Economic theory in the perspective of during recession for Ford Company

Term Paper, 2012

12 Pages, Grade: A


This paper presents and discusses the Ford scenario in recession in the perspective of business economic theory. Economic theory is a broad concept for the explanation of the movement of goods in a market. Theoretical economic concepts have scientific backing or studies to prove or disprove a stated speculation. National governments also have an interest in theories ofeconomics. Politicians swear on studies ofgovernment spending, money supply, tax collections, andconsumer spendingdata to make laws or set policy. Dissimilar economic theories exist that focus on different aspects of government policy perspective economics. (Salvadori 2003)

Ford Motor Company was shaped on superior products and that exists today. They have an exceptional line of trucks and cars which ranges from the Model-T to today’s Ford Focus and F-Series, the excellent selling car and truck in the world. Their current product line is the strongest in their history and is getting stronger yet. (Collins 2007) This year they added the new Ford Explorer, Expedition and Thunderbird in North America, the new Lincoln Blackwood, Ford Fiesta in Europe and Navigator, Land Rover Freelander and Range Rover, Aston Martin Vanquish, Jaguar X-Type, Mercury Mountaineer, and the Mazda Sport Wagon. These vehicles will help to separate them from their competition. (Rosenberg 2012)

Scenarios about the microeconomic and macroeconomic

Microeconomics is the study of target markets, and segments of the economy. It looks at issues such as consumer nature, individual labor markets, and the theory of organization while Macroeconomics is the study of the whole economy. It looks at ‘total’ variables, such as whole demand, national output and inflation.

Moving from Micro to Macro

If we looked a diagram of supply and demand for motor cars. Microeconomics is interested with issues such as the impact of an increase in demand for cars. This micro economic analysis explains that the increased demand leads to higher price, and higher quantity.

Microeconomics is related to: Macroeconomics is related to:

- Supply and demand in personal markets, - Monetary / fiscal policy,
- Individual consumer behavior, - Reasons for inflation,
- Individual labor markets, - Economic Growth,
- Externalities growing from production - International trade and globalization, and consumption, - Government borrowing,

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(Chart-1, Source: Pettinger 2013)

Demand is the price at which consumers want to buy a product. Economic theory kept that demand consists of two factors: taste and ability to buy. Taste, which is the desire for a good, decides the willingness to buy the good at a specific price. Ability (level of income) buy means that to buy a good at any higher price, an individual must have sufficient wealth or income. (Morishima 2009) Both factors of demand depend on the market price. When the market price for a product is high, the demand will be low. When the price is low, demand is high. At very low prices, many consumers will be able to purchase a product.

When supply and demand are in equal, the economy is said to be in equilibrium between price and quantity

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[Chart -2, (Source: Morishima 2009)]

Good or services in concern with price and income elasticity

Ford Motor Company produces and sells automotive vehicles under thebrand names Ford, Mercury, Jaguar, Volvo, and Lincoln. Ford also owns 33.4% of Mazda Motor Corporation and engages in other business such as car rental, done its Hertz Corporation subsidiary. A total service experience for Ford and Lincoln owners available only at Ford and Lincoln dealerships – designed to deliver customer satisfaction and repeat purchase intent. They provide following types of good or service: - (Anderson & Vincze 2006)

- Specifications parts engineered by Ford Motor Company.
- Technicians trained, experienced and certified specifically for Ford and Lincoln vehicles. (Anderson & Vincze 2006)
- One-stop service for all mechanical and maintenance needs.
- A leading automotive, financial sector services company founded in 1959.
- Provides a broad variety of dealer and customer financing products and services globally in support of Ford Motor Company vehicle sales..

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While their income calculated as the ratio of the percentage change in demand to the percentage change in income For example, if, in response to a 10% increase in income, the demand for a good increased by 20%, the income elasticity of demand would be 20%/10% = 2. Then price and income elasticity depends on consumer purchasing interest.

Market structure and possible strategy

Ford market structures its cars around a perfect competition. They are surely not looking for a monopoly. If they were in a monopoly competition situation then they would not have all of the sales and concession available on the cars. They are manufacturing a differentiated product that is continually changing to meet the needs of consumers and there are many substitutes available, but we feel that we are by no means producing homogeneous products. There are many producers in the market to desire an oligopoly. (Lien 2008)

Ford’s possible strategy is presented in our one Ford plan in concern with economy theory. One Ford flourishes on our Company’s four-point business plan achieving success. The four-point business plan consists of the following:

- Fast restructure to operate profitably at the current demand and changing model mix.
- Speedily development of new products our customers’ needs and value.
- Finance our plan and reform in our balance sheet.
- Work in unity effectively as one team. (Lien 2008)

Building on this plan, One Ford encourages on teamwork and a single global approach, straight forward employee efforts toward a common definition of success. It forced the importance of working together as one team to achieve automotive leadership, which is calculated by the satisfaction of our employees, customers and essential business partners, such as our dealers, suppliers, investors, unions/councils and the communities in which we operate. We have explained aset of behaviorsthat are expected of all employees to support the One Ford plan. . (Lien 2008)

The goal of one ford is to create an interesting and viable company with profitable growth for all. The output (result) of one ford is:

- Great Products, defined as those that are top quality,green,safeand smart.
- Strong Business, based on a well manage portfolio of products and global presence; and
- Better World, established through oursustainability strategy.


Excerpt out of 12 pages


Economic theory in the perspective of during recession for Ford Company
Stanford University
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ISBN (Book)
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economic, ford, company
Quote paper
Francis Marete (Author), 2012, Economic theory in the perspective of during recession for Ford Company, Munich, GRIN Verlag,


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