NUMMI Case Study External Environment Example | Topics and Well Written Essays - 1500 words

NUMMI External Environment - Case Study Example Discussion The effects of the government`s laws and regulations to the business. The aspect of a government`s involvement in the operations of a given business is an external factor that can either have a positive or negative impact on the business. In this case, the government of the United States has stipulated various regulations to guide various aspects in the production of motor vehicles; the main role of the set benchmark was to govern the construction of motor vehicle engines in a manner that emits limited quantities of exhaust whose final impact on the business became negative. These regulations forced the company to increase their production cost since the production of the required engines was very expensive thus leading to a negative influence on the General Motors Company which at that time focused on production of large vehicles with bigger engines that emitted large quantities of exhaust since the production cost was favorable. This presented the Company with a major ch allenge that involved seeking for better ways that that could not agree with the financial status of the company since the customers started demanding for high quality vehicles thus leading to a left shift in the demand curve of the vehicles manufactured before the new regulations came were enforced. Despite the fact that the General Motors struggled to produce vehicles that met the government and customer standards, they experienced frequent losses as their products were of low quality since they could not meet the required standards of both the customers and the government. The management of the NUMMI had to modify their strategies used in terms of production so as to face the challenge. As a result, the above challenge created the need to seek external assistance in order to improve their productivity hence profits; a solution was formulated which could see the Company form a partnership with the Toyota Company in Japan. The agreement was that Toyota could assist General Motors C ompany to produce smaller cars with higher operational qualities. The merger led to the formation of the New United Motor Manufacturing Incorporated (NUMMI). However, General Motors Company did not implement most of the modes of car production systems employed by Toyota Company hence leading to the closure and failure of some of its branches such as the Van Nuys in the year 1992 (Glass 9). Economic Recession The second aspect of external environment that led to the failure of the General Motors Company is the economic recession experienced in the United States of America that resulted to the loss of the Company’s market share from forty seven percent to thirty five percent from the late 1907’s to the early 1980’s (Glass 10). At that time, the recession was characterized by excessive car production that led to deflation in the markets. The reduction of the market share of the General Motors Company enabled many of the customers to develop a negative perception to wards the products produced by the company due to the fact that they were of low quality. The media and the consumer report magazine also played a big role in the failure of the company since they portrayed a negative perception of the company towards the consumers thus enabling them to ignore the NNUMIS`s products (Glass 12). By the year 1992, the Company had made a loss of approximately twenty billion US dollars propagated by the recession and the