Case Questions

1. According to a major economics consulting firm, Fiat's “South American operations are the jewel
in the Italian company's global operations.” Fiat has plants in Brazil and Argentina, and Brazil
is its biggest market, well ahead of its home-country market. In 2011, with the Chrysler venture
taking up more and more of the firm's attention—and as European sales suffered a steep decline
—rumors began to circulate that Marchionne might move Fiat headquarters from Italy to the
United States. Discuss Fiat's takeover of Chrysler as part of a strategy to transform itself from
an international business into a multinational or global business.

From the beginning Fiat produce and sell several models of its automobiles in Latin Americans
countries. As Fiat didn’t had no presence in the United States they have to be proactive to enter
US market.

This was CEO Marchionne’s goal when he convinced Fiat’s stakeholders to sign off on the
partnership with Chrysler – to establish a viable presence in the US market and to attain the
status of multinational business. In January of 2009, author Peter Valdes-Depena wrote “For its
part, Chrysler has promised to assist Fiat with bringing its brands to the U.S. market. Only Ferrari
and Maserati are currently sold here and Fiat has long wanted to bring the luxury Alfa Romeo
name back to the U.S.” (“A taste of Italy, para.1). In fact, last month, Fiat shareholders voted in
favor of a full merger between the two carmakers, effectively moving Fiat’s headquarters to
America (Snavely, 2014). Not only has Fiat become multinational, it may very well be on its way
to global corporate status.

2. What benefits does Fiat hope to gain from its arrangement with Chrysler? What potential
drawbacks does it face? Judging from your analysis of benefits and drawbacks, explain why
the Fiat-Chrysler arrangement might best characterized as a strategic alliance? In what sense
is it best characterized as a direct investment?

Again, Fiat hoped to establish a substantial presence for its products in the US automotive
market. Marchionne wanted to capitalize on the Chrysler brand name, which is exceedingly
familiar with American buyers and Chrysler could work a distribution channel of Fiat in US
market. Fiat will also likely be able to use excess global production capacity to assemble
 Chrysler-badged variants of its products. However, the two companies were up against (and still
are) some potential challenges to this new alliance.

Fiat-Chrysler agreement could be a very good strategic alliance strategy. Because both of the
companies are form automobile industry which is going to spread risk, increase market power,
preempt resources, access new markets and gain organizational learning. Among the various
functions, knowledge acquisition, transfer and generation of technology have been regarded as
the primary motives of strategic alliances in certain industries especially highly technological
industries like automobile industry. We think if the both car companies come up with an idea to
develop a new car model that could be an innovation. As Chrysler brand value and market share
is low the can develop a new car model with Fiat and utilize their brand value to be establish
brand in car industry.

We can categorize the Fiat-Chrysler partnership as a direct investment by Fiat, in that Chrysler
was essentially underwater before the Italian automaker came into the picture. A large chunk of
Chrysler’s government bailout money was dependent upon the merger, and would have been
revoked if it hadn’t ultimately taken place. Fiat’s sales weren’t exactly soaring either, but it
appears they had more to lose in the deal, since Chrysler was in the midst.

3. What challenges in the U.S. cultural environment do you expect Fiat to face as it uses its
Chrysler connection to compete in the American car market? What management challenges
will Marchionne face in the areas of planning and decision making, organizing, and leading?

As a CEO of merged company Marchionne will face several challenges. First of all his company is
now becomes more diversified and complex. As it also now a new multinational company it have
to focus on different customer segments. Fiat has established itself as quality product. Bringing
their reputation and business skill will attract American consumers. The CEO have maintain good
relationship with US government and also have to follow the business rules and regulations.
Their main challenge is going to be exceed the customer standards in manufacturing vehicles
and develop proactive marketing strategies. As US citizen loves to use indigenous vehicles the
CEO have to take right decision to convey them to buy Fiat’s car. The language barrier between
employees could lead miscommunications issues but an automation software could make the
communication process easier. Fiat will also have a situation of dealing with new labor laws.
American labor laws are more stringent than other companies and cost of labor is also high.
Another vital challenge Fiat is going to face is to meet style and performance expectations.
Americans love to drive big fast muscle cars. Fiat will have to consider these to penetrate
American market.