Analysis of Opportunities and Threats in the Automotive Industry

This report analyzes the opportunities and threats in the automotive industry using Pestle and Porter's Five Forces analysis. It also evaluates the resources and competences of Fiat Chrysler to identify strengths and weaknesses.

Applied Strategic Corporation
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Contents
INTRODUCTION...........................................................................................................................3
MAIN BODY..................................................................................................................................3
1. Carry out the external analysis to identify the set of opportunities, threats and assess
industry attractiveness.................................................................................................................3
2. Analyse the different resources and key competences of organization to identify strength,
weakness, identify its core competences.....................................................................................7
Strategy evaluation....................................................................................................................12
CONCLUSION..............................................................................................................................15
REFERENCES..............................................................................................................................16
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INTRODUCTION
Applied strategic management is based on the process or method that involves formulation,
implementation of major goals, initiatives taken by an organization to manage or control
different operational activities. Strategic management provide the brief overview direction to
enterprise and involves specifying the certain objectives.
This report will discuss about the analysis of opportunities, threats of attractiveness of
automotive industry with application of pestle, porter’s five force external environment.
It provide the evaluation of internal ability of “Fiat Chrysler” company and identifying
capabilities, resources and identification for both strength and weakness with application of
value chain. This report will describe SAFs criteria as strategy and mapping the stakeholders to
evaluate Fiat Chrysler and Peugeot Acquisition.
MAIN BODY
1. Carry out the external analysis to identify the set of opportunities, threats and assess industry
attractiveness
Pestle analysis
Fait Chrysler Automobile Company can use Pestle analysis as strategic tool or platform
that help for analysing macro environment of enterprises. PESTLE stands for political,
economic, social, technological, and legal and environment factors that impact on the Fiat
Chrysler Automobile Company (Argyres and et.al., 2020). Typically, Pestle analysis has
provided the brief idea about the challenges of fiat Chrysler Company. It will face in prevalent
macro environment other than competitive force.
Political Factor- This factor play an important role in identifying particular impact on Fiat
Chrysler automobile company. In order to gain more profitability as well as productivity in a
certain marketplace. Usually, this was more than dozen nations and expose itself to various
political environment or system. This will be generating a risk in term of corruption, intellectual
protection. When achieve success of business in Auto Manufacturers within across counties to
diversify the risk regarding political environment such as safety regulation with industry.
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Economic Factor- This factor is related to the saving rate, inflation, foreign exchange and
economic cycle that identify the aggregated demand, investment in economy. This type of macro
environment factor impact on the Fiat Chrysler automobile company in term of competitive
advantage. This company can use nation’s economic factor like inflation, growth rate as indicate
the manufactures. Sometimes, it is also spending to forecast growth trajectory of not only
automotive sector and but entire enterprise. In this Economic factor, Fiat Chrysler Company
should be considered the recession system in nations of operation in order to increase instability,
infrastructure quality of goods and services.
Social Factor- This factor is based on the social culture or environment that directly impact on
the organization. Usually, individual people will share their own beliefs, attitude of population,
which play a great role in marketer at Fiat Chrysler Automobile firm (Argyres and et.al., 2020).
It can be identified the potential consumer of given market and how they can design marketing
message of Auto manufacture. Social factors are considered as leadership of Fiat Chrysler firm
should analyse demographics, skill level of population, class, hierarchy of individual within
society.
Technological Factor- Advancement of technology is fast disrupting various manufacturer
industry across global world. Transportation is consider as one of good case to illustrate this
point. Over last five years, Fiat Chrysler firm is focused on transforming their service in global
marketplace (David, 2020). It is always tried to implement automation led by technology within
their different vehicles. The company should not include technological aspects but also speed at
certain level, disrupt that industry. Fiat Chrysler can involve recent technological development
and give a tough competition for their alternative competitors. This innovation is directly impacts
on the cost, price of entire structure in Auto manufacturers.
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Legal Factor- In different countries, legal framework and other institution are not capable or
robust enough to protect or secure their intellectual property right of Fiat Chrysler firm. In this
way, Automobile Company should carefully evaluate an effective rules and regulation before
entering into competitive marketplace (Dim and Okoli, 2020). It will be establishing a strong
position and achieve desirable goal. Typically, legal factors that Fiat Chrysler should be
considered such as discrimination legislation, Anti-trust law in auto manufactures, employment
law, consumer protection and e-commerce.
Environmental Factor- Different markets have various norms, standards and other
environmental legislation which can directly impact on the profitability of Auto manufactures.
Even within a nation often states that have different liability law (Sioutis and Anagnostopoulos,
2020 ). Fiat Chrysler enter into market before they are carefully evaluate the specific
environmental standards that requires to operate in other market. Fiat Chrysler firm should
include environment norms such as climate change, air and water pollution regulations, waste
management in goods, Applicable rules and regulation in environment pollution.
Porter’s five forces
Porter Five Forces analysis is based in strategic management tool or platform that can
analyse or understand underlying lever of profitability in global marketplace. Fiat Chrysler
automobile manager can use this tool to understand different competitive forces (Argyres and
et.al., 2020). These are influence profitability and develop an effective strategy for enhancing the
overall business in term of competitive advantage. Afterwards, it will achieve long term of
profitability in auto manufacturer.
Threat of New Entrants
Fiat Chrysler has been established the business with cost effective and performance
advantage in automobile industry over last past years. In particularly, product of company are
patented as well as proprietary limiting advanced technology and then develop for usage
purpose. Organization has been established the business itself as brand through quality assurance
system. the switching cost is lower. The primary issue for new entrant in automobile industry
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when establish a production unit but require a procurement of raw materials, components
essential to manufacturer Fiat Chrysler is investing the millions of dollars from business
establishment and then develop a strong distribution, supplier network. Thus, threat of new
entrant is low.
Bargaining power of Suppliers
In Fiat Chrysler, it can be used the raw materials in the automobile which are procured
through suppliers and become standardizes rather its differentiated. At certain point, there are
extensive contract with supplier so that it cannot force Fiat to increase cost or price (Sioutis and
Anagnostopoulos, 2020 ). But the switching price to another supplier is becoming low. It is very
difficult for new suppliers to enter into industry. Since, Fiat Chrysler offers the various supplier
with extensive enterprise regularly and hold more importance. In this way, it will reduce the
bargaining power of supplier.
Bargaining power of Buyers
The number of buyers in Fiat Chrysler automobile company is largest as compare to
another firms. It is always purchase each and every customer which makes as thousands of
dollars. Thu, it make a long term purchases in global marketplace. Price, cost of switching from
another seller is lower. In this way, it can easy for customer to purchase vehicle from Fiat
Chrysler firm. Existing potential consumers are gaining the more information about particular
product of Fiat Chrysler Company (Gupta, Mejia and Kajikawa, 2020). It offers the various
goods and services through website, buyers can perform extensive research before purchasing or
finalizing the vehicle as per need or requirement. Most of client are becoming price sensitive so
that they make a plan for long term. As a result, bargaining power of buyer is high.
Threat of substitutes
There are few substitutes to vehicles such as using bicycling, motorbikes and other public
transport. In this way, it can be identified that all substitutes have limited performance occurred.
They do not offer that much speed and time saving. Fiat Chrysler can offer same level of comfort
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as personal vehicle which become more attractive for potential buyers. Afterwards, Buyers can
utilise this substitutes once. Threat of substitutes is low.
Competitive Rivalry
Fiat Chrysler Automobile company is well-established with dominating the marketplace.
It is mainly focused on the fixed price, cost of running business, establishing a manufacturer unit
and distribution network. Fist Chrysler use their product and offer from various services to
customer. In this way, it will be maintained the position differently in marketplace. This
organization have focused on long term commitment in the form of financial obligation, product
deliveries marking it difficult to exit in markets.
2. Analyse the different resources and key competences of organization to identify strength,
weakness, identify its core competences.
PSA group, the French owner of Peugeot, has been setup to announce a merger with US, Italian
Rival Fiat Chrysler. This type of deal between two carmakers that would create a business with
combined market value of nearly $ 50 billion (Röhm, Merz and Kuckertz, 2020). In context of
political as well as financial, Discussion remain in early stage and there is so specific guarantees
of final deals. However, these two companies are following steps to combine and established as
enlarge group.
Internal analysis of Fiat Chrysler
In 2017, Fiat Chrysler from made 4.4 million vehicle shipments, selling vehicle parts and
other accessories in proper agreement. After official union of FIAT and Chrysler, FCA has been
formulated its five years plan and organize its business. During acquisition, the company is
mainly focused on the differentiating, strengthening, achieving the cost efficiency (Schwabe,
2020). it help for overall business to enhance profit margin and strengthening of its capital
structure. In 2016, it has made up plan to respond for changing trends and improve economic
scenario, consumer trends. It helps for handling the critical situation.
Strength
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Fiat Chrysler is based on the global automotive brand. Apart from that its operations in 40
different countries. There are various strengths that enable to thrive in marketplace.
 Successfully track or record the information of developing new product
 Highly successful at market strategies implementation and achieve desirable goal or
objective.
 Fiat Chrysler firm have a strong brand portfolio over years and invested in building a
string brand position in marketplace.
 Highly satisfied to their existing customer and always dedicated towards customer
relationship management.
 FCA firm have a string dealer community that help for build a strong culture among
different dealer and distributors.
Weakness
 High attrition rate in term of workforce so that compare with other organization.
 Investment in research and development is below as fastest growing player in
marketplace.
 Financial planning is not done in proper manner.
 Fiat Chrysler is very high inventory as compare to other competitors in markets.
Threat
 In Fiat Chrysler Automobile, it is increasing trend towards isolationism in economy that
can increase reaction from other government.
 FCA has been increasing the pay level especially movements such as $15 an hour.
 Shortage of skilled workforce in certain global market which represent as threat to grow
profit for Fiat Chrysler.
Opportunities
 Fiat Chrysler should maintain free cash flow which provide the opportunities to invest in
product segmentation.
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 New taxation policy can impact on the business processes of Fiat Chrysler automobile
company.
 Decreasing the price or cost of transportation because of their lower shipping prices. It
brings down cost of FCA firm.
Fiat Chrysler Value chain
Figure 1
In Fiat Chrysler, value chain cover the entire rage of different activities that mainly
performed within organization. Basically, it is mainly focused on the conception of automobile
products and its final delivery into hand of existing client. In case of business involved in
production of goods.
In above figure, value chain of FCA firm is depending on the different elements such as
Infrastructure, Human resource management, technology development and procurement. Each
and every department within Fiat Chrysler automobile company (Sioutis and Anagnostopoulos,
2020 ). For improving the infrastructure of vehicle that needs to consider as strongest financial
and business model. It helps for improving the current capacity of vehicle in organization.
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Another way, it directly impact on the brand identity. This is the most important aspect for
creating an effective value chain in marketplace. in particularly, brand identity is depending on
the different factors such as capabilities and innovation.
On the other hand, technology department is mainly focused on the implementing innovative
concept in product manufacturing. Typically, Fiat Chrysler can use Nectar loyalty program or
event, which always support for creating a strong relationship with existing program. This
program will help for Fiat Chrysler to interact with client and maintain loyalty, trust towards
particular goods and services. in this way, it always helping for established a better coordination
while increasing production and sales.
After merger with Peugeot, it has been increasing the popularity in global marketplace.
The owner of Fiat should improve their business in term of infrastructure, innovation and
workforce (Yingwen and et.al., 2020). In FCA automobile company, Human resource
management will hire talented or skilled individual’s so that they can implement innovation in
business and then afterwards launch an efficient goods and services in marketplace.
VRIO analysis
VRIO Analysis is based on the analytical technique for evaluation of all company’s resources,
competitive advantage or benefits. Typically, this can be used by Fiat Chrysler Automobile
Company for evaluating all essential resources such as Financial, Human resource, materials and
non-material resources such as Information or knowledge related. In this way, it will be
maintained the position differently in marketplace. During acquisition, the company is mainly
focused on the differentiating, strengthening, achieving the cost efficiency. In 2016, it has made
up plan to respond for changing trends and improve economic scenario, consumer trends. It helps
for handling the critical situation.
The VRIO analysis can be applied to evaluate Fiat Chrysler resources and competencies
which contributes to organizational competitive advantage. As per identifying VRIO analysis
and indicate as customer loyalty program for providing best quality of goods and services.
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Identifying the Competitive advantage resources
By conducting value chain analysis of Fiat Chrysler at the time of planning. It can be
identified all essential possible sources of competitive advantage. Usually, it is collecting the
different activities of trade such as sales, marketing, innovation and financial.
Improve flow of materials, information and finances
It is helping the Fiat Chrysler automobile company to exploit new opportunities and also
reducing external threats. The value chain evaluation can help for increasing the overall business
productivity as well as profitability in marketplace (Yingwen and et.al., 2020). Furthermore,
Automobile company has been established a strong relationship with customer, supplier to give
better options. Afterwards, it will be implementing innovative idea to manage information or
data flow.
Fiat Chrysler resources and competencies
The core competencies of Fiat Chrysler is based on its history of innovating business
process. It is high efficiency with product as well as manufacturing. Such business development
history yields long term competitive advantage. FAC automobile use for maintaining its overall
profitable operations but have applied strict regulatory requirement.
Resources and capabilities VRIO
High efficiency in term of manufacturing
processes
✔
High production capabilities and abilities ✔
Partnership and alliance with other company ✔
A strong global network of manufacturing
facilities in term of strategic location
✔
Implementing a rapid innovation in business
development
✔
Capacity for improving intelligent driving
technology
✔
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Table: 1
Strategy evaluation
The strategy evaluation has been process analysing the company strategic plan against achieving
goal of the specific strategies. The strategic evaluation is about internal analysis tool used as
the parts of broader strategic analysis for organization making up with decision. This have been
the important phase in which the top manager looks into decision making as a strategi choice to
be t up in the choice implemented to setup objective in better manner.
The “Fiat Chrysler” have to look into the interest including potential sales growth from the
customer base increase in offering of products along with delivery improvements.
Suitability
Strength
 Successfully track or
record the information
 Highly successful at
market strategies
 strong brand portfolio
 Highly satisfied to their
existing customer
 FCA firm have a string
dealer community
Weakness
 High attrition rate
 Investment in research
and development
 Financial planning is
not done
 Fiat Chrysler is very
high inventory
Opportunity
 Maintain free cash
flow which provide
the opportunities
 New taxation policy
can impact on the
The company should look into
the unique value proposition .
There is need for company to
pay major focus on the
people , resources , system
and procedure.
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business processes
 Decreasing the
price or cost of
transportation
Threat
 It is increasing
trend towards
isolationism in
economy
 The pay level
especially
movements such as
$15 an hour
 Shortage of skilled
workforce in certain
global market
There is need to look into the
change of government policy and
social pattern, population
profiles, lifestyle in significant
manner.
The company should pay
attention on development og
proper strategies to meet up
the external challenges
Acceptability
The strategy has acceptability revaluing whether the expansion and turning out to be outcome.
The strategy is actuary based on the return. The value chain evaluation can help for increasing
the overall business productivity as well as profitability in marketplace. Automobile company
has been established a strong relationship with customer, supplier to give better options.
Moreover, a well-managed debt is a strategic move to reduce equity financing.
Stakeholder analysis
Level of attention
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Minimal efforts Keep informed
Suppliers
Media
Public
Customers
Employee
Keep satisfied Key players
UK governments Management
Shareholders
Analysis
Fiat Chrysler to interact with client and maintain loyalty, trust towards particular goods and
services. in this way, it always helping for established a better coordination while increasing
production and sales. Value chain of FCA firm is depending on the different elements such as
Infrastructure, Human resource management, technology development and procurement.
Feasibility
When achieve success of business in Auto Manufacturers within across counties to diversify the
risk regarding political environment such as safety regulation with industry. Social factors are
considered as leadership of Fiat Chrysler firm should analyse demographics, skill level of
population, class, hierarchy of individual within society. Fiat Chrysler enter into market before
they are carefully evaluating the specific environmental standards that requires to operate in
other market. Since, Fiat Chrysler offers the various supplier with extensive enterprise regularly
and hold more importance. In this way, it will reduce the bargaining power of supplier.
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CONCLUSION
From above discussion, it has concluded that applied strategic management plays important
role which involves formulation, implementation of automobile firm to manage or control the
business processes in marketplace. In this report, it has been described about the internal as well
as external analysis by using Pestle, Porter’s five forces. These are helping for organization to
analyse its opportunities, threats of attractiveness of automotive industry. Furthermore, it can be
identified the current internal ability, capabilities, resources in term of strength or weakness. In
order to improve or acquire another enterprises by “Fiat Chrysler” company. Additionally, it can
be used the value chain analysis and model to find the current position of business. However, it
is mapping stakeholder to evaluate SAFs criteria as strategy at the time of Fiat Chrysler and
Peugeot Acquisition.
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REFERENCES
Book and Journals
Argyres, N.S. and et.al., 2020. History‐informed strategy research: The promise of history and
historical research methods in advancing strategy scholarship. Strategic Management
Journal. 41(3). pp.343-368.
David, A., 2020. Corporate and individual environmental responsibility towards automobile.
Book Rivers.
Dim, E. and Okoli, P., 2020. BUSINESS TECHNOLOGY AND PERFORMANCE OF
SELECTED AUTOMOBILE FIRMS IN NIGERIA. European Journal of Economic and
Financial Research.
Gupta, R., Mejia, C. and Kajikawa, Y., 2020. Analysis on formation of emerging business
ecosystems from deals activities of global electric vehicles hub firms. Energy Policy.
145. p.111532.
Röhm, P., Merz, M. and Kuckertz, A., 2020. Identifying corporate venture capital investors–a
data-cleaning procedure. Finance Research Letters. 32. p.101092.
Schwabe, J., 2020. Risk and counter-strategies: The impact of electric mobility on German
automotive suppliers. Geoforum. 110. pp.157-167.
Sioutis, P. and Anagnostopoulos, K.P., 2020The Technology-Production Base of the Firms:
Creating Sustainable Strategic Competitive Advantage.
Yingwen, W.U. and et.al., 2020. Technological capability, eco-innovation performance, and
cooperative R&D strategy in new energy vehicle industry: Evidence from listed
companies in China. Journal of Cleaner Production. p.121157.
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