On June 16, 1903 Henry Ford would found the Ford Motor Company. This company would go on to become one of the world’s leading companies in the automobile industry. With Ford being such a giant in this industry, analyzing how they got there and how they stay there are ways one can learn more about business and economics. When looking at Ford’s comparative advantages over other companies such as General Motors, Toyota Motors, and Honda Motor, you find that they do not have any. When comparing Toyota and Ford, Toyota relies more on production volume to drive prices down, giving them a better return in profits for the manufacturers whenever a vehicle in comparison to Ford (llctlc). Toyota has the comparative advantage in this case due to the fact that they can produce the same product for a better return. Despite this fact Ford is still able to stay on top of their industry due to their strong brand name and the quality of the product they put out. These factors keep customers emotionally connected to the product and the company itself, with many consumers only wanting to use Ford products. Supply and demand is an important piece of business and economics, this can change depending on external factors. Properly supplying the demand of a product is the most beneficial for a business, but it is difficult to accomplish that. A business has control over their supply, but the demand curve can be changed by many different factors. These factors include income, population, expectations, and tastes (Cowen & Tabarrok, xxx). In the case of Ford as of recently, their demand is exceeding their supply which has caused a 4.5% decrease in sales (cnbc). Their key product right now is electric trucks, which has the highest demand of their vehicles due to the current state of gas prices. The automobile industry has seen the rise in price of used cars since new cars are not being manufactured fast enough to meet the demand of the consumers. This is one of the affects that covid had on this industry. “Gross domestic product is the market value of all finished goods and services produced within a country in a year (Cowen & Tabrrok, xxx).” Since Ford was founded in America and is headquartered in Dearborn, Michigan, analyzing the GDP for the United States is essential. The GDP in the United States in the year of 2021 was 22996,10 billion US dollars, representing 17.2 percent of the world economy, with the automobile industry making up 3 percent of the United States GDP. Fluctuations in the GDP would affect Ford’s profitability as the fluctuation would be a representation of the United States’ economy as a whole.
References
Cowen, T., & Tabarrok, A. (2021). Modern principles of economics. Worth Publishers.
How do you calculate the manufacturing cost of a product? AccountingCoaching. (n.d.). Retrieved September 4, 2022, from https://accountingcoaching.online/how-much-does-it-actually-cost-manufacturers-to/
john__rosevear. (2022, June 2). Ford's U.S. sales decline narrowed in May as demand remained high for its electric vehicles and pickups. CNBC. Retrieved September 4, 2022, from https://www.cnbc.com/2022/06/02/fords-us-sales-decline-narrows-in-may-amid-tight-supplies.html
United States GDP2022 data - 2023 forecast - 1960-2021 historical - chart - news. United States GDP - 2022 Data - 2023 Forecast - 1960-2021 Historical - Chart - News. (n.d.). Retrieved September 4, 2022, from https://tradingeconomics.com/united-states/gdp
Hey Josh, I enjoyed reading your post. It is well-written and easy to follow. You are right in saying that Ford does not have any comparative advantage over Toyota and Honda looking at the price and what the customers get as a return. However, you pointed out that Ford has the emotional factor, which means that people are emotionally attached to the company because of nostalgia. I have never thought about that before, but it makes sense and is genius.
That the demand exceeds the supply is not only a problem Ford is facing. Many car companies and companies, in general, have the same problem, the Corona Pandemic, Inflation and the Ukraine War have a huge influence on that.