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Fiat auto has played a significant role in the Italian motor industry. It has acquired the biggest winning margins in its competitive history. It is unfortunate to note that due to bad management the company was in a financial crisis and almost reached the peak of bankruptcy. In June 2004 Sergio Marchionne was appointed as chair person for fiat in order to revive the company fortunes in order for the organisation to avoid bankruptcy.
A SWOT analysis will be used to access the internal and external audit of fiat during the time of Sergio Marchionne's appointment. It is important to note that the SWOT will be compiled on historic data. The importance of historic data is to access the core of the problem that was faced by one of the leading car industries in the world. The strengths, weaknesses, opportunities and threats will create an understanding based on what key elements lead to success and the crisis Fiat faced during the 1990's. This can only be done by assessing the internal and external audit of the company during the time of the crisis to the time of its success. Please note that the 2008 SWOT will be based on an assumption.
The History of Fiat
Fiat in 1899 during the centaury of industrialization of manufacturing processes in Italy, international development lead fiat into trading in 180 different markets, operating in 61 countries, establishing 1063 companies and employing over 223000 people. Traditionally fiat sold small cars and operated in Italian markets but sold 60% of its cars to outside of Italy. In 2000 fiat joined ventures with gm motors and divorced from the contract in 2005.In 1966 fiat owned 70% of the Italian market share, acquiring Lancia and Alfa its major rivals. In 1990 deep crisis compromised the position of the fiat both internally and externally. Diversifying to North Europe and the USA was not effective because of the lack of reliability, an average life cycle and vulnerability to rust. In the early 2000's fiat share price had dropped by a third of its share, liquidity lead the company to selling 50% of Ferrari. The astronomic losses made fiat the only car giant in Europe industry operate with negative profitability. Another problem with fait was its branding; the fiat logo was changed 14 times. In 2000 GM motors acquired 20% of fiat. From 2000 to 2004 the company's stock quotes had dropped by 70% in the New York stock exchange. The continuations of the crisis lead the appointment of Sergio Marchionne who was appointed to revive the company fortunes.
Fiat under Agnelli family
The poor performance at fiat lead to the inferior product quality fewer motorists wished to buy. The industrial problem hampered restructuring and the national government pressed fiat to take the role of public welfare agencies. The company lost its market share and was unable to compete in the Japanese segment. The organisation stuck to an outdated car product strategy. This lead to the production of inferior products, excessive diversity of platforms, dependence of the Italian market, pressure from the government to serve political objectives, and the use of outdated technological processes. Fiats market share dropped from 17% in 1990 to 70% in 2002. The fate of fiat depended on the presence of the Agnelli family.
Fiat under Sergio Marchionne
Fiat had financial problems with losses of 1.2 billion in 2002. In 2003 the group restructured core areas by focusing on the manufacturing and service activities on the traditional motor vehicle sector. In June 2004 Sergio Marchionne was appointed CEO of fiat. At the beginning of 2005 fiat announced the creation of power train technology, a new industrial unit which was designed to integrate the group's innovation, capabilities and expertise in engineering and transmission. Mr Marchionne made it clear that he demanded openness, fast communication, and accountability. He was against corporate politics and hierarchy.
The SWOT analysis
A swot analysis helps organisations understand their product attributes competition and sales opportunities. Organisations are able to develop opinions on the scope of the project and the goals that are needed in order to be achieved. Management is forced to understand the markets that will be operated in and require financial resources for takes to be fulfilled. A SWOT is useful, logical and helps with planning of strategies. The problem with SWOT analysis is that it does not give one solution but it directs them to the solution. The simplicity of the analysis leads to unfocused and poor analysis. If the SWOT is performed correctly, it becomes a valuable mechanism in the development of the marketing plan.
SWOT analysis offers
Integration and synthesis
The directives for a productive SWOT
Search extensively for competitors
Collaborate other functional areas
Examine issues from customer perspectives
Look for the cause not the characteristic
Separate internal from the external
SWOT can be found by resources of competitors
Financial resources: cash, equipment and raw materials
Intellectual resources: expertise, creativity and innovation
Legal resources: trademarks and contracts
Human resources: skills and leadership
Organizational resources: culture, vision, values, beliefs and work relationships
Informational resources: customer intelligence and competitive intelligence
Reputational intelligence: brand names and image
Well known brand name
Giving executives freedom of action
Flush out non performing management
Superior management talent
Commitment of employees
Better marketing skills
Employees take risks
Merge of departments
Use of young employees
Limited financial resources
Weak R& D
Alliances with weak firms
Narrow product line
Weak marketing image
Limited management skills
No customer focus
Confusion of organisational operations
Change in customer needs
New product discoveries
Discover new advertising methods
New use of engines
Product life-cycle of cars
Light weight cars
Exploring new markets
Change in customer needs
Poor performing firm
Product life cycle decline
New technology from competitors
Low employee self esteem
Low customer confidence
Rival firms with new strategies
Odd looking cars
Integration with weak firms
Decline in share prices
Comparison be Agnelli and Sergio Marchionne
Poor performance at fiat was the use of hierarchy. Organisations with tall structures often fail because of the inability to adapt to change. Communication breakdown thus information cannot flow appropriately from top- lower level managers. The crisis in the 1990's crippled fiat making it go into partnership with GM motors. The move was not a strategic move rather it was a move of desperation. GM motors failed to assist in the revival of Fiat thus share prices kept dropping dramatically. Organisations that are faced by politics stand a good chance to fail. Organisational politics lead to conflict and the monopolization of critical information. Key shareholders focus their attention on the negative dynamics of the organisation forgetting about human resource development and the upgrading of technology. Fiat was operating with limited management skills. The reason is the organisation failed to forecast changes in the external environment. Changes were seen but management was not skilled to develop strategies that would lead to the flexibility. Fiat was in need of an effective and efficient R&D bringing idea on how innovation can change its image.
Fiat paid no attention to change in customer needs thus continuing to produce odd looking cars causing customers to having low confidence on its products. Customer satisfaction is one of the most important marketing tools. Fiats customers received satisfaction from fiats major rivals who at that time was using innovative technologies on their products. The use of new technology from rival competition created less expenses and an increase in share prices. Share prices were dropping dramatically and the company was spending excessively, this meant disaster for the company. Fiat focused its attention on the manufacturing rather than customer needs which lead to the rapid decline of product life cycles. Ongoing internal tension was the cause of the negative publicity coming to fiats disadvantage because of the rapid loss of customers. Rival firms were able to capitalize on the misfortunes that were occurring at fiat. Fiat witnessed the decline of market share to its competitors. In a state that fiat was in differentiation was negative and something had to be done. The remarkable change occurred in June 2004 when Sergio Marchionne was appointed as CEO of fiat.
When Mr. Marchionne was appointed at fiat motors, there was a crisis in the internal organisation of the company. The company was making astronomic losses at the time. His first step was restructuring the whole organisation. It was important for him to flush out none performing management and flattening the whole organisational structure. A flatter organisational structure allows for communication to flow effectively and efficiently. The use of young employees is also strength because they bring potential, innovation and vibrancy in the organisation. New management brings a talent pool of employees possessing skills and bringing value to R&D of the organisation further enhancing the organisations brand name and commitment of employees. Fiat under Mr. Marchionne introduced new technological discoveries. They used virtual technology discontinuing the use of prototypes, cutting down organisational spending. It was a strategic move to merge the design departments. This created teams in the organisation which lead to efficient communication between the employees. Soft human resource tactics considered employees and valued them as assets in the organisation. Employees became their own managers and this offered accountability, taking of risks, supervision of management talent. Fiat under the hands of Mr. Marchionne was more flexible than under the Agnelli family.
The opportunities that arise from using effective and efficient employees address customer needs and the use of new technologies allows the organisation to discover new advertising methods. In the harsh competitive market organisations have to be alert of their competitors and use methods that competitors cannot duplicate. Fiat was able to use methods of diversification which are growth strategies for the organisation. In this instance fiat used low cost methods. Customers will benefit from this because they will get the best value products at low costs. The new design team offered customers with appealing models that were best differentiated in the external environment.
The 2008 SWOT analysis
Flow of communication
New and advanced technologies
Commitment of employees
New organisational culture
Regulation of spending
Superior management skills
Flat organisational structure
New customer focus
New designing team
New organisational culture
Teams- no brain storming
Resistance to change
Monopoly of information
Low self confidence
Exploiting new markets
Lack of competitor innovation
Decrease in outsourcing
Low fuel consumption
Exploring new markets
Product life cycle
Change in demographics
Change in customer tastes
Change in PESTEL
Rival firms-new strategies
The new organisational structure at fiat introduces young and experienced employees. The merge of departments will create better flow of communication and enhanced flow of communication. This will further create accountability of employees and flexibility to the organisation. The use of new and advanced technologies will enhance the firm's performance. It is clear that this method of operation will create effective research and development and regulate the firm's performance. New management brings with it a new organisational culture that will perform better than the structure used before MR. Marchionne's appointment in 2004. Fiat will be able to acquire investments and thus creating a wide range of customer focus in the external market.
It must be understood that all organisations have their own dynamics which can come both as a strength and weakness. The new organisational structure introduces inexperienced and young employees. The organisation must be able to enforce new human resource management and development tactics that will assist both inexperienced and young employees. The major problem that may arise will be resistance to change. Old employees may not be willing to assist young employees who will monopolize organisational information, internal politics and tension. Employees may not be willing to work together and this may reduce the organisations performance.
With the high change that fiat will enforce, it will be able to explore new markets in the external environment of operation. Employees will be able to research on customer needs thus producing appealing models to the environment. The new use of virtual technology will cut down on spending and fiat will reach the point that will decrease outsourcing. Another strategy that will assist fiat is the use of growth strategies which consist of:
These strategies will assist the company to explore new markets and win markets where competitors are not innovative thus capitalizing on the horizontal strategy. Another aspect that will assist fiat is the use of light and fuel efficient cars. This will increase fiats product life cycle this comes as an effective opportunity.
Change in demographics is both an opportunity and a threat to organisations. Immigration is the cause of this, some individuals may accept and some may not accept the types of cars fiat provides them with but all will be determined by the environment they reside in. Mass production is also a threat in the external environment; it's an advantage if there is no sudden change in customer needs. The change in customer needs will disadvantage the firm because there will because there will be more output and less income which will result to a loss. The external environment is influenced and affected by change thus competitors are also changing their strategies and are constantly innovating products. This will be a threat to fiat because change influences consumer needs and behaviours. The step that fiat can take is vertical amalgamation. The amalgamation strategy did not work out for fiat in recent years; the question that we should raise is will the vertical integration work between fiat and Tata? Change in PESTEL is critical for the organisations success or failure, change in politics, economy, socio culture, technology, environment and legislature will force the organisation to adapt to change and if not the organisation will face its demise.
Using space matrix to find appropriate strategies
Backward, forward, horizontal integration
Backward, forward, horizontal integration
Fiats success in the market happened when it was able to adapt to change in the external environment where it operates. The swot analysis may not provide solutions but it gives directions to what strategies are necessary for the organisation to employment and adapt to the change. MR. Marchionne's appointment is clear that fiat was using old managerial tactics and MR Marchionne able to revive and provide hope for fiat automobile.