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

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.

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

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.

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

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

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)

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.

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:

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

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.

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.

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

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

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.