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A case study on 
Submitted To 
Tanvir H. Dewan 
Coordinator of CAB of IUBAT 
And 
Instructor of MGT-403 
Submitted By: 
Te...
Current Situation: 
The company was founded by Walter Chrysler (1875–1940) on June 6, 1925 when the 
Maxwell Motor Company...
B. Corporate Governance: 
Board of Directors 
 Sergio Marchionne, Chairman and Chief Executive Officer 
 Steven G Beahm,...
The general environment often has a substantial influence on an organization’s level of 
success, executives must track tr...
E Is for “Environmental” 
The environmental segment involves the physical conditions within which 
organizations operate. ...
products, etc. The bargaining power of suppliers: The cost of factors of production (e.g. 
labor, raw materials, component...
2008, the sales figure of Chrysler declined by 54% as compared to the sales reported in the 
corresponding month of 2007. ...
Despite heavy investment in information technology, GM's information systems were 
virtually archaic. It had more than 100...
The goal of core competencies is “to build world leadership in design and development of a 
particular class of product fu...
1. Change in the management for better 
2.It may also assist it for selling its cars in new geographical markets 
3.Increa...
External Factor analysis summary 
Weighted 
Score 
Opportunities: 
1.Change in the management for 
better 
2.It may also a...
Internal Factors analysis Summary: 
Weighted 
Score 
Internal factors Weight Rating comments 
Strength: 
1High Fleet Sales...
TOWS: Threat, opportunity, weakness & strength. 
External Factors 
Internal 
Factors 
Strength: 
1. High Fleet Sales 
way ...
Identification of Strategic issues 
Chrysler’s largest problem is its inability to react to customer demands and industry ...
Evaluations and controls: 
We would strongly evaluate all alternative strategies because Chrysler’s not sales, return on 
...
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Chrysler case study report

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Case study report on chrysler

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Chrysler case study report

  1. 1. A case study on Submitted To Tanvir H. Dewan Coordinator of CAB of IUBAT And Instructor of MGT-403 Submitted By: Team name: Sunbeams Section: “B” Name ID Mahbub Hasan 12102446 Md. Mozammel Hoque 11102062 Zumana Ayrin 11102214 Mahmuda Rahman Liza 11102160 Date of Submission: 29th November,2014
  2. 2. Current Situation: The company was founded by Walter Chrysler (1875–1940) on June 6, 1925 when the Maxwell Motor Company (est. 1904) was re-organized into the Chrysler Corporation. Walter Chrysler arrived at the ailing Maxwell-Chalmers company in the early 1920s. He was hired to overhaul the company's troubled operations (after a similar rescue job at the Willys-Overland car company). In late 1923 production of the Chalmers automobile was ended. In January 1924, Walter Chrysler launched the well-received Chrysler automobile. The Chrysler was a 6-cylinder automobile, designed to provide customers with an advanced, well-engineered car, but at a more affordable price than they might expect. (Elements of this car are traceable to a prototype which had been under development at Willis during Chrysler's tenure). The original 1924 Chrysler included a carburetor air filter, high compression engine, full pressure lubrication, and an oil filter, features absent from most autos at the time. Among the innovations in its early years were the first practical mass-produced four-wheel hydraulic brakes, a system nearly completely engineered by Chrysler with patents assigned to Lockheed, and rubber engine mounts to reduce vibration. Chrysler also developed a wheel with a ridged rim, designed to keep a deflated tire from flying off the wheel. This wheel was eventually adopted by the auto industry worldwide. In 2014, Chrysler Group LLC is the seventh biggest automaker in the world by production. Chrysler is the quintessential American brand as seen in its popular advertising campaigns. In 2011, the Chrysler brand launched the popular Imported from Detroit campaign with a Super Bowl ad this invigorated the brand and led to record-breaking sales. Chrysler Group invested nearly a billion dollars into the Sterling Heights, Michigan manufacturing plant for the production of the All-New 2015 Chrysler 200. Redesigned from the ground up, the All-New 2015 Chrysler 200 debuted in January 2014. The vehicle features craftsmanship of the highest quality with a beautiful exterior design, a thoughtful, exquisitely crafted interior and an exceptional driving experience, thanks to a segment-first nine-speed automatic transmission+ and 36 hwy mpg+. The Chrysler brand, with its ambitious American ingenuity, continues to stand for substance and style. At its core are the hallmarks of quality, design, craftsmanship, performance, efficiency, innovation and technology, all at a very affordable price.
  3. 3. B. Corporate Governance: Board of Directors  Sergio Marchionne, Chairman and Chief Executive Officer  Steven G Beahm, Vice President, supply chain management  Reid Bigland, Dodge brand; U.S. sales chief & President and CEO Chrysler Canada  Bruno Cattori, Ram brand; Chrysler Mexico/Latin America  Olivier Francois, Chrysler brand and marketing  Ralph Gilles, Design and SRT brand  Michael Manley, Jeep and international sales 2. External environment: A. General environment On May 5, 2009, Chrysler filed for bankruptcy. The company announced that it had reached an agreement to establish a global strategic alliance with Fiat. The company also made a reference to all its efforts to enter into partnerships with different automobile companies, including GM, Volkswagen, Toyota, Honda, Nissan, and Hyundai. However, except for Fiat, no other options had been viable for it, the company said. Thomas La Sorda, Vice Chairman of Chrysler, said, “Despite continual efforts over the course of approximately two and a half years, no party except Fiat has emerged as a viable and willing alliance partner for us. As part of the alliance, Chrysler decided to sell all its assets to Fiat except eight factories: a sedan plant in Sterling Heights, Michigan; a St. Louis-area pickup-truck plant; a Dodge Viper sports car plant in Detroit; factories in St. Louis and Newark, Delaware; a metal stamping plant in Twinsburg, Ohio; an engine plant in Kenosha, Wisconsin; and an axle plant in Detroit. Virtually all of the labor associated with these facilities will be offered employment with the new company
  4. 4. The general environment often has a substantial influence on an organization’s level of success, executives must track trends and events as they evolve and try to anticipate the implications of these trends and events. PESTEL analysis is one important tool that executives can rely on to organizes factors within the general environment and to identify how these factors influence industries and the firms within them. P Is for “Political” The political segment centers on the role of governments in shaping business. This segment includes elements such as tax policies, changes in trade restrictions and tariffs, and the stability of governments E Is for “Economic” The economic segment centers on the economic conditions within which organizations operate. It includes elements such as interest rates, inflation rates, gross domestic product, unemployment rates, levels of disposable income, and the general growth or decline of the economy S Is for “Social” A generation ago, ketchup was an essential element of every American pantry and salsa was a relatively unknown product. Today, however, food manufacturers sell more salsa than ketchup in the United States. This change reflects the social segment of the general environment. Social factors include trends in demographics such as population size, age. T Is for “Technological” The technological segment centers on improvements in products and services that are provided by science. Relevant factors include, for example, changes in the rate of new product development, increases in automation, and advancements in service industry delivery.
  5. 5. E Is for “Environmental” The environmental segment involves the physical conditions within which organizations operate. It includes factors such as natural disasters, pollution levels, and weather patterns L Is for “Legal” The legal segment centers on how the courts influence business activity. Examples of important legal factors include employment laws, health and safety regulations, discrimination laws, and antitrust laws Industrial Environment Industry analysts were also apprehensive about whether the small cars that the new company was to produce would be successful in the United States. According to Dennis Defrosters, a Canadian Automotive Analyst, “First, Americans have to embrace smaller cars, which they never have. Second, they have to buy Italian small cars, which they never have. Third, Fiat/Chrysler has to find a way to make small cars profitable in North America, which no one, including the Japanese, has been able to do. Analysts were also worried about the rising competition in the car market. According to them, companies like Chevrolet, Ford, Toyota, and Honda had already launched their small car models in the United States. They were of the opinion that Fiat’s entry into the United States, especially at the time of an economic slowdown, may not be a success. The threat of substitute products: The existence of close substitute products (i.e., high elasticity of demand) increases the propensity of customers to switch to alternatives in response to price increases. The threat of the entry of new competitors: Unless there are significant barriers to entry, profitable markets that yield high returns will attract firms (i.e., perfect competition), and effectively decreasing profitability. The intensity of competitive rivalry: As in the case of oligopoly markets, rivals may choose to compete aggressively, non-aggressively or in non-price dimensions. The bargaining power of customers: The ability of customers to put the firm under pressure due to availability of existing substitute products, buyer price sensitivity, uniqueness of the
  6. 6. products, etc. The bargaining power of suppliers: The cost of factors of production (e.g. labor, raw materials, components, and services such as expertise) provided by suppliers can have a significant impact on a company's profitability. As such suppliers may refuse to work with the firm or charge excessively high prices for unique resources. Internal environment: Marketing: There was a market test of the Chrysler plan, but unfortunately it was a test that no one could believe adequately revealed Chrysler’s underlying value, as what was put to market was the sub rosa plan itself. Chrysler and the government asked the court to only permit the firm to be marketed with multiple pre-bankruptcy claims on Chrysler intact, including the United Automotive Workers’ retiree claims. But that’s exactly what was at stake: whether Chrysler’s assets were more valuable without those claims. On March 30, 2009, the U.S. Treasury and the U.S. Auto Task Force rejected Chrysler’s stand-alone Viability Plan. The U.S. Auto Task Force announced that it would provide another US$6 billion federal loan to Chrysler. However, in order to get the additional loan, Chrysler would have to form an alliance with Fiat by April 30, 2009. In addition, the company would have to restructure its debt and would have to negotiate with the UAWand CAWunions to reduce employee benefits and increase productivity. Finance: In 2007, Chrysler reported a net loss of US$1.6 billion. The company’s financial problems continued in 2008, due to declining sales. (See Exhibit 1 for Chrysler’s annual U.S. sales between 2000 and 2008.) In October 2008, Cerberus and General Motors Corporation (GM)26 engaged in discussions regarding the merger of GM and Chrysler. Under the deal, it was proposed that GM would acquire Chrysler’s automotive operations and Cerberus would get a 49% stake in General Motors Acceptance Corporation (GMAC).27 However, the deal did not materialize. In November 2008, NarChrysleri announced in the media that Chrysler required US$4 billion to run its operations until March 2009. Overall, Chrysler sought US$7 billion financial aid from the U.S. government. On December 17, 2008, Chrysler announced that on December 19, 2008, it would close its 12 North American plants due to weak demand. In December
  7. 7. 2008, the sales figure of Chrysler declined by 54% as compared to the sales reported in the corresponding month of 2007. Operation and Logistics: Chrysler Group Logistics Operations began developing plans to minimize the impact of such actions and were approached by officials of Canadian Pacific Expressway Division to consider using their newly launched intermodal system, which runs between Detroit and Montreal with a stop in Toronto, as an alternative. A major crisis never materialized but Steve Tripp, Senior Manager of Chrysler Group Logistics Operations, was intrigued by the possibilities this new system presented, particularly with such a positive impact on the environment and on the congestion in the Windsor-Toronto corridor. The concept was given to the Plant Delivery Analysts for further investigation. A preliminary market study was done to determine the financial viability of the program. While the study was under way, I was contacted by delivery operations to investigate this option from the standpoint of the DaimlerChrysler, Brampton Assembly Plant. A small team was assembled which consisted of myself, Debbie Hall – Brampton Assembly Just-In-Time Coordinator and Markus Gerlinger, a Just-In-Time Team Leader from the Mercedes plant in Sindelfingen Germany, who was working at Brampton as part of an ongoing information exchange program between the two plants. Human Resources Management (HRM) Chrysler Group LLC is an American multinational automaker headquartered in the Detroit suburb of Auburn Hills, Michigan. Chrysler was first organized as the Chrysler Corporation in 1925. On June 10, 2010, Chrysler Group LLC emerged from Chapter 11 reorganization and announced a plan for a partnership with Italian automaker Fiat. Fiat holds a 25% stake in the new company, with an option to increase its stake to 35%, and up to 51%, if it meets financial and developmental goals for the company. Fiat's stake cannot go beyond 49% until the government has been paid back in full. Information System(IS)
  8. 8. Despite heavy investment in information technology, GM's information systems were virtually archaic. It had more than 100 mainframes and 34 computer centers but had no centralized system to link computer operations or to coordinate operations from one department to another. Each division and group had its own hardware and software so that the design group could not interact with production engineers via computer. GM adopted a "shotgun" approach, pursuing several high-technology paths simultaneously in the hope that one or all of them would pay off. GM also believed it could overwhelm competitors by outspending them. GM does spend more than its competitors on information systems. It spends 2.5 percent of sales on information systems, whereas Ford spends 1.6 percent and Chrysler 0.9 percent of sales on information systems budgets. GM also tried to use information technology to totally overhaul the way it does business. Recognizing the continuing power of the divisions and the vast differences among them, Roger Smith, CEO of GM from 1981 to 1990, sought to integrate their manufacturing and administrative information systems by purchasing Electronic Data Systems of Houston for $2.5 million. EDS supplies GM's data processing and communications services. EDS and its talented system designers were charged with conquering the administrative chaos in the divisions: more than 16 different electronic mail systems, 28 different word processing systems, and a jumble of factory floor systems that could not communicate with management. Even worse, most of these systems were running on completely incompatible equipment. Core Competencies of the firm: In 2002 companies will continue to grow and become market leaders only if there ability to examine the company's core competencies by identifying, cultivating, and exploiting these competencies continues now and beyond into the future. Failure to do so could be catastrophic for even the most powerful of companies, not in the short run but over time competitors will get ahead and the technology gap is so significant in core competencies that these corporations will never be able to catch up. That is why as we progress into the 21st century core competencies of a company is what is going to keep the company competitive and ahead of the rest, and on the brink of technological breakthroughs in their specified area.
  9. 9. The goal of core competencies is “to build world leadership in design and development of a particular class of product functionality” (Brad more, Joy, Kimberley, & Walker, 1997). Having advantages and control over core products is critical for several reasons. A dominant position in core competencies and core products enables a company “to shape the evolution of applications and end markets” (Jain, 2000). Strategic core products born from the evolution of core competencies leads companies to economies of scale and scope. 4. Analysis of Strategic Factor SOWT Analysis: Strengths: 1. High Fleet Sales way above industry average. In US, over 1 million sales per annum 2. Strong brand recall in North American markets 3. Reputation for V-8 Hemi engines 4. Domination in minivan market 5. Strong customer focus and a strong employee base of over 50,000 Weaknesses: 1. Due to high fleet sales there is also seen a non-preference by customers for few of the model of Chrysler 2.Management problems have been a concern. 3. Limited market share owing to increasing competition. Opportunities:
  10. 10. 1. Change in the management for better 2.It may also assist it for selling its cars in new geographical markets 3.Increasing demand for green vehicles where Chrysler has presence Threats: 1. Decreasing confidence of dealers & other associates in the Company 2.Strong reliance on the North American market
  11. 11. External Factor analysis summary Weighted Score Opportunities: 1.Change in the management for better 2.It may also assist it for selling its cars in new geographical markets 3.Increasing demand for green vehicles where Chrysler has presence Threats: 1.Decreasing confidence of dealers & other associates in the Company 2.Strong reliance on the North American market 10 15 10 8 7 30 20 4 5 3 2 2 3 3 2 3 2 40 75 30 16 14 45 60 30 90 40 As per the cal., Change in the management for better 2.It may also assist it for selling its cars in new geographical markets are most considerable opportunities for Chrysler. Statistics says Decreasing confidence of dealers & other associates in the Company is the most considerable threat for Chrysler.
  12. 12. Internal Factors analysis Summary: Weighted Score Internal factors Weight Rating comments Strength: 1High Fleet Sales way above industry average. In US, over 1 million sales per annum 2. Strong brand recall in North American markets 3. Reputation for V-8 Hemi engines 4. Domination in minivan market Weaknesses: 1. Due to high fleet sales there is also seen a non-preference by customers for few of the models of Chrysler 2. Management problems have been a concern 3. Limited market share owing to increasing competition 15 10 13 12 20 15 15 4 4 2 4 3 2 1 60 40 26 48 60 30 15 1. Statistics says High Fleet Sales way above industry average. In US, over 1 million sales per annum. And Strong brand recall in North American marketsare most considerable strengths for Chrysler. 2. StatisticsSays that Due to high fleet sales there is also seen a non-preference by customers for few of the models of Chrysler is the most considerable weakness for Chrysler inc.
  13. 13. TOWS: Threat, opportunity, weakness & strength. External Factors Internal Factors Strength: 1. High Fleet Sales way above industry average. In US, over 1 million sales per annum 2. Strong brand recall in North American markets Weakness: Due to high fleet sales there is also seen a non-preference by customers for few of the models of Chrysler Opportunities:  1)Change in the management for better 2) It may also assist it for selling its cars in new geographical markets SO- Chrysler needs technology to expand its growth around the world for its board range of products WO- In order to enter into new market, Chrysler needs to balance supply chain to survive get success as efficiently as possible. Threats: .Decreasing confidence of dealers & other associates in the Company ST- TO take competitive advantage, Chrysler might adopt new technologies. TW- Chrysler needs to turn the weak supply chain into strong one to gain dominant position in the international competition
  14. 14. Identification of Strategic issues Chrysler’s largest problem is its inability to react to customer demands and industry changes. It has fallen into a ³competency trap´ since its successes with large passenger vehicles. Right now, Chrysler is a regional player, with all but 8% of its $62 billion in sales coming from North America. (Muller) In order to increase its market share and remain competitive, Chrysler must increase its global presence. The company has shown little product innovation since its introduction of the minivan in 1984, which has led to a stagnant product line. Additionally, Chryslers past management failed to respond to increasing oil prices and environmental issues. As U.S. vehicle sales decelerate, Chrysler is actively attempting to strengthen their international presences, which have led to rising international sales. (Reed) The newly separate Chrysler stated that sales growth in Asia and Latin America fueled a 26% increase in sales during August 2007. Strategic Alternatives and Recommendation (1) Chrysler can formulate innovative strategy for the future. Pros: It will help Chrysler to have better guarantee of quality of its products and services with more new features. Cons: It might be expensive and risky for the company. Because, at the beginning, it might cut down the amount of sales by a particular percent. (2) Chrysler can adopt expansion strategy to enter new countries to gain market share. Pros: It will lead to an increase in sales volume, revenues and finally market share and reduce operational cost and overcome shortage of outlets as well. Cons: This strategy is the most time consuming as they will be competing against well-established competitors like Wal-Mart and maximum number of competitors have existence over there. (3) Chrysler should obtain differentiation strategy to maintain leading position in its industry Pros: This strategy will help Chrysler to take competitive position. Cons: It might be expensive, risky and time consuming as well to put into execution
  15. 15. Evaluations and controls: We would strongly evaluate all alternative strategies because Chrysler’s not sales, return on investment, profitability, quality of its products and services and market share would positively upward but ensure its dominance position in its industry. For the controlling these alternative strategies, Chrysler needs to set standards by which it can measure its performance being done according to strategic plan (alternatives) and can spot out deviation between planning and performance being done.

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