Download - corporate restructuring

FIAT: GLORY OF 50 YEARS


Submitted by:

MR. SUYOG HAGIR

Towards partial fulfillment of BMS course

2009-2010

SUYOG | TYBMS 1


BHAVANS COLLEGE OF MANAGEMENT STUDIES

Andheri (west), MUMBAI

DECLARATION

I, Mr. Suyog Hagir of Bhavans College of Management Studies of BMS (Sem 5) have

completed the project on “FIAT: GLORY OF 50 YEARS” in year 2009-2010.

The information submitted is true and original to the best of my knowledge.

Date: signature of the student

Place: Mumbai

SUYOG | TYBMS 2


CERTIFICATE

I Prof. Riddi Sharma, hereby certify that Mr. Suyog Hagir, of Bhavans College of

Management Studies has completed the project on “FIAT: GLORY OF 50 YEARS” in the

academic year 2009-2010.

__________________Signature of

Project coordinator

__________________Signature of

PrincipalDr. Mrs V.I. Katchi

SUYOG | TYBMS 3


ACKNOWLEDGEMENT

During The Perseverance Of This Project, I Was Supported By Different People, Whose Names

If Not Mentioned Would Be Inconsiderate On My Part. I would like to Extend My Sincere

Gratitude and Appreciation to Prof. Riddi Sharma Who Initiated Me into the Study of “FIAT:

GLORY OF 50 YEARS”

It Has Indeed Been A Great Experience Working Under Her During The Course Of The Project

For Her Invaluable Advice And Guidance Provided Through Out This Project. I Also Owe My

Sincere Gratitude To Dr. Mrs V.I.Katchi Principal Of Our College.

I Would Also Like To Thank The Following People Who Through Their Experience Have

Enlightened Me On The Practical Aspects Of This Subject Without Whom The Study Would Not

Have Been Carried Out Successfully.

1. Prof. Riddi Sharma.

2. Concord Motors & Its Executive Staff.

3. Family & Friends.

I Would Also Like To Give My Sincere Gratitude To All My College Librarian Staff Because Of

Whom I Am Able To Complete My Dream Project.

SUYOG | TYBMS 4


INDEX

SR.NO TOPIC PAGE NO.

1.1 Executive Summery

1.2 Purpose Of Study

1.3 Objectives

1.4 Scope

1.5 Limitation

2.1 Intro : FIAT INTERNATIONAL

2.2 Evolution

2.3 History

2.4 Presence All Over The World

3.1 Industry Glimpse

3.2 Segment & Market Share

3.3 FIAL

3.4 FIAT Value Chain

3.5 FIAT Pest Analysis

3.6 FIAT Porters Analysis

3.7 SWOT Analysis

4 RESEARCH

4.6 Findings & Analysis

5.1 Recommendations & Drivers For Strategic Solutions

5.2 BIBLIOGRAPHY

SUYOG | TYBMS 5


CHAPTER 1

SUYOG | TYBMS 6


1.1 EXECUTIVE SUMMARY

Fiat Auto is a catastrophe and the group as a whole lacks strategic direction and is again

becoming too complex to manage effectively."

- Jurgen Pieper, Motor Analyst, Metzler Bank (Frankfurt), in April 2002.

FIAT was one of the founders of the European motor industry. Right from the outset the

company pursued two growth strategies that became the cornerstones for its later

development: a strong international vocation and an innovative spirit, as seen in the

technological quality of its products and the advanced production and organizational

solutions it adopted. But in more than one century- activity, FIAT has meant much more

than cars alone. In fact the company interpreted its vocation for the motoring world in an

original manner, expressed by its commitment to all forms of mobility for people and

goods: from cars to trucks, agricultural tractors, marine engines, aeronautical engines

and, in more recent years, space launchers.

Today Fiat is well known brand established into the mind set of the consumer and is

amongst the most trusted brand too. Besides, producing cars Fiat has revitalized it self

according to the Indian consumers and their needs. Fiat has truly being hero during its

glorious time and in true sense is the one of the most reputed brand.

In the era of competition and stiff cost cutting; FIAT would have definitely faced those

problems as other auto brands have but none the less it stays in the Indian market forever.

1.2 PURPOSE OF THE STUDY

The auto sector is very vast, still nascent as compare to developed countries and fastest

growing sector. The purpose of the study is to understand/study brand FIAT and its long

years up and downs journey into the Indian auto market.

SUYOG | TYBMS 7


1.3 OBJECTIVES

To study strategies applied brand FIAT into Indian market.

Understand various facets relating to FIAT and it’s models

Study brand FIAT and strategies used by them.

Understand reasons for FIAT failure and an attempt for its recover

Through primary research, understand the position of brand FIAT vis-à-vis other auto

brand into the same sector.

1.4 SCOPE

The study of whole universe is not possible. Auto sector has very vast scope and cannot

be defies. It is fastest growing sector, however recent disease of recession has also

affected this sector. The report studies only the facets relating to brand FIAT thus the

report scope is narrow and specific.

1.5 LIMITATION

The report limits itself to the study of brand FIAT and do not discuss the other brand.

This is so as the project does to become vague and is specific to its study. Primary

research methodology too focuses on brand FIAT and other auto brands into the segment.

1.6 REPORT FLOW

SUYOG | TYBMS 8


CHAPTER 2

SUYOG | TYBMS 9


2.1 INTRODUCTION: FIAT INTERNATIONAL

Fiat, an acronym for Fabbrica Italiana Automobili Torino, is an Italian automobile

manufacturer, engine manufacturer, financial and industrial group based in Turin in the

Piedmont region. Fiat-based cars are constructed all around the world, with the largest

number produced outside Italy being built in Brazil. It also has factories in Argentina and

Poland. Fiat has a long history of licensing its products to other countries regardless of

local political or cultural persuasion. Joint venture operations are found in Italy, France,

Turkey, India, Serbia and Russia.

Fiat Group is the largest vehicle manufacturer in Italy, with a range of cars starting from

small Fiat city cars to sports cars made by Ferrari, and vans and trucks ranging from the

Ducato to Iveco commercial trucks. Besides Fiat Group Automobiles S.p.A, the Fiat

Group automotive companies include Ferrari S.p.A., Iveco S.p.A. and Maserati S.p.A.

The Fiat Group Automobiles S.p.A. companies include: Abarth & C. S.p.A., Alfa Romeo

Automobiles S.p.A., Fiat Automobiles S.p.A., Fiat Professional and Lancia Automobiles

S.p.A.. Ferrari S.p.A. is 85% owned by the Fiat Group, but is run autonomously.

The European Car of the Year award, Europe's premier automotive trophy for the past 40

years, has been awarded twelve times to the Fiat Group, more than any other

manufacturer. Most recently the Fiat Nuova 500 has won the award for European Car of

the Year 2008.

Fiat models which have won European Car of the Year:

1967: Fiat 124

1970: Fiat 128

1972: Fiat 127

1980: Lancia Delta

1984: Fiat Uno

1989: Fiat Tipo

1995: Fiat Punto

SUYOG | TYBMS 10


1996: Fiat Bravo/Brava

1998: Alfa Romeo 156

2001: Alfa Romeo 147

2004: Fiat Panda

2008: Fiat 500

In 2003, the Group restructured its core business area by focusing on manufacturing and

service activities of the traditional motor vehicle sector. Today, the company has made up

of nine Operating Sectors: Automobiles, Agricultural and Construction Equipment,

Commercial Vehicles, Ferrari and Maserati, Metallurgical Products, Automotive

Components, Production Systems, Publishing and Communications and Services. This

new structure of the Group, also with Business Solutions (service company of the group)

and ITEDI (Publishing & Communications division of FIAT Group), ensures a total

focus on the automotive industry.

SUYOG | TYBMS 11


2.2 EVOLUTION

Fiat 3 ½ CV (1899)

Giovanni Agnelli founded Fiat in 1899 with several investors and led the company until

his death in 1945, while Vittorio Valletta administered the day-to-day activities of the

company. Its first car the 3 ½ CV (of which only eight copies were built, all bodied by

Alessio of Turin) strongly resembled contemporary Benz, and had a 697 cc (42.5 cu in)

boxer twin engine. In 1903, Fiat produced its first truck. In 1908, the first Fiat was

exported to the US. That same year, the first Fiat aircraft engine was produced. Also

around the same time, Fiat taxis became somewhat popular in Europe. By 1910, Fiat was

the largest automotive company in Italy — a position it has retained since. That same

year, a plant licensed to produce Fiats in Poughkeepsie, NY, made its first car. This was

before the introduction of Ford's assembly line in 1913. Owning a Fiat at that time was a

sign of distinction. A Fiat sold in the U.S. cost between $3,600 and $8,600, compared to

US$825 the Model T in 1908.

Upon the entry of the U.S. into World War I in 1917, the factory was shut down as U.S.

regulations became too burdensome. At the same time, Fiat had to devote all of its

factories to supplying the Allies with aircraft, engines, machine guns, trucks, and

SUYOG | TYBMS 12

http://en.wikipedia.org/wiki/File:Fiat_3,5hp_1899.jpg


ambulances. After the war, Fiat introduced its first tractor, the 702. By the early 1920s,

Fiat had a market share in Italy of 80%.

Corso Dante plant

Lingotto factory (1928)

Mirafiori plant

SUYOG | TYBMS 13

http://en.wikipedia.org/wiki/File:Fiat_corso_dante.jpg

http://en.wikipedia.org/wiki/File:Fiat_Lingotto_veduta-1928.jpg

http://en.wikipedia.org/wiki/File:Fiat_Mirafiori.jpg

http://en.wikipedia.org/wiki/File:Lingotto-1.jpg


Lingotto factory (today)

In 1921, workers seized Fiat's plants and hoisted the red flag of communism over them.

Agnelli responded by quitting the company. However, the Italian Socialist Party and its

ally organization, the General Confederation of Labor, in an effort to effect a compromise

with the centrist parties ordered the occupation ended. In 1922, Fiat began to build the

famous Lingotto car factory — the largest in Europe up to that time — which opened in

1923. It was the first Fiat factory to use assembly lines; by 1925, Fiat controlled 87% of

the Italian car market. In 1928, with the 509, Fiat included insurance in the purchase

price.

Fiat made military machinery and vehicles during World War II for the Army and Regia

Aeronautica and later for the Germans. Fiat made obsolete fighter aircraft like the biplane

CR.42, which was one of the most common Italian aircraft, along with Savoia-

Marchettis, as well as light tanks (obsolete compared to their German and Soviet

counterparts) and armored vehicles. The best Fiat aircraft was the G.55 fighter, which

arrived too late and in too limited numbers. In 1945 — the year Mussolini was

overthrown — the Italian Committee of National Liberation removed the Agnelli family

from leadership roles in Fiat because of its ties to Mussolini's government. These were

not returned until 1963, when Giovanni's grandson, Gianni , took over as general

manager until 1966, as chairman until 1996.

2.2.1 GIANNI AGNELLI

Among the younger Agnelli's first steps after gaining control of Fiat was a massive

reorganization of the company management, which had previously been highly

centralized, with almost no provision for the delegation of authority and decision-making

power. Such a system had worked effectively enough in the past but lacked the

responsiveness and flexibility made necessary by Fiat's steady expansion and the growth

of its international operations in the 1960s. The company was reorganized on a product-

line basis, with two main product groups — one for passenger cars, the other for trucks

and tractors — and a number of semi-independent division and subsidiaries. Top

management, freed from responsibility for day-by-day operations of the company, was

SUYOG | TYBMS 14


able to devote its efforts to more far-reaching goals. In 1967, Fiat made its first

acquisition when it purchased Autobianchi; with sales amounting to $1.7 billion, it

outstripped Volkswagen, its main European competitor, and in 1968 produced some

1,750,000 vehicles while its sales volume climbed to $2.1 billion. According to

Newsweek in 1968, Fiat was "the most dynamic automaker in Europe...[and] may come

closest to challenging the worldwide supremacy of Detroit." Then, in 1969, it purchased

controlling interests in Ferrari and Lancia. At the time, Fiat was a conglomerate, owning

Alitalia, toll highways, a typewriter and office machine manufacturer, electronics and

electrical equipment firms, a paint company, a civil engineering firm, and an international

construction company. Following up on an agreement Valletta had made with Soviet

officials in 1966, Agnelli constructed the AvtoVAZ plant in the new city of Togliattigrad

on the Volga. This began operation in 1970, producing a local version of the Fiat 124 as

the Lada. On his initiative, Fiat automobile and truck plants were also constructed in

industrial centers of Yugoslavia, Poland, Bulgaria, and Romania. In 1979, the company

became a holding company when it spun off its various businesses into autonomous

companies, one of them being Fiat Auto. That same year, sales reached an all-time high

in the United States, corresponding to the Iranian Oil Crisis. However, when gas prices

fell again after 1981, Americans began purchasing sport utility vehicles, minivans, and

pickup trucks in larger numbers (marking a departure from their past preference for large

cars). Also, Japanese automakers had been taking an ever-larger share of the car market,

increasing at more than half a percent a year. Consequently, in 1984, Fiat and Lancia

withdrew from the United States market. In 1989, it did the same in the Australian

market, although it remained in New Zealand.

SUYOG | TYBMS 15


2.3 HISTORY

The history of Fiat began many years ago, at the dawn of Italian industrialisation, in

which the company has always played a leading role. From that moment on, the Fiat

brand spread throughout the world and developed extensively.

Today, following a change in corporate culture and mentality, the name Fiat is still

fraught with meaning, and not only on account of the cars we produce - cars with

attractive styling and exciting engines, cars that are accessible and improve the quality of

everyday life - but also on account of our heritage and tradition: let's take a stroll back in

time through the brand's history.

2.3.1 From 1899 - 1911

Fiat was founded

On 11 July 1899 at Palazzo Bricherasio, the company charter of "Società Anonima

Fabbrica Italiana Automobili Torino" was signed. Among the members of the Board of

Directors, Giovanni Agnelli stood out in the group of investors and won recognition for

his determination and strategic vision. In 1902 he became the Managing Director of the

company.

The first factory was opened

The first factory was opened in 1900 in Corso Dante. 150 workers were employed there

and produced 24 cars, among which the 3/12 HP, not yet fitted with reverse gear. The

Fiat logo, oval on a blue background and designed by Biscaretti, was adopted in 1904.

First wins in the races

The first Car Tour of Italy saw 9 Fiat cars arrive at the finish line. The first real

competition car, a 24 HP driven by Vincenzo Lancia, won the Sassi-Superga uphill race

in 1902. Giovanni Agnelli himself ran in the Second Tour of Italy and set a record in an 8

HP.

SUYOG | TYBMS 16


The company renovates its production

In a few years Fiat completely renovated its production: the cars were fitted with

electrical accumulators for the first time. The cardan transmission, a FIAT patent, began

to be used. Fiat cars continued to shine in the competitions and set several records.

2.3.2 From 1912 - 1925

The Lingotto factory

In 1916 the construction of Lingotto started under the direction of Giacomo Mattè

Trucco. The Factory, the largest in Europe, occupied five floors and had a futuristic test

track on the roof. It soon became the emblem of the Italian automotive industry and was

completed in 1922.

Fiat expands to new sectors

In the meantime Fiat expanded its activities to the steel industry, the railway, electricity

and public transportation lines. Fiat Lubrificanti was established and the first Italian

subsidiary was opened in Russia. When the War broke out, company production was

almost entirely aimed at supplying the army

Post-war crisis and recovery

After the war there were years of transformation and crisis but as early as 1923 growth

resumed thanks to an effective cost-curbing policy. Giovanni Agnelli became the CEO.

Numerous car models were launched, among which the 509, the first car with four seats.

Development of the Company

The policy adopted by the company was to develop industrial mass production. Mass

production was launched as the only way to curb the prohibitive prices of cars. During a

phase of increasing consumption, Sava, a holding company was set up to promote

instalment plans for purchasing cars. IFI, Istituto Finanziario Industriale, was also

established at that time.

SUYOG | TYBMS 17


Services for employees

These years were also significant for the internal growth of Fiat. Numerous organizations

for employees were established: from health care to specialized schools to sports clubs.

2.3.3 From 1926 - 1938

Falling back on the domestic market

During the years of Mussolini's autarchic policy, Fiat too had to rescale its plans for

international presence and concentrate on the domestic market. In the Thirties trucks and

commercial vehicles underwent considerable technological development and at the same

time the aviation and railway sectors grew.

The new cars

In 1934 and 1936 two cars came out and were destined to an enormous public: the

"Balilla", also called "Tariffa minima" due to its low consumption of fuel, and the

"Topolino", the smallest utilitarian car in the world, which was produced until 1955.

The Mirafiori factory

In 1937 works started for the great Mirafiori plant, which introduced the most advanced

principles of industrial organisation and confirmed company focus on mass production.

2.3.4 From 1939 - 1951

Second World War

During the war years there was a drastic reduction in the production of cars, while the

construction of commercial vehicles increased considerably.

Changes in the top management

In 1945 Senator Giovanni Agnelli died and the presidency of the Fiat was assumed by

Vittorio Valletta.

Post-war recovery

SUYOG | TYBMS 18


In 1948 the reconstruction of the plants destroyed during the war was completed, also

thanks to the American subsidies from the Marshall plan. Profits started to grow and the

number of employees also increased.

Commitment to research

With two new cars such as the 500 and the 1400, Fiat confirmed its commitment to

research and innovation. For the first time the heating and ventilation systems were

installed in mass production. Research continued on marine and aircraft engines: in 1951

the first Italian jet aircraft came into being, the G80.

2.3.5 From 1952 - 1964

Diesel

In 1953 the first Fiat diesel engined vehicle was presented, the 1400 diesel.

The beginning of the economic boom

In 1958 production started growing enormously, both for automobiles and farm

machinery. Mirafiori doubled its factories and Fiat set up new manufacturing plants

abroad as well. In Italy this was the period of the economic boom and the auto sector was

the 'driving force' of the economy.

The new models

In 1955 the Fiat 600 was born, a big utilitarian car with a rear mounted engine. In 1957

the New 500 was presented and in 1960 it began to be produced in the 'Giardinetta'

version, a precursor of the Station Wagon style. Moreover, these were the years of Fiat

1800, then 1300 and 1500.

2.3.6 From 1965 - 1977

The economic boom and social unrest

Growth continued in exports as well as production: the trend showed an increase from

one car every 96 inhabitants to one every 28. In the meantime Fiat boosted its presence in

SUYOG | TYBMS 19


southern Italy by setting up numerous factories there. There was also an increase in trade

union conflicts: in 1969 total hours on strike reached 15 million.

The new cars

After Fiat 850, a new popular utilitarian car, the 127, made its debut in 1971.

Toward automation

In 1966 Giovanni Agnelli, the grandson of the founder, became President of the

company. In those years there was a trend toward increased automation of the

manufacturing processes to cope with the oil crisis and to continue on the road of

technological innovation.

2.3.7 From 1978 - 1990

The Robogate system

In 1978 the "Robogate" system was created, the new flexible robotized system for

assembling the bodywork. It was the road to innovation and the automation of

production.

The holding configuration

In 1979 the auto sector was set up as an independent company: Fiat Auto S.p.A., which

included the brands Fiat, Lancia, Autobianchi, Abarth, Ferrari. The Ferrari brand was

acquired at 50% initially, a share that later rose to 87%. In 1984 the company also took

over Alfa Romeo (following by Maserati acquisition - a prestigious sports car brand - in

1993).

Independent companies

Fiat's numerous operations were set up as independent companies. Alongside Fiat Auto

the following companies were founded: Fiat Ferroviaria, Fiat Avio, Fiat Trattori, Fiat

Engineering, Comau, Teksid, Magneti Marelli.

The Fiat Panda and the Fiat Uno

SUYOG | TYBMS 20


In 1980 a new utilitarian was styled by Giugiaro for Fiat and was called Panda. Two

years later the car that would become the emblem of Fiat Auto's renewal was born: the

Fiat Uno. It featured radical innovations in its electronics, choice of materials and the use

of a clean engine: the 1000 Fire.

The Fiat Tipo

Another successful model appeared in 1989: the Tipo, voted "Car of the year" for its

cutting-edge technical solutions. Its production marked a conquest of Fiat technology:

production by processing stations.

2.3.8 From 1991 – 2003

The new cars of the 1990s

After the debut of the Fiat Tempra in 1990, the 500 came out in 1991. Two years later, in

1993, it was the moment of Fiat Punto (named "Car of the Year" in 1995) and Fiat

Coupé, with bodywork designed by Pininfarina and Centro Stile Fiat

Other popular cars

With Fiat Ulysse, which came out in 1994, the company made its entry in a sector that

was progressively expanding: the SUV. 1995 saw the debut of the Barchetta, the Fiat

Bravo and Brava, followed the next year by Fiat Marea and Marea WE, and in 1997 Fiat

Palio.

Changes at the top and a new registered office

In 1996 Giovanni Agnelli became the Honorary President of the Fiat Group and Cesare

Romiti took the office of CEO. In 1997 the parent company left its premises in Corso

Marconi and moved to the Palazzina Fiat of Lingotto, which in the meantime had been

converted into a Trade Fair and Convention Complex.

The last born in 1990s and the first born of the new century

1998 was the year of Fiat Seicento, ideal for city driving, and the Multipla, characterised

by flexible use and uncommon versatility. Two years later, at the Paris Motor Show, Fiat

SUYOG | TYBMS 21


Doblò was presented: a young car, informal, that also served the functions of a

commercial vehicle. Meanwhile, in Brazil, the three world cars were launched: the Palio,

Palio Weekend and Siena. In 2001 Fiat Stilo was launched, characterized by a new

design, with sophisticated technology and numerous deluxe options; the following year

Fiat Multipla, New Fiat Ulysse and Fiat Stilo Multi Wagon were restyled. In 2003 - the

year that saw the sad death of Giovanni Agnelli, who had been at the helm of Fiat for

almost half a century - the new Punto was marketed (exactly 10 years after the model was

first launched) with the innovative 1.3 Multijet 16v, and the new Barchetta was restyled

inside and out. In the autumn Fiat reclaimed its leading position in the super-compact

segment with the new Panda, immediately awarded the prize '2004 Car of the Year'.

2.3.9 From 2004 - 2007

The restyling of the logo on Fiat Idea

Fiat Idea was the first MPV created by Fiat but also the first car with the task of

communicating the brand's new 'mission': Fiat Idea displayed the round logo, renewed

and proposed by Centro Stile Fiat to evoke the emblem designed to celebrate the

Company's 100th Anniversary. It was also meant to get across the most significant

change in Fiat car design: more attention to high-tech content and intelligent solutions

designed to simplify several aspects of daily life in the car

Multijet engines

Fuel saving and top performing, this engine proved a real success factor on the new Fiat

car models. The new system - born of the evolution of the 'Common Rail' principle - is

the basis of the new second-generation Fiat engines: the small 1.3 Multijet 16v, the sporty

1.9 Multijet 120 and 150 bhp and the powerful 1.4 90 bhp.

Three years of new models

The years 2004-2006 were an extremely busy time for the Turin company, which,

following a profound change in corporate culture and mentality, focused on a continuous,

rapid overhaul of its products, on technological research, on the quality of its designs and

on a new, constructive relationship with the customer. During these years, this new

SUYOG | TYBMS 22


philosophy gave rise to a series of new models, and some restyling of older models: from

the restyling of the Fiat Idea Model Year, Seicento MY and Stilo MY to the new Multipla

and the launch of the Panda 4x4, in 2004; 2005 began with the launch of the new Croma,

designed by Giugiaro, the new 600 (celebrating its 50th anniversary), and the Grande

Punto - beautiful, solid and exciting. 2006 saw the launch of the New Doblò and Sedici,

the 4x4xTUTTI for city and off-road driving, and the official car of the 2006 Olympic

Winter Games, while the Panda MY 2007 range was extended and overhauled.

The debut of the new logo on the Bravo

2007 began with the launch of the Bravo - preceded by the first ever institutional Fiat

blog. Bravo is the first car to sport the new Fiat logo as a tangible sign of the company's

turnaround. The new Bravo is a successful blend of beauty and substance, destined to

become a benchmark for the segment.

SUYOG | TYBMS 23


2.4 PRESENCE: ALL AROUND WORLD

2.4.1 Fiat Automóveis, Brazil

The 1979 Brazilian Fiat 147 was the first modern car to run on pure hydrous ethanol fuel

(E100). Fiat Automóveis s.a., a subsidiary of Fiat S.p.A., began making automobiles in

Brazil in 1976 beginning with the production of the Fiat 147, the Brazilian version of the

Italian Fiat 127, produced until 1986.

Launched in July 1979, the 147 was the first mass produced car that run on ethanol as

fuel instead of petrol. The performance slightly increased and fuel consumption was 30%

higher but the cost of the alcohol was a quarter of the gasoline because, at that time,

petrol had become expensive as a consequence of the 1979 oil crisis. This version was

nicknamed cachacinha (little cachaça) because it had the smell of that Brazilian drink.

SUYOG | TYBMS 24

http://en.wikipedia.org/wiki/File:World_locations_of_Fiat_Group_car_manufacturing_sites.png

http://en.wikipedia.org/wiki/File:Fiat_147_br.jpg


2.4.2 Fiat Argentina

Fiat has been present in Argentina since the beginning of 20th century. There was a Fiat

manufacturing plant in Córdoba at least as far back as 1954 when Fiat entered into a joint

venture with two local companies for the manufacture of tractors. In 1959 the

construction of a car plant in Caseros was approved, and 1960 saw the production there

of the first Argentinian produced Fiat passenger car, a Fiat 600. By 1978 a car

manufacturing facility was well established in Córdoba, producing Fiat 128s as well as

two models which from the Italian perspective belonged in earlier decades, the 125 and

the 600R. The current day automobile manufacturing started with a new factory opened

in Córdoba on December 20 1996. From April 1997 the Siena and Palio models

production started.

2.4.3 Zastava, Serbia

Its first enterprise came in 1955, when it agreed a deal with Yugoslav carmaker Zastava

to assemble Fiats for Eastern Europe. The first cars to be produced by Zastava were its

versions of the Fiat 1300 and Fiat 1400. By 1970, Zastava was producing parts for the

newer Fiat 124 and Fiat 125 models, although these cars were actually assembled in

Poland. Zastavas were not popular outside of Eastern Europe before the 1980s, although

they were exported to the United States under the Yugo brand as long ago as 1973.

2.4.4 Polski Fiat/FSO (Poland)

Fiat automobiles have been made in Poland since 1920. In 1932, the Polskie Zakłady

Inżynieryjne (Polish Engineering Works, PZInż) started the production of Fiat 508,

produced until 1939 also as a military vehicle. In 1936 the licence was extended to

include the Fiat 518 model. In 1965, the Polish communist government signed a deal with

Fiat to produce selected Fiat models in Poland at the FSO factory in Warsaw that had

been built in 1951. Production of the new car — the Polski Fiat 125p - began in 1967.

SUYOG | TYBMS 25


2.4.5 AutoVAZ Lada (Soviet Union/Russia)

In 1966, Fiat helped U.S.S.R. state industries build a new car factory (AvtoVAZ) on the

banks of the Volga river. A planned city called Tolyatti was developed around the

factory, which started producing a "people's car" similar to the Volkswagen Beetle and

Citroën 2CV of Germany and France. The new Soviet car, called the Lada, however, was

a more spacious offering, in four-door saloon and five-door estate variants. Fiat installed

British-built machine tools supplied by Herbert-BSA of Birmingham for the manufacture

of many Lada parts. The 124's design was mechanically upgraded to survive treacherous

Russian driving conditions and extremely cold winters. Imports to Western Europe,

Canada, and some third world countries began, and by the early 1980s, the cars began to

sell fairly well thanks largely to their low asking price. This car was upgraded to become

the Lada Riva (marketing name in some markets) in 1980.

2.4.6 Bulgaria

1967-1971 produced Pirin-Fiat in Lovech, Bulgaria.

2.4.7 Tofaş, Turkey

Tofaş is joint venture owned by Fiat SpA and Koç Holding (37.8% Fiat Group

Automobiles, 37.8% Koc and 24.3% others). The Fiat 124 was produced under licence by

Tofaş as the Tofaş Murat. This was replaced by a version of the Fiat 131, known as the

Tofaş Şahin. Today the Fiat Linea car is amongst those manufactured by the Fiat-Tofas

joint venture in Turkey, and the company has 12.1% of the Turkish car market as of

2007.

2.4.8 SEAT, Spain

In Spain, SEAT was set up with Fiat assistance, producing Fiat models under its own

brand name until 1981, when Fiat withdrew its support. However, production of the Fiat-

based models continued, with the final Fiat-based SEATnot finishing until 1996. By this

SUYOG | TYBMS 26


stage, SEAT had become part of German manufacturer Volkswagen after several years of

ownership by the Spanish government.

2.4.9 South Africa

In South Africa, the Fiat Uno was assembled under licence by Nissan, which marketed it

through its dealerships as the Uno, without Fiat branding.

2.4.10 Ethiopia

The Fiat 131, known as the Holland Car DOCC.

2.4.11 Helwan, Egypt

Following the Egyptian Revolution of 1952, President Gamal Abdel Nasser ordered the

EGID (General Intelligence Agent) to establish a state owned automobile company. Nasr

was founded in 1960 in Helwan, Egypt. It began producing some Fiat based models, but

later on produced the Tofaş Şahin under license by Tofaş. Until today, both the Fiat 128

and the Şahin are in production in Egypt.

2.4.12 Premier Automobiles, India

Premier Automobiles Limited is a Mumbai-based manufacturer of vehicles founded

in 1944. In 1951, the company began producing versions of the Fiat 500 for the

Indian market. This was followed by the Fiat 1100 in 1954. In 1973, the Premier

name was used on its vehicles for the first time, the Premier President, based on the

Fiat 1100 as Premier Padmini. In 1984, they launched the Fiat 124-based Premier

118 and 138D models.

Fiat India Automobiles Private Limited (FIAPL) is a joint venture between Fiat and

Tata Motors. It was founded in 1997. Fiat builds the Palio Stile and Palio Stile

Multijet in India and imports its Fiat 500 into India from Italy, whereas Fiat has

many cars under its hood planned for India like the internationally acclaimed

Linea, Grande Punto and Bravo, of which the Linea was released in January 2009

SUYOG | TYBMS 27


and the Punto in June 2009. Bravo will follow in mid 2009. The Fiat plant is situated

in Ranjangaon near Pune in Maharashtra and also manufactures the Tata Indica.

2.4.13 Sri Lanka

In 1964-65, the Ceylon Transport Board contemplated production of buses in Sri Lanka

in collaboration with FIAT. However, with the change of Government in 1965, the CTB

opted for a deal with British Leyland.

In 1973, entrepreneur Upali Wijewardena's Upali Motor Company began assembly of the

so-called 'Upali-FIAT' 128. However, production ended with the introduction of the

open-market economy in 1978.

2.4.14 North Korea

The North Korean car manufacturer and dealer Pyeonghwa Motors assembles two Fiat

models under licence since 2002: Hwiparam - based on the Fiat Siena, Ppeokkugi - based

on the Fiat Doblò.

SUYOG | TYBMS 28


CHAPTER 3

SUYOG | TYBMS 29


3.1 INDUSTRY GLIMPSE

The automobile industry today is the most lucrative industry. Due to the increase in

disposable income in both rural and urban sector and easy finance being provided by all

the financial institutes, the passenger car sales have increased at the rate of 38% per

annum in June 2005-06 over the corresponding period in the pervious year. Further

competition is heating up in the sector with a host of new players coming in and other

like Porsche, Bentley, Audi, and BMW all set to venture in the Indian markets. One

factor that could help the companies in the marketing of their product is by knowing and

creating a personality for their brands.

The automobile industry today is the most lucrative industry. Due to the increase in

disposable income in both rural and urban sector and easy finance being provided by all

the financial institutes, the passenger car sales have increased at the rate of 25% per

annum in June 2007-08 over the corresponding period in the previous year. Further

competition is heating up in the sector with a host of new players coming in and others

like Porches, Bentley, Audi, and BMW all set to venture in Indian markets. One factor

that could help the companies in the marketing of their products is buying Behavior of

the consumers.

Indians have emerged as avid car enthusiasts sporting their prized possessions as status

symbols and speed machines. Foreign car companies have discovered the Indian

consumer as well as the R & D potential in the Indian technical fraternity and are setting

up manufacturing plants right and left across the country at lower costs. The Indian

automobile industry is currently experiencing an unprecedented boom in demand for all

types of vehicles. This boom has been triggered primarily by two factors:

(1) increase in disposable incomes and standards of living of middle class Indian families

estimated to be as many as four million in number; and

SUYOG | TYBMS 30


(2) The Indian government's liberalization measures such as relaxation of the foreign

exchange and equity regulations, reduction of tariffs on imports, and banking

liberalization that has fueled financing-driven purchases.

Industry observers predict that passenger vehicle sales will triple in five years to about

one million, and as the market grows and customer's purchasing abilities rise, there will

be greater demand for higher-end models which currently constitute only a tiny fraction

of the market. These trends have encouraged many multinational automakers from Japan,

U. S. A., and Europe to enter the Indian market mainly through joint ventures with Indian

firms.

India is increasingly becoming a global automotive hub both for the vehicles and

component industry. India is fast integrating itself into the world economy and open to

international automotive companies, who are increasingly investing in India.

The Indian automotive and component industry is looking to increase the quality of

production from existing levels, to develop new products and to increase exports. In the

long run India is well set to become a key market for automotive and component

manufacturers in terms of local demand and as a base for export.

Additionally, companies such as GM, Daimler Chrysler, Toyota, Delphi and

MICO/Bosch are utilizing India’s well developed IT / software capabilities and have set

up R&D hubs here for their global operations

SUYOG | TYBMS 31

Maruti55%

Hyundai18%

Tata13%

Fiat4%Ford

3%

HM2%

Honda2%GM

1%Skoda1%

Mitsubishi1%

Daimler Chrysler

0.2%

Toyota0.3%


3.2 SEGMENT & MARKET SHARE

Category Models

Economy segment (upto Rs 0.25mn) Maruti Omni, Maruti 800 etc.

Mid-size segment (Rs 0.25-0.45 mn) Fiat Uno, Hyundai Santro, tata Indica,

Maruti Alto etc.

Luxury car segment (Rs 0.45- 1mn) Tata Indigo, Honda City, Mitsibushi

Lancer, Ford Ikon, Opel Astra, Hyundai

Accent & others

Super luxury segment (above Rs 1mn) Mercedes Benz & other imported models

Segment Market Share (%)

Economy 90.2

Mid-size and luxury 9.8

Source: SIAM/ Auto Car India

SUYOG | TYBMS 32


3.3 FIAL

Fiat India Automobiles Limited is a 50-50 Industrial Joint Venture between Fiat Group

Automobiles S. p. A., (Fiat) and Tata Motors Limited (Tata) originally incorporated on

January 02, 1997. The company presently employs about 600 employees and is located at

Ranjangaon in the Pune District of Maharashtra. The definitive agreement of the Joint

Venture was signed on October 19th 2007.

Fiat, which holds a 50% stake in the Company, also owns and controls five

internationally renowned brands:- Fiat Automobiles, Alfa Romeo Automobiles, Lancia

Automobiles, Abarth and Fiat Light Commercial Vehicles, the makers of renowned cars

such as the Ferrari, Maserati, Alfa Romeo and Lancia besides the Fiat branded cars.

Tata Motors Limited, the other partner to the Joint Venture, is the largest automobile

company in India, with revenues of Rs. 32,426 crores (USD 7.2 billion) in 2006-07. It is

the leader in commercial vehicles in every segment and the second largest in the

passenger vehicles market with winning products in the compact, mid-size car and utility

vehicle segments. The company is the world’s fifth largest medium and heavy

commercial vehicle manufacturer and the world’s second largest medium and heavy bus

manufacturer

The state-of -the-art facility at Ranjangaon, have an installed capacity to produce 100,000

cars and 200,000 engines, besides aggregates and components. This facility is currently

manufacturing the Palio Stile 1.1 and 1.6 models, as well as premium Fiat cars such as

the Grande Punto and Linea. The facility also manufactures Fiat’s successful 1.3 litre

Multijet diesel engines and 1.2 & 1.4 litre Fire gasoline engine. Apart from Fiat cars, the

facility also produce Tata passenger and next generation cars with investment exceeding

€ 650 Million.

SUYOG | TYBMS 33


3.4 FIAT VALUE CHAIN

The strength of FIAT lies in its own production, as the automotive industry generates

economic activity in other sectors the large importance of inputs from other sectors in the

production of motor vehicles. In fact, the main impact of an increase in the final demand

is visible in the where the production of automotive products increases. As a

consequence, this has an impact on other sectors: steel production, the metal working

industry, high-tech manufacturing (mechanical and technical engineering, electronics,

and so forth) chemical products and rubber. There are also strong links between car

production and several service sectors, including R&D and IT services, financial services,

transport and trade. These links through the value chain demonstrate the importance of

the automotive sector as an engine for growth and employment.

SUYOG | TYBMS 34


3.5 FIAT PEST ANALYSIS

3.5.1 Political

According to the Kyoto_ protocol, all the countries must reduce greenhouse gas

emissions by 8% compared to 1990 levels in the period of 2008–2012; more than 100

countries, including the EU and its member states, have deposited their instruments of

ratification. However, some large countries have not ratified the protocol yet. As far as

environmental restrictions regard, the strictest market is the EU.

Considering the distribution in the automotive industry, FIAT needs to carry out the

distribution of their products by themselves but they organize it through a dense network

of authorized dealers whose function is to resell the products to the final consumer. The

Block Exemption for fiat allows network of service and exclusive dealerships

Rising oil prices has also affected FIAT as petrol and cars are complementary products.

However, the demand is price elastic and the good is perceived as prime necessity. (The

demand tends to be less elastic in countries where the revenue per capita is lower).

3.5.2 Economic factors

Growing Chinese market and Chinese make products which are much more cheaper than

any other products would definitely had affected FIAT. Thus FIAT has to focus on the

low production cost in order to compete Chinese make cars.

3.5.3 Technology

FIAT has to keep up with the global technology improvement and enhancement. The

improvised technology in the automobiles sector would help to increase car efficiency,

reduce emissions, help produce the best at cheaper cost.

3.5.4 Social

The ever-changing consumer demands and taste has to be well updated by FIAT product

designs. IT should well suits the consumer needs and provide the full satisfaction.

SUYOG | TYBMS 35


3.6 FIAT PORTERS ANALYSIS

SUYOG | TYBMS 36


3.6.1 Competitive rivalry within the industry

There is an intense rivalry between firms in the automotive industry because of the

concentration both on the national and international markets. FIAT pursued advantage

over its rivals is product differentiation by improving features and implementing

manufacturer process innovations. For instance, FIAT began to look seriously at cutting

components costs and outsourcing more contracts in the 90s. By understanding the need

for smaller supplier networks and just-in-time delivery, FIAT began to concentrate on

larger tier-one suppliers who would absorb much of the R&D costs necessary to develop

components.

In a constantly changing market, there is a strong competition coming from abroad (in

particular, from Japan and Korea) that has obtained part of the FIAT's domestic market

share. At the same time, investments abroad can become a significant factor in corporate

internationalization strategies by exploiting comparative advantages in foreign countries,

especially in labor costs. Fiat could do profit by cutting costs and through alliances with

other car makers such as Ford and the Indian group Tata Motor.

3.6.2 Supplier power

Suppliers provide raw materials, different components and the labor required by the

producing industry. In the FIAT value chain analysis we will discuss about the “rules” on

which supply is based. In this section, we want to mention the double situation referring

to suppliers' power. Suppliers of FIAT have been divided into two categories. The first

group involves the Italian component suppliers which rely on the FIAT Group for their

business. In this group there are firms, such as Magneti Marelli and Teksid that are

subsidiaries of Fiat and economically dependent on it. In the second category there are

hundreds of smaller firms that are usually dependent on Fiat but in a more indirect way.

In recent years, FIAT has tried to expand its production abroad and so it has fostered the

possibility of international expansion of many Italian suppliers as well.

SUYOG | TYBMS 37


3.6.3 Threat of new entrants

The possibility that a new firm can enter the market influences competition. However,

barriers to entry could also exist. These barriers can reduce the rate of entry of new firms

and maintain a level of profit for all the other firms in the industry. Fiat is pursuing a

strategy by expanding its portfolio. In fact, firms can choose to merge in foreign markets

like India, and thus creating new relationships with other companies. Firms can choose to

merge in order to avoid barriers to entry in new markets. Almost all the major car

companies, such as Renault and Nissan, Toyota and Honda merged and many of them

find themselves in a very complex cross-ownership network. The pattern is to emerge in

the global economy which is characterized by a very small number of large players.

Furthermore, FIAT has to be able to manage brand identity in order to avoid the threat of

new entrants.

3.6.4 Power of costumers

The power of costumers is the impact that buyers have on the producing industry. In the

automotive industry, many firms such as Volkswagen, Ford, GM, and BMW are groups

that have developed multi-brand marketing strategies in order to serve different

customers in different markets. All of them are now working on new distribution channel

strategies as part of their product differentiation on the market. The FIAT marketing

strategy revealed to be weaker than that of many competitors and this condition was

made worse by the trend that took place in the last ten years. Even style-conscious

Italians started looking elsewhere for their wheels and, as a consequence, the share of

FIAT on the Italian market decreased considerably. In the international markets, FIAT

lost many costumers because some FIAT models were perceived as unreliable and

because spare parts were difficult to get and often very expensive. Now, the new Fiat

Punto seems to be the only ray of hope for the company to foster the FIAT Auto in doing

profit. As Giulio Salomone recently pointed out, the priority is to improve the buyer

power and in order to reach this goal FIAT has introduced a new dealer training: “We and

our dealers must improve the customer experience, give better customer satisfaction and

we now have the right models for them to sell.”

SUYOG | TYBMS 38


3.6.5 Threat of substitutes

It comes from products inside the industry. In the automotive industry, the consequence

can be price competition. Although FIAT has launched the new Punto last year

(September), it has to face tougher competition when rivals such as Peugeot and Opel

will launch their own city car models. The situation raises much more concern if we

consider the fact that FIAT models’ popularity and sometimes even availability is weak

elsewhere in Europe (excluded Italy) and as a consequence, it is difficult for the company

to become a strong competitor and substitute for the other car makers in the industry. The

crisis of FIAT Auto is also due to the inefficient management of the brand. The success

of FIAT depends on having the ability to give the company a serious position on the

market on the base of tangible assets and creating different categories of cars such that

buyers can find the input to compare various models of different brands.

SUYOG | TYBMS 39


3.7 SWOT ANALYSIS

3.7.1 Strength

A brand with a strong historical value

Evocative power of the FIAT golden years (50s and 60s). Some models, such as 500,

are evocative of the glorious age of the Italian style.

Made in Italy. Great names and designers, such as Giorgetto Giugiaro.

The new top management would be more open minded than the previous era of the

Agnelli brothers.

Presence of FIAT Plants abroad

The other two brands, Alfa Romeo and Lancia, which are strong and evocative

Good at producing small cars

Qualified people FIAT has qualified personnel in its research centres.

Expertise in CRF and style center

3.7.2 Weakness

Management culture inefficient For instance top management takes too seriously the

concept of “mature market” and so focuses on services, assistance and price cuts

(through promotions) more than on innovation and brand asset management. The

inefficiency of the management is underlined by its inability to give the FIAT a

serious position on the market. What people perceive is a high ratio quality-price and

this is an important evidence and result of an inefficient management.

A culture far from customers and dealers, those who represent FIAT on the market

Lack of sensitivity It is noticed that FIAT seems not to be able to understand what

happens around. The problem is the lack of the important ability of understanding the

symptoms that anticipate problems. The consequence is the abrupt and disastrous

reaction of the company that tries to survive the crisis by firing people, selling off,

projecting reductions of costs, and so forth. Another important consequence is that

this kind of behaviour leads FIAT to be always out of step if compared with its

competitors and makes FIAT blind in front of the huge changes that are taking place

all around.

SUYOG | TYBMS 40


The “supremacy” of Engineering.the attention is focused on creating a product which

tries to be perfect from engineering perspective thus it is not consumer oriented.

Marketing is weak._Marketing is not considered a relevant source in order to

understand customers’ needs and market trends. It is considered as a way through

which sell something which is far from customers’ expectations. A weak brand

identity: nobody knows what FIAT stands for.

Economices of scale: FIAT tries to implement economies of scale, although it has not

the financial power to sustain them. In addition, this brings the company to focus on

quantity rather than quality and innovation.

Strong dependency of manufacturers on suppliers, the lack of integration between

them, the lack of cooperation and commitment to achieve the same goals, the lack of

recognition in the brand, and so forth…have negative implications. First, the

impoverishment of the internal know-how and competencies; second, lower quality;

third, no long-run savings.

No defined segments

The style is anonymous. After the old model of panda and uno, new models have not

been able to make mark. FIAT be recognizable. This is of huge concern because it

means that FIAT is not able to “exploit” in the right way the great potentials that are

offered by the Centro Stile.

Never pioneer in introducing new models

No demand advantage in the home market. It is appropriate to consider a brand

perspective since the brands are primary channels through which customers recognize

manufacturers. We have to underline that there is a strong affiliation of French and

German car buyers towards brands that originate in their respective home market.

This suggests an atmosphere of trust into cars that are domestically built and

designed. For the Italian brands, and above all for of FIAT, this link is weaker. Italian

car buyers are less focused on the domestic brand but keep a strong interest in other

European brands.

SUYOG | TYBMS 41


3.7.3 Opportunities

Third world countries. In this countries cars tends to be simpler thus they require less

money.

From Vertical Integration to Virtual Integration in the design, manufacture and

marketing of cars has historically been defined by the efficiency and internal

capabilities of vertically integrated Original Equipment Manufactures (OEMs) and a

few key suppliers.Automotive companies made huge investments automating and re-

engineering design, manufacturing, and marketing processes in pursuit of lower costs

and greater efficiency. The strategy: Implementing a collaborative commerce strategy

requires more than linking data and synchronizing information. Companies need to be

prepared to first define the overall approach to collaborative commerce and ensure it

align to strategic objectives. The strategy should guide the prioritization of the

portfolio of initiatives and roadmaps. Everything is based on creating value through

collaboration, while maintaining flexibility for future growth and requirements.

The Chinese automotive market is growing very rapidly. Market size, terms of

investments and an improving infrastructure provide the basis for foreign automotive

companies. The potential of the Chinese market attracts not only manufacturers but

also the whole supplier industry.

Trend towards free trade. As the world trade organisation expands its membership

and activities are under way for a new round of trade liberalisation, Europe as a major

player in automotive trade should be among the prime beneficiaries from the opening

of new markets and the strengthening of existing relationships.

As a major player in international markets, Europe has established stable channels

that constitute a competitive advantage.

3.7.4 Threats

Impact of regulation on the value chain flexibility. While changes in taste and

technology require constant reconfigurations in the automotive value chain, the

regulatory framework may make this task more difficult and costly.

SUYOG | TYBMS 42


Over-capacities. In recent years European, North America and Japanese markets see a

sluggish development in demand. On the other hand, a rapid capacity build-up in

emerging Asian markets and Eastern European markets is taking place. Both

developments may induce world over-capacity and stimulate price competition. Due

to high labour costs and lagging labour productivity EU producers are not very well

equipped for price competition in the standard car segment. This may induce

additional pressures for consolidation of the industry e.g. via mergers.

Groundbreaking innovations challenge existing excellence in production. The

European manufacturers distinguish themselves with an excellent position in different

markets. However, the threat of missing groundbreaking innovations is still on the

agenda. Success can breed failure, as manufacturers are in danger of being locked in

traditional products and technologies and often ignore revolutionising developments

outside their traditional fields of expertise. Some of those major breakthroughs are on

the horizon in the automotive sector. They have potential to make conventional value

chain configurations obsolete and subsequently open up opportunities for new

competitors.

Major innovation competition from Japanese producers. competitive position in

global vehicle production and they are strong competitors of European and American

companies. In some fields like the hybrid engine they lead the market significantly

ahead of other manufacturers.

SUYOG | TYBMS 43


CHAPTER 4

4.1 RESEARCH OBJECTIVES

SUYOG | TYBMS 44


The research objectives for the project undertaken can be defined as follows:

To determine the demographic variables of the customers

Examine the customer perception about the FIAT brands.

4.2 RESEARCH SCOPE

Research is limited towards the understanding towards FIAT brands in. Also it analyze

consumer attitudes towards purchase automobiles

4.3 SAMPLE SIZE

100 respondents

4.4 RESEARCH CONDITION

The owners of FIAT brand

4.5 RESEARCH LIMITATION

Area is being restricted to Mumbai due time and financial constraint. As project flows

goes on; only auto brands particularly to economic segment are being only considered.

4.6 FINDINGS & ANALYSIS

SUYOG | TYBMS 45


Q1. Why you bought your present car? Please rank from the highest order of preference

1. Increase in disposable income

2. Better safety at roads

3. Family needs

4. Increase in family size

5. Suits your lifestyle and personality

39

12

17

23

9

0

5

10

15

20

25

30

35

40

Increase indisposable

income

Better safetyat roads

Family needs Increase infamily size

Suits yourlifestyle andpersonality

Motives

Motives For buying a car

Series1

As per the analysis shows, increase in disposable income seems to be the most

important reason for buying a car. This trend is reflected in the growth of the Per

capita Disposable income and consequently the growth of the Indian automobile

industry especially in the B and C segment cars. Similarly, the growing family needs

like working partners, increasing family size, status, etc. add to the motives of buying

a car.

SUYOG | TYBMS 46


Q2. You decided to buy a car brand because of (rate best 3 factors from 1 to 3 in order of

your preference)

1. Affordable price

2. Technical superiority over competition

3. Comfort

4. Manufacturer’s image

5. Value for money

6. Safety

7. After sale services

Product Specific Reasons for Buying a Car

32

7

912

28

102

Afforable prices

Technical superiority

Comfort

Manufacturer's image

Value for money

Safety

After sale services

Indian market is still the hard nut to crack for most of the automobile manufacturers.

Though the Indian car industry is among the fastest growing car markets of the world still

the Indian psyche is too complex for the manufacturers to understand. The most

important reason for buying a car when it comes to B and C segment cars seems to be

‘value for money’. 32% of the respondents suggested that affordable prices are the most

important factor while purchasing a car. This is the reason for sticking to a particular

segment till the next substantial rise in the personal disposable income. This reason is

SUYOG | TYBMS 47


followed by ‘Value for money’ where the customers look for the best product, best

services and best repute all bundled in one with the best deal they can strike. This

explains the reason for the stagnant or sudden growth in sale of B and C segment cars just

before budget and near occasions like Diwali.

SUYOG | TYBMS 48


Q3. Please rate your FIAT car in terms of understated Interior Design features on a scale of 1 to 5 where

1 Highly Dissatisfied2 Dissatisfied3 Neutral4 Satisfied5 Highly Satisfied

Interior Type 1 2 3 4 5Seats designLeg Room Dash BoardInterior ColourMusic SystemAdjustable Front seat Headrest

SUYOG | TYBMS

Interiors for Segment B cars

3 4 43 4 4 4

3

4 44 4 3 4

3

3 33 4

43

44 4 4

4

4

4

11 1 1 3

14

3 3 3 3 3 3 3

0%

20%

40%

60%

80%

100%

PALIO PALIO STILE

lINEA GRADE PUNTO

UNO FIAT 500

STILE MULTIJET

Cars

Lev

el o

f sa

tisf

acti

on

Adjustable Front Seat Headrest

Music System

Interior Colour

Dash Board

Leg Room

Seat Design

49


Interiors play a very important role in deciding the sale of a car. More plush, comfortable

and exotic the interiors are more are the chances of its being popular among the

customers. For this reason manufacturers spend billions of dollars every year on R&D to

continuously improve the interiors of their cars. Seats, leg room, dash board, armrests etc

are few of the options which count for the interiors. As the analysis show Stile multijet

substantially high w.r.t. its counterparts on the account of music system installed.

Similarly, Palio stile races far ahead as far as leg room is concerned. However, UNO

fares badly on this front. Overall, almost all cars get a mixed response in this segment as

far as the interiors are concerned.

As one can see most of the respondents are quite happy with the interiors of their

respective cars. However, one striking point observed here are that almost every car fares

neutral on the adjustable front seat headset.

SUYOG | TYBMS 50


Q4. Please rate your existing car in terms of understated Safety features on a scale of 1 to 5

Safety Parameters 1 2 3 4 5Crossbar under DashboardAir BagsAnti Lock Breaking SystemAerodynamic Shape Intensity of front lights

As can be noted Linea and Grade punto fight neck to neck on almost every front, with

Grade punto marginally better in features like crossbars under the dashboard and Anti

Brake systems. Most of the cars in this segment fare relatively similar and very close to

each other on most of the fronts.

As one can see most of the respondents are quite happy with the safety parameters of

their respective cars. However, one striking point observed here are that almost every car

fares neutral on the safety parameters.

SUYOG | TYBMS

Customer Satisfaction on the Safety Parameter

3 3 33 3 3 3

11

1

13

11

3

3 43

4

3 4

3

4 43

3

4 5

34 5 4

34 4

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

PALIOI PALIO STILE

LIENA GRADE PUNTO

500 STILE MULTIJET

Safety Parameters of Different cars

Intensity of front light

Aerodynamic Shape

ABS

Air Bags

Crossbar under Dashboard

UNO

51


Q5. Please rate your existing car in terms of following parametersParameter

1 2 3 4 5Fuel Consumption

Mileage ( Km/ltr)

Pick Up

Stability at higher speed

Top speed

The customer choice of the car highly depends upon the performance and maintenance

costs of the car. This is the reason why this class of parameter was chosen for this study.

And the results show that Palio stile fares the best car in its segment as most fuel efficient

car of all. Similarly, Palio stile fares the best on the terms like mileage but it lags behind

Palio 500 on pick up front. So this segment shows a mixed bag of response for the Fuel

efficiency and mileage parameter. Grade Punto performs consistently on all the

SUYOG | TYBMS

Customer Satisfaction Level on the Fuel Efficiency

34

3 3 3 3 3

3

4

44 3

3 4

3

34

44 5

5

33 3

4 4 4 4

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

Cars' Fuel Efficiency Parameters

Cu

stom

er

Sati

sfacti

on

Leve

l (

%ag

e)

Stability at higher speed

Pick up

Mileage

Fuel Consumption

PALIOI PALIO STILE

LIENA GRADE PUNTO

UNO 500 STILE MULTIJET

52


parameters and Stile Multijet really well on pick up whereas it fares badly on fuel

consumption. Considered this condition for Stile Multijet it should be seen as a red signal

for the manufacturers so does not end up being like Fiat’s Palio famous as a car for

drinking petrol.

Q6. How do you rate the brand image of your car?

1 2 3 4 5 Very Low Very High

As per the analysis, Palio 500 is car whose brand image is most preferred in the market.

On the contrary Palio and UNO share the same platform on the brand image. This can be

attributed to the fact that both these cars are relatively new on the block and market takes

time to imbibe and give the brand an image.

SUYOG | TYBMS

Brand Image

3

4 4 4

3

5

3

0

1

2

3

4

5

6

Palio Palio stile Liena Grade punto

UNO 500 Stile Multijet

Car Brands

Cu

stom

er

Perc

ep

tion

( A

vg)

Series1

53


Q7. Will you recommend your car to your friends?

Yes No

Customer's Ultimate Perception

73

27

0

10

20

30

40

50

60

70

80

Yes No

Customer Action ( Will you recommend your car to your friends?)

Fre

qu

ency

It seems logical that satisfied customers will someday become loyal customers, in other

words there is a positive correlation between customer satisfaction scores and customer

buying behavior. If a customer rates the car very high in satisfying his or her needs, the

car manufacturer should expect more referrals and this is reflected in the analysis that

73% customers say that they will refer their car to their friends even if they move to other

segment or other brand.

SUYOG | TYBMS 54


Q8. Will you buy your new car in the

Same segment , same manufacturer Same segment, different manufacturer Upper segment, same manufacturer Upper segment, different manufacturer

Customer Perception

11

17 17

23

7

6 7

12

0

5

10

15

20

25

30

35

40

Same Segment,same

manufacturer

Same Segment,different

manufacturers

UpperSegment, SameManufacturer

UpperSegment,Different

Manufacturer

Customer Actions

Val

ues C

B

The analysis shows that most people when moving to upper segment will prefer a

different manufacturer. And the next striking finding is that the customers will prefer

both same and different manufacturers in the B segment cars and there is not much

difference in the C segment also. This behavior is complex to understand as this are the

customers who have given whopping response for recommending their car to their

friends. It’s the reason why brand perception is so difficult to understand.

SUYOG | TYBMS 55


DEMOGRAPHICS

I surveyed around 100 people who belonged to various age groups. The survey of 4 age

groups was done. The four age groups were:

Less than 21 years

21 -35 years

36-54 years

More than 55 years

SUYOG | TYBMS

20

42

21

17

age group

<21

21-35

36-55

>55

56


MONTHLY FAMILY INCOME

I surveyed around 100 people who belonged to various monthly family income groups.

The survey of 4 income groups was done. The four income groups were:

Less than 50000

50000 - 1,00,000

1,00,001 – 2,00,000

More than 2,00,001

Above graphs exhibits the income bracket of the sample size, as evident the majority of

the sample is in the income bracket of < 50,000 a month income. Though none of the

bracket is highly skewed, this enables the study to be wide and not dependent on a set

income class, which was a fortunately desirable result of simple random sampling.

SUYOG | TYBMS

34

28

19

19

monthly family

income

<50,000

50,001-1,00,000

1,00,001-2,00,000

>2,00,001

57


CHAPTER 5

SUYOG | TYBMS 58


5.1 RECOMMENDATIONS & DRIVERS FOR STRATEGIC

SOLUTIONS

1. Revaluation of the brand equity relying on the historical valuation of the brand and on

the evocative power of the FIAT golden years (50s-60s) in addition FIAT must

“exploit” the evocative brands of Alfa Romeo and Lancia which are focused brands

and well recognizable: the first one is a well defined sports car model while lancia

remains synonymous of elegance

2. Firstly, FIAT can solve the problem reduced to the absence of the domestic

competitive advantage and reached those customers who owned a FIAT car in the

golden years. This is important to regain a good reputation and then start a process to

develop loyalty and gain new customers.

3. FIAT must focus on style and try to exploit all the potentials of the Style Centre

which is characterised by the presence of great designers. This behaviour can help

FIAT, not only in the domestic market, but also abroad where the Italian style is

deeply appreciated

4. FIAT can also follow the current competitors’ trend aimed at offering to the market

historical models with a completely renewed style, as VW with New Beatle and

BMW with Mini did. The revival of old models is based on great historical and

evocative value they still have. All this helps to create an Italian product that is

instantly recognisable as FIAT.

5. FIAT must match the competencies and know-how of the Engineering and the Style

Centre. That is, promoting an efficient and balanced interaction between the team of

designers and that of engineers becomes a fundamental factor. This balanced

interaction is aimed at comparing the model’s design and the engineering problems in

order to solve and pre-empt problems. If this relationship is well balanced and not

characterized by the “supremacy” of the engineers’ instructions, it will lead to a final

model with a very high level of quality, providing precise data for any changes that

SUYOG | TYBMS 59


need to be made. However, high quality is perceived by customers on the base of

what they need. How better understand customers’ needs rather than using in an

appropriate way the Marketing competencies?

6. Marketing has always been used by FIAT in the wrong way. Promotions, discounts,

special editions (often aimed at selling usually unasked accessories) and so forth have

always come before the whole car, that is the model the company was selling. As a

consequence, what immediately passed through advertising to the customer was a

“fragmented” perception of the car, to the extent that nobody knows what FIAT

stands for. Thus, a turn of the screw is needed!

7. FIAT must implement customer-orientation. This allows FIAT to understand what the

real needs of customers are and leave the idea that what is perfect from an

engineering perspective must be what the customer wants. Marketing plays a

fundamental role in achieving this goal because it is one of the most relevant sources

of information about the customer and the market trends.

8. FIAT is the inability to understand what happens all around and this makes FIAT

unable to comprehend the symptoms of huge crisis. FIAT has often shown the

inability of reacting environmental and internal changes and this is a huge problem if

we consider the fact that the automotive industry is deeply unstable und competitive.

Marketing can be an important way to monitor competitors and the whole

environment but it is not enough. Many analysts have highlighted the negative impact

of an “outdated” top management. The solution is to be found in an “updated”_ top

management, made up of relatively younger people that benefit from both experience

and an “updated” corporate education_(which centres on educating people on

learning how to be able to react to changes and pre-empt problems). FIAT can only

reap benefits from this new top management that is more flexible, reactive and able to

understand the needs of market segments.

SUYOG | TYBMS 60


9. Another issue that we have considered is the wrong choice of implementing

economies of scale which is mainly due to the presence of FIAT plants abroad.

According to our analysis, this kind of strategy has not been profitable for FIAT.

Thus, this must be replaced by the implementation of economies of scope that enable

to produce some components that fit different models. In the case of FIAT, for

instance, the production of the same chassis on which assemble different car models,

is fundamental in order to obtain lower costs. As a consequence, these cost savings

must be invested in innovation and quality. These economies of scope are important

because they allow the company to offer both basic models to the emerging countries’

customers (and this is also enhanced by the fact that the FIAT brand focuses on

smaller cars) that do not ask for e.g. air conditioning, and more accessorized cars for

the developed ones. In addition, the implementation of economies of scope solves the

problem related to high stock inventories which cause high costs.

10. The FIAT main offering of utility cars is a strength that must be exploited not only in

the emerging countries but also in the western ones. We do not have to forget the

segment of the price sensitive people, such as the younger generations.

11. The FIAT outsourcing is another issue of concern. FIAT must regain control over the

value chain and above all suppliers. The solution must be found in the so-called

“collaborative commerce” or “virtual integration” that is based on network of

suppliers although not belonging directly to FIAT, behave as if they were. This

strategy is based on two important aspects: collaboration and flexibility.

12. Finally, we want to stress the important commitment of FIAT in the research and

development of environmental-friendly vehicles. The role of FIAT is recognized, not

only on a national level, but also on a European one. FIAT must continue in investing

in these innovative technologies because the future is oriented in this way.

SUYOG | TYBMS 61


5.2 BIBLIOGRAPHY

1. Annual Report, Consolidated and Statutory Financial Statements, at December 31,

2004 - 99TH Fiscal Year. Torino, June 2005 Humphrey, J. & Memedovic, O. (2003).

The Global Automotive Industry Value Chain: What Prospects for Upgrading by

Developing Countries. Vienna: UNIDO - United Nations Industrial Development

Organization.

2. European Commission (2005). EUROPA - Enterprise & Industry - European

competitiveness report 2004 - Automotive Industry - extract from the Commission

staff working document SEC(2004)1397, Bruxelles : EU

3. Deloitte Research, (2002). C ollaborative Commerce in the Automotive Industry.

4. Detroit: Deloitte & Touche LLP Galgano, A. (2005). Toyota, Perchè l’industria

Italiana non progredisce, Abbiategrasso (MI): Guerini Associati

5. Kahn, G. & Hawkins, L. “GM to Pay FIAT $1.99 Billion To Settle Dispute Over

Alliance” – The Wall Street Journal, Feb 14, 2005, NY:WSJ

6. Kahn, G. & Kenneth, M. “Fiat posts profit on asset sales, turnaround auto unit” - The

Wall Street Journal, Jan 31, 2006, NY:WSJ

7. “Fiat-Ford, insieme per le piccole. Così nascerà la nuova 500” – La Repubblica.it,

Nov 7, 2005 Roma: L’Espresso Casaroli, C. FIAT: Avanti tutta, senza esitazioni.

8. http://www.omniauto.it/magazine June 21st, 2004 - OmniAuto.it Lojacono, S. La

grande auto torna a parlare italiano…

9. http://www.omniauto.it/magazine May 29th, 2005 - OmniAuto.it Berta, G. &

Ciravegna, L. Una nuova configurazione. Il sistema mondiale dell’auto.

10. http://www.torino-internazionale.org Jan, 2005 – Torino Internazionale

11. Berta, G. & Ciravegna, L. Una nuova configurazione. Il sistema mondiale dell’auto.

http://www.torino-internazionale.org Jan, 2005 – Torino Internazionale

12. www.fiat.com Jan, 2006

13. www.fiatgroup.com Jan, 2006

SUYOG | TYBMS 62

Download - corporate restructuring

Top Related