International Business Case Study Fiat Automobiles S.p.A
Tuesday 4 June 2013, Afternoon
This is an open-book examination, and you may consult any previously prepared written material or texts during the examination. Only answers that are written during the examination in the answer book supplied by the examination centre will be marked.
© ABE 2013
As in real life, anomalies may be found in this Case Study. Please simply state your assumptions where necessary when answering questions. ABE is not in a position to answer queries on Case data. Candidates are tested on their overall understanding of the Case and its key issues, not on minor details. There are no catch questions or hidden agendas. After the publication of the Case Study, subsequent developments may occur. The examination is based on the published Case Study, and students who do not mention such developments will not be penalised. However, students may consider such developments in their answers if they wish.
Fiat Automobiles S.p.A Fiat Automobiles S.p.A. is an Italian car manufacturer that produces Fiat branded cars, and is part of Fiat Group Automobiles S.p.A. The company, Fiat Automobiles S.p.A., was formed in January 2007 when Fiat reorganised its automobile business. The company traces its history back to 1900 when the first Fiat (Fabbrica Italiana Automobili Torino) factory opened in Carso Dante, Italy with a workforce of 150 people. In 1922 Fiat opened what was to be the largest factory in Europe, with a unique five floor assembly line that finished with a futuristic test track constructed on the building’s roof. It became the symbol of the automotive industry in Italy for decades to come. The company also became involved with the production of other industrial goods, particularly agricultural machinery and military vehicles. Fiat continued to experience growth of production into the mid 1960s, in both exports as well as domestic sales. The iconic Fiat 500 and Fiat 600 were best sellers and Fiat dominated the domestic market. During this period car ownership in Italy increased from one in 96 Italians owning a car to one in 28 Italians owning a car. Fiat took advantage of the increase and established several factories in southern Italy. The Italian car market became both the most attractive and competitive in Europe. This put pressure on production costs, as large French and German car manufacturers introduced their products at heavily discounted prices in order to gain market share. In a bid to remain competitive Fiat introduced Robogate, an innovative and flexible robotic system for assembling bodywork, in 1978. Fiat was also becoming an economic as well as industrial powerhouse, as it began to acquire other well-known Italian brands such as Lancia, Ferrari, Alfa Romeo and Maserati. These, along with the Fiat brand, would be formed into Fiat Auto S.p.A. Between 1978 and 1990 Fiat also set up numerous operations as independent companies. These included Fiat Avio, Fiat Engineering, Comau, Fiat Ferraviaria, Magnet Marelli and Teksid. During the 1990s, as more and more car manufacturers, particularly from Asia, entered the EU car market, Fiat was once again facing a crisis in the form of market competition. In order to cope, the company expanded further into the international market, making Fiat one of the most recognised worldwide producers of affordable vehicles. However, there were serious quality problems that inhibited long-term customer loyalty. Fiat’s main market is Europe, mainly focused on Italy, its home market, which is one of the world’s most dynamic markets. Historically Fiat has been a success in the smaller city-cars and super-mini sectors and currently Fiat has a range of models focused on the two segments. In 2011 these two segments accounted for 84% of Fiat’s sales. Fiat does not currently offer a successful medium family...