Chrysler Current Situation - Case Study Example

Case Analysis-Chrysler Case al affiliation Case Analysis-Chrysler Case I. Current Situation A. Current Performance Poor financial position, high debts mainly from the federal; government inform of federal loans, a sharp decline in sales. A net loss of US$1.6 billion in 2007which worsened in 2008 as a result of declining sales A failed merger of General Motors and Chrysler in which GM would acquire Chrysler’s automotive operations and Cerberus would get a 49% stake in General Motors Acceptance Corporation (GMAC). Closure of 12 North American plants due to weak demands. A US$4 billion federal loan in 2009. B. Strategic Posture 1. Mission During its inception in 1925 by Walter Chrysler, the mission was to design with purpose. After from bankruptcy in 2008, the company redefined its mission to creating the type of exciting, efficient, reliable and safe vehicles you expect and deserve. 2. Objectives To create an exciting lineup of vehicles that consumers want to buy. 3. Strategies To enhance their core: investing in product enhancement; strengthening the focus on customer; improving relation with dealers; and lastly recommitting the new organization to a new level of quality. Extending business through the development or establishment of partnerships aimed at providing new products; building off of existing products aimed at extending into new segment, exploring new and adjacent market opportunities; and accelerating new technologies and innovations. Market expansion: pursue global alliances aimed at filling the gaps in product portfolio and opening new geographic opportunities; increasing global sales by building from existing dealer networks; investing closer to global customers through the enhancement of regional business operations and global engineering centers. 4. Policies Emphasis on both product quality and cost effectiveness Keen on Corporate Social Responsibility Research and development on environment conservation. II. Strategic Managers A. Board of Directors 1. Nine members of the board of directors, three being outsiders. 2. Well respected Americans 3. Vast experience and management in the motor industry B. Top Management 1. The top management is sourced from within the company. 2. Very experienced on the affairs of the motor industry 3. Attributed to the current wellbeing of the company. III. External Environment A. Natural Environment 1. Intense competition for scares resources 2. Increasing cost of energy B. Societal Environment 1. Economical a. The instability in the global economy b. The current trend whereby individual economies are increasingly becoming interconnected into a global economy. 2. Technological a. The increase in the role played by computers and information technology in the production and research and development. 3. Political-Legal a. The increased environmental awareness through its reflection on laws touching on pollution and the use of energy. b. Higher prospects for developing markets in Asia and Africa. 4. Sociocultural a. The desire by the developing countries to participate in the global economy b. The need for mostly second card by the Dual-careers couples. c. Career mobility ensures there is need for more cars to suit the changing careers. d. Middle-aged baby boomers desire and need for high quality products like vehicles. C. Task Environment 1. International expansion as European and North American firms diversify globally hence leading to the global industry going global. 2. The popularity of the European designs and the desire by the consumers to have technologically advances gadgets. 3. The high rivalry from competitors like the General Motors and Mercedes Benz. 4. The high threat of substitutes 5. The low buyers’ power resulting from the fact that most technology and materials can be sourced worldwide. 6. High barriers to entry for new entrants. IV. Internal Environment A. Corporate Structure 1. Divisional structure: there is outsourcing of row materials and the assembling of the finished products. 2. The decision making is centralized with all the major decisions filtering from the headquarters to the subsidiaries. B. Corporate Culture 1. Customer satisfaction key intertwined with the commitment to produce quality products, a vision that is shared by both the executives and the employees. 2. Much of the corporate culture was initially based upon the founder, Walter Chrysler nut changed after the company emerging from bankruptcy. V. Analysis of Strategic Factors A. Situational analysis(SWOT) 1. Strengths a. The federal loan helped to restructure the company. b. Introduction of better designs of fuel-efficient K cars for example the Dodge Shadow. c. The Chrysler Company acquired other companies and thereby increasing its shareholding in Mitsubishi motors and also joined a strategic alliance with Samsung 2. Weaknesses a. Lack of financial resources made the company to seek for financial help from the federal government of the United States. b. Poor performance after the merger with the Daimler Company that also led to a fall in the market share of the Chrysler group. c. Worker being demoralized due to the different cultures of the two companies after the merger. For example the two companies had different ways of their pay system to their employees and also the working styles. Marketing of the company’s products needs an improvement 3. Opportunities a. Integration with other companies. b. Favorable government 4. Threats a. New entrants into the market b. Declining sales due to low demand. B. Review of Current Mission and Objectives From the analysis carried out about the Chrysler Company the mission is not appropriate. Something needs to be done in order to streamline the company otherwise it might not be able to continue with its operations. VI. Strategic Alternatives and Recommended Strategy A. Strategic Alternatives 1. Growth by acquiring other companies in the same field a. Pros: increased shareholding and also entering into a strategic alliance with big companies b. Cons: experiencing low levels of sales and financial constraints. 2. Merging- this is combining the business of two companies together and operating as one entity. a. Pros: the merging process led to increased revenue that placed the companies as the third largest automobile company, market capitalization and also increased number of units produced. b. Cons: losses were reported and the market share of the Chrysler group also reduced with2.7%. Demoralization of employees was also experienced that resulted from the different cultures of the two companies. 3. Retrenchment-sell the Chrysler group to the Cerberus capital management which is aimed at contributing toward the pension plan of Chrysler a. Pros: it will help in protecting the retirement security of the Chrysler worker. Also there is an increase in sales. b. Cons: financial problems due to reduced sales. B. Recommended Strategy 1. Merging would be the best strategy to restructure the company and increase its sales 2. Acquiring a loan from the federal government will also help the company to have a grip on the United States economy and also give good results to their customers. VII. Implementation A. Board members with vast knowledge and experience in the business should be recruited. B. The best way to improve their earnings through sales is to involve with general Motors Corporation which will enable the Chrysler to compete with others in the market. C. Better research and development also improve marketing of the products so as to avoid low levels of demand for the products. VIII. Evaluation and Control A. A management information system should be adopted to ensure a faster and efficient evaluation and control. B. The merger with the Daimler Company did not have similar work structure or culture with Chrysler and therefore the managers of Chrysler should instill these values to the employees so as to avoid demoralizing workers. C. Proper systems should be put in place to check whether the company’s manufacturing plant is proper and to also plan the future Financial ratios Since the balance sheet and the income statement are not available we cannot be able to calculate the financial ratios but instead we can use the past sales records which have been decreasing during the period when the Chrysler Company combine its business with other companies. It is also evident that when the company undertakes it business operations as a stand-alone entity their sales increase significantly but at some point the sales levels deteriorate due to low levels of demand for their cars. References Read More