportunity to increase electric car sales. Government subsidies and policies in China encourage the ownership of electric cars. Other markets include Europe, Australia, and North America.
The organizational changes that will enable the achievement of these milestones to include:
• Outsourcing of research in the electric car market.
• The hiring of expert personnel in electric car design.
• Concentration in the Chinese and other potent markets.
Financials
This project is cost effective considering the return on investment is long-term. Additionally, the initial cost of the project can be internally financed since Ford already has most of the personnel and equipment to produce the required electric cars.
Outsourcing or market research tasks will reduce the costs to about $10 million.
Performance improvement and car design make up the most costly part of the project.
Installing high capacity batteries in the cars will be done at the cost of $500 million in the first six months of production.
Marketing strategies with a focus on the potential markets are less costly than other approaches. Marketing will be at an estimated cost of $50 million.
Financing for this project in the initial year of its implementation will be done by cutting down on expenditure in the less lucrative operations and business that Ford conducts such us the production of least demanded car models. The success of the project will be achieved through increased demand for Ford’s electric cars. Therefore, within the first year, the plan will be self-sustaining.
• By increasing electric vehicle sales to 7% of Ford's total sales, estimated revenue of $4 billion is expected annually with a profit of $800 million.
Competitive Advantage
The electric car's market is highly competitive, with customers demanding high-performance cars at a reduced cost that the current prices. Implementation of this plan will cover both the performance and cost aspects of the customer's demands. This will help Ford to stay ahead of competitors.
Additionally, the electric cars market is in its initial stages of growth. Hence, this move will enable Ford to establish itself as a market leader. Thus, the company will continue to benefit from the market establishment for years to come. Furthermore, Ford will establish itself as a market leader hence enjoy economies of production that will prevent competitors from producing at the same costs.
Risks
The major risk for the success of this plan is a change in consumer preferences. This plan is designed with consideration for consumers’ favorable preferences for electric cars. However, this plan sufficiently mitigates this risk through research that establishes the exponential growth of the electric cars market.
An internal risk to the success of this project is the unavailability of funds. This project requires a large capital input in the initial year of its establishment. Channeling funds from other sections of the company will adequately pay for the expenses. Considering that the project will be self-sustaining from the second year, it is also safe to be funded through loans that will be repaid through the profits gained.
References
Bonges III, H. A., & Lusk, A. C. (2016). Addressing electric vehicle (EV) sales and range anxiety through parking layout, policy, and regulation. Transportation Research Part A: Policy and Practice, 83 , 63-73.
Ford Motor Company. (2018). Ford Motor Company 2017 annual report. Retrieved on 14 May 2018 from,
http://s22.q4cdn.com/857684434/files/doc_financials/2017/annual/Final-Annual-Report-2017.pdf.
Ford Motors. (2018). Financials. Retrieved on 14 May 2018, from http://shareholder.ford.com/investors/financials/quarterly-reports/default.aspx
Hawkins, A. J. (2018). Ford is throwing $11 billion at its electric car problem . The Verge . Retrieved on 14 May 2018, from
https://www.theverge.com/2018/1/15/16892386/ford-electric-car-11-billion-2022-detroit-auto-show-2018.
International Energy Agency. (2017). Global electric vehicles evolution. Retrieved on 14 May 2018, from https://www.iea.org/publications/freepublications/publication/GlobalEVOutlook2017.pdf
Nykvist, B., & Nilsson, M. (2015). Rapidly falling costs of battery packs for electric vehicles. Nature Climate Change, 5(4) , 329-341.
