PSA Case Study
Q1 – Critically assess the strategic environment and the impact on the organisation. The strategic environment that exists in the motor industry is one of extreme volatility and uncertainty. Since the economic crash affected global car sales in 2008 by $0.4 billion dollars and by 33% in Europe and the US, there have been numerous strategies employed by the main players to turn around their fortunes. There has been a strong element of overproduction in the car industry for years presumably to take advantage of economies of scale and to maintain production capacities. However, with the reduction in cars being purchased, car manufacturers are looking at alternative ways to protect their business. The main detractors for car manufacturers have been the global recession, the price of fuel and the move/ desire for greener transport from customers. This has created a necessity for sustained innovation and a determined focus on research and development. Many companies are looking to reduce their cost base and are using joint ventures/ alliances/ associations to improve economies of scale and scope and to leverage their R&D capabilities. For example, VW have strategic JV’s in China which has lead to them having a majority share in that market. They have also bought into Suzuki as a means to enter the Indian market via Suzuki’s established network. As a direct comparison to PSA Peugeot – Citroen, Renault has partnered with Nissan very successfully which has completely reversed their fortunes. From this strategic alliance, Renault have managed to maintain its presence in France which is a key success factor for them as a European producer as well as being able to draw upon the knowledge of Nissan in developing an electric car, which many believe is the future in the car industry. Ghosn, Renaults CEO, is CEO of Nissan also and has been successful at developing a culture of innovation and cooperation through economies of scope – they share common parts and platforms and Renault/ Nissan can take advantage of their improved purchasing power from their suppliers. For many of the larger companies, such as GM and Ford in the US and VW & PSA in Europe, they have been left with legacy issues from the ‘good times’, in the shape of pensions and union agreements. As a result, many have been forced to rely on governmental support via grants, subsidies and bailouts to protect an industry that’s regarded as essential to the survival of a nation’s economy. This has seen companies such as OPEL, VW and PSA possibly restricted in the restructuring of their European divisions due to obligations to home governments. GM restructured its model in the US by closing numerous plants and laying off staff thus reducing costs. Due to their acceptance of a €3 bn loan from the German government, they have been restricted in performing the same style cull in Europe. This has been echoed by PSA’s position in France, where the government still maintains a strong hold over the company, potentially restricting any plans for downsizing of production facilities they may be entertaining. The environment that PSA exist in has left them behind in terms of innovation and creativity, so they’re losing market share and not earning with the potential they once had. Their inability to react to the market and the trends that have developed have seen their once strong position evaporate with a strategy based nearly on past glories.
Q2 – WHAT ARE THE SUSTAINABLE COMPETITIVE ADVANTAGES OF THE COMPANY AND HOW ARE THESE RELATED? PSA have a number of sustainable advantages across the industry built on from the foundation of their Key Success factors: •
Distribution network – SCA – loyal garages
Regional strength from their home presence and market share – SCA – strong links to Gov’ •
Strong after sales service (Faurecia) – SCA - Essential when people aren’t purchasing as often •
Profitable finance package through their PSA Bank – SCA – better rates are attractive...
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