Strategic Analysis Report on Fiat Chrysler and Peugeot Merger

This report provides a strategic analysis of the merger between Fiat Chrysler and Peugeot (PSA) in the automobile industry. It includes an assessment of industry attractiveness, internal analysis of the firms, and identification of opportunities and threats. The report also analyzes the core competence and resources of the merged company.

Applied Corporate
Strategy Assessment:
Strategic Analysis
Report

Table of Contents
1. INTRODUCTION..................................................................................................................3
2. MAIN BODY.........................................................................................................................3
2.1 Identify the issues and concluded as on opportunity and threats along with assessing
industry attractiveness............................................................................................................3
2.1.2 Porter five force Model.................................................................................................4
a) Threat of new entrant (low)...............................................................................................5
b) Bargaining power of buyers (moderate)............................................................................5
c) Threat of new substitute (high):.........................................................................................5
d) Bargaining power of suppliers (high)................................................................................6
e) Competitive rivalry (high).................................................................................................6
2.2 Performing internal analysis and determine the core competence and resource of a firm
................................................................................................................................................7
2.2.1 Strength.........................................................................................................................7
2.2.2 Weaknesses:..................................................................................................................7
2.2.3 Opportunities.................................................................................................................7
2.2.4 Threats...........................................................................................................................8
2.2.3 Resources......................................................................................................................8
Value chain.............................................................................................................................9
VRIO analysis.....................................................................................................................10
Evaluating the strategy of a firm using SAFE analysis........................................................11
CONCLUSION........................................................................................................................12
REFERENCES.........................................................................................................................15

1. INTRODUCTION
Strategic analysis is that process which involves research on organization’s business
environment in which the firm is operates. Therefore, it is an essential to formulate the
strategic planning which assist in smooth running and make better decision. The present
study main aim is to examine the selected strategy is better for the firm or not. The report is
based upon Fiat Chrysler and Peugeot (PSA) who deal in automobile industry and the merger
agreement help to attract range of customers towards it. For that, the report will carry out an
external analysis in order to identify a set of opportunities as well as threats. Further the study
will also assess industry attractiveness by using model and then analyse the resource and key
competences of a firm in order to determine the strength and weakness as well as core
competence. Lastly by using the SAFe criteria, study will evaluate the given strategy.
2. MAIN BODY
2.1 Identify the issues and concluded as on opportunity and threats along with assessing
industry attractiveness.
Peugeot and Fiat Chrysler both working in an automobile industry and a deal between
two car makers would create a business within a high market values of nearly $50bn. So there
are many issues which concluded as opportunities and threats. These are as mention below:
 Fiat Chrysler and Peugeot (PSA) get a biggest opportunity with a merger in the
context of innovation. It is so because both the companies are working behind
technologies like electrification and safety features (Warter and Warter, 2020). Hence
with a tie-up, company increase its innovative skills and offer new cars to customers
by complying technological aspects. That is why, it is consider as an opportunity for
the firm.
 Fiat Chrysler faces issue with their employees but with a merger, it could be an
opportunity to develop a better relationship with United Auto Worker because the
workers are suffering from corruption scandal (bribery). So with a merger, companies
need to reduce its domestic workforce which in turn create an opportunity for the firm
to solve this issue.
 Fiat Chrysler and Peugeot (PSA) merger faces issue of competition and this issues is
consider as an opportunity. It is so because there are range of companies who deal in
this industry and that is why both company faces tough competition. But, regulators

from European are worried the dealmay also reduce competition in market and the
same was performed after the merger.
 A small fluctuation in the economy of the country is also affect the overall
performance of a business. As Fiat also faces issue of bribery with United Auto
Worker and loss huge amount as well (Maya and Montes, 2020). Therefore, the
company faces threat that by fall in economy will lead a negative impact upon the
business and that is why, there is a need to make an agreement of merger with
Peugeots.
 Both companies are focused upon technology advancement and makes effective
planning for future. This in turn assist the firmto fight from intense competition within
market and Fiat have stronger foothold in US whereas Peugeot has strong position in
Europe. Therefore, this merger provide an opportunity to offer range of products in
other developing countries like China which assist to strengthen the financial market.
 Increasing pollution is consider the biggest issue in automobile industry and that is
why, companies face threat to manufacturing cars accordingly. Therefore, the merger
will increase the innovation and that is why, Fiat Chrysler and Peugeot (PSA) start
offering electrification cars which do not polluted environment and did not depend
upon fuel as well.
2.1.2 Porter five force Model
Industry attractiveness is consider by using Porter five force model and this helps to
determine the competitive analysis of an industry. By using five key aspects, it is easy to
understand the competition within automobile industry. These are as mentioned below:

a) Threat of new entrant (low)
Most of the people did not invest in manufacturing automobile because the initial cost is high
and there is no chances of 100% return. Therefore, for earning revenue, most of the people
sell the car on rental purpose but do not invest to open new shop (Jacobs, 2019). Hence, the
threat of new entrant within automobile industry is low because people do not want to invest
in such industry due to fluctuating market.
b) Bargaining power of buyers (moderate)
Consumer are not satisfied with many car makers and they began looking for an alternatives
I.e. foreign cars. While on the other side, consumer are very price sensitive and that is why,
do not invest huge amount of purchasing car in volume. In this factor, individuals are do not
negotiate with dealers regarding price and this in turn leads to moderate the bargaining power
of buyers.
c) Threat of new substitute (high):
The industry faces high threat of substitute because there are many alternative available in the
market i.e. bus, train and airplane. Also, higher the cost of operating a vehicle, more likely
the people will seek alternative transportation options. That is why, people do not invest on
car purchase, instead of using public transport which in turn increase saving. Also, increase in

price also change the willingness of people to purchase any automobile products. Hence, this
in turn reflected that there is high threat of substitute.
d) Bargaining power of suppliers (high)
There are range of suppliers available in the market and sometimes it is not easy to choose
the best one. So many suppliers rely on one or two automakers in order to buy majority of
their products (Porter five force model of automotive industry, 2020). Also if the company
wants to switch from one supplier to another, there are lots of options available. As a result,
the suppliers are extremely vulnerable to the demand as well as requirement of a
manufacturer. Thus, the industry have high bargaining power of suppliers.
e) Competitive rivalry (high)
The automobile industry is consider to be an oligopoly where the sellers are few. Also, each
company update their products as per the demand and market need. As a result, the price of
the product is also fluctuation and they also tried to avoid the price based competition. Due to
high competitive rivalry, the chances of generating profit is low and a new design offered by
the firm is may pay off significantly in long run. Hence, there is a high competition in the
market and due to low number of seller, most of them tries to offer new and innovative
product to attract the customers.

2.2 Performing internal analysis and determine the core competence and resource of a firm
To determine the internal analysis of the company, strength and weakness of the
company will be analysed which is as mentioned below:
2.2.1 Strength
 Fiat Chrysler and Peugeot (PSA) has a successful track records of developing new
product by using innovation. This in turn attract customers easily which further assist
to improve the financial performance.
 It has a strong brand portfolio and ensure to satisfy the need of customers byoffering
good quality of products to their consumers (Caputo, 2019).
 Also, with the help of merging, company generate good returns on capital expenditure
and this in turn helps to executing new projects that helps to enhance new revenue
streams.
2.2.2 Weaknesses:
 High attrition rate in the work force is consider biggest issue for the Fiat Chrysler and
Peugeot (PSA) and that is why, Fiat has to spend lot of amount in order to solve the
problem.
 The forecasting of the products is not appropriately done and this in turn affect the
inventory of the business in negative manner. Therefore, it will affect the financial
planning of the company in negative manner (Roth, 2017).
 The working culture of the company is not properly done and this in turn affect the
overall business working performance in negative manner. That is why, it is also
consider another weakness of Fiat Chrysler and Peugeot (PSA).
2.2.3 Opportunities
 Fiat Chrysler and Peugeot (PSA) has business growth opportunity for exploration
within new business domains and expertise for keeping up active business expansion
into untapped arenas, functionally focus on building active growth goals developed
among quick operations.
 There is opportunity of exploration within new keen arenas here new quest horizons
shall be enhanced and developed on higher efficacy paradigms to bring on larger
goals diversified widely. The Company business goals have been also heading to
bring on new investments strength within diversified where there is competent
diversity analysed.

 There is opportunity to bring on new variety of electric cars , new machinery elements
where it will enhance working specific growth among larger goals and strengths,
where exploration enables to keep up the new creative efficacy strong among
customers preferences.
2.2.4 Threats
There is threat of larger competitive industry aspects where best working new brands
are coming on among global industry, where there is keen larger functional demands
among customers working preferences worked on. It can be also analysed that there has
been varied quick growth coming on within larger goals where new automobiles designs
are coming on within customers preferences. The varying economic situation within
various arenas are also largely factor of threat where it may impact functional goodwill,
revenue targets in longer time parameter. There has been also quick rise within costing
where frugal innovation is need of hour for company to ideally adopt larger goals worked
on for innovative business services.
2.2.3 Resources
The company resources are all assets which assist the firm to attain the define task
and there are range of resources available in Fiat Chrysler and Peugeot (PSA). Such that
Physical resources which includes the retail outlets of the company and after the merging,
company is establish in France and UK. On the other side, company have its manufacturing
facilities which like suppliers, equipment, logo and website which are consider another
physical resources (Gachúz and Montes, 2020). Next is human resources such that the team
and experts who provide their opinion for strategic development that assist to improve the
brand image of a firm. Also, the workers of the firm are also include under human resource.
Another resource is intangible resource i.e. finance, company’s brand, stakeholders such as
suppliers, government, customers and community which also included on Fiat Chrysler and
Peugeot (PSA) resources.
Thus, these resources are directly or indirectly related to strength and weakness of the
firm. Such that its stakeholder and team members are included under strength while
customers are consider as a strength. On the other side, products are concluded under
weakness of the firm because forecasting of the firm is not appropriate.

Value chain
The value chain model can be understood as step by step business model for
transforming products and services form varied idea into reality, for increasing business
efficiency and delivering business with utmost value which enhances revenue parameters and
goodwill among customers. The businesses of Fiat Chrysler and Peugeot (PSA) with usage
of Value chain will be able to build varied new functional innovation structured among
working aspects where main primary activities are inbound logistics, operations, outbound
logistics, marketing and sales that enables business to be gown on varied domains. The
brands collaboration has been successfully building stronger working image and position
within global automobile industry, where higher profits and functional goals diversification
have been widely grown on diversified aspects (Chaubey. and Sahoo, 2019).
Primary activities such as logistical operations and primary activities have been
emerged as largely integral space where the companies widely focus on pertaining strategic
focus to build specific functional scale growth. The Fiat Chrysler and Peugeot (PSA) have
been also focusing on innovation business diversification where it aims to build larger
profitable goals worked on varied products, services within various domains and growth
developments built on. Along with analysis of primary activities there are support activities
also where Firm infrastructure, human resource management, procurement of various
resources and technology have been widely analysed to be largely also essential for keeping
up with work efficiency and also pertaining varied focus for competitive strengths. Primary
activities add value directly to the production procedures and moreover there is also support
of varied technology and resources, where Fiat Chrysler and Peugeot (PSA) aims to build on
competitive advantage. This also derives technology improvements and innovations in
business models, with information systems and R&D, general management to be widely
formed on larger goals diversification (Ding, Ye and Wu, 2019).
The model enables businesses to enhance varied cost advantage and
differentiation parameters where the cost advantage approach is used when companies try to
compete on cost advantage factors. The steps under this are based on identifying the primary
activities which build working strengths, for analysing establishing new importance within
varied activities and to functionally build cost factor. There is also analysis of larger links
identification factors, where there is functional domain identified on business opportunities
and reduced cost aspects widely. Differentiation factor is based on approach where
companies try to compete on costs factors and resources where advantage, disadvantages and

factors drive functional goals analysed widely. Fiat Chrysler and Peugeot (PSA) by keeping
focus on value chain operations will be able to work on new scale active growth domains,
keen functional scope and also for technical innovation on wide paradigms which grows on
larger scale paradigms
VRIO analysis
The VRIO analysis is one of the most competent analytical tool for evaluation of
company resources and competitive advantage factors, where there are larger goals
advancement developed on keen growth scenarios. The full form can be discussed as Value,
rareness, limitability aspects and organisation where tool enables business domains to
uncover, protect the resources and capabilities developed on longer term for competitive
advantage. Framework puts into play company long term vision, where strategic vision is
built on for keeping up the larger scale efficacy aspects on wider domains for connecting on
new scale growth paradigms (Meng., Liu and Wang, 2020).
 VALUEABLE: This factor enables us to analyse that has been the competitive
strength widely valuable for company to focus on, where Fiat Chrysler and Peugeot
(PSA) services are valuable and strongly innovative for commercial excellence in
business domains. It can be also potentially evaluated that business growth can be in
functional competitive industry be achieved when products are highly technically
diversified.

 RARE: The rare factor is however missing where rarity is less advanced among Fiat
Chrysler and Peugeot (PSA), as the automobile industry has been widely gown on
larger arenas and there is specific functional growth. Rarity factor reduces
competitiveness for company business there has been quick growth worked on new
quest arenas, to yield on larger profitability goals.
 IMITATE: The innovation and functional services which brand offers are not
imitable for another competitor where it widely enables higher position within
business industry domains. It can be also analysed that there is Fiat Chrysler and
Peugeot (PSA) functional working scenario where company aims to be largely vision
oriented for ne scale diversification (Rothgang and Dürig, 2020).
 OREGANISED TO CAPTURE VALUE: Temporary competitive advantage under
organised factor widely plays larger working operational parameters of efficacy,
where scenarios are widely focused on strategic planning and functional formation of
goodwill for longer working scenarios.
The VRIO model enables us to analyse that Fiat Chrysler and Peugeot (PSA)
has been progressively heading towards productive growth domains of larger
fucntionl growth aspects, new scale functional efficacy scenarios and also brand
aims to keep up with strengths of higher capital infrastructure.
Evaluating the strategy of a firm using SAFE analysis
The SAFE enables to identify criteria where specific company identifies possible
reach strategy within business horizons where company functional scenarios can be
identified on longer term and also within sustainable, favourable competitive strategies
which enhance business paradigms. Fiat Chrysler and Peugeot (PSA) functional innovative

business strategies are widely advanced where SAFE analysis will enable goals to be worked
on, keenly strategically analysed to be productive and also form higher evocative space
among working supervision.
 Suitability: The suitability factor widely essential for strategy model where key
strengths are identified on larger goals efficacy aspects, where it enables business to
explore longer scale active growth among working productive goals widely. It is
specifically focused on leveraging diversity suitability and capability aspects where
there are higher working innovations coming on within automobile industry scenarios.
Fiat Chrysler and Peugeot (PSA) has been competently working on within heading
domains of new specific functional goals where new scale growth domains are
analysed, to keep working efficacy scenarios and also build longer working goodwill
within customers target markets (Lan, 2020).
 Acceptability: The acceptability factor correlates with benefits that stakeholders and
shareholders expect form strategies that could be financial, as well as non financial
depending on working paradigms and larger vision working targets. Return
calculations are performed by analysing methods such as cost benefit analysis,
profitability analysis and value towards shareholders for keeping up the keen strength.
 Feasibility: The feasibility factor within strategy model enables business to identify
the variable aptitude and resources, which enables financial feasibility aspects to be
analysed on where there are larger goals analysed. Management power, resources and
also formed on keen performing analysis within company working domains for
keeping up creative shift, dynamic strengths to keep up productive goals diversity for
longer time frame.
CONCLUSION
The report has concluded strategic working parameters analysed on Fiat Chrysler and
Peugeot (PSA) working scenarios where report has analysed various issues and
opportunities within automobile industry. Further it can be analysed with conclusion based
on porters5 force model and swot analysis where internal and external factors are being
analysed , company has been progressively working on automobile innovation scenarios.
The study concluded further VRIO analysis, value chain model where analysed results have
enabled us to evaluate various aspects of keen strengths within technology parameters., and
also there is high competitive pressure seeking on which has reduced functional vitality

widely. The results of research done within study has concluded SAFE analysis where tool
has practically enhanced working vision among operational strengths and larger competent
functional efficiency pertaining active growth. Fiat Chrysler and Peugeot (PSA) shall keenly
bring on being unique among working horizons where there are larger quest horizons
analysed, to keep up the goals efficacy aspects and also for creating developed new goals
advancement which will generate technical growth among operations (Bohnsack, R., Kolk,
and Bidmon, 2020).

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