AMP Incorporated, one of the largest manufacturers of connector and interconnect device, started in 1941, experienced several rounds of fluctuation and grew up with the bloom of U.S. economy. Literally, AMP could be seen as the leader and the guideline of the electrical industry. However, there does not exist a forever winner in business world. The rapidly changing environment, complex condition and intense competition may influence the result of a decision dramatically and push the company into a dangerous abyss like the situation AMP Incorporated met after the financial storm in Asia-Pacific. If there are some other possible strategies AMP could make out to deal with the issue it met under such kinds of situation? Could AMP do better by making the same decision? To obtain the answer, we will then make insight and comprehensive analysis to those issues happened on Amp Incorporated.
Issue of aggressively purchasing:
From the beginning of AMP history, one of the core philosophies of AMP was that it was an engineering and manufacturing factory. It almost becomes a tradition of AMP that it will spend as much as 9 percent of its sale annually on research and development department which is far less than 1
its competitor. An article of faith is created by AMP that it remains self-contained and develops its own technology during a period of 40 years.
However, time always changes. The appropriate strategy in 40 years ago may not proper to the company 40 years later and might even stagnant the development of a company. According to the case, why AMP starts to aggressively purchasing companies is mainly based on two reasons. First is the external reason that the rapid growth of the electrical industry makes it harder for company to continue competing by simply depending on itself. To curb the mounting risks and prohibitive costs of increasingly complex technologies, AMP have no choice but to join to each other through consortia, joint ventures and other partnerships. Second reason is the internal ambition of AMP to diversify it products and try to monopolize a whole realm of electrical products. AMP expects to broad its product lines and providing complete assemblies to its consumers instead of supplying some discrete electrical components.
The good thing for AMP to insist on those purchasing is really obvious and remarkable that AMP constructs it powerful force on the oversea market. Through such an aggressive purchasing strategy oversea, AMP achieve huge amount of revenue from the investment on those fast developing countries such as China and India.
Apparently, AMP has a bunch of sufficient reasons to apply its aggressive purchasing strategy. While, could we just assert that this aggressive purchasing strategy is a great strategy without any flaw? Although by acquiring or entering joint ventures with other enterprises may help AMP to expend into new products and market, the pace of buying of AMP seems too rapid on the other hand.
In other words, the purchasing strategy of AMP is not prefect as it looks like because that it is too aggressive and impatient. Overly aggressive purchasing not only brings high revenue to AMP but also bring high rate of risk at the same time. Overly rapid speed of acquisition may lead to a large numbers of unreasonable and irrational buying. For instance, the first venture in the history of APM which cost it 13 million dollars does not proved fruitful at all. In fact, this purchase is a quite obvious failure of acquisition because the AMP has to close this first subsidiary company itself in just 4 years, and AMP has to lay off one-third of the employees. How could we improve the aggressive purchasing policy? To avoid the danger of over aggressive acquisition, we just need to convert aggressive acquisitions to rational acquisitions. First of all, AMP should have a long...