Wednesday, September 28, 2016

Ford Fights Back Against Trump Debate Claims - Analysis By Agoglia

Ford Fights Back Against Trump Debate Claims
Analysis by Franco Agoglia

Original article published: Sept. 27, 2016 11:03 a.m. ET

Image result for Ford Focus rs
2016 Ford Focus RS

Within the context of entering foreign markets, companies need to sometime look beyond strategies and investments. In this article by John D. Stoll a question is inferred, what are the political and social implications of direct foreign investment? The more obvious question when entering a new market is, how will it impact the country that is being entered? However, the harder question to answer is, how will the companies home country perceive the move?

In the case of Ford Motors move of small vehicle production to Mexico, this dilemma is evident. As highlighted by the article, presidential candidate Donald Trump has used Ford as the poster boy for companies taking production and jobs to other lower labor cost countries. Trump may be using this argument in order to gain political points, but when it comes to marketing and public relations, popular opinion of a company must be considered when making any strategic move.

In my opinion Ford has done what is necessary in order to stay competitive within the industry. Small economic vehicles such as the Ford Focus provide a very small profit margin relative to luxury cars, trucks and SUVs, therefore the pressure to maintain competitive pricing and high profit margins lead companies to explore the best option within their environment and capabilities. In other words, Ford is forced to make the move to Mexico for its cheaper labor force under the current economic and political environment between Mexico and the US. In response, Ford has also given emphasis to the their target to increase higher profit margin vehicles such as their pick-ups and SUV within the US, which proves logical as the higher margins allow Ford to absorb the costs of higher labor costs.

So what could be the solution to this dilemma? As long as there is a strategic advantage to investing in foreign countries, companies from all industries will continue to do so. From the prospective of Ford and other automakers, the flak that they may take from moving jobs across the border is marginal to the economic benefit of producing in countries with lower labor costs. Besides, outside of the election cycle who really pays attention to the origin of production of their sweet new ride, which they are getting with a low price and probably some awesome financing options?

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