The Pact Between Tata Motors and Fiat

The Fiat Auto acquisition of Chrysler occurred in 2014, which turned Chrysler into an Italian automobile manufacturer (Abrams, 2014, para. 1). By combining these two firms one automaker now have strong ties to the American and Italian auto industry. By Fiat gaining Chrysler’s reputable name it can easily penetrate the American market. This why the acquisition between Fiat Auto and Chrysler can be seen as a growth strategy. Fiat now competes in a large global market, which subjects the firm to many different external environments. The General Enviornment consist of factors that affect every industry, for example taxation. A firm that operates in the auto industry and one that operates in healthcare industry are both going to be subject to government taxation and affect by it. In order to work efficiently and eliminate the threat of general enviornment risk the firm must use a strategy of including these risks in their work process. For example, if Fiat operations in the United States (U.S.) have to follow the U.S. Department of Labor regulations and pay any employee that works over forty hours in a workweek, overtime pay (2015, para.1). In order to reduce the cost associated with paying overtime and keep the budget in line, Fiat might consider hiring in part-time help during its anticipated high volume periods. This will keep production costs low and allow for a larger margin of profit.

General Motors, the “mother company” has faced many troubles in the past, and surfaced. A research by the National Research Council in the United States has revealed in 1992 that there had many impacts and future impacts in the automotive industry, indeed; it would affect the jobs and the internal economy. However, General Motors understood the threat potential that this and established strategic plans to revert the trend. Furthermore, whether General Motor Company was able to change the trend, and it saw the internal and external factors, prepared a strategic plan, Holden being the first brand in Australia, with at least just the 10 % of the population compared with the USA, the way to get a plan looks easier. In addition, it is easier to see a trend in countries with low population and good policymakers. In 2008 General Motors faced again the limit to bankruptcy. A fierce plan to develop and a new business association with FIAT made that GM avoid the dissolution. Even do all Europe have had a similar crisis( Boudette & Choudhury,

There are distinctive barriers to entry in the automotive industry. The main 10 firms operating in the automotive industry have great power in terms of reputation, finances, experience, technology and existing large product portfolios. It would be highly difficult for a new company to compete with the above.
• The existing companies within the industry are joining forces, which at times do have detrimental effects for new comers to the market and for some existing companies. For instance, the situation of Rover in the UK. In the past, the profitable components of Rover were purchased by BMW and Ford, and Rover was left producing poor quality and old vehicles, which consequently led to its bankruptcy in April, 2005 (BBC, April

In the business industry, if businesses want to export their goods and services to other countries, they must become familiar with and adopt international and global strategies. Consequently, there are three types of international and global business strategies. The first type is international, which entails conducting a significant amount of activities outside the home country, yet its focus remains on the home market (Fung, 2014). The second type is multinational, which consists of operating in multiple countries, yet the headquarters is in its home country, not to mention that the competitive advantage will vary by country (Fung, 2014). The third and final type is global, which is when the organization treats the whole world as one market and one source of supply, not to mention, that its competitive advantage is contingent of common brands, standardized products, and global scale production (Fung,

Fiat and Chrysler had very different points of strengths and weaknesses before and after the alliance. They both were also in very different circumstances that created varying levels of success domestically as well as internationally. Fiat’s points of strengths include small cars, their diesel engines and transmissions, as well as in exotic cars. Fiat is one of the largest producing car manufacturers in all of Europe, particularly in Italy. Fiat is also the leading seller in Brazil, producing a quarter of the markets cars and light trucks. However, only leading in this country and partially the continent did not satisfy their hunger for global expansion, as international sales were relatively low. The United States was a market that Fiat was ready to re-enter but couldn’t do so effectively without forming an alliance that would allow for the manufacturing of their brand of cars. Fiat aimed to fix its tarnished reputation in the U.S of producing lower quality vehicles relative to its European siblings. Fiat does have strong leadership in their CEO, Sergio Marchionne. Chrysler has always been a step behind GM and Ford in quality and technology in its long history. Surviving without these two elements in this industry is not possible. They were always late to any consumer demands met by its competitors and were in constant economic trouble. Chrysler’s management during previous partnerships was not

However, the two iconic British brand Jaguar and Land Rover failed to generate profit in the past and as a result were forced to merge with each other. Thus, the auto industry today if it wants to be competitive, it has to opt for delivering unprecedented levels of consumer value and service. Furthermore, intense competition among firms has been singled out as the one thing which is driving this unprecedented increase in consumer value and service. Therefore, the challenges facing (JLR) and other (MNC) is that because their subsidiaries in these emerging markets like China and India, find it harder to handle the performance management that’s required of them. Additionally, in order to drastically reduce production cost and deliver their products and services cheaply to consumers, (MNC) like (JLR) are entering into these joint ventures especially in China to handle production for them at such pace that causes concern among the traditional lover of the (JLR) brand.

Italian firms are renowned for being small and family-owned. Yet some of them have managed to tackle and be successful on the global market. One such firm is Fiat which specializes in vehicles manufacturing. The company was founded by Giovanni Agnelli in 1899. An interesting example of how Fiat has used heritage and tradition is the fact

The 1980s and 1990s saw much investment and collaboration between domestic and foreign auto makers. Not only did the foreign acquisitions enable the domestic companies to obtain technologies to compete for

There are several modes of entry into foreign markets. According to Hill (2010), “Firms can use six different modes to enter foreign markets: exporting, turnkey projects, licensing, franchising, establishing joint ventures with a host-country firm, or setting up a new wholly owned subsidiary in the host country” (p. 475). With each mode of entry, there are advantages and disadvantages. Joint ventures are often a common choice when entering a foreign market. In a joint venture, two or more independent entities will establish a business jointly (Yip & Hult, 2012). On November 9, 2015, Boeing announced a joint venture with Tata Advanced Systems in India (Boeing, 2015). Boeing and Tata’s joint venture is to manufacture aircraft aero-structures and to work in partnership on integrated systems development in India.

The constant involvement to the workshops hampered its profitability level as the cost of operations increased. The company’s expansion strategy depends on its ability to increase the awareness process and ensure that it commands the global market. Chrysler performances have been affected by the cross-cultural focus and the need to implement strategies that will change the management’s sentiment and the understanding of the cultural perspectives in the economy (Business Week New York, 2007). The level of competition in the automotive industry has also increased, and without effective policies and strategies, the entity’s success will be hampered. The workshops that were conducted after the merger had failed did not yield the results as expected and it was an additional cost to the operations of the entity (Isidore, 2007).

In the Fiat’s Group it is noticed a high impact turnaround, the re-launch of the company had been made possible by the identification and implementation of a very clear strategic choices which had a significant effect on the firm’s business model in relation to its competitors. The positive aspects of their strategy is the risk reduction due to the diversification of the Group’s business, which in turnaround process lower

The world offers significant business opportunities for every company, however, opportunities are accompanied by significant challenges for managers. Managing global operations across diverse cultures and markets represents a big challenge and opportunity for companies. To compete in the global market and be successful, companies must learn the strategies, policies, norms and technology necessary to conduct international business. The opportunities for global expansion are numerous, and attaining success is a matter of developing the right strategy to win local markets and its consumers.

This is an open-book examination, and you may consult any previously prepared written material or texts during the examination. Only answers that are written during the examination in the answer book supplied by the examination centre will be marked.

Please use the following questions as guideline to prepare the case: (Follow instructions in outline except those mentioned below..

Companies can decide to go global or to enter international markets for various reasons, and these different objectives at the time of entry that enable the business to produce different strategies and the performance goals, and even forms of market participation.