A strategic management study for Asian Transmission Corporation

• Main Author: Escano, Roberto V.
• Format: text
• Language: English
• Published: Animo Repository 1999
• Subjects: Business Administration, Management, and Operations
• Online Access: https://animorepository.dlsu.edu.ph/etd_masteral/2144
• Institution: De La Salle University

Asian Transmission Corporation is a Ps2.8B subsidiary of Mitsubishi Motors Corporation (MMC). It assists MMC in satisfying the need for self-propelling four-wheeled vehicles for transportation. Currently, ATC is supplying the transmission requirements of MMC companies in Japan, Taiwan, Thailand, Malaysia, Indonesia and the Philippines. Aside from transmissions, ATC also assembles engines and axles for the Philippine market. ATC is part of the automotive industry. Its environment however, is limited to MMCs parts manufacturing sector in ASEAN, Taiwan & Japan. The other MMC parts manufacturing affiliates sectors can be considered ATCs competitors. ATC has been greatly affected by the economic crisis in the region. The sales of its international and domestic markets have dropped, resulting to a reduction in sales of transmission assemblies and component parts. In addition to the reduction in sales volume, the devaluation of the peso also has raised dramatically the costs of ATC raw materials, thus shrinking their margins. In facts, ATC has already retrenched almost 28% of its manpower. To further analyze the effects of this crisis as well as other events or factors on ATC, the ASEAN, Asian & Philippine automotive industry, the Five Forces Model of Michael Porter has been used. The five forces involved in the model are: The treat of entry, the bargaining power of buyers, the bargaining power of supplies, the threat of substitutes and the intensity of competition. From the analysis of the model, it was determined that the industry has a low threat of entry due to economies of scale. Low bargaining power of supplies since the industry is an important customer of suppliers. There is high threat of substitute due to the presence of alternative models of land transportation. High bargaining power of buyers, as buyers collectively account for most of the industry sales. And finally, high intensity of competition as a result of the presence of numerous and equally balanced competition, high fixed costs and lack of differentiation. From the same model, the opportunities and threats facing the industry were identified. One of the opportunities facing industry is the recently installed Asian industrial Cooperation (AICO) Scheme, which offers tariff incentives to participating companies. Another opportunity would be the increase in middle income families and young professional in the region who constitute the bulk of the industrys market. The improvement of the road infrastructure in the Philippine was also classified as an opportunity as it may further add on the existing buyers. The threats facing the industry are as follows: Impending globalization and full trade liberalization, continued decline in GDP, continued rise in inflation and interest rates, increase in tariffs, the worsening traffic and the improvement in the mass transport system.