Fiat Chrysler Automobiles 

Fiat Chrysler Automobiles 

Fiat Chrysler Automobiles (FCA) came to being in 2014. Before Fiat was a distinct company, the same to the Chrysler group. In January 2014, a merger between the two companies happened. The merger was 100%, and therefore the name of the companies change to Fiat Chrysler Automobile (FCA). The company is American but bases its operation in Italy. After the acquisition of Chrysler, the company became the 7^th largest automaker in the world. The company has been going through difficulties trying to penetrate the European market. So when the two companies merged, the main target was to try and have economies of scale. That could happen by having new strategies about their products that is, try and make their vehicle to be standard, and make their brand, models and engines more acceptable. The next target was to try and produce cars at reduced costs. The ultimate aim the company had was to be available in the growing markets.

Achieving Economies Of Scale

Economies of scale are trying to get a cost advantage by producing efficiently. The diversity the company has may help the company achieve the economies of scale it targets. The company provides a different model of cars such as the Fiat 500 minicars, Volkswagen, Ferrari ff supercars, among others. Therefore FCA has to cover every segment in the market by producing vehicles that will appeal to a large number of consumers and suppliers. Apart from providing cars matching customer preferences, the company has to be attentive on the detail of the vehicles that is both interior and exterior. Therefore the mechanical, electrical and structural elements of production have to be taken care of during production (Balcet and Commisso, 2013). The company has also mandated each platform that produces vehicles such as Volkswagen, Ford, Fiat minicars to produce an average of 1 million cars so that the company has bargaining power with the suppliers.

To achieve economies of scale, then FCA has to invest in the research and development, technology, creativity and marketing of its products heavily. The product strategies give the company a competitive advantage over its rivals. Since to produce the many cars needed for the company to gain economies of scale, then technology is required. The company has to be up to date with the current technology in the market that will make them produce the cars need to match customer need, and supplies demand, that is the quantity and the quality. Research and development are crucial to any company since it is responsible for coming up with the new designs for the vehicles, models and engines. Different customers have different like for their cars. Some may want to buy a car due to the strength of the engine, functionality, price or model. All these features are categorized in the research and development section to come up with the necessary and appropriate model and designs that will match the preferences of the customers. The marketing department is responsible for meeting with the customer when promoting the products. The market is where they learn of the preferences of the customers and report them back to the research and development department to actualize them. The company has invested heavily in those departments to ensure it achieves economies of scale.

Improving Production by Cost Reduction

FCA has, in all its production plants, a world-class manufacturing system that targets to reduce the cost of production of the cars. The primary system’s purpose is to remove all that does not add value to the product, such as waste, losses, defects and accidents. The reduction of wastage minimizes the cost of production of the vehicles. The system works based on cost management. Therefore it considers the loss against the event (Balcet and Commisso, 2013). The system can identify cost against events; it can identify added value and activities that do not add any value. The system also tries to achieve efficiency by reducing wastage and unnecessary costs. In automotive production, the system works in ten pillars that give it the power to identify non-value activities and eliminate. The system is also programmed to ensure improvements, maintenance and safety, thus protecting man and the machinery. The FCA system also ensures quality control; therefore, the products from the system will be quality and refined.

Cost reduction is the aim of any organization to maximize profits. FCA has a system that enables the reduction of cost by taking into account the wastage and losses. The system ensures that the production material and resources are fully utilized. The system is also safe since it protects the human and the machinery. Therefore no cost will be incurred to repair machines or to cater to medical bills. The systems also ensure the quality of products. As such, when the company can produce the number of cars, it wants cost-effectively.

Presence in Growing Markets

FCA has exploited the developed markets for long, and the sales in developed markets are declining. FCA has the task of venturing into young, developing countries to market their products. That has been a challenge for the company. The company has not been able to venture into markets such as China, India and other markets. In such countries, demand is driven by supply and having a footing in such a state will mean that they will have a big customer base. In developing markets, the customers do not check for quality, the innovation of finishing the vehicles (Balcet and Commisso, 2013). Venturing into such markets will be a big boost for FCA  since they will have entered the global business. That way, they will be in a position to compete with their rival have already entered the developing market.

Since the target of any company is to increase the sale and have a more significant market share, FCA should make an effort and venture into the developing markets since they are not driven by specifics and have less consideration for the technological innovation. FCA has had it rough since the company has been trying to model and come up with new designs for their vehicle to sell in the already crowded market of the developed markets. To avoid the challenges, the company should go global and enter the developing markets. In such markets, production will be cost effective; there will be the availability of labour and resources required for manufacturing.

FCA Strategic Problems

The company has had it rough with sales in the European developed markets. The results have been strategies on how to conquer the markets. The plans have mostly included mergers, acquisitions and partnerships. The partnership has resulted in profit sharing for the company, therefore not getting enough profits for the company. Most of the FCA  manufacturing plants are in Italy, and for the company to diversify its activities to other developing countries, it has to close some of the plants and fire the employee. The company will get in trouble with the Rome authorities if that happens. The only option the company has left is to partner with other groups in other countries to ensure their vehicles are bought.

The strategic problems the company has have left it with dilemmas on the strategy to employ. The strategical difficulties the company faces can be categorized into four groups that are logic vs creativity, deliberateness vs emergence, marketing vs resource and international orientation.

Logic Versus Creativity

Logic reasoning requires a manger to use reasoning to solve the problems at hand. Logic thinking, most of the time, uses experience and managers’ knowledge to come up with the strategy or decision. Plans made from logical thinking do not focus on the future, but the main aim is to solve the problem at hand. Logic thinking is characterized by a feature like a time limit. Logic strategies are all about efficiency; therefore, time and resources are divided to ensure the task or activity is completed as fast as possible. The other feature is that logic strategies to not care about the future since they are tailored to solve the problem appropriately immediately.

FCA problems are all related to strategic thinking. The leader of the company is focused on solving the problem the organization encounter immediately using a short-term solution. For example, CEO  Sergio Marchionne overruled a five-year presentation, and together with the other leaders, they gave specifics, product timelines and powertrain offerings so that they address the rising criticism of the company would compete with the other with the new technology (Vellequette, 2018). The decision was made fast, which makes them strategic thinking. They were also meant to solve a problem that had risen

Creative thinking involves a manger seeing the bigger picture. That is through innovation and strategic plans to achieve success in the future. Creative thinking is characterized by the time taken to plan and make the decision. Creative thinking also involves coming up with unusual, new and unique ideas for the company. Creative thinking focuses on the bigger picture and comes up with exceptional solutions to the problem in the long run.

FCA had creative thought but lacked the opportunity to implement them. For example, the idea to close some of the plants they had in Italy so that they open new ones in developing countries so that they supply the demand in those countries (Balcet and Commisso, 2013). Here long-term strategies for the company could have ensured the company was successful. Instead, the managers opted for simple solutions like partnerships.

Deliberateness Versus Emergence

Deliberate strategies are put in place to assist the company in achieving expected outcomes. On the other hand, emergent strategies are put in place to help the company achieve long term outcomes that are unforeseen or expected. Deliberate strategies are formulated to follow a specific criterion, Which means they have to follow the set goals and objectives; hence they are rigid and inflexible. Emergent strategy, on the other hand, use creativity and innovation in the planning process. The aims and objectives of the company do not guide them, and therefore they are flexible (Moore, 2011). That means they can adopt new changes that may arise in the company, be it technology or product change.

In the context of FCA, the company is inclined to the use of deliberate strategies where they know what the result will be. For example, the company has failed to produce more new cars; instead, they keep on remodelling the Maserati and Alfa Romeo (FCA, n.d). The manager is aware of the outcome of remodelling the vehicles and taking them to the market. The company has failed to use emergent strategies that will come up with innovation. The approach will enable the company to produce entirely new vehicles that will be appealing to the customer. Through that, a large customer base will be created as well market share of the company, which will result in improved financial performance.

Marketing Versus Resources

Marketing strategies and resources strategies revolve around the SWOT analysis. They involve aligning the strengths and weaknesses to come up with a solution that beats the fault (Wit and Meyer, 2010). Marketing strategies refer to how an organization should be conversant with development in the market. So that, in any case, there is the emergence of new markets the company can venture into them. Marketing strategies are tied with resources strategy. Since for when new markets develop, the resources are mobilized to set up a place for the company.

In the case of FCA, the company has had difficulties in venturing into new developing markets. The company has remained stuck in the developed market where the saturation of the vehicles it manufactures is at optimum (Balcet and Commisso, 2013). The company has resulted in modelling old models and resupplying them in the market again. Such activities have left the company struggling financially and seeking partnerships to help out.

International Orientation

International orientation refers to how a company makes a plan to go global that is import and export good across borders (Brummelen and Luppes, n.d). International orientation is vital to young aspiring companies since the companies have a chance to explore the new markets where they can promote their goods and services.

FCA has had a problem penetrating other countries, especially developing new markets. The company has only been able to base its operation in Europe and America. The company is being advised to venture into emerging markets to sell the vehicles. The company should act as it did in Serbia, where a plant was built to manufacture Fiat cars, and the plant became successful, producing 250,000 units a year (Balcet and Commisso, 2013).

Conclusion

FCA, as a company, is going through a rough patch despite trying to boost its sales and performance through mergers, acquisitions and partnerships. The company is still far behind in comparison to other carmaker companies. The problem with FCA  is the strategies made by the management. The focus of the management is short term goals, which are sometimes achieved but through a lot of costs like profit sharing and using other groups’ plants to produce their products. The best option for the company to take is to fuse strategic and creative thinking to come up with a well-thought strategy that will propel the company to greater heights. Apart from a relationship between deliberate and emergence strategy should be established so that the strategy made cater to the present and the future. Harnessing the marketing and resources together will help the organization do away with threats and weaknesses and focus on the available opportunities. Finally, the company should venture internationally to supply demand in the developing markets. At the same time, the company improves its market share and its financial position.

Reference List

Balcet, G. and Commisso, G., 2013. [online] Available at: <https://www.researchgate.net/publication/263714304_Structuring_and_restructuring_Fiat-Chrysler_can_two_weak_carmakers_jointly_survive_in_the_new_automotive_arena> [Accessed 22 March 2020].

Brummelen, M. and Luppes, M., n.d. [online] Oecd.org. Available at: <http://www.oecd.org/sdd/business-stats/41691167.pdf> [Accessed 22 March 2020].

FCA, n.d. History | FCA Group. [online] Fcagroup.com. Available at: <https://www.fcagroup.com/en-US/group/history/Pages/default.aspx> [Accessed 22 March 2020].

Moore, K., 2011. Porter Or Mintzberg: Whose View Of Strategy Is The Most Relevant Today?. [online] Forbes. Available at: <https://www.forbes.com/sites/karlmoore/2011/03/28/porter-or-mintzberg-whose-view-of-strategy-is-the-most-relevant-today/> [Accessed 22 March 2020].

Vellequette, L., 2018. Sergio’s Survival Guide. [online] Automotive News. Available at: <https://www.autonews.com/article/20180604/OEM/180609923/sergio-s-survival-guide> [Accessed 22 March 2020].

Wit, B. and Meyer, R., 2010. Strategy. Hampshire: Cengage Learning.