Applied Corporate Strategy

This report discusses the external analysis, resources and key competencies, and evaluation of strategy in applied corporate strategy. It covers topics such as Pestle analysis, Porter's Five Forces, SWOT analysis, VRIO framework, and more. Find study material and solved assignments on Desklib.

Applied Corporate
Strategy

Table of Contents
INTRODUCTION...........................................................................................................................3
MAIN BODY..................................................................................................................................3
1) External Analysis....................................................................................................................3
Pestle Analysis.........................................................................................................................3
Porter’s Five Forces.................................................................................................................5
2) Resources and Key Competencies..........................................................................................6
SWOT Analysis.......................................................................................................................6
VRIO Framework....................................................................................................................6
3) Evaluation of strategy..............................................................................................................6
CONCLUSION..............................................................................................................................11
REFERENCES..............................................................................................................................12

INTRODUCTION
Corporate strategy can be defined as strategy or planning with help of which
organisations achieve their strategic objectives. Corporate strategy involves several analyses and
environment analysis is key element of corporate strategy. This report will contextualise Fiat
Chrysler Automobiles it is an Italian/American multinational corporation. Fiat Chrysler is
world’s eighth largest automaker. Founded in 2014 company has multiple headquarters legal
office and headquartered in Amsterdam, Netherlands and fiscal office and headquartered in
London, United Kingdom. Company was created by merger of Fiat and Chrysler into a new
holding company. Company operates worldwide and in order to operate company and carry out
all operations and activities of the company it has employed around 198,545 employees. This
report will discuss about external and internal analysis of the company and later will discuss and
evaluate strategy on the basis of SAFE criteria. For the purpose of external and internal analysis
Pestle and SWOT analysis will be used along with Porter’s five forces model and VRIO
framework.
MAIN BODY
1) External Analysis
Pestle Analysis
Political Factor
This factor plays significant role in successful operations of the organisation. This factor
is becomes more important for multinational companies. Opportunities and threats in this factor
are involved in political stability, political relations of home countries with other countries
(Rastogi and Trivedi, 2016). Level of corruption and attitude of government towards
multinational organisations are certain other factors that are involved in opportunities and threats
of Fiat Chrysler’s political environment. Other than this, Fiat Chrysler’s political environment
also involves different environment protection rules of countries, this create difficulty as
production process becomes complex due to such factors.

Economical Factor
This involves factors involve elements that influence and impact cost, profit and financial
position of the company. This involves GDP, per capita income, interest rate, cost of operations,
taxation rates and policies. This is because income per capita has direct impact on purchasing
capacity of the people and this affect business success of Fiat Chrysler in a country. High
taxation and interest rates also increase cost of Fiat Chrysler and it is a threat for Fiat Chrysler.
Along with this economic recession is also an important threat to influence Fiat Chrysler.
Economic condition of the country is also important as this allows knowing what type of
automobiles will be successful in a country, this may be luxury products or mid-range products.
Social Factor
This is concerned with those who are customers of the company. Frequently changing customer
trends is a threat for Fiat Chrysler (Vallati and Grassi, 2019). But increasing middle class in
developing and emerging economy is an opportunity for Fiat Chrysler. But opportunity and
threat of the Fiat Chrysler in a certain country also get influenced by perception and attitude of
people towards automobile products.
Technological Factor
This is concerned with technological development of the company and in automotive industry
where Fiat Chrysler operates it is highly important. This means that people are looking for
vehicles with latest technologies and this is both opportunity as well as threat. This gets
determined by level of technological development of Fiat Chrysler and its capacity for further
technological development.
Legal Factor
Legal factor involve those elements that regulates and govern operations and functioning of a
company in a country. This involves employment regulations, intellectual property law, health
and safety law, data protection laws etc. increasing complexity in production laws is a threat for
Fiat Chrysler. Differentiated regulations for business functioning in different countries increase
complexity for Fiat Chrysler and also are a threat for Fiat Chrysler.

Environmental Factor
This factor involves standards for environment and its safety. Due to increasing concern for
environment and its safety, this factor has become very important (Kozel, Chuchrova and Sanda,
2017). For Fiat Chrysler it involves consideration for environment while production and its
safety. This also involves environment initiatives taken by Fiat Chrysler to safeguard
environment and its safety. Increasing demand for environment friendly electrical vehicles is an
important opportunity for Fiat Chrysler.
Porter’s Five Forces
Threats of new entrants
Threat of new entrants is concerned with threat is concerned with threat which is created
be entry of new organisations in industry. Attractiveness of the industry for an existing
organisation gets affected by entry barriers in an industry. These entry barriers are investment
required in to entry in industry, economies of scale, capital and skills and knowledge required in
a country. Concerned with Fiat Chrysler industry barriers are high and this is positive element for
Fiat Chrysler, because requirement for capital and investment are very high to enter in
automotive industry in which Fiat Chrysler operates.
Threats of substitutes
This is concerned with products that can be used in place of Fiat Chrysler’s product. This
pose a significant threat to products of Fiat Chrysler as customers can easily switch to other
companies. This is because customers get wide range of option and in relation with Fiat Chrysler
attractiveness of the company gets affected by number of substitute, cost of switching
(ÖNEREN, ARAR and YURDAKUL, 2017). Concerned with Fiat Chrysler there are high
number of substitute products that are available for the company and this reduces attractiveness
of the industry for Fiat Chrysler.
Bargaining power of suppliers
This is concerned with power that suppliers have, suppliers are those parties who supply
required material and input for Fiat Chrysler. Attractiveness of the company gets affected by
number of suppliers, input and material being supplied and cost of switching suppliers. High

number of suppliers is there for Fiat Chrysler and this increases industry attractiveness of Fiat
Chrysler.
Bargaining power of buyers
This is concerned with power that is hold by customers of Fiat Chrysler. This gets
influenced by number of customers and number of sellers. High number of customers and low
numbers of sellers is a favourable state and this also increases industry attractiveness. Concerned
with Fiat Chrysler there are high number of customers and high number of sellers and this is why
attractiveness of Fiat Chrysler in industry is at moderate level.
Industry Rivalry
This is concerned with rivalry among existing organisations in industry. Attractiveness of
industry is concerned with number of competitors in industry and their competitive position
(Bhatia, 2016). On the basis of this Fiat Chrysler has moderate attractiveness because of
competitive strength and position of Fiat Chrysler and high number of strong competitors for Fiat
Chrysler.
Industry attractiveness for Fiat Chrysler
Competitive Force Attractiveness for Fiat Chrysler
Threat of entrants High
Threat of substitute Low
Bargaining power of suppliers High
Bargaining power of buyers (customers) Moderate
Industry rivalry Moderate
On the basis of this it can be said that overall industry attractiveness for Fiat Chrysler is
moderate because different forces of industry has different level attractiveness for Fiat Chrysler.

2) Resources and Key Competencies
SWOT Analysis
This is analytical framework through which organisations can analyse their strength and
weaknesses of the organisation and potential opportunities and threats of companies. This helps
in analysing internal environment of the company (Do Quang, 2017). Analysis of internal
environment of Fiat Chrysler is as follows-
Strength
 Strong brand portfolio- This means that Fiat Chrysler has effective brand portfolio that
includes high number of products and that are highly attractive
 Global sales and distribution network- This means that Fiat Chrysler not only but operate
on global level but its distribution network is high effective and because of this company
is a successful global organisation
 Strong research and development- This means that research and development practices
that are highly important for the companies in modern business environment is focused
by Fiat Chrysler
 Focus on innovation- Innovation is very important for companies for the sustainability
and competitive advantage and Fiat Chrysler has focus on innovation
 Strong brand image- This means that image and brand value of Fiat Chrysler is very
good making it highly important strength of the company
 Strong market share- This is another important strength of the company. this means that
Fiat Chrysler has strong market share and this strength is important for long term
competitive advantage of the company
Weaknesses
 Products recall causing financial loss- This means that Fiat Chrysler has required to
recall several products, though these have caused no harm to human life but has proved to
be harmful for the brand image of Fiat Chrysler (Vlados, 2019).
 Declining market share in important markets- This means that Fiat Chrysler is losing
market share in several markets and important reason for this is high competitive pressure
on the company

 High attrition rate of workforce- This means that employee turnover of Fiat Chrysler is
high and because of this Fiat Chrysler faces increase in cost associated with employees
Opportunities
 Electric vehicles- Increasing demand of electric vehicles is an important opportunity for
Fiat Chrysler
 Emerging markets- This means that increasing demand of automotive products in
emerging market is an opportunity for Fiat Chrysler
 Digital marketing- Digital marketing contributes in attracting customers through different
channels and this can be an important opportunity for Fiat Chrysler
 Automated driving- This means that increasing demand of automatic driving vehicles is
an opportunity for Fiat Chrysler (Gürel and Tat, 2017).
Threats
 Recession- This means that economic slowdown and recession has a significant threat for
Fiat Chrysler
 Trade war and protectionist policies- trade war in countries and protectionist policies of
government might influence success of the companies in international market
 Increasing and strengthening competition
 Frequently changing consumer trends
VRIO Framework
VRIO refers to valuable, rare, inimitable and organised these are elements that are
associated with resources and competencies of the organisation. These elements determine
competitive advantage of the company. VRIO analysis also facilitates determination of strength
and weaknesses of company in context of resources and capabilities (Ariyani and Daryanto,
2018). VRIO analysis of Fiat Chrysler and competitive advantage is as follows-
Resources and
Competencies
Valuable Rare Inimitable Organised Competitive
advantage
Brand Image Yes Yes Yes Yes sustainable
Brand Portfolio Yes Yes No Yes Moderate
Innovation Yes Yes No Yes Moderate

Research and
development
Yes Yes Yes Yes sustainable
Global network Yes Yes Yes Yes sustainable
Human
resources
Yes No No Yes sustainable
Market share Yes No No Yes Moderate
This analysis of VRIO elements of different resources and capabilities of Fiat Chrysler outlines
that competitive advantage of the company is sustainable in many of the resources and
capabilities but there are resources that allows moderate competitive advantage to the company.
This requires that Fiat Chrysler work towards increasing competitive capability of these
resources and capabilities so that company can increase and enhance its overall competitive
position. This means that in terms of elements such as human resources Fiat Chrysler needs to
improve this resource as this is an important resource for the company and this is why it is
important that company take action to reduce attrition rate (Lin and Tsai, 2016). This means that
high attrition rate not only because increase in cost but also cause shortage of effective and
competitive manpower in organisation. Another capability to focus on its market share, this
means that even tough has Fiat Chrysler effective market share which is its strength its market
share is reducing and this is important to consider and take action to improve.
3) Evaluation of strategy
Fiat Chrysler is based on the automobile company, which designs, engineer, distributors,
selling various vehicles in marketplace. This organization provide retail and dealer financing,
leasing or rental service through its subsidiaries. Usually, this firm can sell their products under
Alfa Romeo, Abarth, Chrysler and Fiat professional related service parts, accessories under
particular brand.
Fiat Chrysler has shown an interest to merge with Peugeot, set to announce as biggest
collaboration between two carmakers. It would be developing a business with combined market
value of nearly $50billion. Fiat Chrysler is becoming second attempt at merger this year and after
it pulled out of agreement with Renault in June (Ackermann, Beggiato and Krems, 2019). The
reason for showing interest which include potential sales growth from increasing consumer base.

It also increasing product service while delivering better quality of vehicles in marketplace. This
type of acquisition is based on the external growth and analysed with use of SAFe Criteria.
Suitability
The Automobile industry is one of fastest growing industries globally, creating various
growth opportunities for Fiat Chrysler operating in it. With advancement of technology, it has
rapidly increasing the demand for driven cars, hybrid care which gain more popularity in global
world. The major threats that FCA encounter which are fluctuating government policies,
escalating fuel prices, alternative mode of transportation and severe competition.
Strength
 Fiat Chrysler has a strong brand
portfolio.
 Strong financial as well as ancillaries
setup
 Globally situated the best world class
manufacturing facilities and services
 Focus and investment on research or
development.
Weakness
 Fiat Chrysler can reduce surplus profits
of vehicles because of their fleet sales.
 Absence within captive financing
conditions.
 Delay in the strategy of electrification
that impact on margin.
Opportunities
 Fiat Chrysler is moving towards
electric vehicle.
 Increasing opportunities in various
vehicle segments.
 Emerging market through new
technology.
Threat
 Impact of global trade war and
developing protection policies
 High competition level
 Cyclic nature of enterprise
Table: 1
*
TOWS Matrix

Internal
External
Strength (S)
S1: strong brand portfolio
S2: Strong financial condition
S3: Globally established
business.
S4: Research and
development
Weakness (W)
W1: Reduce surplus profits
Opportunities (O)
O1: vehicle segment
opportunities
O2: Emerging market through
innovation
O3: Manufacturing electric
*vehicle
SO strategies
S1: O1 Strategy
S3: O2 strategy
S4: O3 Strategy
WO Strategies
Threat (T)
Trade war
Higher competition
ST strategies SW strategies
Table: 2
In above Matrix, it has been analysed that S1 (strong brand Portfolio) and O1 (Vehicle segment
opportunities) are considered as advantage, benefit of acquisition because of low cost of capital
while improving brand position in marketplace (Caldera, Desha and Dawes, 2019). The strength
of Fiat Chrysler is a strong brand portfolio, organization would be successful in market,
achieving its desirable goal and objective. It helps for deploying both short term as well as long
term financial resource effectively and efficiently.
Beside the S3: O2 strategy, There are considered as opportunities where S3 (global
established business) and O2 (emerging market through innovation). It could for instance as

introduced innovative technique that help for emerging global marketplace. In order to increase
overall business productivity as well as profitability in global world.

Accessibility
Acceptability related strategy reveals about the expectation level of stakeholders and their
specific result or outcome. This will help for meet all essential outcome on the basis of strategy.
Afterwards, it would be generated a return, stakeholder reaction and their major risks.
Risk
Fiat Chrysler has been gearing and liquidity ratio on the basis of analysis. it can be
predicted the strategic result or outcome. The company is well-established and their gearing ratio
which exists under 50% in particular datasets. Additionally, it is to be considered as optimal and
inductive of automobile boosting shareholder profitable rate. Well-maintained strategic option
that will help for reducing the financial investment.
Return
Main return on capital employed at Fiat Chrysler and appeared as moderate for
automobile industry. This company is deploying its capital better than other automobile
companies because of better shareholder value and effective use of capital in proper manner.
Stakeholder Reaction
The stakeholder map evaluation is based on the process that can identify management
processes, shareholder from both Fiat Chrysler and Peugeot. At that time, owner of business
have a power to improve current condition of business while applying acquisition acceptance
from two carmaker players.
Fiat Chrysler and Peugeot will be strongly affected through acquisition, at some point
Fait has supposed to find better option of their head office in both companies. It leads to
anticipate the different roles and responsibilities. It would increase as non-managerial roles on
the basis of planning. Afterwards, it is combined with outlets across majority of Fiat Chrysler
automobile accessories and parts.
Feasibility
Fiat Chrysler has been analysed strategic feasibility by evaluating effective capabilities
and resources. It help for identify whether it will perform better or not.
Human resources and skills

The merger can possible because Fiat Chrysler has owned capacity to adapt its new
business operations, employee skills and other training to take on Peugeot operations. Thus, it
will be reduced the plan of 500 managerial position because companies are joined their head
office. This acquisition will be creating almost 1000 new managerial roles within Fiat Chrysler
firm over next 2 years.
Financial Feasibility
Fiat Chrysler has been experiencing as strong financial performance. On the basis of
market research, this automobile company has recorded 4 % annual growth and 11% increasing
its operating price. In this way, it become easier for measuring the current performance of
business in context of financial terms (Reinhardt, Christodoulou and García, 2019). Company
has a strong adaptability and smart financial management that become strengthening their current
cash flow position. Thereby, Fiat Chrysler is able to easily utilise its financial flexibility in
growth and development. However, it has been identified the Fiat Chrysler as strong or flexible
financial position in market, which make it easier for increasing the business performance.
Afterwards, it has been suggested that merger between “Fiat Chrysler” and “Peugeot” strategy
can be successful.
CONCLUSION
On the basis of above discussion, it can be concluded that external environment analysis
outlines that Fiat Chrysler is operating and functioning in a highly complex environment. This
environment of the company involves several opportunities as well as several threats for the
company. Internal environment analysis of the company outlines that it has enough strength to
utilise opportunities that are there in external environment of the company. However, internal
environment of the company also has several weaknesses that can create difficulty in dealing
with threats and also influence capability of company while utilising opportunities of the
company. This report also involved analysis of resources and capabilities of the company in
terms of VRIO factors and this outlined that on the basis of these elements company has
moderate competitive advantage in some elements and sustainable competitive advantage
through some elements.

REFERENCES
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