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1 Management of International Firms

The Allison Transmission Division is a branch of GM that strived to profit off of the then-new idea of automatic transmissions on the European market. Initially faced with a great deal of opposition and skepticism, Allison has since worked to improve its European face and is slowly becoming a globally prominent company. I. Identifying the Problems

We are able to discern that there are several problems in the case of Allison Transmission Division in Europe. First, there was the initial struggle of the company establishing itself as a European company and appealing to the European market. Terry Tuton notes that we were perceived very much as an American companyOverall, it was very clear that we needed to be present as a European face to our customers, which became a theme that we rallied around. (Dhanaraj 2004) Because of this, Allison Europe could not demonstrate the benefit to the community of having Automatic Manual Transmission, instead of the manual transmission that Europe was so accommodated with. On a more practical level, Allison Europe addresses the struggles of shipment with their AMT product. Domestically, Allison had initially experienced struggles in transporting their product. One member noted that since we were shipping items from Indianapolis, including the shipping and customs clearance, it was taking us up to 60 days to deliver a product. ( Dhanaraj 2004) While this was certainly an issue on a domestic level from state to state, one can only assume the practical obstacles and delivery delays that would occur overseas. The delayed shipping would undoubtedly spark a negative reaction from international partners. It is clear, however that there are larger problems that lie under the surface. In light of Allisons struggle to be accepted in a European market, there were cultural barriers that prevented the company from launching its product. Many nations had struggles accepting an

2 Management of International Firms

American company in the European market, simply because it was an American product; personal qualms with the country prevented initial acceptance for a very practical product. The only exception was the UK, who embraced Allison due to previous economic friendship and language commonalities. More than anything, it was the nationalism of European countries that impeded Allison transmission from smoothly transitioning to a European market. II. Analyzing the Situation Like any industry, automotive engineering deals with a great deal of competition on the international level. While outsourcing and exporting products and services provides an increased market and international unity, there is a lot to be said of a nation that is autonomous and self-sustaining. Many consumers are familiar with products that are made outside of their home nation, including automobiles. Different resources from different producing nations allow certain automobiles to have increased endurance, gas mileage, or reliability depending on what a nation has to offer; these all give consumers more options to pick from based on personal preferences. Even public transportation, which is on a government level, and not a private one, experiences strong levels of competition amongst manufacturers. While the government At the same time, many native consumers invest more trust in products that are created in their own home nation. Its a sense of nationalism that promotes growth in any given country, because consumers are more willing to invest in a market that directly benefits them. These benefits include an increased job market, greater financial stability, and domestic integrity, all of which motivate a nation to succeed further. Even the entirety of the European Union functions on a level of nationalism, since the countries are so closely interconnected. Because of this, it would make sense that Allison, an American company, would struggle to

3 Management of International Firms

establish a strong European face in this market and gain personal trust from international consumers. Furthermore, placing trust in the European market to transition from manual to automatic transition is impeded by a number of challenges. Not only is the industry fighting against nationalism that already places distrust on a foreign company, but any industry can struggle when it comes to marketing new products with potential risks. There are many perceived threats that are correlated with this struggle. The first is that the many anti-American attitudes held by European nations can impede growth for an industry. This is especially found true when multiple nations are competing with the same product or objective. Very similar to the Space Race in the 1960s between the US and USSR, industries trying to profit from the same technology will increase competition and production. Like any race, speed and endurance would be needed to succeed as a competing member in any industry. It was noted that European competitors were spearheading a new technology known as automated manual transmissions. (Dhanaraj 2004) At the time, this technology was incredibly innovative, and companies that were not already a part of the market needed not only to produce the product faster, but to provide extra incentives that would draw in new clients, especially those overseas. On the flip side, international relationships in the automotive industry can improve overall economic ties between two nations. Many automobiles, and therefore the parts that assemble them, are exported overseas, and an American is very likely to see a European or Asian made car in a nearby driveway or parking lot. The constant exchange of products or ideas allows for fruitful developments of relationships, between nations. Stronger economic ties, resulting from a companys flexibility and open-mindedness, can result in greater

4 Management of International Firms

diplomacy between these two nations. That being said, an industrys decisions bear a lot more weight, and opportunity for growth, when working on an international level. Allison Europe had initially experienced greater success marketing products for the public sector, especially in the UK. This success is noted in how going from a manual market by the mid-1990s, the penetration of automatics had shot past 50 per cent in the transit bus segments. (Dhanaraj 2004) Internally, their greater successes lie in maintaining this relationship with the UK as a superpower. While developing the speed and endurance it needed to develop its product in the competitive market, Allisons strength was in the charisma it gained by having strong ties with the UK. However, while still facing opposition from countries such as Italy, Germany, and France, Allison would need more than the UK to support its endeavors. Therefore, the strategic GAP in the way of Allisons growth in the European market is that its economic charisma is not yet influential enough to dominate in the competitive market. Especially in a market where it is not welcomed, Allison would need to overcompensate with increased speed in delivering its product. It was already noted that this proved to be troublesome, as Allison was experiencing two-month delays in shipment from its home base of Indianapolis. With not enough charisma to compensate for issues in speed, there are very strong odds against Allison in grounding itself in the European market. Allison Transmission has already implemented some strategic methods to overcome its international struggles in Europe. In Austria, the company developed the Strategic Alliance with Steyr, which created strengths on both a personal and professional level for Allison. What was particularly strong about this relationship were in the tactics in which Allison went about reaching its objectives. It was noted that the strategy was consistent with our objective

5 Management of International Firms

to achieve European manufacturing, but gets it through collaboration and alliances and not through direct investment in an Allison-owned manufacturing facility in Europe. (Dhanaraj 2004) This was a step in the right direction, because it encouraged common bonds between the American company and the European market. When Allison formed its bond with Hungary, it was even more profitable because Hungary was perceived by many at GM and Allison as one of the best sites in Europe for manufacturing. (Dhanaraj 2004) While Hungary was by no means a perfected option to break into Europe, the countrys economic and developmental success proved beneficial because it allowed Allison to expand with an influential resource. III. Generating Alternatives Although Allison managed to find success in establishing itself in the European market, there are alternatives to its process that could have proved more effective, had the company been more preemptive about the cultural struggles that were presented. These alternatives could have proved a quicker success rate The strongest alternative is cultural assimilation prior to marketing their product. New industries and life altering products are intimidating, so its obvious that Allison Transmission Division would struggle immediately launching a new, foreign concept that would completely alter the way Europeans drive. Furthermore, catering to the public sector, which is what Allison primarily appealed to, presents challenges because a greater number of people and higher risks are involved. Allison would have been better prepared to have spent more time integrating its company into the European culture, prior to positioning itself on the European market. Like any international relationship, Allison would have been better off to establish a sense of diplomacy, understanding the native etiquette of a given country, before

6 Management of International Firms

going straight to the business propositions. A stronger relationship between the American company and its foreign partner allows a greater sense of trust that will encourage the partner to take on potential risks in the hopes of a profitable gain. One then must ask if Allison Transmission did enough to meld and adapt to the cultures it was attempting to partner with, or if a capitalist mindset alienated the company in the long run. IV. Evaluating the Alternatives There are certain criteria to be taken into consideration when evaluating this presented alternative. Several questions must be asked, such as: Is there any quantitative value to the alternative that can be measured? Does it help to overcome the GAP that Allison is struggling with? Finally, Will this alternative augment what Allison already has in its favor? In terms of the first question, thats where the alternatives greatest weakness lies. With the primary focus being on diplomatic ties and cultural assimilation, there isnt a concrete way of taking the alternative and applying results to measurable units. As a result, there would be increased challenges in understanding whether or not this alternative is working. However, incorporating this diplomatic tactics would, in theory, help Allison overcome its strategic GAP, by providing more of the charisma that it would need to compete in this European market. With Allison already having its strengths with the UK, Austria, and Hungary, the company is not unfamiliar with how to navigate foreign business. By creating more flexibility and cultural understanding it its business practices, Allison can form ties with competitive opponents, such as Germany, Italy, and France. The strength of this alternative is that it is not really an alternative at all. Rather, it is an alternate approach on a plan that is already working, if even to a certain extent. An even

7 Management of International Firms

greater strength is this approaches adaptability. Rather than changing how an entire company functions, it changes how that company reacts from country to country. More cultural understanding allows the company to navigate any scenario with flexibility and ease, which is extremely advantageous when working in a limited time frame. The only major weakness, unfortunately, is the political nature of this alternative. Like all politics and diplomacy, the relationships rise and fall, and no successes are guaranteed to last. V. Recommendations The greatest recommendation that can be taken from this alternative is that it can be used to augment Allisons current tactics. As seen in Hungary, Austria, and the UK, Allison Transmissions has experienced growth and success in creating its European face. With success happening, although it is not yet exponential, Allison would not want to eliminate tactics that are already empowering the company. By augmenting a greater sense of cultural awareness into its strategic plans, Allison would be able to cater to any nations needs and appeal to their interests. The only potential challenge would be maintaining enough flexibility to navigate the needs of multiple nations in the European market, all while maintaining the companys internal integrity. In conclusion, while there is no ultimate resolution, its inarguably progressing more quickly in the right direction.

8 Management of International Firms

Works Cited
Dhanaraj, P. C. (2004). Allison Transmission: Creating a European Face. Ivey Management Services, 117.