Ford Motors PLC Business Expansion in Czech Republic: A Case Study

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Business Organizations and Environments in a Global
Context
“A Case Study of Ford Motors PLC”

Executive Summary
The conducted study primarily focuses upon the different chances and opportunities of
expanding the business of Ford Motors PLC in the selected region of Czech Republic. A brief
overview of the organization and the country has been exhibited with the help of describing
certain factors. For the assumed difficulties which are going to come ahead, a vivid detailed
analysis of different factors have been comported of Ford Motors PLC with support of the
justified graphs, tables, and related statistics. Further recommendations have been proposed in
order to strengthen the negative factors contextual to Czech Republic.

Table of Contents
Introduction......................................................................................................................................3
Background Information on Ford Motors PLC...............................................................................4
Background Information on the Business Environment in Czech Republic...................................7
Analysis of the Business Scenario.................................................................................................12
Conclusion.....................................................................................................................................18
References......................................................................................................................................19

Introduction
Business environment in a global context refers to a rigorous analysis of the business
environment at regional, national and international level which incorporates all kinds of issues,
concepts and theories revolving around the business world. On another hand, business expansion
relates to the obtained growth by the increment of number of stores to maximize the sales and
revenue of an organization through the medium of various physical location. The conducted
study is concerned about an organizational environment of a business and the impact of business
environment in aspect to the global context, therefore a certain understanding of business
environment in a global context, based on some vivid clarification is required to gain an in-depth
knowledge of the concept.
This report especially focuses upon the expansion of the current operations which are getting
held by Ford Motors PLC, and the best chosen country in this aspect is Czech Republic. Ford
Motors PLC is also contriving upon the decision of engaging a foreign direct investment.
Foreign direct investment can be defined as a form of investment made by an investor from
another country who can automatically exercise a control over the purchased company. They are
concentrating to reach a foreign investor from the developed first world countries. To effectively
carry out their plans and strategies an overview has been presented upon the present and past
conditions and affecting factors of Czech Republic and Ford Motors PLC, and all these have
been justified by critical and detailed analysis through various models and theories. Certain
recommendations are also been proposed at the end for improving and enhancing their strategies
of business expansion.

Background Information on Ford Motors PLC
Ford Motors PLC is considered to be a multinational automaker headquartered in Dearborn,
Michigan which is a suburb of Detroit. The foundation of Ford was accomplished by Mr. Henry
Ford in the year 1903. Specifically the organization trades commercial vehicles and automobiles
underneath the Ford brand and luxurious cars underneath Lincoln brand. This organization can
be regarded as a 8% stakeholder in Aston Martin and a 32% stakeholder of Jiangling Motors.
Besides that the organization has also their ongoing joint ventures Turkey, Russia, Thailand,
China and Taiwan (Prajogo, 2016).
According to the last estimation made on December, 2017 Ford Motors PLC has an altogether
strength of 202,000 employees. After conducting a international market research, the marketing
team and the management body of Ford Motors PLC has found out that there are less
competition in the countries like Poland, Austria, Slovakia and mainly Czech Republic, and the
market share standpoint and available resources are quite comfortable there in Czech Republic.
This can be counted as a magnificent scope for the organization (Lenssen and Lenssen, 2018)
Generally, Ford Motors PLC can be distinguished as a legal formation of corporation, however
the ownership structure of the referred organization is quite different than the limited liability
companies. The particular ownership structure of Ford Motors PLC provides with the
institutional holdings and activities over a determined stock.
Figure 1: Institutional Ownership of Ford Motors PLC
Source: (Lenssen and Lenssen, 2018)

The most amount of share ownership lies in the hands of William Clay Ford Jr., Mark Fields and
Joseph R. Hinrichs. The amounts are respectively 6.8 million, 1.78 million and 645,155.
According to the financial performance statement of 2016 and 2017 financial year of Ford
Motors PLC, it can be reckoned that the organization witnessed a certain amount of increment in
their sales and revenue scale contextual to different sectors. It can be followed as, keeping the
operating margin at 6.7% in the year 2016 the revenue earning was 141.5 billion dollars and
operating cash flow was 6.4 billion dollar in the automotive segment, respectively in the year
2017, the revenue earning reached to 145.7 billion dollars and the operating cash flow turned
down to 3.9 billion dollars while the operating margin was 5%. The pre-tax profit amount of
Ford credit was 1.9 billion dollars in 2016 and it increased to 2.3 billion dollars in 2017. Apart
from these, the net income attributable to Ford Motors PLC was 4.6 billion dollars in 2016 and it
increased to 7.6 billion dollars in 2017. The table has been provided below for further
clarification and assistance (Reed, 2015).
Figure 2: Financial Highlights of Ford Motors PLC
Source: (Reed, 2015).
In the below mentioned portion, the financial performance of Ford Motors PLC has been briefly
discussed by the medium of a derived table.

Figure 3: Financial Performance of Ford Motors PLC
Source: (Gallego-Álvarez et al., 2015).
Ford Credit as a part of Ford Motors PLC extensively operates in United States and Canada, on
the other hand Europe is the ground of Ford’s largest operations outside the region of United
States. The European operations get completed by the help of UK based subsidiary named as
FCE bank PLC which has also enabled Ford Motors PLC to expand their functional operations.
Although Ford Motors PLC has posted a significant footprint in the regions of United States and
Europe contextual to their vehicle industry (Gallego-Álvarez et al., 2015). The other various
market operations are still volatile in respect to various countries. For the reason of market
investment and present manufacturing status in Brazil, the south American operation has been
impacted in case of Ford Motors PLC.

Background Information on the Business Environment in Czech Republic
Conducting a discussion upon the principle factors, issues and considerations of the business
environment of Czech Republic, certain important factors can be noted down. Upon these factors
a close look can be indulged on, to effectively strengthen the negative issues and amplify the
positive factors exponentially.
The country has a relatively high per capita gross domestic product as the Czech economy has
undergone consecutive restructuring for over a period of last twenty years. Due to this condition,
the unemployment rate in the state was rapidly increasing and reached the rate of 8% in the
recent years. But as a positive factor the foreign direct investment (FDI) has faced a rapid
expansion. The Czech economy is supported by a numerous number of service sectors which
particularly influenced the agricultural and industrial sectors which held a 30% of combined
share in the economy (Allen, 2017). Tourism turned out to be another important backbone of
Czech Republic as it contributes almost one-tenth of the whole gross domestic product. The
economical considerations and issues are hereby projected below through the help of a table.

Figure 4: Economical condition of Czech Republic
Source: (Allen, 2017).
The investors are convinced towards investing into Czech Republic which results in a liberalized
investment environment in the country. The country is considered as one of the major recipient
in foreign direct investment in central and Eastern European region. Especially the machinery
and equipment sectors, petroleum, chemical, food, tobacco contributes a one-third of the
complete foreign direct investment. The countries like Germany, Netherlands, Austria, France,
Spain, United States accounts a large portion of the foreign direct investment which are
respectively 27%, 15%, 10%, 8%, 6%, 6%. Czech economy has transferred into a management
expertise and the labor skill efficiency is uprising to amplify foreign direct investment. An
exhibited graph shown below clarifies the whole in brief.

Figure 5: Inflows of Foreign Direct Investment of Czech Republic
Source: (Bradshaw, 2017).
The corresponding income level of Czech Republic is amongst the highest in that region,
therefore the purchasing power of ten million residents automatically increases. The employees
of the financial sector enjoys the highest wage but other sectors like retail trade, manufacturing,
construction and wholesale suffers from a lower wage and exceptionally the agricultural sector
obtains the lowest of all the wages (Bradshaw, 2017).
Figure 6: Employment and Wages of Czech Republic
Source: (Císař and Navrátil, 2017).

The above table can assist to clarify the present employment condition of Czech Republic.
There are also certain other factors of Czech Republic’s business environment which can be
considered as their competitive advantages. They are respectively;
 Regulatory and patent environment in conformation with European Union standards.
 Well developed infrastructure
 High degree of entrepreneurship.
 An attractive place to live and do business.
 Creative and experienced professionals at lower costs.
There are certain other factors which can be differentiated to obtain a balanced and proper
business environment for Czech Republic. Those are mentioned below;
Political Systems
Czech Republic is considered as one of the most advanced, sharp, dedicated and focused member
of European Union. It is manifested as one of the most stable and prosperous country in the
eastern and central European region. The Czech government provides incentives for investments
and tax immunity along with creating the opportunity for job, training and retraining grants. Due
to their current political pressure they are preventing wage increase and there is a further threat
of relocation (Císař and Navrátil, 2017).
Cultural Systems
Czech Republic is considered as a transitional economy which is in process as the economy is
moving from state controlled centrally planned economy to a more vivid Anglo style capitalistic
model. The Czech Republic business culture primarily focuses upon developing deep level of
trust. That’s why they follow the custom of patience and quick work which breeds counter-
productiveness. The culture reservation of Czech Republic is initially cold but later on it
becomes warm, welcoming and receptive as the workforce engages a combination.
Economical Systems
The land area of the Czech Republic economy is not very widened as only it constitutes 78,864
Km. As the population is not much the labor force suffers from lack in their quantitative

approach. Although the labor force is extremely skilled and transport system is maintained
perfectly. The inflation rate of Czech pertains as 1.1%. The country depends mostly on foreign
capital which results in a foreign controlled economy (Ehrenberger et al., 2015).The
improvement in welfare gets affected for the lack of internal funding. Due to its privatized
economy the chances of FDI are more. Their trade structures are beneficial, quick and efficient.
Legal Systems
Czech Republic protects the intellectual property and its rights. Foreign legal bodies as well any
state from European Union can develop real estate inside Czech Republic without any sorts of
confinement. These are also applicable for the local legal entities. The laws and regulations of
Czech Republic are approved by the European Union and both of the foreign and domestic
entities are same for them.
Financial Systems
In regards to Czech Republic’s financial systems, it has a relevant historical background upon
the transformation of the banking sectors during the period of economic reform which happened
from 1990-1996. The corporate governance system emerged into capital market system and
mostly the complete control; authority went towards the banking and investment sector for the
controlling the industrial enterprise operations.
Technological Systems
Czech provides a high quality and advanced technological infrastructure along with rapid
advancement in automotive industry. The country is willing to invest in research and
development sector. The system is completely owned and centrally controlled which propagates
joint venture (Pilík et al., 2017).