Environmental Scanning

            American Motor Corporation (AMC) was an American Automobile Company that was formed in 1954 by the merger of the Nash Kelvinator Corporation and the Hudson Motor Car Company.  This was the largest Company to be formed by Merger in the history of US by this time.  When the merger was completed, Hudson’s chief Executive officer, A.E Barit was retained as a consultant and given a seat on the board of Directors in the new company, and Nosh’s George W. Mason was made president and chief executive officer of the new concern.

            During the Merger Mason believed that only chances of survival for American remaining independent automakers was for them to join forces in one large, multi-brand and auto giant that could be capable to challenge to three giant companies such as general motors, ford and Chrysler.  He also entered into some local talks with James, J. Nance of Packard to outline his strategic vision.  Nance accepted the offer and in turn plans were made to buy Packard ultramatic automatic transmissions and Packard V8 engines for certain AMC products.

Product Development

            The American motors combined the Nash and the Hudson product lines under a common manufacturing strategy, while retaining both Nash and Hudson established dealer nut work, beginning in 1955.  They produced Rambler Model, which was fast selling.  However for the 1958 model year, the Nash and Hudson brands were dropped in favor of the popular Rambler name, which became a marque in its own right.  This later on was also dropped because of the invention of another fast selling product.  There were only few modifications that were made to the Nash Rambler and the name changed to Rambler American.  The leadership now changed to be under George W. Romney.  The products were now selling highly in the market and this led to decline in sales of the American products that formed from the merger.

            The declining sales and competitive auto market in the United States forced the America Motors Corporation to seek a partner in the late 1970s, which led to a tie-up with France Renault in 1979.In an effort to stay competitive, American motors produced a wide range of products during the 1960s.  In the early times of the decade, sales were strong and its ramblers were ranked in third place among domestic automobile sales.  Romney’s strategic focus was very effective and the company realized heavy profits.  It therefore became debt free.  However Romney later resigned to via for Governor of Michigan and was replaced by Roy Abernetly.  Roy Abernetly was the American motors corporation sales executive.

            Roy believed that AMC’s reputation of building reliable economical cars could be translated into a new strategy that was to attract different buyers since they traded up into large and expensive vehicles.  A part from just competing with the Ford’s new pony car, American Motors Corporations’ family sized car also provided personal luxury.  This therefore made him to scrap the Rambler brand.

            During 1970s there were a lot of developments that started on a high note.  The American motors invented a variety of passenger cars that were consolidated under one distinct brand identity.  In 1979 the company started with high sales but later on there were a lot of problems in the history of the company.  American Motors Corporation’s problems were compounded by an economic slump at midyear initiated by soaring energy prices.  The decrease in sales were accompanied by automobile plants shutting down and domestic unemployment rising at the same time, pressure increased on the car lines due to growing big numbers of American buyers turning to imported cars.

The problem the AMC faced.

            It was realized that re-branding of the company’s aging line of cars was not a permanent fix to the problem.  In spite of the previous sales that were good and marketing strategies, the AMC still needed to look into ways on which it could produce new products.  However this could not be solved because it lacked enough capital to improve its production means.  At the same time a lot of challenges were also developing in the market, which were brought by the big three automakers.  The competitors were the general motors, Ford and Chrysler.  The Japanese were also coming in the market and started demonstrating how to produce automobiles that could sell very fast and attract many customers (buyers).

            The challenge that was brought by Japanese was very huge.  They not only targeted the American Motors small cars but also they supplied various spare parts and components to their efficient brand new assembly industry that was located in the United States.  The AMC by this time was still using its old facilities in the manufacturing of automobiles.  So they seriously required new components to have a competitive advantage in the United States.

Solution to the problem

            In normal cases the external environment in which various businesses operates can create opportunities that any business can utilize as well as threats that can hinder the continuinity.  Therefore SWOT analysis is very important. In overcoming such threat and even exploiting such opportunities.

            Good strategic analysis was therefore very important to place the business in good position different kinds of strategic analysis such as portfolio analysis, SWOT analysis, performance analysis and value chain analysis .The portfolio analysis tries to analyze the overall balance of the strategic business units of a given industry.  In strategic audit one of the most important objectives that should be looked at is to ensure that business portfolio is good.  The business units requiring investments and management attention are also mentioned in portfolio analysis.  For example in the case of America Motor Corporation could recover its production due to good portfolio analysis.

This was because the only alternative it had was to look for a partner to invest in the business.  It found an investor in the French automaker Renault and formed an alliance called American Motor Renault alliance.  The French company purchased 5% interest in the American Motors and provided US $ 135 millions in the form of loan to help share up the business. The American Motors acted as North American importer and distributer of Renault products that could be sold through the existing AMC jeep dealer network.  The Renault during the time of merger agreed to assemble the CKD kits and marketed Rambler cars in France.  The new products that were provided from the partnership were named Renault Alliance. The product was a front wheel drive compact 4-door sedan.  During this period the alliance won motor trend car of the year and other awards.

            SWOT analysis also was capable of placing the American Motors in the market.  SWOT analysis stands for strength, weakness, opportunities and threats. Once a firm understands the issue involved in developing an effective strategy, it is supposed to evaluate its internal strength and weakness as well as opportunities and threats in the environment.  This is what is summarized in SWOT analysis.  The industry places itself in a good position have competitive advantage through forming SWOT analysis.  This can only be achieved by forming a clear mission.  In the case of American Motor Corporation there were a lot of changes in the market places by 1985.  The market moved a way from American Motor Corporation’s small cars or models to large models.  Buyers moved to large powerful automobiles and the AMC was shocked with the rapid change in the market. Since the large automobiles could even use less and cheap fuel.  This forced the management team to change their management styles to fix the problem.

            There was therefore transfer of power at AMC from Paul Tippet to a French executive, Pierre Semerena.  The new management addressed the problem that the industry was facing in a very tactful manner.  It had the ability to formulate strategies that was to make it rely on outside vendors to supply components in which they had differential advantages.  This outweighed the big three firms that brought a lot of competition in the market.  This also helped the company a great deal and kept it running as usual. The revival of the American Motors Corporation gives a big lesson to learn by the managers of different firms.  The top managers should have the relevant skills that can help them improve their business.  The American Motor Corporation faced stiff competition in the market because it produced outdated automobiles that could not match the market standards any more.

Reference

Bradford, P. (1993).  The Cambridge History of American Foreign Relations.  London: Cambridge University Press.