Fiat Company’s International Management

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Introduction

Fiat group is one of the companies that founded the motor industry in Europe. Immediately after the company was established, it started pursing critical growth strategies, that have been able to make it become one of the strongest international companies with technological prowess, innovative spirit, advanced organizational and production solution. According to Cammarata, Kuruez, Maj, Pavlovic and Portmann, after once century of the existence, FIAT has not only become successful in manufacturing world class cars but it has also been able to manufacture space launcher, aeronautical engines, marine engines, agricultural tractors and trucks (4). FIAT group concentrated in the manufacturing traditional motor vehicle and related services. Cammarata, Kuruez, Maj, Pavlovic and Portmann state “Today the company is made up of nine operating sectors: automobiles, Agricultural, and construction Equipment, Commercial Vehicles, Ferrari and Maserati, Metallurgical Products, Automotive Components, Production Systems Publishing and communications and Services” (4). FIANT is one of the companies, which pioneered the car industry and had its first car built in 1899. From 1899, FIANT has produced over 87 million of cars as well as light commercial vehicles (Fiat India Automobile 1).

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FIAT Auto company has four types of brands in the international markets (Slideshare 1). The brands are unique and are identified by their manufacturing solutions, styles and innovative content. Some of the brands of FIAT just to mention a few include Alfa Romeo, Lancia, FIAT, which are well known for their practicality, versatility, elegance and technology (Automobile India 1). The company has its network spread in many countries, for instance, it has plants in Argentina, Brazil, Poland and Italy. FIAT has also established alliances with other companies in the same industry from Vietnam, China, India, South Africa, Egypt, Turkey and France. FIAT has a lot to show as proof of its might in the motor industry. The company has been able to win eleven different occasion award of the car of the year as the company that manufactures one of the most prestigious cars in the industry globally. The models that pushed the company to such level of winning the prestigious award are Lancia, Alfa Romeo and the FIAT. Fiat’s products sales increased in 2004 by 4.2% over the previous year with the company selling over 271 000 units, which confirmed the company’s leadership in several countries, Italy inclusive.

FIAT’s Products and Services

In 2004, FIAT Auto introduces five new cars in the market following innovating effort the company took to sharpen its competitive edge. The cars were well received by the public, which include the crosswagon Q4 and 147 of Alfa Romeo, Panda 4×4, FIAT Multipla and Lucia Musa compact MPV. The cars were manufactured with special features that entail latest technology. For example, FIAT Stilo was manufactured and equipped with an engine that is 100 horsepower JTD, Lancia Ypsilon was equipped with a robotized DFN automatic transmission among many others. In the same year, several FIAT’s light commercial vehicles were reinforced with Doblo Cargo and Ducato Model Year versions. The model that rode above the others during 2004 about innovation was the Scudo, which is not only attractive and stylish but is also characterized by amazing technological features that ensure safety and comfort ride in the vehicle. During 2004, preparations were also going on to renew the lineup of FIAT Auto product and agreement was reached to allow the company to enter SUV market. Another agreement was reached between FIAT and AdamOpel AG to use the architecture of Opel Epsilon for the FIAT Croma. FIAT seized the opportunity and together with Alfa Brera, Alfa Romeo 159 and the New FIAT Punto models, it managed to surprise the players in the industry in 2005 by the new innovative products.

FIAT Auto Company used joint ventures and subsidiaries to provide financial services to suppliers and dealers in 2004 (Cammarata, Kuruez, Maj, Pavlovic and Portmann 4). The associate companies and the subsidiaries of FIAT combined efforts to improve service and sale network by focusing on making better productivity of new contracts. For instance, Leasys, FIAT’s subsidiary strengthened the position of the company in Italy in the rental market by establishing additional business units on light commercial vehicles (Cammarata, Kuruez, Maj, Pavlovic and Portmann 4). During the same year Savarent, which an associate company of FIAT managed to acquire14 000 new contracts, an indication of productive association between the company and its associates (Rediff 1). Commendable improvement was exhibited in the operations of the company, especially in its distribution network with more than seventy-two outlets, eleven of which are located in major airports of Italy.

Analysis of FIAT

Porter’s Five Forces of FIAT

A part from SWOT analysis, Porter’s five forces of FIAT will also give useful information necessary for the understanding the position of the company in the current market. The Porter’s five forces of FIAT include substitutes, suppliers, industry rivalry, customers and entrants.

Industry Rivalry

Rivalry in the automotive industry is quite intense between companies due to the concentration of firms in both the international and the national markets. However, FIAT has been able to pursue and claim an advantage over its competitors using product differentiation through implementation of manufacturer process innovation and improvement of features (Just-Auto 1). This was exhibited in 1990s when the company considered outsourcing more contracts as well as cutting component costs (Cammarata, Kuruez, Maj, Pavlovic and Portmann 13). It was during such time that FIAT Company understood the importance of establishing ties with other companies and without hesitations, it started establishing networks with other suppliers that would support the cost of research and development in a bid to develop components. Domestic market share of FIAT has been claimed by competitors from Korea, and Japan due to strong rivalry in the industry and constantly changing markets. The option of investing foreign countries has proved quite profitable in terms of labor cost and the company has managed to reduce costs by establishing alliances car other companies in the industry such as Tata Motor and Ford (Cullen and Praveen 12).

Supplier Power

The power of supplier is very significant to any particular business from any industry because of the role they play. According to Cammarata, Kuruez, Maj, Pavlovic and Portmann, the suppliers of FIAT Company can be divided into two categories, where the first category comprise of the Italian component of suppliers. The Italian suppliers rely majorly in the FIAT Company for business and they include subsidiaries of the company such as Teksid and Magneti (Articlebase 1). The other category of the company is made up of hundreds of smaller firms, which indirectly depend on FIAT. FIAT has managed to expand its operations and production both locally and internationally with successes.

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Threats posed by new entrants

Rivalry in a market is influenced greatly by the likelihood of new firms coming into the market. There are barriers in many industries that are aimed at preventing new entrants into the market to maintain the level of profit enjoyed by the players in the industry. FIAT has embarked on a strategy to expand its portfolio. To overcome barriers in the market, firms can choose to ally with companies in the market to avoid the barriers. It is believed and has been proved that all major car companies in the motor industry like, Honda, Toyota, Nissan and Renault and others are in cross-ownership network, which is very complex (Cammarata, Kuruez, Maj, Pavlovic and Portmann 14). FIAT Company has succeeded in preserving its brand identity to avoid new entrants’ threat.

Power of consumers

Power of consumers is regarded as the influence buyers have on production industry. Therefore, every serious firm would like to secure the confidence of consumers by allowing consumers demand to orientate their production. For instance, companies in the motor industry such as BMW, GM, Ford, and Volkswagen have established multi-brand marketing strategies to reach as well as to serve customers from different markets. They are working on strategies of new distribution channels as one of their efforts to provide the requirements of the customer (MapsofIndia 1). Marketing strategy of FIAT for many years proved to be weaker that many of its competitors during the last ten years. This influenced negatively the company’s market nationally and internationally by reducing its market. As a result, the company lost several customers since some models of FIAT were perceived to be unreliable due to difficulty of getting their spare parts and because they are very expensive. FIAT Company currently relies on the new Fiat Punto to restore the confidence of its customers to improve its profit margin. Giulio Salomone made the following remarks “We and our dealers must improve the customer experience, give better customer satisfaction and we now have the right models for them to sell” (Cammarata, Kuruez, Maj, Pavlovic and Portmann 14).

Threat of Substitutes

Threat of substitutes according to Cammarata, Kuruez, Maj, Pavlovic and Portmann comes from products within the industry (4). In motor industry for instance, the consequence of threat of substitution is price competition. Even with the launching of new Punto, FIAT still faces very tough competition from rivals like Open and Peugeot that also launched new city car models. The weak market and popularity of FIAT Company internationally worsen the situation and as a result, it is quite difficult for FIAT to become a strong substitute as well as competitor for other carmakers in the motor industry.

SWOT Analysis

Strengths

The study of FIAT has revealed several strengths of the company according to Cammarata, Kuruez, Maj, Pavlovic and Portmann as illustrated below (4).

  1. FIAT has brands with very strong historical value that is better than many brands and which can contain the threats of new entrants into the industry.
  2. In 1950s and 1960s, FIAT earned evocative power and some model for instance 500 are expressive of the Italian style and glorious age. Such power has made most of the models of the company to be recognized and valued in Italy.
  3. FIAT Company has very innovative designers like Giorgetto who have managed to enhance innovation in the company (OPPaper).
  4. FIAT Company has skilled and visionary management team that has made it possible for the company to be where it is today and has made the present tolerable and the future worth waiting.
  5. In addition, FIAT has several plants abroad, which have made the company expand its market in the international community. Hence, consumers can now access the products of the company from different countries.
  6. FIAT Company has very evocative and strong brands, especially the Lancia and the Alfa Romeo, which have contributed significantly in making the company popular internationally.
  7. FIAT Company is quite proficient in producing small cars and such specialization has made many consumers who desire small cars to prefer FIAT’s.
  8. FIAT Company has established research centers with well skilled and experienced personnel who have contributed significantly to the innovative production of the company.
  9. FIAT company is committed to environmental conservation and it products limit carbon footprint.

Weaknesses

FIAT Company has shown some level of weakness (QuickMBA).

  1. The management of FIAT has portrayed element of weakness in the strategies and approach towards local and international markets (Gaadi 1). They prefer price cuts to brand asset management and innovation, which are instrumental in the mature market where the company is a player (AOL 1).
  2. The representatives of FIAT in the market have been found to embrace a culture that keeps them far from dealers and customers. This serious undoing cost the company a lot because the relationship between the company and its customer is very crucial for its success.
  3. Cammarata et al. found out that the company is not sensitive enough and is oblivious of what goes around. Misinterpretation of symptoms or lack of ability to understand symptoms of problem make the company to make wrong judgment that can be quite costly to the company.
  4. FIAT has misplaced its priority by pursuing engineering supremacy with an aim of manufacturing perfect models concerning engineering perspective and not customer-oriented production. Customers’ requirements and needs should be given a priority in all cases to produce products that will be acceptable to consumers.
  5. FIAT has poor marketing strategies, which do not take into consideration the needs of customers as well as the market strands.
  6. The efforts of FIAT about implementation of economies of scale are misinformed because it does not have the money power to do so. The other problem with such implementation is that it makes the company to focus on quantity production and not innovation and quality production.
  7. Outsourcing policy of FIAT has not been properly implemented. It is illustrated by lack of proper cooperation, commitment; brand recognition and strong dependency, which have negative implication on the company.
  8. FIAT does not have well designed segments, which are instrumental for organization and management purposes.
  9. The new models that FIAT produces are not recognizable but are rather anonymous thereby denying the company the opportunity to exploit sufficiently potentials offered by for instance Centro Stile.
  10. Innovative ability of the company is questionable because it has never pioneered introduction of new models (Scribd 7-14).
  11. FIAT does not have demand advantage in its home market and this has cost the company the recognition it ought to have.

Opportunities

  1. There is opportunity that FIAT needs to exploit from third world countries where cars are simple and require less money to produce.
  2. FIAT should consider redesigning of old historical car models, which had success.
  3. FIAT need to venture Eastern countries where production cost is lower due to lower labor cost.
  4. There is opportunity in collaborative commerce that FIAT should exploit further.
  5. There is also opportunity in the Chinese market that FIAT should consider exploiting. The automotive market of China is growing rapidly in terms of size, terms of investment and infrastructure, which is a good opportunity that the company should consider.
  6. FIAT should make use of the position of the European automotive in the global market and expand it markets (Enterprise and Industry 1).
  7. There is opportunity in new fuels and technology and the company should consider producing cars that are environment friendly and employ the use of fuel cells.
  8. As European Union expands, the market also expands, which provide suitable and profitable production due to reduced labor cost. FIAT could make good use of the opportunity to expand its market in the continent.

Threats

Some threats face FIAT and they include the following:

  1. Regulatory framework that comes with technology makes production costly and difficult.
  2. There is price competition stimulated by overcapacities in Europe and other continents.
  3. Economic downturn in Italy and the entire Europe has affected demand for the automotive products and has threatened the global competition in the automotive industry in Europe.
  4. FIAT is faced with the challenge groundbreaking innovation.
  5. Producers from Japan are very innovative, which FIAT cannot easily beat.

Recommendation

  1. FIAT should uphold innovation in all its strategies
  2. FIAT Company should put in place competent leadership in place
  3. FIAT should formulate proper marketing strategies that would reach all its potential customers as well as to provide the needs of the customers.
  4. It is high time FIAT Company established a mutual and strong relations with its subsidiaries, associates and customers
  5. FIAT should consider exploiting markets in the third world counties
  6. FIAT should consider redesigning of old historical car models
  7. FIAT should venture Eastern countries where production cost is lower
  8. FIAT should expand its market to China market
  9. FIAT Company should make good use of opportunity available in the European Union market

Works cited

AOL. FIAT. 2010. Web.

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Articlebase. Fiat’s Success in India. 2010. Web.

Automobile India. Fiat Car Models in India. 2009. Web.

Cammarata, Vincenzo, Kuruez Veronika, Maj Valentita, Pavlovic Aleksandra and Portmann Katherine. The FIAT Case: a Therapeutical Crisis. 2006. Web.

Cullen, John and Praveen Parboteeah. Multinational Management: A strategic Approach. USA: Cengage Learning, 2008.

Enterprise and Industry. Automotive Industry. 2010. Web.

Gaadi. Fiat swot analysis for 2004. 2008. Web.

Fiat India Automobile. History. 2010. Web.

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Just-Auto. Fiat. 2010. Web.

MapsofIndia. Fiat India Private Ltd. 2010. Web.

OPPaper. Fiat India. 2010. Web.

QuickMBA. SWOT Analysis. 2010. Web.

Rediff. How Tatas plan to turn around Fiat in India. 2010. Web.

Scribd, Swot analysis of a company. n.d. Web.

Slideshare. FIAT India. 2010. Web.

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