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Table of contents
Introduction.................................................................................................................................. 2
Answer to Question 1..................................................................................................................2
Capital Goods.......................................................................................................................... 2
Automobile Companies............................................................................................................ 3
Answer to Question 2..................................................................................................................4
The pros of the strategies.........................................................................................................4
The cons of the strategies........................................................................................................5
Answer to Question 3..................................................................................................................5
Possible reasons behind the diversification discount................................................................5
Conclusion................................................................................................................................... 6
Reference list............................................................................................................................... 8
1
Introduction
Strategy and management help an organization to make a profitable condition in the global
market and this also helps to increase the competitive advantages among the competitors. This
essay is concerned about the strategy and management of a company named Fiat. Fiat
Industries belongs to the Heavy Equipment industry which mainly manufactures heavy
machinery and vehicles, founded in 2010. The company designs products and sells various
industrial trucks, commercial vehicles, buses, tractors, special vehicles, agricultural and
construction equipment including engines and transmission of those engines. Fiat Industrial SpA
markets its products throughout the world using various brand names like Case, Case IH, New
Holland, and others for agricultural and construction equipment; Iveco, Astra, Magirus, and
others for trucks; and FTP Industrial for powertrain technologies (Forbes, 2022). Firstly, this
essay will discuss the investigations regarding the different ways of splitting off. After that, the
advantages and disadvantages of the strategies will be discussed and lastly, the reasons for
possible diversification will be discussed.
Answer to Question 1
Investigation
As per the case study, the Italian Elite company named Fiat has decided to demerger and make
an individual business in the 2010 to 14 business plans. The new holding name is Fiat Industrial
and this is a parent company from the 2014 business plan announcement (Gatti and Lenzotti,
2012). The case study also showed the scenario, that all companies belonging to Capital Goods
have transferred to the new group and others like industrial vehicles, machinery also
transferred. Only the automobile companies belong to the company named Fiat. Two reasons
are responsible for this incident as well as a spin-off, these are as follows:
Fiat was unable to maintain the industrial conglomerate business because it was unable to find
a proper marker in the modern world. And secondly, the company wants to deal with only one
business in the world which will be helpful for the company to maintain the business
successfully. Fiat group of companies, as well as Fiat Industrials, included several subsidiaries
which help the company to maintain the business concretely. This helps the company to enable
the market capture by the subsidiaries and the company will be able to assess the performance
of two businesses such as Automobile and Capital Goods.
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Capital Goods
Fiat capital goods market became popular with the period which represents the brand of this
company named Fiat. The capital business includes the agricultural and related materials and
the company included several companies as subsidiaries such as Case IH Agriculture, New
Holland Agriculture, and Steyr. Moreover, this company also included the construction
equipment companies such as Case Construction, New Holland Construction and Kobelco.
Including these subsidiaries, the company spread the business through Europe and American
countries (Gatti and Lenzotti, 2012). As per the case study this helped the company to increase
the economic benefits. Moreover, this branded company has an extensive network throughout
the world which helps the company to establish itself in the global market. Fiat capital goods
business called Fiat Money, which is supported by any physical commodity. The company
succeeded to increase the trade purchasing power which is helpful for the people to make
specialized economic activities. For Instance, Fiat succeeded to accumulate all required
materials to maintain the business concretely and the company will be able to increase
employability.
The monetary value of this company depends on the country's economic performance and this
varies among the countries (Mărgulescu and Mărgulescu, 2021). This was affected in the United
Kingdom because the economy was divided into two parts. Insatiable political conditions also
affect this company for better performance in a nation. In Venezuela, the inflation rate is highest
so this company was affected and failed to make a better performance because the inflation
rate prevented this system from performing better. Fiat groups of companies get support from
the governments of different countries.
Automobile Companies
As per the case study Automobile sector is the main sector of this company which is helping the
company to make a placement in the global market. This company included several subsidiary
companies such as Alfa Romeo, Lancia, and Abath to intensively maintain the automobile
sector as well as a business throughout the world. Fiat manufactures and sells the products
based on commercial vehicles with the brand name. The company gets better results on sales
while the company sells the mini multipurpose vehicles, which are described in the case study.
Additionally, some companies like Ferrari and Maserati under Fiat make Sports vehicles and
Luxury vehicles (Gatti and Lenzotti, 2012). According to the case study, these products are
high-performing products, which are very popular in the automobile sector. Ferrari is especially
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popular for making sports cars and being a subsidiary company of Fiat, Ferrari got a huge
opportunity to grow in the global market.
On the other hand, Fiat also makes its vehicles which are very popular in the world market such
as Urban Cross, Linea, Punto, and many other vehicles which are based on luxury cars at
reasonable prices (Corredor and Mahoney, 2021). The cars are usable for different purposes so
the company makes different models as per customers’ requirements. Fiat also makes Industrial
vehicles for the people which are also called Iveco. These vehicles are such as the Irisbus
brand and this company also makes the cars for fire services. Additionally, the company also
makes for special purposes and the brands are Magirus and Astra brands. However, Iveco’s
business spread throughout European, American as well as Latin American countries, and
Australia (Gatti and Lenzotti, 2012). On the contrary, the company, Fiat also makes heavy
weightage vehicle equipment which helps the company to provide better services to the
automotive sector of the world. Development in the automobile sector enhances the company to
implement technological innovations on their products.
Answer to Question 2
Critical Reflection
The Fiat group thinks that diversification is important because they found that it is difficult to
make sure the exact value of each business in an industrial conglomerate. The business of
Capital goods will be transferred to another new group and the core business Automobile will
remain the same under Fiat. The two groups will be the Fiat S.p.A. and Fiat Industrial S.p.A. Fiat
Industrial S.p.A. includes the CHN agricultural and equipment, Iveco and FPT Industries as well
as Marine activities. The Fiat S.p.A. which is the Automobile business, includes Fiat, Alfa and
Lancia, Maserati, and 85% of Ferrari (Gatti and Lenzotti, 2012).
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risks of a possible downgrade because of the demerger plan. New Fiat or Fiat Automobile had
received revenue of eur 64 billion (O’Connell, 2018). The case study shows that the strategy
discovered that Fiat Industrial S.p.A. had to invest more than the Fiat S.p.A. because the
business needs more resources, research, and development.
Answer to Question 3
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in the international business framework. Additionally, the competition in the international
automobile sector is increasing day by day because various companies such as Volkswagen,
Mercedes, Tesla, and other similar companies are implementing innovation to capture the
global market. Therefore, the company wants to implement technological innovations that will
help the company to gather competitive advantages in the global automobile business. Fiat will
be able to be diversified regarding the products and the customers will get the opportunity to
choose different types of vehicles as per their requirements. Hence, this company included
Ferrari as a subsidiary company and other companies to make a variety of products. Ferrari can
meet the requirements of sports cars that will help to increase the business.
After that, this decision helped the company to achieve a profitable condition because the
scenario shows that 90 million euros has been earned by the company. On the other hand, the
company has faced a loss situation in the last year by 168 million Euro which affected the
company. The company will be able to increase the level of profitability throughout the world.
This is why the company made this decision regarding spin-off. This company will be able to
make a successful framework regarding the business which will help the company to get a
proper placement in the automobile industry.
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automobile industry. This helped the company to transfer the foreign shareholdings and also
helped the company to initiate the powertrain technology and finally increased the revenue.
Conclusion
This report successfully analyzed the strategy and management of the company named Fiat.
The investigation says that the company wanted to split off the business because the company
wanted to be profitable focusing on a particular business that is based on automobiles. The
company implemented several strategies such as the implementation of diversification of the
products helps to increase profitable conditions.
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Reference list
Forbes. (2022) Fiat Industrial, Forbes, [online] Available at:
https://www.forbes.com/companies/fiat-industrial/?sh=48f0f35d7307 (Accessed 23March2022).
O’Connell, B. (2018) Pros and Cons to Buying Fiat Chrysler Stock, [online] Available at:
https://money.usnews.com/investing/stock-market-news/articles/pros-and-cons-to-buying-fiat-
chrysler-automobiles-fcau-stock (Accessed 23March2022).
Lux, F., (2021). Fiat Lux, February 15, 2021. [online] Available at:
https://aura.alfred.edu/bitstream/handle/10829/24388/20210215.pdf?sequence=1 (Accessed
23March2022).
Gatti, S. and Lenzotti, S. (2012) Fiat / Fiat Industrial The Value of a Spinoff, [online] Available at:
https://www.thecasecentre.org/products/view?id=106848 (Accessed 23March2022).
Corredor, S. and Mahoney, J.T (2021) Multi-business firms’ corporate renewal decisions:
Divestiture governance mode choice of corporate spin-offs and equity carve-outs, Strategic
Management Review, 2(2), pp.235-280. [online] Available at:
https://josephmahoney.web.illinois.edu/Publications/Papers/Corredor%20and
%20Mahoney_2021.pdf (Accessed 23March2022)
Mărgulescu, S. and Mărgulescu, E., (2021) Traditional Cryptocurrencies And Fiat-Backed Digital
Currencies, Global Economic Observer, 9(1), pp.116-123, [online] Available at:
http://cks.univnt.ro/download/cks_2021_articles%252F5_economic_sciences
%252FCKS_2021_ECONOMIC_SCIENCES_009.pdf (Accessed 23March2022)