Chrysler and Fiat Alliance
Fiat was not only a survival matter for Chrysler but also became a part of taking care of the company’s sake bankruptcy. Fiat will share its technology with Chrysler to build small cars , and will let Chrysler to gain a new distribution network in the European markets. In other hand, some weaknesses will knock the strategic alliance with the two companies, technology sharing and mismatch of brand portfolios. This is a major problem and can cause issues related to the goals of both companies.
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Knowledge sharing in R&D, control, regulatory and antitrust issues distribution and ownership problems will be major weaknesses. Furthermore, because of global competition and expensive labor contracts will lose the company competitive advantage. But, Fiat assembled quality vehicles and carried a good learning curve in R&D, manufacturing, dealer networks. Moreover this strategic alliance is a major saving act in the area of joint product development A main reason is behind all this auto manufacturing implementation in the U.
S, is the U. S government 2009 auto bailout. The Obama administration illustrated the bailout plans for the auto manufacturing field, this plan was closely specific to help Chrysler and GM from falling in Bankruptcy, because Chrysler and GM are considerate a national image of the U. S culture. A bankruptcy file must be implemented and a long-term partnership must be held with an auto manufacturer, Fiat was the best candidate for this strategic alliance.
The first integrated plan of Fiat is to supply two types of small engines to Chrysler. Chrysler helped Fiat to re-enter the North American market to sell it cars and be a strong competitor with the lead of Sergio Marchionne. New opportunities are available today for the due to the globalization, new models and new technology, Chrysler and Fiat have a good opportunity to target small car hybrid segments, a new potential to reach middle classes in North America, Europe and emerging markets.
High gasoline prices boost the demand on small cars, this strategic alliance between the two auto-manufacturer will help them to pool resources together to consolidate brand portfolios and saving in R&D and technology platforms costs through long-term strategies. Marchionne may be the CEO of Chrysler in the short future, helping to pass by four challenges: recasting the brand image of Chrysler and Fiat productions, dealing with labor unions in Europe and North America, redesigning management structures, formulating new global synergies for long-term survival. Fiat was powerful in the European market ut lack visibility in North America. Fiat and Chrysler have fair brands but lag in quality and global integration, that’s what Marchionne is willing to enhance in both companies, by achieving in the next four years the alliance objectives in the areas of cost cutting, technology sharing, global integration, products rationalizations. And R&D savings, and will lead to a major achievements. New models of Fiat will be launched using better technology platforms and R&D resources. Chrysler will gain new aspect and image of its auto-making, with new plans and strategy.
Finally I shall state that Marchionnee is a Business Magician who helped the joint venture between the companies to get free from bankruptcy, improve growth of sales, provide Chrysler with better technology and engines, new product development, to integrate in the market competition, and open new opportunities for Fiat in North America, to finally acquire 35 percent of Chrysler shares in 2013. CASE QUESTIONS: (Answers) 1. Chrysler-Fiat Alliance is a successful operation done from both sides. A strategic tie-Up between two huge auto-manufacturers, with different backgrounds and culture.
An international joint venture happened, where as the choice of a partner in an IJV is a matter of success or a failure. As Chrysler was on the edge of vanishing, Fiat needed to penetrate the North American market, as “Marchionee” (CEO of Fiat) required to expand larger and more global with his industry, competing with other giant auto manufacturer as GM, Toyota, Ford. Managers of both companies started with reviewing the organizational structure of each, selecting the weakest points that threat their business planning and reliable strategies.
The two huge companies understood that a successful implementation of a joint venture require the orchestration of many variables into a cohesive system that complements the desired strategy. Chrysler headquarters examined very carefully their reason for outsourcing and decided that Fiat must be the partner that will delegate the daily operations of the international joint venture among them, since Fiat will help Chrysler by providing new technology, in other hand, a key component in Fiat’s strategy was to expand its reach into new international market, seeking the North America region.
With this alliance, Chrysler was seeking for a knowledge management, a transfer of flow information. A sharing and development of new technology among the two partners, Fiat provided the opportunity for new knowledge transfer among Chrysler that requested a maximum acquisition of harvesting tangible information that will benefit the company after being through hard years of failure and economical problems.
This information exchange provided a technology solution that helped the partners to do business more effectively, because of Fiat, Chrysler will compete by introducing a new industry of small cars that consume less gas , a whole new industry achieving a significant economies of scale for development of a strong competitive position and establishing strongly the extent of consumer satisfaction, whereas , because of globalization, the crude oil and gas is reaching higher prices, at a point where people search for cars that guzzle less fuel and smaller for a better driving attitude.
Therefore, in my expectations, Chrysler-Fiat will start to grow fast, and will recover the Chrysler brand image in the market by using the fiat technology in manufacturing small nice designed cars, in addition to a high penetration of Fiat cars in North America after several years of hiding, the two joint ventures companies will enriched their shareholders, we will see a growth of sales, moreover the US is pulling up from the economic problems, Chrysler is hoping to reach the second place in the car industry market shares. Fiat will be known as a successful European car in America, and compete aggressively Renault and Toyota.