fiat pest | Supply Chain | Car

The FIAT Case: a Therapeutical Crisis

Why did we choose to analyze Fiat? Our interest and curiosity arose when we thought about the agreement that Fiat signed with GM…at the end, this one preferred to pay a huge penalty rather than do business with FIAT. Why was this possible? What were the reasons that brought GM to such a decision? These were the first questions we had and with this work we have tried to give us, through the support of specific tools, the answers we were searching for. Fiat Auto was one of the founders of the European motor industry. With this work, we want to understand the reasons why the company has run into a huge crisis. This situation has deeply damaged Fiat reputation in the period 2000-2004. This had logically bad consequences on sales and profit. We propose an introduction of FIAT to understand the historical and economic evolution of the company. Then, it is fundamental to understand the characteristics of the automotive industry that plays a huge role in the world economy. In this section, we will analyze the main actors, the increasingly importance of suppliers in the industry value chain, the great opportunities that stems from emerging countries, the importance of investments in corporate strategies and the environmental commitment. The tools we have used are: the PEST analysis, the Porter’s Five Forces analysis, the FIAT Value Chain and the SWOT analysis. On the base of the SWOT analysis, we propose a ray of strategies in order to overcome the crisis of 2000-2004. These proposals are compared with the 2005 strategy that has been really implemented by the company. Finally, we underline what, according to our analysis, is in line with our conclusions and what diverges.
Lugano - 02.07.2006 – USI - Corporate Strategy SI 2005-2006 – Prof. Erik R. Larsen

by Vincenzo Cammarata, Veronika Kurucz, Valentina Maj, Aleksandra Pavlovic, Katherine Portmann

Table of contents Prologue 1. The FIAT Group
1.1 1.2 Focusing on FIAT Auto Products and Services p. 7 p. 3 p. 4

2. The Automotive Industry
2.1 2.2 2.3 2.4 2.5 2.6 2.7 2.8 2.9 2.10 Economic Importance Industry Value Chain The main actors The great importance of suppliers The opportunities coming from the new markets Competitiveness and international markets Internationalization: investments and corporate strategies Consumers The environmental approach: the manufacturers’ contribution The P.E.S.T. Analysis of the Industry

3. Analyzing FIAT Auto
3.1 3.2 3.3 3.4 FIAT Porter’s Five Forces FIAT Value Chain S.W.O.T Analysis Drivers for Strategic Solutions

p. 13

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4. Recent adjusting actions in FIAT house
4.1 4.2 “La grande auto torna a parlare italiano” The turnaround year: 2005

p. 24

Epilogue

p. 26 

© 2006 - The FIAT Case: a Therapeutical Crisis by Vincenzo Cammarata, Veronika Kurucz, Valentina Maj, Aleksandra Pavlovic, Katherine Portmann for Università della Svizzera italiana, - Corporate Strategy – Prof. Erik R. Larsen – SI 2005-2006

Erik R. The prospect of absorbing FIAT Auto and its heavy debt load contributed to fears that GM's credit rating would be downgraded.  The Wall Street Journal.   . . But.  fig. Veronika Kurucz. Larsen – SI 2005-2006   burden for the ongoing Wall Street downfall of the Detroit’s group? (fig. 1)  to bolster its unprofitable European operations. what were the real reasons behind this decision? Why GM preferred to pay a penalty rather than proceed with the Alliance? Was the crisis of Fait so evident and desperate to the extent that also the American company became anxious? Maybe was there the sensation that FIAT could Let’s analyze FIAT strategy and identify the drivers for the wished rebirth of the Phoenix. 2005 Fearing FIAT 3 The rumors before and the official news after confirmed what was known since the end of 2004: the reverse of General Motors on Mega-Deal with FIAT Auto SpA.99 Billion To Settle Dispute Over Alliance Under the deal reached yesterday.The FIAT Case: a Therapeutical Crisis by Vincenzo Cammarata. Aleksandra Pavlovic.1 – Stock quotes for FIAT SpA (FIA) comparing to GM and Toyota share on NYSE from 2001 to 2006 . Katherine Portmann for Università della Svizzera italiana. The alliance signed by the two OEM’s in 2000 was part of a strategic plan aimed at reinforcing the giant of the US automotive industry but threatened by Toyota. Valentina Maj. FIAT is giving up its right to force GM to buy the 90% of the Italian company's ailing auto unit that it doesn't already own. The agreement also preserves GM's access to FIAT technology it needs By Gabriel Kahn in Rome and Lee Hawkins Jr.Prologue «GM to Pay FIAT $1. and at saving the last glorious symbol of the historical Italian industry. in Detroit. Feb 14.Corporate Strategy – Prof.

aeronautical engines and. in more recent years. agricultural tractors. This new structure of the Group. Katherine Portmann for Università della Svizzera italiana.Corporate Strategy – Prof.1. Today. the company has made up of nine Operating Sectors: Automobiles.The FIAT Case: a Therapeutical Crisis by Vincenzo Cammarata. But in more than one century. marine engines. ensures a total focus on the automotive industry. Valentina Maj. expressed by its commitment to all forms of mobility for people and goods: from cars to trucks. Metallurgical Products. a positive net result of more than 500 million euros in 2006 and operating profitability that accounts for 5-6% of total revenues in 2007. Larsen – SI 2005-2006   . also with Business Solutions (service company of the group) and ITEDI (Publishing & Communications division of FIAT Group). Commercial Vehicles. The FIAT Group  FIAT was one of the founders of the European motor industry. . Publishing and Communications and Services. Aleksandra Pavlovic. as seen in the technological quality of its products and the advanced production and organizational solutions it adopted. Agricultural and Construction Equipment. FIAT is now committed to carry out a turnaround plan which envisages the achievements of the operating breakeven in 2004. In 2003. In fact the company interpreted its vocation for the motoring world in an original manner. Production Systems. Erik R.2 – FIAT Group after 2003 restructure is a clear vertical integration model . Following the conclusion of important transactions aimed at the financial and industrial strengthening of the Group. Automotive Components. Veronika Kurucz. FIAT has meant much more than cars alone. Ferrari and Maserati. the Group restructured its core business area by focusing on manufacturing and service activities of the traditional motor vehicle sector.activity. space launchers. 4 fig. Right from the outset the company pursued two growth strategies that became the cornerstones for its later development: a strong international vocation and an innovative spirit.

2% over 2003. On the light commercial vehicle market. it built its first car in 1899. Since then.1 Focusing on FIAT Auto ne of the pioneers in the car industry. it has produced approximately 87 million cars and light commercial vehicles and many of its models marked important milestones in the motoring history. Erik R.000 units. Turkey. twice by Alfa Romeo and once by Lancia. Alfa Romeo.8% over the previous year that confirmed FIAT's leadership in Italy and many other countries. The real star of the season. Larsen – SI 2005-2006    . FIAT Auto's sales increased by 4. . the car industry’s most prestigious recognition worldwide. Valentina Maj. FIAT Auto put five new cars on the market in 2004. all distinguished by their innovative content. the FIAT Idea with the Dualogic transmission. the combination of spottiness. South Africa. Egypt.The FIAT Case: a Therapeutical Crisis by Vincenzo Cammarata. technology and elegance in a unique design. Veronika Kurucz.2 Products and Services in order to sharpen its competitive edge. though. The award has been won eight times by FIAT. style and manufacturing solutions: FIAT. Lancia. FIAT’s range of light commercial vehicles was also reinforced during the year with the Ducato Model Year and Doblò Cargo versions. known for its creativity. Brazil and Argentina. which features an elite and exclusive line of models. and the FIAT Stilo equipped with a 100 horsepower JTD engine. a gain of 9. Attention was also devoted to improve existing models. India. the FIAT Punto bConnect with standard satellite navigation system. China and Vietnam. FIAT Auto activities include sales financing and a broad array of support programs for customers and the dealer network. Commerciali Leggeri To round out the range of products and services offered. was the New . which mark the brand’s return to all-wheel drive. In 2004. to extend the product lineup with new versions: the Lancia Ypsilon with the DFN robotized automatic transmission. these new models included the Lancia Musa compact MPV. Aleksandra Pavlovic. Katherine Portmann for Università della Svizzera italiana. and FIAT Veicoli gratifying working experiences. 1. the Sector sold a total of 271. Well received by the public.Corporate Strategy – Prof. FIAT Auto has plants in Italy. 5 On eleven occasions FIAT Auto models have won the Car of the Year Award. versatility and practicality. Manufacturing is also carried out through either joint ventures or licensing agreements in France.1. the New FIAT Multipla – restyled and an even more lavish array of standard and available features – the Panda 4x4 and two Alfa Romeo models: the new 147 and the Crosswagon Q4. FIAT Auto operates in international markets under four brands. Poland.

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reinforced its leading position on the Italian long-term rental market by setting up a new business unit specialized in equipped light commercial vehicles. 6    . jointly owned by FIAT Auto and Enel. In vehicle rentals. focusing in particular on improving the profitability of new contracts. Through its subsidiaries and joint ventures. together with the New FIAT Punto. the year 2004 saw important improvements in the distribution network which has now 72 outlets (eleven of them in the Italian major airports). through an agreement with AdamOpel AG. Savarent acquired 14.000 new contracts during the year and this confirmed its important role as a captive company operating through the FIAT Auto dealer network. FIAT Auto went on providing financing services to dealers and suppliers in 2004. In short-term vehicle rentals.nd technological features that brought further improvements in ride comfort and safety. Leasys. Moreover. when an agreement was signed which will enable FIAT to enter the SUV market with a vehicle produced at Suzuki’s plant in Hungary. is one of the new models with which FIAT Auto plans to take the market by storm in 2005. Solid preparations for continuing to renew the FIAT Auto product lineup were also made in 2004. the Alfa Romeo 159 and the Alfa Brera. the sector’s subsidiaries and associated companies used their efforts to upgrade the sales and service network. The latter. the Opel Epsilon architecture will be used for the New FIAT Croma.

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Veronika Kurucz. Larsen – SI 2005-2006 . Valentina Maj. Aleksandra Pavlovic. Katherine Portmann for Università della Svizzera italiana.      © 2006 .Corporate Strategy – Prof.The FIAT Case: a Therapeutical Crisis by Vincenzo Cammarata. . Erik R.

2 Industry Value Chain its own production. We must not forget all the effects on the automotive repair and maintenance services. In fact. the United Kingdom (11%). the metal working industry. The Automotive Industry 2. 2. . high-tech manufacturing (mechanical and technical engineering. Within the EU. including R&D and IT services. Italy (7%).1 Economic Importance motive industry is one of Europe’s major industries. These links through the value chain demonstrate the importance of the automotive sector as an engine for growth and employment. Aleksandra Pavlovic. Erik R. electronics. Katherine Portmann for Università della Svizzera italiana. Larsen – SI 2005-2006                              . The largest producers are Germany (which accounts for 45% of EU value added in motor vehicles production). these six countries account for about 93% of motor vehicle production within the EU. There are also strong links between car production and several service sectors. plant and equipment. 7 the automotive industry generates economic activity in other sectors: we can underline the large importance of inputs from other sectors in the production of motor vehicles. and so forth) chemical products and rubber. There are high levels of investment in fixed capital. Motor vehicle manufacturing is an investment-intensive industry. this has an impact on other sectors: steel production.2. As a consequence. Spain (7%) and Sweden (6%). the main impact of an increase in the final demand for cars is visible in the automotive sector where the production of automotive products increases. Together. France (17%).The FIAT Case: a Therapeutical Crisis by Vincenzo Cammarata. – Value Chain Scheme of the Industry : new challenges requires new production system. Veronika Kurucz. since these services are contracted through final users of vehicles. financial services.Corporate Strategy – Prof. the production of motor vehicles is concentrated in a few countries. It contributes about 6% to total European manufacturing employment and 7% to total manufacturing output. Source Deloitte Research . transport and trade. Valentina Maj.

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China and Russia. and niche markets has increased as larger companies are now present in all of them. manufacturers have transformed themselves from automobile companies to automobile groups. and Japan. Suppliers are assuming more and more responsibility for different parts of the value chain. Katherine Portmann for Università della Svizzera italiana. Within the Europe.4 The great importance of suppliers ned by the fact that the manufacturer and supplier partnerships are now indispensable. The largest twenty supplier companies fall into four geographical groups dominated by UK. Larsen – SI 2005-2006         . Considering the passenger cars for the world market. For instance.3 The main actors characterized by large internationally owned manufacturers and suppliers as well as a number of small and medium sized companies which meet the criteria of component suppliers. Veronika Kurucz.Corporate Strategy – Prof. Established automakers were able to participate in these markets by shipping car kits that . As a result. Therefore. can form the basis of other industries that eventually could upgrade the general well-being of the total country. France. Aleksandra Pavlovic. Europe’s share is 37%. Ford. followed by General Motors. Volkswagen. . Valentina Maj. An important reality that can not be underestimated is the saturated status of the Western automobile market where there is not much more to gain. once established in these countries. these countries used high tariffs to protect the fledgling auto industry that they were trying to develop. Germany has the highest production share (29%). Despite the decline in the number of car manufacturers. In terms of cars produced. Germany. 8 2. The search for scale and scope economies by large manufacturers and the difficulty for smaller ones to sustain the investment race have led to an ever increasing number of independent manufacturers in the market. The automotive industry. local. 2. These can be found in the Third world countries. In the past. Honda.2. The leading car manufacturer is Toyota. Mergers and Acquisitions have played an important role in the process by giving instant access to particular regions and niche markets. Another important issue that has been underlined by many Western car manufacturers is the one related to remain viable in the future and this implies to develop the capability to do business in other existing world markets. China is regarded as the market with the highest overall potential and Russia is attractive for its size and proximity to the EU. followed by France (18%).The FIAT Case: a Therapeutical Crisis by Vincenzo Cammarata.5 The opportunities coming from the new markets characterized by many developments that have accelerated in the last decade with the opening up to international competition of new and increasingly important markets such as Eastern Europe. the number of independent manufacturers decreased from 36 in the seventies to 14 in 2003. Spain (13%) and the UK (9%). it is necessary to find new markets. Erik R. competition in the regional. followed by Asia-Oceania with 35% and America with 21%. Europe leads with a share of 42% of world production.

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Japanese brands are the largest external players on the European markets. The majority of trade of European automotive companies happens within the EU. followed by France. As we can understand. Erik R. German brands hold the third largest share of the US market. .the developing countries were able to assemble in their own plants. Valentina Maj. Because of the volume. Not only do motor vehicle producers realize sizeable shares of their sales abroad  © 2006 . while Italian and UK market shares declined.g. the US manufacturers are not. considerably ahead of Korean brands.7 Internationalization: investments and corporate strategies nvestments abroad are a very important factor. Consequently. and only some German brands have made recognizable inroads into the Japanese market. that is. 9 2. the most prominent feature is the strong performance in international markets of Germany across all market segments.6 Competitiveness and international markets and. but all significantly below the US. The European market is dominated by European brands. The Japanese brands control almost completely the Japanese market. at the same time. use people and ideas globally. For these reasons. Large American manufacturers serve the EU markets mostly through their European branches and hence brands (e. 3) Responsiveness obtained by adapting to local customer demands. In the US market. no appreciable skilled labor force developed. These are markets from which you can expect growth. 2) Knowledge leverage. Opel). This is logically facilitated by the single market. In contrast. Korean brands gained considerably in the US between 1998 and 2002. Aleksandra Pavlovic. Between 1998 and 2002. the kits were very expensive. The German automotive industry is the most active in Europe. American brands hold the largest share. Spanish firms are also growing successfully while Italy and the UK have lost market share. and Japanese brands hold a sizeable. Larsen – SI 2005-2006 .Corporate Strategy – Prof. while traditional American brands might be absent from the European markets. the brands are still considered to reflect some national identity. Italy and the UK. But this arrangement did not work too well. Evidence of corporate strategies towards internationalization beyond exports can also be found at a company level. and the assembly of the kits required only unskilled labor. The benefits that derive are different but the most important ones are: 1) Efficiency reached with global economies of scale. but declining stake. Katherine Portmann for Università della Svizzera italiana. Veronika Kurucz. these countries represent a significant chance for auto makers in order to discover untapped opportunities. advantage of location. 2. followed by France. German and French brands hold the largest share. From a European perspective.The FIAT Case: a Therapeutical Crisis Vincenzo Cammarata. FDI have become a significant element in corporate internationalization strategies. FDI in influential regions seem to be an appropriate mechanism in order to open up a more efficient channel for companies to harness these forms of tacit knowledge abroad. Therefore.

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forth) that influence people to buy a car. This is very important in the European Union where the Automobile Manufacturers Association negotiated a voluntary commitment with the European Commission in order to reduce CO2 emissions. Swedish. they are satisfied with their home brands and this is reflected in their intentions to buy. The demand advantage can become a competitive advantage for those manufacturers that have complete access to the relevant market and customer information. Valentina Maj. According to the Kyoto protocol the European union must reduce greenhouse gas emission by 8% . Aleksandra Pavlovic. car manufacturers offer a startling variety of different models. This fact certainly reflects a country’s wealth but also its general tendency to treat cars as a status symbol. cars have also become an element of style through which their owners can express their individuality. Interesting is the strong affiliation of French and German car buyers towards brands that originates in their respective home market. Many countries throughout the world take measures to reduce the specific emission for vehicles. It is appropriate to consider a brand perspective since the brands are the primary channels through which customers recognize manufacturers. In addition. this is a very important source of advantage that every company should build and exploit. BMW and Volvo).Corporate Strategy – Prof. There is evidence that this demand advantage in the home market plays an important role and it is fundamental to create success abroad. . For Italian. In particular.The FIAT Case: a Therapeutical Crisis by Vincenzo Cammarata. One of them is the relationship of owners towards their car. In addition. Erik R. the traditional car producing countries have implemented legislation or have set targets in order to increase fuel efficiency of cars. and British brands this link is weaker and customers are less focused on domestic brands but keep a strong interest in other EU brands. but others have gained significant relevance. This suggests an atmosphere of trust into cars that are domestically built and designed. the need for transportation should be the primary cause. . Therefore. Katherine Portmann for Università della Svizzera italiana. To meet this need. Obviously. 10 community.icant assets there ( especially for Honda. Veronika Kurucz. As far as Japanese consumers concern. Larsen – SI 2005-2006                     .

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social. Honda. and so 2. Toyota. FIAT) accompany their international market orientation in sales not only with investing in assets abroad but also with transferring employment out of the home market. knowledge and responsiveness).          most manufacturers (Volvo. Their corporate internationalization strategy is based on all leverage points (efficiency. 2. there are different aspects (individual. Volkswagen.9 The environmental approach: the manufacturers’ contribution  . economic.8 Consumers Considering passenger cars.

including the following new members: Cyprus. social and technological ones. However. . Slovakia. some large countries have not ratified the protocol yet. The Block Exemption for Cars1 11 Estonia.Corporate Strategy – Prof. Czech Republic. Katherine Portmann for Università della Svizzera italiana. Hungary.What is interesting to underline is the fact that manufacturers dedicate research work in order to develop promising technologies for the reduction of CO2 emissions. Lithuania.S. However.  2. Larsen – SI 2005-2006     ). Poland. economic.10 The P. including the EU and its member states. (The demand tends to be less elastic in countries where the revenue per capita is lower). have deposited their instruments of ratification. Economic factors automotive market is growing rapidly: sales increased by 69% reaching 1 2 EC Competition Law (Articles 84 and 85) Enforcement Regulations 2001 KOF ETH 2005 . important scenarios can be created and the corporate strategy shaped. Slovenia. more than 100 countries. As far as environmental restrictions regard. and 20072) has been driven up. the demand is price elastic and the good is perceived as prime necessity. Malta. Veronika Kurucz. Erik R.1 Political factors emissions by 8% compared to 1990 levels in the period of 2008–2012.The FIAT Case: a Therapeutical Crisis by Vincenzo Cammarata. as implicit information will come to the fore. The dimensions that are considered are the political. Considering the distribution in the automotive industry. On the base of this analysis. Another fact to take in consideration is the enlargement of the European Union May 2004 grew from 15 to 25 States. car producers do not carry out the distribution of their products by themselves but they organize it through a dense network of authorized dealers whose function is to resell the products to the final consumer.E.10.T. the strictest market is the EU. 2. Analysis of the Industry influence the performance of FIAT and the car industry as a whole. since petrol and cars are complementary products. Aleksandra Pavlovic. Valentina Maj. Latvia. This fact has effects on the car demand. Funding for this work is sought from the European Framework Program for Research and Development.

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other  $ known as the "peak oil"6 fuel cells. by government policies. while sales of buses doubled at the same time. Valentina Maj.10. . countries (like Iceland) hope to be self-sufficient in energy in another 40 years by using hydrogen 2.4 Social factors according to China Academy of Social Sciences 2006.9% is the actual growth transportation which is also supported in Europe. The consumer behavior 4 5 6 7 .a scenario .45 million cars3 . In the production of urope leads with a share of 42% of the world production. China will be the third largest WTO this means both a threat for FIAT.1. Larsen – SI 2005-2006  . According to the forecasts. A relevant factor is that *''&   ina has joined the to market internationally and an opportunity since FIAT can trade much easily).3 Technology global oil production will peak and demand will outstrip production . Veronika Kurucz. Another arising issue is the people to use public        middle class is growing ng pace. since the growing giant has more opportunities market for automobiles by the end of the decade4. car makers are researching into alternative fuels.The FIAT Case: a Therapeutical Crisis by Vincenzo Cammarata.5 2. Sales of commercial vehicles increased by 30% between 1999 and 2002.Corporate Strategy – Prof. 11.10. Erik R. for instance. followed by Asia-Oceania with 35% and America with 21% (2002). Aleksandra Pavlovic. Katherine Portmann for Università della Svizzera italiana.

Association for Study of the Peak Oil land Gas. 2005 Survey conducted by the US firm Fleishman-Hillard International Communications in 2003.  3 Resources Asia.2003 The German Association of the Automotive Industry (VDA): World Auto Statistics. 2003 ASPO. 2003 The German Association of the Automotive Industry (VDA): World Auto Statistics. +    as the  September . $ .

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The first group involves the Italian component suppliers which rely on the FIAT Group for their business. Analyzing FIAT Auto 3. we want to mention the double situation referring to suppliers' power. In the FIAT value chain analysis we will discuss about the “rules” on which supply is based. from Japan and Korea) that has obtained part of the FIAT's domestic market share.1. In this group there are firms. especially in labor costs. different components and the labor required by the producing industry. Larsen – SI 2005-2006   3. In this section.2 Supplier power Suppliers provide raw materials. . there is a strong competition coming from abroad (in particular.1. FIAT began to look seriously at cutting components costs and outsourcing more contracts in the 90s. Valentina Maj. By understanding the need for smaller supplier networks and just-in-time delivery. Katherine Portmann for Università della Svizzera italiana. FIAT began to concentrate on larger tier-one suppliers who would absorb much of the R&D costs necessary to develop components. In the . In a constantly changing market.Corporate Strategy – Prof. For instance.1 Competitive rivalry within the industry  . 3. Suppliers of FIAT have been divided into two categories. Aleksandra Pavlovic. investments abroad can become a significant factor in corporate internationalization strategies by exploiting comparative advantages in foreign countries.1 FIAT Porter’s Five Forces 13 There is an intense rivalry between firms in the automotive industry because of the concentration both on the national and international markets. At the same time. Fiat could do profit by cutting costs and through alliances with other car makers such as Ford and the Indian group Tata Motor.The FIAT Case: a Therapeutical Crisis by Vincenzo Cammarata. FIAT pursued advantage over its rivals is product differentiation by improving features and implementing manufacturer process innovations. such as Magneti Marelli and Teksid that are subsidiaries of Fiat and economically dependent on it. Veronika Kurucz. Erik R.3.

    . In recent years. FIAT has tried to expand its production abroad and so it has fostered the possibility of international expansion of many Italian suppliers as well.there are hundreds of smaller firms that are usually dependent on Fiat but in a more indirect way.

the priority is to improve the buyer power and in order to reach this goal FIAT has introduced a new dealer training: “We and our dealers must improve the customer experience. Furthermore. However. Fiat is pursuing a strategy by expanding its portfolio. and BMW are groups that have developed multi-brand marketing strategies in order to serve different customers in different markets. firms can choose to merge in foreign markets like India. the consequence can be price competition. GM. The pattern is to emerge in the global economy which is characterized by a very small number of large players. In fact. FIAT has to be able to manage brand identity in order to avoid the threat of new entrants. The crisis of FIAT Auto is also due to the inefficient management of the brand. Firms can choose to merge in order to avoid barriers to entry in new markets.   . such as Renault and Nissan. barriers to entry could also exist. give better customer satisfaction and we now have the right models for them to sell.5 Threat of substitutes  products inside the industry. In the automotive industry. FIAT lost many costumers because some FIAT models were perceived as unreliable and because spare parts were difficult to get and often very expensive. In the automotive industry. The FIAT marketing strategy revealed to be weaker than that of many competitors and this condition was made worse by the trend that took place in the last ten years. 3. The situation raises much more concern if we consider the fact that FIAT models’ popularity and sometimes even availability is weak elsewhere in Europe (excluded Italy) and as a consequence. Now. Toyota and Honda merged and many of them find themselves in a very complex cross-ownership network. Ford. As Giulio Salomone recently pointed out. Almost all the major car companies.4 Power of costumers The power of costumers is the impact that buyers have on the producing industry. The success of FIAT depends on having the ability to give the company a serious position on the market on the base of tangible assets and creating different categories of cars such that buyers can find the input to compare various models of different brands.”8  3. Even style-conscious Italians started looking elsewhere for their wheels and. These barriers can reduce the rate of entry of new firms and maintain a level of profit for all the other firms in the industry. Although FIAT has launched the new Punto last year (September). as a consequence.1. All of them are now working on new distribution channel strategies as part of their product differentiation on the market. many firms such as Volkswagen.1. 8 Threat of new entrants he possibility that a new firm can enter the market influences competition. it has to face tougher competition when rivals such as Peugeot and Opel will launch their own city car models. In the international markets. the new Fiat Punto seems to be the only ray of hope for the company to foster the FIAT Auto in doing profit. and thus creating new relationships with other companies. it is difficult for the company to become a strong competitor and substitute for the other car makers in the industry. the share of FIAT on the Italian market decreased considerably.

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Valentina Maj.    http://www.just-auto.The FIAT Case: a Therapeutical Crisis Vincenzo Cammarata. . Katherine Portmann for Università della Svizzera italiana.Corporate Strategy – Prof.com/news_detail. Larsen – SI 2005-2006      . Erik R. Aleksandra Pavlovic.asp?art=50758  © 2006 . Veronika Kurucz.

. Erik R. Larsen – SI 2005-2006                        15 FIAT R&D is essentially carried out in two centres: CRF and Cento Stile . the centre is engaged in research to find solutions for environmental protection. Katherine Portmann for Università della Svizzera italiana. Kearny Italian Industries. that . particularly in terms of reducing overall vehicle fuel consumption and emissions.2 FIAT Value Chain 4 – Weights and Considerations after our FIAT Value Chain analysis. emissions control and efficiency.1 Research & Development CRF was founded in 1976 as an Engineering Centre providing R&D services to each of the different companies within the FIAT group. and by the Italian newspaper Il Sole 24 Ore Confindustria As far as the Environmental matter is concerned.2. The commitment of CRF is demonstrated also on a European level: together with other European car makers and component manufacturers. This is in line with the introduction and diffusion of the increasingly stringent emission legislation. Aleksandra Pavlovic. The prototype. Veronika Kurucz. The centre presents high quality and this is confirmed by the awards it won.The FIAT Case: a Therapeutical Crisis by Vincenzo Cammarata.T. One interesting achievement of FIAT Research Centre in 2004 was Stop & Start prototype which uses a new power plant control device aimed at shutting off the engine and re-start it automatically at traffic lights or during stop-and-go driving and deceleration. The FIAT environmental commitment has been proved by the results gained in 2004 by putting a range of products on the market whose environmental impact was lower than before in all the three key areas of fuel economy. An example is “Italy 2004-Best innovator award” promoted by A.Corporate Strategy – Prof. 3. . Valentina Maj. the FIAT Research Centre participates in two 15-year-projects co-funded by the European Union to promote the introduction of hydrogenpowered vehicles. Research addressed the pressing need to reduce fuel consumption and hence CO2 emissions.

FIAT lacks of the fundamental ability of understanding customers’ needs and tastes. Katherine Portmann for Università della Svizzera italiana. Valentina Maj. many are the issues that we must take into account while considering the role and the impact of R&D on the FIAT crisis within the period 2000-2004. This is an issue of huge concern because Marketing is the one that gives information about customers’ needs. The so called “supremacy” of Engineering can be recognized in the Centro Stile as well. cuts fuel consumption by over 20% under particular severe traffic conditions and provides an excellent cost-benefit ratio. Larsen – SI 2005-2006       ! $     On the other hand. FIAT must be analyzed in relation to the whole market and its competitors. is the “supremacy” of Engineering over customers’ needs. employees about 200 people and it is divided into specialist departments including Exterior Design. while analyzing this part of the value chain. Design Laboratories in which designers from the FIAT Style Centre can experiment new concepts of car. Second. The most serious problem we have recognized. and market trends. Erik R. and designed a range of products. it has its own premises. The Reality Centre helps to focus on the design quality and in particular on individual details: the process starts at the Style Centre. such as Giugiaro. the Reality centre which is a unique system of visualization of the models. Technical Department. which allows the team to concentrate on each individual component of the model.The FIAT Case: a Therapeutical Crisis by Vincenzo Cammarata. including industrial appliances and fridges. Aleksandra Pavlovic. for this reason we can assert that FIAT cannot invest in R&D as much as its competitors do and this makes the company to remain a step behind to them. and over time it has been transformed into an articulated organization dedicated exclusively to the automobile. This centre is characterized by the presence of very qualified people and great designers. where the individual details are studied. Another issue is related to the financial problems that FIAT is facing during the years we are considering. .Corporate Strategy – Prof. there is was part of the FIAT   . 16 . Although these centers reveal to be qualified and oriented to the development of innovations. The requests of Marketing are often rejected because considered as wrong from an engineering perspective. Veronika Kurucz. such as VW and BMW which invest huge amounts of money in R&D and innovations. As many analysts have underlined.has been successfully tested. expectations. Today. but the style reveals to be submitted to the engineers’ instructions. Real debates and exchanges of perspectives among experts are encouraged by the centre that finds in this “open system of exchange” the right way to discuss about new technologies and innovations. this is relevant in order to produce and offer car models able to satisfy customers’ expectations. and then switches to the visualization by the Reality Centre. Interior Design and trim and Colour Design First. An important aspect that characterises this centre is the constant involvement of specialists and experts.

second. Poland. Toyota has achieved this goal by focusing on the development of relationships based on loyalty and on the fact that everyone (manufacturer and supplier) want to reach the same goals. Manufacturers  the partnership between suppliers and manufacturer fundamental but. it will bring to lower quality and impoverished brand identity in the long term.The FIAT Case: a Therapeutical Crisis Vincenzo Cammarata. as a consequence. this policy leads to lower costs in the short term but. into the action of firing employees. Nevertheless. analysts were wrong: the situation turned out to be not so attractive and this was mainly due to their economic weakness. FIAT started to face a very serious crisis: FIAT had invested a lot in trying to develop economies of scale. In order to understand this concept we want to show the case of another car company. such as Brazil. we can understand that FIAT has clearly implemented a wrong outsourcing policy that leads the company to develop only a short-run perspective rather than a long-run one. In fact. This policy. since there are not integration and scope economies. at the same time. Thus. Another important implication of the FIAT outsourcing process is the reduction and impoverishment of the internal know-how and competencies. Valentina Maj. that is a  © 2006 . that has successfully implemented this policy. FIAT seems to have lost the control of the value chain itself. Turkey. according to analysts. there is an increase in the complexity of the value chain and.Suppliers is conducting an outsourcing policy that splits the operative and productive cycle into lots of segments. Aleksandra Pavlovic. In the following paragraph we want to show the role of suppliers and the outsourcing impact on FIAT. Firstly. on the model of the big US car companies. The aim of FIAT was that of building a “world car”. This makes manufacturer becomes more and more dependent on them. Katherine Portmann for Università della Svizzera italiana. Toyota has shown how the outsourcing trend does not necessarily mean an impoverishment of the traditional supply. they showed the highest growth rates. At those times. This is interesting if we consider two aspects: first. the by establishing plants in the emerging countries. Larsen – SI 2005-2006       Since the beginning of the 90s. This has serious social implications that translate. In this context. For all these reasons. these countries were very attractive because.Corporate Strategy – Prof. the success is even greater if we consider the fact that Toyota delegates the greatest part of the production of the car to its suppliers. This efficient system has been reached through the awareness of belonging to the same “system” and of being committed on longterm relations. FIAT has focused its attention on an internationalization trend . and India. The Toyota success is far from the FIAT situation in which the negative implications related to the wrong implementation of the outsourcing are emerged and have caused lots of problems. has many negative implications. Erik R. if wrong implemented. the importance of suppliers is constantly increasing within the value chain. the outsourcing has brought lots of benefits to Toyota. This is mainly due to the fact that the company is increasingly loosing control on the value chain. Argentina. Toyota. . for instance. Veronika Kurucz.

FIAT to encounter huge debts because its investments were concentrated in achieving these productive goals. As a result. we can assert that this behaviour reflects the short-run view that characterizes FIAT during these years. accessories. Another manufacturing issue is represented by the overproduction in cars for high and medium segments. joint with the problem of overproduction. Larsen – SI 2005-2006                 . Katherine Portmann for Università della Svizzera italiana. Marketing FIAT value chain. Erik R. Valentina Maj. This trend can only bring the customer far from the FIAT product. This logically deprives quality from investments and makes innovation more difficult to develop.  Marketing is not considered as a way to improve products by understanding customers’ needs. and on everything that can give FIAT the chance to sell one more car. but rather as a way to convince people to buy something which is far from their expectations. This leads FIAT to sell many cars and models off. The result is the FIAT’s attempt to build something which is perfect from an Engineering perspective but absolutely far from customers’ needs and tastes. the standardization of car components was radically reduced. In addition. Aleksandra Pavlovic. Veronika Kurucz. An important evidence of what we have stated is FIAT’s advertising. As we have previously asserted. As many analysts have pointed out. many have underlined that FIAT quality-price ratio is perceived as too high and this. zero-kilometre-cars. promotions.  © 2006 . Moreover.The FIAT Case: a Therapeutical Crisis Vincenzo Cammarata. This situation has lots of implications on the FIAT crisis that occurs in the period 2000-2004. In addition. This leads to concentrate investments in volumes rather than in innovation and the consequence is lower quality. . This inevitably leads to car models characterized by a low quality and not competitive. we assert that FIAT tries to implement economies of scale and focuses on volumes. this can be considered as evidence of the fact that FIAT is not customer-oriented. At this point. FIAT’s advertising seldom focuses on the product (on the car) it is “offering” to the customer. Another consequence of this kind of Marketing strategy is that the brand is constantly loosing its identity and people do not know what the brand stands for. This can be observed in the FIAT models that are mainly sold among the lowest customer segments. There is no partnership between Marketing and Engineering and what is of huge concern is that the “supremacy” of Engineering over Marketing is very strong. FIAT tries to implement economies of scale on the model of the big US manufacturers but it has not the financial power to sustain them. FIAT is not able to use Marketing as an important source in order to understand market trends.Corporate Strategy – Prof. At this point. The consequences are high inventories and high stock inventory costs. It always concentrates its message on discounts. the concept of the “world car” was in conflict with the necessity to satisfy local needs. makes the inventory increase with high costs due to the stock. This is intended to do little profit in the short term but not oriented to be profitable in the long-run.

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and other financial services. such as 500. An attempt to meet customers’ needs is represented by the Configure-to-order policy. They are the lens through which the client looks at FIAT. On the other hand. there is an aspect that causes concern: the lack of customer orientation. S3 . are evocative of the glorious age of the Italian style. than the previous era of the Agnelli brothers. This one belongs to the FIAT group and it guarantees to the company a higher presence on the market through loans.Made in Italy. Great names and designers. Weaknesses s too seriously the concept of “mature $     . This is an important evidence of FIAT being present in many different fields. such as Giorgetto Giugiaro. In many circumstances. Another positive factor related to this part of the value chain is the insurance company. This aspect is positive because the presence of FIAT is guaranteed and this ensures the customers to find FIAT cars easily and to have assistance when they need. FIAT has shown a culture which is far from customers and dealers and this is a serious issue because dealers represent FIAT and are the channels in order to reach the market. Toro. Some models.Dealers and Service are organised in a dense network. plants abroad. leasing.

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projecting reductions of costs. selling off. The inefficiency of the management is underlined by its inability to give the FIAT a serious position on the market. Lack of sensitivity ave noticed that FIAT seems not to be able to understand what happens around. What people perceive is a high ratio quality-price and this is an important evidence and result of an inefficient management. The consequence is the abrupt and disastrous reaction of the company that tries to survive the crisis by firing people.   W1 market” and so focuses on services. and so forth. Another important consequence is that this kind of   . The problem is the lack of the important ability of understanding the symptoms that anticipate problems. assistance and price cuts (through promotions) more than on innovation and brand asset management.

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Analysis  19 -minded .T.3.W.O. 3.     S1   dealers of FIAT present both positive and negative aspects.1 Strengths A brand with a strong historical value   An important aspect to remark is the presence of a great number of dealers and retailers which 3 S.  S2 Evocative power FIAT golden years (50s and 60s).

third. Marketing is weak. FIAT reveals to be The “supremacy” of Engineering. second. Companies need to be prepared to first define the overall approach to collaborative commerce and ensure it align to strategic objectives.  .  creating value through collaboration. the lack of cooperation and commitment to achieve the same goals. while maintaining flexibility for future growth and requirements. . Katherine Portmann for Università della Svizzera italiana. Erik R. The Chinese automotive market is growing very rapidly. although it has not the financial power to of manufacturers on suppliers. Valentina Maj. Market size. In so doing.The beneficiaries from the and the strengthening of existing relationships. tries to implement economies of scale. and so forth…have negative implications. It is considered as a way through which sell something which is far from customers’ expectations. . be perfect from an engineering perspective. manufacture and marketing of cars has historically been defined by the efficiency and internal capabilities of vertically integrated Original Equipment Manufactures (OEMs) and a few key suppliers.Trend towards free trade. Europe as a major player in automotive trade should be among the prime . . The strategy should guide the prioritization of the portfolio of initiatives and roadmaps. manufacturing. First.The . arketing is not considered a relevant source in order to understand customers’ needs and market trends. A weak brand identity: nobody knows what FIAT stands for. The strategy: Implementing a collaborative commerce strategy requires more than linking data and synchronizing information. no long-run savings. the lack of integration between them.Corporate Strategy – Prof. Aleksandra Pavlovic. As a major player in international . terms of investments and an improving infrastructure provide the basis for foreign automotive companies. lower quality. Europe has established stable channels that constitute a competitive advantage. Larsen – SI 2005-2006   markets. Automotive companies made huge investments automating and re-engineering design. and marketing processes in pursuit of lower costs and greater efficiency. .The FIAT Case: a Therapeutical Crisis by Vincenzo Cammarata. The potential of the Chinese market attracts not only manufacturers but also the whole supplier industry. As the world trade organisation expands its membership and activities are under way for a new round of trade liberalisation. Veronika Kurucz. Everything is based on . the lack of recognition in the brand.From Vertical Integration to Virtual Integration in the design.behaviour leads FIAT to be always out of step if compared with its competitors and makes FIAT blind in front of the huge changes that are taking place all around. the impoverishment of the internal know-how and competencies.

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Since the security of fuel supply is an issue for many markets.   !  . members offer interesting and profitable production circumstances based. manufacturers must develop products which could reduce CO2 emission and energy consumption. While changes in taste and technology require constant re. Due to the dominant part of motor vehicles in air pollution. European automotive firms are leading in some fuel technologies which can become profitable before the fuel technology is ripe for the mass market. on their labour cost.new opportunities for business and environment. the large experience of European manufacturers with different types of fuels can be of crucial importance for the future. for instance.     4 Threats bility. In addition.

distinguish themselves with an excellent position in different markets.       demand for automotive products.  !  ! .g. Some of those major breakthroughs are on the horizon in the automotive sector. They have potential to make conventional value chain configurations obsolete and subsequently open up opportunities for new competitors. competitive position in global vehicle production and they are strong competitors of European and American companies. However. rebates). the threat of missing groundbreaking innovations is still on the agenda. Producers have largely stimulated demand through extensive sales tactics (e. as manufacturers are in danger of being locked in traditional products and technologies and often ignore revolutionising developments outside their traditional fields of expertise. a prolonged economic downturn at home would threaten the global competitiveness of European automotive industry. Success can breed failure. In some fields like the hybrid engine they lead the market significantly ahead of other manufacturers. Still.

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In the following section. This will be done on the base of our analysis. Aleksandra Pavlovic.Groundbreaking innovations challenge existing excellence in production Major innovation competition from Japanese producers. Katherine Portmann for Università della Svizzera italiana.Corporate Strategy – Prof. Erik R.The FIAT Case: a Therapeutical Crisis by Vincenzo Cammarata. . Veronika Kurucz. 3. Revaluation of the brand equity d on the evocative power of the FIAT golden years (50s-60s) first one is a well defined sports car model Lancia evocative brands of Alfa Romeo and Lancia which are focused brands and well recognizable: the © 2006 . we want to highlight what are the main aspects that the company has to take into account in order to develop an efficient strategy to overcome the crisis during the period 20002004.4 Drivers for Strategic Solutions FIAT has to focus on. Valentina Maj. Larsen – SI 2005-2006      #   .   .   .

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The technology of fuel cells presents       . in Europe   s synonymous of elegance. Overcapacities. On the other hand. New chances and possibilities stem from the     . In recent years European. Due to high labour costs and lagging labour productivity EU producers are not very well equipped for price competition in the standard car segment. the regulatory framework may make this task more difficult and costly.      T1 configurations in the automotive value chain.g. North America and Japanese markets see a sluggish development in demand.    New EU Member States. via mergers.The attention and New technologies and fuels. Both developments may induce world over-capacity and stimulate price competition. a rapid capacity build-up in emerging Asian markets and Eastern European markets is taking place. This may induce additional pressures for consolidation of the industry e.

    process of the EU 21 FIAT must “exploit” the .

not only in also follow the current competitors’ trend aimed at offering to the market historical models with a models l and evocative value they still have. This is important to regain a good reputation and then start a process to develop loyalty and gain new customers. On the base of these strengths.important aspect is the made in Italy which is highly recognized abroad. FIAT can the problem who owned a FIAT car in the golden years. FIAT can overcome many different weaknesses by making its models recognizable. All this helps to create an       $                    . Secondly. FIAT must 5 – The Historical value of the Italian Brand  all the potentials of the Style Centre FIAT can which is characterised by the presence of great designers. This behaviour can help FIAT. Firstly.

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To achieve these goals. That is. promoting an This balanced interaction is aimed at comparing the model’s design and the  . other two related issues must be taken into account: the “supremacy” of competencies and know-how of the Engineering and the Style Centre.

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to the extent implement customer-orientation. discounts. $ efficient and balanced interaction between the team of designers and that of engineers $    engineering problems in order to solve and pre-empt problems. it will lead to a final model with a very high level of quality. special editions (often aimed at selling usually unasked accessories) and so forth have always come before the whole car. Promotions. As a consequence. providing precise data for any changes that need to be made. that is the model the company was selling. How better understand customers’ needs rather than using in an appropriate way the Marketing competencies? Marketing has always been used by FIAT in the wrong way. what immediately passed through advertising to the customer was a “fragmented” perception of the car. Thus. a turn of the screw is needed!  . FIAT to understand what the real needs of customers   that nobody knows what FIAT stands for. high quality is perceived by customers on the base of what they need. If this relationship is well balanced and not characterized by the “supremacy” of the engineers’ instructions. However.

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Marketing plays a fundamental role in achieving this goal because it is one of the most relevant sources of information about the customer and the market trends. Katherine Portmann for Università della Svizzera italiana.The FIAT Case: a Therapeutical Crisis Vincenzo Cammarata.   are and leave the idea that what is perfect from an engineering perspective must be what the customer wants. Erik R. Valentina Maj. Veronika Kurucz. Aleksandra Pavlovic. Larsen – SI 2005-2006     Engineering and the low given to Marketing  .Corporate Strategy – Prof. .  © 2006 .

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According to our analysis. the production of the same chassis on which assemble different car models. As a consequence.  $              . In addition. and more accessorized cars for the developed ones. In the case of FIAT. Thus. Marketing can be an important way to monitor competitors and the whole environment but it is not enough. These economies of scope are important because they allow the company to offer both basic models to the emerging countries’ customers (and this is also enhanced by the fact that the FIAT brand focuses on smaller cars) that do not ask for e. for instance. Many analysts have highlighted the negative impact of an “outdated” top management. Another issue that we have considered is the wrong choice of implementing economies of scale which is mainly due to the presence of FIAT plants abroad. is fundamental in order to obtain lower costs. made up of relatively younger people that benefit from both experience and an “updated” corporate education (which centres on educating people on learning how to be able to react to changes and flexible. The FIAT main offering of utility cars is a strength that must be exploited not only in the sensitive people. FIAT has often shown the inability of reacting environmental and internal changes and this is a huge problem if we consider the fact that the automotive industry is deeply unstable und competitive.the inability to understand what happens all around and this makes FIAT unable to comprehend the symptoms of huge crisis. this must be replaced by the implementation of economies of scope that enable to produce some components that fit different models. the implementation of economies of scope solves the problem related to high stock inventories which cause high costs. these cost savings must be invested in innovation and quality.g. this kind of strategy has not been profitable for FIAT. reactive and able to understand the needs of market segments. such as the younger generations. The solution is to be found in an “updated” top management. air conditioning.

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we want to stress the important commitment of FIAT in the research and development of environmental-friendly vehicles. The role of FIAT is recognized. Erik R.   The outsourcing belonging directly to FIAT. Aleksandra Pavlovic.The FIAT Case: a Therapeutical Crisis by Vincenzo Cammarata. not only on a national level. but also on a European one. FIAT must continue in investing in these innovative technologies because the future is oriented in this way. Katherine Portmann for Università della Svizzera italiana. Finally. Veronika Kurucz. behave as if they were. This strategy is based on two important aspects: collaboration and flexibility. . . Valentina Maj. Larsen – SI 2005-2006                    .Corporate Strategy – Prof.

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Innovation is acknowledgement that the needs of emerging countries’ customers may be different and. as a Italian R&D centres focusing on local requirements without loosing the Italian typical heritage Engineering and Style and this is fundamental in order to offer the customer what he/she wants. became the leitmotif of a multisubject advertising campaign that shows Japanese. Firstly. Lapo Elkan.4. Since 1999. This feeling of nationalism. this one was replaced by the actual circular logo which was the revival of the original art nouveau acronym FIAT (Fabbrica Italiana Automobili Torino).1 “La grande auto torna a parlare italiano” “The great car company speaks Italian again. The previous logo was evocative of the 80’s. Recent adjusting actions in FIAT house is section. And the promise is supported by other initiatives which are completely new for the company: the launch of the Grande Punto and the New Croma on the UK market trough Harrods’ windows and the trendy merchandising and gadgets with the historical brand lettering.2 The turnaround year: 2005 In 2005.  in which “FIAT” was “Mirafiori” plant) it was “gray” and characterized by four 4. which is often “sleeping” in Italy. The color blue became more present in order to communicate the idea of the Italian country and it referred to another big passion of Italians: the national football team which is able to unify and make the “Italian pride” emerge.                           . we want to show if our analysis matches or not with the previous actions done by FIAT and the decisive 2005 strategy that the company has implemented. This is strongly promoted by the young Marketing manager and Agnelli’s successor. a message with a never used tone of voice that shocked the public opinion. This is one of the last statements communicated by FIAT to the customers. Changes can be noticed. German and French people that say “Thanks Italians!”. FIAT concentrates on new engineering and design organization. FIAT seems to understand that a drastic change is needed in order to overcome the crisis.” These words sound like an admission of guilty and a promise at the same time: “We was negligent about our product.    ! 6 – The revival of old logo  4. (period rhombs. FIAT understood that one of the drivers for its rebirth could be the redesign of the Logo. but… we want to remedy”.

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The aspects on which FIAT focuses are simplicity and symbolism which is aimed at rediscovering brand awareness. On the one hand. As we have shown in the SWOT analysis. FIAT signed alliances which were based on projects focused on products. All this is accompanied by the commitment of offering cars which are able to give the customer surprising feeling. development costs and to reach flexibility to retain brand differentiation. In addition. This will result in benefits deriving from economies of scope. One of these alliances is with Ford. this is a step forward because FIAT understands the necessity to lower and medium segments and less on the higher ones             . the FIAT of 2000-2004 was far from the customer and in 2005 we can observe an important change that  can be summarised in only one word: customer orientation. FIAT aims at decreasing product costs by 10 percent.  middle/high education and income levels are the segments that FIAT wants to reach with the 2005 strategy. FIAT and Ford will produce the Trepiùno that is the revival of the 500 and they will share plants in Poland.this way. this strategy enables the company both to obtain substantial reduction in engineering. In order to achieve scope economies advantages.

between our analysis and the 2005 implemented strategy. We have found that FIAT should focus on Distinctiveness that must be based on a Hi-tech care for the product. adopt flexible tactical approach to cleanse and fire up network. this will turn to be another FIAT mistake. We believe that the link with the glorious years of FIAT is fundamental to regain brand awareness and reputation. but at the same time on a Hi-Fidelity to Tradition.  #!       identify specific customers with the same tastes. We believe that much must be invested in increasing the dealers’ awareness of the brand and the feeling they belong to the FIAT family. According to our analysis. if this point is not accurately communicated. The company decides to reposition the brand on the base of two variables: Affordability and Modernity. In this case. the FIAT golden past can become a source of real competitive advantage.              . increase speed and spend in network development are the key aspects of dealer field improvement. FIAT seems to recognize the problem related to dealers. This must be achieved trough training and more attention and confidence in this part of the value chain. The 2005 aim is to reinvigorate distribution capabilities to support production.      forget that FIAT has been always good at producing small cars. Improve dealer economics. FIAT should concentrate on this strength and try to make this one become a real competitive advantage.

Larsen – SI 2005-2006   As far as        . Katherine Portmann for Università della Svizzera italiana.   .The FIAT Case: a Therapeutical Crisis by Vincenzo Cammarata.Corporate Strategy – Prof. Aleksandra Pavlovic. Erik R. $ . . Veronika Kurucz. Valentina Maj.

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Feb 14. . turnaround at auto unit Italian industrial giant Fiat SpA posted a fourth-quarter profit and said it had a full-year net profit for the first time since 2000. . Sergio Marchionne.The FIAT Case: a Therapeutical Crisis by Vincenzo Cammarata. which not long ago was considered to be an albatross around the neck of former partner General Motors Corp. 2005  26 Marchionne. returned to operating profit. A key factor that allowed FIAT to overcome the crisis in the period 2000-2004 was the acknowledgement of the need for a long-term strategy that was concentrated in doing profit immediately. Veronika Kurucz. is gaining traction. As a consequence. Valentina Maj. returned to operating profit – at a time when   GM is deep in the red. which not long ago was considered to be a burden for the former partner GM. the restructuring plan is gaining traction. Fiat reported a fourth-quarter net profit as well as its first full-year profit since 2000.. offering another sign that the restructuring plan of its chief executive. Erik R. » By Gabriel Kahn in Rome and Kenneth Maxwell in Detroit. Larsen – SI 2005-2006    "      . $   . we can assert that FIAT has used the disastrous relationship with GM in a therapeutical way that helped the company to change direction.Epilogue «Fiat posts profit on asset sale.Corporate Strategy – Prof. at least in the short term. Fiat’s ailing auto unit. Aleksandra Pavlovic. What is surprising is that Fiat’s ailing auto unit. at a time when Gm is deep in the red. The Wall Street Journal. Katherine Portmann for Università della Svizzera italiana. In a reversal of fortunes.

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