You have been approached by the CEO of a declining MNE to provide management consulting advice. The company is called FURD Auto Ltd, based in Detroit, Michigan, USA, which was once a global leader in automotive manufacturing in North America, the UK and Australia. Competitors from Japan, Germany and now South Korea have eroded FURD’s global market share and its’ automotive sales have been in steady decline for the past 20 years in all of its main markets. FURD has been unable to produce affordable, competitive, innovative and high quality vehicles, which are attractive to consumers in both its domestic American market or in new markets in developing countries, such as China and India, which are known to either heavily subsidise or support local manufacturers. The CEO has openly discussed three options with you to “turn-around” FURD Auto Ltd. The specific options being considered include: • Firstly, a full acquisition of a small sized highly innovative foreign entity in a developing country in Asia, which has a very large population and a growing middle class, who desire cost-effective cars. • Secondly, a strategic alliance with a well-established, larger sized and technologically advanced European rival in a much smaller market and with a declining population. The European market is considered to be mature, dominated by established players and noted for its very discerning consumers. • Thirdly, pursuing a merger with another similar sized rival company in the MNE’s home market, in order to consolidate its market share in its existing markets. Critique each of the three options noted above by considering one advantage and one disadvantage of each option. To which option can the VRIO criteria be used?
You have been approached by the CEO of a declining MNE to provide management consulting advice. The company is called FURD Auto Ltd, based in Detroit, Michigan, USA, which was once a global leader in automotive manufacturing in North America, the UK and Australia. Competitors from Japan, Germany and now South Korea have eroded FURD’s global market share and its’ automotive sales have been in steady decline for the past 20 years in all of its main markets. FURD has been unable to produce affordable, competitive, innovative and high quality vehicles, which are attractive to consumers in both its domestic American market or in new markets in developing countries, such as China and India, which are known to either heavily subsidise or support local manufacturers. The CEO has openly discussed three options with you to “turn-around” FURD Auto Ltd. The specific options being considered include: • Firstly, a full acquisition of a small sized highly innovative foreign entity in a developing country in Asia, which has a very large population and a growing middle class, who desire cost-effective cars. • Secondly, a strategic alliance with a well-established, larger sized and technologically advanced European rival in a much smaller market and with a declining population. The European market is considered to be mature, dominated by established players and noted for its very discerning consumers. • Thirdly, pursuing a merger with another similar sized rival company in the MNE’s home market, in order to consolidate its market share in its existing markets.
Critique each of the three options noted above by considering one advantage and one disadvantage of each option. To which option can the VRIO criteria be used?
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