“From International to Global”: FIAT S.P.A. case study

Marco Marinozzi

Student thesis: Master thesis

Abstract

We live in a World of uncertainty, where business cycles are shortening and competition is increasing, requiring companies and their strategies to be suitable to continuous changes and adaptations. Just like it happened in other sectors, the economic crisis Western economies have been experiencing in these years heavily influenced the Automotive Industry’s dynamics. The Car Industry is in fact strongly linked to the business cycles, as showed also by Haugh et al. (2010). The sector has always been characterized by a high intensity of rivalry, and such rivalry and increasing concentration will inevitably lead to a struggle for survival out of which only a few groups will emerge. The industry is capital intensive and with a high capital-to-labor ratio. In the past years production has been moving increasingly towards emerging countries particularly due to decentralization processes and outsourcing. The outsourcing phenomenon is also provoking shifts and changes along the industry’s value chain, with suppliers gaining more and more power. The saturation of traditional markets, accompanied with an overall negative business cycle, is pushing carmakers to look for new ways to sustain their production, currently affected by over-capacity problems in many regions of the World. Many Automotive Industry’s CEOs are aware of the fact that change has to take place within companies in order to face the Globalization of Markets, but the majority of them don’t believe such transformation should include activities like mergers, acquisitions or alliances, as showed by a study conducted by Price Waterhouse Cooper (2014). The Italian car-manufacturer FIAT S.p.a. constitutes an exception in this context, and this is the reason why it got involved in a complex M&A deal with Chrysler LLC. The present work has a speculative nature and exploratory purpose. It is grounded on a network perspective and it takes into account the economic landscape described above, including social and political elements in order to better understand and describe the process of strategic and organizational change which arises from a M&A agreement in crisis time. The study analyzes FIAT Spa’s process of Globalization through the acquisition and successive merger with Chrysler LLC, an operation that led to the creation of the 7th biggest group in the car industry, with a production volume of about 4.5 Million vehicles. Data come from three direct interviews with people involved in the Auto-industry at different levels and with different roles. Moreover three indirect interviews have been used, the interviewee being FIAT’s CEO, Sergio Marchionne. Other sources of information come from documentaries and the internet. The case is interesting because of the size of the deal and its actual and potential influence on the industry; moreover it represents one of the most remarkable examples of recent reorganization attempts. In particular, the focus is on the strategic and organizational challenges faced by FIAT from the network point of view and the consequences for the value-chain during the company’s process of globalization. The case study considers the way change originated, was supported and enacted through time.

EducationsMSc in Strategy, Organization and Leadership, (Graduate Programme) Final Thesis
LanguageEnglish
Publication date2014
Number of pages122