Literature Review Assignment Sample
“A Study on why Ford exited the Indian Market”
Introduction:
The Ford Motor is a multinational American Automobile Company. The Company’s Headquarter is located in the city of Dearborn, Michigan in the United States. Henry Ford founded the company on 16th of June 1903. Ford Motor have two brands under its name, namely, the Ford brand under which it sells commercial vehicles and the second brand is called the Lincoln luxury brand under which it sells the luxury cars (Kuruva,2022).
The main topic, under which the study will be based upon is “A Study on why Ford exited the Indian Market”. Under this topic, we will mainly be discussing about the Literature review about the chosen topic (Jyotishi,2021). The American based automobile Company i.e., the Ford Motor Company is known to have been identified or recognized in India through the company’s product “Josh Machine”. However, the Ford Company decided to stop manufacturing its cars in India in the year 2021 and was even ready to face a loss of about $ 2 billion because the company did not see any way through which it would garner profits in the Indian Market (Mishra,2022).
Research Questions
- Reasons why car manufacturer such as ford had to take an exit from the Indian market?
- What other steps ford could have taken to maintain a position in the Indian automotive market?
Objective
- The Indian automobile industry is one of the most important areas of the Indian economy, increasing and prospering as a fast-growing industry
- Ford has effectively grown its position in the global automotive sector since its inception in 1903, ranking among the world’s largest automobile manufacturers.
- Two factories have a potential for producing 4,00,000 units per year, but in recent years Ford has only able to build 80,000 vehicles (20 percent of the ability), with half of them exported.
- Ford said it would stop making vehicles for sale in India. It blamed persistent overcapacity and a lack of growth in the country’s car industry
Justification
There are varied objectives that we will be potentially aiming to achieve with this research study that is based on the topic “A study on why Ford exited the Indian market”. Some of the objectives which we are planning to achieve with this research study about the exit of the Ford Company from the Indian market are as follows-
- To truly identify and understand all of the reasons and mistakes made by the Ford Company which contributed in the exit of the company from the Indian market
- To understand why was the Ford Company not able to compete with Indian owned local company i.e., the Maruti Suzuki Company. How and why did the Maruti Suzuki Company able to entice and meet the demands of the Indian Consumers (Agrawal,2021).
- To analyze and evaluate to what extent and manner did the Ford’s decision to leave the Indian market ended up impacting the Indian automobile industry and the country’s economy and people as a whole?
The American automobile Company entered the Indian market about 25 years ago but it has been noted that the company was able to account to only about 2 % in the Indian market when it came to the passenger vehicle (Ajitha,2021). The Company failed to entice the Indian consumers and faced a huge loss. The Ford Motor even in one of its statement stated that the company faced a loss of about 4 2 billion with regard to its operations over the last 10 years in the Indian market. Not only that, the demands for the company’s manufactured new vehicles in the Indian market from the Indian consumers had been very low and meek. Anurag Mehrotra, the head of the Ford franchise in the Indian market stated that albeit great efforts put by the company to woo the Indian consumers, the company failed in finding a sustainable path towards a long- terms centric profitable journey. Now, we will be discussing in detail as in what were the reasons that lead to the failure of the Ford Company in the Indian market and also how did its exit impacted the Indian market holistically in the literature review (Pati,2021).
Literature Review:
Ford Motor entry, rise and fall in the Indian market:
The American automobile Company i.e., the Ford Motor and India is known to have a very long history together. The Ford India journey began in the year 1926 but due to the restrictions with regard to import which resulted in the rise in the production cost, it stopped its partnership in India in the year 1953. However, the Ford Motor, re- entered the Indian market on October in the year 1995 in the form of MFIL (the acronym for which is known as the Mahindra Ford India Limited).
The Mahindra Ford India Limited was a joint venture of 50 – 50 between the Ford Motor and the Mahindra & Mahindra Limited. It was reported that in the year 1998, Ford was able to increase its interest rate by about 72%. Some of the products which the Ford Company launched in the Indian market are as follows- Ford Escort, Ford Ikon, Ford Fusion, Ford fiesta, Ford Figo and vice versa. It is reported that since it re- entered into the Indian market from 1995 till 2012, the company invested about $2 billion in the Indian market (Bhattacharyya,2021).
The Ford Motor witnessed great success when it came to some of the car models manufactured by the company such as the Endeavour, EcoSport and Ikon. However, the same cannot be said for the company’s models such as Mondeo and Fusion which failed to entice the Indian consumers. Nearly, after operating in the Indian market for 25 years, the Ford Company decided to stop its operations in the Indian market (Jamaleh,2021). The decision of Ford to quit operating in the Indian market came as a surprised for many (Gandhi,2021). There are mainly two factors which lead to such drastic decision on the part of Ford Company. The two factors were, Ford company failed to entice the Indian consumers and the second factors were, the company failed to thrive in the competitive environment of the market. While its competitors such as Toyota (Japanese Company) and the Skoda (Czech automobile company) succeeded to make a strong presence in the Indian market, the Ford Motor failed to do so and hence, its decision to exit the Indian market came forward because the company did not see any profitable journey within the Indian market in the long- run (Poorani2021).
Reasons or factors that lead to the failure of the Ford venture into the Indian market:
The Ford Company’s announcement to stop its operations in India came as a shock for everyone. As stated earlier, two factors came into play for the failure of the Ford’s company in the Indian market namely- failing to entice the Indian consumers and failing to thrive in the competitive environment (Jeyabharathy,2018). But then the question arises, how and why did the company fail to entice the Indian consumers? To much irony, Ford company followed every steps and templates of the rule book and was very much committed to make this venture work. Ford even set up large manufacturing operations (which consisted of 2 production plants of the company’s vehicles), set up an engine factory and deep base for supplier was also developed so as to give the company’s manufactured models the much- needed local touch in order to succeed in the market. The company was so much committed in the cause that all of its products were dynamically engineered and set a very high benchmark for the other automobile vehicles in the Indian market but still it failed albeit all those endearing efforts and dedication (Thomas2021).
Here are some of the reasons/ mistakes which potentially contributed in the failure of the Ford operations in the Indian market-
- One biggest reason or factor which contributed in the failure of the Ford Company was that it underestimated the consumers in the Indian market (meaning it failed to understand the Indian consumers and its wallet) (Thao,2022). Ford Company was known to be one of the very first multinational corporations to step foot into the Indian market however, despite that it failed to understand the Indian consumers. The American automobile company thought that just by launching the latest global products, the Indian consumers would blindly go by the flow and purchase what the brand is offering. However, the rejection of the company’s manufactured Ford Escort by the Indian consumers became an eye opener for the company. The Company then decided to manufacture products specifically for the Indian consumers and came up with the Ikon and the Figo model. The two model indeed enabled the company to earn some profits but because of the models being quite on the expensive range, it failed to compete with the pricing range of its competitors (Zheng,2019).
- Another mistake that the Ford Company made was by investing too much in a market that was over exaggerated. Ford Company in the year 2011, decided to invest about $1 billion in the Sanand factory (that had a of about 240,000 units/ year). The success of the EcoSport model further boosted the company’s confidence and hence, in the year 2015, Sanand factory was officially launched. However, the investment failed miserably. The company failure to judge the Indian market and its own growth, ended up making the company suffer a huge loss from which it was unable to recover.
- The third mistake that the Ford Company made was its decision to chase after the same market where Maruti Suzuki was striving over the SUV market which was an unstabbed market with lots of lucrative potential. Ford decided to compete with Maruti Suzuki by manufacturing sedan vehicles such as Figo and Aspire and even lowered the cost of running of those vehicles but even albeit that it failed to compete with Maruti. Ford Company failed to decode the formulae in the right manner with regard to the sedan market like the Maruti Company did meanwhile ignoring the untabbed lucrative market of the SUV. Ford should have kept heed of the success of its EcoSport model and invested in the SUV market but it ended up ignoring it. To which could have been a pathway towards the success of the company’s brand in the Indian market, Ford Company ended up decoding the trick and identifying the potential a little too late (Isidore,2021).
- The fourth mistake that the Ford Company made in the Indian market was its decision to spend in areas with no potential instead of investing in areas with lots of potential. Ford along with many of the foreign companies failed to understand the Indian consumers and the Indian market demands. Unlike the Maruti Company which have mastered and successfully decoded the structure and demands of the Indian market, Ford Company failed to do so. The Indian consumers are very clever, they want good quality and efficient products that won’t cost them much but would benefit them in the long- run. However, Ford failed to decode this secret of the market and consumers of India. The classic case with the Ford Company was that, it invested in areas which did not benefit the Indian consumers in any way which ended up resulting the rejection of the company’s owned business by the Indian consumers (Bhatia,2021).
Impact of the Ford’s decision to stop its operations on the Indian market:
Ford’s decision to stop its operations in the Indian market came as a huge blow of shock for many of the people owing to the tremendous potential it had to make it through despite the varied hurdles and blows it faced along the way. Undoubtedly, the Ford Company’s decision came as an aftermath of lots of business loss faced by the company despite its many efforts to make a mark for itself in the Indian market. Yes, the company did face a huge financial loss but its decision to withdraw from the Indian market ended up also affecting and impacting the Indian consumers and the Indian market. The company’s decision to stop its operations affected nearly about 4,000 employees within the Indian market. Not only that, the company’s withdrawal from the Indian market also affected many dealers and a lot of costumers and consumers from all over India.
Indian economy took a huge toll and losses after the Covid- 19 lead pandemic hit the world which turn many dynamic upside down. And so, the decision of the automobile company to stop its operation in the Indian market in such crucial time when the country is struggling to revive its economy, will indeed add up on the negative impact of the pandemic on the country’s overall economy and potential growth. Owing to the large population in the country where nearly 35 million of the population is still unemployed, the Ford Company’s decision to withdraw and stop its operation in the Indian market will only helped in elevating the unemployment rate which is not good for the future growth of the country.
Research Methodology:
The topic of the research is “A study on why Ford exited the Indian market”. Aiding to the topic, the main aim of this research study is to analyse and evaluate about what were the main factors and reasons which contributed in the decision on the part of the Ford Company to make an exit from the Indian market. Also, with this research study we will also be analysing and evaluating how factors ended up forcing or boosting the decision factor on the Ford Company with regard to withdraw all of its operation in the Indian market.
Research design:
For this particular research, the descriptive type of research design was utilised so as to understand in detail the different factors that came into play which contributed in the exit of the Ford Company from the Indian market. This particular design assisted in truly untapping all of the details, factors and outcome of the decisions undertaken by the Ford Company (Haralayya,2021).
Collection of the data:
The data for this particular research topic was mainly obtained via secondary sources i.e., via internet sources, literature sources, articles, newspapers, journals and books.
Consideration of the ethical factors:
The data collected for this research topic was done in such a way that it will not infringe upon anyone’s privacy or upon the confidentiality of the company’s data. All of the sources were extracted from open and legal sources. Also, issues with regard to copyright and plagiarisms is not entertained in this research study.
Conclusion:
The topic under which the research study is undertaken is titled as “A study on why Ford exited the Indian market”. Under this topic, we mainly focused on the literature review of the chose topic. Under the literature review, we discussed about the following topics- Ford Motor entry, rise and fall in the Indian market, reasons or factors that lead to the failure of the Ford venture into the Indian market and lastly, we also discussed about the impact of the Ford’s decision to stop its operations on the Indian market. While going deeper into the research topic, we realised that there are mainly two factors which lead to such drastic decision on the part of Ford Company. The two factors were, Ford company failed to entice the Indian consumers and the second factors were, the company failed to thrive in the competitive environment of the market. While its competitors such as Toyota (Japanese Company) and the Skoda (Czech automobile company) succeeded to make a strong presence in the Indian market, the Ford Motor failed to do so and hence, its decision to exit the Indian market came forward because the company did not see any profitable journey within the Indian market in the long- run. The Ford Company really tried its best to make a mark for itself in the Indian market but it was not able to do. The company did have many potentials to succeed only if it succeeded in tabbing and understanding the gap of the market from its initial phase. The company should have entered the Indian market by thoroughly analysing the structure and demands of the Indian automobile market and the Indian customers instead of relying on their own understanding of the market. Because fail to truly understand the Indian market and its consumers, it became difficult for the company to truly understand the Indian consumers and the Indian market which led to the company facing lots of losses in terms of financially and in terms of resource and time as well.
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