BUMGT5920: Management In A Global Business Environment
The modern businesses are riding on the wheels of globalisation and expanding beyond the land, sea, and aerial constraints. They are going global in order to progress in their field. The international market offers a plethora of opportunities for the business but it brings certain challenges for the business organisation as well. These challenges can be related to macro and micro-environment of the company. It is said political, economic, technology, legal, social, and environment factors of a global location that may pose various challenges to the business organisation. This essay discusses the challenges faced by Ford Motor Company while exploring the business opportunities to expand further. Being one of the leading automaker companies in the world, it is committed to reinventing its technology and innovations to target high margin and high growth. This essay outlines those challenges and provides opportunities for the manager operating the business in the global environment. In addition to this, certain conflict generating solutions have been discussed in order to get the best outcomes strategy for the company to excel in the international market.
Ford Motor Company is one of the automobile manufacturing companies having headquarter in Dearborn Michigan and was founded by Henry Ford in 1903. The company manufactures and sells not only automobiles but also commercial vehicles. There are two subcategories of the brand. The Ford brand sells only normal automobiles that are purchased for daily use purpose and another category is Lincoln Brand that is only for the luxury vehicles. In addition to this, the company has the ownership of Brazilian SUV manufacturing company ‘Troller' along with the 8 % stake in one of the premier class cars manufacturing firm ‘Aston Martin' of the UK. Apart from this, it holds 32% shares of Jiangling Motors (Ford, 2019). Talking about the entry in China, Ford formed a joint venture in China, Thailand, Taiwan, Russia, and Turkey. At present, the company is led by the Ford family and is well-listed in New York Stock Exchange. At present, Ford stands second in car manufacturing in the USA and acquire the fifth position in the global market. The company introduced large-scale production of automobiles along with the large-scale management of the working labours. These methods are characterised as the ‘Fordism' that are usually engineered manufacturing processes differentiated by moving assembly lines. At present over 190,000 workers are hired by the company globally (Ford, 2019).
Challenges and Opportunities
Expanding business in different countries means targeting new customers or client in order to boost potential profits. One thing which is obvious in every global expansion is that the company has to follow certain guidelines for carrying out business on a global scale. The first and foremost challenge that any company faces is International organisational structure. The location of the workforce team and organisational structure (Baier, et.al, 2015). The headquarter of the company is ina different country and the regional offices are located in the target market. There has to be a coordination between the two commanding units of the same company while working abroad. The next challenge is compliance with foreign rule, regulations, and law. It is required from the executives of any firm to have a top-notch understanding of the foreign rules and regulations ( Beghin and Bureau, 2017). From trading law to taxation rules, the company is required to comply with the necessary legislation in the target country in order to avoid huge penalties or fine (Brouthers, et.al, 2015). Another significant challenge is the global pricing strategy. Deciding the price of cars or its auto-parts or services is one of the crucial challenges for the company. Costing decide the competitive position of the company and ensure profitability is good along with the sustainability (Gamble, 2016). Local market players can pose a competitive challenge for the company as for international organisation, the shipping, distribution, marketing, and labour cost would be high in comparison to the local players. Another issue fluctuations in the exchange rates and is considered one of the crucial factors that may affect the sustainability and profitability of the company in the targeted market. Major fluctuations in the exchange rates can drastically impact the business profit (Baier, et.al, 2015). The major challenge is the cultural difference and a company cannot avoid this no matter how big or well-planned it is. There will always be issues in the communication process, working style, and work ethics due to different cultural norms and values between the two units of the same company operating in the home country and in the foreign country (Dür, et.al, 2014). Another issue is the supply chain complexity issue. While operating in the new market, the company always finds it hard to manage its supply chains and key suppliers. As the number of complexities in the supply chain increases, the chance of the company to get indulged in illegal and unethical practices also increases (Gamble, 2016).
Talking about the opportunities offered by the global expansions of the company, this opens the floodgates of opportunities for the company, if executed properly. By taking the business in the global arena, the company can get a large number of customers. This not only improves the profitability of the company but its goodwill also (Inklaar and Timmer, 2014). In addition to this, going global will help the company to acquire the best talents and skilled employees around the globe (Lodefalk, 2014). This would improve the innovation and idea generations scope for the company. The company will get exposed to a new culture and will help it to deal with global customers effectively. Hiring a cultural consultant can be beneficial for the company to guide the marketing team to prepare the marketing content in order to avoid any linguistic nuances. Another opportunity for the company is that it can diversify its market. Business operating in one or two markets might not survive if any mishap takes place. Having the knowledge and excess to multiple markets can help the company to deal with any economic crisis ( Rodrik, 2015). With an effective strategy, the company can be able to beat the odds.
Talking about the impact of these challenges on the business operations and performance of Ford, the company can undergo various changes. Starting from the organisational structure issues, Ford is headquartered in Michigan while it is operating in Europe, Brazil, Asia Pacific region, etc. Hence, the company is operating well in all the regions due to a well-defined structure and communication network (Dearborn, 2019). If the company fails in managing the structure properly, then the consequences would be very disastrous for the company and it might end up losing its competitive position. There are rules and regulations such as labour safety rules, employment act, taxation rules, standards to comply with, environmental obligations, and other legal obligations. Ford, being a car manufacturing firm, has to follow international standards. Any change in the environmental rules or standards can hinder the whole production process and may increase the cost of production for the firm (Dearborn, 2019). For instance, if the duties on fuel-based cars increases, then this may increase the price of cars and might reduce the demand for cars as well. This can be a major issue for Ford and other car companies as well. No doubt Ford has been one of the leading market leaders in Europe and the USA but it has to seek another potential market for growth opportunities. However, doing is so is not an easy task. The company has to put funds in the Research and Development team and the marketing team to decide the pricing strategy (Dearborn, 2019). If the pricing strategy fails, then it would not only lose its funds but its reputation in the global community. In addition to this, the global expansion would bring cultural challenges. For example, at present, the company is progressing in China. However, Chinese culture is completely different from the American. Hence, the strategic leaders from the USA might not be very effective in dealing with the Chinese workforce due to the linguistic barrier.
There are many ways to deal with such challenges. The first and foremost is that the management of Ford should establish synergies between various departments and overseas operating units. This may be very challenging for the company but in the long run, it would benefit the company hugely. In order to resolve the issue of supply chain complexities, Ford can form joint ventures or new mergers with local leaders in car manufacturing. This would help the company in easy resource acquisition. In addition to this, Ford would get a well-settled market and large customer base along with a leader having tremendous knowledge of the demand-supply chain of the targeted market. Organisational structure should also support the standardisation of the processes. Having a hierarchical structure may not work in all the regions, especially in the European markets. Hence, a flatter organisational structure should be encouraged in order to empower lower-level management employees to take decisions of their own. This brings innovations in the manufacturing process. Usually, organisations ignore the communication planning aspects and as a result of which their operations face a lack of coordination and their strategies fail. Ford has to ensure that its managers and staff get the information from a well-defined channel in order to achieve the target. The communication plan should address the cultural barrier as well in order to bring a common workplace harmony. At last, it is also suggested that the company should customise its services and products in order to satisfy the varying needs of customers in a different marketplace. This would help the company in gaining customer loyalty for a longer period.
Based on the aforesaid points about the challenges and opportunities, I tried to produce my own sets of ideas for the international expansion of Ford. The company should carry out thorough research and studies to understand the demographic trends of any particular market. This would help the firm in addressing the gap between the customers and automobile makers. If Ford gets successful in doing so, then this would help the company in acquiring the top position. The market study will also help the company in dealing with the pricing strategy problem. Once the labour cost and other expenditure are determined, the company can calculate the profit margin. In addition to this, I realised that to curb the fluctuating currency problem, Ford can set up a forward contract. This would have a mutually agreed price that is fixed in advance for future sales. Furthermore, to address the cultural barrier issues, soft skills training should be provided to the staff and managers to understand what the local labour and staff are trying to convey.
In this essay report, a thorough discussion of the international expansion of organisation was talked about. It is a well-known fact that international expansion is very challenging for firms of all scale and size. This is due to many factors that were discussed here. These threats include poor organisational structure, currency fluctuations, cultural differences, supply chain complexities, and much more. It was determined that the company is required to comply with the necessary legislation in the target country in order to avoid huge penalties or fine. In addition to this, global pricing strategies for any firm is a critical issue for Ford. The labour cost, taxes, charges, fees, and other expenditures vary with location. Hence, carrying out a market study is quintessential for every firm that is aiming to go global in the market. It was also determined that expansion in the global market brings many opportunities for the firm as well. By taking the business in the global arena, the company can get a large number of customers. This not only improves the profitability of the company but its goodwill also. Ultimately, the essay concluded by providing solutions to the problem identified.
- Baier, S.L., Bergstrand, J.H. and Feng, M., (2014). Economic integration agreements and the margins of international trade. Journal of International Economics, 93(2), 339-350.
- Beghin, J.C. and Bureau, J.C., (2017). Quantitative policy analysis of sanitary, phytosanitary and technical barriers to trade. In Nontariff Measures and International Trade(39-62).
- Brouthers, K.D., Nakos, G. and Dimitratos, P., (2015). SME entrepreneurial orientation, international performance, and the moderating role of strategic alliances. Entrepreneurship Theory and Practice, 39(5), 1161-1187.
- Dearborn, M. (2019). Ford Details Commitment to Global Redesign -- Reshaping Overseas Operations and Strengthening North America | Ford Media Center. Retrieved 9 August 2019, from https://media.ford.com/content/fordmedia/fna/us/en/news/2019/01/16/ford-details-commitment-to-global-redesign.html
- Dür, A., Baccini, L. and Elsig, M., (2014). The design of international trade agreements: Introducing a new dataset. The Review of International Organizations, 9(3), 353-375.
- (2019). About Us. Retrieved 9 August 2019, from https://corporate.ford.com/company.html
- Gamble, A., (2016). Regional blocs, world order and the new medievalism. In European Union and New Regionalism(49-65). Routledge.
- Inklaar, R. and Timmer, M.P., (2014). The relative price of services. Review of Income and Wealth, 60(4),727-746.
- Kalinic, I. and Forza, C., (2012). Rapid internationalization of traditional SMEs: Between gradualist models and born globals. International Business Review, 21(4),.694-707
- Koopman, R., Wang, Z. and Wei, S.J., (2014). Tracing value-added and double counting in gross exports. American Economic Review, 104(2), 459-94.
- Lodefalk, M., (2014). The role of services for manufacturing firm exports. Review of World Economics, 150(1), 59-82.
- Rodrik, D., (2015). How far will international economic integration go?.Journal of Economic Perspectives, 14(1), 177-186.