KSA+1+Case+Paper

7/29/2019 KSA+1+Case+Paper

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Table of Contents

Project Outline 3-4

I. Executive Summary 5-6

II. Introduction 7

III. Company Profile and Environment (Context) 8-9

IV. Strategic Issues and Reverence 10-12

V. Stakeholder Impact 12-13

VI. Conclusions and Recommendations 13-14

VII. Bibliography 15



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Project Outline

I. Discuss history of Chrysler Group

A. Discuss Chrysler’s start within the automotive industry

B. Discuss some of the automobiles that Chrysler makes

C. Discuss Chrysler’s position within the automotive market

II. Discuss history of Fiat SPA

A. Discuss Fiat’s start within the automotive industry

B. Discuss some of the automobiles that Fiat makes

C. Discuss Fiat’s position within the automotive industry

III. Discuss how both automobile firms have had past reputations in America.

A. Discuss when Fiat first came to the United States

B. Discuss why Fiat suddenly left the United States

C. Discuss Chrysler impact within the American market and how America’s past look on

their automobiles shaped its future.

IV. Discuss some of the competitors of Chrysler and Fiat

A. Discuss how competition affected both firms

B. Discuss how Chrysler and Fiat at one point were competition for one another

V. Cultural Context

A. Culture aspects of the Chrysler- Fiat alliance

B. Discuss how society and positioning have affected both automobile firms

C. Discuss some recent news about the alliance between the two firms

VI. Strategic Issues

A. Discuss why was this case so prominent in the newsB. Discuss Global Management

C. Business Ethics

VII. Global Environment

A. Discuss the automobile environment

B. How is this market sustaining its position globally



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VIII. Discuss Chrysler’s bankruptcy

A. When did Chrysler file for bankruptcy

B. Why did Chrysler have to file for bankruptcy

C. Discuss Chrysler lack of competitive advantage within the automobile market that ledto a decrease in sales.

D. Discuss the methods Chrysler considered taking to overcome bankruptcy.

IX. Do an overview of how the discussion for an alliance between Chrysler and Fiat came to be.

A. Discuss the benefit of having an alliance between the two automotive firms.

B. Do a SWOT Analysis which takes a look at the strengths, weaknesses, threats, and

opportunities of this alliance.

X. Discuss how this alliance could be beneficial in giving both firms a second chance to

change their reputation.

A. Discuss how the alliance could benefit both firms’ reputations

B. Discuss will a second chance be beneficial in increasing both firms’ revenue

XI. Discuss what the plans are for the future product lines for Chrysler and Fiat

A. Look at the newest car models that are going to be released post alliance

B. Look at how these new cars could increase business for both firms

XII. Stakeholder Analysis

A. Discuss who are the stakeholders in the Chrysler- Fiat alliance

B. How does this alliance affect the stakeholders’ position

C. Do a SWOT (Strengths, Weaknesses, Opportunities, Threats) Analysis of the

Stakeholder’s situation.

XIII. Strategic Approach

A. Business Level Approach

B. Recommendation for strategic, sustainable positioning



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Executive Summary

The automobile market is one of the most lucrative markets in the world. They have

focused on international expansion since the late 1900s. This market has very successful

international companies such as Mercedes-Benz, Lexis, Hyundai, Chrysler, Camry, Fiat, etc. All

of these firms have held a position in the automobile industry. Even in economic hardships

when demand for automobiles was decreased, the market did not faze them. Two firms

prominent in this industry are Chrysler and Fiat which have both held successful positions in the

late 1900s. Due to decreased market demand and lackluster products both firms have

drastically diminished their market appeal. This has led to decreased profits which have led to

European based company Fiat leaving the United States in the 1980s. American based firm

Chrysler had to deal with sales drops and lack of demand. An alliance between both firms could

potentially increase their customer base and future profits. This could be a very lucrative

business venture for both firms if successful.

I started off examining the environment that the firms were in. The American market for

automobiles is compiled of highly successful firms that are both stationed in the U.S. and

internationally. Chrysler an American corporation has held a strong position in the automobile

industry in the earlier 1900s. Fiat an Italian corporation has one of the strongest corporations in

Italy. Among the three most substantial United States automobile makers, Chrysler is the

smallest one. This means that Chrysler’s stand in the automobile market needs much

improvement. With the vast growing nature of the United States and international automakers,

Chrysler has to improve their performance and appeal to even compete at their level. I will take



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a look at how Chrysler plans to increase their portfolio and compete in the fast moving and

advancing automobile market. Fiat needs to bring back its position within the American market

that could increase their presence internationally. It is important to know the environment of

the firm that you could be attempting to form an alliance with. It would be beneficial for both

Chrysler and Fiat to know how each other’s position in their respective automobile

environments. If you do not know the culture of the firm in which you intend to do business

with how will you become successful in the environment? It would be strategically important to

get to know the vital information before leaping into any potential merger.

I am going to review why this potential alliance between Chrysler and Fiat was so

prominent in the news. Chrysler and Fiat alliance had the attention of some of the best world

publications such as the Wall Street Journal, Business Week, etc. Chrysler has already been the

focus in the news due to their corporations’ financial issues and measures taken to overcome

the financial hardships. Fiat has been lacking media presence in the U.S. and the news coverage

of their alliance with Chrysler will increase presence and potential profit for Fiat. A change in

potential management could be another reason why this alliance has gained so much attention

from the media. CEO of Fiat Sergio Marchionne will take over as presidency of Chrysler as well.

People want to know how the new management will not only affect the corporation but also

the stakeholders that have invested in both companies. Also, I will look at the strategic

standpoint that each firm holds. Potentially what could each firm bring to the table to help

benefit the other firm? Why would a second chance help to change the past reputations of

disgraced automobile firms? These are all questions that will be examined when I look in detail



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as to why this alliance is occurring. The Chrysler Fiat alliance will be a power global alliance that

will have a strong impact on the world and will change the future of the U.S. market.

Introduction

Global expansion has been in the mindset of all automobile makers looking to increase

their profits and clientele. Chrysler and Fiat are two prominent automobile makers looking to

expand internationally. Chrysler is an American multinational company that was founded in

1925 by a man named Walter Chrysler. Their location was initially started in the headquarters

in Auburn Hills, Michigan. The Chrysler Corporation was a reorganization of a failing automobile

named Maxwell Motor Company. This was an effort to help improve the company’s troubled

operations. Walter Chrysler introduced the first Chrysler automobile to make its appearance

within the same time period. This company started from a rough background and has emerged

within history as a multinational company that has made its presence within the world. Fiat is

an Italian multinational firm that was founded in 1899 by a man named Giovanni Agnelli. The

headquarters for this corporation is located in Turin, Italy. This firm is known for not only

making automobiles but also aircraft and engine manufacturer. They are one of the largest

automobile firms in the world, placing ninth in rank. This gives Fiat a good position within the

automobile industry.

With an impending alliance both firms could find beneficial use at combing their

resources. Since Fiat already has a very strong world position, they could still use better

American appeal. When Fiat combines with Chrysler, they would be bringing their line of cars to

America, increasing their portfolio and strategic advantage. Chrysler in return could use a new

initiative to increase their lackluster past profits and potentially increase their market share.



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Next, we will take a look at the company profile and economic environment that both Chrysler

and Fiat are experiencing.

Company Profile and Environment

Since Chrysler’s start in the early 1900s, they have held a substantial amount of respect

and leverage within the automobile industry. Some of the car brands that Chrysler makes are

Dodge Ram, Chrysler 300, Dodge Avenger, Grand Caravan, Charger, Sebring, and Ram. Some of

these vehicles have given Chrysler success within the auto market. Of the three largest United

States carmakers, Chrysler ranks the smallest. This is compared to more prominent firms such

as General Motors and Ford Motor Company. Chrysler lacked the superior technology and the

required financial stability that their competitors had which led them into financial trouble.

Without the needed funds to create new projects and gain more customer appeal this led them

to decreased profits and their mainstream customer base and led them to debt. Another

reason that led Chrysler’s customer appeal decrease is the bad reputation that Chrysler

received for the quality of some of their car brands. This has led to a decrease in customer

loyalty because they could not depend on the dependability of the brand’s cars. Chrysler needs

to improve their vehicles in order to get the support of their biggest revenue, the customers.

The difficulties that Chrysler has experienced as far as decreased customer appeal, Fiat

has experienced them as well. Fiat has gone through decreased sales and loyalty in the US.

Some of the brands Fiat is highly known for are the Fiat 500, Fiat Punto, Lancia Delta, Maserati

Gran Turismo, and Ferrari 458. Fiat first made its appearance in the United States in 1908. They

were the first year that they started exporting their vehicles within the American market. Years

later Fiat was given the proper licensing to start creating their line of cars in New York. Within



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this time frame Fiat was a successful carmaker in America. Shortly after problems arose and led

to Fiat discontinuing its marketing in America. Fiat hasn’t had an appearance in the U.S. since

the 1980s. The reason for Fiat’s dismissal from the US is because the public was having

problems with the quality of Fiat’s cars. Due to these quality problems and lacked customer

loyalty, Fiat felt it was best to leave their presence from the U.S. Even though they were still

marketed their Maserati and Fiat brands in the U.S., their once popular lines still left. Thus has

given them time to refocus their efforts to improve the quality and stability of their car lines

which would help their reinvention into the American market.

Chrysler and Fiat both share some of the same competitors. Automotive international

heavyweight firms consist of Mercedes- Benz, Lexus, Toyota, Hyundai, etc. Even though Fiat had

removed itself from the U.S., two of its successful brands still are prominent in the U.S. This

contributes to Fiat and Chrysler having some of the same competitors that affect potential

profits. Chrysler has held a low position in the market due to the overall increased funds and

technology that its competitors has available to them. Chrysler and Fiat were competitors to

each other at one point within the automobile market. Both firms were vying for the appeal of

the American customer base. They competed with car brands and mass appeal. Chrysler and

Fiat which were once competing in the same market are not an alliance which could increase

both the position of both firms in the automobile industry.

With the American market, consumers are looking for a reliable car that they can get

their everyday errands done and am able to travel around in. Society values their opinion on

automobiles by how there reliability and sustainability are. If quality problems of any sort are

occur consumers are quick to lose loyalty in the brand. Ethically that should make the



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corporation want to reevaluate their brands if there keeps having an occurrence of quality

problems. This can significantly hurt the automobile firm because no one is going to want to

invest money into a car that is known for having malfunctions. This is the reason that Chrysler

and Fiat were ridiculed in the American market at one point. This meant that both brands didn’t

have the capabilities to meet the culture’s needs. With the new alliance of Chrysler and Fiat,

you can expect car models to be designed to meet the needs of the current culture and the

people. Society wants a car that will be exactly what they expect it to be. Chrysler and Fiat are

given the opportunity to show the world that there past poor reputation does not have to

influence their future reputations.

Strategic Issues and Reverence

Before the news of the potential alliance between Chrysler and Fiat was made public,

Chrysler had been the topic within the news. Due to their financial trouble and debt Chrysler

experienced bankruptcy. Chrysler had been within bankruptcy for an estimated 40 days. This

meant that the company had to sell majority of its assets to make for their debt. The fate of

their corporation was held on the potential for someone to buy shares of the company. There

were not many options Chrysler could have taken to forgo bankruptcy because they needed to

repay the money they owed to their bondholders. Fiat was the company to help Chrysler exit

bankruptcy by buying significant portions to the already failing company. Fiat sought a 5% stake

in Chrysler in the beginning to help the company reduce its debt and pay bondholders what

they were owed. In 2011, Fiat increased its stake in Chrysler from 5% to about 52%, which gives

Fiat controlling interest over Chrysler. With this amount of influence over Chrysler, Fiat could

help them formulate an effective long-term business plan. Chrysler has made past mergers with



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international companies that have been drastically bad and left Chrysler worse off than they

started with. This alliance with Fiat looks to bring a potentially bright future for Chrysler.

The alliance of Chrysler and Fiat has been the topic within popular news. Every

prominent literary publication has given their opinion and standpoint as to how beneficial the

alliance between the two automobile firms would be. Some of the prominent literary

publications are Wall Street Journal, Investing Daily, The New York Times, and Washington Post.

Both firms were once ridiculed by the American market could stand for a profitable alliance.

Wall Street Journal has publicized the announcement of the alliance between Chrysler and Fiat.

With the help of Fiat, Chrysler would get the technology, long-term financial support,

manufacturing capabilities, and vehicle manpower. The new and improved “Chrysler Group

LLC” will become a force to be admired within the automobile industry. This alliance gives two

automobile firms that once have had some of the same problems with their cars join forces to

ultimately combat those problems and how the automobile market that they are better than

what they once were.

The idea of an alliance came to be because Fiat strategically thought they were the

perfect candidate to help bring Chrysler out of bankruptcy. Fiat could benefit by bringing their

name brand entirely back to the United States. The Chrysler and Fiat alliance would be

beneficial in giving both firms dynamic distribution networks, cost saving opportunities, and the

ability to elevate each other’s global supplier base. This alliance would from one powerful

global competitor that could strategically advance in the market further than each firm could

separately. Fiat would plan to help Chrysler by giving them key strategic methods that could

increase their portfolio, technology necessary to advance the capabilities of their vehicles, and



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access to new markets available at their leisure. These are all the strengths as why this alliance

is profitable. The potential weaknesses of this alliance would be that Chrysler would not

increase its customer appeal furthermore not increasing their sales and production. This would

lead Chrysler right back into the turmoil they had just exited. This could lead Fiat to back away

from the alliance they had made with Chrysler like the past international firms have done. This

would also hurt the investments Fiat has put into Chrysler. The threat to this alliance would be

the dominating automobile firms increasing and perfecting their strategic advantage and taking

any potential profits from Chrysler and Fiat. The opportunities existent are that Fiat can begin

producing cars in the United States again and Chrysler could potentially get a profit again by

reworking and rejuvenating their plan for future product lines.

Stakeholders Impact

The stakeholders could potentially gain or lose from the alliance of Chrysler and Fiat.

The stake holders that would benefit from this alliance would be the credit holders and

everyone that invests or is involved with the new company under Fiat which is the Chrysler

Group LLC. The stakeholders are the economy, owners, customers, employees, unions,

suppliers, distributors, strategic allies, community, economy, and government. The

stakeholders that each firm had separately would have to choose if they wanted to continue

having a stake within the alliance. The potential dominance this alliance could create in the

automobile industry could attract a new breed of stakeholders. This alliance would be in the

best interest of Chrysler and Fiat’s stakeholders. It would be strategic for an alliance to help

gain strong stakeholders who will support the firm in their good and bad times. With the

potential progress that the alliance looks to achieve it would be successful for current



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stakeholders to try to increase their stake. When looking at the stakeholder SWOT analysis, the

strengths would be the revenue that the stakeholders stand to make with the success of the

Chrysler-Fiat alliance. Weaknesses for the stakeholder’s within the alliance would be lack of

loyalty or confidence in the alliance which could promote departure of some of the

stakeholders. The opportunities would be along with increased profits but with a stronger

global conglomerate new advantages are given with success in the market. The threats include

any competitor’s advantage that could hinder the profits and success that the alliance tends to

make.

Chrysler and Fiat have future plans for both of their car lines that would make the public

want to become stakeholders within this company. With the alliance taking place, Fiat plans to

not only bring their corporation back to the United States but also to produce completely new

car lines here. Some of the new product lines that Fiat plans to contribute to the American

market are the Fiat 500, Alfa Romeo brand, and more of Fiat’s highest grossing brands such as

Maserati and Ferrari. Fiat will gain access to some of Chrysler’s plants located in North America

to manufacture more of their brands than they could have. With the help from Fiat, Chrysler

plans to continue with their successful brands such as Dodge, Jeep, and Chrysler. These brands

have been modified to include Fiat’s expertise and will be ready to make a new appearance in

the U.S. market. CEO of Fiat and Chrysler Sergio Marchionne says that the future of this alliance

will bring new and improved cars into the automobile market that increase consumer

confidence and enhance future sales.

Recommendation



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After extensively looking at the details of this alliance I would say that it is a very

lucrative deal. I feel as though is the perfect strategic business plan for Chrysler to reinvent

themselves and show the world that this automobile firm can go through rough times and are

still able to triumph above their problems. They are showing the public that they can reinvent

themselves and become profitable in the process.



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