| Ford Automobiles Economic Analysis Essay
Ford automobiles are produced by a multinational company called Ford Motor Company, named so after its founder Henry Ford. Based in Dearborn, Michigan, Ford produces durable, efficient, and classy vehicles. These are different types of vehicles that generate profits to the company. Demand and supply is a market model that is applied to prices of commodities and services in the market. When quantity demanded equals quantity supplied a product is said to be in an economic equilibrium of price and quantity. At this point, consumers are willing to buy goods and services at that price, and suppliers are also willing to supply the products at that market price. However, there are demand and supply factors that affect the sales and profitability of vehicles. Demand for these products is influenced by various factors, such as changes in the tastes or preferences of consumers. Consumers tend to opt for other models of automobiles according to their preferences or class affiliation, regardless of other important features of Ford vehicles, which consequently affects sales and profitability.
Another factor that affects demand is the price of automobiles. In the modern world, some competitors in the automobile industry manufacture cheaper vehicles to enhance sales volumes and increase profitability. This affects demand for Ford vehicles, as consumers choose to buy cheaper products. Advertising also plays a major role in the demand for Ford vehicles. Making the consumers aware of the existence of a product triggers increase in sales volumes and profitability of the company. Ford does this through print media, videos and showcasing in motor vehicles exhibitions. Increase or decrease of the Ford vehicles price also has an impact on demand. Prices in competitive market structure are determined by prevailing market forces, among other factors. When the company raises price for its vehicles, demand is reduced, and when the company reduces the price, demand for its vehicles goes up. Reduction of price for Ford vehicles is achieved through discounts .Changes of government fiscal and monetary policies also have an impact on demand for Ford vehicles. A fiscal policy, such as an increase in tax on vehicles, would decrease demand and cause a reduction in profit. Seasonal factors, such as Christmas and other popular holidays, can also affect demand for vehicles. Some people give Ford vehicles as gifts to their friends or relatives. Quality and durability of Ford vehicles also increase demand. and help create unique market niche.
Some factors, such as changes in technology, have an impact on the supply of Ford vehicles. In modern days, vehicles are manufactured to suit |er needs. Vehicles are automated to perform efficiently and reduce manual work to drivers. Ford has endeavored to embrace changes in technology, and it now produces vehicles to suit modern times, e.g. electric cars. Changes in prices of related goods also affect supply of Ford vehicles. When the competitor sets a higher price for its vehicles, Fords supply increases because it also increases its price to fit in the market. Ford companys expectations about future changes in price affect supply, too. When the firm anticipates an increase in price for vehicles, supply will decrease to take advantage in future when the price will be high. Similarly, when a decrease in price is expected there is an increased supply of vehicles to avoid overstocking of the already manufactured vehicles. The number of competitors in the market also affects the supply of Ford vehicles. Consumers have a wide range of products to choose from; hence, this affects supply of Ford vehicles. There are numerous manufacturers of vehicles, e.g. Toyota, and therefore supply is low. Production cost is also a factor in determining supplying of these vehicles. When the cost of production, such as labor, machine hours and so on is high, the supply of these vehicles is low, because the cost will be paid for by the consumers, which will result in low demand because of an increase in prices.
Growth and profitability are the key goals and objectives that a company strives to achieve. Ford Company can do a number of things to increase sales of its vehicles. For instance, cutting production costs can increase profit margin. This can be achieved through elimination of inefficient divisions, or even subsidiary companies. A proper evaluation of feasibility of different divisions and subsidiaries should be conducted to determine those divisions that operate at a loss and those that are profitable. In an effort to increase sales volumes, Ford Company has plans to produce more fuel-efficient cars, thus enhancing profitability of its operations. Proper marketing strategies should be implemented to generate awareness of the product in an effort to create a unique market niche.
Pricing strategies give a company an edge over its rivals. Analysis of elasticity provides Ford Company with an opportunity to determine its pricing strategy. Price elasticity of demand is a measure of responsiveness of the quantity demanded of a good or service to change its price. Sales revenue in Ford is maximized through the setting of the price to enable the price elasticity of demand to be uniform. Ford varies its price from time to time to evaluate responsiveness on the demand, and sets elasticity of demand to one to increase sales revenues, and consequently profits. Gross elasticity of demand will measure the response of demand for a certain commodity to a change in the price of another commodity. When other motor vehicle companies increase the price of their vehicles, demand for Ford vehicles increases. Consumers are described as rational spenders, and therefore there will be more sales of Ford vehicles. This is achieved by comparing prices of vehicles that have identical features. Ford sets its price to a relatively low level to attract consumers.
Income elasticity of demand measures the relationship between changes in demand in response to changes of consumer income. An increase of consumer income raises demand for Ford vehicles, whereas decrease of income causes a reduction in demand. During the Great Depression, consumer disposable income was low, which affected demand and sales of Ford vehicles. The unemployment rate was high at that period, thus signifying that the level of income was low, which consequently affected supply and demand of Ford vehicles. Ford Company is currently in the process of streamlining and using its resources efficiently. Sales reduction, reduction in the lines of production, as well as huge discounts and losses have made Ford Company re-strategize its implementation of policies. These included resizing the company, consolidating production lines, closing some factories, dropping some unprofitable and inefficient models and cutting jobs. Ford Company has achieved economic growth in various ways. The company manufactures tractors, trucks and other vehicles that are used in various infrastructural developments in the world. Exports of these vehicles also add up to GDP.
Ford Company operates in a market where fluctuations of foreign exchange rates have a significant impact due to imports and exports. When a value of a currency falls in certain country, imports become more expensive, and this affects balance of payments. When a country imports more than what it exports, there is a deficit in the balance of payment. And when exports exceed imports, there is surplus in balance of payment. Foreign direct investment by Ford has increased capital account of the USA. Therefore, the state exports patents and rights to manufacture Ford vehicles in other countries. The company also makes a profit on the fluctuations of the exchange rate.
Manufacturing, assembly and sale of Ford vehicles have helped create multiple jobs, thus curbing unemployment to some extent. Unemployment is a major macroeconomic factor that countries try to curb. This can be in terms of resources, such as land, labor, capital, etc.,and is aimed at attracting workforce and increasing income per capita, hence reducing dependency ratio. By extension Ford also has an impact on employment of people in the petroleum and gas industries. Inflation has made export or import of Ford vehicles difficult. Increase in prices causes a drastic decrease in demand, and therefore consumers find it expensive to import Ford vehicles. Inflation also has affects cost of production. Ford incurs extra expenses to acquire raw materials for manufacturing of vehicles, and will have to pass this cost on to consumers.
In conclusion, Ford Company has a positive impact on economic development of the USA. It has succeeded in creating multiple jobs, using available resources and increasing capital account of the USA. Fords vehicles can be classified as Giffen goods, which implies that with an increase in price demand also increases, and because some people value classy and luxurious vehicles, an increase in price does not have an impact on consumption. To curb air pollution, Ford also produces environmentally friendly vehicles, such as electric vehicles
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