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strategic management study case analysis of AvtoVAZ - Essay Example
AvtoVAZ, the biggest Russian automobile manufacturing company, is facing a new challenge due to the sudden changes in the market trend and consumers’ preferences with the land-based vehicles. In line with the external factors that contributes to the current situation that…
The internal strength and weaknesses of AvtoVAZ including the best ways on how these weaknesses can be converted into strength will also be tackled.
Considering the given situation of AvtoVAZ, it is advisable for the company to enter into merger and acquisitions. This strategy will enable the company to meet all the needed requirements such as: having a sufficient fund for a total restructuring, competent leaders and individuals assigned to run the business, and having a group of engineering and car designing experts within the business organization among others within the shortest possible time.
In order to prevent losing control over the company, it is very crucial for the company owner to pay close attention to the negotiations of the merger plan. A win-win negotiation with the chosen partner should push through.
AvtoVAZ or Volzhsky Automobilny Zavod (VAZ) was established back in 1966. The Russian government used to have a strong hold over AvtoVAZ since it was a state-owned company. For some time, the Russian government imposed strict rule that the local citizens could only purchase cars made by AvtoVAZ to protect its sales and profitability.
After AvtoVAZ upgraded its technology in early 1990s, the company began to increase its prices. This made the Russians to switch over the use of imported cars. The company started to lose its market share to imported cars. Four years later, the Russian government decided to privatize the company.
Since then, the Russian government withdrew its support to AvtoVAZ. In fact, high taxes made the company experience financial difficulties as early as in mid-1990s. Over the succeeding years, the market share of AvtoVAZ slides down from 90% to 60% in 2004. (Shlyornin, 2004) The tight competition in the Russian car market is expected to become stronger due to the entrants of foreign automobile manufacturers such as General Motors, BMW, Kia motors, France’s Renault, and Japan’s ...