An Analysis of Business Risks for Ford Motor Company in South Africa

This essay provides a comprehensive analysis of the business risks encountered by Ford Motor Company in the South African market. The assessment delves into various risk factors, including infrastructure deficiencies, operational inefficiencies, human resource challenges, and the impact of the legal framework. The essay highlights how poor infrastructure, encompassing transportation, trade facilities, and energy management, poses significant threats. Operational risks stemming from high transportation costs, corruption, and technological limitations are also discussed. Furthermore, the essay explores the scarcity of skilled labor and the impact of social tensions and legal uncertainties on Ford's operations. The analysis underscores how these interconnected risks can hinder Ford's ability to meet its financial goals and maintain its competitive edge in the South African market.

Running head: BUSINESS RISK
BUSINESS RISK
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Author Note:

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The aim of this paper is to discuss risk factors that prevents the ability of the company
to meet the target and achieve the financial goals. As the companies gain support from
different sources and exploit all the available opportunities before them, they also face some
business risks which curb their growth in any industry or market. The business however tries
to enter those markets where they have the opportunities to gain advantage from every
internal as well as external environment and avoid those markets which may threat the
growth or survival of the company. Due to this reason, the risks also come from different
environment and manipulate the companies from different sources. These risks harm the
companies in such a way that the company cannot shelter itself completely. In this regard, the
companies either analyse the internal and external environment before entering the new
market or lay strategies for mitigating the risks to affect the successful business of the
company. In order to understand the impact of risks in the market, most of the companies
mainly focus on the four methods which include strategic risk, compliance risk, reputational
risk and operational risk. In those case, the market where the organisation is already
operating, need to focus on the operational risk as the external factors affect the operation of
the company.
South Africa is an important market for business that allows the company like Ford
Motor Company to utilise the abundant raw materials there along with the cheap labour force.
The company has been operating in the South African region since 1923 with it’s headquarter
situated in Port Elizabeth (Ford.co.za, 2019). Despite the fact that the company has been
operating for long in this market, it is as venerable as other or new automobile company
operating in the same market. There are several factors present in the country of South Africa
that effectively harm the successful business of Ford Motor Company in the market. In
operating in the South African market any company like Ford can face risks in the factors like
infrastructure, operational insufficiencies, human resources, costs and legal frameworks.

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Infrastructure:
To many of the companies operating in the South African market, the low quality
infrastructure has been one of the most threatening factors of successful business in the
market. Starting from the transport infrastructure, cross border trade facilities to energy and
power management, all these basics facilities of the market are not properly fulfilled by the
government of South Africa (Brink, 2017). The situation is so much problematic as the
political situation of the country is clouded by corruption and intolerance. The political and
administrative situation of this particular market is affected by the mismanagement of the
government, and popular protests and supporting of violence for serving interests. Thee
political uncertainties are reflected in the foundation and management of the needed
infrastructure in the market that can attract the companies from the other parts of the world or
for that matter the existing companies to mitigate any risks. The infrastructure related to the
maintenance of the business climate or environment is also related to the arrangements of the
raw materials for the foundation and growth of the business. The poor infrastructure of this
market has put the company to face risks. Moreover there are problems in the development of
technological infrastructure for increasing communication system in the different
departments of the company.
Operational inefficiencies:
South Africa in terms of nominal GDP, is the 34th largest economy in the world and
pertains a system of mixed economy. The tax structure of this country includes personal and
professional taxes. Every company has to have a particular tax structure which they obey but
the operation of the companies are mainly prevented by the costs of transportation of the raw
materials and giving toll fees (Burke & Clark, 2016). The corruption level in the
administrative level is high therefore, the business do not get permission for acquiring the

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resources they need. The inability of the supply chains to gain financial information and
applying them in the successful operation of the business create scope of risks. The
information gathered by the companies to understand the trends in the market and the
expectations of the customers are prevented as the technological environment of the country
is not very strong, the government of South Africa do not invest much in the development of
the information technology and communication aspects (Burns, 2016). This is the reason why
the companies like Ford which has a huge network present in the country as well as in some
of the most important countries of the world cannot communicate as it does in the other
countries. In addition to this, even if the companies from other countries enter and do
business by arranging technological support for their own operation, the issues of the data
breach and cybercrime can make the situation risky. These create scope for operational risk
of a company that aims to invest hugely in the market of South Africa.
Human resources:
In the market of South Africa, there is no scarcity of cheap labours but the main
problem is the absence of skilled employees for successful operation of business. In order to
compete with the global business the South African workforce as well as the supply chain
have to be very competitive (Lam, Rodlauer & Schipke, 2017). They do not have the levels
of skill, experience and productivity that can be used by the company for the growth in this
market. The supply chain or the employees of this particular market do not have the ability to
adapt with the fast changing business process. This takes back to discuss the problem of
inability of the government to educate the younger generation to possess minimum standard
of education so that they can be trained by the international corporations in any way. The
standard of education curriculum is lower than any other Asian or European countries. This
therefore leads to grow an unproductive generation of unemployed youth (Lam, Rodlauer &
Schipke, 2017). The transfer of skills and collaboration process is also impossible in this type

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of workforce and supply chain as they possess a particular orthodox mentality which create
risk for the companies in the market to have good performance.
The lack of skilled labour force hamper the internal work culture of the companies is
also the supply chain. In addition to this, the inability to acquire tertiary degrees any
professional certificates are impossible for these people due to low standard of living and
poverty. Therefore, these young people cannot invest in their education to gain training for
acquiring skills. These people therefore have no place for the competitive world of business
as they have very little skill to contribute to the companies in their region (Hess et all., 2016).
The overall quality of staff that lack training and possess no insight into the result of their
actions can prove to be a risk for the business organisation.
Another risk that the company operating in the South African market actually face is
related to the divided mentality present in the society. Despite the fact that the people show
collective nature while completing any task and are marked for their unity in terms of human
and employee rights but growing tensions relating to the migration problems can pose a risk
for any type of business. The main social problems started with the apartheid movement
where the tensions between black Africans and the whites started and their mutual hatred
affected the workforce (Sadgrove, 2016). The ignorance of the non-African whites and their
discriminative behaviour were reflected in the social and political policies also. These issues
led one sector of the society to become poor in terms of economy, education and life style. In
addition to this, the social system of the country is based on the traditionalism followed by
the cultural groups practiced for long. The behaviours and moral framework are set by the
great leaders like Nelson Mandela who is an international instance of leadership. However,
the perspectives of the people here have changed and they are now following the path of
dividing politics and fighting for their own interests. In this opportunity, some of the political

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leaders are gaining profit and indulging in the corruption (Ganson & Wennmann, 2018). This
tension in the country often hampers the sales of the products and services of the company.
The risk factor of sudden slowdown of the sales of the products of the company like
Ford can hamper the complete structure and strategies. The threat of mass violence can often
be seen in the various part of the country for which the government remain not ready. In such
cases, the transport system gets stopped, communication system cut down and the entire
process of legal and administration get shut down. In such case, the company like Ford
cannot find any way to solve the problem immediately but wait for the problems to be solved
with time. This leads to failure of achieving monthly or quarterly sales and profitability form
the part of the company and its management (Kinderman, 2016). This type of threat is
impossible to overcome which discourage many a companies to enter the market of South
Africa and operate actively without any threat or risk.
Legality:
As the politics of the country is highly connected by the legal process, therefore, the
enforcement of law is a necessity in the country. In this regard, most of the companies which
are operating in the market of South Africa do not find any support when there is a violation
of law through corruption or data breach. The World Economic Forum has indicated that the
security continues to be one of the major concerns for the market of South Africa for doing
business (Weforum.org. 2019). It ranks 109th out of 148 countries in terms of corruption and
risk factors. The main problem with the legal system of the market of South Africa is that the
laws and constitutions are changed more often according to the ruling party in the system.
The problem gets more complicated when the political leaders change the laws with9out
thinking about the needs and issues of the business, people and other stakeholders depending
upon the legal system of the country. This leads the business organizations to being changes

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in the structure and operation to meet the regulation. This sudden changes in the legal system
leads to corruption, fraud and injustice which hamper the constant growth of the companies
operating in the market of South Africa. In addition to this, the government as do not
implement any law needed to support the corporate in the market, therefore, the
environmental laws for which the nations of the wold are taking strict actions, are not present.
This reduces the competitiveness of the companies in comparison to the other companies
operating in the other markets of the world.

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