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Ford’s Operation in the Global Market Essay

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Updated: Jun 21st, 2019

Introduction

The Ford Motor Company was founded in 1903 by Henry Ford and it has grown into a multinational company with operations in different nations. One of its most significant markets outside America is the Chinese population. In America, the Ford Motor Company’s Headquarters is in Dearborn.

This essay seeks to discuss the external influences that impacts Ford’s operation in the global market in relations to Competition, Cultural, Legal/political, Economic, and Geographical factors.

External factors affecting a company’s operation in the global market

There are several factors that influence the operations of a business both locally and internationally. Such factors include cultural differences, competition, legal and political issues, economic environments, as well as geographical factors. All these factors emanate from outside the business which means the company has no control over them.

The Ford Motor Company has been successful in the business and its years of existence have enabled it to establish foreign operations. China is one of the biggest Ford’s markets in the East.

Cultural factors

Unlike Americans, the Chinese are slightly conservative. The Chinese use small vehicles with sophisticated technology. On the contrary, Ford specializes in SUV’s and their vehicles are simple in design and technology. This may prove to be a challenge in a culture that is used to complex technology in a car.

In addition to this, the Chinese are very loyal to their own products hence penetrating this market will affect the strategies used by Ford in their normal operations. Setting up a company in a foreign land requires a clear understanding of the cultural differences between the home and the foreign market.

Ford’s management will have to compromise some aspects of leadership in order to appeal for China’s cooperation in trade.

In china, for a foreign company to establish a business it must establish a relationship first. In other regions, a business starts its operations then it builds a relationship there after. In China, hierarchy is an important cultural aspect. Therefore, setting a business in the country Ford has to pay attention to hierarchy.

Another cultural aspect that is important and will change Fords operations is the culture of Guanxi (Pradhan, 2012). This means that actions are reciprocal in nature. When someone grants you a favor, you are indebted to grant a favor back as well.

Legal /political factors

Currently, Ford has not recorded any interference from the ongoing political changes in China. There have been major changes in the leadership structure and this was influenced by a recent scandal that exposed China’s political elite’s underground indecency.

However, the Ford Motor Company has not been affected by the political tension in and party wrangles in the country.

However, in China there are laws that govern the entrance of a foreign investor, one of these legislations include the mandatory requirement for an investor to obtain an approval license from the Commerce Committee (Lanteigne, 2012).

Another legal and political restriction that the Ford Motor Company has to endure is the joint ventures law. Joint ventures are not allowed to hold shareholders’ meetings as the ultimate decision-making authority (Daniels, Radebaugh, & Sullivan, 2015).

The government has also passed a law that requires all the foreign investors such as the Ford Motor Company to operate under the corporate governance rules as stipulated in the Company Laws.

Economic factors

Majority of the Chinese people are middle-class individuals and the economic environment in the country is friendly to foreign business. China is one of the greatest economies of the world and the financial market in the country is very stable.

Therefore, the Ford Motor Company is safe to invest in the country. Another economic factor that can influence Fords operation in the country is the population. China is the most populated country in the world. This creates a large market for Ford’s products in the country.

Therefore, the company has to come up with the right strategy to satisfy the vast market.

Competition

The main competitors in the Chinese market include General Motors and Volkswagen. The Chinese market is the world’s fastest growing automobile market and the major industry players are moving in speed to cease the opportunities presented by this market.

Comparing GM and Ford’s sales, the difference is quite evident. GM’s sales increased by 21% while Ford’s sales rose by 23% (Ramasamy, Yeung, & Laforet, 2012). However, this is a close range meaning that the competition is very high.

Geographical location

China is the most accessible platform to launch products in the bigger Asian region. The country is surrounded by international seaways making it easy for companies to export their products by sea.

From china, it is easier to supply products to other regions like India, Dubai, Africa and other economically viable regions (Ramasamy, Yeung, & Laforet, 2012). Therefore, Ford’s opportunities are unlimited.

Nonetheless, the geographical location of the target market is very humid which may force the company to change its production processes to address the climatic conditions in the country.

References

Daniels, J. D., Radebaugh, L.H., & Sullivan, D. P. (2015). International business: Environments and operations (15th ed.). Upper Saddle River, NJ: Pea.

Lanteigne, M. (2012). Chinese foreign policy: an introduction. New York, NY: Routledge.

Pradhan, J. P. (2012). Emerging multinationals: A comparison of Chinese and Indian outward foreign direct investment. Institutions and Economies, 3(1): 10.

Ramasamy, B., Yeung, M., & Laforet, S. (2012). China’s outward foreign direct investment: Location choice and firm ownership. Journal of World Business, 47(1): 17-25.

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