CHAPTER 5

COMPANY ANALYSIS
Marketing
1

Fords offers a considerable variety of products. The company is popularly known for its

automobiles, such as sedans. However, the firm also has trucks, buses, and tractors in its product
mix. In addition, the firms Motorcraft brand includes automotive parts for most of Fords
vehicles, although some of these parts are also suited for the vehicles of other firms like Toyota.
The Ford Motor Credit Company is Fords subsidiary that offers financing for its customers. The
firm also provides vehicle leasing mainly to corporate clients.
Ford dealerships are the most prominent places for distributing most of its products. The
majority of sales revenues are achieved through these dealerships. The companys automotive
parts/components are available in third-party auto parts stores, as well as the Ford Parts website.
In addition, customers can access the firms financial services at the Ford Motor Credit Company
offices or through personnel at the dealerships.
Ford uses advertising as the main tactic to promote its products. The companys
television advertisements and online advertisements are especially prominent. In addition,
agents/sales personnel use personal selling to persuade buyers at Ford dealerships and other
venues. In some cases, the company applies direct selling, usually to corporate clients who lease
vehicles from the firm. This marketing mix also involves sales promotion, usually through
special offers, discounts, and trade-ins. Moreover, corporate social responsibility programs and

1 http://panmore.com/ford-motor-company-marketing-mix-4ps-analysis

sponsorship of sports events and facilities enable the firm to promote its business and products to
a wider population of potential customers.
Fords prices vary, depending on the market.

Fords goal is to set prices that are

appropriate to market conditions, with consideration for competition, demand, consumer

perception, and other variables.
Financial
2

Ford's 2014 revenues decreased by 2%, driven by a 3% decline in its automotive sales (a

collective 6% drop from North America); this decline offset a 10% surge in financial services
sales during 2014.
The companys net income in 2014 also plummeted 55% from $7.2 billion in 2013 to
$3.2 billion in 2014 primarily due to an additional $1.2 billion it paid in income taxes. Ford's
operating cash flow in 2014 increased to $14.5 billion compared to 2013, primarily due to
increases in accounts payable.
Production
3

In 2014, Ford Motor Company launched 24 all-new or significantly refreshed products

globally, including the all-new Ford F-150, Mustang, Escort, Ka and Transit and the Lincoln
MKC. Our momentum will continue in 2015 with 15 new global product launches. Their strategy
is to serve customers in all markets with a full family of best-in-class vehicles small, medium

2 http://www.vault.com/company-profiles/auto/ford-international-capital-llc/company-overview.aspx
3 http://corporate.ford.com/microsites/sustainability-report-2014-15/strategy-business.html

and large; cars, utilities and trucks; each delivering the highest quality, fuel efficiency, safety,
smart design and value and to deliver profitable growth for all.
Global Product Lineup

Research and Development

4

Ford conducts market research online and in person, refining and creating new data-gathering

processes that influence product development and marketing campaigns. The company engages
consumers through moderated clinics and through one-on-one interviews before vehicles reach
market. It also mines the Internet for consumer comments in auto sites, chat rooms and blogs.
Were heavily influenced by market research, said Gordon Platto, Ford chief designer.
We go to customer immersion events and spend time with customers in their homes to
understand how they use their vehicles. It enables us to better meet the customer needs. You can
see the influence in our new vehicles.

4 http://www.reliableplant.com/Read/3802/market

In order to refine a future niche vehicle, Market Research recently took one exterior
design and two interior designs to a customer focus group in Georgia to ask specific questions
about participants' likes and dislikes. The design team will analyze and interpret the consumer
feedback in the next stage of the products development.
Its not just about styling; its about function, as well, Platto said. We learn a lot by
listening to customers and observing how they use their vehicles.
Internal Factor Evaluation Matrix

S1 - Increase in Equity turnover by .18

5

Equity turnover is a ratio that measures the proportion of a company's sales to its

stockholders' equity. The intent of the measurement is to determine the efficiency with which
management is using equity to generate revenue. The company got a score of 3 due to the
increase on its equity turnover.
S2 - Increase in Working Capital Turnover
5 http://www.accountingtools.com/questions-and-answers/what-is-equity-turnover.html

Working capital turnover ratio is an activity ratio that measures dollars of revenue

generated per dollar of investment in working capital. Working capital is defined as the amount
by which current assets exceed current liabilities.
A higher working capital turnover ratio is better. It means that the company is utilizing its
working capital more efficiently i.e. generating more revenue using less investment.
The company got a score of 3 because it is trying to increase its working capital turnover by
generating more profit though having a high investment.
S3 Strong Dealership Expansion
7

Ford says its Asia/Pacificand Africa markets, which include Australia, New Zealand,

Japan, China, Taiwan, India, Thailand, Indonesia, the Philippines, Vietnam and South Africa, are
expected to account for 60%-70% of its growth in the next decade.
To capitalize on this, Ford rapidly is constructing new factories. Since 2006, it has
invested P6 billion in the APA region and opened two new plants in China. Seven more, five in
China and two in India, are planned.
8

Ford projects 90 percent of its plants around the world will be running on a three-shift or

crew model by 2017, which will help increase production time more than 30 percent. Fords

6 http://accountingexplained.com/financial/ratios/working-capital-turnover
7 http://wardsauto.com/industry/ford-ra1556291ly-expanding-asia-pacific-and-africa-markets
8 http://corporate.ford.com/innovation/100-years-moving-assembly-line.html

recent expansions in global manufacturing and production have helped to retain 130,000 hourly
and salaried jobs around the world.
They also put the company on pace to produce 6 million vehicles in 2013
approximately 16 vehicles every 60 seconds around the world. By 2015, Ford will have opened
the facilities below:

These new state-of-the-art, highly flexible manufacturing facilities will help us reach the
goal of increasing worldwide sales to about 8 million vehicles per year. This is why it got a score
of 3.
S4 - Remained the best-selling vehicle brand in the U.S. / strong brand
recognition
9

Ford continues as Americas best-selling vehicle brand for the fifth consecutive year and

the F-Series remains the best-selling vehicle for the 33rd straight year and best-selling truck for
the 38th year in row as 2014 U.S. sales results are tallied.
Ford Motor Companys U.S. sales totaled 2,480,942 vehicles in 2014, flat versus a year
ago, primarily due to the all-new F-150 changeover and a planned 15 percent reduction in daily

9https://corporate.ford.com/content/dam/corporate/en/investors/investorevents/Sales%20Calls/2014/2014-dec-salesresults-press-release.pdf

rental sales. Sales totaled 220,671 vehicles in December, up 1 percent from a year ago and the
companys best December sales since 2005.
Fusion and Escape posted record years, and our newest products including Mustang
and Transit and Lincolns are attracting strong customer demand, said John Felice, Ford vice
president, U.S. Marketing, Sales and Service. Demand for the all-new F-150 also is very high,
and it now is the fastest-turning vehicle in Ford showrooms, averaging just five days on dealer
lots in December. Due to the increasing demand, it got a score of 4.
S5 Increase in Production
10

In November of 2014, Ford opened a third assembly plant in China. The plant, which opened

in Chongqing, will increase the companys production capacity in the region by 360,000 units
per year. Another plant is expected to come up in Hangzhou sometime next year and will add
another 250,000 units in production capacity. Concomitantly, the companys sales targets will
also increase from 1.1 million units a year to about 1.5 million units a year.
The added production capacity from the new Chongqing assembly plant helped Ford
pick up growth again in China. In the month of December, the company returned to the double
digit growth rate it posted in the first seven months of the year, with sales growing by 13%. This
brought the full year sales growth to 19%. In January 2015, sales grew again by 19%. This is
why it got a score of 4.

W1 - Cash Outflow is greater than cash inflows by P3,711million

10 http://www.forbes.com/sites/greatspeculations/2015/03/02/ford-returns-to-rapid-growth-in-china-afterovercoming-production-constraints/#6728296c4d8b

Net cash flow refers to the difference between a company's cash inflows and outflows in a

11

given period. In the strictest sense, net cash flow refers to the change in a company's cash
balance as detailed on its cash flow statement.
To survive, a business must generate a positive cash flow, meaning that long-term cash outflows
must be less than long-term cash inflows. Users rely on financial statements regarding cash flows
to assess the ability of an organization to generate cash and cash equivalents to evaluate the
companys liquidity. The Cash Flow Statement also highlights the requirements of the
organization to use those cash flows, which help indicate the organizations solvency or ability to
meet long-term expenses and to accomplish long-term expansion. The cash outflows may also
signal financial flexibility that, in turn, suggests fewer restrictions may affect financing and
investment decisions. Such information enables investors to predict dividends or interest the
company will distribute. It also enables investors to evaluate the potential risk of an investment
in or a business relationship with the company. In turn, management relies on the cash flow
statement to predict future cash flow, which they use to budget for future operations.
The company got a score of 1 because it tends to increase their investment by increasing
its production, generating more expenses which resulted to a negative cash flow.
W2 - Decrease in Revenue by P3,587 million

Automotive revenue is generated primarily by sales of vehicles, parts, and accessories.

12

Revenue is recorded when all risks and rewards of ownership are transferred to Ford's customers

11 http://smallbusiness.chron.com/cash-inflows-outflows-operations-32743.html
12 https://www.stock-analysis-on.net/NYSE/Company/Ford-Motor-Co/Analysis/Revenues

(generally dealers and distributors). For the majority of Ford's sales, this occurs when products
are shipped from manufacturing facilities. When Ford gives dealers the right to return eligible
parts for credit, Ford reduces the related revenue for expected returns.
Aggregate revenue recognized during the period is derived from goods sold, services rendered,
insurance premiums, or other activities that constitute an entity's earning process. For financial
services companies, also includes investment and interest income, and sales and trading gains.
Ford Motor Co.'s revenues increased by $13,358M from 2012 to 2013 but then decreased
by $3,587M from 2013 to 2014. Due to its high yearly investments, the company got a score of
2.

W3 - Decrease in Inventory Turnover by .54

The inventory turnover ratio is an efficiency ratio that shows how effectively inventory

13

is managed by comparing cost of goods sold with average inventory for a period. This measures
how many times average inventory is "turned" or sold during a period. In other words, it
measures how many times a company sold its total average inventory dollar amount during the
year.
Ford Motor Co.'s inventory turnover increased by .89 from 2012 to 2013 but then slightly
decreased by .54 from 2013 to 2014. A low turnover implies poor sales and, therefore, excess
inventory. A high ratio implies either strong sales or ineffective buying. The company got a score
of 1 due to the strong market competition.
W4 - Decrease in Current Ratio by .14%
13 http://www.myaccountingcourse.com/financial-ratios/inventory-turnover-ratio

14

The current ratio is a popular financial ratio used to test a company's liquidity (also

referred to as its current or working capital position) by deriving the proportion of current assets
available to cover current liabilities. The concept behind this ratio is to ascertain whether a
company's short-term assets (cash, cash equivalents, marketable securities, receivables and
inventory) are readily available to pay off its short-term liabilities (notes payable, current portion
of term debt, payables, accrued expenses and taxes).
Ford Motor Co.'s current ratio decreased by 0.08% from 2012 to 2013 and decreased by .14%
from 2013 to 2014. In theory, the higher the current ratio, the better. The companys deceasing
current ratio from year 2012-2014 was the reason why it got a score of 1.

W5 - Increase in Debt to Equity Ratio by .26%

The debt to equity ratio is a financial, liquidity ratio that compares a company's total

15

debt to total equity. The debt to equity ratio shows the percentage of company financing that
comes from creditors and investors. A higher debt to equity ratio indicates that more creditor
financing (bank loans) is used than investor financing (shareholders).
Ford Motor Co.'s debt-to-equity ratio decreased by 2.17% from 2012 to 2013 but then
slightly increased by .26% from 2013 to 2014. A higher debt-to-equity ratio is unfavorable. The
companys increased on its liabilities through debt financing used for their investments to

14 http://www.investopedia.com/university/ratios/liquidity-measurement/ratio1.asp#ixzz41SFDS7dJ
15 http://www.myaccountingcourse.com/financial-ratios/debt-to-equity-ratio

increase production without considering its currents assets was the reason why the company got
a score of 2.
W6 - Decrease in Net Profit Margin by 2.78%
The profit margin ratio, also called the return on sales ratio or gross profit ratio, is a

16

profitability ratio that measures the amount of net income earned with each dollar of sales
generated by comparing the net income and net sales of a company. In other words, the profit
margin ratio shows what percentage of sales are left over after all expenses are paid by the
business.
Creditors and investors use this ratio to measure how effectively a company can convert
sales into net income. Investors want to make sure profits are high enough to distribute dividends
while creditors want to make sure the company has enough profits to pay back its loans. In other
words, outside users want to know that the company is running efficiently. An extremely low
profit margin formula would indicate the expenses are too high and the management needs to
budget and cut expenses.
Ford Motor Co.'s net profit margin increased by .65% from 2012 to 2013 but then decreased by
2.78% from 2013 to 2014. The companys decrease in net operating income shows that the
company spends too much by generating more expenses rather than the previous year. This is the
reason why the company got a score of 2.

W7 - Decrease in Return on assets by 2%

16 http://www.myaccountingcourse.com/financial-ratios/profit-margin-ratio

Return on assets (ROA) tells how much profit a company generates for each dollar in

17

assets. It measures the asset intensity of a business. The lower the profit per dollar of assets, the
more asset-intensive the business is. Ford is asset-intensive, because it requires big, expensive
equipment to generate profit. This means more money must be reinvested into the company to
continue to generate earnings. Calculated by dividing a company's annual earnings by its total
assets, ROA is displayed as a percentage. Sometimes this is referred to as "return on investment".
Ford Motor Co.'s ROA increased by .57% from 2012 to 2013 but then decreased by 2% from
2013 to 2014. An increasing trend of ROA indicates that the profitability of the company is
improving. Conversely, a decreasing trend means that profitability is deteriorating. Decrease in
return on assets might decrease the number of investors the company has, thats the reason why it
got a score of 1.

17 http://www.investopedia.com/terms/r/returnonassets.asp#ixzz41RmGZMV1