External audit is a strategic management tool that aims at understanding features affecting a business but an individual business cannot control. In an external audit, the focus is on factors that affect a business but the business has nothing much it can do regarding their effects.
External factors include among others political stability/instability in a county, technological developments, computer invention, population compositions and foreign competition. Ford is an automobile company in United States of America that have been affected positively and negatively by external factors. This paper discusses external audit for strategic management of Ford Company in the United States of America.
The process of organizing an external audit
To gather as much information as possible, the management should undertake the process with as many competent employees as possible. It should also analyze both published and unpublished data which will assist it in appreciating the need the prevailing conditions. The following process is followed;
Gathering of information
Testing data validity
Interpolating and analyzing information gotten
Making strategic decision based on the information gotten
The nature of external audit
An external audit addresses five area, they are;
Social and cultural factors
Technology and innovations and
The factors may affects a business either negatively to positively, to illustrate how this is attained this paper will analyze threats and opportunities of external forces to Ford company;
Ford motor company was established in June 16, 1903, by twelve business associates with Henry Ford as the most influential. It is an automobile company with head quarters in Dearborn, Michigan (US) (Hoover’s, Inc, 2010).
Through the years of operation, there are different external factors that have affected the company and its processes. These factors have changed the way the company conducts its processes (Ford Company Limited official website, 2010). These factors are in the larger united State of America and the world in general. They include;
Opportunities offered by External forces
There are different opportunities that external environment have offered to Ford Company and the company has taken the advantage;
The world is experiencing a rapid technological change; this is brought about by the use of computers in different sectors of a business (E*TRADE Financial Corporation official website, 2010). Ford Company has been forced by the prevailing conditions to adopt the changes; for example the company has a website where a customer can log in and communicate directly to the company.
These services are available for 24 hours in seven days. In line with the same, the company has embraced computerized marketing and advertisement where it sells its products all over the world through the internet (Fred, 2008).
United States has had an increased population, with the greatest number being youth. As a result the company has been faced with a changing demand of its products. This has lead to development of various models. Models are sometimes rebranded while others are just improved to meet the needs of changing customer trends; currently the company has the following brands; Aston Martin, Lincoln, Mazda, Mercury and Volvo, Ford and Jaguar (Ford Company Limited official website, 2010).
Managerial processes developments
The model of management has changed with increased enlightened people; customers are continuously demanding for better treatments form companies in the way they are served and the production processes involved. Currently social corporate responsibility management, ethical business products and customer care services have taken center stage.
The company has embarked on corporate social responsibilities, it practices in environmental management exercises like tree planting, engage in clean technology among others. This is in the efforts to meet track with changing need/demand from customers (Haberbeg & Rieple, 2001)
International and national legislations/regulations
The government of united states is increasingly adopting laws and regulation aimed at ensuring that business are conducted effectively, standards have been reviewed and compliance with the treads is important. An Article by Bell, 2010 in Money central says that there is a change in taxation policies in United States and businesses and individuals are left with no option other than comply with the set laws.
On the international, United States has been a signatory of various international treaties. An example of such treaty is Kyoto protocol which requires companies to minimize the amount of green house gases produced from their processes. In this response Ford Company has automated its processes and developed new disposal measures. It has also increased fuel efficiency of its products (Donaldson, 1995).
Social status/ living conditions
United States living conditions are on the rise; this has lead to an increased demand to the company’s products. As more people are getting stable jobs, the need for a motor vehicle is increased. Well structured financial institutions have also assisted people to purchase motor vehicles through loan facilities. This has worked to the benefit of the company.
Threats offered by External Forces
The company has suffered a number of threats from the outside world; this is in the following areas;
Foreign competition is competition from companies situated in other countries than in United States. The motor industry is targeting international markets with their custom made products aimed at reaching more customers. Internationally Toyota Company in Japan is the largest motor industry followed by General motors; they have entered United States market offering stiff competition to Ford Company.
In the efforts to remain competitive, the company has embarked on making products that give more satisfaction than its competitors however in some countries, it has not been able to compete effectively; it has been withdrawn from the markets in such areas. An example is in 2008, when the company was forced to sell its United Kingdom branch to Tata limited of India; the sold branch was concentrating on making of Jaguar and Land Rover (Ford Company Limited official website, 2010).
Global financial crisis
The world is experiencing global financial crisis which started in 2007, the crisis has affected businesses negatively. Drawbaugh, 2010, in his article in Reuters is of the opinion that the economy is not fully recovered. Ford Company is not left either; the company’s sales have reduced with time (Ford Company Limited official website 2010).
This is despite various improvement processes undertaken in the company’s products. The company has no control of global crisis and thus it is left with no option other than suffer hard economic times. Associated Press, 2010, is of the opinion that the situation is changing.
Conclusion and recommendation
Businesses do not operate in a vacuum but in environments, these environments have factors that affect a business. These are external factors which must be considered in strategic management. Recognizing the effect that external environment has on a business assists management to remain competitive and devise measures aimed at mitigating any potential loss.
Some of external factors include; Social status/ living conditions, International/national legislations/regulations, Managerial processes developments Global financial crisis, foreign competition, Population increase, and technological change. Ford Company has been in operation since 1903 and has faced changed external environments.
Associated Press. (Friday October 1, 2010). Euro steady at $1.3642 after better US data. Retrieved from http://finance.yahoo.com/news/Euro-steady-at-13642-after-apf-2753015971.html?x=0
Bell, K.( 01 October 2010 ). If you moved after filing your 2008 return and never gave the IRS your new address, some of the $123.5 million in unclaimed tax refunds might be yours. Retrieved from http://articles.moneycentral.msn.com/Taxes/CutYourTaxes/123-point-5-million-dollars-in-tax-refunds-unclaimed.aspx
Donaldson, G (1995). A New Tool for Boards: The Strategic Audit, Harvard Business Review, July-August, pp. 99-107.
Drawbaugh, G.(Sep 30, 2010). Economy still needs reinforcement: Geithner. Reuters. Retrieved from http://www.reuters.com/article/idUSTRE68T5ZZ20100930
E*TRADE Financial Corporation official website.(2010). Retrieved on 01 October 2010 from https://us.etrade.com/e/t/invest/markets
Ford Company Limited official website. (2010).Ford . Retrieved on September 30 2010 from http://www.ford.com/
Fred, D. (2008). Strategic Management: Concepts and Cases. New Jersey: Pearson Education,
Haberbeg, A and Rieple, A (2001).The Strategic Management of Organisations. Prentice Hall, London.
Hoover’s, Inc.(2010). Ford Motor Company . Retrieved on 01 October 2010 from http://www.hoovers.com/company/Ford_Motor_Company/rfhski-1-1njg4g.html
External factors affecting Ford Company
Positive factorsNegative factors
Increased populationPolitical instability
Technological developmentHigh competition
GlobalizationChanges in people tastes
Changes in management stylesGlobal financial crisis
Social status improvementIncreased taxations
Environmental regulationsIncreased interest rates
Health and safety regulationsInflation and deflation
International and national regulationsTerrorists attacks