Free Essay About Ford Motor Company: Moving To China
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Moving Ford Motor Company to China is a proposed strategy that might affect the organization greatly. China has a large labor force, which constitutes of 815.3 million people; hence, indicating that cheap and affordable labor is available in the country. Costs of labor in China are also unbelievably low. However, Vehicle manufacturers in China produce cheap and affordable cars sold locally and in neighboring regions. Ford will have to beat the prices or use a different approach when venturing into the Chinese market as a competitive strategy. This paper outlines what validations can be used for Ford to succeed in the country.
It is essential to understand the possible implication of moving Ford Motor Company to China would have on the organization before deciding to move the company entirely to China.
Currently, Ford operates in China and also sells equities and securities in the local securities market. The country’s operation in China has been tremendous and as such, it is justified to assume that such a decision would be the right choice for the organization to make, especially considering all other added benefits such as reduced cost of manufacturing (Lim, 2015).
Prior to making such a decision, assessing the environment, the opportunities and risks associated with such a move and provide necessary recommendations to avoid such outcomes.
PEST Analysis China
China is the second largest country and the most populated as well. The country has a population of over 1.3 billion people. The country is governed by one political party, the Communist Party of China.
The country has high tariffs, but in the last few years, these tariffs have subsided marginally (Sedki, Chao & Chen, 2014).
The political environment is stable and highly attractive for foreign investments. China has the world’s strongest economy.
Literacy levels in China are also as high as 92.8%, thus indicating that the country has a highly skilled labor force (Yang & Rubin, 2014).
The country’s poverty line is below 10% and the unemployment rates in the country are as low as 6.1%, considering how large the population is. The GDP growth in the country is one of the highest growing at 9.5% per year and a capital of $8,394.
China has a large labor force, which constitutes of 815.3 million people, hence indicating that cheap and affordable labor is available in the country (Holz & Mehrotra, 2014). Costs of labor in China are also unbelievably low.
Additionally, the country’s exports constitute a higher percentage than its imports, with a positive balance of payment of 254 billion dollars.
Production in the country is also growing steadily, currently at 8.1% per year.
Threats and Challenges
The environmental challenges and risks associated with China include water shortages, over-reliance on rain, the absence of clean and renewable energy (Chen, Matzinger & Woetzel, 2013).
Additionally, the technological environment needs to be assessed critically as well. The country has close to 700 million internet users (Choi, Williams & Ha, 2014). As such internet marketing is quite effective in China. The infrastructure in the country is also effective.
According to China infrastructure report, (2015) China has 482 airports, the second largest road network in the world, and the third largest railway network in the world. The country is thus a perfect place for a company such as Ford.
Their shipping industry would enable easy exportation to various global regions and give Ford a chance to conquer the European and Asian Market beating competitors such as Toyota, who have also invested heavily in China.
China’s Automobile Industry
Evidently, China’s motor industry is locally known. Vehicle manufacturers in the country produce cheap and affordable cars sold locally and in neighboring regions (Gao, Hensley & Zielke, 2014).
The Chinese automotive industry is also one of the most innovative with electric cars in China gaining popularity. The Chinese government has also subsidized such industries (Cendrowski, 2014).
The support for electric cars might pose a great challenge to Ford. As such, the industry has a large number of limitations. However, Ford can still export its brands to various destinations.
Ford Current Performance in China
Ford sales grew 9% in 2014 which is remarkable since China is the world’s largest auto market (Oh, 2014). Volkswagen and Ford have great interests in China as the industry is already very profitable.
China also offers the opportunity for Ford to expand into the Asia-Pacific region. Therefore, it is advisable for Ford to be moved to China, but maintain its operations in the United States and all other countries functioning.
However, for strategic purposes, it is crucial for Ford to invest in electric cars when they move into China, as this will assist the organization gains a competitive advantage over other global competitors seeking a share of the promising market.
Ford moving to China would lower exportation costs, cut in labor costs and also take advantage of a promising market. Additionally, China is one of the fastest growing economies. By moving to China Ford will realize much growth and benefit from the economic growth in the country.
Moving to China would have a number of implications of Ford such as loss of the American market, owing to the fact that the company would be exiting one of its most promising markets.
Ford needs to make this move as it is not only intelligent, but also one that has much potential for strategic planning and growth.
Ford needs to expand her client base since China and the United States relate well, and thus American businesses in China, as well as other international businesses, enjoy an attractive business environment.
Cendrowski, S. (2014). Beijing Pulls Back The Welcome Mat. Fortune, 170(6), pp. 88-92.
Choi, S. B., Williams, C., & Ha, S. H. (2014). Institutions and broadband internet diffusion in emerging economies: Lessons from Korea and China. Innovation: Management, Policy & Practice, 16(1), pp. 2-18.
China Infrastructure Report. (2015). China Infrastructure Report, (1), pp. 1-143.
Chen, Y., Matzinger, S., & Woetzel, J. (2013). Chinese infrastructure: The big picture. Mckinsey Quarterly, (3), pp. 8-15.
Gao, P., Hensley, R., & Zielke, A. (2014). A road map to the future for the auto industry. Mckinsey Quarterly, (4), pp. 42-53.
Holz, C. A., & Mehrotra, A. (2014). Wage and price dynamics in a large emerging economy: The case of China. BOFIT Discussion Papers, (7), pp. 1-26.
Lim, P. J. (2015). Why China Is Over. Money, 44(1), pp. 92-97.
Oh, S. (2014). Shifting gears: industrial policy and automotive industry after the 2008 financial crisis. Business & Politics, 16(4), pp. 641-665.
Sedki, S. S., Chao, N., & Chen, D. (2014).The Development of China's Economy Since 1978. Academy Of Business Research Journal, pp. 29-12.
Yang, C., & Rubin, B. A. (2014).Market Transition and the Deinstitutionalization of Standard Work Hours in Post-Socialist China. Industrial & Labor Relations Review, 67(3), pp. 864-890.
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