Case Study: Fiat Auto and General Motors Alliance
Case Study: Fiat Auto and General Motors
The economic crisis and other factors, affect different companies in the global market and automotive industries are not exempted. In order to cope with economic problems within the industry, different companies try to find the most efficient ways to save the company and one of these is through the consideration of merging or going into alliance. In alliance, both companies pursue strategic fit to compliment organisational approaches setting the stage for potential strategic synergy (De Kluyver, 2000). However, it is inopportune that there is no clear evidence that supports the value of strategic fit in mergers Case Study: Fiat Auto andGeneral Motors (Chatterje et al., 1992). In addition, research shows that there is a relatively high risk in having an alliance or joint venture as between 55%-70% mergers and acquisitions are unable to meet the anticipated purpose (Carleton, 1997). Primarily, the goal of this paper is to analyse the alliance the happened between Fiat Auto, an Italian car manufacturer and General Motors (GM), a US-based automotive industry. The analysis will consider the use of marketing analysis tools such as Porters Five Forces Analysis. In addition, this will also analyse the problems and issues facing the alliance of both companies and provide recommendation to solve the problems faced. Overview of the Case study: Problems and Issues
The case was about the merging or the strategic and industrial alliance set and established by Fiat Auto and General Motors in order to expand their business in the global market, particularly in North America for Fiat and Italy for General motors and the rest of the world. In this alliance, General Motors have obtained 20% share to expand their business inEuropean market and Latin market, while Fiat obtained 5.1% stake in the General Motors. The strategic and industrial alliance seems to meet the objectives of the company but because of the economic crisis in various parts of the globe and external factors like the terrorist attacks in 9/11, both industries suffered big loss affecting not only their business operations but also the strategic alliance built by the two industries. Fiat auto try to regain their business by proposing to GM in which the latter rejected. One of the problems that can be attributed with this alliance is that, the alliance made was considered to be allies in costs only but will still remain competitors in the market, specifically in Europe and Latin America. Hence, such aspects affects the entire partnerships since both companies are still trying to compete with each other in spite of their agreement. In addition, another problem that can be considered in this alliance is the inability of both companies to provide support for the other. Since the objective of the alliance is to be just partnered in costs, and stay competitors, industries that are being left behind could not ask support for the other company, which happened when Fiat is having financial problems and General Motors did not even bother to take a step of helping them by providing financial supports. Aside from this, it can be noted that the management of both industries, though agreed on a partnership are seen to be not acting as allied or partners. Both companies have different aims and objectives, without knowing that this might affect their partners in some aspects. Both companies are in the middle of economic crisis in each industry, since both are experiencing profit loss. Each company have been able to do what they can to solve the problems like Fiat Auto have tried to reliance and restructure their business to solve the issue. On one hand, General motors are trying to layoff and cost cut to save the industry from total loss. In this regard, it is essential that such issues and gap between the two companies...
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