When it comes to the automotive industry, there are many
external factors that car companies and dealerships have to keep in mind.
Recently, one of the most prevalent external factors in the auto industry has
been the substantial rise in oil and gas prices.This
is an important topic for people to pay attention to because it is an industry
that nearly all Americans are tied to through their own personal vehicles. Even
outside of the personal realm, auto dealers and corporations that distribute
company cars to their employees need to pay attention to this matter in order
to maximize their profitability.
So what is the issue at hand? In short,
gas prices have reached an all time high due to crude oil nearly doubling in
price. In December 2005 crude was at $61.04, as of February 2011, crude oil
prices have risen to $109.77 (Source). In turn, consumers are now wanting
to purchase more gas mileage friendly cars, causing car companies, such as
Ford, to experience a noticeable decline in sales of certain larger models like
their F-series and SUV’s.
How
then should the managers of Ford react to the rising gas prices and the change
in consumer demand? In order to maintain profit, Ford began to create more
hybrid models of smaller vehicles such as the ford fusion. They also released a
non-hybrid car called the focus, which boast about its 40-mpg gas mileage. This
helped them in overall sales, but Ford still struggled in pick up truck sales,
which is what the company is notorious for.
According to
The Wall Street Journal, Ford plans to adjust their F-Series and make it 25%
more fuel-efficient by using more aluminum and less heavier metals in the body
of the truck. It is impressive to
see managers realize and react so creatively to the issue and important for
Ford to adapt to the effects of the external environment and consumer demand,
but this might not be the best way for the company to do so. The new design
that Ford is planning to implement not only brings up issues of safety, but
also compromises all that the company stands for which is clearly displayed in
their infamous motto: Ford, built tough.
However,
their actions do bring up important question for managers and companies all
over to ask themselves: Is it worth it? How can a company properly adapt to
external factors without risking everything it stands for? Are they truly the
same company that they originally set out to be by making major changes?
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