Strategic Audit: Apple
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CI04.2Studentstrategicauditsample-1.pdf
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GLOBAL STRATEGY AND POLICY – MAN 4720: SCHWARTZ
COURSE INFORMATION HANDOUT NUMBER 4.2
A SAMPLE STUDENT PAPER
MAN 4720-015 Global Strategy and Policy
Fall 2014
Prepared for Professor Harry Schwartz, November 6, by the following students:
Arnol Calderon Z0000 Finance
Diane Laird Z0000 Accounting
Leah Partyka Z0000 Accounting and Marketing
Gary Piazza Z0000 Management
Leroy Sinkfield Z0000 Accounting
Daniel Wagner Z0000 Accounting
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CRITICAL CASE ISSUES
(CI #1) Socio-Cultural (Marketing; Research & Development; Operations):
Fiat Chrysler is lacking a strong international presence.
(CI #2) Economical (Financial; Reasearch & Development):
Fiat Chrysler’s market share and investor support is unstable.
(CI #3) Technological (Research & Development; Operations):
Fiat Chrysler is having trouble developing the design and quality control that is involved with
establishing new vehicles and making an impact in the industry of hybrid technology.
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I. CURRENT SITUATION
Fiat S.p.A., an Italian automaker, has envisioned the concept of merging with another automaker
for several years now in order to compete more closely with the market’s leaders, such as
Toyota, General Motors, and Volkswagen. In 2009, Chrysler Group, an American automaker,
was critically suffering during the recession after a failed attempt to merge with Daimler-Benz, a
German automaker. As part of a government and labor-union bailout, Fiat began accumulating
shares of Chrysler stock. Providing effective management experience and innovative technology
(CI #3), Fiat strived to help Chrysler turn around and meet their performance goals. In late
January 2014, Fiat bought the remaining shares of Chrysler and has now completely acquired the
fellow corporation. As of August 1, 2014, the merging process of the two corporations into what
will be known as Fiat Chrysler Automobiles is underway after first receiving approval from its
shareholders. The merging process is expected to be completed by the end of 2014. Currently, it
is expected that this newly formed company will hold the position of the seventh-largest
automaker globally (CI #1 and #2). Legally, this company will be housed in the Netherlands,
however, for tax purposes, will sport a British address.
A. CURRENT PERFORMANCE
According to Fiat’s annual report, the net revenues of Fiat including its shares in Chrysler were
€86,816 million as of December 31, 2013. This is an increase in net revenue of about €3 million
from 2012 and easily doubles the net revenue of the company three years prior in 2010. Fiat’s net
revenues of 2013 not including its Chrysler shares were €35,593 million, meaning that Fiat’s
solitary net revenues in Chrysler were €51,223 million. In 2013, Fiat’s net industrial debt was
€6,649 million, which was only slightly higher than its 2012 debt amount of €6,545 million.
Overall, Fiat, including Chrysler, had a profit of €1,951 million in 2013 and Fiat, not including
Chrysler, had a loss of €441 million. Looking exclusively at Chrysler’s annual report, the net
revenues of Chrysler were $72,144 million in 2013, which is an increase over its 2012 $65,784
million net revenues.
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B. STRATEGIC POSTURE
1. MISSION
“The [Fiat] Group designs, engineers, manufactures, distributes, and sells vehicles for the mass
market under the Fiat, Alfa Romeo, Lancia, Abarth, and Fiat Professional brands and Chrysler
brands such as Chrysler, Jeep, Dodge, and Ram brand vehicles and vehicles with the SRT
vehicle performance designation, as well as luxury cars under the Ferrari and Maserati brands.
Fiat also operates in the components sector, through Magnetti Marelli and Teksid, and in the
production systems sector, through Comau and in after-sales services and products under Mopar
brand name.”
2. OBJECTIVES
The objective of the merger between Fiat and Chrysler is “to create an efficient, competitive
global automaker through the sharing of industrial and technological know-how, resources,
projects, targets and ambitions”. The core values of integrity, commitment to maintain promises,
transparency, respect, rigor, reliability, and passion are to be present in this newly integrated
corporation’s culture.
3. STRATEGIES
Prior to Fiat’s acquisition of Chrysler, Chrysler had adopted a cooperative business strategy by
agreeing to a strategic alliance with Fiat. Since then, Chrysler has become completely acquired
by Fiat. The business strategy Fiat has always implemented and continues to implement is a
competitive differentiation strategy by offering vehicles that are substantially different and
innovative in comparison to what has previously been offered by competing automakers. From a
corporate standpoint, Fiat is practicing a parenting strategy as it strives to create a synergy
between the Fiat and Chrysler operations. Functionally, the Fiat corporation primarily practices a
push marketing strategy, meaning that the company focuses heavily on product research and
development, creates unique automobile concepts, and markets these inventive vehicles to
consumers and thus, pushes the products through the distribution channels.
4. POLICIES
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“The Fiat Group conducts its business, and requires all its directors, officers, and other
employees and other persons to whom the Code [of Conduct] is addressed to behave on the basis
of and consistent with its business conduct values. All its directors, officers, and other employees
and other persons to whom the Code is addressed must be aware that they represent Fiat Group
and that their acts will influence the reputation of the Group and its internal culture. Therefore,
they must pursue the Fiat Group’s business in compliance with the following policies:
● No director, officer, or other employee or any other recipient of the Code shall ever make
use (or disclose to unauthorized third parties) of information not in the public domain and
obtained as a result of his/her position in the Fiat Group or because of the fact that he/she
enjoys a business relationship with the Fiat Group, in order to trade, directly or indirectly,
shares a company of the Fiat Group or other companies or in any case to obtain a
personal advantage or to favor third parties.
● All directors, officers, and other employees, and other persons to whom the Code is
addressed, are bound not to reveal to third parties any information regarding the
technical, technological, and commercial know-how of the Fiat Group, nor any other
information regarding the Fiat Group that is not in the public domain, except cases in
which such disclosure is required by law or by other regulatory directives, or where it is
expressly provided by specific contractual agreements whereby the parties have
committed themselves to using such information exclusively for the purpose for which it
was transmitted and to maintain its confidentiality.
● The Fiat Group and its directors, officers, and other employees will not be engaged or
involved in any activity which may imply the laundering (i.e. the acceptance or
processing) of proceed of criminal activities in any form or manner whatsoever.
● Fiat Group directors, officers, and employees are expected to abide by the Code around
the clock.
● The Fiat Group is committed to ensuring that its business activities do not violate
applicable domestic or international embargo and export control laws established within
or applied by the countries where it operates.
The following principles, in compliance with the UN Declaration of Human Rights, and the
relevant ILO Conventions confirm the importance of respect of the individual, ensure equality of
treatment and exclude any form of discrimination. The Fiat Group supports the protection of
fundamental human rights.
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● The Fiat Group does not employ any form of forced, mandatory or child labor, namely it
does not employ people younger than the permissible age for working established in the
legislation of the place in which the work is carried out and, in any case, younger than
fifteen, unless an exception is expressly provided by international conventions and by
local legislation.
● Harassment of any kind, such as racial or sexual harassment or harassment related to
other personal characteristics which has the purpose or the effect of violating the dignity
of the person who is the victim of such harassment is totally unacceptable to the Fiat
Group whether it takes place inside or outside the workplace.
● All Fiat Group employees shall not work while under the influence of alcohol or drugs,
shall be sensitive to the needs of those who will physically suffer from the effects of
“passive smoke” in their place of work where smoking is not already prohibited by the
law, and shall avoid behavior that might create an intimidating or offensive climate with
respect to colleagues or subordinates for the purpose of marginalizing or discrediting
them in the workplace.
● All Fiat Group officers and employees may not serve on the boards of companies without
Fiat Group’s approval and may not engage in recurring private business activities that
interfere with their Fiat Group related duties.
Critique: From an outsider’s viewpoint, the aforementioned policies seem to have been created
with purely good intentions. However, while these policies are very thorough and appropriate for
the corporation, it is likely that not all employees actually oblige with them. Top management
needs to ensure that all employees, including themselves, are actually following such policies in
order for them to be truly effective.
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II. CORPORATE GOVERNANCE
Executive Directors:
● Sergio Marchionne
● Reid Bigland
● Giorgio Fossati
● Michael J. Keegan
● Robert G. Liberatore
● Michael Manley
● Richard Palmer
Non-executive Directors:
● Leo W. Houle
● John B. Lanaway
● Ronald L. Thompson
● Ruth J. Simmons
● Stephen M. Wolf
● Hermann Waldemer
A. BOARD OF DIRECTORS
Sergio Marchionne
● Chairman and CEO, Chrysler Group LLC 2011-Present
● Chairman, CNH Industrial N.V. 2013-Present
● CEO, GEC, Fiat S.p.A. 2011-Present
● COO-NAFTA Regional Operation Group, GEC, Fiat S.p.A. 2011-Present
● Chairman, SGS Group of Geneva 2006-Present
● Member of the Board, Fiat S.p.A. 2003-Present
Sergio Marchionne may have a possible conflict in regards to marketing Chrysler and Fiat in the
European market while attempting to purchase Ferrari.
Reid Bigland
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● Board of Directors, Chrysler Group LLC 2014-Present
● President and CEO, Alfa Romeo Brand, NAFTA Region 2014-Present
● President and CEO, Ram Truck Brand 2013-2014
● Head of U.S. Sales Chrysler Group LLC 2011-Present
● Member of Fiat S.p.A. Group Executive Council (GEC) 2011-Present
● Chairman, President and CEO Chrysler Canada Inc. 2006-Present
Giorgio Fossati
● Board of Directors, Chrysler Group LLC 2014-Present
● General Counsel, Fiat S.p.A. 2011-Present
● General Counsel, Fiat EMEA Region 2011-Present
● Fiat Group Automobiles S.p.A. 2002
Leo W. Houle
● Board of Directors, CNH Global N.V. (CNH Industrial) 2013
● Board of Directors, Chrysler Group LLC 2011
● Director, CNH 2006
Michael J. Keegan
● Board of Directors, Chrysler Group LLC 2014-Current
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● Senior Vice President – Human Resources, Chrysler Group LLC 2014-Current
● Corporate Sustainability Officer 2012-Current
● Senior Vice President – Supply Chain Management 2009
● Vice President Volume Planning and Sales Ops, Chrysler LLC 2007
John B. Lanaway
● Board of Directors, Chrysler Group LLC 2011-Current
● Interim Chief Financial Officer, Paley Center for Media 2013
● Board of Directors, CNH Industrial N.V. 2013-Current
● Self-employed Consultant and Director 2011-Current
*There may be a possible conflict of interest if Lanaway includes Chrysler as a client of his
consulting company and could influence the choice of advertising agencies.
Robert G. Liberatore
● Board of Directors, Chrysler Group LLC 2013-Current
● Member, Board of Fiat Industrial S.p.A. 2011-2013
● Consultant for Institutional Affairs, Chrysler Group LLC 2010
Michael Manley
● Board of Directors, Chrysler Group LLC 2014-Current
● COO - APAC, Head of Jeep Brand, GEC, Fiat S.p.A. 2011-Current
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● President and CEO - Jeep Brand, Lead Executive for
International Operations, Chrysler Group LLC 2009-Current
● Executive Vice President - International Sales and Global
Product Planning Operations, Chrysler LLC 2008
● Executive Vice President - International Sales, Marketing
and Business Development 2007
Richard Palmer
● Board of Directors, Chrysler Group LLC 2014-Current
● CFO, GEC, Fiat S.p.A. 2011-Current
● CFO, Chrysler Group LLC 2009-Current
● CFO, Fiat Group Automobiles S.p.A. 2006
Ruth J. Simmons
● Board of Directors, Chrysler Group LLC 2012-Current
● President Emerita, Brown University 2012-Current
● Professor - Department of Comparative Literature and the
Department of Africana Studies, Brown University 2001-Current
● President, Smith College 1995
Ronald L. Thompson
● Board of Directors, Chrysler Group LLC 2009-Current
● Chairman, Board of Trustees, TIAA 2008
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● CEO and Chairman, Midwest Stamping Company 1993
● Chairman and Chief Executive Officer, GR Group 1980
*There could be a possible conflict of interest for Thompson if the Midwest Stamping Company
provides metal molding or stamping services for Chrysler.
Hermann Waldemer
● Board of Directors, Chrysler Group LLC 2014-Current
● Sabbatical 2012-2014
● Chief Financial Officer, Philip Morris International 2008
● Executive Vice President and Chief Financial Officer,
Philip Morris International 2005
● President, Western Europe 2003
Stephen M. Wolf
● Board of Directors, Chrysler Group LLC 2009-Current
● Chairman, R.R. Donnelley & Sons Company 2004
● Managing Partner, Alpilles LLC 2003
● Chairman and CEO, US Airways 1996
*There is a potential conflict of interest here with if Wolf’s involvement in Donnelly & Sons
marketing of supply chain solutions gets tied up in business with FCA.
B. TOP MANAGEMENT
Sergio Marchionne
● Chairman and CEO, Chrysler Group LLC CEO, Fiat S.p.A
Steven G. Beahm
● Senior Vice President - Supply Chain Management, Chrysler Group LLC
Doug D. Betts
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● Senior Vice President - Quality, Chrysler Group LLC
Reid Bigland
● Head of U.S. Sales, CGLLC; Chairman, Pres. & CEO-Chrysler Canada, Head-Alfa
Romeo, NAFTA region, CGLLC; BOD, CGLLC
Bruno Cattori
● President and CEO, Chrysler de Mexico
Thomas A. Finelli
● Head of NAFTA Purchasing and Supplier Quality, Chrysler Group LLC
Olivier Francois
● Chief Marketing Officer, Chrysler Group LLC
Alistair Gardner
● President and CEO - Chrysler Brand, Chrysler Group LLC
Ralph V. Gilles
● President and CEO – Motorsports and Senior Vice President - Product Design, Chrysler
Group LLC
Pietro Gorlier
● President and CEO - Mopar® Brand Service, Parts and Customer Care, Chrysler Group
LLC
Peter M. Grady
● Vice President - Dealer Network Development, Chrysler Group LLC President and CEO
- Maserati North America
Robert J. Hegbloom
● Head, Ram Truck Brand
Michael J. Keegan
● Senior Vice President - Human Resources and Corporate Sustainability Officer, Chrysler
Group LLC
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Timothy Kuniskis
● President and Chief Executive Officer - Dodge Brand, SRT Brand and Head of Fleet
Operations, Chrysler Group LLC
Scott G. Kunselman
● Senior Vice President - Head of Vehicle Safety and Regulatory Compliance, Chrysler
Group LLC
Robert E. Lee
● Vice President and Head of Engine, Powertrain and Electrified Propulsion Systems
Engineering, Chrysler Group LLC
Marjorie Loeb
● Senior Vice President - General Counsel and Secretary, Chrysler Group LLC
Jeffrey P. Lux
● Head of Transmission Powertrain, Chrysler Group LLC
Laurie A. Macaddino
● Vice President - Audit, Chrysler Group LLC
Michael Manley
● President and CEO - Jeep® Brand, Chrysler Group LLC
John Nigro
● Head of NAFTA Product Development, Chrysler Group LLC
Richard Palmer
● Chief Financial Officer, Chrysler Group LLC
Barbara J. Pilarski
● Vice President - Business Development, Chrysler Group LLC
Mauro Pino
● Head of NAFTA Manufacturing/World Class Manufacturing, Chrysler Group LLC
Gualberto Ranieri
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● Senior Vice President - Communications, Chrysler Group LLC
Scott A. Sandschafer
● Vice President and Chief Information Officer, Chrysler Group LLC
Jason Stoicevich
● Head of FIAT Brand, North America, Chrysler Group LLC
Joseph Trapasso
● Senior Vice President - External Affairs, Chrysler Group LLC
Joseph Veltri
● Head of Investor Relations
Benjamin P. Winter
● Head of NAFTA Product Planning, Chrysler Group LLC
C. MANAGEMENT STYLE
Chrysler Group LLC operates under a partnership management model. This management style
allows the group to collaborate and implement changes quickly and proficiently. The
management team is led by the CEO of Chrysler Group LLC and Fiat S.p.A., Sergio
Marchionne. The management team is comprised of both Chrysler and Fiat leadership, which
allows Marchionne to disseminate and control all information pertaining to the Fiat Chrysler
Group. This organizational structure also allows Marchionne to hear directly from all functions
of the organization, including finance, marketing, operations, etc.
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III. EXTERNAL ENVIRONMENT: OPPORTUNITIES AND THREATS
A. SOCIAL ENVIRONMENT
1. THREATS
Economic:
● Foreign currency exchange rates, rising taxes.
● Catching up to competitors can be costly. (CI #1)
● CEO Marchionne said of the new electric Fiat 500e, "I hope you don't buy it because
every time I sell one it costs me $14,000”. (CI #2 and #3)
● Lack of a large presence in Asian countries. (CI #1)
Technological:
● Technology has made replication easier for competing firms, therefore, any competitive
advantage that one automaker possesses will, typically, not last long because other firms
will act quickly to catch up.
● Fiat Chrysler is falling behind, technologically, in hybrid and electric vehicle
development. (CI #3)
Political-Legal:
● Tax credits are being issued to consumers who buy hybrid or electric cars. This market
segment has the potential to become much larger.
● Product recalls tend to create a big problem with the perception of the quality of products.
If a product is recalled, the public’s perception of that specific product and the company
that produces that product can be, and most likely is, negatively affected. And if a recall
does not occur at all or quickly enough, then the public’s opinion of that product and
especially the company that produces it, again, is likely to be negatively affected.
● The cost of business can increase when there is political instability or trade barriers
increase.
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Sociocultural:
● People are concerned with protecting the environment, which can affect consumers
buying habits.
● Consumers value good customer service. If this area is lacking it could turn loyal
customers against the company, as well as turn away potential customers.
Ecological:
● New fuel emission regulations could have a large impact on future sales growth rate.
● There is an ongoing threat of a shortage of raw materials needed in order to manufacture
automobiles.
● There is a related environmental concern with protecting the environment, which
coincides with a pressure to reduce the presence of plant emissions
2. OPPORTUNITIES
Economic:
● Fiat Chrysler is striving to reach a point of economies of scale with hybrid and/or electric
cars. (CI #2)
● Building vehicles in host countries to service domestic markets, to increase footprint, and
to reduce shipping costs. (CI #1)
Technological:
● Demand for hybrid and electric cars is increasing.
● Fiat Chrysler already has small, fuel-efficient vehicles that have the potential to become a
larger market segment.
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Political-Legal:
● Gaining more access to the Chinese and other Asian markets, which are growing rapidly.
(CI #1)
● Use lobbyists to increase favorable operating conditions.
● Continual turbulence in the Middle East almost guarantees that there will be increases in
fuel prices.
Sociocultural:
● Become a leader in the hybrid and/or electric industry.
● Market smaller, more fuel-efficient cars.
● Focus the brand around more environmentally friendly vehicles.
Ecological:
● New research and technology are opening doors for alternative resources and production
techniques
● The possibility of working together with other industries with a more advanced
background in electronics and alternative power sources
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B. TASK ENVIRONMENT
1. PORTER ANALYSIS
Threat of New Entrants: Low
● The threat of new entrants in the automobile industry is low. A barrier to entry in
this industry is the high amount of capital that is needed up front to create
manufacturing facilities, purchase raw materials, acquire and develop a qualified
labor force. Additionally, research and development can be a very costly and
labor intensive process. Firms in this industry also require a large marketing
budget to create brand equity. Another essential factor is access to distribution
channels. Without distribution channels it is almost impossible to widely
distribute your products and stay competitive within this industry. Large
companies in this space operate dealerships or maintain relationships necessary to
widely distribute their products. Economies of scale is an important factor which
can be a large barrier for a prospective company (CI #2). Large auto makers in
this industry have the ability to mass produce vehicles and components so that
they are affordable to the consumer. The threat of new entrants is low because of
the many barriers to entry, the restricted access to distribution channels, and
economies of scale.
Rivalry among Existing Firms: High
● Rivalry among existing firms is high. Firms in the automobile industry are
relatively few and roughly similar in size and therefore, most firms watch their
competitors very closely and are prepared to match any move a competitor makes
with a counter move. Large firms continue to build new plants in order to increase
capacity and keep unit costs as low as possible to make their firms more
competitive (CI #2). Height of exit barriers is high because firms in the auto
industry have invested large amounts of capital into facilities and equipment. It
makes more sense for companies to reduce prices and get into a price war rather
than to shut down completely. In an increasingly global economy, firms cross
paths in many different regions or countries (CI #1). Rivalry among existing firms
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is high because there are relatively few large players, firms continue to counter
each other’s moves, firms continue to increase capacity, and exit barriers are high.
Threat of Substitute Products or Services: Medium
● The threat of substitute products or services is medium. The largest threat to the
automobile industry is used cars. The automobile industry bases their numbers
from new car sales to the used car market is a big threat because the product they
are offering is very similar at a low price then new automobiles. In order to ensure
consumers choose to buy a new car, rather than a used one, it is important to
innovate. Firms that do not innovate fast enough or often enough could see their
sales decline because consumers will buy the used version of their cars rather than
buying the new one (CI #3). Another threat to the automobile industry is public
transportation. In urban areas in the past 10 years, those taking public
transportation, such as busses, trains, and subways, has increased to almost 25%
of the population. While these options are viable in urban areas, in rural areas they
pose as a much smaller threat. Those that live in rural areas generally have to
travel a much larger distance to reach their destinations and public transportation
is not always easily accessible. The threat of substitute products or services is
medium because of the threats of used cars and public transportation. These
threats can be minimized by geographic location of consumers and the amount of
innovation in new cars.
Bargaining Power of Buyers: High
● The bargaining power of buyers is high. The purchase of an automobile represents
a large percentage of the buyer’s costs, because of this the buyer has the incentive
to shop around and find the lowest price. The internet has empowered buyers by
showing them all the options and prices that are out there (CI #2). Buyers also
hold large amounts of power when they decide if they will buy a new car or a
used one. Buyers will buy a new car if it is of higher quality, includes more
features, or is innovative in some other way (CI #3). This power the buyers yield
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ensures that automobile firms continue to invest into research and development to
provide increasing value in each new model vehicle. The bargaining power of
buyers is high because of the expense involved in purchasing a vehicle, the
increased accessibility of information, and the continuous demand from buyers
for innovation.
Bargaining Power of Suppliers: Low
● The bargaining power of supplier is low. There are thousands of suppliers of
automobile components, which lowers any one supplier’s power substantially.
Because firms in the automobile industry purchase a large portion of a supplier’s
goods, it is very important for a supplier to keep doing business with a specific
firm. In the automobile industry there are many substitutes available, keeping the
power in the hands of the automakers. Suppliers can exert some force in the
industry by raising prices or adjust the quality of the products they provide, but it
could be costly for a supplier to try and exert too much pressure because of all the
competition there is (CI #2). The bargaining power of suppliers is low because
there are many suppliers in the market and firms buy a large percentage of their
goods, thus holding a large amount of pressure over them.
Relative Power of Other Stakeholders: High
● The relative power of other stakeholders is high. Governments have the ability to
create new laws in the form of taxes, tariffs, or regulations, which could affect
firms within all industries, including the automobile industry. Hiring lobbyists on
a firm’s behalf is one way in which auto firms can attempt to influence legislation
in a direction which will be positive to the firm. Organizations such as WTO, EU,
and NAFTA all have the ability to constrain a firm’s actions in certain regions of
the world. Regulation companies such as the NHTSA have control over recalls of
vehicles. The EPA also has the ability to affect the automobile industry. Recently,
EPA finalized new emissions standards which will change formulas for fuel and
set higher standards on engine efficiency. The automobile industry also has
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relevant complementor industries such as tire companies. Shareholders are
another important group that hold power over firms. Shareholders have the ability
to put pressure on firms to change certain aspects of their business when
necessary. The relative power of other stakeholders is high because of all the
different groups that can apply pressure to firms and top management and force
new action of auto firms.
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IV. INTERNAL ENVIRONMENT: STRENGTHS AND WEAKNESSES
A. CORPORATE STRUCTURE
Fiat Chrysler Automobiles is classified as a strategic business unit based on its prior existence as
two separate companies that have since come together to form the newly merged corporation.
The company operates under a flat organizational structure. This management style allows
management to collaborate and implement changes quickly and proficiently. The management
team is comprised of both Chrysler and Fiat leadership together. The company is in a process of
merging into a new entity called “Fiat Chrysler Automobiles NV…Pending shareholder
approval, the new entity will be incorporated in the Netherlands and have a fiscal domicile in the
U.K. for tax purposes”. The company's primary stock listing will be on the New York Stock
Exchange with a secondary listing on the Mercato Telematico Azionario located in Milan.
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B. CORPORATE CULTURE
The corporate culture can be broken down into five distinct categories: Innovation, leadership,
passion, cooperation, and responsibility.
Innovation:
● To stay competitive in a tough environment, the firm embraces change. It
promotes competition and wants its employees to think bigger and bolder. Not
only are these traits encouraged, but they are expected from everyone. The
company realizes that they must become nimble to compete on a global scale. The
company will provide a fast-paced environment where employees will be
challenged and expected to adapt and grow.
Leadership:
● The company is looking for people who “exemplify the entrepreneurial spirit, act
with integrity and are accountable for delivering what they promise”. The
company offers opportunities to make a difference right from the start and allows
employees the opportunity to grow their careers as far and as fast as they are able
and willing. The company will provide an environment of encouragement and
freedom, backed up by rewards for proper incentives.
Passion:
● The company does not just produce products, it produces true labors of love. The
company encourages an environment where “every design, every piece of
engineering, every new technology that makes up our offering represent
opportunities to innovate…explore…invent”. The company is looking to help
employees grow to become the best they can be and in return, get the best out of
them.
Cooperation:
● The company, first and foremost, is one big team that is “committed to treating
everyone with dignity and fairness”. It is expected for everyone to voice their own
points of view. The culture is one of vast diversity; the company employs people
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from all around the world. It is important to embrace the many differences to
make a stronger, more innovative culture.
Responsibility:
● It is every employee’s responsibility to help to invest in all local communities in
order to “help build a safe, sustainable environment for future generations…and
encourage and promote the workforce of the future through education programs”.
The company is very committed to respecting and supporting the roles and growth
of all team members.
Critique: The core categories of Fiat Chrysler’s corporate culture are innovation, leadership,
passion, cooperation, and responsibility. These values are fairly similar to ones that many other
companies claim make up their corporate cultures. While these values may be important to the
company, it is likely that they are not nearly as fundamental to the corporation as a whole. For
instance, in regards to the value of cooperation, the topic of diversity is addressed and Fiat
Chrysler claims that the company is focused on treating all employees with “dignity and
fairness”, but, as is the case in most companies, there is probably quite a bit of discrimination
going on within the company. It would be very beneficial for Fiat Chrysler to focus more on the
core values listed and ensuring that all employees exemplify such traits.
C. CORPORATE RESOURCES
Marketing
Product:
● Fiat has a wide variety of brands and products for sale. It sells passenger cars,
utility vehicles, minivans, light commercial vehicles, related spare parts, trucks,
commercial vehicles, lighting components, engine control units, suspensions,
shock absorbers, electronic systems, exhaust systems, plastic molding
components, cast iron components for engines, gearboxes, transmissions and
suspension systems, and aluminum cylinder heads (CCI#3).
● These products are sold under the following brands: Chrysler, Jeep, Dodge, Ram,
Fiat, SRT, Fiat Professional, CNH Industrial Group, Alfa Romeo, Abarth, Lancia,
Ferrari, and Maserati.
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Promotion:
● Fiat owns and operates La Stampa daily newspaper. It also uses all available
media channels to promote its products. Fiat also is a socially responsible
company so it promotes many social causes and charities. The company also will
make strategic alliances and cross brand their products, one such product is the
Gucci edition Fiat 500.
Price:
● Competitive and fair prices within the industry. It provides products which range
from low to extremely high-end (CCI#2).
Place:
● Fiat is a global brand with a foothold in six continents. It operates within many
markets, both high and low. The company is continuing to expand its influence
worldwide (CCI#1).
Finance
Revenue & Profit Comparison
During the second quarter Ford Motors Company outperformed Chrysler in Revenues 37.4
billion compared to 20.454 billion dollars. This is not a surprise because Ford is one of the top
performers in the automobile industry. When comparing the whole first half of 2014 the gap
between Ford and Chrysler in terms of revenue is even more startling. Chrysler is at 39.4 billion
dollars which is a sharp increase from the previous year when their revenues were 33.4 billion
dollars. That is an increase of 6 billion dollars in revenue. This still falls short of Fords revenues
for the first half of the year at 73.3 billion dollars. What is not apparent to the naked eye is that
Ford went down about .2 billion dollars from the previous year, which would signify that
Chrysler is growing in market share whilst Ford is losing a small portion of market share. There
is a slight reflection in profits when looking at the current revenue track of these two companies.
Ford has a second quarter profit of 1.3 billion compared to Chrysler at 985 million. This is an
improvement for Chrysler due to increased shipments from their Ram truck and Jeep Cherokee
Products. Although, Chrysler is growing, their market share is still fairly low in the United
States, and with their planned growth in Europe now taking the forefront bigger markets in China
26
and the U.S.A. may suffer. Below are a few ratios that help compare the value of Chrysler Group
LLC to Ford Motor Group.
Liquidity:
● Liquidity ratios shows the company’s financial health. The current ratio is a
shorter term indication of whether a firm can pay its short-term liabilities by
converting short-term assets. The quick ratio, or acid test, measures a firm’s
ability to pay off short-term liabilities with current assets, not counting inventory
into the equation. The cash ratio shows the amount of capital that is in cash or
near-cash assets.
Chrysler Liquidity
Current Ratio 1.16
Quick Ratio 0.86
Cash Ratio 0.60
Ford Liquidity
Current Ratio 1.78
Quick Ratio 1.67
Cash Ratio 0.49
Current Ratio
Chrysler’s current ratio is a little low compared to one of the industry leaders Ford
Motors. Although, it is lower than Ford’s ratio, Chrysler’s current ratio would
indicate that they would have no issues paying off their short term liabilities.
Total Current Assets / Total Current Liabilities
27
Quick Ratio
Compared to Ford, Chrysler has a very low quick ratio. This ratio indicates that
Chrysler is a much more dependent on its current assets and needs inventory to be
a part of the equation in order to cover all their current liabilities.
(Current Assets - Inventories) / Current Liabilities
Profitability:
● Profitability ratios show profitability of a company. The gross margin shows the
availability to cover expenses over than cost of goods sold and yield a profit. The
net margin shows after tax profits generated by each dollar in sales. The return on
equity shows the amount of return of the Shareholders total investment. The
return on invested capital shows the amount of return on the total assets use in the
company. This ratio is known to show a managers efficiency of assets under the
company’s control.
Chrysler Profitability Ratio
Gross Margin 13.08
Net Margin 1.04
Return on Equity 10.40
Return on Invested Capital 2.91
Ford Profitability Ratio
Gross Margin 17.30
Net Margin 4.87
Return on Equity 33.81
Return on Invested Capital 6.98
28
Gross Margin
Chrysler’s Gross Margin is lower than Ford’s. This indicates that Chrysler needs
to improve on their efficiency to increase profitability.
(Revenue - COGS) / Revenue
Net Margin
Chrysler’s Net Margin is much lower than Ford Motor Companies. Chrysler’s net
margin indicates that Chrysler’s ability to convert sales into profit is poor and in
order to compete with a company such as Ford, Chrysler needs to find more
efficient ways to handle liabilities and expenses. Although, net margin is absent of
expenses, the lower your expenses the higher your net profit the better your ability
to convert to sales to profits for stakeholders.
(Total Revenue - Total Expenses) / Total Revenue
Return on Equity
Chrysler has a very low ROE compared to Ford. This indicates that Ford is better
at delivering profit for its shareholders than Chrysler. Chrysler must increase sales
by possibly expanding into bigger markets, while maintaining its steady brand
increase in the United States of America. (CI #1) (CI #2)
Annual Net Income / Average Stockholders’ Equity
Return on Invested Capital
Chrysler 2.91 ROIC is much lower than Ford’s 6.98 ROIC. ROIC is used to
measure how a company uses its capital to generate returns. This ratio can be
tricky because it doesn’t suggest where the generating returns come from. The
2.91 is significantly lower than Ford’s 6.98 but it does indicate that Chrysler is
able to raise cash through investments.
(Net Income – Dividends) / Total Capital
29
Activity:
● Activity ratios measure efficiency within a company. Receivables turnover
measures the ability to turnover receivable goods. Total asset turnover shows how
fixed assets where utilized by measuring the amount of dollars generated versus
each dollar in assets.
Chrysler Activity Ratio
Receivables Turnover 10.42
Total Asset Turnover 1.03
Ford Activity Ratio
Receivables Turnover 1.73
Total Asset Turnover 0.75
Receivables Turnover Ratio
Chrysler has a significantly higher Receivables Ratio than Ford which indicates that
Chrysler’s accounts receivables are more liquid then Ford’s. This implies that
Chrysler is more efficient when it comes to extending a line of credit and then
properly collecting.
Net Credit Sales / Average Accounts Receivable
Total Asset Turnover Ratio
Chrysler’s Total Asset Ratio implies that the company is generating 1 dollar of sales
for every dollar invested in assets. Chrysler appears to be more efficient than Ford
when it comes to investing in productive assets. These are characteristics that will
allow Chrysler to pull ahead of Ford once they began to open up into bigger markets.
Net Sales / Average Total Assets
30
Leverage:
● Leverage ratios show how the company uses debt. Total debt to total equity shows
capital provided by owner’s versus capital provided by creditors. Debt to total
assets shows how much borrowed capital has been used to finance the company’s
assets. The automobile industry is a relatively stable environment, which indicates
that a greater leverage is actually likely to have a positive effect for the company.
Specifically during good economic conditions, leverage can represent corporate
strength and opportunity for growth.
Chrysler Leverage Ratio
Total Debt to Total Equity 359.14
Total Debt to Total Assets 34.46
Ford Leverage Ratio
Total Debt to Total Equity 434.70
Total Debt to Total Assets 56.77
Total Debt to Total Equity
This ratio indicates that Chrysler does not depend on lending companies making it
a less risky investment than Ford. Although, these numbers signify a high risk for
both companies, it is fair to assume that these numbers are more of an industry
average due to the nature of the business.
Total Liabilities / Shareholders’ Equity
Total Debt to Total Assets
Chrysler is also a lower risk to investors in total debt to equity. Albeit if Chrysler
were to sell off all their assets they would still owe a considerate amount of debt,
Ford Company would be in much rougher shape.
Total Liabilities / Total Assets
31
Other:
● Included in other ratios is price to earnings ratio which measures current market
stock price and shows the amount that shareholders are willing to pay for each
dollar of earnings.
Other ratios
Chrysler Price-Earnings Ratio 10.12
Ford Price-Earnings Ratio 8.87
Market Value per Share / Earnings per Share (EPS)
This ratio signifies that investors are expecting Chrysler to have higher growth in
the future compared to Ford Motors Company. This is a direct reflection of Mr.
Marchionne’s vision for growth in both the European and U.S. markets with
Chrysler, Ferrari, Fiat, and Maserati.
Summary: Since the merge of the two companies, the financial reportings and ratios have
shown an improvement in various areas. The development and improvement of
marketing and distribution around the world are sure to increase the company’s volume
and bring in more revenue. The company’s margins show promising opportunity for
growth and profit in the future.
Research and Development
The company operates 78 Research and Development centers worldwide. It has 17
centers in North America, 5 in South America, 35 in Italy, 16 in Europe (excluding Italy),
and 5 in the rest of the world. FCA spends between 2-3% of overall sales on R&D each
year, which is an R&D intensity level comparable to the industry average. The company
maintains a commitment to innovation and is continually evolving to be on the forefront
of new technology. The company can be described as having an R&D mix of combined
product and process strategies. Currently Chrysler is attempting to create a more efficient
way to produce hybrid technology so that they can expand into the hybrid car market (CI
#3), which represents its activity in process R&D. However, the merge of two separate
companies has an effect on the integration of their shared product platform. The
32
development of products, along with a rising emphasis on marketing those products,
represents a substantial use of product R&D.
Operations and Logistics
“The Group’s operations relating to mass market brands passenger cars, light commercial
vehicles and related parts and services are run on a regional basis and attributed to four
regions representing four geographical areas: NAFTA (U.S., Canada and Mexico),
LATAM (South and Central America, excluding Mexico), APAC (Asia and Pacific
countries) and EMEA (Europe, Russia, Middle East and Africa)”.
NAFTA:
● In this region, there is a focus on design, engineering, development,
manufacturing, distribution and sale of passenger cars, utility vehicles, minivans
and light commercial vehicles, under the Chrysler, Jeep, Dodge, Ram, and FIAT
brands, and the SRT performance vehicle designation. “The company also
distributes the Alfa Romeo 4C and Mopar products in the United States, Canada
and Mexico”. Fiat essentially took over Chrysler Group LLC so that they could
enter into the North American market with an already established distribution
network. This allowed Fiat to to avoid the usual growth pains that most foreign
companies run into which is distribution networks, supply chains, and barriers of
entry.
LATAM:
● In this region, there is a focus on design, engineering, development,
manufacturing, distribution and “sale of passenger cars and light commercial
vehicles and related spare parts under the Fiat and Fiat Professional brand names
in South and Central America, excluding Mexico, and distribution of Chrysler
brand cars in the same region; in addition, supply of financial services to the
dealer network in Brazil and Argentina, and to the dealer network and end-
customers of the CNH Industrial Group for the sale of trucks and commercial
vehicles in those countries”.
33
APAC:
● In this region, there is a focus on the distribution and sale of cars and related spare
parts under the Chrysler, Jeep, Dodge, Fiat, Alfa Romeo, and Abarth brands
mostly in China, Japan, Australia, South Korea and India, “carried out in the
region through both subsidiaries and joint ventures; financial services to the
dealer network and end-customers of Fiat Group and CNH Industrial Group, in
China only”.
EMEA:
● In this region, there is a focus on “design, engineering, development,
manufacturing, distribution and sale of passenger cars and light commercial
vehicles under the Fiat, Alfa Romeo, Lancia, Abarth, and Fiat Professional brand
names and sale of the related spare parts in Europe, Russia, the Middle East and
Africa, and distribution of Chrysler Group vehicles in the same areas; supply of
financial services related to the sale of cars and light commercial vehicles in
Europe, primarily through the 50/50 joint venture Fiat Group Automobiles Capital
S.p.A. (FGA Capital) with the Crédit Agricole Group”.
Luxury Brands:
● The company is committed providing luxury as a part of their portfolio. The
company focuses on design, engineering, development, manufacturing,
distribution and sale of luxury sport cars under the Ferrari and Maserati brands,
management of the Ferrari racing team and supply of financial services offered in
conjunction with the sale of Ferrari branded cars. By combining Ferrari and
Maserati technology and luxury branding with Chrysler, the company will be able
to make a significant push into the luxury and performance luxury sedan markets
allowing them to increase profit potential.
Components:
● The company also has a focus on production and sale of lighting components,
engine control units, suspensions, shock absorbers, electronic systems, and
exhaust systems and activities in the “plastic molding components and in the
after-market carried out under the Magneti Marelli brand name, cast iron
34
components for engines, gearboxes, transmissions and suspension systems, and
aluminum cylinder heads (Teksid), design and production of industrial automation
systems and related products for the automotive sector (Comau)”.
Other Activities:
● Other Activities that the company operates “consist of companies that offer
services to the Fiat Group and the CNH Industrial Group”. Also manage central
treasury activities (excluding Chrysler) and operate in media and publishing (La
Stampa daily newspaper).
Human Resource Management
Fiat has 214,836 employees worldwide. The company is a diverse workplace that
employs people from almost every race, religion, and region of the world. Employees are
offered many different types of training and education to help increase their value.
Diversity is part of the culture, because with diversity you can see many different points
of view and help to move the company forward in a positive direction (CI #1). While of
course diversity is a good thing, it also brings the challenge of employees being accepting
of many cultural differences among the workplace. Marchionne has done exceedingly
well in resolving past union issues, however it may still propose a challenge to integrate
human resource management adjustments across the globe in order to fairly adapt to all
of the new cultures among the company.
Information Systems
Fiat is always looking to improve efficiency to help to add value. Fiat Chrysler has signed
a deal with IBM to turn over management of their IT infrastructures. IBM will help to
integrate its individual systems into one global IT environment which will “allowing it to
collaborate more easily on vehicle designs and to share resources globally”. This system
will have several other benefits as well, such as, the combination of dealer networks into
a single network, supply chain management, CRM, design, and technologies. This will
provide a consistent system worldwide (CI #3).
35
V. ANALYSIS OF STRATEGIC FACTORS
A. SWOT AND TOWS ANALYSIS
CI #1: Fiat-Chrysler is lacking international presence.
Strengths:
● S1: Fiat has blended well with Chrysler’s strong distribution network on US turf
and has advertised and marketed their cars profitably.
● S2: Chrysler is very strong in sales of trucks and SUVs.
Weaknesses:
● W1: Chrysler has no marketing for their vehicles to compete in Europe.
● W2: Strong reliance on the North American market.
Opportunities:
● O1: Finding a niche market in Europe that appeals to particular consumer interest.
Threats:
● T1: China houses a large and growing automobile market in which Fiat Chrysler
has yet to make a presence.
● T2: Foreign currency exchange rates and rising taxes.
TOWS Analysis:
Column Row
W1
O1
To improve Chrysler’s presence in Europe, they should take advantage of promoting their
Jeep model to fulfill finding a niche, since it could compete with the Land Rover, which
already has a popular demand in Europe.
S1
T1
Fiat-Chrysler’s new growing knowledge of distributing in foreign markets should aid them
in planning a marketing strategy in the Asia market.
36
CI #2: Fiat-Chrysler’s market share and investor support is unstable.
Strengths:
● S1: Chrysler has been showing increasing profits each quarter.
● S2: Marchionne has plans implemented for profit yielding expansion in order to
attract investors.
● S3: Share prices are slowly rising since having appeared on the New York Stock
Exchange on October 13 th
.
Weaknesses:
● W1: Differences in accounting procedures transferring from Europe to the US
have shown a decline in Fiat margins in North America.
Opportunities:
● O1: The merger restructures debt within the company and lists Fiat-Chrysler
shares on the New York Stock Exchange in order to attract more investors to the
combined automaker.
Threats:
● T1: A provision in the merger agreement allows investors to sell their shares for
cash instead of trading them for shares in the new company.
● T2: Wall Street analysts are skeptical of Chrysler’s future operating margins,
mostly involving their ratio of profits to revenue.
● T3: Weakening overall automobile market in South America.
TOWS Analysis:
Column Row
S2
O1
T1
Marchionne’s plans (including over exposure of Jeep around the world and developing more
competitive pickup trucks) should yield profits and reflect with an increasing share price
which should attract more investors and also eliminate the threat of investors cashing out
their shares.
37
CI #3: Fiat-Chrysler is having trouble developing the design and quality control that is involved
with establishing new vehicles and making an impact in the industry of hybrid technology.
Strengths:
● S1: Fiat-Chrysler’s synergy as a combined company gives them enhanced mix of
experience and know-how. (Fiat’s already existing market of small fuel-efficient
cars)
Weaknesses:
● W1: Fiat-Chrysler are behind technologically in the hybrid and electrical vehicle
development industry.
Opportunities:
● O1: Reaching a point of economies of scale with hybrid technology.
● O2: Pushing the emphasis on Hybrid Technology R&D and potentially becoming
a leader in the hybrid and/or electric industry.
● O3: Launch of a new luxury brand, Alfa Romeo.
Threats:
● T1: Technology has become easier to replicate so other firms catch up quickly to
any new technological advances.
● T2: New fuel emission regulations could have a large impact on future sales
growth rates.
● T3: Product recalls.
● T4: There is a growing social concern to help conserve the environment, which
could naturally have a negative effect on sales.
TOWS Analysis:
Column Row
S1
W1
O2
T1
The threat of new fuel emission regulations on the future of Fiat-Chrysler vehicles along
with their straggling performance in the Hybrid industry should be motivation to utilize
both company’s resources in order to give priority to R&D to make an impactful Hybrid
Technology model and potentially become a leader in the industry.
38
O2
T3
An increasing emphasis on R&D for new vehicles should prevent the threat of recalls from
ever occurring.
S1
T4
Fiat-Chrysler’s knowledge together as a synergy will help them in being more susceptible
to the demand of the consumers, including any increased demand in more environmentally
friendly options.
39
VI. STRATEGIC ALTERNATIVES AND RECOMMENDATION STRATEGY
A. STRATEGIC ALTERNATIVE - PAUSE STRATEGY
For Fiat-Chrysler to improve as a new combined and integrated corporation, it is necessary to
implement some room for growth. However, before proceeding with a growth strategy, Fiat-
Chrysler would benefit from a stability strategy, and more specifically pause strategy. After all
the rapid changes to be endured after the merge, the company needs to take some time to regroup
and evaluate its options. From that point, a functional strategy should be implemented in order to
kick start the company’s growth as an integrated effort.
1. ALTERNATIVE #1: HORIZONTAL GROWTH STRATEGY
Addresses issues of international presence and market share.
Fiat Chrysler as a whole has been profitable, but only to a point. The company recorded a $369
million dollar net profit from revenues of about $26.3 billion. The reason behind this is that the
company’s international presence is lacking, causing Fiat to record losses for the past years in
Europe. The option to refocus the corporate strategy and create synergy amongst the brands will
help to improve the competitive position of one or more of its business units (CI#1 and #2).
The goal here is to create vehicles that will compete with the current leaders in foreign markets
like Europe and Asia. By increasing productions of more luxurious brands like Alfa Romeo,
Maserati, and Jeep the company will be able to obtain higher margins and compete globally.
1. Pros
● Help to create a better brand presence in international markets.
● Allow Fiat-Chrysler group to better compete across each business
unit.
● Generate higher profit margins.
● Increase investor support and trust.
2. Cons
● On initial launch, losses will occur.
● Will cost a lot of capital to implement this strategy.
40
2. ALTERNATIVE #2: MARKETING STRATEGY
Address the growing concern of Fiat brand losses.
Currently, the business unit of Fiat is operating at a loss because the brand is being associated as
a cheap commodity in foreign markets. This could be due to a number of different circumstances
but is still a major concern for Fiat Chrysler group. In the 2012 third quarter alone, Fiat recorded
a $281 million loss and has been projected to end the year at a $700 million loss. Since 2012, the
company has been able to bounce back a bit to almost break-even, but does not expect to break-
even until 2015 or 2016. So in order to increase profits and market share, increased marketing
efforts are needed. (CI #1 and #2)
Every market is different and Fiat is doing quite well in the US, but in Europe and other
countries overseas it is a different story all together. However, this is nothing that the company
cannot handle. In 2004, Fiat was also experience issues and managed to successfully bounce
back.
1. Pros
● Increased marketing will create increased consumer awareness.
● May aid in the creation of a new brand image to increase sales.
● Could provide a permanent solution to Fiats problems in Europe.
2. Cons
● Will need to increase capital investments in a brand that is
currently at a loss.
● Could back fire or be a waste of capital.
3. ALTERNATIVE #3: RESEARCH AND DEVELOPMENT STRATEGY
Address Fiat-Chrysler’s trouble in design and quality control involved in establishing new
vehicles and technologies.
Fiat-Chrysler has been behind on technological advancements for many years now leaving them
to try and catch up to other automobile manufacturers just to be able to compete in certain
market segments. The most important is the hybrid and electric market, which should have been
easy enough to access with Fiat automobile’s typically compact size and limited weight.
41
Nonetheless, R&D will become a big investment opportunity and with the advancement in
technology access to hybrid technology information is readily available so the Fiat Chrysler
group can begin prototypes. Another big concern is breaking into the European market with
more premium brands to compete with current leaders. Increased R&D into new vehicles in the
Alfa Romeo, Maserati, and Jeep brands will help Fiat Chrysler to establish themselves as a
competitive force in differentiated markets. (CI #1, #2, and #3)
1. Pros
● Will increase product lines to increase profits.
● Allows the company to break into new markets.
● Provides a better position in international markets for Fiat-
Chrysler.
2. Cons
● It may be too soon to put all that capital into R&D with the
companies’ current position.
● Rushing into R&D without proper knowledge could prove to be a
waste of money.
● With new technology comes the possibilities of malfunctions and
recalls, which could negatively affect the companies’ image.
B. RECOMMENDATION STRATEGY
It would first and foremost be recommended for Fiat-Chrysler to install the pause strategy to
evaluate options for further future growth. This is a regrouping time necessary for the company to
contemplate its’ next move. From there, it is recommended to carry out the various functional
strategies above starting with the horizontal growth strategy.
Alternative #1: Horizontal Growth Strategy
Addresses the issues of international presence and market share.
If Fiat-Chrysler is going to create a better international presence and increase its market share it
will need to become a better competitor in these markets. If the company is able to successfully
increasing production of its premium brands, Maserati, Alfa Romeo, and Jeep, as well as
successfully market them, then they stand a chance in competing in foreign markets. By
42
increasing its production of these premium brands and decreasing production of cheaper Fiats,
this will not only help them compete better but will also give the company better returns and
higher profit margins.
Stability is key in any company and especially one where some of its units are currently running
on losses. This strategy will help to create that synergy, which will even out and increase net
profits across all of the business units. Sergio Marchionne said it best, “Sustainability is the
foundation that must define our company and guide our decisions and actions. It is the best path
to guarantee merit and dignity to the results we achieve”. By sticking to this new plan the
company as a whole can increase its market share, which in turn will increase its profits, which
will increase investor trust. This will create a stepping-stone for future endeavors and give Fiat-
Chrysler more options for R&D and marketing to continue a competitive advantage for years to
come.
43
VII. IMPLEMENTATION
A. PROGRAM OBJECTIVES
To increase Fiat-Chrysler’s market share by minimizing losses and maximizing sales in the
European Market.
B. PROGRAM ACTIVITIES
1. Focus on the production/sales of Luxury brands (Alfa Romeo and Maserati) and
Jeep.
2. Create an advertising/sales campaign to enforce sales of luxury brands in Europe.
3. Minimize sales losses by Fiat production; close one or more plants in Europe.
4. Provide after-sales services.
C. ACTION STEPS
Activity
What?
Action Steps
How?
Responsibility
Who?
Start Date
When?
Financial Impact
How Much?
1. A. Review
previous strategy
Upper
Management
12/01/14
B. Discuss
recommended
strategy
Discuss
possible
European
market share
gains of
emphasizing
the
manufacture of
luxury brands
and Jeep
Upper
Management
Palmer, Richard
01/01/15 Determine
production costs
and establish
budget
C. Implement
revised strategy
Maximize
production of
Maserati, Alfa
Romeo, and
Jeep
Upper
management
Palmer, Richard
03/01/15 Endure
production costs
2. A. Generate ideas
for ad
Write
specifications
for advertising
campaign
Upper
Management
Francois, Oliver
01/01/15 Determine cost
of advertising
campaign
44
B. Contemplate
the possibility of
outsourcing
Select the best
European
advertising
agencies and
request ad
proposals
Upper
management
Manley,
Francois &
Palmer
04/01/15 Determine cost
of outsourcing.
C. Select best
advertising
proposal
Analyze
advertising
proposals and
select best
advertising
campaign
between
advertising
department
and external ad
agencies
Upper
management
Francois, Oliver
06/01/15 Set budget for
cost of
advertising
campaign
D. Implement
advertising
campaign
Launch the
chosen
advertising
campaign to
promote the
sales of luxury
brands and
Jeep in Europe
Francois &
Palmer
10/06/15 Endure the
established
advertising costs
3. A. Minimize losses
caused by Fiat
products
Assess
production/
sales losses by
all European
Fiat Plants and
possible
benefits of
shutting down
and limit
production to
Fiat models
Upper
Management
Palmer, Richard
01/01/15 Determine profit
benefits and
losses reduction
by shutting down
plants and
reducing
production
B. Close one or
more Fiat
plants in
Europe
Manley &
Keegan
01/01/16 Set budget for
shutting down
costs and
determine
benefits
45
C. Limit Fiat
production to
best European
sellers, Fiat
500 and Panda
models
Upper
Management
Manley,
Keegan, &
Palmer
04/01/16
4. Ensure customer
satisfaction and
loyalty
Provide
outstanding
after-sales
service at all
dealerships.
Making sure
that the
customer
knows that
they are the
most important
part of this
enterprise
Upper
Management
12/01/14
VIII. EVALUATION AND CONTROL
Fiat-Chrysler has been performing poorly on the European market share, mainly due to the
millionaire losses caused by the Fiat products line. To improve its market share the company
must reduce the production of the least desired Fiat models and reinforce the production,
exportation, and sales of its luxury brands (Maserati and Alfa Romeo) and Jeep brands.
However, in addition to these financial measures of performance, non-financial measures are
essential in order properly measure the firm’s value. To better evaluate and control the
company’s performance, a balanced scorecard approach should be used:
1. FINANCIAL
● Monitor Fiat Chrysler’s market share internationally, especially in the European market
(CI #1 and #2).
● Establish standards for sales, production, and exportation of Luxury brands and Jeep
vehicles (CI #1, #2, and #3).
2. CUSTOMER
46
● Survey customers to gather information regarding product performance and after-sales
experience to ensure their loyalty and satisfaction (CI#1, #2, and #3).
3. INTERNAL BUSINESS PERSPECTIVE
● Set a tolerance range, measure performance quarterly, and compare the results with the
predetermined objectives (CI #1 and #2).
● Evaluate the actual performance of Marchionne’s plans for profit growth to attract
investors (CI #1 and #2).
4. INNOVATION AND LEARNING
● Set exporting objectives of luxury brands to establish a presence in the Chinese market
(CI #1 and #2).
● Adopt the concept of benchmarking in order to appropriately compare to competition and
industry leaders (CI#3).
47
IX. WORKS CITED
“Annual Report: At 31 December 2013”. Fiat S.p.A. 2013. Web. <http://www.fiatspa.com/en-
US/investor_relations/financial_reports/FiatDocuments/Bilanci/2013/2013_annual_report
.pdf>
"Asset Turnover Ratio | Analysis | Formula | Example." My Accounting Course. N.p., 2014.
Web. 04 Nov. 2014. <http://www.myaccountingcourse.com/financial-ratios/asset-
turnover-ratio>.
"Auto Industry." 123HelpMe.com. 30 October, 2014.
<http://www.123HelpMe.com/view.asp?id=163732>
"Automobile Industry Analysis." Academia.edu. N.p., 2014. Web. 30 October, 2014.
<http://www.academia.edu/5661995/AUTOMOBILE_INDUSTRY_ANALYSIS>
"Automotive Manufacturing Industry Analysis." Auto Industry Analysis. N.p., 2010. Web. 30
October, 2014. <http://www.personal.psu.edu/law5039/assign5.html>
Berman, Jay M. "Industry Output and Employment Projections to 2014."Monthly Labor Review
128.11 (2005): 45-69. Chysler. CHRYSLER GROUP REPORTS SECOND-QUARTER
2014 NET INCOME OF $619 MILLION, 2014. Web. 4 Nov. 2014.
"Board of Directors." Chrysler Group LLC -. N.p., 2014. Web. 30 October, 2014.
<http://www.chryslergroupllc.com/company/leadership/Pages/BoardofDirectors.aspx>
"Chrysler Fiat Hybrid Mini-Van: CEO Outlines Plans to Introduce Plug-In Vehicle." Latin Post
RSS. N.p., 2014. Web. 30 October, 2014.
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