Posted: October 17th, 2013
Fiat: More Than a Sign of Recognition
1. Fiat Company is the leading automobile brand in Brazil. The degree of competition in Brazil’s market is an oligopoly whereby, there are limited players in the market, leading to the dominance of the market by few companies. Porter’s five forces analysis is valid for analyzing the Fiat’s dominance in the Brazilian market and strategies utilized by other competitors to penetrate the market. The firm is affected by the strong presence of substitutes through the entrance of low cost automakers from China such as Anhui Jianghuai Automobile Company (Wuestner, 2012). With respect to the power of suppliers, Fiat has a low supply network in major markets such as Asia and North America. However, its supply network in Europe is strong. The power of buyers is strong, characterized by the varying preferences and purchasing habit attributed to the Global Recession. Consumer needs and demands are different in segmented markets in Europe, North America and Asia. Fiat is threatened by the entrance of new firms in the market. The firm has been enjoying dominance for a long time; however, the threat of new entrants such as Hyundai Motors has undermined the market share of the company. Hyundai Motors penetrates the Brazilian market because it enjoys massive economies of scale such as large capital, efficient required technologies and enhanced management skills. The HB20, a hatchback manufactured by Hyundai Motors, was introduced in the Brazilian market. Another entrant threatening Fiat’s dominance in the Brazilian market is General Motors. The firm recently introduced the Chevrolet Onix. Additionally, the firm has also engaged in production of mass vehicle production presenting seven novel vehicles in the country (Wuestner, 2012). Fiat is also experiencing competitive rivalry indicated by the entrance of numerous carmakers in the market such as China’s Chery carmaker (n.p, 2002). However, Fiat still has the largest market share in the country characterized by the perfect knowledge it has over the other companies enabling it to create vehicles according to the preferences of the Brazilian customers. For instance, the company recently unveiled a different model mainly designed for the Brazilian population. The model, Fiat Uno, is popular among the Brazilians because of the dual engine system that encompasses two engines that use alcohol or gasoline or a mixture of the two increasing its efficiency.
2. The SWOT analysis is a constituent of the environmental scan that analyzes the strengths and weaknesses in the internal environment of a firm and the opportunities and threats of the external environment of a firm. It is a common technique used by management to create an impression of the firm’s strategic situation (Crossan, 101). Fiat, despite being involved in automobile making, is also involved in other processes such as distribution of the vehicles, manufacturing of agricultural and construction equipment. The firm’s internal environment is comprised of factors that the firm can strategically control. Such factors comprise strengths such as the diversification of business, strategic acquisition by acquiring the automobile maker, Chrysler as a subsidiary to penetrate the North American market and production of innovative products such as the Fiat Uno, which is yet to be released in the European markets. The firm’s weaknesses comprise lack of scale compared to other carmakers such as Mercedes and Honda companies, weak performance of business divisions indicated by low sales growth in the Brazilian market, poor performance of the Fiat models in major markets such as North America. The external environment comprises factors that the firm cannot control. These factors include opportunities (Narayanan & Fahey, 67). Such opportunities available for the firm include the emergent worldwide truck market. Another opportunity includes the increasing demand around the world for agricultural machinery and equipment. The firm can also venture in the Indian and Chinese markets because of the emergent construction industry there, as the need for infrastructure rises. However, the firm also faces threats that affect its financial performance. One dominant threat is the 2009 Global Recession. The Recession led to the devaluation of most currencies leading to inflation of most auto parts forcing consumers to cease purchase. Another threat is the weakening of the global automotive industry mostly attributed to the low power of suppliers in the industry, as well as the increase in competitive pressure, in the industry. By understanding the various factors affecting the company internally and externally, the firm can use the strengths and opportunities to create strategies to counter the weaknesses and mitigate the threats facing the company.
3. Value chain analysis refers to the ongoing activities in a firm and connects them to the analysis of the competitive strength of the organization. Such activities that a business engages in can be categorized into two classes: primary activities and secondary activities. Primary activities include activities that are directly involved in the creation and delivery of a product. Secondary activities comprise activities that are not directly concerned with production. However, the activities have the influence to increase efficiency and effectiveness. Both activities have the power to reduce costs or add value to the company (Nieman, Gideon and Bennett, 98). Thus, it is rare for a company to undertake all primary and secondary activities. Most of the activities that Fiat engages in are primary activities, which reduce costs in the company. For instance, operations, which are primary activities in the firm, add value to the financial performance of the company. Fiat is mostly involved in lean production of automobiles. Operations according to Fiat are characterized by the efficient production of small sized automobiles and high end sports vehicles. Fiat also comprises efficient marketing and sales. This is primarily an information activity since it involves firms relaying information about their products to customers. The marketing and sales area in the firm is characterized by the firm’s improved customer services in foreign markets such as the North American market, in which the firm had pulled out. The firm also engages in secondary activities to add value. Such activities include technology development. This is characterized by the innovative automobiles the firm produces through its fuel-efficient technology in models such as the Fiat Uno. The firm also has efficient human resource management characterized by the high number of workers it has employed and the strong management skills and efficient leadership. The firm also has an efficient support and control system and structure characterized by its financial planning, quality management and broad senior management.
Christian Wuestner. “Fiat Faces Brazil Challenge as Hyundai Threatens Profit.” BusinessWeek. 22 Oct. 2012. Web. 26 Oct. 2012. <http://www.businessweek.com/news/2012-10-22/fiat-faces-brazil-challenge-as-hyundai-threatens-profit/>
Crossan. Strategic Analysis and Action, Toronto: Pearson Education Canada, 2009. Print.
n.p. “Fiat Under Siege.” The Economist. 17 Oct. 2002. Web. 26 Oct. 2012. <http://www.economist.com/node/1390122/>.
Narayanan, V.K. and L. Fahey. Macroenvironmental Analysis: Understanding the Environment outside the Industry. New York: Wiley, 2001. Print.
Nieman, Gideon, and J A. Bennett. Business Management: A Value Chain Approach. Pretoria: Van Schaik Publishers, 2006. Print.
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