External and Internal Analysis of Fiat Chrysler and Peugeot

This report provides an in-depth analysis of the external and internal factors affecting Fiat Chrysler and Peugeot. It includes a PESTLE analysis, Porter's Five Forces analysis, and a Value Chain analysis. The report also evaluates the strengths and weaknesses of the companies using VRIO analysis.

Report

Contents
Contents...........................................................................................................................................2
INTRODUCTION...........................................................................................................................1
MAIN BODY..................................................................................................................................1
1. External Analysis.....................................................................................................................1
2. Internal Analysis......................................................................................................................4
3. Evaluation................................................................................................................................8
CONCLUSION..............................................................................................................................11
REFERENCES..............................................................................................................................12

INTRODUCTION
The term corporate strategy is delineated to hierarchically strategic plan that is prepared by
managers of company to define overall objectives, direction and goals along with the ways to
attain strategic management activities (Cardoni, Kiseleva and Lombardi, 2020). In an
establishment, it assists in extracting wider sustained aspects to build and capture values within
particular product market. For the report, Fiat Chrysler and Peugeot are selected which are
automobile manufacturer that operates within automobile industry. The PSA and FCA are
specialised in designing, engineering, manufacturing, promoting and selling vehicles addition to
their associated parts with production system globally.
The report highlights external analysis through PESTLE and Porters Five Force analysis.
Further, it covers internal analysis to analyse resources and competences. At last, it evaluates
strategy on the basis of suitability, acceptability and feasibility.
MAIN BODY
1. External Analysis
Business environment is aggregation of various factors that are not controlled by
business. External analysis can be represented to investigation of industrial environment in
which an organisation operates. Major purpose to conduct external analysis is for ascertain
opportunities and threats within the industry that drives volatility, expansion, development and
profitability of the venture. For Fiat Chrysler and Peugeot, external analysis is conducted through
mentioned frameworks:
PESTEL Analysis
PESTLE analysis is termed to the framework that is applied by company to analyse key
macro factors which influences business from outside. In association to Fiat Chrysler and
Peugeot, external factors that impacts the businesses as well as create opportunities or leads to
threats are as analysed:
Political: There are various number of political factors including defined regulations by
government, stability or instability of political system, taxation policy, trade barriers and so on
(Köhler and Zerfass, 2019). In case with Fiat Chrysler and Peugeot, government have laid down
various trade barriers for automotive makers that creates complexities to trade across global
borders that acts as threat as it impacts drastically on their sales volume and profits.
1

Economic: Within external environment, the factors gauge economic situation via
studying elements within macro economy. In case with Fiat Chrysler and Peugeot, economic
factors comprising consumer disposable income, business cycle and foreign exchange rates. As a
common trend, people around the globe are earning huge every year that reflects that they are
spending money on luxury items including automobile and so on. It is an opportunity for Fiat
Chrysler and Peugeot to offer the vehicles at relatively lower prices to enhance sales and
building image in the industry.
Social: The factor covers study of target customers along with demographic variables. It
assist in gauging potential market size. In Fiat Chrysler and Peugeot, elements of social factor
that are impacting the businesses includes buying habits, family structure, attitudes, population
density and hence forth. Among people, popularity for driving is increasing due to which
families across the globe are owning one or more vehicles which is a threat for Fiat Chrysler and
Peugeot as there are various auto-makers offering vehicles to customers which creates intense
competition for the ventures.
Technological: It involves issues related with emerging technologies, scientific advances
and R&D practices (Helmold, 2020). In automotive industry, technology is changing rapidly that
provides opportunity to Fiat Chrysler and Peugeot for expanding market with adoption of
collaboration through technological analytics. At same time, advancements in technologies in
analytics comprises Artificial Intelligence, Big Data usage, etc which assist businesses to gain
knowledge about operations so that they are able to carry out activities across the world in easier
and convenient ways.
Legal: It states the ways legislations impacts operations of company and behaviour of
customers. In relevance to Fiat Chrysler and Peugeot, copyright act is one of issue that impacts
the working of businesses in automotive industry. There are certain characteristics of vehicle that
can be protected through trademark, patent laws and copyright which is an opportunity for the
businesses to protect its designs from others and sustaining positions to design and attractive
vehicles.
Environmental: There are multiple environmental factors which causes issues for
running a successful business venture. In this, carbon emission is one of serious issue that causes
threats for Fiat Chrysler and Peugeot when their vehicles create huge pollutions or lack to meet
desired standards which trapped the atmosphere by causing global warming, rising sea levels and
2

extreme whether events. This causes disturbances in cyclic nature of business which is a key
threat for the ventures.
In accordance to external analysis, it is identified that there are various issues
caused by macro environment. In this, Fiat Chrysler and Peugeot have chances to grab
opportunities and faces various threats that are as outlined:
Opportunities Threats
 Growing disposable income and
spending on vehicles.
 Market expansion via collaboration
through adopting technological analytics.
 Protecting designs through legislations
from other auto-makers.
 Trade barriers that reduces sales
volume and revenues.
 Intense competition in automotive
industry.
 Cyclic nature of business.
Porters five force analysis
Porter's Five force refers to strategic framework which is opted to analyse competitive
surrounding within an industry (Shahidan, Pandya and Minh Thu, 2019). In Fiat Chrysler and
Peugeot, main purpose of the framework is to ascertain and examine five forces which shapes the
industry and assist to determine its strengths and weaknesses. Five forces in relevance to Fiat
Chrysler and Peugeot are discussed underneath:
Competitive rivalry: In automotive industry, multiple automotive makers and sellers
performs activities that creates high rivalry for Fiat Chrysler and Peugeot. Groupe Renault,
Toyota, Nissan Motor Corporation, BMW Group and hence forth are key competitors for Fiat
Chrysler and Peugeot that designs, manufactures and sells similar vehicles with limited
differentiation. The companies Fiat Chrysler and Peugeot have unique ideas that have influences
the managers to take decision of merger.
Threats of substitutes: Substitute products are those commodities that offer or satisfy
people by providing similar values. Within automotive industry, substitutes of vehicles of Fiat
Chrysler and Peugeot are other modes of transportation including bus or train that helps
consumers to move from one location to other at less prices which creates high threat of
substitution of the businesses.
3

Threats of potential entrant: Force which guides to measure complexities for
newcomers to enter within the industry is threat of potential entrant. In automotive industry,
factors that defines barriers to entry are excess production capacity, regulations from government
and loyalty of brand. For Fiat Chrysler and Peugeot, new entrant brings innovative ideas but
require large investment and compliance formalities that results in low entrant threat for the
venture as they offers innovative vehicles.
Bargaining power of suppliers: In automotive sector, various suppliers performs
activities to supply materials to auto makers so that all the vehicles are manufactured as per
demand (Richardson, 2016). In case with Fiat Chrysler and Peugeot, it have relations with
multiple suppliers that are small in size. When one makes modifications in price structure of
material then the businesses shift to others ones that provides suppliers low bargaining powers.
Bargaining power of buyers: It calculates level of powers that customers have to
determine current prices of product in market. In automotive sector, buyers for vehicles are large,
concentrated and price sensitive. In case of Fiat Chrysler and Peugeot, vehicles made by
organisations differs in performance, price, quality and appearance that provide easy access to
buyers about information. It is examined that buyers of Fiat Chrysler and Peugeot have high
powers to bargain due to existence of various auto makers which attracts customers by reducing
prices of vehicles. However, with luxury brands, buyers are more loyal as they are willing to pay
additional for vehicles of specific brand.
2. Internal Analysis
Internal analysis assists in studying internal environment of organisation so to evaluate its
capabilities, competences, resources together with competitive benefits (De Lellis, 2019). In case
with Fiat Chrysler and Peugeot, when internal analysis is conducted then it permits the
businesses to recognise their strengths and weaknesses as whole. For this, following frameworks
helps Fiat Chrysler and Peugeot to denote strengths and weaknesses of resources and
competences:
Value Chain Analysis:
Value chain analysis refers to strategic framework that directs to examine internal
activities of organisation. It represents internal practices in which an association engages
while converting inputs towards outputs. In Fiat Chrysler and Peugeot, purpose of value chain
analysis is to appreciate the activities which are most valuable and activities that requires
4

improvements. It includes primary and secondary activities that are discussed in context to
Fiat Chrysler and Peugeot below:
Porter's value chain analysis for Fiat Chrysler and Peugeot
Profit
Primary activities
Inbound
Logistics
Operations Outbound
logistics
Marketing
and sales
Service
Firm Infrastructure Technology
Human Resource
Management
Procurement
Supporting Activities
Primary activities: Organisational activities which are associated in producing and
selling commodities to end consumers are primary activities (Izawa, 2020). In relevance to Fiat
Chrysler and Peugeot, analysis of set of primary activities of the businesses are as follows:
Inbound Logistics: For a business, it is significant to build relations with suppliers as
support which suppliers provides is essential for receiving, storing addition to distribute its
products. When Fiat Chrysler and Peugeot do not analyse in bound logistics, it faces multiple
challenges in vehicle manufacturing process which is weaknesses for it.
Operations: Organisational activities that are related with production of goods is
operations. Fiat Chrysler and Peugeot includes manufacturing and service related operations that
ensures that adequate quantity of vehicles are manufactured to meet demand of customers which
is its key strength.
Outbound Logistics: Activities that are necessary to deliver products to end consumers
through intermediaries is outbound logistics. Within Fiat Chrysler and Peugeot, outbound
logistics activities are scheduling, order processing, material handling, warehousing,
transportation as well as delivering to places. The businesses have strong distribution system that
is its strength because the activity assist it reaching maximum customers living at far places.
5

Marketing and sales: Organisational activities that promotes and persuades customers to
make buying decision are termed to marketing and sales. Certain activities that are relevant to
marketing and sales engrosses advertisement, quoting, pricing, customer relationship
management and hence forth. Fiat Chrysler and Peugeot have invested huge sum of funds still
failed to attract desired proportion of customers which became weakness of the businesses.
Services: Services includes activities that builds customer loyalty towards a brand. Pre
sale as well as post sale services which are offered by Fiat Chrysler and Peugeot develops huge
customer loyalty which is key strength of businesses.
Supporting activities: Business activities that coordinates addition to facilitates primary
activities are known as supporting activities (Volkhonskaya and Shmat, 2018). Different types of
supporting activities that exist within Fiat Chrysler and Peugeot are as analysed:
Human resource management: In an organisational, activities that are guides for sourcing,
recruitment, selection, performance management, training, compensation, retaining and so on are
human resource management. In case with Fiat Chrysler and Peugeot, no defined criteria to
manage personnel is set because of which the businesses lack innovative ideas or productive
talents which shows that it is a weakness for organisations.
Technology development: Within modern era, all activities of value chain rely on
technological support for functioning. In Fiat Chrysler and Peugeot, technology is integrated in
activities of production, distribution, promotions, human resource management and hence forth.
Firm Infrastructure: It denotes activities comprising management of quality, accounting,
strategic management, legal matter handling, etc that are performed within devised
organisational structures. It assist Fiat Chrysler and Peugeot to control diverse number of costs,
allows to optimise values and strengthen competitive positions that works as strength of
businesses.
As per Value Chain Analysis of Fiat Chrysler and Peugeot, it is identified that
organisation have various activities that are its strengths and some weaknesses. In this context,
strengths of the businesses are firm infrastructure, outbound logistics, operations and services.
Nevertheless, activities that are weakness for the ventures includes Inbound Logistics, Human
resource management, Marketing and sales.
VRIO Analysis:
6

For evaluation of resources and capabilities of company, one of analytical tool is VRIO
Analysis (Keeys, 2020). The model helps in examining linkage among organisational internal
resources to that of its performances. VRIO Analysis of Fiat Chrysler and Peugeot is below:
Capabilities and resources Valuable Rare Inimitable Organised
Operations (Tangible) X X X ✔
Services (Intangible) ✔ ✔ X X
Outbound logistics (Tangible) ✔ X X X
Marketing and sales (Intangible) X X ✔ X
Human resource management
(Tangible)
✔ ✔ X X
Firm Infrastructure (Tangible) ✔ X ✔ ✔
Valuable: From VRIO analysis, it is analysed that resources and capabilities of Fiat
Chrysler and Peugeot that are valuable are human resource management, services, outbound
logistics and services. The services that are offered by the ventures satisfy its customers and
build brand loyalty that provides competitive advantage to the auto-makers. Moreover, human
resource management of the ventures conducts all practices to benefit employees and company
to sustain competitive edge. Outbound logistics is managed promptly at the enterprise with
optimal costs as well as delivers vehicles for exploring competitive beneficial sources. Firm
infrastructure of Fiat Chrysler and Peugeot is devised as per structure of organisation so that all
the mechanisms are conducted properly to access opportunities together with dealing with
threats.
Rare: Rare resources are those which other firms do not have or lacks. In accordance to
VRIO analysis, it is determined that rare resources of Fiat Chrysler and Peugeot are services
addition to human resource management. In the venture, professionals in department of human
resource management have skilled people that have adequate knowledge about legislations, ways
to handle employees and coordinates activities with other departments that other firms do not
possess. At same time, services of the venture are rare as it offers both pre- and post-sales
facilities in suitable modes that others fail to offer.
7

Inimitable: There are some resources which rival companies founds difficult to obtain
and these are named to imitable resources (Pidun, 2019). The outcomes of VRIO Analysis shows
that inimitable resources of Fiat Chrysler and Peugeot includes marketing and sales as the
businesses conducts all their activities associated to promotions and sales in systematic manner.
The company have also adopted various marketing strategies including email marketing,
relationship marketing and so on that improves sales volume of offered vehicles.
Organised: There are resources and capabilities of entity which are sequenced in proper
way and carried out to grab opportunities effectively. As per outcomes of the analysis, it is seen
that firm infrastructure and operations are organised resources. With the operations, the ventures
acquire larger shares in market together with position in the industry. Moreover, firm
infrastructure is also organised resource as it permits optimisation of entire values of the chain.
3. Evaluation
Fiat Chrysler and Peugeot have adopted merger strategy which was a deal among two car
makers that would establish a business with combined value of around $50 Billion which was
nearby £39.9 Billion (Fiat Chrysler and Peugeot owner 'on verge of' merger, 2019). Moreover,
the merger strategy would face significant financial hurdles as well as political interference. Both
these businesses are making efforts so to effectively respond towards market demands, changing
customer perceptions and reducing own costs. Evaluation of merger strategy is done through
SAFe test that is below:
SAFe test: It is an approach with the help of which business managers monitors together
with evaluates strategies by following three criteria which includes suitability, acceptability as
well as feasibility (Berning, 2016). Below is evaluation of Fiat Chrysler and Peugeot merger on
the basis of three criteria:
Suitability: It defines whether the strategy adopted by business makes sense in the
dynamic world. It involves assessment of proposed strategy that whether it addresses
opportunities and threats which organisations are facing in the external and internal business
environment. For analysing suitability of Fiat Chrysler and Peugeot merger strategy, TOWS
Analysis is applied which is underneath:
TOWS analysis: It looks forward for matching organisational strengths with opportunities
as well as threats with weaknesses. Below is TOWS analysis of Fiat Chrysler and Peugeot
merger strategy:
8

Factors Strengths:
 Effective firm
infrastructure.
 Manageable inbound
logistics.
 Organised operations.
 Effective services.
Weaknesses:
 Lack of marketing and
sales initiatives
 Unsuitable inbound
logistics
 Unprofessional human
resource management
Opportunities
 Protecting designs
through legislations
from other auto-
makers.
 Growing disposable
income and spending
on vehicles.
 Market expansion via
collaboration through
adopting technological
analytics.

Fiat Chrysler and Peugeot
merger strategy
-
Threats:
 Cyclic nature of
business.
 Intense competition in
automotive industry.
 Trade barriers that
reduce sales volume
and revenues.
- -
As per TOWS Analysis, Fiat Chrysler and Peugeot merger strategy is suitable for Fiat
Chrysler and Peugeot to align its strengths with opportunities so to build unique position within
9

automobile industry. By aligning strength with opportunities, the business will be able to expand
by offering effective services.
Acceptability: In this criteria, evaluation of the strategy is done so to analyse whether it
is acceptable by suitable stakeholders (Sinatra, Singh and von Krogh, 2016). For Fiat Chrysler
and Peugeot merger strategy, stakeholder mapping is as follows:
Level of Interest
Level of power
High Low
High Management Government
Low Employees Customers
High power and high interest: In relevance to Fiat Chrysler and Peugeot merger strategy,
management is the stakeholder group that have high power and high interest to run the business,
make revenue and decrease costs. The strategy has high possibilities to meet expectations of
management to attain desired outcomes:
High power and low interest: The stakeholder group which belong to this category is
government that expects timely payment of taxation and huge contributions in economic
development (Long and Lin, 2018). Fiat Chrysler and Peugeot merger strategy is able to meet all
expectations of this stakeholder group.
Low power and high interest: Employees are the stakeholder group which expect career
growth and payment of salary with incentives. Through Fiat Chrysler and Peugeot merger
strategy, all expectations of employees will be met promptly.
Low power and low interest: Customers have low powers addition to low interest in
strategies of company. They only expect unique and differentiated products. with Fiat Chrysler
and Peugeot merger strategy, customers have expectations of low price and unique featured
vehicles which will be met by the strategy adequately.
Feasibility: The criteria focuses whether the strategy have chances for implementation or it
could perform actions (Cadez, Czerny and Letmathe, 2019). In case with Fiat Chrysler and
Peugeot merger strategy, there are huge probabilities that it will work as at the time when human
resources, financial resources, intellectual capabilities and so on will combine then it will give
fruitful returns to businesses. Moreover, the skills that are required for the working of the
strategy includes analytical, problem solving, decisiveness, strategic planning and many more
10

skill that Fiat Chrysler and Peugeot will acquire through recruiting people from various sources
and placing them at right places or jobs at workplace.
CONCLUSION
From the report, it have been concluded that corporate strategy is essential as it guides in
allocation of resources, enhances shareholders values and improving organisational competitive
position. PESTLE and Porter’s five force model are applied for analysing external environment.
Porters value chain and VRIO Analysis are applied with the way to analyse internal
environment. SAFe test includes three criteria that are suitability, acceptability addition to
feasibility to evaluate corporate strategy.
11

REFERENCES
Books and Journals:
Berning, S. C., 2016. International Corporate Strategy and Post-M&A Integration of Chinese
Firms in Germany (WITHDRAWN). In Academy of Management Proceedings (Vol.
2016, No. 1, p. 14236). Briarcliff Manor, NY 10510: Academy of Management.
Cadez, S., Czerny, A. and Letmathe, P., 2019. Stakeholder pressures and corporate climate
change mitigation strategies. Business Strategy and the Environment. 28(1). pp.1-14.
Cardoni, A., Kiseleva, E. and Lombardi, R., 2020. A sustainable governance model to prevent
corporate corruption: Integrating anticorruption practices, corporate strategy and
business processes. Business Strategy and the Environment. 29(3). pp.1173-1185.
De Lellis, G., 2019. Corporate Social Responsibility: implementation in the corporate strategy to
generate value (Bachelor's thesis, Università Ca'Foscari Venezia).
Helmold, M., 2020. Pricing as Part of Corporate Strategy. In Total Revenue Management (TRM)
(pp. 29-42). Springer, Cham.
Izawa, R., 2020. Corporate structural change for tax avoidance: British multinational enterprises
and international double taxation between the First and Second World Wars. Business
History, pp.1-23.
Keeys, L. A., 2020. Incorporating Corporate Sustainable Development Strategy in Projects:
Prioritizing Context Through Qualitative Constructivist Research. SAGE Publications
Ltd.
Köhler, K. and Zerfass, A., 2019. Communicating the corporate strategy. Journal of
Communication Management.
Long, C. and Lin, J., 2018. The impact of corporate environmental responsibility strategy on
brand sustainability. Nankai Business Review International.
Pidun, U., 2019. Corporate growth strategy. In Corporate Strategy (pp. 95-126). Springer
Gabler, Wiesbaden.
Richardson, J. G., 2016. Forethought in designing corporate strategy. Foresight.
Shahidan, M., Pandya, K. and Minh Thu, V. T., 2019. Corporate Governance Feature on Capital
Structure Decision of Vietnamese'firms.
Sinatra, A., Singh, H. and von Krogh, G. eds., 2016. The management of corporate acquisitions:
International perspectives. Springer.
Volkhonskaya, S. K. and Shmat, V. V., 2018. Corporate Strategies' Feasibility Study Using
Cognitive Approach. In МНСК-2018: Экономика (pp. 236-237).
Online:
Fiat Chrysler and Peugeot owner 'on verge of' merger. 2019. [Online]. Available through:
<https://www.bbc.com/news/business-50228611>
12