Strategic Management Case Study

5065 Words Apr 5th, 2011 21 Pages
Q1. Expand on the rationale behind the Fiat and Chrysler strategic alliance.

In December 2008 Fiat witnessed such a drop off in its demand for cars that they were forced to close for a month and lay off close to 50,000 workers. The company indicated that amid the financial crisis it was looking for a partner who could give the company the much needed push in the North American market. Fiat learned about Chrysler’s bankruptcy problems and put an offer on the table for the purchase of Chrysler. Experts felt the alliance was part of Fiat’s expansion and risk diversification strategy. On Jan 20th, 2009 as part of its bankruptcy filing, Chrysler announced its plans to establish a global strategic alliance with Fiat.
The rationale
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It was because of this agreement with the Government that Chrysler had to present a long term viability plan to the US Government by the end of March 2009, which needed to include the possibility of mergers with other companies. This is effectively what allowed the Fiat/Chrysler alliance to take place.

Q2. Investigate what could be a hindrance to the realisation of the synergies of the Fiat / Chrysler partnership?

In any merger, or acquisition for that matter, it can be extremely difficult. In a lot of cases mergers often fail to produce the anticipated gains.
There are many difficulties of which both Chrysler and Fiat may encounter, such as;
1. One company’s reputation can damage the profitability of the venture as a whole.
2. The coming together of different cultures.
3. Different business strategies.
4. Increase in management turnover.
5. Increase in bureaucratic and export costs.
1. Reputation
“A good reputation is worth more than money” Publilius Syrus
A company’s reputation will determine its success rate; a good reputation generally leads to a successful profitable company. A bad reputation will affect a company’s profitability whether that is through poor customer service or production faults, if a company garners a substandard reputation
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