Fiat is a manufacturer and a seller of the common Fiat brand vehicles based in Italy and with many sales branches around the world. It has been successful for many years in the production of its vehicles and has made a lot of returns from that. However, the company has faced a lot of challenges, especially the effects of the global financial crisis, factors that have caused it to undergo a recession and a great fall in its business resulting to very low returns. On the other hand, the company has undergone a lot of pressure from its competitors in Italy and also other car manufacturers from prominent countries like Germany and Japan and this has resulted to a lowered competitive advantage. All these factors have contributed to what has been referred in the vehicle business world as the fall of Fiat.
In addition, the company suffered a lot of pressure, both internal and external, which forced it to experience a severe downward trend. The effects of the global oil crisis and the high rates of political instability in Italy cost the company a lot and forced it into a large debt burden by the mid 70s. The company had a lot of struggles within its management and as a result of the stiff competition from its main competitors like the Volkswagen and Japanese car manufacturers especially due to the lack of flexibility in its manufacture strategies that did not allow it to meet the rising requirements of its target market in Italy and around the world. The greatest challenge for the company was its penetration into the world market as the competition there was very stiff and most of its competitors were considered as offering better services, higher quality and more competitive and friendly prices. All these resulted to a lot of problems and complications within the company (Hoffman 46).
Though the management of Fiat was trying all it could to contain the situation, the company continued to fall further especially in its sales and image, even as it plunged deeper into debts that could not be easily covered. The climax of the situation was experienced in 2002 when the company was left with no other option rather than instilling restructuring strategies as well as seeking for more sources of income and lowering its spending. The company undertook a lay-off in its labor sector and over 14, 000 workers were laid off within a span of one year. This cost the company a lot as there were thousands of families that depended on it for their income and hence there was a public unrest as a result of the lay-offs. The international bodies, especially the humanitarian ones, were also opposed to its decision resulting to lowered acceptance both within the country and around the world. This further resulted to loss of a large part of the market share and lowered returns, leaving the company in a lot of debts and losses.
However, all was not lost. After what was seen as the final blow for the company and as the fall of Fiat, the new CEO of the company made proposals for what was later to be referred to as the turn-around of the company and the rise of Fiat. He laid down a lot of strategies that were to see the company transform and gain its lost glory through restoration of its place and its market share in the market.
There were a lot of strategies that were considered in ensuring the corporate turn-around of the company. First, the company planned to enhance its partnership with GM so as to reduce the risks it faced operating as a single entity. This way, it would be cautioned against large losses and also would undergo a facelift that would elevate it to a higher position in the market.
The company came up with strategies that would enable it gain a lot of income so as to be able to settle its debts and also to be able to cater for its operations. It also embarked on selling of some of its sectors, such as the aerospace department, so as to concentrate on the production of vehicles. This way, the company was able to concentrate all its resources and efforts to one sector, a factor that ensured increased quality of products and service delivery and resulted to customer satisfaction.
In addition, the company formulated a strategy of reorganization and restructuring of its management and the staff so as to maximize the labor output and create satisfaction within the employees. The whole management was scrutinized and all the management personnel that were noted as lacking a culture for growth of the company were laid off while more talented workers filled their slots. Also, the structure was re-organized so as to reduce the hierarchy that was in existence and ensure that the management and employees interacted in a better way. This factor was bound to increase the productivity of the company. This in return ensured that all the labor was properly utilized and hence it was economical for the company to maintain the number of employees it had at that particular moment (Hoffman 51).
Further, the company formulated an investment strategy that focused available funds into the sales and marketing of its products so as to increase customer awareness and attract many prospective buyers of its products. This was expected to raise the company’s competitive advantage against its competitors as well as enlarging its market share.
Another strategy that was used by the company was the redesigning of the brand for the company, a factor that was aimed at lifting the face of the company so as to create an image for the company and also uplift the trust and loyalty of its clients.
Through the use of different corporate turnaround strategies, Fiat was able to overcome its main challenges that had caused its fall and was able to rise again and maintain its position as a competitive car manufacturer in the world. This way, the company was able to increase its profits and also to utilize more innovations and inventions that made its production better and more competitive in the market.
Works Cited
Hoffman, Richard. “Strategies for corporate turnarounds: What do we know about them?” Journal of General Management. 1989: 46-66. Print.