Disclaimer: This is an example of a student written essay.
Click here for sample essays written by our professional writers.

Any opinions, findings, conclusions or recommendations expressed in this material are those of the authors and do not necessarily reflect the views of UKEssays.com.

Strategic Analysis and Proposal: Fiat Chrysler Automobiles 2016

Paper Type: Free Essay Subject: Business Strategy
Wordcount: 4358 words Published: 8th Feb 2020

Reference this

External Analysis

The Global Automobile Industry

The global automotive industry is comprised of companies that partake in the manufacturing and final assembly of automobiles and light duty motor vehicles. The NAICS code for the industry is 33611. The automobiles include, passenger cars, sport utility vehicles, pick-up trucks, vans and crossovers. The industry is comprised of 955 total companies with estimated employment total of 167,566 as of 2019. (SICCODE, 2019).

Get Help With Your Essay

If you need assistance with writing your essay, our professional essay writing service is here to help!

Essay Writing Service

The trillion-dollar global automotive industry weighs heavily on the global economy in terms of revenue. The industry was set back due to the financial crisis of 2008, but has rebounded nicely since. Revenue in billions of dollars as well as revenue growth rate for the industry from 2004 to 2015 is illustrated in the Appendix page 17. Revenue declined sharply in 2009 and but rebounded in 2010 with a YoY increase of over 20%. From 2011 to 2015, 5-year average growth rate for revenue amounted to 4.26%. Industry revenue is expected to grow at an annualized rate of 4.5% to $3.0 trillion from 2015 to 2019 (Ozelkan, 2019).

The following political, economic, sociocultural, technological, environmental and legal factors effecting the industry are explained in the preceding paragraphs. Political factors have a big influence on company profitability. Taxes on luxury vehicles and non-fuel-efficient vehicles have increased recently as governments around the world continue to favor low emission vehicles. The UK and the EU governments are even providing subsidy for low emission vehicles. Import and export laws as well as taxes vary from country to country. Many manufactures also attempt to set up production where labor cost is the cheapest and least regulated by the government. China has taken center stage of late due to their low labor cost and lose labor regulation.

Economic impact on profitability of companies in the industry are massive. When the economy is booming and consumer disposable income is rising, more consumers will be able to purchase or finance new cars, especially luxury cars. When the economy is cooling and disposable income is flat compared to inflation, then consumers will look to take alternate modes of transportation, buy used cars on the secondary market, or be hesitant to buy a new vehicle and extend the life of their current vehicle even if their vehicle is in poor condition. Globally there are developed and underdeveloped markets and companies need to position their brand accordingly in either of these markets to be successful. Purchasing power of the consumer plays a key role in company profitability and thus the two are positively correlated.

Sociocultural factors heavily influence the industry as well. Ultimately, the automobile must appeal the consumers’ tastes, values, morals and standards. Recent trends include are the need for low emissions, high technological integration, increased safety, and durability. Because of this, companies in the industry have turned to technological innovation and fuel efficiency for competitive differentiation. Social cultural factors are inherently dependent upon the demographic landscape of the company’s target market. For instance, certain areas may desire more SUV type automobiles due to inclement weather year-round. It could also be that the area contains an abundance of households with large families and they need spacious vehicles with third row seating. Age demographics in this respect play a key role. Companies in the industry create vehicles based on their target population’s preferences. Culture aside, consumer’s style and preferences vary. Vehicles that sell in one market, might not be popular another market. Social trends change continuously affecting the popularity of brands and models.

Technology is one of the most important factors affecting the industry and technological innovation has become a determinant of industry market share. All major companies make considerable investments in R&D to stay ahead of the technological curve. Highlights of the big technological advancements in the industry from 2000 to 2015 are as follows. In the year 2000, Toyota introduced the first ever hybrid car better known as the Toyota Prius. In 2002, back up cameras were introduced and in 2003, cars could park themselves with the new park assist feature. In 2010, safety driver assists features such as lane departure warning, LDW, and front collision warning, FCW, and blind spot detection sensors were introduced. In 2014, Tesla introduced the first ever autopilot feature, that allows drivers to engage autopilot mode, where the car can practically drive itself. In 2015, Google launched its Waymo project, a complete self-driving car, expected to debut to the public in 2020 (Jardinemotorsuk, 2019). Advancement in technology is rapidly reshaping the industry and companies who fail to integrate new tech will eventually become obsolete.

Governments continue to crack down on pollution control. Laws related to environment friendliness and carbon emissions are tightening globally. Vehicles which are low on emissions and fuel consumption receive tax subsidies. Environment friendliness has become an important test for the vehicle makers in the 21st century. Vehicles selling in the international market are subject to laws related to product quality and safety. Vehicles being exported overseas must pass strict emission controls. Laws related to product safety have an important impact on the sales of the vehicles. Major recalls on automobiles have resulted in government laws related to passenger safety. A good example of this is when Toyota had a recall on 9 million vehicles in 2007 due to a faulty gas pedal that would get stuck to the floor. This recall made national headlines as a family of four died because of the faulty gas pedal design. After recalls of 7.5 million vehicles, Toyota was forced to suspend the sale of eight of its best-selling vehicles. This cost the company and its dealers a minimum in lost sales revenue of $54 million a day (Evans, 2010). Recalls on automobiles have occurred since their existence and shape the way for more strict safety requirements and regulation year after year.

Auto analyst speculate that soon, the number of auto manufacturers at the global level will decrease significantly. This is due to the large number of consolidations and mergers that is happening as of late and are expected to continue. These cross-border alliances, joint ventures and corporate tie-ups are done to leverage economies of scale and increase market expansion. These alliances also increase revenues, net profit and increase R&D networks.

Key external drivers for the industry include, global per capita income, the GDP of emerging economies, the world price of crude oil and steel. As the price of gasoline rises, consumers become more price conscious at the pump and are turning to more fuel-efficient cars to help them cut gasoline cost. The price of crude oil is very volatile and unpredictable. The price was as low as $41 a barrel in 2000 and peaked at $162 a barrel in 2008. In 2009 prices declined sharply to $50 a barrel. Oil prices did recover to $112 a barrel in mid-2014, only to plummet to a low of $36 a barrel in December of 2015. Prices are projected to increase through 2019 (Macrotrends, 2019).  This has pulled down gasoline prices and encouraged greater adoption of higher margin SUVs and crossover vehicles in developed markets. Albeit, consumers and therefore automobile makers are still leaning toward maximizing fuel efficiency either through more efficient engine designs or incorporating hybrid/ full electric technology.

The major players in the global industry by revenues in 2015 is as follows. Toyota lead the industry with $250 billion. The next are listed via company name and revenue in USD, Daimler AG $162 billion, General Motors 159.250 billion, Ford Motor $146 billion, Fiat Chrysler $131.385 billion, Honda Motor $115.415 billion and Nissan Motor $100 billion (Value Line, 2015).

As far as the major players in the United States market as of 2015, there are the big three, Toyota 14.4%, GM 17.7%, and Ford 15.5%. The three accounts for 47.2% of the US automobile industry in 2015. Chrysler was the smallest of the big three domestic automakers prior to its acquisition by Fiat in 2014. In 2014 the big three by market share was GM 14.3%, Ford 10.7% and Chrysler 6.4%. The figure in the Appendix page 17, depicts the market share of automobile manufactures in the US midway through 2015 (Cain, 2015).

In Italy, the market was dominated by Fiat in 2015. Looking at the chart in the Appendix page 18, Fiat has by far and away the most passenger car sales in 2015.At 329,298 passenger car sales, Fiat has more than then next three closest competitors, Volkswagen, Ford and Renault combined at 323,202. Clearly Fiat is the dominant player in the Italian market. Furthermore, Volkswagen, Ford and Renault are all competing for a close second place. (Statista, 2019).

Overall the automobile industry is a mature industry. The automobile industry has been around since the late 1800’s. It has come a long way since then with the industrial revolution and the great technological advancement of the 21st century. The number of automobile manufactures is declining as massive mergers, acquisitions and consolidations occur. Technological innovation is always reshaping the industry and thus newer segments such as self-driving cars will keep the industry growing and producing revenue for a long time. The automobile as a mode of transportation whether self-driving or manually operated or flying will always have a high consumer demand.


In comparing cultures to cultures, Hofstede’s 5 dimensions of national culture provides a nice framework. The following dimensions are as follows, power distance index, individualism versus collectivism, masculinity versus femininity, uncertainty avoidance index, and indulgence versus restraint.


The following are Italy’s scores out of 100 according to Hofstede’s 6 dimensions of national culture analysis. Power distance index 50, individualism 76, masculinity 70, uncertainty avoidance 75, and indulgence 30 (Hofstede Insights, 2019).

Key takeaways from their scores are as follow. Italian’s prefer equality and push for equality in the work place. Control and supervision is detested and rather an open-ended management style focused on teamwork and collectivism is preferred. A score of 76 for individualism displays a strong individualistic culture. Family and friends are extremely important and happiness and achievement is found through personal fulfillment.

With a masculinity favored score of 70, Italian’s are motivated by wanting to be the best as opposed to linking what they do. This relates to Italian’s being highly success driven and big materialist items such as a luxurious car or big house translates to success and achievement in society’s eyes. An uncertainty avoidance of 75 translates into situations of ambiguity don’t sit well with individuals. Italian’s want to be masters of their own fate. They are hardworking dedicated individuals who plan everything out to a T. This can create a stressful and demanding workplace culture. Because of this, Italians need to partake in various tension relieving activities. Italian’s wear their emotions on their sleeves.

Indulgence at 30 translates to an Italian culture of restraint. Italians believe that social norms restrain their actions. Italian’s are hesitant to indulge themselves in that they feel it is somewhat wrong.

United States

The following are Italy’s scores out of 100 according to Hofstede’s 6 dimensions of national culture analysis. Power distance index 40, individualism 91, masculinity 62, uncertainty avoidance 46, and indulgence 68 (Hofstede Insights, 2019).

A score of 40 for power index indicates that the US culture is one that doesn’t accept power inequalities. The US has a long history of inequality. In the US money is power and the decision of wealth is very lopsided. The US citizens are not going to accept these inequalities and push power boundaries as much as possible for the country was founded upon tolerance and freedom. The US is all about freedom and justice regardless of your role in society or employment status. An extremely high score of 91 for individualism translates to a culture that individuals are self-reliant and put it upon themselves to succeed. Success and prosperity can only be grated from self-determination and grit. It’s a highly competitive dog eat dog world so today. Therefore, many Americans focus on self-advancement and gain. Family is also very important to Americans. Many workplace relationships don’t extend beyond the workplace and individual goals and drive center around providing for family members and self-gratification. In the workplace, Americans tend to excel at one specific task and rely on an effective corporate hierarchy structure of communication to accomplish workplace task.

Masculinity score of 70 subsides with the American culture ideology of success taking the form of the winner or the one who is the best in the field. Society is driven by success, advanced and competition. American’s are always working so they can obtain more monetary rewards and achieve a higher status in society. In the workplace, the strive to be the best they can be.

A low uncertainty score of 46 indicates that Americans are open minded to opinions and ideas from others and are willing to try new things when it comes to technology and business practices. American aren’t as emotionally expressive as Italians.

An indulgence score of 68 shows that American are less likely to hold back and control their impulses but to feed the beast so to say. A common sating among millennials in society is work hard and play hard. Americans like to enjoy life and have fun as way to relieve any stress and tensions from working all day and or week.

Labor Unions in Italy

In Italy, Fiat had survived serious labor crises fueled by a weakening Italian economy and a massive layoff by Fiat. The long history of strikes and against Fiat have been in the fight to acquire better wages, treatment, job security, and working conditions. The war began in1969. The strikes in 1969 were over unfair treatment, and the offshoring of production plants.

Find Out How UKEssays.com Can Help You!

Our academic experts are ready and waiting to assist with any writing project you may have. From simple essay plans, through to full dissertations, you can guarantee we have a service perfectly matched to your needs.

View our services

Fiat is Italy’s biggest private employer with 80,000 of its global workforce of 190,000 based in the country. In 2010 massive layoffs of Fiat workers in Italy due to the outsourcing of production overseas caused harsh working conditions for laborers in certain plants. Fiat’s decision to move production overseas and cut production in times of economic distressed cause a lot of uproar in Italy. Giovane Italia, the junior organization of Italian Prime Minister Silvio Berlusconi’s ruling Popolo della Liberta party, in 2010 stated to the public, “Fiat is taking anti-national decisions such as delocalizing vehicle production out of Italy, closing plants and putting workers in temporary lay-offs,” (Avi, 2014).

In 2010 Fiat announced it would temporarily close its six Italian plants. 30,000 workers were temporarily laid off to realign inventories to fading demand. Italy’s industry minister Claudio Scajola responded to Fiat’s actions by stating, “Fiat’s decision to temporarily close factories was “not well-timed” while the government and the automaker are currently discussing Fiat’s entire manufacturing footprint in Italy.”

Union representatives also criticized Fiat’s 2010 announcement that it will pay a 237-million-euro dividend to its shareholders despite a euro 848 million net loss in 2009 while laying off employees (Avi, 2014). Clearly Fiat had created a lot of turmoil in Italy as it planned to outsource production plants and downsize the labor force. A weakening economy in Italy didn’t help the problem. Fiat’s CEO had to make some tough choices in the face of adversity and ultimately succeed with the first alliance then merger with Chrysler Auto in the US. This allowed Fiat to enter the US market and boost revenue and profits.

Internal Analysis


  • Strong establishment of export markets
  • Chrysler’s iconic image
  • Diverse range of cars, from SUVs to luxury coupes 
  • Strong Brand Portfolio
  • Strong dealer community
  • Strong distribution network
  • Differentiation Positioning


  • Lacking good workforce relations- labor strikes
  • Aging brand portfolio
  • Weakened quality standards
  • Negative Synergy among brands
  • Overdiversification
  • No access to the latest available tech in electronic car manufacturing or autonomous driving capabilities

Strategy and Implementation

Current Strategy

Company sales are slumping in Italy since 2011 and the company’s focus has turned to the North American market and emerging markets. Since the Fiat Chrysler Automobile’s inception, the company has concentrated on launching 30 new car and truck models in global markets. After the alliance, a common R&D platform, streamlining global operations as well as downsizing, has led to cost savings. To deal with the aging brand portfolio and attempts to enter more emerging markets, Fait Chrysler Auto NV may be looking for future mergers and alliances. Broad differentiation seems to be their current strategy. As they offer a wide variety of brands to a broad spectrum of buyers.

 Proposal and Implementation

I propose Fiat Chrysler Automotive NV should look for a potential joint venture in China. They should also consolidate their brand portfolio. The Dodge Caravan, Chrysler Town and Country as well as the Chrysler Pacifica are all very comparable and thus creating negative synergy. Appendix page 18 better illustrates the similarity. The Dodge Caravan and the Chrysler Pacific are practically the same and the edge goes to the Pacifica. The reason being that Chrysler has a better brand value associated with it and overall better quality for the price.  According to JD Power Associates overall rating, the 2017 Dodge Grand Caravan has a score of 7.3 out of 10. With an 8.4 out 10 in safety and 3 out of 5 in reliability. The 2017 Chrysler Pacifica has a score of 8.6 out of 10 with a 9.8 in safety and a 3.5 out of 5 in reliability (U.S. News, 2019).

The Jeep Compass and the Jeep Cherokee are very similar as well as the Dodge Journey. The Dodge Journey and the Jeep Compass should be dropped from production. Overall Dodge cars will see the Journey as well as the Caravan dropped from production. The Jeep Compass will be dropped from production as well. Appendix page 19 better illustrates this comparison. The 2017 Dodge Journey has a JD Power Associates score of 7.1 out of 10 with an 8.4 out of 10 in safety and a 2.5 out of 5 in reliability. The 2017 Jeep Cherokee has a score of 7.6 out of 10 with an 8.7 out of 10 in safety and a 2.5 out of 5 in reliability. The 2017 Jeep Compass has a score of 7.4 out of 10 with a 9.3 out of 10 in safety and a 2.5 out of 5 in reliability (U.S. News, 2019).

This will omit some of the negative synergies that exist within the company. It will also cut cost in terms of research, development and design of these models going forward and more resources and energy can be put towards existing successful car models as well as the next phase of the strategy, a joint venture in China.

China makes up the largest market for automotive vehicles today with a population over 1.4 billion and car sales amounting to 29 million in 2017. Compare this to the US which amounted 17.5 million car sales and Europe with 20.9 million in 2017, China is the clear leader (OICA, 2018). Over the last decade, the Chinese economy has been growing rapidly with GDP growth rate exceeding 10% in 2010 and near 7% as of 2018.

The Chinese are increasingly adopting cars as their primary means of transport due to rising incomes, which previously inhibited more profound growth in the region. Consequently, Chinese automakers snapped up the domestic Chinese market by manufacturing automobiles at a much lower price point than the dominant players. import penetration into China has also proven difficult, major global brands such as Volkswagen and General Motors Corp. have set up partnerships with Chinese manufacturers to enter the market. Fiat Chrysler needs to follow suit before it’s too late and the market becomes saturated.

The perfect joint venture would be with BYD Auto Co. Ltd. This Chinese company is the sixth top car manufacturer in China. BYD is an electric car manufacture with advanced technological innovation. The joint venture would strictly focus on getting fully electric cars in China. The joint venture could get Fiat Chrysler Auto NV’s foot in the door in China as well as give them industry leading technology like that of Tesla’s. A joint venture with Tesla could also benefit Fiat Chrysler Auto NV. This would allow them to have access to Tesla’s technological advancement and Tesla to have access to Fiat Chrysler Auto NV’s upscale car designs and supply chain avenues. Overall it would benefit both companies and ultimately give Chrysler Fiat Auto NV a leg up when it comes to technological innovation for the future.

Fiat Chrysler Auto NV should also shift production capabilities and centralizing manufacturing operations in large bases nearby lucrative markets like Mexico to service the US market. These areas have lower labor costs.


  • Avi, H. N. (2014, June 04). Workers Rights In Italy’s Automobile Industry. The Relocation of Fiat Automotive. Retrieved May 1, 2019, from https://www.globalresearch.ca/workers-rights-in-italys-automobile-industry-the-relocation-of-fiat-automotive/5385412
  • Cain, T. (2015, July 01). U.S. Automaker Market Share In America – June 2015 YTD. Retrieved May 1, 2019, from https://www.thetruthaboutcars.com/2015/07/chart-day-u-s-automaker-market-share-america-june-2015-ytd/
  • Evans, S. (2010, January 27). The Toyota Recall Crisis. Retrieved May 1, 2019, from https://www.motortrend.com/news/toyota-recall-crisis/
  • Gale Company Intelligence Database. (2019). Gale Business Insights: Essentials. Retrieved May 1, 2019, from http://corvette.salemstate.edu:2185/essentials/comparisonTool/industry?u=mlin_n_state&entities=441110&metric=historicalCompanies#tab=table
  • Hofstede Insights. (2019). Italy. Retrieved May 1, 2019, from https://www.hofstede-insights.com/country/italy/
  • Hofstede Insights. (2019). United States. Retrieved May 1, 2019, from https://www.hofstede-insights.com/country/the-usa/
  • Jardinemotorsuk. (2019). The History of Car Technology. Retrieved May 1, 2019, from https://news.jardinemotors.co.uk/lifestyle/the-history-of-car-technology
  • Macrotrends LLC. (2019). Crude Oil Prices – 70 Year Historical Chart. Retrieved May 1, 2019, from https://www.macrotrends.net/1369/crude-oil-price-history-chart
  • OICA. (2018). Sales Statistics. Retrieved May 1, 2019, from http://www.oica.net/category/sales-statistics/
  • Ozelkan, E. (2019, April). Global Car & Automobile Manufacturing. Retrieved May 1, 2019, from https://corvette.salemstate.edu:6336/reports/gl/industry/default.aspx?entid=1000
  • SICCODE.com (Ed.). (2019). NAICS Code 33611 – Automobile and Light Duty Motor Vehicle Manufacturing. Retrieved May 1, 2019, from https://siccode.com/naics-code/33611/automobile-light-duty-motor-vehicle-manufacturing
  • Statista. (2019). Number of passenger cars sold in Italy by leading car brands from 2015 to 2017. In Statista – The Statistics Portal. Retrieved May 2, 2019, from https://corvette.salemstate.edu:2677/statistics/417582/italy-leading-car-brand-sales/.
  • US News. (2019). Reviews. Retrieved May 1, 2019, from https://cars.usnews.com/cars-trucks
  • Value Line. (2015). New York: Value Line Publishing LLC, 2015.



Cite This Work

To export a reference to this article please select a referencing stye below:

Reference Copied to Clipboard.
Reference Copied to Clipboard.
Reference Copied to Clipboard.
Reference Copied to Clipboard.
Reference Copied to Clipboard.
Reference Copied to Clipboard.
Reference Copied to Clipboard.

Related Services

View all

DMCA / Removal Request

If you are the original writer of this essay and no longer wish to have your work published on UKEssays.com then please: