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Transcript of Plano de Marketing - Fiat
STRATEGIC MARKETING PROJECT
PROFESSORA CRISTINA BAPTISTA
Instituto Superior de Gestão
Ano lectivo 2006/2007
By the Erasmus Students from Turin, Italy:
Sara Zerbinati, Giorgio Guarnieri
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EXECUTIVE SUMMARY
Fiat is one the most important Italian industries. It has been founded in 1899 in a northern
Italian city, Turin, where it is still based in. Its core business has always been the
automotive sector. It is now a group that includes: Fiat S.p.A, Ferrari, Maserati, Lancia,
Alfa Romeo, Iveco, CHN. It has got plants all over the world and employs 173,695 people.
Instead, just Fiat employs 46,099 people around the world.
Fiat is a company that contributed to the Italian economic boom of the post Second World
War, and it has still got a strong impact on the national economy. Before the liberalization
of the markets Fiat had almost a monopoly, controlling more than the 60% of the Italian car
market. Then its leadership was restricted to the low market segment, suffering the
competition of the German car makers in the middle-high segments. Until 2000 the
business seemed to be stable and with positive outlook, but a huge crisis affected the
Group. Fiat did not adapted itself to the time, keeping an old-style structure while the
environment required radical changes in order to compete with rivals all over the world.
The situation was critical: Fiat was one step far to the crash.
Then something has happened: the Group has been re-designed, with new president, new
CEO and new top management to save Fiat. And they succeed.
In our work we analyze how it has been possible: which is the strategy today and what is
the car that symbolizes Fiat’s rebirth, the Fiat Grande Punto. It represents a turnaround
respect the past, in terms of strategy, product, design, quality, services and prices.
Fiat today presents a positive outlook, while other historical rivals suffer now from deep
crises (e.g. General Motors and Ford).
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INDEX
1. INTRODUCTION…………………………………………………………………………………………………………………………………………….4
1.1 The group………………………………………………………………………………………………………………………………………………5
1.2 The company……………………………………………………………………………………………………………………………………….7
1.3 Automobile market segmentation……………………………………………………………………………………………..9
2. STRATEGIC ANALYSIS
2.1 Vision and Mission………………………………………………………………………………………………………………………….11
2.2 Macro Analysis
2.2.1 Economic context……………………………………………………………………………………………………………….12
2.2.2 Social-cultural context…………………………………………………………………………………………………….16
2.2.3 Political-legal context………………………………………………………………………………………………………16
2.2.4 Technological context…………………………………………………………………………………………………….19
2.2.5 Ecological context……………………………………………………………………………………………………………21
2.3 Market analysis…………………………………………………………………………………………………………………………………23
2.3.1 Sector analysis by Porter’s five factors…………………………………………………………………..28
2.3.1.1 Suppliers’ bargaining power……………………………………………………………………….28
2.3.1.2 Buyers’ power……………………………………………………………………………………………………30
2.3.1.3 Alternative goods…………………………………………………………………………………………….31
2.3.1.4 Potential new competitors……..…………………………………………………………………..32
2.3.1.5 Competition among existing firms……………………………………………………………32
2.3.2 Customers analysis, buying behaviour.………………………………………………………………….34
2.3.2.1 Fiat purchase behaviour……………………………………………………………………………..37
2.3.3 Competitors analysis……………………………………………………………………………………………………..38
2.3.3.1 Ford & Ford Fiesta…………………………………………………………………………………………39
2.3.3.2 Toyota & Toyota Yaris………………………………………………………………………………….40
2.3.3.3 Renault & Renault Clio……………………………………………………………………………….43
2.3.4 Competitors’ financial analysis…………………………………………………………………………………45
2.4 Internal analysis…………………………………………………………………………………………………………………………….47
2.4.1 Financial assets………………………………………………………………………………………………………………….47
2.4.2 Value Chain…………………………………………………………………………………………………………………………49
2.4.2.1 Purchases and internal logistics………………………………………………………………49
2.4.2.2 Production………………………………………………………………………………………………………….50
2.4.2.3 Distribution………………………………………………………………………………………………………..52
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2.4.2.4 Marketing……………………………………………………………………………………………………………54
2.4.2.5 Services………………………………………………………………………………………………………………55
2.4.2.6 Infrastructure…………………………………………………………………………………………………….55
2.4.2.7 Human Resources…………………………………………………………………………………………55
2.4.2.8 R&D………………………………………………………………………………………………………………………56
2.5 Swot Analysis…………………………………………………………………………………………………………………………………….57
2.6 Key Success Factors………………………………………………………………………………………………………………………60
3. The strategic plan………………………………………………………………………………………………………………………………………….61
4. Future marketing mix and segmentation…………………………………………………………………………………………….67
5. Conclusions
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INDEX OF FIGURES, CHARTS AND TABLES
Fig. 1 “Participations in the Group’s companies”…………………………………………………………………………………….6
Fig. 2 “Fiat worldwide markets”……………………………………………………………………………………………………………………….7
Fig. 3 “Fiat plants in the world”………………………………………………………………………………………………………………………..8
Fig. 4 “Porter’s 5 factors”………………………………………………………………………………………………………………………………….28
Fig. 5 “Maslow’s hierarchy-influence on car buyers”……………………………………………………………………………36
Fig. 6 “The Ford Fiesta”…………………………………………………………………………………………………………………………………….40
Fig. 7 “The new Yaris”……………………………………………………………………………………………………………………………………….42
Fig. 8 “The Clio III”………………………………………………………………………………………………………………………………………………44
Fig. 9 “Fiat value chain”……………………………………………………………………………………………………………………………………49
Fig. 10 “Fiat Mirafiori view”……………………………………………………………………………………………………………………………..51
Fig. 11, 12 “Grande Punto assembly line”……………………………………………………………………………………………….51
Fig. 13 “Mirafiori plant”……………………………………………………………………………………………………………………………………..52
Fig. 14 “Point of sale outlook”……………………………………………………………………………………………………………………….53
Fig. 15 “Mirafiori Motor Village”…………………………………………………………………………………………………………………….53
Fig. 16 “Grande Punto commercial”……………………………………………………………………………………………………………54
Fig. 17 “SWAT Analysis”………………………………………………………………………………………………………………………………….57
Fig. 18 “Brand awareness expected evolution”……………………………………………………………………………………..58
Fig. 19 “Key success factors”…………………………………………………………………………………………………………………………60
Fig. 20 “Development strategy”…………………………………………………………………………………………………………………….61
Fig. 21 “Quality and safety 1”.……………………………………………………………………………………………………………………….61
Fig. 22 “Quality and safety 2”…………………………………………………………………………………………………………………………62
Fig. 23 “Design by Giugiaro”………………………………………………………………………………………………………………………….62
Fig. 24 “Competitive strategy”……………………………………………………………………………………………………………………….63
Fig. 25 “Cost reduction”……………………………………………………………………………………………………………………………………64
Fig. 26 “Fidelization strategy”……………………………………………………………………………………………………………………….65
Fig. 27-32 “Fiat brand stretching and sponsorship”…………………………………………………………………………….66
Fig. 33 “Fiat positioning”………………………………………………………………………………………………………………………………….66
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Chart 1 “Employee/unemployment rate”………………………………………………………………………………………………….12
Chart 2 “Tax of change”………………………………………………………………………………………………………………………………….13
Chart 3 “Trend of costs”…………………………………………………………………………………………………………………………………..13
Chart 4 “Inflation breakdown by component”…………………………………………………………………………………………14
Chart 5 “10 years trend”……………………………………………………………………………………………………………………………………23
Chart 6 “Car park breakdown”………………………………………………………………………………………………………………………24
Chart 7 “Car park breakdown by feed”…………………………………………………………………………………………………….
Chart 8 “Market structure breakdown by feed”…………………………………………………………………………………….
Chart 9 “Market structure breakdown by cars body type”……………………………………………………………
Chart 10 “Market structure breakdown by use”………………………………………………………………………………….
Chart 11 “Market structure breakdown by geographical area”……………………………………………………..
Chart 12 “Supply breakdown by product lines”……………………………………………………………………………………
Chart 13 “Brand loyalty breakdown by age”…………………………………………………………………………………………
Chart 14 “Market structure breakdown by segment”………………………………………………………………………….
Chart 15 “B segment breakdown”………………………………………………………………………………………………………………..
Chart 16 “Reason for purchase”…………………………………………………………………………………………………………………..
Chart 17 “B segment top 10 breakdown”………………………………………………………………………………………………..
Chart 18 “Costs breakdown”…………………………………………………………………………………………………………………………
Chart 19 “Age breakdown Grande Punto vs. Punto buyers”………………………………………………………….
Chart 20 “Buyers’ age average”…………………………………………………………………………………………………………………….
Table 1 “The macro economic context”………………………………………………………………………………………………….
Table 2 “The political legal context”…………………………………………………………………………………………………………..
Table 3 “The technological context”…………………………………………………………………………………………………………..
Table 4 “The ecological context”…………………………………………………………………………………………………………………
Table 5 “Competitors’ financial analysis”…………………………………………………………………………………………………
Table 6 “Fiat’s financial assets”…………………………………………………………………………………………………………………..
Table 7 “Fiat rating”…………………………………………………………………………………………………………………………………………..
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1. INTRODUCTION
The goal of this work is to analyze the Strategic Marketing Plan projected and implemented
by Fiat. In our analysis we will focus on one Fiat Auto’s company: Fiat. Another restriction
will be made, analyzing a single product: the Fiat Grande Punto. These restriction are
made in order to simplify the research on one hand, but on the other to pay attention to
some details that would have been loss enlarging the work to a corporate strategy
perspective.
The company has been chosen for different reason: the main is that Fiat was born and it is
still based in our city, Torino in Italy. It is one of the biggest Italian companies and one of
the most important in the Italian economical scenery. But in 2001 it begun to struggle,
going through a deep crisis that resulted into 17 consecutive quarters of net loss. Fiat was
loosing the incredible amount of € 3 million per day.
A radical change in the company was then made: a new CEO, Sergio Marchionne, was
appointed and the entire management restructured. The strategy was thus radically
changed for finding a way to survive.
In 2005 the crisis was finally overcome and the company is now constantly growing.
One car, in our opinion, symbolize perfectly the rebirth of Fiat achieved through a deep
strategy change: the Fiat Grande Punto. This explains why our research was made to
understand that strategy.
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1.1 THE GROUP
Fiat is not just a brand. It is a company of a bigger group: Fiat Group.
Fiat is a huge industrial Group with more than one hundred years' experience in the motor
vehicle field, designing, manufacturing and marketing cars, trucks, tractors, agricultural
machinery, construction equipment, motor vehicle engines and components, and
production system. The Group is present in 190 countries and performs manufacturing
and service activities through Operating Sectors, which can be divided into business areas.
A. Automobiles
Fiat Auto produces and sells automobiles under the Fiat, Alfa Romeo and Lancia
brands and light commercial vehicles under the Fiat brand. It provides financing
services to its dealers and suppliers and rental services to its customers.
The Fiat Group also controls Maserati and Ferrari. These two companies produce
luxury sports cars that excel for their exclusive characteristics, technology and
performance.
B. Agricultural and Construction Equipment
CNH operates in the field of tractors and agricultural equipment through the Case IH
and New Holland brands and in the construction equipment business through the
Case and New Holland brands. Its financial services provide support to its end
customers and dealers.
C. Trucks and Commercial Vehicles
Iveco designs, produces and sells a complete line of commercial vehicles under the
Iveco brand, busses under the Irisbus brand, and fire-fighting and special purpose
vehicles under the Iveco, Astra and Magirus brands. In addition, Iveco provides
financing services to its dealer network and rental services to customers.
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D. Components and Production Systems
Fiat Powertrain Technologies comprises the passenger vehicles engine and
transmission activities – over which Fiat regained control in May 2005 following
termination of the Master Agreement with General Motors – as well as the industrial
powertrain activities that were included in the Iveco Sector until December 31, 2005.
The Sector also includes powertrain research activities previously carried out by
Centro Ricerche Fiat and Elasis.
Magneti Marelli produces components for lighting systems, exhaust systems,
suspensions and shock absorbers, engine control units, and electronic systems.
Teksid supplies engine blocks, cylinder heads and other cast-iron components for
engines; cast-iron components for transmissions, gearboxes and suspensions; and
magnesium bodywork components.
Comau produces industrial automation systems for the automotive industry in the
areas of product and process engineering, logistics and management,
manufacturing, installation, production start-up and maintenance.
85%
Fig 1 Participations in the group’s companies. Source: www.fiatgroup.com
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1.2 THE COMPANY
One of the pioneers of the automobile industry, Fiat built its first car in 1899. It was founded
in Torino, Italy, where it is still based in. More than 88 million cars and light commercial
vehicles have been produced since that date. Many of the models have represented
milestones in the history of motoring. Fiat Auto operates in international markets with
brands that are innovative in terms of their content, styling and manufacturing solutions:
Fiat, marked by creativity, versatility and practicality; Lancia (acquired in 1969), the
exclusive brand for the elite; Alfa Romeo (acquired in 1986) that combines sportiveness,
technology and elegance in a unique design; and Fiat Veicoli Commerciali with a line of
modern, functional, versatile and captivating vehicles.
Fiat is a worldwide company. It has plants in Italy, Poland, Brazil and Argentina. Production
is also carried out through joint-ventures and licensing agreements in Turkey, Iran, France,
Poland, India, China, Egypt, South Africa and Vietnam.
At the end of 2005 it counted 46,099 people employed.
Where they are
Where they want to be
Fig. 2 Fiat worldwide markets. Source: www.fiatgroup.com
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1.3 AUTOMOBILE MARKET SEGMENTATION
The segmentation adopted in this work is the one usually used analyzing automotive
market. This is segmented as follows:
SEGMENT A: small cars
SEGMENT B: economy cars
SEGMENT C: medium cars
SEGMENT D: up medium cars
SEGMENT E: up market cars
SEGMENT F: top exclusive cars
The range of Fiat products includes these cars:
• SEGMENT A: 500, Panda
• SEGMENT B: Grande Punto
• SEGMENT C: Bravo, Stilo
FAMILY VEICHLES-CROSSOVER (SW): Croma, Multipla, Sedici, Ulysse
• COMMERCIAL VEHICLES: Doblò, Palio, Ducato
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2. STRATEGIC ANALYSIS
2.1 VISION AND MISSION
”It is not just the logo”
The vision of Fiat, today, is to develop a brand recognized by people not only for its
heritage and tradition, but for its strong character and ability to offer a product that lives of
differentiation from its competitors’. It explains the idea of “what do we want to be?” and it
fix goals and intentions for the future, without specifying how to realize them. Moreover it
has to be a source of inspiration, a guide for the values of all the company’s employees.
“Today Fiat Grande Punto car is recognized for its fresh and lively style, for its all-Italian
design and because it offers more tangible responses to customers. Since the beginning
"innovation and emotion" have been Fiat Grande Punto key words: with this car, we try to
make state-of-the-art technology accessible to everyone, offering "intelligent solutions" to
simplify and improve life. This is also our promise for the future”
The mission is a written declaration that has to define how to transform ideas and
intentions into reality. It must have both a strategical and operational character (Adriano
Freire page 170).
It effectively gives an answer to several questions:
Why the company exists? To offer intelligent solutions to simplify and improve life.
What is the company’s business? Automobiles
Who are the company’s customers or segments? Potentially every ones but in
particular it becomes clear that its goal is to offer a competitive car in terms of
quality, services and technology with an accessible price, focusing indeed on the
low-middle market.
Which is the product? The Fiat Grande Punto, characterized by “innovation and
emotion”.
Which competencies are required for the future? The company is will to continue on
this path offering products with characteristics defined above in the text.
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2.2 MACRO ANALYSIS
2.2.1 Economic context
After a 2005 characterized by a low GDP growth, the 2006 registered a better situation that
should fix it at about 1.6%, although still lower than the UE average, 2.4%.
As showed in the chart above, the unemployment lowered in the 2006, passing from 7.7%
to 7.1%. The wages should have got advantages from this decrease, having grown the
contractual bargaining power of workers. This was reflected in the growth of the family
consumptions rate, increased from 0.1% of GDP up to 1.6%. The growth of the
employment rate was influenced mainly by the regularization of the illegal workers. The
real labour cost raised of a 0.6% in Italy while the European trend is a decrease of a 0.7%
average1.
The real tax of change (RTC) influenced the level of export and import. Its growth created
favourable conditions to a increase of importation while a loss of competitiveness in
exportation. (chart x)
1 Growth rate of the ratio: compensation per employee in current prices divided by GDP in current prices per total employment. Source: EUROSTAT
EMPLOYEE
UNEMPLOYMENT RATE
Chart 1 Source: Italian Ministry of Economics and Finance, RPP 2007
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A decreasing trend in the combustibles prices is observed, with particular regard to the
petrol price (See Chart in the Annex section 3). A contrasting trend is observable in the raw
materials prices. Although the consumption price seems to have a little trend to the
increase, a more volatile situation characterizes the production side. (Chart 3)
Period
RT
C r
ate
Raw
mat
.
Con
sum
ptio
n/P
rodu
ctio
n pr
ices
Raw mat-total Combustible Product. Costs Consumption price
Chart 2 Source: Italian Ministry of Economics and Finance, RPP 2007
Chart 3 Source: Italian Ministry of Economics and Finance, RPP 2007
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The inflation rate has levelled off at the UE average, being constantly around the 2.2%.
During the period in which the combustibles price grew, the inflation did not suffer of it,
highlighting the fact the companies generally preferred to reduce their margins instead
than raising prices. Although the energy prices generally had an high impact on the
inflation composition.
The macro economic forecast provided by the Ministry of Economics highlight what
follows.
The employment growth should decrease at the level of 0.5%, as result of an industrial
production slow down. The inflation should decrease to 1.5% because of a new stability
of the petrol price and of the new politic of liberalization that should increase the
competitiveness in several sectors, lowering indeed prices for the consumers.
The GDP should grow of 1.7% in the four-year period 2008-2011. The growth will be
influenced by higher consumptions and investments. The increase of competitiveness will
drive the exportation growth, while the development of the private demand will result in an
importation growth. The employment rate is expected to increase of a rate of 0.7%,
lowering the unemployment rate under the 6%.
Con
trib
utio
n in
per
cent
age
Energy
Goods
Services
Public tariff
Chart 4 Source: Italian Ministry of Economics and Finance, RPP 2007
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Factors analysed Tendencies Positive impact Neutral impact Negative impact
GDP Medium growth
(expected +1.7%).
Higher consumptions.
Higher investments.
Risk of growing
inflation
INFLATION Decrease at 1.5%.
Lower prices for consumers.
Increase of purchasing power.
If the decrease is
the result of production slow down.
EMPLOYMENT
RATE
Decrease of employment
growth rate expected at
0.5%.
Wages tend to
remain constant
Risk of lower purchasing power in absence of inflation indexed wages
PETROL PRICE Expected to become
stable.
Lower impact on inflation.
Potential increase in cars usage.
Table 1. The macro economic context. Source: own elaboration
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2.2.2 Social context
The Fiat Grande Punto concept was developed taking in consideration some social-
cultural trends.
Consumers usually prefer cheerful brands, because of their positive appeal.
People look for products that are simple to use.
Consumers attention is caught by something that is unique.
The obsession for big and expensive items is declining.
Design is even more important.
There is an increasing attention on ecological issues, thus automobile companies are
developing new eco-friendly cars, and Fiat is in the first line for it.
2.2.3 Political-legal context
The new government, a coalition of left parties, was established in the 2006 springtime.
The elections showed a country almost perfectly divided, in political terms: they were won
just for a difference of 50,000 votes. A country that presents such a deep political division
is not easy to be governed.
With its first financial act the government adopted measures for increasing the yield of
taxation, in order to reduce the ratio deficit/gdp under the 3% within 2007. Even if the
purpose appears right, the financial act has received several critics both from Italian
organizations and analysts, and from important international organizations such as the
OCSE, because it seems to be focus only in increasing the yield of taxation for the State
(expected to increase of 0.2% of GDP). Several category of workers have already
manifested their disapproval organizing strikes and demonstrations.
The waves of extra taxes has not spared the automobiles sector. This mean an increase,
after 2007, of cars stamp taxes:
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Higher taxes do not influence ecological cars, that is to say Euro4 and Euro5;
Higher taxation will influence the more polluting cars, such as Euro0, Euro1, Euro2
and Euro3;
Cars over 100 Kw will pay an extra tax.
As highlighted by many analysts, the auto sector is target of an extremely high taxation
that generates high taxation yield to the state. The taxation effects all the life of the car,
from the production to its demolition. (For further details see the Annex section x).
40 million of automobiles, the 38% of the total, are still Euro0 o Euro1, the most polluting
cars. This represents an important environmental issue that has been faced in different
ways. Some cities have forbidden the circulation downtown to those cars. Moreover they
limited the circulation of the other cars, only to particular time of the day. Even if this
protects the historical value and the environment of the Italian cities, it represents an
disincentive to the use of the car.
On the wave of what suggested by analyst and experts like the Fiat’s CEO, Sergio
Marchionne, the government has fixed, in its financial act, an incentive to change the old
polluting cars. Consumers who will buy a new car, giving back to the seller the old Euro0
or Euro1 car, will receive a bonus of € 800 on the new car value and will not pay for two or
three years, depending on the car capacity, the car stamp tax. This should result in a sales
boost of new car, an increase of the taxation yield for the State (due to the Iva, the value-
added tax, and the matriculation tax paid on new cars) and a growth under the 0.5% of the
GDP.2
Higher taxation on capital gains and strict controls on banking and financial operations
should drive investors to a more careful decision when investing.
2 Source: Centro Studi Promotor. Study published at the “31° Motorshow di Bologna”
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Factors analysed Tendencies Positive impact Neutral impact Negative impact
CAPITAL GAIN
TAXATION Increase
Probability of less
investments
CAR STAMP TAXES Stable, except for most
polluting cars
Incentive to buy new cars
“ECO-INCENTIVE”
TO BUY NEW CARS
New incentive, in
monetary terms, to buy
new cars
Potential sales
boost.
FRAGILE
POLITICAL
BALANCE
Government of small
majority, highly
fragmented in its
composition.
Uncertainness for
markets and
investors.
Table 2. The political legal context. Source: own elaboration
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2.2.4 Technological context
Fiat produces innovative technologies, through it R&D department.
Research are conducted in the “Centro Ricerche Fiat” (Fiat research centre) in which 890
people are employed. It outputs an average of 460 projects per year, fielding 80 new
patents. Environmentally-friendly engines, innovative vehicle structures, electronic chassis
control system, integrated transportation safety, environmental projection and advanced
manufacturing methods are the fields where the Centro Ricerche Fiat concentrates its
work, with the aim of safeguarding the environment and the health of consumer.
Elasis is another highly specialized Fiat Research centre whose work addresses
technological innovation, complete vehicle development, mobility and its environmental
impact, and traffic safety. It employs 800 people. It is provided with sophisticated
computer-aided design tools and advanced physical and virtual testing equipment which
are based on an ability to develop and manage information system that puts Elasis in the
front ranks of the world’s R&D centres.
Moreover Fiat reengineered, in collaboration with Hp, its distribution to meet customers’
needs. An innovative sales support/customer relationship management (CRM) was
developed. Fiat Link will integrate and enhance sales and service across 5,800 retailers in
Europe. It allows Fiat to innovate not only in cars but also in services provided.
The continuous technologies development, open always new path to improve the business
management in order to reduce costs and enhance effectiveness.
Adopting a customer perspective, the diffusion of technologies in their hands imposes to
car producers to improve the products they offer to meet new requirements or, even better,
unmet needs. In this perspective a collaboration with Microsoft was implemented.
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Factors analysed Tendencies Positive impact Neutral impact Negative impact
NEW
TECHNOLOGIES
Extremely rapid
introduction into markets
Possibility to improve productions and management control activities
Possibility to reduce costs
Opportunity to satisfy unmet customers needs creating new products.
High risk of obsolescence due to the short life cycle of new technologies
High strategical risk in decision taking
Heavy investment required
OWN R&D
DEPARTMENTS
Increase in projects
output
Development of own technologies and patents.
Possible base of sustainable competitive advantage
Heavy
investments required
Table 3. The technological context. Source: own elaboration
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2.2.5 Ecological context
Fiat environmental commitment is not just a consequence of the international pollution
regulation, but it is a new approach to the production in order to protect the environment,
its population and the future generation wellness.
Those company’s values take form into the Fiat group Code of Conduct, which sets out
environmental policy guidelines since 1992. The Group companies and their production
sites are responsible for the environmental impact of their products and manufacturing
process, and make every effort to prevent harmful consequences. Environmentally-
friendly situations must be pursued and consolidated through the following fundamental
guidelines:
Prevent pollution, using environmentally friendly materials by preference.
Conserve resources, using a Design for the environment approach for all products
and process.
Minimize environmental impact, taking every stage of the product and process life
cycle into account.
Reduce waste generation, sorting used materials so that they can be recovered,
reused and recycled.
Fiat developed an innovative system, Cosene: it is an Intranet-based information system
launched in 1999 for the integrated developed of environmental management systems at
Fiat Auto manufacturing plants. It makes possible to keep track of environmental
management data and parameters in real times, thus providing a comprehensive view of
the situation at all sites. It provides access to data on management procedures for
energies (NPE) and waste (CRL) and makes possible to view data breakdowns by plant,
by operating unit, etc. Applying this online system Fiat can cut operating costs by ensuring
that energy carriers are more effectively managed, and raw materials and waste can be
carefully reused and recovered.
In its manufacturing processes, the Group pursues ISO 14001 certification as a means of
an ensuring uniformity in organisational practices, procedures methods for measuring
parameters by following the requirements mandated in international recognized standards.
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Factors analysed Tendencies Positive impact Neutral impact Negative impact
ECOLOGICAL
COMMITMENT Increasing
Lower costs (disposal, for product unit)
Improve in public image, reduce risk of litigation
Higher value
More market opportunities
Natural resources and energy conservation
Less polhitants (waste, fumes, water..)
TRAFFIC
RESTRICTIONS
Increase for the historical
centers of several cities Potential boost of
new cars sales
Too strict restrictions should discourage car utilization
Table 4. The ecological context. Source: own elaboration
Strategic Marketing Project
Giorgio Guarnieri, Sara Zerbinati
2.3 THE MARKET
In our work, the analysis has been restricted to the Italian market, focusing on the B
segment, in which Fiat Grande Punto is included among.
The car sector generates sales for about € 50 billions. Its trend during the last ten years,
has been variable. It is characterized, generally, by low growth rate. An exception could be
noticed analyzing the chart 5 below: the 1997, in fact, presented an anomalous tax of
growth. It was due to an extraordinary governmental commitment, the “eco-incentive”, in
order to stimulate the Italian economic upturn through the car sector.
10 years trend
0
500000
1000000
1500000
2000000
2500000
3000000
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
* esti
mat
ed
year
ca
r re
gis
tra
tio
ns
-40
-30
-20
-10
0
10
20
30
40
50
% g
row
th
Series2
Series1
This year financial act, as already described in the paragraph 2.2.3, adopt a similar
measure. Its goal is no longer to stimulate the economy, but to enhance the car park
renewal. Moreover it is a lighter manoeuvring than the 1996 one, but it is expected to arise
the level of car registrations up to 2,610,000 units, making, for the first time, the Italian
market the second in Europe.
Chart 5 “10 years trend”, own elaboration on ANFIA data
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As showed in the chart 6, more than 5 millions vehicles are still Euro 0, the 15% of the total
cars in circulation. The situation, from an ecological perspective, appears worst if we
extend the analysis to Euro1 and Euro 2 cars, that together represents the 50% of the total
car park, while Euro 3 the 30%. Considered that the Euro 4 car represents just the 10% of
the total, adopting a company perspective, the eco-incentive is thus a big opportunity to
increase, potentially, the sales in the next months.
Car park breakdown
Euro 015%
Euro 120%
Euro 230%
Euro 325%
Euro 410%
Euro 0
Euro 1
Euro 2
Euro 3
Euro 4
Chart 6 “Car park breakdown”. Own elaboration on the Transportation Ministry Centre of Data Elaboration (CED) information. Percentage on registered cars.
Strategic Marketing Project
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The 70% of the circulating cars
is fed by fuel, the 26% by diesel.
The more eco-friendly car, fed by
fuel+methan or fuel+gpl are only
the 4%.
Looking at the 2006 car registrations statistics (see chart 8), is possible to see an opposite
tendency in which the diesel represents now the buyers’ preferred car feeding system,
followed by fuel while the alternative feedings persist in being clearly the minority (1%). An
incentive campaign, made by the government like the Swedish has done, should improve
the diffusion of alternative fuel cars, like ethanol or hydrogen. The project need public and
private investments for updating and modifying infrastructures (ex. fuel stations have to be
provided, widely on the territory, with alternative fuels).
Market structure breakdown by feed 2006
Others1%
Fuel40%
Diesel59%
Diesel
Fuel
fuel+metan
Hybrid
Methan
Fuel+gpl
electrical
Chart 8 “Market structure breakdown by feed 2006”. Own elaboration on the Transportation Ministry Centre of Data Elaboration (CED) information. Percentage on registered cars.
Chart 7 “Car park breakdown by feed”. Own elaboration on the Transportation Ministry Centre of Data Elaboration (CED) information. Percentage on registered cars.
Car park breakdown by feed
Fuel70%
Diesel26%
Alternative4%
Fuel
Diesel
Alternative
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Analyzing the sector in terms of body type, what results is that a large majority of sold cars
are sedan (63%), while Station Wagons follow with only 11%. The other important group
are the SUV (Sport Utility Vehicles) and the mono-volume, both compact and small ones.
(See the chart 9 below).
The 87% of the car are sold to privates,
while 13% to rent companies as Hertz,
Europe Car ext. Just the 0,15% are
sold to be used as taxi.
Market structure breakdown by cars body type
Others5%
SUV6%
small monovolume7%
Sedan63%
Station wagon11%
compact monvolume8%
Sedan
Station wagon
compact monvolume
small monovolume
SUV
cabrio and spider
big monovolume
coupè
multi-space
combined
Market structure breakdown by use 2006
Taxi0,15% Rent
13%
Private87%
Private
Rent
Taxi
Chart 10 “Market structure breakdown by use”. Own elaboration on the Transportation Ministry Centre of Data Elaboration (CED) information. Percentage on registered cars.
Chart 9 “Market structure breakdown by cars body type”. Own elaboration on the UNRAE data.
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The car sales reflect the different economic development of the Italian regions, where the
South part of the peninsula presents a lower economical growth, due to lack of
infrastructures, investments and management culture background. The north-west has the
biggest industrial districts on its territory, while the north-east and center are characterized
by a wide diffusion of SME (Small Medium Enterprises). Having said this, the north-west
and center regions are the most active in car purchase, while the southern and the Islands
shows a smaller contribution. (see chart 11 below).
In brief, the best opportunities in the market for Fiat are:
Car park renewal, in order to substitute the Euro0, Euro1 and Euro2 with the support
of Governmental incentives for new car buyers.
Improve the development of diesel engines, for catching up its growing trends.
Improve the development of fuel fed eco-friendly engines.
Development of alternative fed engines, to be ready for future market changes.
Focus on Sedan cars (63% of the market), marketed especially to privates (87% of
car sales).
The 78% of car sales are made in the North and Centre of Italy, with peak of 29%
for in the North-West and in the Centre. South and Islands represents only the 22%
of the market.
Chart 11 “Market structure breakdown by geographical area”. Own elaboration on the Transportation Ministry Centre of Data Elaboration (CED) information. Percentage on registered
Market structure breakdown by geographical area
North-west29% North-east
20%
Centre29%
South14%
Islands8%
North-west
North-east
Centre
South
Islands
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2.3.1 PORTERS FIVE FACTORS
2.3.1.1 Suppliers’ bargaining power
The products that Fiat buys from its suppliers for purchasing its production activity, can be
divided into three main categories: electrical, metal and chemical products. (Chart 12
below).
Chart 12 “Supply breakdown by product lines” Source: own elaboration on Fiat data
Fig 4 Porter’s 5 factors. Own elaboration
Supply breakdown by product lines
Metal49%
Chemical
22%
Electrical29%
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Most of suppliers are companies of Fiat Auto Group.
Magneti Marelli produces components for lighting systems, exhaust systems,
suspensions and shock absorbers, engine control units, and electronic systems.
Teksid supplies engine blocks, cylinder heads and other cast-iron components for
engines; cast-iron components for transmissions, gearboxes and suspensions; and
magnesium bodywork components.
Comau produces industrial automation systems for the automotive industry in the
areas of product and process engineering, logistics and management,
manufacturing, installation, production start-up and maintenance.
Considered that about the 40% of these suppliers’ sales is warranted by Fiat purchases,
Fiat itself exercises an important power on them.
Moreover, Fiat changed its strategy in selecting its suppliers. Its continuous research for
excellent suppliers and demands for technological compliance and environmental quality
guarantees, led the Fiat Auto Group to set up a Supplier Quality Assurance (SQA)
committee. Its mission is to assure optimization and standardization of best practices at the
Group level, assuring standardization of all supplier evaluation and certification activities.
This Fiat’s research for suppliers that could assure quality standards, puts even more
pressure on them, increasing Fiat’s bargaining power. The big supplying companies’
failure to obtain quality certification as the ISO 14001, for instance, is no longer tolerable.
Fiat extended its value of World Class Manufacturing towards its suppliers, demanding for
no losses of any kind: zero accidents, zero services and quality defects, zero inventory,
zero breakdown. In particular, the zero inventory requirement is the result of the production
philosophy change to a Just In Time system. This requires the establishment of a
information sharing platform with suppliers that could lower Fiat’s bargaining power: in fact,
it could become difficult to find suppliers able to meet requirements as expected. This
could have a counterbalance effect on the suppliers’ power, tending to increase it.
However, we believe the bargaining power is still balanced in Fiat favour due to the factors
described above in this section.
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2.3.1.2 Buyers’ power
The buyers’ power is conditioned by several factors: variable brand loyalty, unsymmetrical
information and switch-costs.
The brand loyalty varies with the customers’ age. Young people are the most inclined to
changes and to experiment new brands and/or products. On the contrary more the age
increases, more consumers are loyal to their favourite brands because of their
conservative attitude. Thus if it could be relatively easy to gain a young consumer’s
preference, on the other hand it is not as easy to make older people to switch their
preferences to new brands. Moreover it is estimated that to gain a new consumer is three
time more expensive than keeping
a customer loyal to the brand. But
loyal customers have an high
demand for services and products
quality, that means high
bargaining power in their hands.
Companies need to invest assets
to meet those requirements.
Unsymmetrical information means that buyers, when purchasing a car, do not have the
same information that producer and retailer have about the purchased good. The reason of
this is that buyers, generally, do not have an adequate knowledge background to evaluate
the technical characteristics of a car. The information they have is provided by the
producer or by the retailer, who could easily deceive the consumer on particular aspects.
This buyers lack of knowledge and the consequential unsymmetrical information, reduce
the buyer’s power. For further details on the unsymmetrical information see annex 4.
Considering the cost for buying a new car and the maintenance expenses, usually buyers
have to carefully evaluate what can be considered an investment. Not everybody could
effort the expenses to buy new cars. Moreover, many customers use financial services
provided by the producers in their purchases. Indeed, they are not free to change
Brand loyalty breakdown by age
35%
45%
55%
65%
75%
85%
17-25 26-35 36-45 46-55 56-65 66-75 76+
Age
Lo
yalt
y
Chart 13 “Brand loyalty breakdown by age” Own elaboration on Fiat data.
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whenever they want the car. For these reasons, we can affirm that buyer’s power is
negatively effected by switch-costs.
In brief, considered the factors analyzed above, customers’ power can be classified as
medium.
2.3.1.3 Alternative goods
The alternative goods for cars can be identified in public transportation and other urban
vehicles.
The difficulty to enter by car in the cities centers have three causes: the first is the
increasing traffic congestion, that stuck people for hours into their cars; the second is the
difficulty to find parking into city centers, and when available they are extremely expensive;
the third is the traffic limitation to car downtown that several cities have adopted (it restricts
the access to the center just in some hours of the day or forbids it at all). All those
difficulties increase the attention that people pay to alternative transportations and in
particular to the public transportation (Bus, tram and metro). It ensure lower stress caused
by driving in critical conditions, time saving and often it becomes to be cheaper than use
cars.
Although the service output provided by the Italian Railway Company is worst in terms of
quality (punctuality, trains cleanness, prices), the number of passengers tends to increase.
That is the reason why railways can be seen as an alternative vehicle to car.
One problem of car, is the low flexibility it gives to drivers into the traffic. Small cars, like
the Smart, and motorbikes allow the driver to bypass with agility queues and, moreover, it
is easy to park them. They are characterized by low consumptions and low maintenance
expenses. They are largely diffused in the Italian big cities like Milan, Rome, Florence and
Turin.
In some cities, like Parma, Modena and Bologna, bicycles are largely used as
transportation vehicles in the city center. Although, we believe they can not be considered
pure alternative to cars, because of their short-range transportation character.
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2.3.1.4 Potential new competitors
The threat of new competitors in the sector is low. In fact some barriers make it difficult to
break into the Italian car market.
Economies of scale are extremely important for developing a competitive advantage (in
this case of cost) and in particular for the car market.
Another factor that disincentives the entrance of new competitors, is the access to the
distribution channel: Fiat, in fact, being the national car producer, has a massive
distribution in the whole territory. In the Fiat Grande Punto segment, the B segment, an
intensive distribution channel has to be designed and implemented for being able to face
Fiat’s power. The product characteristics of this sector do not allow to develop a selective
distribution: there is no need of sustaining a positioning of quality or exclusivity. However
an intensive distribution is not easily developable because of costs and difficulties to find
right partners.
Moreover the costs for breaking into a market characterized by high competitiveness are
so high, that together with distribution channel development costs and the necessity of
reach economies of scale, make it almost impossible to be accessed.
For all the reasons described above, we rate the threat of potential new competitors as
low.
2.3.1.5 Competition among existing firms
The B segment, object of our analysis, represents the 42% percents of the car market in
Italy. It is the biggest segment, as showed below in the chart 14.
Obviously such a big market segment, attracted several companies. Today some of the
most important car producer of the world compete in Italian B segment: Renault, Ford,
Citroen, Peugeot, Volkswagen, Opel and others (see chart 15 below) In a market
characterized by low growth rate, this means an extremely hard competition within market
members: to maintain the business profitable in this scenery, the only chance is to try to
gain competitors’ market share, increasing the competition in terms of prices, warranty
extensions, financial and other services outputs available for buyers.
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High exit barriers from the business, oblige companies to do their best for surviving in the
market. Thus, their strategic choices have big impact on the company’s future and are
consequentially risky. Indeed, we rate the competition among existing firms high.
All the factors above analyzed, make of the Italian car market, and in particular the B
segment, an extremely competitive market in which the strong position of Fiat can be
source of different competitive advantages. Thus our rating for the market profitability, to
complete the Porter’s five factors analysis, is medium-high.
Market structure breakdown by segment 2006
SEGMENT F0,5%
SEGMENT E4%
SEGMENT D13%
SEGMENT C26%
SEGMENT A15%
SEGMENT B42%
A
B
C
D
E
F
Chart 14 “Market structure breakdown by segment, 2006” Own elaboration on UNRAE data
B SEGMENT BREAKDOWN
OTHERS 30%
RENAULT CLIO5%
TOYOTA YARIS7%
FORD FIESTA8%
FIAT GRANDE PUNTO24%
FIAT GRANDE PUNTO
FORD FIESTA
TOYOTA YARIS
RENAULT CLIO
CITROEN C3
VW POLO
OPEL CORSA+MERIVA
LANCIA YPSILON+MUSA
OTHERS
Chart 15 “B segment breakdown”. Own elaboration on the Transportation Ministry Centre of Data Elaboration (CED) information. Percentage on registered
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2.3.2 BUYERS ANALYSIS, BUYING BEHAVIOUR
The buyers behaviour in car purchasing is characterized as follows:
PROBLEM AND/OR NEED RECOGNITION
The car is broken, it is too expensive to be repaired. The car is too old, inefficient, non
conform to anti pollution regulations; it cannot be used for going in the city centres due to
traffic restrictions to non-ecological cars. Last, the simple will to change the old car for
buying a new one.
Price and financial considerations remain the main reason for customers to purchase,
although its important in the last three years has substantially decreased. The second
reason, for importance, is the car size. The third is the design always more people pay
attention to it and it represents a strong appeal to buy a new car. The forth are the driving
characteristics. The last, are the technical aspects: only for about 15% of buyers they
represents a reason to purchase, considered also the knowledge background difficulty (it is
a clear demonstration of the asymmetrical theory). (see chart 16)
REASON FOR PURCHASE
5%
15%
25%
35%
45%
55%
65%
75%
2003 2004 2005
technical aspects
price/financialconsiderations
driving carachteristics
size
design
Chart 16 “Reason for purchase” Own elaboration on Fiat Audit data
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INFORMATION SEARCH
The potential buyer seek for information about the car. It is an high value product, no often
purchased, thus it requires a careful evaluation through information analysis. Information
are usually obtained from retailers, car magazines, TV car magazines, Motorshow,
websites, online forums and word of mouth.
EVALUATION OF DIFFERENT PURCHASE OPTIONS
The information obtained are compared one with the other. Consumers allocate attribute
factors to certain products, almost like a point scoring system which they work out in their
mind over which brand to purchase. This means that consumers know what features from
the rivals will benefit them and they attach different degrees of importance to each
attribute. Consumers usually have some sort of brand preference with companies as they
may have had a good history with a particular brand or their friends may have had a
reliable history with one.3 Moreover different quotations are compared in order to
recognize the best offer.
PURCHASE DECISION
Through the evaluation process discussed above consumers will reach their final purchase
decision about brand, product, dealer and purchasing time. They reach the final process of
going through the purchase action. The process of going to the shop to buy the product,
which for some consumers can be as just as rewarding as actually purchasing the product.
POST-PURHCASE BEHAVIOUR
It is a common trait among customers to have doubt about the product they bought. It is at
this stage that companies need to support the sale, through marketing activities, to make
the consumer proud and sure of the product.
Several factors influence the buyer’s decision: culture, personality, lifestyle, social position,
marketing, advertisement and the decision center. Culture is defined as our attitudes and
beliefs. It is developed during the life by the family, school, friends and other influences.
3 Source www.learnmaketing.net
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Personality influences the customer’s lifestyle. The Fiat customers should be a person of
young spirit, who pay attention to design and has a taste for classic but at the same time
innovative.
For social position we mean all the factors that determine how a person is located into the
society. It is influenced by culture, job and family. Some people look up to may influence
their choices of purchasing a particular product or service. Reference groups are particular
groups of people that indirectly have influence on other buyers’ decisions (followers).
Marketing and advertisement make big effort in trying to gain customers’ preferences and
trust. They are studied and implemented to influence the customers’ buying decision.
Moreover Abraham Maslow hierarchy of needs theory sets out to explain what motivated
individuals in life to achieve. He set out his answer in a form of a hierarchy. He suggests
individuals aim to meet basic psychological needs of hunger and thirst. When this has
been met they then move up to the next stage of the hierarchy, safety needs, where the
priority lay with job security and the knowing that an income will be available to them
regularly. Social needs come in the next level of the hierarchy, the need to belong or be
loved is a natural human desire and people do strive for this belonging. Esteem need is the
need for status and recognition within society, status sometimes drives people, the need to
have a good job title and be recognised or the need to wear branded clothes as a symbol
of status. Self-actualisation is the realisation that an individual has reached its potential in
life.
Fig. 5 “Maslow’s hierarchy-influences on car buyers”. Own elaboration
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As showed in the figure 6 above in the text, when a consumer decides to buy a car, is
influenced by some factor of the hierarchy pyramid of Maslow. The improvement of the car
safety system offer a more efficient protection to drivers against car accident: usually
people are aware of the probability to have an accident and of its possible consequences,
indeed they see new car safety systems as an improvement of their own safety.
Moreover car is nowadays a status-symbol: it is used, like other objects, as a symbolic sign
of social power, representing an index of the social position achieved by a person.
Finally it could allow a person to meet part of its esteem needs.
2.3.2.1 Fiat Purchase Behaviour
Group Sectors are organized according to integrated, worldwide purchasing processes that
satisfy the different needs of specific regional markets. The macrostructure of Fiat Group
purchasing processes can be summarized as follows:
Definition of purchasing strategies and policies;
Definition of approved Group suppliers;
Assessment and approval of suppliers;
Codifications of materials, identifications of needs, and system of purchasing
request;
Market studies and identification of potential suppliers;
Technical/commercial analysis of bids and choice of suppliers;
Order issuance and approval system;
Supplier performance evaluation system and updating of suppliers’ ranking.
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2.3.3 COMPETITORS ANALYSIS
In the Italian B-segment car market, Fiat, faces the competition of some of the world
biggest car producers: Ford, Opel, Volkswagen (VW), Toyota, Renault and Citroen.
Our analysis has been restricted to the three closest Fiat’s competitors, with their
respective car for the B segment: Ford “Fiesta”, Toyota “Yaris” and Renault “Clio” (Chart
17). We did not consider the Lancia Ypsilon as a direct competitor because it is a car
produced by a company, Lancia, that is member of the same group of Fiat Auto, Fiat
Group. The marketing strategy and especially target and segmentation for this car, are
definitely different from Fiat’s one. For these reasons we excluded it from our analysis,
being a product that complete the range offered by the group.
FiatGrandePunto
FordFiesta Lancia
ypsilon ToyotaYaris Renault
Clio Citroen C3Vw Polo
OpelCorsa Opel
Meriva LanciaMusa
2006
2005
0
50000
100000
150000
200000
250000
Ca
r re
gis
tra
tio
ns
20
06
Segment B top 10 breakdown
20062005
Chart 17 “B segment top 10 breakdown”. Own elaboration on the Transportation Ministry Centre of Data Elaboration (CED) information. Percentage on registered
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2.3.3.1 Ford
Ford Motor Company, a global automotive industry
leader based in Dearborn, Michigan USA manufactures
and distributes automobiles in 200 markets across six
continents. With approximately 300,000 employees
and 108 plants worldwide, the company’s core and affiliated brands include Ford, Lincoln,
Mercury, Mazda, Volvo, Jaguar, Land Rover and Aston Martin. Its automotive financing
business is Ford Motor Credit Company.
Vision
“Our vision is to become the world’s leading consumer company for automotive products
and services”
Mission
“We are a global family with proud heritage, passionately committed to providing personal
mobility for people around the world. We anticipate consumer needs and deliver
outstanding products and services that improve people’s lives.”
Values
“The customer is Job 1. We do the right things for our customers, our people, our
environment and our society. By improving everything we do, we provide superior returns
to our shareholders”
Ford provides financial service through its own financing company: Ford Credit. It is
considered the biggest automotive financing company in the world. It offers such a wide
range of services that each customer can find the best solution to his needs. It is present in
40 countries serving 10 millions customers. In 2000 it financed sales and leasing of more
than 4 millions cars.
Ford provides assistance to its Italian customers through a network of 1,200 Ford Service
assistance centres: maintenances, reparations are performed by specialized workers
formed by the own Ford’s training programs. The warranty on the cars sold is a two years
lasting one; if any problem would occur, the customer can get its car repaired for free all
around the Europe in the Ford Assistance Centers. The warranty on the substituted
components is of three years.
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THE FORD FIESTA
The new Fiesta, offer a wide variety of
colours (fourteen) and motors divided into
five fitting-outs: Fiesta, Titanium, Ghia, S,
ST. The Fiesta is the basic offer, while the
others provide to the consumer a wider
choice of technologic accessories, more
powerful motors and higher quality of
interiors. For the Fiesta fitting-out, prices
range from € 10,700 to € 13,500; Titanium from €11,050 and €13,850; Ghia from € 12,950
to €15,750; S from € 14,200 to € 15,650; ST standard price € 16,500. Prices are variable in
function of the motor power (Hp and capacity), feed system (fuel, diesel) and car body (3/5
doors).
Ford’s presence in the European market appears stable at 8.3% of market share. In Italian
B-segment, instead, it showed an increase of 9.2% compared to the 2005 result.
The strategy adopted by Ford with the Fiesta is a product diversification with low prices,
good quality, wide variety of colours and motors, and special warranty conditions sustained
by a well known brand with a strong heritage in its background.
2.3.3.2 Toyota
Established in 1937, Toyota Motor Corporation is one of the
world’s representative automobile manufacturers, producing
vehicles in 26 countries (in each of the five continents) and
marketing vehicles in more than 170 countries. The group
produced in 2005 8 millions vehicles around the world. The
workforce at the end of 2005 was of 280,000 employees.
Vision
“By manufacturing cars that reflect the needs of customers and society, Toyota will target
sustainable growth and contribute to the development of the automobile industry.”
Fig. 6 “The Ford Fiesta” Source: www.ford.it
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Mission
“We want to be a company that continue to grow in any era and in any conditions. Bearing
that in mind, Toyota in reinforcing the foundations of an unshakable growth platform while
taking decisive management measures to grow earnings. Always welcoming change and
eager to take on challenges, we are transforming the quality of our management and
operations in preparation for making our next stride forward.”
Toyota aims to sell 1.20 million vehicles in the European market by 2010; in 2005 they sold
995,200 cars, registering an incredible growth, equally distributed, since 2001 of 48%.4 To
achieve that target, their strategy is to increase product appeal, sales capabilities and
localization. Moreover, responding to the strong interest in environmental issues in the
region, they will add to their offerings of diesel vehicles and hybrid models while actively
advertising their merits and performance to grow vehicle sales. To advance localization,
they will continue staged expansion of production capacity for vehicles and such major
components as engines.
The Italian subsidiary contribute to the corporate growth in Europe, considered that its
sales grew of 30.23% since 20015. If we consider as index base the 1996, the growth of
Toyota in the Italian market appears simply incredible: +759%. It grew from 15,192 sales to
130,507 in 2005. This growth was sustained by the development of a careful commercial
network along the whole peninsula. Today Toyota dealers and assistance points are more
than 200.
One of Toyota’s strength is its philosophy summarized in this motto: “In the world men and
autos need to coexist in harmony”. This result in the extreme quality of car produced. The
two famous principles, base of the philosophy are the “Just in Time” (JIT) and the “Auto-
activation”. The JIT represents the search of the optimization and the synchronization of all
production phases in order to manage in the best way, in other world, efficiently and
effectively, the assets, ensuring the best quality of products. The Auto-activation created a
revolutionary relation between man and assembly line, in which the man influences the
machine rhythms, eventually correcting possible errors, and not the opposite, in order the
ensure an always higher product quality.
4 Data source Toyota Shareholders Information: 2005 review. 5 Data source www.toyota.it
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THE TOYOTA YARIS
It revolutionized the small car market offering an innovative product based on four
theorems:
1. Small length (3,75m), wide inside, for the best habitability for five passengers and
an easy system for improving charge capability.
2. Small capacity motors, with high power and low consumptions (two fuel fed: 1.0 69
Hp, 1.3 87 Hp; one diesel fed 1.4, 90 Hp)
3. High safety standards certificated with the 5 stars NCAP (safety standards
classification). Nine airbags, including the exclusive one for driver’s knee, ABS (Anti
Blockage System), EBD (Electronic
Breakforce Distribution) and EBA
(Emergency Break Assistance)
represents the standard safety
equipment on all the Yaris. Other
electronic control as TRC (traction
control) and VSC (vehicle stability
control) are available upon request.
4. High technology in all components.
Available on all Yaris the new digital 3D
instruments, onboard computer, CD
reader and air-conditioner.
Prices range from € 11,151 to € 14,801. Only five colours and three motors (1.0 fuel
fed, 1.3 fuel fed, 1.4 diesel) are available.
The strategy adopted is a product differentiation in terms of quality, prices, services and
warranty extension (three years or 100,000 Km). Although the variety of fitting-outs,
motors and colour is restricted.
The services provided by Toyota includes: assistance points open 12 hours per day, 6
days a week, including August, provided by qualified technicians; clear prices available
for customers as well as a statement of their rights.
Fig. 7 “The new Yaris”
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2.3.3.3 Renault
The Renault group is composed by Renault, Dacia and Samsung
Motors. More than the 60% of the shareholders equity is in the
hands of privates, the 15.7% of the French State, 15% of Nissan
and the remaining part is hold by the company itself or by
employees. It has more than 350 commercial and industrial sites
in 36 countries all around the world. The entire group employs
129,912 people while Renault 43,788. In 2004 it sold 2.5 millions
cars in the world. The group has fixed the goal of 4 millions cars to
be sold until 2010. Renault confirms its global attitude with the alliance made with Nissan
in 1999. The Alliance develops and implements a strategy of profitable growth and sets
itself the following three objectives:
• To be recognized by customers as being among the best three automotive groups
in the quality and value of its products and services in each region and market
segment.
• To be among the best three automotive groups in key technologies, each partner
being a leader in specific domains of excellence.
• To consistently generate a total operating profit among the top three automotive
groups in the world, by maintaining a high operating profit margin and pursuing
growth.
On the strength of the numerous synergies generated by the Alliance over the past five
years in engineering, manufacturing, sales, IT and purchasing and the performance of both
companies, Renault and Nissan are actively present on most of the major international
markets.
Renault has defined and published its goals into the "Renault Commitment 2009" :
• Quality : position next models among the top three of their respective segements.
• Profitability : achieve an operating profit margin of 6% in 2009.
• Growth : sell addition 800,000 units, the strongest growth in Renault’s history.
The plan to reach those goals includes the launch of 13 new models and 13 "face-lifting" of
existing ones. The resources to achieve the commitment will be $obtained by reducing :
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• Purchasing costs : -14% in three years
• Manufacturing costs : -12% in four years
• Logistics costs : -9% in four years
• General and administrative costs : less than 4% of revenues in 2009
• Total distribution costs per unit in Europe : -8%
• Optimize cost of investment : -50% target.
Renault’s market share in Europe is 10.3% while in the italian B segment it reaches the
5%. 6
RENAULT CLIO
It is characterized by a sophisticated
design both for the exterior and the interior.
Tries to put emphasis on the driving
pleasure, ensuring a surefooted
roadholding in every weather conditions,
thanks also to its good balance that gives
to the driver a better impression of control.
Ergomonics driving position contributes to
the driving pleasure. It is roomy being
confortable for five passengers. It is
certificated for safety standars by the NCAP with 5 stars, being also awared as the most
safety car of the segment for children. The car is available with up to 8 airbags ; it is
equipped with ABS and EBA. Optional incledes ESP, understeer control, additional
cornering lights and tire pressure monitoring system.
A considerable work went into aerodynamics and reducing friction and vehicle weight. As a
result, fuel consumption is low and CO2 emissions have been reduced. A full 95% of
vehicle weight is recyclable, putting great emphasis on the use of recycable plastics and
renewable materials.
Prices ranges from € 11,101 to € 22,951. Severals fitting-outs are available, as well motors
(1.2, 1.4, 1.5, 1.6, 2.0 capacity, ranging from 65 Hp to 200 Hp) and feed system (fuel,
diesel). In total are provided 50 different combinations of fitting-outs, motors, capacity,
body (3/5 doors) and feed system. 6 All data about Renault are taken from the Renault Annual Report 2005 available on www.renault.com
Fig. 8 “The Clio III”
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2.3.4 COMPETITORS’ FINANCIAL ANALYSIS
A brief financial analysis of Fiat’s competitors gives further details to our analysis.
FORD TOYOTA RENAULT
WORLD SALES Millions units
6.818 7.974 2.250
REVENUES
$ Millions 153,503 179,083 39,458
OPERATING
INCOME
$ Millions
(4,209) 15,990 1,514
NET INCOME
$ Millions (3,895) 11,681 3,453
SHAREHOLDERS’
EQUITY
$ Millions
10,700 89,899 19,661
CASH DIVIDEND
$ per share 0.40 0.77 1.80
DEBT
$ Millions 131,233 8,476 2,252
DEBT-EQUITY
RATIO 12.5 0.0942 0.1145
R&D
% revenues 5.2% 3.9% 5.5%
PROPERTIES
$ Millions 61,946 60,157 15,663
INVENTORIES
$ Millions 10,271 13,799 5,862
INVENTORIES
% assets 3.8% 5.4% 8.6%
The world sales could be a wrong indicator of the competitive potential because, for
example, Toyota and Ford are much more oriented to non European markets than how
Renault is: it sales are more concentrated in Europe although growing its international
Table 5 “Competitors’ financial analysis” Own elaboration. Source: competitors’ 2005 year reviews.
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expansion through acquisitions (Dacia, Samsung Auto) and alliances (Nissan). The
Renault’s market share in Europe is of 8.7%, Ford’s 8.2% and Toyota 5.6%. In the Italian B
segment, instead, the market share are in order: 5%, 8% and 7%. Toyota and Ford sells
about three time more cars than Renault around the world and their revenues are result of
this situation. Although the operating margin suggest that Toyota and Renault run their
business much more profitably while Ford shows a negative operating income. What
actually saves Ford’s business are the non-automotive business units that allows the group
to obtain positive results and even to distribute dividends to shareholders. The incredible
data about Ford is its debt, better definable by using the debt/equity ratio that highlights a
debit 12.5 times higher than its equity. Toyota and Renault, instead, seems to shows
definitely a more solid financial position. Moody’s, Standard&Poor (S&P) and Fitch rate
negatively Ford’s actual position and its outlook, remarking a negative trend. Toyota and
Ford have a wide assets of properties (including plants, equipments and others), four times
larger than Renault’s. Although the French company invests a lot in R&D, the 5.5% of
revenues, while Ford and Toyota respectively the 5.2% and 3.9%. Moreover a negative
index of Renault is the inventory level, quantifiable as the 8.6% of assets, fact that could
suggest that a more efficient management should be implemented for reducing it.
In brief, all the competitors selected for our study have peculiarity in their financial
positions. Toyota appears the biggest company in terms of assets and financial stability
(rated AAA by Fitch, Aaa by Moody’s with stable outlook) while Ford has wide resources
but a fragile financial stability effected by the highest debt level; Renault appears as a
smaller competitor, but solid and efficient as confirmed by the rating (Fitch: BBB+;
Moody’s: Baa+; S&P: BBB+; they all rate the outlook as stable).
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2.4 INTERNAL ANALYSIS
2.4.1 Financial assets
2005 GROUP 2004 GROUP 2005 FIAT 2004 FIAT
WORLD SALES Millions units
1,697,300 1,763,495
REVENUES
€ Millions 46,544 45,637
19,533 19,695
OPERATING
INCOME
€ Millions
2,215 (585)
(818) (1,412)
NET INCOME
€ Millions 1,331 (1,634)
SHAREHOLDERS’
EQUITY
€ Millions
9,590 9,413
DEBT
€ Millions 3,200 9,400
DEBT-EQUITY
RATIO 1.93 2.59
R&D
% revenues 3.4% 3.92% 3.4% 4.83%
PROPERTIES
€ Millions 11,006 9,437
INVENTORIES
€ Millions 7,881 7,257
INVENTORIES
% assets 12.6% 11.6%
The core market of Fiat is Italy: this explains why the world sales appear definitely lower if
compared to competitors’. The market share of Fiat in Italy is 24%, being leader in A and B
segment. The 2005 revenues increased of 2%; although they suffered a slight decrease
because of a negative result of the Automotive sector, result of the first nine months trend,
Table 6 “Fiat’s financial assets” Source: Fiat 2005 Annual Report
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partially recovered by the last quarter sales. The operating result was positive by 2.2
billions euros compared with an operating loss of 585 millions euros in 2004. This result
was effected by the extraordinary gain of 1.1 billion euros from the General Motors
settlement. Although, the operating income of the automotive sector remained negative (-
818 millions euros), even if increased of 42%. The consolidated net income of 2005 was
positive of 1.4 billion euros, against a loss of 1.6 billion euros of 2004. In 2005 the debt
amounted to 3.2 billion euros having been decreased of 65%. This result in the
improvement of the ratio debit/equity from 2.59 to 1.93.
When writing this paper, only the 2005 annual report was available. Considered the
volatility of the automobile market, we believe that an analysis of the first six months of
2006 gives a better indication of the market trends and of Fiat’s business evolution.
Net revenues of first nine months of 2006 showed an increase of 13.5% compared to the
same period of 2005. This result has been achieved especially through a sales boost of the
automobile sector. Its revenues increased of 25.5%; the number of sold cars increased of
18.7%, scoring +22.5% in Europe, +26.5% in Italy while the market shows a stable and
reduced trend of growth. The ordinary operating income was of 1.4 billions compared to
the 1.85 billion euros of 2005. The result of the previous year was affected by the
extraordinary gain obtained by the resolution of the Master Agreement with General
Motors. The Fiat ordinary operating income was of 196 millions euros, increased of 498
millions compared to first nine months of 2005, when a loss of 302 millions euros was
scored. The debt was lowered of 600 millions euros, resulting in a better net debt/equity
ratio (0.27).
In brief 2006 was a positive year for the group and in particular for Fiat Auto that is growing
quickly in all its index, definitely going out from the wave of the past year crisis. The entire
situation is reflected in the rating assigned to Fiat by the most important rating society in
the world: Fitch, Moody’s and S&P. The positive outlook expressed by the rating
companies represents a chance for enhancing the ability of attract investors’ funds.
MID-TERM OUTLOOK
FITCH BB- POSITIVE
MOODY’S Ba3 POSITIVE
S&P BB STABLE Table 7 “Fiat Rating” Source: www.fiatgroup.com
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2.4.2 Value Chain
For adding value to the final customer’s product, Fiat works on several areas to meet this
target.
2.4.2.1 Purchases and internal logistics
Fiat has decided to select its suppliers on a quality basis. The key words for the company
in selecting its suppliers are: quality, cost, maintenance and logistic. For this reason it
established the Group Purchasing Coordination protocol with two aims. First, to promote
initiatives through the formation of cross sector working groups that target the principal
types of commodities purchased by the Group, exploiting the best know-how available at
the individual Sectors and on the various markets where they operate. Second, to monitor
performance with respect to targets on a constant basis.
The Group Purchasing Coordination worked on the following specific areas:
Fig.9 “Fiat value chain” Own elaboration
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• Direct materials: commodity sector teams were created to realize purchasing
efficiency and technical synergies.
• Raw materials: the group increased the level of centralized purchasing of raw
materials, especially of steel.
• Supplier quality assurance: common processes were defined for qualification of new
suppliers. Its mission is to assure optimization and standardization of best practices
at the Group level, assuring standardization of all suppliers evaluation and
certification activities.
• Transport and logistics: two cross sector teams (inbound and outbound) were
created to work on targeted projects in order to realize efficiencies and synergies in
negotiations processing.
2.4.2.2 Production
The Grande Punto is produced in two Italian plants: Mirafiori, in Turin, and the Sata Plant
in Melfi. Considered the favourable demand trend, Fiat has took action to increase plants
utilization. These actions were taken with an agreement of employee representatives and
trade unions and resulted, for instance, in the increase of the number of shifts, re-
introducing a six-day working week in Melfi, specifically to ramp up production of the
Grande Punto. If a capacity underutilisation at its plants would occur, due to lower sales
volumes, Fiat handle it by using the Cassa Integrazione Guadagni (Temporary Layoff
Benefits Fund).
Actually the output of Mirafiori plant is of 1,000 Grande Punto units per day, 5 days a week.
The Melfi’s one, instead, is of 1,400 units per day, 6 days a week. Moreover, in less than
one year, there has been a 12% increase of productivity, in terms of hours per car.
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From the top to the bottom: Fig. 10,11,12 In order: “Fiat Mirafiori view”, “Grande Punto assembly line”, “Grande Punto assembly line 2” Sources: www.fiat.com
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2.4.2.3 Distribution
Fiat distributes its cars through a network of 3,966 points of sale around Europe.
The strategy adopted by Fiat includes three main points: territory coverage, qualitative
presence and mandate attractiveness.
Fiat has a strong presence on the Italian territory, composed by own points of sale and
private dealers. In fact when a proper partner is not available, Fiat invests directly to
establish the point of sale. This happens especially in metropolitan areas, in order to set
standards for qualities in sales and
services. It is remarkable that in the last
18 months, 90 of the new partners that
joined Fiat came from competitors’
networks. In 2006 were opened two
Flagship Stores. The Flagship Store is a
new concept created by Fiat: the idea is to
create a polyvalent space, in which
combine sale and after-sale services,
convention room, training academy, café
and merchandising. For example the Turin
Flagship Store is a 70,000m2 surface,
obtained by a non utilised part of the
Mirafiori plant. There cars are exposed in a
2,300m2 showroom, while an area of
12,000m2 is dedicated to after-sale
services. It has an average of 1000 visits
and 300 quotations per day. In the next
three years, new opening are planned in the European strategic cities as London, Munich
and Paris.
To sustain its brand image, Fiat is working hard to make its presence not only spread but
also of quality. For achieving this goals they are improving the dealer identity by enhancing
the vehicle presentation, offering test drive and increasing the salesmen preparation.
Fig. 13 “Mirafiori plant”. Source: www.fiat.com
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Fig. 14 “Point of sale outlook” Source: www.fiat.com
Fig. 15 “Mirafiori Motor Village” Source: www.fiat.com
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The key to have a network of higher quality, is to make the mandate more attractive in
order to find good partners. For doing this Fiat is implementing a strategy to improve the
brand appeal and to increase the dealers’ profitability. In order to meet this goal, Fiat has
developed in collaboration with HP the FIAT LINK, a system that support customer
relationship management, integrating and enhancing sales and services across 5,800
retailers in Europe. Thanks to this new and innovative system, a customer will be able to
receive continuity of service from any Fiat retailer in Europe. The dealer will have instant
access to the customer’s preferences, registered by the salesman on a notebook since the
first contact with him. By enhancing the customer’s buying experience, Fiat expects to
strengthen its brand and fuel growth in sales. At the same time, Fiat and its retailers have
the potential to lower costs.
2.4.2.4 Marketing
For the launch of the new Grande Punto, Fiat has made a strong advertisement campaign
through commercial, magazines and boards. It was based on the idea of emotion, using as
soundtrack a masterpiece of the Italian music, loved by all generations. The car has
always appeared in the sport version, coloured in red, going through a environment
characterised by soft colours. The red, symbol of passion and emotion, catches the
watcher’s eyes. Moreover the slogan adopted was based on a word joke: “Punto. E basta”,
meaning that “Punto is enough” (Punto in Italian means fullstop). This kind of
advertisement resulted very effective, also thanks to its intensity in terms of presence.
Fig. 16 “Grande Punto commercial” Source: www.fiat.com
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2.4.2.5 Services
Since some year ago, Fiat was well known for the weak level of services provided to
customers. For this reason, considered the entire new strategy based on the brand
empowerment, Fiat today positions the customer care at the center of its value proposition.
Its aim is to raise the service level to best-in-class standards, reducing also costs for the
customers as the ones for courtesy cars, while raising the customer satisfaction to the best
level.
The goal of a customer care is to takes in charge customers’ request, needs, expectations
and to give them answers. One of the new activities promoted by Fiat is “CIAO FIAT”, an
international toll-free telephone number for its customers. The center handles about
700,000 multi-channel contacts (telephone, Internet and others) in 14 European Countries.
It staff includes about 250 native speaker operators.
2.4.2.6 Infrastructure
Considered the nature of the elements characterizing an infrastructure, we decided to
analyze them in the section on the SWOT analysis.
2.4.2.7 Human Resources
At the end of 2005 Fiat Group had 173,695 employees, of which 15,800 hired in the same
year. Just Fiat S.p.A had 46,099 employees.
In 2005 Fiat has implemented a program for strengthening the managerial structure: 113
manager of international experience, have been appointed; nine of them were selected to
cover top management roles. A new management evaluation process, has been used as
part of the management system, involving more than 2,200 people.
The composition of the board of directors that led to the Fiat turnaround is composed by
two very important Italian managers and by a descendant of the Agnelli founder family,
John Elkann.
Luca Cordero di Montezemolo, joined the Group in the 70’s as Ferrari team manager. He
grew in the Group covering different roles while increasing its success also outside Fiat.
Today he is the Fiat Group Chairman, President of Cofindustria, President and CEO of
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Ferrari S.p.A, President of the Bologna International Trade Fair, Vice President of UNICE
(Union des Industriels de la Communautèe Europèenne), member of CNEL (National
Council For Economics and Labour), member of the boar of directors of different
companies as La Stampa (Italian national newspaper), Tod’s, Indesit Company, Le Monde.
He is awarded of the Cavaliere del lavoro title, and he received five Honoris Causa
degrees.
Sergio Marchionne grew in Canada where he began to work as fiscal expert at Deloitte
Touche. Executive Vice President of Glenex Industries and others roles before joining the
Swiss company Algroup in which he became CEO. He joined Fiat in may 2003 as Director,
becoming CEO of Fiat S.p.A in 2004 and since 2005 Fiat Auto CEO. He is also Chairman
of CNH Global, of Banca Unione di Credito, of SGS SA, of ACEA (European Automobile
Manufacturers Association).
In 2005 the investment in training for development of professional skills was of € 90
millions, 2,1% of the wages. Training activities, handled by the Fiat Group company for
Training, Isvor, involved about 89,000 employees, for a total of 400,000 hours.
Fiat compensation is based on performance indexes, in order to reward talent, to attract
valuable recruits, motivate employees, ensuring that they identify with the company’s
goals. For this reason the compensation is divided in basic, short-term and long-term. The
short-term compensation is added to the basic one and it is paid to professionals annually,
tied to their performance and that of the company. The annual bonus depends on the
employees’ role in the company. As long-term compensation executives are eligible to
participate in stock options plans.
2.4.2.8 Research and Development
The R&D function is performed by two Group’s companies, the Centro Ricerche Fiat and
Elasis. The expenditure of Fiat for R&D is of 3.5% of net revenues. 13,200 people are
involved in 120 centres all around the world. One of the result brought by a constant R&D
activity, is the shortest time to develop a product: 18 months from the design freeze to the
production. This is possible through the exclusive use of virtual engineering, eliminating
physical prototypes. The first unit is built directly on the assembly line. Moreover, Fiat,
collaborates with Microsoft to offer innovative products.
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2.5 SWOT ANALYSIS
STRENGHTS:
1. New technology
• Heavy investments in R&D
• New hi-tech applications in projecting, designing and producing processes.
• Important collaboration with Microsoft
2. New product
• Now able to meet more effectively customers’ needs of the B segment
• “6 ports car”: 5 traditional + 1 USB for connecting electronic equipments to
the car system (e.g. mp3 reader)
• Hand-free communication (Blue & Me system)
• All these features offered for an accessible price.
3. Market share
• High market share in the Italian B segment: 24%
Fig. 17 “SWAT ANALYSIS” Own elaboration
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WEAKNESSES:
1. BRAND IMAGE
• To be recovered and improved after year of overlooking.
The strategy adopted is expected to produce the following result in terms of
brand awareness, image and market share
The figure 18 shows the market share in connection with other two indexes
relative to the brand awareness and image. It appears that Fiat target is to
growth on all dimensions, obtaining a better image than Seat and getting always
closer to the main competitors, VW, Ford and Toyota.
The most recent indexes about the brand image (source Fiat audit) shows that
the company is on the right path, having improved it in all the main European
countries, as well as the market share.
2. FINANCIAL POSITION
• Still high debt level, although decreased of 2/3 in 2005 (detailed in section
2.4.1)
• Returned to register profit only in 2005 after 17 consecutive quarter of net
loss.
3. DELIVERY PUNCTUALITY
• The company moved only during the last years to a JIT supplying strategy
from a traditional one.
Fig. 18 “Brand awareness expected evolution” Source: www.fiat.com
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• The traditional strategy resulted in bad punctuality to the final customers in
the past, and large stocks to be handled since the production did not respond
effectively to the market demand.
• The change in delivery punctuality as still to be perceived by customers.
OPPORTUNITIES:
1. TRAFFIC RESTRICTIONS
• Limitations to old car circulation (Detailed in sections 2.2.3 and 2.2.5)
• Development of new engines driven by alternative energies to petrol
(ethanol, hydrogen and others).
THREATS:
1. HIGHER TAXATION
• Increasing taxation on car property (detailed in section 2.2.3 and annex 3),
personal income and capital gain.
2. ALTERNATIVE TRANSPORTATION DIFFUSION
• Public transportation, motorcycle and similar (detailed in section 2.3.1.3)
3. PETROL PRICE INCREASE
• Increasing price per barrel of petrol would result in higher fuel prices for
vehicle users.
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2.6 KEY SUCCESS FACTORS (KSF)
In identifying the KSF for Fiat, we analyzed two factors that influence them: the first are the
key purchasing factors on the customer side; the second are the competition factors, in
other word how competitors respond to the customers’ needs.
The key purchasing factors that we have identified along our research are: price, demand
for services and safety, technology and image. Regarding the price, competitors developed
strategies with the aim of rationalizing processes. This has been made, for example,
trough the implementation of Just In Time systems and the development of integrated
logistics. For meeting the customers’ demand for services and safety, the rival car makers
constantly develop safety innovations and improve sale and post-sale services. Moreover,
technology is the key for differentiating the products in such a competitive market. Finally,
an important aspect of competition, is the image that producers transmit to the public of
their brands: this is mainly made through the implementation of advertisement policies.
Having said this, the KSF for Fiat are: 1) REDUCE OPERATING COSTS
2) IMPROVE SERVICES QUALITY LEVEL;
GET INTERNATIONAL CERTIFACTIONS FOR
CARS SAFETY.
3) INNOVATE MORE THAN COMPETITORS.
4) DEVELOP AN EFFECTIVE
COMMUNICATION STRATEGY.
Fig. 19 “Key success factors” Own elaboration
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3. THE STRATEGIC PLAN
In its strategy Fiat has opted for a product development, in order to face the increasing
competition in the market. The new product is the Fiat Grande Punto introduced in the
market in 2005. The car was developed following three main lines: to create a fresh
design, to improve quality and to offer technology innovations.
The design needed to be innovative, fashionable and of style to attract the largest number
of customer. In the past Fiat cars were known for their simple design, simple mechanics,
medium-low quality and low price. With this car, that is just one of the numerous new car
launched in the market, the producer tried to change the idea people have on the brand
Fiat. For this reason Giugiaro, a world famous designer, studied for this low market car a
rich design. Furthermore, the second idea was to
offer to the public a car of higher quality: this
passed through a better engineering, better
components and better control on quality. The
aim, did not remain a purpose, instead it resulted
in a 27% reduction of warranty costs, only in the
2005, year of the Fiat Grande Punto launch.
Fig.21 “Quality and safety 1” Own elaboration on Fiat
Fig. 20 “Development strategy” Own elaboration
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Moreover, in one year there was a
decrease of 50% of the electric
check defects identified on Grande
Punto in comparison with the
number of the ones detected on the
old Punto. The bigger efforts made
in the engineering projection phase,
gave result in terms of quality,
warranty cost reduction and
also of safety. In fact, the Grande
Punto has been awarded with the
best safety ranking (five stars) by the EuroNcap, a European society that certificates the
safety degree of all cars in the market. An example of the technology innovations
introduced on the Grande Punto is the Blue&Me system, developed in collaboration with
Microsoft. It allows the driver to increase its safe in conduction, because if the mobile
phone is equipped of Bluetooth, the car blue system recognizes it; in this way, the driver
can leave the mobile in its jacket, or wherever he want, being able to receive the call
hearing it from the amplification system. If an SMS is received, the car system read it with
a prefixed voice. All the information about SMS and callings are displayed in front of the
driver’s eyes next to velocity indicator. All the commands for callings are on the wheel. In
this way, the driving experience become always more safety: the driver can keep its eyes
on the road while being able to
speak, to know what is written in
an SMS without moving the
hands from the wheel. Moreover,
the car is equipped with a USB
port that allows the customer to
connect to the car every kind of
electronic staff, including MP3
reader for listening the music
stored on it, directly on the car
audio system.
Fig. 22 “Quality and safety 2” Own elaboration on Fiat Data.
Fig. 23 “design by Giugiaro” Own elaboration
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Fiat adopted a competitive strategy that is a mix of defence and attack. Part of the attack
can be considered the development of retailers network, the heavy investment in
advertisement and the R&D expenditure. Instead, the defence strategy is implemented by
cost reduction and differentiation.
The development of the retailers network has been detailed in the section 2.4.2.3 of this
work, the advertisement policy in the 2.4.2.4 and the R&D in the 2.4.2.8 In brief, the
retailing network is based on the territory coverage, through private points of sale or own
stores in strategic cities if proper partners are not available. The strategy includes the
enhancing of the presence quality, closing the less productive points of sales and providing
training programs for retailers in order to increase their qualitative standards. The
advertisement campaign is made on TV, newspapers, magazines and boards. The
investment in R&D is the 3.5% of net revenues. It is carried out by two group’s companies:
the Fiat Centro Ricerche and Elasis.
The cost reduction strategy includes different activities: rationalization of internal
processes and establishment of alliances and share protocols.
For rationalizing the internal processes the company has adopted four methods in order to
achieving four targets: zero waste, zero defects, zero breakdowns, zero inventory. Fiat has
Fig. 24 “Competitive strategy” Own elaboration
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0
10
20
30
40
50
60
70
80
90
100
Stand alone Shared
13%
22%
25%
40%
20%
10%
10%
25%
35%
-10% costsSpecific Components
Internally shared components
Powertrain
Platform
Specific components
Internally shared components
Externally shared compoenents
Shared Powertrain
Shared Platform
done this keeping focused on its values of people involvement, value creation and
customer satisfaction.
In order to lower costs without compromising the brand, Fiat enhanced its corporate
synergies, utilizing common part in car building. This resulted in a reduction of more than
10% in costs.
Fig. 25 “Cost reduction” Own elaboration on Fiat Data.
Chart 18 “Costs breakdown” Own elaboration on Fiat Data.
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For increasing customer’s fidelity, Fiat developed a strategy with a mix of image and
differentiation. Part of the image strategy can be considered public relations policy, quality
and sponsorship. Instead differentiation concerns about the positioning, the design and
training programs.
To improve the brand image Fiat used a brand stretching tactic. They made exclusive
clothes and shoes with Fiat logo. Some of the most popular Italian people appeared in
public wearing them. Fiat is also involved in the organisation of glamorous events and in
sport sponsorship specific for different target: figure skating galas, snowboard contests,
Olympic Games and others.
Fig. 26 “Fidelization strategy” Own elaboration
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Quality policy and design (beginning of section 3), training (in paragraph 2.4.2.7) have
been discussed previously in the text. Fiat differentiates its brand through product
characteristics and prices. In particular Fiat has raised its price, passing from a situation of
€ 1,200 less than direct competitors to an average of € 200 less. This is shown in the table
above, in which it is illustrated the goal of Fiat regarding the new positioning to be obtained
until 2008. The
strategy is to create
a brand less linked
to tradition in favour
of modernity,
increasing the
distinctiveness
through products
characteristics and
higher prices.
Fig. 27-32 ”Fiat brand stretching and sponsorship”. Source: www.fiat.com
Fig. 33 ”Fiat positioning”. Source: Fiat Data
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4. FUTURE MARKETING MIX AND SEGMENTATION The Fiat goals in the Italian market are: continue to increase the market share in the B
segment, maintaining a strong segment leadership; continue to reduce the industrial debt,
distributing dividends to share holders; increase the business profitability reducing costs;
empower the brand image.
In order to do that, the development of the marketing mix should be structured as follows:
• PRODUCT: continue to offer innovative cars with high tech contents and high
quality. Develop new eco-friendly motors. Increase the safety.
• PRICE: offer a complete and quality car in the low market with a low price. This,
should continue to be benchmarketed to the competitors’ prices in order to sustain
the brand image evolution and the new positioning.
• PROMOTION: do not sustain sales with discount on the product that should
damage the brand. Keep the focus on highly effective advertisement. Continue with
the innovative research for new sponsorships in order to promote the brand within
new targets.
• DISTRIBUTION: continue the innovation of the points of sales in terms of images,
structures but in particular enhance the level of services provided by retailers. In
order to find the best partner, Fiat is trying to make the mandate more attractive,
lowering its costs, make it easier to be managed, extending to retailers the Fiat link
customer interface software (details in section 2.4.2.3). For increasing the network
quality, Fiat wants to reduce the number of underperforming dealers to below 15
and to reach 100% standard compliance in terms of image and processes. These
goals are imperative for sustaining the brand image. The real contact of customers
with the brand has place in the point of sale, facing with the salesman, who is
responsible to give the right image of Fiat. Training programs and continue
unrevealled evaluations, have to be implemented for salesman and technicians who
care the post-sale service providing.
In the past, the Punto was typically the car bought by retired and old people. The target
was not clearly defined, being only a car for the low market B segment. The age average of
old Punto buyers was of 48.7 years. The new strategy, that in our opinion should continue
on this path, is based on making the Grande Punto desirable by young people, as new
drivers and under 30. For this reason the brand image has to be improved paying attention
to the new target. The result of the new strategy can be noticed in the two charts below.
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AGE BREAKDOWN G.PUNTO vs. PUNTO buyers
0
5
10
15
20
25
30
35
18 to 29 30 to 39 40 to 49 50 to 59 > 60
age segments
perc
enta
ge
Punto
G. Punto
Buyers' age avarage
41
42
43
44
45
46
47
48
49
50
Punto G.Punto
Chart 19 “Age breakdown Grande Punto vs. Punto buyers”. Own elaboration on Fiat Data.
Chart 20 “Buyers’ age average”. Own elaboration on Fiat Data.
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5. CONCLUSION
After the big crisis that affected Fiat since 2000, we can now say that the future for the
Italian car maker appears bright. The product introduced in the market in 2005, Fiat
Grande Punto, went beyond every forecast, becoming the driving element for the Group
rebirth. The product is a total success, in terms of sales but also in terms of costs. The
company is working hard on re-engineering its processes, lowering all costs. The goal is to
increase margins and to drain the heavy industrial debt that has been one of the main
factors that almost knocked-down the company.
Not only the Italian market is responding positively: Fiat is attacking the whole European
market, with the aim of achieving a 10% market share in Europe, bypassing historical rivals
such as Renault and Peugeot.
Although the situation today is more than positive, a lot has still to be done to transmit to
customers the new Fiat’s values. This will not take one ore two years. For this reason Fiat
needs to work on a long time view. On the other hand, the financial position necessities of
short-term liquidity to give a certain stability to the company.
As conclusion of our work, we want to include the portfolio analysis, as result of all the
topics discussed along the entire project. The model used is the ADL matrix, that combines
the analysis of the business intensity with the competitive position. Indeed, what resulted is
that today, Fiat has a strong competitive position in the B segment, although the product
life stage has not yet reached the maturity. Moreover, the Grande Punto represents the key
to success for Fiat, having indeed a
big dimension into the matrix. The
evolution forecasted by us for the
Grande Punto is to remain still in
the A sector, having a slow increase
directed to the top right, result of the
consolidation of its position in the
market. The B segment saturation
and the strong competition within its
protagonists, will not allow Fiat to
expand its market share more than
the 30%.
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ANNEX 1
THE CORPORATE STRUCTURE
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INFLACTION RATE
0
0,5
1
1,5
2
2,5
3
3,5
1997 1998 1999 2000 2001 2002 2003 2004 2005
YEAR
AN
NU
AL
AVA
RA
GE
RA
T
ITALY EU (25)
LABOUR COST GROWTH
-5
-4
-3
-2
-1
0
1
1996 1997 1998 1999 2000 2001 2002 2003 2004 2005
YEAR
CO
ST G
RO
WTH
(%G
DP)
ITALY EU (25)
ANNEX 2
+1,3%
Brent spot price ($ per barrel)
Nominal Real
Source: own elaboration
Source: own elaboration
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ANNEX 3
The car taxation in Italy
The 46% of the inland revenue returns derives from the taxation on fuels. The first taxation
in made when the car is bought: the added-value tax (Iva) is calculated as the 20% of the
car value; a local taxes, the “IPT” is paid for registering the car into the public registry of
transportation. The average of the IPT is of about € 180. Local authorities are free to arise
this tax up to a limit of 20% more. Other € 75 are paid as stamp tax.
The road tax “bollo auto” is paid for being owner of car, independently from the effective
use of the car itself. It is paid proportionally to the maximum car capacity and to the level of
pollution (from the most polluting, the Euro0 increasing to the most eco-compatible Euro5).
Local regions are free to arise this tax within a 10% range. A extra margin is charged for
each Kw over the 100Kw.
Pre reform
From 0 to 100 Kw Over 100 Kw
EURO per Kw + 50%
EURO 0 2.58 3.00 4.50
EURO 1 2.58 2.90 4.35
EURO 2 2.58 2.80 4.20
EURO 3 2.58 2.70 4.05
EURO 4 2.58 2.58 3.87
EURO 5 2.58 2.58 3.87
The fiscal burden on car insurance is often not perceived by consumers, because it is
incorporated into the insurance premium. It is a tax of 12.5% of the insurance premium,
plus a 10.5% paid to the National Healthcare System (Sistema Sanitario Nazionale) for
compensating the incurred expenses of the hospitals for recovering car accident wounded.
The imposition on fuel is double: the excise tax, or production tax, that is translated to the
final consumer; moreover the consumer itself pay a 20% value-added tax (Iva) calculated
on the industrial price plus the excise tax.
A 20% of Iva is paid also on motorway tolls, parking, repairs and maintenances expenses.
Table X “the road tax in Italy” Source: own elaboration
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ANNEX 4
The Akerlof theory
The paper by Akerlof describes how the interaction between quality heterogeneity and
asymmetrical information can lead to the disappearance of a market where guarantees are
indefinite. In this model, as quality is undistinguishable beforehand by the buyer (due to the
asymmetry of information), incentives exist for the seller to pass off a low-quality good as a
higher-quality one.
The buyer, however, takes this incentive into consideration, and takes the quality of the
good to be uncertain. Only the average quality of the good will be considered, which in turn
will have the side effect that goods that are above average in terms of quality will be driven
out of the market. This mechanism is repeated until a no-trade equilibrium is reached.
As a consequence of the mechanism described in this paper, markets may fail to exist
altogether in certain situations involving quality uncertainty. Examples include the market
for used cars
However, not all players in a given market will follow the same rules or have the same
aptitude of assessing quality. So there will always be a distinct advantage for some
vendors to caters low-quality goods to the less-informed segment of a market that, on the
whole, appears to be of reasonable quality and have reasonable guarantees of certainty.
This is part of the basis for the idiom, buyer beware. Akerlof uses the market for used cars
as an example of the problem of quality uncertainty. There are good used cars (“cherries”)
and defective used cars ("lemons"). The buyer of a car does not know beforehand whether
it is a good car or a lemon. So the buyer's best guess for a given car is that the car is of
average quality; accordingly, he/she will be willing to pay for it only the price of car of
known average quality.
This means that the owner of a good used car will be unable to get a high enough price to
make selling the car worthwhile. Therefore, owners of good cars will not place their cars on
the used car market. The withdrawal of good cars reduces the average quality of cars on
the market, causing buyers to revise downward their expectations for any given car. This,
in turn, motivates the owners of moderately good cars not to sell, and so on.
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ANNEX 5
FIAT HISTORY
F.I.A.T. was founded in Turin on July 11, 1899, at a time of lively industrial expansion of
the city. The first factory was inaugurated in 1900 in Corso Dante and it employed 35
people that produced 24 cars a year.
Giovanni Agnelli, a former cavalry officer, stood out among the shareholders for his
determination and strategic vision and in 1902 he was appointed Managing Director. He
promoted a Tour d’Italie by car for advertising purposes: an initiative that had become a
huge success by the time it reached the Milan Exhibition finishing line. In 1904 the
company adopted the oval trademark on a blue background designed by Carlo Biscaretti.
The first Fiat-branded car was a 4 HP. The company was to follow a two-pronged strategy
of growth: diversification of production and a focus on the most promising markets.
In 1903 Fiat was listed on the stock exchange and new companies with specific functions
were set up: Società Carrozzeria industriale, Fiat Brevetti, S.A. Garages Riuniti Fiat-
Alberti-Storero. The Fiat plants produced road and racing cars, commercial vehicles,
marine engines, trucks, trams, taxis and ball bearings.
The company approached the market with a strategic, international vision: in 1908 Fiat
Automobile Co. was set up in the United States to produce Fiat vehicles under license and
in 1909 the Poughkeepsie plant was built in the State of New York. Relations were
established for the export of cars to France, Austria, the United Kingdom and Australia. At
the end of its first decade of activity, Fiat had a capital stock of 12,000,000 Italian liras,
2,500 employees and an annual output of 1,215 cars.
The outbreak of World War I brought about a massive expansion in the production of army
trucks, airplanes, ambulances and engines for submarines. This temporary conversion to
military production did not however alter Giovanni Agnelli’s long-term plans: his biggest
dream was still that of a great future for Fiat as a car manufacturer. After a number of trips
to the United States Giovanni Agnelli, Bernardino Maraini and Guido Fornaca decided to
design a “new, great, American-style factory”.
So in 1916 construction of the Lingotto factory began, in Turin, on a still largely agricultural
site, with Giacomo Mattè Trucco as project manager. The Lingotto factory, the largest in
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Europe, soon became the emblem of Italian automotive industry and one of the best-
known sites in Turin. In those years Fiat diversified its activities to include the iron and
steel industry, and the railway, electricity and public transport sectors, becoming the
exclusive supplier of buses to the SITA company in Florence.
The Great War ushered in a decade of complex and profound social change. And Fiat was
not immune to this, with its factories being occupied by the workers in September 1920. In
November of the same year Giovanni Agnelli was appointed Chairman of the Board of
directors and Guido Fornaca Managing Director.
After two years during which Fiat was forced to contain costs, reduce the workforce and cut
wages, in 1923 the new Lingotto factory became operational and growth resumed. The
Fiat 501 was launched followed by the 505, the 510, the 519 and in 1925 the four-seater
509 made its debut.
The Fiat management understood that there was a close connection between the
expansion of the company and the development of mass production in Italy: increased
industrial output meant a higher standard of living, social progress and higher consumer
spending. With that in mind, Fiat created Sava, a consumer credit company whose
objective was to enhance instalment sales (so-called hire purchases). For the first time
advertisements also addressed women: in posters, newspapers and corporate publications
women appeared as potential buyers. Fiat’s victories in motor racing, the crossing of the
Sahara desert by car and rallies in Latin America helped to stimulate interest in this
modern means of transport.
In those years Fiat introduced health care services for its employees, it set up the Fiat
Apprentices School and a number of associations such as the Fiat Sports Group, holiday
camps in the mountains and the Employee Association. Many of these institutions have
kept pace with social change and are still active today. Fiat continued to invest in Italian
and foreign companies and IFI (Istituto Finanziario Industriale) was set up to coordinate
this complex network.
In 1924 the Moscow plants became operational. They manufactured cars and trucks under
Fiat license on the basis of a 1913 project. Mussolini’s call for autarchy forced the
company to rescale its international expansion plans and focus on the domestic market.
During the thirties, trucks and commercial vehicles, including diesel-powered vehicles,
underwent considerable technological development and the aeronautical and railway
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sectors also grew significantly. Fiat produced the world’s first high volume runs of self-
propelled electric and diesel trains for the Italian state railways.
In 1928 Vittorio Valletta was appointed Fiat’s General Manager. In 1935 Senator Giovanni
Agnelli suffered the loss of this son Edoardo. In 1934 the company designed a low-
powered car: the 508, also known as “Balilla” or “low rate” due to its reduced fuel
consumption (eight liters for every 100 kilometres). Overall, a total of 113,000 units were
produced, including a sports version (508 S) and a 4-speed gearbox version (71,000
units). 1936 was the year of the debut of the Fiat 500 “Topolino”, designed by Dante
Giacosa. It was the smallest utility passenger car in the world, and from that year until
1955 a total of 510,000 units were produced.
Fiat’s commitment to mass production was reaffirmed when in 1937 construction of the
Mirafiori plant began in Turin. This plant was to introduce the most advanced concepts of
industrial organization in Italy. Inaugurated on May 15, 1939, Mirafiori employed 22,000
workers on two shifts, a considerable number if one considers that Fiat’s total workforce at
the time numbered approximately 55,000. Service centers, workshops and specific
industrial initiatives started to be set up in Spain, Egypt, Poland and France.
During the Second World War the production of cars was drastically cut while there was a
fivefold increase in the number of commercial vehicles produced. During the war, carpet
bombing badly damaged Fiat’s plants but failed to paralyze production. Both during and
immediately after the war, the assistance Fiat offered its employees helped to make up for
the deficiencies of Italy’s public services: the welfare office provided linen, shoes and
firewood to employees, while Fiat canteens distributed 100,000 meals every day.
Senator Giovanni Agnelli died in 1945 and in July 1946 Vittorio Valletta was appointed
Chairman of Fiat. Valletta was faced with the task of bringing Fiat up to date with American
technology and introducing mass motoring in Italy. With the aid of the Marshall plan,
reconstruction of plants was completed in 1948. Workforce increased from 55,674 to
66,365, and profits, which had stagnated during the war, had reached break-even after
1943, and were at loss in 1946, began to show an upward trend in 1948.
During the postwar revival, Fiat launched the Fiat 500 B berlinetta and giardinetta, the
1100E and 1500E models, and a car with a monocoque body, completed new in its design
and mechanics, the Fiat 1400. For the first time ever, a standard heating/ventilation system
was installed on the 500C. In 1953 the first diesel-powered cars made their debut.
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Research in the field of marine engines and airplanes continued and in 1951 Fiat produced
the first jet plane: the G 80. New opportunities emerged with the construction of a
turbocharged car prototype and activities in the nuclear field. In 1956 Fiat’s G 91 won the
Nato tender for the manufacture of a tactical fighter plane.
In 1955 the Fiat 600 was launched. Over 4,000,000 units of this utility car would eventually
be produced. Its launch was celebrated by a cavalcade of multicolor Fiat 600s parading
through the streets of Turin, symbolically announcing the era of mass motoring in Italy.
Two years later the new 500 was launched and in the end 3,678,000 units of it were
produced. During this decade the overall number of employees increased from 70,000 to
80,000, and production rose from 70,800 cars in 1949 to 339,300 in 1958.
Between 1956 and 1958 the size of the Mirafiori plant doubled and at the end of the sixties
it employed over 50 thousand workers. Meanwhile production of tractors and construction
machinery also expanded. Operations abroad also increased, with new plants being built
in South Africa, Turkey, Yugoslavia, Argentina and Mexico. Fiat’s plant engineering and
construction operations, headed by Impresit, experienced urging international expansion:
the Kariba hydroelectric plant on the Zambesi, the Dez dam in Iran and the Roiseires dam
on the Blue Nile in Sudan, the rescue of the ancient Egyptian temples at Abu Simbel, and
the motorway tunnel of the Gran San Bernardo.
Those were the years of Italy’s “economic miracle”. Between 1958 and 1963 gross
domestic product increased at an annul rate of 6.3%; the automotive industry was the
driving force of the economy. Between 1959 and 1968 Fiat’s output increased from
425,000 to 1,751,400 cars, and the ratio between inhabitants and cars went from 96 to 28
inhabitants per car. Exports also boomed: from 207,049 to 521,534 cars.
The production of commercial vehicles and tractors also increased from 18,968 units to
68,200 units and from 22,637 to 52,735 units, respectively. Workforce doubled: from
85,117 to 158,445 employees, with a more pronounced increase in the number of blue
collar workers with respect to white collar workers.
In 1964 Fiat launched a widely popular new utility car, the Fiat 850 that was soon followed
by two bigger models, the 124 and the 125: the first Fiat cars to adopt in 1968 the
rhomboid Fiat trademark. In 1966 Giovanni Agnelli, grandson of the founder, became
Chairman of the Company.
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In 1969 Fiat decided to strengthen its involvement in the South of Italy, where the
Company could already count on facilities located in Reggio Calabria, Bari and Naples. So
plants for the production of cars were built at Termini Imerese, Cassino and Termoli, while
the Sulmona, Lecce, Brindisi and Vasto plants were to satisfy special production
requirements. The economic boom was followed by a long period of social unrest: turmoil
inside the factories reached its peak in 1969, with a total of 15 million strike hours. The
tidal wave of conflict was to have drastic repercussions on Fiat’s profitability.
The 127 was launched in 1971, the first Fiat car with front wheel drive which was distinctly
innovative for its time. The car was a huge success and in 1974 the one millionth 127
rolled off the assembly line. The oil crises and technological innovation led to an ever-
increasing emphasis on automated manufacturing processes: as early as 1972 Mirafiori
was using 16 robots on its 132 model production line and in 1974 the Cassino plant was
robotized as well. 1978 saw the introduction of “Robogate”, the new robotized, flexible
bodywork assembly system. This system, installed in the Rivalta and Cassino plants, was
designed by Comau which would soon become world leader in the field.
In 1978 Lancia S.p.A. was merged into Fiat S.p.A., while the Lancia trademark was
preserved for marketing purposes. In 1979, the Automobiles Sector was transformed into
an autonomous company with Giovanni Agnelli as its Chairman and it included the Fiat,
Lancia, Autobianchi, Abarth and Ferrari brands.
At the end of the seventies, Fiat adopted a holding structure. The various manufacturing
operations, which had been divisions during Valletta’s period, converged into independent
companies which headed specific Sectors. Alongside the traditional Fiat businesses
represented by Fiat Auto, Fiat Ferroviaria, Fiat Avio, Fiat Trattori, Fiat Veicoli Industriali,
other Group activities such as Fiat Engineering, Comau,Teksid, Magneti Marelli,Telettra
were also established as independent companies.
Cesare Romiti, who had joined Fiat in 1974 as Chief Financial Officer, became Chief
Executive Officer of the Fiat Group in 1980. In these years both Fiat Ferroviaria and Iveco
significantly expanded. Fiat Ferroviaria developed cutting-edge technologies for the
construction of tilting, independent wheel railway bogeys that were to culminate in the
production of the Pendolino, a high-speed train thanks to which Fiat was to win important
tenders in many European countries. Iveco became the international trademark for all of
Fiat’s commercial vehicles operations.
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Set up in 1974, the Iveco trademark included the Fiat, Om, Lancia, Magirus and Unic
brands, and from 1991 the Spanish Pegaso brand.
In 1983 the Fiat Uno was unveiled at Cape Canaveral: this car was to represent the
beginning of a new era for Fiat Auto. It was radically innovative in its use of electronics and
alternative materials and for the adoption of a “clean” engine, the Fire 1000. Overall, a total
of 6,272,796 units will be produced.
The following year Fiat Auto S.p.A. acquired Alfa Romeo S.p.A. and its associated
companies, while in 1993 it acquired the prestigious Maserati sports brand and completed
the range of automobile brands that the Group still owns today. The number of
international agreements for the manufacture of Fiat products under license continued to
increase, as did interests held by Fiat in other companies. Particular focus was placed on
acquiring stakes in telecommunications and components companies. In this area, a
program of mergers and demergers culminated in a major reorganization that transformed
Magneti Marelli into an industrial holding company, which in 1987 controlled more than 60
companies around the world. With the increasing use of electronics, components started to
play a decisive role in the development of private transport vehicles.
In 1989 the Fiat Tipo was elected “Car of the Year”, an award assigned by the international
press for the innovative features of this model. Society was starting to change its attitude
towards the automobile world: this mature industrial society began to recognize the
importance of a car’s environmental impact. Fiat addressed this issue by launching a
project for the total recovery and recycling of end-of-life vehicles.
In 1991 work began on two new plants at Pratola Serra and Melfi. These two plants, which
became operational in 1994, represented a new revolutionary approach to industrial
production. Fiat responded to the crisis of the yearly nineties by expanding its international
presence. At the same time it undertook a major capital increase and continued to invest
significant resources in innovation, while rigorously cutting costs and pursuing incisive
restructuring programs.
On February 28, 1996 Giovanni Agnelli became Honorary Chairman of the Fiat Group and
Cesare Romiti took over as Chairman, a position he will hold until 1998, when Paolo
Fresco replaced him. At the same time, Paolo Cantarella was appointed Chief Executive
Officer.
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The Fiat Punto was the innovative car launched in those years. Designed to be a European
car, in 1995 it was elected Car of the Year In 1998 the Panda celebrated its 18th birthday
and became one of the cars that had been on the market for the longest time.
Beginning in September 1997, the Parent Company left its offices in Corso Marconi to
move to the Lingotto building, which is part of a complex that had in the meantime been
turned into a fair and conference center.
At the end of the nineties industrial competition became more aggressive in Western
European markets. Fiat responded to the incursion of South East Asian products into the
European market by returning to the Company’s original strategy of focusing on emerging
markets.
The plants in Brazil and Argentina were expanded and Fiat launched the Palio, a world car
designed to meet the needs of differing markets. Fiat soon became the biggest anufacturer
in Brazil, Argentina, Poland and Turkey.
In 1991, with the acquisition of the tractor and agricultural machinery operations of Ford
Motor Co, Fiat’s construction machinery sector took on the New Holland brand and
became international. In 1993 it signed an agreement with Hitachi Co Machinery Ltd and
expanded existing joint ventures. It thus became one of the biggest manufacturers in the
world, and accounted for approximately 20% of total global output.
Iveco strengthened its leadership position in Europe, renewed its product range with the
introduction of the EuroTech, EuroStar and EuroCargo new series and set up joint
ventures and manufacturing operations in India and China for the production of the light
vehicle Daily.
In 2000, Fiat entered into an industrial alliance with General Motors, a giant of the
automotive industry. Three years later, on January 24, 2003 Giovanni Agnelli passed away
after forty years at the helm of the company. At the same time, in order to face the crisis
that the Group was going through, Fiat redesigned the scope of its operations to focus on
its automotive operations, thus selling certain non-strategic activities such as the Aviation
and Insurance Sectors.
On May 27, 2004 Umberto Agnelli, who had taken on the reins of the Group after his
brother’s death, passed away. The Group’s top management now featured Luca Cordero
di Montezemolo as Chairman, John Elkann as Vice Chairman and Sergio Marchionne as
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Chief Executive Officer. The new top management embarked on a profound restructuring
plan.
The Fiat Panda was elected “Car of the Year” and Ferrari won the sixth Constructors’
Championship and the fifth Drivers’ Championship in a row. Rigorous cost-containment
measures and an incisive industrial relaunch enabled the Group to reach operating break
even in 2004 and post an income in 2005.
The termination of the Master Agreement with General Motors, which led to the unwinding
of all joint ventures, is recent history. It was February 13, 2005 and Fiat Auto was once
again a fully Italian company.