Economics for Business: Ford Motors Industry Analysis Report

This report provides an economic analysis of Ford Motors, examining its operations within the UK automotive industry. It begins with an overview of Ford, its market position, and its competitors like Toyota and Volkswagen. The report then delves into the industry's structure, identifying it as an oligopoly, and analyzes the determinants of demand and supply for Ford cars, including price, income levels, and production costs. The concept of demand elasticity is explored, highlighting its elastic nature due to the presence of competitors. The report also investigates a current event that is likely to affect the company's operations, though the specific event is not fully described in the provided text. The analysis includes market leaders, market structure, determinants of demand and supply, demand elasticity, and the impact of a current event.

Economic1
Economics
By
<Your Name>
<Date>
<Lecturer’s Name and Course Number>

Economic2
Executive Summary
The company selected for analysis in this report is Ford Motors. The company is one of the main
leaders in the automobiles industry in the United Kingdom and the work at large. Its operations
are under the automobile industry, and which is one of the main GDP contributors to the
economy of United Kingdom. The company mainly markets its products through a retail
structure and supplied to governments and other main dealers. The main determinants of the
demand and supply for the products are quality and prices of the cars and spare parts. It also
clear that the products are elastic and the main contributing factor is the presence of vast
competitors. With regulation on fossil fuel, the company will need to resort to producing more
electric cars, which affects the sales and productivity of the company products.

Economic3
Table of contents
Contents
Executive Summary.....................................................................................................................................2
Table of contents.........................................................................................................................................3
Introduction.................................................................................................................................................4
Overview of the company and industry.......................................................................................................4
Company.................................................................................................................................................4
Industry...................................................................................................................................................5
An analysis of the market structure.............................................................................................................6
Type of market structure..........................................................................................................................6
Market leaders.........................................................................................................................................7
Determinants of Demand.............................................................................................................................9
Determinants of Supply...............................................................................................................................9
Demand elasticity for Ford Cars................................................................................................................10
Factors that affect the elasticity of demand for Ford cars..........................................................................10
Brief description of the event...................................................................................................................11
Impact of the event to market demand and supply.................................................................................12
Effect of the event on the market price and quantity.............................................................................14

Economic4
Introduction
In this paper, an overview of the Ford Motors and the industry in which it operates in the
United kingdom will be presented. Over the years, the company has been excellently operating in
the economy under the most vibrant automobile industry. The entire automotive industry
contributes more than 15.19 billion pounds through the different products. Ford is one of the
formidable companies, which will be explored(Ford, General Motors, 2014). The current
industrial trends, supply and demand factors of the company products along with the market
structure will be presented. Moreover, a current event that is most likely to affect the operations
will be researched and presented.
Overview of the company and industry
Company
Ford motors as a company was incorporated in the year 1919 as a global mobility and
automobile company. The main business of the company include marketing, manufacturing,
designing along with servicing of the vehicles it produces like SUVs, trucks among others. The
company's operations are in mainly four segments of Financial services, automotive, Treasury
operations and Smart mobility. The headquarters are situated in Dearborn Michigan, which is
often referred to the Glass House. The main brands of the company are Lincoln and Ford, and its
products are sold in terms as retails along with the different fleet of customers around the world
and governments. Moreover, the company also engages in the sale of parts along with
accessories mainly to its dealers and authorised dealers around the world. Ford's main
competitors are General Motors, Honda Motor, Suzuki Motor company, Toyota among others
Volkswagen group(Ford, General Motors, 2019). As of 2019, the company's market share stands
at $48,892.30 million with outstanding shares current shares are $3,971.75 million and with a

Economic5
yield percentage of 4.87%. The company employees more than 199000 employees of the end of
2018 in December. It net incomes is more than $3.67 billion with total operating incomes
standing at $3.27 billion a nd revenues of over $160.3 billion(Ford, General Motors, 2019).
Industry
The UK automotive often contributes and excess of 15.19 billion pounds to the economy,
which accounts for more than 8.1% of the total manufacturing output. Moreover, the entire
industry employs more than 162,000 employees across of Britain as of the year 2016 (Brown and
Rhodes 2018). It is clear that more than 1.7 million vehicles were manufactured and produced in
the United Kingdom, with over 80% of the above exported. The total exports accounted for more
than 43 billion pounds as of 2016, but imports more than 40 billion pounds, which accounts for a
trade deficit of an excess of 6 billion pounds(Brown and Rhodes 2018). There has been a great
performance from the industry with excellent production, employment, economic exports and
output.
It is evident that the automotive manufacturing sector in the United Kingdom is
massively integrated with the other parts of Europe. The main products are components parts and
finished cars. In 2017, the entire industry imported more that 13.9 billion worth of spare parts

Economic6
and it is clear that 79% of the total imports were from the European Union. In terms of GDP, the
industry contributed 8% of the industry's manufacturing output and 1% of the total United
Kingdom output. The above can be evidenced in the graph above(Brown and Rhodes 2018).
Below is a graph that represents the economic output of the United Kingdom automotive
industry.
An analysis of the market structure
Type of market structure
Ford operates in an oligopolistic market structure. Numerous reasons explain the
placement or categorization of the company in the latter structure. First, despite the fact that
majority of the manufacturers in the industry have a high enough market share to influence
prices in the market, they lack the capacity to be categorized as monopoly. Secondly, the
companies in the motor industry have strong powers that can sway the price in the market.

Economic7
However, they lack the capacity to eliminate competition in the industry, thus creating the
interdependency need; an oligopoly hallmark. Thirdly, because of the sway the companies that
are interdependent in the industry have, there are heavy entry barriers unless there are enormous
resources possessed by the new company. Otherwise, such a company can never dream of
entering the arena of automotive(Mouzas & Ford, 2018). Fourth, the companies that manufacture
automotive can control their respective outputs with an aim of controlling the price in the market.
However, compared with a monopoly structure, the control is by far below to cause an impact.
Lastly, all the companies in the automotive sector have the capacity to sustainably make profits
hence bringing up the next destination.
Therefore, Ford Motors is among the automotive companies operating in an oligopoly
structure. A few entrants, huge barriers to entering the industry, interdependence, as well as
profit realization in the end, define the structure(Mouzas & Ford, 2018). Therefore, in such a
structure, Ford can only sustain a competitive advantage as well as profits in the end through
advertising, R&D, and price collusion.
Market leaders
The automotive industry has a wide range of leaders. They include ford motors, Toyota,
Volkswagen, general motors, Nissan, Suzuki, Honda, BMW, among others. Since the point of
focus in this paper is Ford motors, the discussion concentrates on s few competitors. These
include Toyota, Volkswagen, and general motors.
Toyota
This is a worldwide brand of vehicle as Ford's tough competitor. Globally, the brand is a
maker of cars, electrical vehicles, and SUVs. Currently, the brand focuses of producing electrical

Economic8
vehicles with low environmental impact. In the year 2017, the company registered its highest
sales in North America with 32% out of the 8970860 sales in total. The company employs about
364445 employees. Around the world, the firm has 69 plants for manufacturing vehicles. In the
same year of 2017, the company's net collective revenue was ¥27597.1 Billion. This was below
the previous years by about 2.8%. For that year, the company had a net income of
¥1831.1(Mouzas & Ford, 2018) Billion.
Volkswagen
The vehicle maker has numerous brands in the industry. Its brands include cars like Audi.
Given the fact that the makers underwent a serious 2015-diesel scandal, it has realized firm
returns in years of 2016 and 2017. In the year 2017, the firm hit a record of new vehicles sales
amidst the challenging and competitive environment. Nevertheless, the diesel scandal issues
went ahead to affect the operational profits. Fortunately, due to the reputation and wide market,
the brand achieved a record of sales of 10.8m vehicles in the year 2017. In the same year, the
revenue from sales was €230 billion, which increased by 6.2% compared to the previous trading
year (Mouzas & Ford, 2018).
General motors
The company was incorporated in the year 2009. In the year 2017, the firm sold vehicles
totaling to 9.6 million with US and china as the market bases. The net revenue of the brand
dropped from 149,184 million dollars to 145588 million dollars in a span of 1 year (Mouzas &
Ford, 2018).

Economic9
Determinants of Demand
Demand is an elements which indicates that ability and willingness of a consumer to
purchase a company's products or services. Consumer demand is an element that determines the
success or failure of a business. Success may be realized in form of increases sales and profits
due to increased demand for the company's products. On the contrary, a company may fail when
the demand for its products or services is significant low in that it cannot reap sufficient returns
from its undertakings. In regards to Ford cars, the company’s products and services are mainly
affected by price changes and levels of income of customers. Prices of Ford cars are ever
changing depending on the objective or interests of the company as far as meeting needs of the
consumers are concerned. When Ford Company increases prices on its cars, their demand on the
market are likely to decline. The above is attributed to the fact that clients will be unwilling to
pay for higher prices of Ford cars. On the other hand, if prices of Ford cars are decreased by the
company, their demand on the market is likely to increase (Groenewegen, 2011). The above
increase in demand is attributed to the fact that clients will find it cheap to buy its cars.
Additionally, levels of incomes also affect the demand of Ford cars because they directly
affecting the purchasing ability of clients. When the target audience for Ford Company’s
products and services has relatively higher levels of incomes, they are likely to demand more of
Ford cars due to high affordability potential. On the other hand, audiences with low levels of
incomes may not be in position to demand for Ford cars since they will have a low affordability
potential. As a result, the demand for Ford cars will be low (Groenewegen, 2011).
Determinants of Supply
Price is still another element that determines supply of Ford cars in the market. Market
segments that fetch higher prices for Ford cars are likely to encourage the company to produce

Economic10
and supply more units of these cars. The above is attributed to the fact that the company will find
it profitable to supply its cars into the segments which is able to pay higher prices for its
products. On the other hand, if the market segment does not fetch higher prices for its products,
then the supply of Ford cars to such a segment will be relatively low. The above element is due
to the fact that Ford Company will not be in position to fetch desirable profits from a market
segment which yields low prices for its cars. Additionally, costs of production are other factors
which greatly affect supply of Ford cars. When there are significantly higher costs of factor
inputs like machinery and labour, Ford Company is likely to decrease on production of cars thus
reducing on their supply. On the other hand, supply of Ford cars is likely to be high when low
costs are involved in their production (Groenewegen, 2011). These low costs may be in form of
reduce costs of raw materials, machinery and labour.
Demand elasticity for Ford Cars
The demand elasticity of Ford Company's products is elastic due to the fact that there are
a number of other firms like Honda and Toyota which are producing similar products. As such,
the demand for Ford cars is greatly affected by the changes in market prices for cars. For
example, when prices for Ford cars increase, their demand is likely to decrease because customer
may opt for cheaper alternative from Toyota or Honda. On the contrary, when prices for Ford
cars decrease, their demand is likely to increase because they will appear to be cheaper
alternative to the consumers (Groenewegen, 2011).
Factors that affect the elasticity of demand for Ford cars
High number of competitors and high degree of substitutability are the two most
influential factors that affect the elasticity of demand for Ford cars across the globe. Currently,
there are over ten automobile companies across the globe which gives direct competition to Ford

Economic11
Company’s products. Some of these companies include; BMW, Honda, Volkswagen, Tesla Inc
and General Motors among others. The above shows that there exists stiff competition in the
automobiles industry as far as globe market share is concerned. Moreover, competition between
Ford and other automobile companies has resulted into practices of price wars as a way of
sustaining the market shares and competitive advantage (Nick, 2010). As a result, quantities and
pricing strategies by Ford Company are ever changing due to price wars and thus greatly
affecting elasticity of demand for its Ford cars.
Additionally, Ford Company's cars are highly substitutable because clients are in position
to derive same level of utility when they make use of cars produced by its rival firms like Honda
and Toyota. As such, when prices for Ford cars increase, clients are likely to demand more of
cars produced by Honda or Toyota especially when they prices have remained stable. On the
contrary, price decreases in the prices of Ford cars is likely to increase their demand when prices
of Toyota or Honda remain higher (Nick, 2010). From the above discussion, it can be seen that
the high degree of substitutability associated with Ford cars greatly affects their elasticity of
demand on the market.
Brief description of the event
Recently, most European countries have implemented various regulations on fossil fuels
and advising Automation companies to adopt to dealing in electric cars. As a result of increased
regulations, most of the automakers have decided to stop their business activities in Europe.
Recently, Ford indicated that it would cut very many jobs around Europe as a result of the
regulations indicated. Various concerns have been raised about the departure of various
Automakers in Europe. Traditional manufacturers of cars in Europe have been affected by the
forces across that globe and they indicate where to manufacture their new car model in the

Economic12
coming years. As different automakers are trying to allocate resources, they have been
considering the need to adjust to the upcoming changes that have been justified on producing
cars in Europe. The move to regulate fossil fuels is aimed at curbing down the effects created by
fossil fuels. The regulation is aiming at banning the use of old cars with diesel engines that emit
too much fossil fuels in the environment. As a result of the regulations, FORD intends to only
produce two brand new Vehicles in America in the coming years with iconic Focus Active and
iconic Mustang (Liodakis et al, 2011).
Impact of the event to market demand and supply
Market Demand
As a result of the regulations of fossil fuel, the market demand of Automations has been
affected across Europe and the world at large. The regulations have majorly affected the
dependency on fossil fuel. Regulations on fossil fuel have affected the market demand in the
following ways; Reduced demand for fossil fuel car, as a result of regulations on the use of fossil
fuels, the demand for car that use such products will reduced. Customers of such products will
not be in the position to purchase more of the products as a result of the government policy or
regulations. The customers of fossil fuel cars will adapt to buying more of electric cars which are
allowed by the law. In the course of adapting to using electric cars, the demand of fossil cars will
reduce in the short time (Liodakis et al, 2011).
Reduced demand for diesel, as a result of regulating the use of fuel fossil, the demand for
diesel will reduce hence affecting its market. Because diesel and cars are complementary
products, the decline in the demand of cars will lead to reduced demand for diesel. This implies
that the market for diesel will reduce in the long run hence affecting the market for diesel. In
addition, this will lead to the collapse of diesel companies in Europe and across the world. For

Economic13
example, if Ford stops producing diesel car, this will affect the producers of diesel products
(Liodakis et al, 2011).
Increased demand for electric cars, as a result of regulations on fossil fuel, the demand of
cars that use fuel will reduce hence giving rise to the purchase of electric cars. For example, if
Ford stops producing Ford cars, people will start purchasing electric cars so as to replace fuel
cars. This will result into the decline of diesel cars. Therefore, if the producers of diesel cars fail
to adopt to producing electric cars, they will be forced out of the market. Because electric cars
act as a substitute for diesel cars, regulations on fossil fuel will lead to the reduced demand for
such cars and result into increased demand for electric cars(Bob, 2014).
Figure one: Demand for substitute goods
Source: https://www.economicshelp.org/blog/glossary/substitute-goods/
Explanation: The figure above indicate that increased government regulation on the use of diesel
care will lead to increased demand for electric cars.
Supply

Economic14
As a result of regulations on fossil fuels, the market supply will be affected in various
ways such as; reduced supply of diesel car, as a result of regulating the production of fossil fuel
cars, the manufacturers of such products will be forced to stop operating. By ceasing their
operation, the supply of diesel car in Europe will reduce or stop. Manufactures of diesel cars
such as Ford will not be in the position to produce more of cars that emit fossils into the
environment hence reducing their supply into the market. Therefore, the supply of diesel cars in
Europe will reduce as a result of regulations on fossil fuel (Bob, 2014).
Effect of the event on the market price and quantity
Regulations on fossil fuel in Europe will create various effects on the market price and
quantity. First, it will lead to increased prices for the related goods for example car electric cars.
As people will be adapting to buying of electric cars, their demand will increase leading to an
increase in their prices. On the other hand, regulations of fossil fuels will lead to reduced prices
of diesel cars. This will be as a result of reduced demand for such products. Considering the
demand theory, an increase in the demand of the products may result into increased prices of the
products leaving other factors constant and vice versa. Therefore, regulations of fossil fuel will
greatly impact market prices (Bob, 2014).
Second, reduced quantity demanded and supplied for diesel cars. Because of regulations
on fossil fuel, people will be forced to stop purchasing such products resulting into reduced
demand. A reduction in demand of diesel cars will result into reduced production hence affecting
the quantity supplied of the products. Automakers will be forced to stop or reduce their
operations hence affecting their supply(Bob, 2014).
Figure:

Economic15
Source: https://2012books.lardbucket.org/books/microeconomics-principles-v1.0/s07-02-
government-intervention-in-mar.html
Explanation: the figure above indicates that the unfavourable government regulation in the
production of a product results into reduced quality supplied from Q2 –Q1. Also, the prices of
the product reduce from P1-P2 as a result of reduced demand of the products from D2-D2. In
addition, the figure indicates that the supply of the products will also be affected in the market.

Economic16
References
Brown, J. and Rhodes, C. 2018.The motor industry: statistics and policy. House of Commons
Library. Retrieved from:https://www.smmt.co.uk/wp-content/uploads/sites/2/SMMT-KPMG-
EU-Report.pdf
Groenewegen, P 2011. Supply and Demand: The New Palgrave Dictionary of Economics:
Palgrave Macmillan, London, p. 10- 98
Nick, B 2010. Ford Profit Comes as Toyota Hits a Bump: The New York Times.
Ford, General Motors. 2019. Auto Tech Review, 3(5), 4-4. doi: 10.1365/s40112-014-0605-y
Mouzas, S., & Ford, D. 2018. The mediating role of consent in business marketing. Journal of
Industrial Marketing Management, 74, 195-204. doi: 10.1016/j.indmarman.2018.03.011
Liodakis, E; Dashdorj, Dugersuren; Mitchell, Gary E. 2011. "The nuclear alternative". Energy
Production within Ulaanbaatar, Mongolia. AIP Conference Proceedings. 1342(1):
91. Bibcode:2011AIPC.1342...91L. doi:10.1063/1.3583174
Bob, J. 2014.Carbon Nation: Fossil Fuels in the Making of American Culture. Lawrence,
KS:University Press of Kansas.