Question 1 Critically diagnose and analyse the current situation facing Stellantis using appropriate strategic models.
The global pandemic has changed a great deal of how companies used to interact with their customers and operate. Some companies have come up with new strategies, while others have adapted. In the post-pandemic phase, companies are struggling to recover and realise their visions while at the same time, remaining productive and profitable. Stellaris is a merger by two remarkable companies, the Fiat Chrysler Automobiles (FCA) and the PSA group, and is among the top car manufacturers today, ranking 5th in the industry. By 2025, the company hopes to achieve production and sales of over 8 million units. This part will analyse the current state of the company as of August 2021.
PESTEL model analyses the current situation of the company holistically. This is because it analyses the political, economic, social-cultural. Technological, environmental and legal factors, all of which affect the company (Pan, Chen & Zhan, 2017). Changes in the macro-environment factors may directly impact the players in the services market. The macro-environmental factors can also impact the porters five forces that shape future strategies and the competitive landscapes; these directly impact the level of profitability and the industrial industries (Gupta, 2013). This company has been phased with all these factors and has led it to the current position,
The political-legal factors– this environment is impacted by the decisions and the new laws of the industry or the strategic groups within the industry. It is also concerned with how the firm’s mat be influenced by political decisions and whether they need to. The company has been greatly impacted by the government interventions that alter the competitive landscape that will hinder the ability of the firm to compete internationally. Currently, the government is supporting the expansion of electric cars, and this is a disadvantage for this company because they decided against investing in electric cars to be safe. Therefore, this will work against the company and may actually hinder productivity and their ability to compete in the local and global markets. Nonetheless, as the world continues to open up and the government lift the travel bans and restrictions, the company may be able to expand the market in countries whose government is yet to set up the infrastructure that will support electric cars, for example, Africa. Nonetheless, the business will be controlled and monitored by the government who set the legal framework and provide services and manages the economy. As the government makes decisions to improve the economy, then the company will thrive in the phase of the growing economy, which is the current state that is being experienced.
Economic factors-Factors like the rate of inflation, the rate of savings. The foreign exchange rates, economic cycles, among others, will determine aggregate investment and the aggregate demand in the economy. The firm will have strong roots in two continents, and by merging, they are enjoying the rising growth rate that is a result of the opening up of the economy. Lower inflation and other great economic indicators like the growth of the goods and services industry and the growth in the rate of consumer spending will be a great opportunity for the company. This is the post-COVID-19 season, and people are trying to recover from the huge blow they suffered during the pandemic. The car industry is expanding, and the demand for both new and second-hand car is increasing. The current situation is that the company has a wider market that they can manipulate and reach as many customers as possible. The merger is well-positioned, and they have the resources and the market base they need to take advantage of the thriving economies and pent-up demand.
Social-cultural- There is a way that societies do thing and this impact the culture of the organisation in the environment, there are shared believes and attitudes that may influence how marketers and the firm will understand the customers in the market and how they will design their marketing message, the factors that should be analysed include; the demographics and the skills level of the population, the culture including gender roles, social conventions and so forth, leisure interests, entrepreneurial spirit, the social class structure, attitudes towards environment and health among others. Currently, the company has just merged. One part of the company has roots in the USA while the other one has established its roots in Europe. There is, therefore, a need to integrate cultures properly to be able to serve the current market and even other target market segments as the world opens up. There is also an issue of the geographical distance between the two merging companies, and this may make it hard for the company to pick-up faster as expected, especially in the post-pandemic phase where the world is still opening up, and people are still scared of travelling.
Technological Factors- This is one of the main factors that the company is struggling with and will continue to struggle with for some time until they come up with a viable solution. Technology is fast growing in the modern world, and keeping up with it has more advantages than disadvantages. Based on the previous company analysis, they have decided to ignore a shift to electric cars based on their ability to make returns. This technology can be expensive to keep up with, and before the market picks up, the latest development can continuously disrupt the productivity of the company and hence ruin its financial position. A firm should be able to do a technological analysis and move at speed at which it disrupts the economy and industries, and currently, the company is still yet to make a decision based on the current state where the government is supporting the shift to electric vehicles by investing in the industry. The slow pace will allow more time to adjust, while a fast speed will give the firm a short time to be profitable and also cope, and the company has chosen the former. Technology analysis will involve the following, the impact of technology in the offering of the product, the diffusion rate of the technology, impact on the industrial sector and value chain structure, developments in technology and the firm, the impact of technology on the cost structure and so forth. This analysis will help the company come up with a viable solution on the matter instead of ignoring the major changes around them, which may greatly and negatively impact their future based on the governments’ actions.
Environmental factors– these are the factors that affect the company both internally and externally. Currently, the internal environment is going well, and operations are running as they should. This is expected as the company has a phenomenon leader who has a record of turning things around for the better. Good leadership can also be attributed to the smooth integration that is being experienced. However, the outside environment is beyond the control of the company, and this puts them at a huge disadvantage when the decisions they made turns out to be what they needed to be successful. These include government interventions. The Chinese market is also yet to open, which affects the flow of raw materials and the market for finished goods. This will directly affect the projected financial income for the year. At the moment, the outcomes are not very favourable for them.
Legal factors– this encompasses equal opportunities, safety and health, advertising stands, product safety, among others; as the organisation becomes a global trader, there will be many legal implications and rules and regulations. For instance, one of the target markets for this company is China which is still stalling due to the decisions made to keep he people safe and healthy, post-pandemic, and because of the financial crisis, they are experiencing. The company’s website is also not yet complete, which limits the ability to advertise themselves.
Analysis of Current Situation Using SWOT
The strengths of the company are the advantages a company has over others that gives it an edge to fulfil its mission. They include:
- The company has a great leader who has been able to turn companies around and sees opportunities, and this will be vital to propel the company from here onwards.
- The company is a merger, and this has opened up a larger market for them, and by doing so, the productivity of the company will increase. Nonetheless, the company is in a good financial position
- The companies that have merged are renowned brands, and this creates a platform for them to grow.
Weaknesses of a company can cause the downfall of the company if they are not looked
into. Anything may be a strength, but it can have the potential to be a weakness. If a weakness is
addressed well, it can become a strength. some of the weaknesses are:
- There is potential for culture clash since Americans and Europeans may not be able to employ the same strategies, structures, an approach in both. This also applies to the Asian market.
- The company is still sceptical about the electric-car investment. Nonetheless, the future in this sector is promising.
- The company is a merger with a new name that may take time before they reestablish themselves. This way, they stand to lose their market share.
Companies continuously look for opportunities to take advantage of. The company has the following opportunities to exploit:
- Invest in the promising electric car market.
- Set capital aside to invest in electric cars, which seem like the inevitable future rendering the current ats useless.
- Merge with other firms to increase their market and increase their capital base to adopt the inevitable changes.
- Tap into their leadership strength and partner with other companies to invest in electric cars while at the same time keeping the company productive.
Like in many organisations, threats exist and need to be addressed. They include laws
and regulations, as well as the aggressive competition that the company may face from the environment. Two of them include:
- There are other companies that are already established in the market. This makes the company struggle to steal a market share.
- The world is always changing, and so is technology; therefore, investing in new technology such as electric cars may require a lot of planning. There is a chance that when technology is adapted to cars, better technology will come up and render the current one absolute and hence losing money that was used in the initial investments.
Question 2: Set out a strategy for Stellantis, considering the scenario presented above, in terms of their strategic intent, the strategic options available and how they might be executed.
The company, Stellantis, is a new merger and the opportunity to turn the current situation to gain competitive advantage and thrive in the face of economic prosperity in many countries as they open-up post COVID. To come up with the strategy, there is a need to look into the company’s internal and external environment and how they can be leveraged to come up with the best strategies. The analysis of the company’s competitive advantage is indeed vital as it will be used as a guideline for the organisation to enhance their performance and their competitive advantage through the application and manipulation of the identified internal systems, capabilities and resources.
Strategy for the company’s success
Setting a goal– the goal is to be a dedicated, renowned and profitable car brand across the globe by offering more attractive, cleaner and more connected vehicles. Based on their vision statement, the company aims to be the leading car manufacturer and prodder of mobility solutions in order to enhance its customer’s freedom of movement across the world.
The car is going to gain this competitive advantage ought to be better integrated into the environment and appeal to the general population, or their target population as different markets will demand different models and have different preferences for their cars. The company should therefore comply with all the regulatory requirements and meet the future anticipation of the customers through being innovative and moving ahead in the market to combine competitiveness with progress and innovation, which are inseparable and the corner stone of value creation.
Understanding the environment- this is the alertness to the changing environment that is sensitive to the market. The company also need to be aware of the new economics of the car industry and the potential needs of the market. Currently, the company is already struggling with a merger due to the cultural differences and the distance between mergers. Their target market is also being affected by the government move to support the introduction of electric cars, and as expected, these cars will be in the market, and if the company does not get ahead of this, there is a high probability that it will be pushed out of the market as time goes by. Currently, people are looking for more innovative and sustainable means of mobility, and electric cars are offering just that, as they reduce pollution and carbon dioxide emission of vehicles. In terms of autonomy, connectivity and driving experience, the electric car market may be able to offer more attractive products, and this will render the company unproductive as its market shrinks to accommodate the new innovations. The company spent 4,721 Euros in research and development in 2018 alone (PSA Groupe, 2021). Therefore, this company is capable of transferring some of this fund to the production of electric cars, which are currently being endorsed in their target markets. As the company invest in the digital factory, they should also understand the current external environment that is they do not adapt to; there are higher chances that they will not live up to their vision.
Resource appraisal– this is the ability to exploit the current market using the human, capital, financial resources that they have at their disposal. After setting the goal and analysing their environment, the company should go ahead and look into the available resources that can help them achieve the goals and thrive in the current environment. The company already has a wider market after the merger. This gives it an advantage over the American market and also in the European market, where the two companies had previously established a customer base. Currently, the company also prides itself on having a modern industry where they can manufacture high-quality vehicles in a timely manner (PSA, 2021). They also have the capacity to consolidate the best technologies, equipment and knowhow of their human capital to move ahead in the automotive industry. With approximately 400,000 employees, the company is the 4th greatest automaker in the world, and hence they have the due capacity to hold into the changes (Fletcher & Brinley, 2021). The company also has an excellent financial plan that will be boosted by the modern plant, which aims at reducing the cost of each vehicle by up to 700 Euros (PSA, 2021). This will boost the finances of the company, and hence they will have more money to expand into new markets and also meet the demand. Some of this money can be put into establishing and implementing an electric car plan since, currently, the electric car market seems to be picking and expanding. The company also enjoy a great value chain that helps it save even more. It, therefore, has the raw materials it needs, the positive customer experience. The company, therefore, has a lot of resources at its disposal, and it can use them to adapt to the current market.
Implementation of the plan- this will involve a resolute commitment to innovation, quality and emphasis on building sustainable cars and appeal to their target market. The company has already proven itself to be on par with the current innovations, and they already have a state-of-the-art factory where most innovations happen. They should, however, note that this is not enough. Looking at the current market, there is more demand for electric cars, and the government is offering subsidies that will direct the market in this direction. The company should emphasise building an effective team that is knowledgeable in the engineering of electric cars. Based on the case study, the company has failed to consider electric cars because they were sceptical about the market, and hence, they were speculating. As the economy opens up, it is clear where the world is headed, and there is the need to be at par. Therefore, as they implement the current strategies, they should also consider the future. Before implementation, the company should look at what is attractive in the industry, analyse the rate of profit above the cost of capital, the competitive advantage and the corporate strategy. Stellantis is a promising company with many car brands some of which have already been embraced in the market. Since the company has already established the name for itself in the current markets, the plan should be to diversify.
Question 3: Discuss how Strategic Management attempts to resolve this tension, making reference to relevant theory in the course and appropriate examples from practice.
A strategy is an overall plan for deploying resources in order to establish a position that is favourable or to achieve a certain effect or goal. Strategic management is the enduring planning, monitoring, analysis as well as assessment of the necessary needs of the organisation to help meet its objectives and goals. Therefore, strategic management typically helps an organisation to transmute the inert aspect of organisational tension that arises formulate an effective organisational goal, mission and aim into a practical and sustainable plan for future positive achievement. And in the process, it allows for flexibility and development based on an ever-changing market environment. It provides an action plan to ensure that the performance target is achieved and all the tension that arises in achieving progress is minimised with an effective strategy for the business to grow. It is the objective of strategic management to provide an all-round direction by formulating plan and policies designed to achieve the intended objectives of the organisation and at the same time obliged to solve any pressure and tension that arises in the process of achieving the objectives of the organisation. Ultimately, strategic management is for the sole purpose of the organisation to gain an effective plan and a competitive edge which is exactly what Stellantis needs as it struggles with the current dynamics of the industry.
A company ought to constantly assess its strategies in order to achieve success in the ever-changing world. Stellaris is on the edge where the company feel the need to be dynamic as the market changes, and the government offer subsidies for electric cars. On the other hand, the company had a clear, rational plan that was based on an analysis that made them opt not to venture into the electric car market. They also did not anticipate the covid-19 pandemic to hit, which also played a role in the changed that are being experienced. Currently, this merger has progressed, and there are still instances of culture clashes. With the help pf their able leader, the internal environment is running smoothly as it is within their control, while in the outside environment, there are numerous changes that will, without a doubt, affect the company long term plan and productivity based on how they will respond to these changes.
Strategic management helps decision-makers be equipped with the necessary management tools, especially when anticipating changes and directing organisational activities along the right path. Nonetheless, it helps reduce the risk of operation by helping an enterprise take early action and innovate in time. Organisation theory focuses on the human and organisational issues affecting the productivity of a company. The theory has greatly evolved, rising across the multidisciplinary field with a formal presence in the academic departments and also programs in the faculties on industrial psychology (Jofre, 2011).
Strategic management requires coordination of efforts, specialisation between the individuals who are working together (Jofre, 2011). Stellaris has already specialised in motor vehicles manufacturing, and through collaboration, they have achieved great success for some of their brands across America and Europe. However, the company is struggling with achieving a wider market, the reason being that the electric car market is expanding. The company is, however, struggling with being dynamic. When the organisation coordinates its efforts, it will be able to expand its market and relaunch some of its brands successfully. By doing this, they will be pulling resources together and doing something that they have done several times. According to the case study, some of their brands have been launched several times and are yet to be adopted in a wider market.
The organisation has a good management record where the senior-most leader is well known for his ability to turn companies that are making losses into profitable businesses. There is, however, a need to have decentralised management since now the organisation will be transcending across continents and looking forward to expanding into the Asian market, which is not doing well at the moment. The company can adopt a decentralised strategy to help it serve the target market with the products that they demand. This will help in decision making, coordination and control, and keeping at par with the current technologies in the motor industry. This will help ensure that the company will be able to achieve its goals while keeping up with the changes in the market to remain profitable and expand its customer base.
To achieve a competitive advantage and thrive in the current market, there is a need to be flexible. A strategic manager will see flexibility as an opportunity, and this will help them be able to venture into any market they set their eyes and mind. This includes the Asian market, which is facing the direction of electric cars. For instance, companies like KFC, McDonald’s, Starbucks, among others, have evolved through this strategy. They adapt according to the market and use the available resources to make themselves profitable. We have seen this even in institutions that established digital platforms for online learning to be able to keep up with the students and avoid the total closure of the on-site campuses. In the same way, Stellantis should adapt to the dynamics of the industry, and this will be achieved if they make the decision to venture into these markets and make profits.
Mergers are also a great strategy to forge ahead. The management of the two companies, FCA and PSA, married the two companies and hence brought both firms top strategic decision-makers together. This also means pulling together the financial capability of the companies and allowing the company financial freedom that is needed to expand. In the current state of the company, the company has the financial freedom it needs to expand to other markets and also to keep up with the current market that shows a lot of promise. The company also has a wide market in Europe and America that they can aim to saturate that market or establish a strong brand presence before they enter the Asian market, which is currently struggling.