External and Internal Analysis of Fiat Chrysler and Peugeot Merger

This report analyzes the external and internal factors affecting the merger of Fiat Chrysler and Peugeot. It examines the political, economic, social, technological, legal, and environmental factors, as well as the bargaining power of suppliers and customers, threat of new entrants, rivalry from existing players, and threat from substitute products. It also evaluates the strengths, weaknesses, resources, and competences of both companies.

Fiat Chrysler and
Peugeot

Table of Contents
Introduction......................................................................................................................................3
Main Body.......................................................................................................................................3
Q1 External Analysis..................................................................................................................3
Q2 Internal analysis.....................................................................................................................6
Q3 Strategy Evaluation...............................................................................................................9
Conclusions....................................................................................................................................11
References......................................................................................................................................12

Introduction
For an organisation to continue to sustain successfully in market it is important that they
formulate strategies which can help them in making effective decisions and actions so that they
can gain a competitive advantage in market. Efficient strategies must be formulated by
organisations after analysing their external and internal environment so that the strategies which
can help in minimising the negative impacts of the factors (Albrecht, Holland and Peters, 2016).
Appropriate strategies can also help in optimising the use of capabilities and strengths of
organisation so that the opportunities present in market can be captured and the threat can be
effectively dealt with. This report is based on Fiat Chrysler and Peugeot is taken of which Fiat
Chrysler Automobiles is an Italian-American multinational corporation and is the world's 8th
largest automotive maker. The group was formed in 2014 by the merger of Fiat and Chrysler and
in October 2019, FCA announced to merge with Group PSA which will be on a 50-50 all stock
basis. In this report the external analysis for the company will be done so that the opportunities
and threats in industry can be found. Also the resources and competences of organisation will be
found so that a competitive advantage can be achieved so that effective merger can take place.
Main Body
Q1 External Analysis
External analysis is related with analysing the external business environment so that the
the potential threats and opportunities which are present in the industry can be identified which
can help in taking effective actions so that high profitability, growth and productivity can be
gained. PESTLE is a strategic management tool which help in efficiently analysing the external
environment which can be used by Fiat Chrysler and Peugeot so that the effectiveness of their
merger can be analysed:
• Political: These are the factors associated with the rules and regulations of a government
which affect the tax regulations, trade tariffs etc. of a country and affect businesses. The
political opportunities for merger of Fiat Chrysler and Peugeot are that the governments
of both the countries i.e. UK and France respectively favour expansion of companies
which help them in increasing investments, job opportunities etc. which can help both the
companies to combine strategically. However, there are certain threats of their merger as
after the post-Brexit of UK from EU, the relations of both the countries will be troubled

which can create many hurdles in their merger. In order to make the merger successful it
is important that the political hurdles are dealt with effectively which can help the
resultant company in becoming the 4th largest automotive company in the world (Ansoff,
2018).
• Economical: These factors are related with the economic condition of a country which
affect the unemployment rate, purchasing power of people, interest rates etc. The
opportunities of merger of both the companies is that it will help them in producing
sustainable, clean and innovative mobility solutions like electrification of auto mobiles,
reduction of emission and autonomous driving technologies. This will help both the
companies in being highly profitable in the market. However there will also be certain
threats for this merger like the global slowdown in the demand for automotive along with
the rising cost of vehicles because of the use of advanced technologies so that emissions
can be reduced and pollution can be controlled.
• Social: These are the factors related with the composition of people in society like age,
religion, caste etc., their living standards, likes and preferences etc. The social
opportunities for the merger of Fiat Chrysler and Peugeot are that the knowledge of
people regarding pollution and global warming is increasing which can help in increasing
the demand of vehicles which have reduced emissions. This can give an opportunity to
the company in producing cars which can help in reducing air pollution. The threats
however with their merger will be that the demand for luxurious cars in the market is
decreasing which can affect the expensive merger of the two companies (Bettis and
Mitchell, 2016).
• Technological: These are the factors related with technological advancements and the
rate at which R&D takes place in a country which can help in accessing advanced
technologies easily and at cheaper rates. The opportunities for Fiat Chrysler and Peugeot
for merger is that the two companies can bring together their investments which can help
them in acquiring highly advanced technology easily and also help in meeting the
changing needs and wants of customers. However, the threats for their merger is that the
fluctuations and high cost of acquiring technology can affect acquiring new techniques so
that highly advanced and innovative features can be installed in the cars.

• Legal: These are related with the laws and legislations of a nation which affect the
businesses of companies like employment laws, environment protection laws etc. The
merger of Fiat Chrysler and Peugeot can be effectively done if the legislative hurdles can
be effectively overcome. The opportunities for the merger of Fiat Chrysler and Peugeot
are that the strict laws for controlling vehicles emissions can be efficiently fulfilled which
can help the company in gaining legal support so that profits of company can be
increased. However, the threats related with the merger is that in order to efficiently meet
all the legal requirements the car costs will increase which can affect the profitability of
the merger (Chanthawong and Dhakal, 2016).
• Environmental: These are the factors related with the environment in which a company
operates which affect the availability of water, resources etc. for a company along with
the environmental protection laws. The opportunities for the merger of Fiat Chrysler and
Peugeot are the changing laws related to the environment which requires that the vehicles
reduce their emissions which can help in reducing air pollution. The merger can help in
manufacturing cars which can help in reducing air pollution and hence can gain the
support of both the people and government. They will be able to manufacture electric
cars so that the energy consumption can be reduced.
Porter's five forces analysis: It is a framework which help in analysing a company's
competitive environment based on the five forces which work in an industry and affect the
company's strategies:
• Bargaining power of suppliers: The bargaining power of suppliers is low as the company
procures raw materials from various suppliers along with having extensive contracts with
the suppliers which help in controlling the prices. Also the cost of switching to another
supplier is low which allow the companies to acquire raw materials at low costs (Das,
2016). The merger of Fiat Chrysler and Peugeot can be efficiently done as the bargaining
power of suppliers can be reduced through building efficient supply chain management,
building strong relations with the suppliers etc.
• Bargaining power of customers: The bargaining power of buyers is high which means
that they can easily switch to other brands after comparing the prices and features of the
vehicles the different brands are offering. This means that Fiat Chrysler and Peugeot
needs to manufacture vehicles which can help them in attracting customers effectively by

adding value for its customers through innovative features like electrification of cars,
introduction of advanced technologies like automation of cars etc.
• Threat of new entrants: The level of threat of new entrants is low as this industry
requires huge capital investment fort manufacturing and establishing distribution network
so that profitability can be increased. Thus the merger of Fiat Chrysler and Peugeot can
be profitable for the company as the company can use highly extensive marketing
techniques and quality assurance systems which can help in efficiently capturing new
markets.
• Rivalry from existing players: The level of rivalry in the automotive industry is very high
which increases the focus of companies on reducing production costs and increasing the
customer satisfaction by dealing effectively with their changing needs and wants. The
merger of Fiat Chrysler and Peugeot can help in reducing the cost of production and also
will help in bringing together investments so that new and advanced technologies can be
used in the cars which can help in dealing with this force. Also this will help in increasing
the market share which makes merger beneficial for companies (Gottfried and Wang,
2018).
• Threat from substitute products: The threat of substitutes in auto-mobile industry is low
as the substitute of cars are public transport, motorbikes etc. which have performance
limits. This means that the merger of Fiat Chrysler and Peugeot can help in gaining large
number of customers in market so that the sales of company can be increased. This can
be done by providing high quality products and services to the customers which can help
in fulfilling the needs and wants of customers effectively.
Thus, from the above discussion it can be said that the industry provides better
opportunities for the merger of Fiat Chrysler and Peugeot which can help in meeting the goals
and objectives of merger in a profitable manner.
Q2 Internal analysis
For an organisation to b successful it is important that strategies are formed based on the
internal analysis of the company which can help in identifying its capabilities which means the
presence of resources and competences of company. These can help the company in using its
strengths effectively in dealing with threats in market along with acquiring the opportunities so
that a competitive edge can be gained. The merger of Fiat Chrysler and Peugeot will have an

annual unit sales of 8.7 million vehicles, revenue of around EUR 170 billion, operating margin of
6.6% and a recurring profit of EUR 11 billion (Fiat Chrysler and Peugeot .2020). The combined
skills and financial strength of merged companies will help in providing clean, sustainable and
innovative mobility solutions. This will help in providing high efficient and best technologies
services and products to their customers. Following are the strengths and weaknesses of the
merger of Fiat Chrysler and Peugeot :
Strengths:
• The merger will help create the world's 4th largest auto-maker with a combined market
value of around $50 billion and help in increasing the profits for both the companies.
• Fiat Chrysler can gain the electric vehicle technology which can help in electrification of
vehicles so that the problem of air pollution can be efficiently dealt with while PSA could
be benefited as it can gain a strong dealership network to reach its goals of selling
vehicles in US (Hitt, Ireland and Hoskisson, 2016).
• This merger will help in gaining huge investments so that highly sustainable, autonomous
technologies can be installed in cars which can help in saving manufacturing costs and
also in meeting the changing needs of customers.
• Increased number of innovations can occur which can help in capturing a large market
and building a string brand image among customers so that high sales can be achieved.
Weaknesses:
• In order to make the merger successful the companies will have to overcome various
financial, political and technological hurdles.
• Efficient management of the merged companies will become difficult which can affect
the overall functions and operations of the company in market (Indartono and Wibowo,
2017).
From the above strengths and weaknesses it can b said that the merger will be highly
profitable for both the companies and can help in achieving the goals and objectives of
companies efficiently. Following are the resources and competences of both the companies:
Strategic capability
Resources Competences
Threshold capability • Presence of investments
• Human resources
• Designing and innovating
vehicles as per needs of

• Intellectual property
• Loyal suppliers
customers.
• Manufacture of sustainable
vehicles with the use of
technologies.
Distinctive capability • Large market share with
presence of loyal customers.
• Advanced technologies
• Innovative and skilled
labour force
• Reduced cost of vehicles
due to combined
investments
• Electrification of vehicles
so that emissions can be
reduced.
Resources
Tangible Intangible Human
• Huge financial
investments through
merger.
• Manufacturing units
• Highly advanced
vehicles
• Brand image of
company in market.
• Intellectual property
such as patents of
company
• Highly skilled labour
force which help in
bringing innovation in
company by using their
skills and talents.
• Formation of effective
teams so that effective
decisions can be made.
Resource based view(RBV): It is a managerial framework which can be used in
determining the strategic resources which can can be exploited by an organisation so that a
competitive edge in market can be gained. Resources of a company help in improving the
performance of an organisation as they can be efficiently utilised so that products and services
which can help in maximising customer's needs and wants can be produced (Kent and Zunker,
2017).
VRIO framework: It is a strategic analysis tool which help the organisations in
recognising their internal resources and capabilities so that a sustainable competitive advantage

can be achieved. This can be applied by Fiat Chrysler and Peugeot so that its ability to gain a
competitive advantage in market can be analysed:
• Valuable: It is related with the ability of an organisation to produce goods and services in
company which help in providing high value to their customers so that high customer
satisfaction can be achieved by providing high value to customers. Fiat Chrysler and
Peugeot can manufacture highly advanced electric vehicles with the use of autonomous
technology so that high value can be created for customers. The company's employees,
finances, organisational culture and intellectual property help in manufacturing highly
valuable products.
• Rare: This is related with the ability of an organisation to acquire rare resources so that
competitive advantage can be achieved by manufacturing goods which are unique in
nature and can help in increasing customer satisfaction. Fiat Chrysler and Peugeot can
together bring their investment so that highly advanced and unique features can be added
to their products which can help in increasing the rarity of the cars. The employees,
organisational culture and intellectual property can help the company in increasing its
rarity in market (Meyer, Neck and Meeks, 2017).
• Imitable: It is the ability of an organisation to manufacture goods and services which
cannot be imitated by other companies so that a competitive advantage can be achieved.
Intellectual property and organisational culture of Fiat Chrysler and Peugeot helps the
company in making such car which cannot be imitated by others.
• Organisation: It is related with the ability of an organisation to assemble and coordinate
its resources so that such products and services can be manufactured which can help in
providing high customer experience. The organisational culture of Fiat Chrysler and
Peugeot will enable the company to produce highly competitive vehicles so that its
profits in market can increase (Morioka, Bolis and de Carvalho, 2018).
Q3 Strategy Evaluation
In order to analyse the effectiveness of the strategy chosen by an organisation TWOS
analysis can be used so that different strategies can be assessed, created and compared so that the
best strategy which can be implemented by company can be selected. TWOS analysis can be
used by Fiat Chrysler and Peugeot so that best strategies in order to gain a competitive edge can

be selected based on various internal and external factors and analysing the opportunities and
threats associated with them in accordance with company's strengths and weaknesses:
External opportunities External threats
Internal strengths SO (Maxi-maxi strategy) ST (Maxi-mini strategy)
Internal weaknesses WO (Mini-maxi strategy) WT (Mini-mini strategy)
• Strength/Opportunity (SO): The strengths will be used to exploit opportunities like Fiat
Chrysler and Peugeot can use the combined investments to use highly advanced
technologies so that electrification of cars can be done and the demand for sustainable
cars can be met. Also the companies can combine their market shares to fulfil each other's
objectives.
• Weakness/Opportunity (WO): In this options that can help in mitigating weaknesses are
found so that opportunities can be acquired. Fiat Chrysler and Peugeot can deal with the
political hurdles so that a competitive advantage in market can be gained (Shenoy and
Aithal, 2017).
• Strength/Threat (ST): In this strength is used to overcome threat like Fiat Chrysler and
Peugeot can use combined investment as an opportunity to overcome the threat of
increasing competition in market.
• Weakness/Threat (WT): In this the weaknesses are minimised so that threats can be
avoided like the company can minimise the weak management of merged companies so
that the threat of increased competition can be dealt effectively.
Stakeholders analysis model: This model can be used so that the stakeholders who will be
affected by the merger of Fiat Chrysler and Peugeot can be analysed so that their support can be
gained:
• High power, low interest: These are the stakeholders like government which has high
power on the merger of companies but have low interest.
• High power, high interest: These are the shareholders of companies who have high
power and high interest in the merger.
• Low power, high interest: These stakeholders like suppliers have low power and high
interest in the merger.

• Low power, low interest: these stakeholders are customers who have low power and low
interest in the merger as they are interested in the features and prices of vehicles.
Feasibility: The merger of Fiat Chrysler and Peugeot is highly feasible as this will help in
combining the financial resources of the companies along with skilled labour force so that high
competitive advantage can be gained in market by efficiently meeting the requirements of the
customers. This will also help in manufacturing sustainable and innovative cars so that high
customer satisfaction can be achieved (Sukholthaman, Chanvarasuth and Sharp, 2017).
Thus, from the above discussion it can be said that the merger of companies is highly
suitable, acceptable and feasible in market and can help the company in gaining a strategic and
sustainable advantage in market.
Conclusions
From the above report it can be said that in order to formulate effective strategies it is
important that internal and external analysis of an organisation is done which help in identifying
the potential opportunities and threats in market. Also with the help of VRIO and TWOS
analysis the company can use its resources efficiently so that a competitive edge in market can be
gained. Through stakeholder matrix and feasibility analysis the ability of the project in achieving
its goals and objectives can be determined.

References
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Online
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