Global Business Strategy - Essay Example

? GLOBAL BUSINESS STRATEGY By Lecturer: of Affiliation: and Allocated Company: Chrysler Group Word Count: 3,304 Executive Summary The researcher provided an introduction to the research topic and a brief historical background of Chrysler Group, as well as, its internalisation process. The evaluation of the current external environmental conditions facing the company was conducted. This is where the author analyzed PEST analysis including political, economic, social and environmental factors, as well as examined Porter’s Five Forces of analysis. Other theoretical aspects and Porter’s five forces vital for achieving a competitive advantage were examined. The author highlighted some strategic challenges impacting the company in the current global market. Company resource audit was included and the author revealed some tangible and intangible organizational resource and capabilities. The researcher analyzed the current strategic alliance and other corporate strategies employed in the business operation process. This included SWOT analysis as a vital strategic tool effective for determining favorable and unfavorable factors in the business environment. Strategic implementations were included and also organizational structure evaluated including the industrial structure, corporate or functional and brand-based organizational structure. Lastly, the author included some recommendations and also the conclusion that summed up the research project. Global Business Strategy Introduction Globilisation, which has been contributed by rapid technology development, has encouraged many multinational enterprises to implement effective global business strategy vital for achieving a competitive advantage. Many multinational enterprises have made significant determinations in order to sustain their business in the competitive global market. Many actors in the international markets have increasingly internationalized their operations; thus their performances are deeply influenced by their mutual interdependencies and by their strategic behaviors towards their competitors. Automotive industries are among the companies that have attempted to implement effective global strategies by forming mergers, alliances and acquisitions in order to improve the automobile markets. Among the automobile companies, Chrysler Group is one of the automobile industries that have adopted strategy of internationalisation and varied strategies for achieving successful business performance. Thus, the research project will focus on Chrysler Group Company’s global strategy and relevant theories, which the company employs in order to improve their business performance in the global competitive market. Historical Background of Chrysler Group and Its Internalisation Process Chrysler Group is an American multinational corporation that designs automobiles and it’s headquarter is located at Auburn Hills in Michigan. It was established by Walter Chrysler in 1925 when Maxwell Motor Corporation was restructured into the Chrysler Group Company, and trades automobile products across the globe under the flagship Chrysler brand, but other brand also exists including the Ram, Doge and Jeep brand. The company has been performing well across the globe and it was named among the leading automaker production globally, in 2011. Chrysler Group established a global strategic alliance with other companies including Fiat and merged also with other firms under, which it currently sells their automobile products. Moreover, with adequate resources, improved technology and global distribution network necessary for competing on a global level, the alliance builds on the company’s innovation culture. It also builds their innovation culture, which is based on the complementary technology of Fiat Company that was founded, in 1899. The company employed internalization strategy by merging Daimler Benz and also merged with Volkswagen Group, with an aim of extending their products range to broaden their sales in the automobile markets. However, the internalisation process of the supplier of Fiat was done through outsourcing, vertical partnerships and modularization as a way of increasing sales across the globe. Evaluation of the Current External Environmental Conditions Facing the Firm Despite the internalisation strategic process, Chrysler Group Company is currently facing varied external environmental challenges including macro and firm environmental challenges. The company faces some of global PEST factors both within and outside the firm operations. First, technological factors are among the challenges impeding the company from achieving effective business performance despite their effort of implementing a global strategy. The increased technology changes and the spread of Internet across the globe are among the major technology challenges impacting the internalisation operations of the company. Haynes (2002, p. 123) argues that managing Internet has become of the most challenging issues in the current business environment. This is because of increased cybercrimes and hacking activities; thus posing threat to the organizational data. Moreover, technology keeps changing in the knowledge-based economy; thus the company is exposed to the knowledge management issues notably technology management and managerial cognition challenges. Grant (2000, p. 111) argues that knowledge-based theory can be conceptualized with the business models, but poor strategic choice employed in a firm may hinder a firm from establishing a sustainable competitive advantage. Additionally, the company encounters varied economic and political challenges including increased production cost, increased capital costs and unstable currency exchange rate (Bartlett, Ghoshal and Birkinshaw (2004, p. 54). The dollars keeps on changing and this affects the organizational performance. For instance, the exchange rate policy continues to deteriorate deeply in other regions such as in Argentina; thus affecting the comparative costs. Moreover, the company also faces political challenges including regional integration issues and government legislation such as high tax regulations; thus impacting their business performance. The company employs Porter’s Five Forces analysis in order to achieve effective competitive advantage, but it faces some challenges in an attempt of using this strategic framework. Stonehouse and Snowdon (2007, p.257) argue that the performance of the firm depends on the degree of competiveness of the five forces or strategic, as well as, the structure of the industry. First, there is an existing competition between suppliers; thus weakening the external markets. For instance, increased imports of automobile components from Italy as foreign units continue to develop. This creates pressure for product improvement and operations, as well as competitive struggle for market shares among the existing firms; thus creating a competitive challenge. Secondly, threat of substitute products is a great challenge facing the industry. There are increased product substitute due to the need to satisfy customers effectively, but this has posed a ceiling on the possible revenues of the company. Thirdly, risk of entry by the rival firms; thus the new players may increase the capacity of the company; thus contributing to market share competition and lowering of costs. There intense competition level from other companies producing similar automobile products and declining components exports from Italy because of increased local content of foreign productions. Lastly, increased bargaining power from buyers and suppliers; thus enabling the company to lower prices for buyers and suppliers have extracted high profit; thus increasing the production cost of the company. A decline in sales in the external markets is not only the problem facing the company but also poor corporate governance. The social changes impacts the sales of the company and this have been one of the major causes for decreased sales of automobile products in the global market. Moreover, corporate governance including marketing regulations and mechanisms, as well as the relationship between Chrysler, Fiat and many other partnering companies have been a problem because of management issues. The company employs sound approaches but mitigating risks emerges from the external environment; thus a call for effective organizational management. Doole and Lowe 2005, p. 45) argue that poor corporate governance can impact economic efficiency; thus employing effective decisions can enable the company to achieve success. The danger may arise in case of poor management in overseas; thus setting effective marketing conditions and employing effective regulatory approaches can enable Chrysler Group Company to succeed in the global market. Moreover, the company faces varied challenges because of increased number of corporate mergers. The research study carried out on the significance of organizational culture within the merger context revealed that mergers frequently fail because of incompatible cultures (Inkpen and Ramaswamy (2006, p. 123). The company is currently facing corporate merger strategy and acquisition strategy challenges because of failing to meet the financial promise. Therefore, managers within the merged automobile companies should take into considerations the role of organizational culture; thus creating a new successful organization. The company also faces challenges in an attempt of incorporating corporate social responsibility (CSR) strategy. Crane, Matten and Spence (2008, p.49) argue that implementing effective corporate social responsibility in an organization can contribute to sustainable business activities. Thus, aligning the business model and the objectives of the organization with the CSR strategy can enable the company to achieve their business goals effectively. Company Resource Audit The daily activities of Chrysler Group are managed by qualified and highly skilled, as well as, motivated management team. Blenkhorn and Fleisher (2005, p. 89) argue that competitive intelligence and employee capabilities are among the core competence resources vital for achieving a competitive advantage. The experienced management leaders came from Fiat and Chrysler companies; thus the management flattened the organizational structure, whereby the management committee is chaired by the CEO and chairman of both Fiat and Chrysler in order to facilitate effective decision making and collaboration (Chrysler Group LLC, 2012). The product committee manages capital investments, product development and the business committee handles matters connected to supply of product and other marketing activities. Both committees came from each of the company’s brand including Dodge, Mopar, and Fiat among others brands of the company. This committee plays separate and significant roles across the organizational brands; thus they share information and make effective decisions in a timely manager, as well as, foster cooperation across the company. The company has varied brands and each of them has well-known brand, which have launched new class segments. The research study report indicated that Chrysler Group has corresponding revenues of 49 billion Euros. According to Engel and United States (2010, p. 135), Chrysler Group received a loan of $ 280.0 million from the office of financial stability, in the year 2009, but the company was able to offer an interest of $ 3.1 million. However, the company was involved in bankruptcy case, which was associated with the assets of the company; thus impacting business performance. The company also recognizes and embraces the significance of global diversity across their business. The company has brought numerous people with competence skills and experiences from varied cultural backgrounds. . Evaluation of the Firm’s Current Strategy The company employed the theoretical business models of merger and acquisition in their business operations. However, the company experienced a severe crisis after the first year of merger strategy implementation. This contributed to a decline in production of products, decline in sales volume and revenues, as well as, reduction of employees. This strategy was viewed as unsustainable because it contributed to sales and efficiency crises; thus it forced the company to change management, as well as, cut supply costs immediately. The company had to increase productivity in order to reduce the break even, but to reach these objectives, the company was forced to shut-down the production sites, reduce production and layoff some of their employees. However, Chrysler Group Company established an international strategic alliance with Fiat Company, which is currently used in the business sector. This strategy is sustainable because it was built under the innovation culture; thus enabled them to build a great automobile company. Sergio Marchionne and the entire management team were able to solve the bankruptcy problems and this strategy became effective; thus enabled the company to improve their performance level. The company began forming a responsive, skilled, experienced and new management team by reinventing new business models. The management team has worked tirelessly for the past few months in order to implemented effective business strategy for moving the company forward. They also focused on brand and world class innovative products with a highly performance cultural ideas. The company employs SWOT analysis as an effective strategic tool vital for examining the internal and external factors, which are favorable or unfavorable for the business. Thompson, Strickland and Gamble (2006) argue that SWOT analysis is an effective tool that will enable the company to evaluate strengths, weakness, opportunities and threats to the organizational performance. Mellahi, Frynas and Finlay (2005, p. 56) argue that implementing effective sales strategy and designing products in a unique manner is crucial. Chrysler Group carries out product analysis and this has enabled them to develop product design strategy and implement sales strategy vital for increasing organizational sales. This is the strength for overcoming competitive challenges; thus achieving a competitive advantage. The formation of the global strategic alliance led to increased market share, which is an opportunity for the increased profitability level in the company. The demand for automobile parts increased; thus an opportunity to effective business performance in the company. The use of SWOT analysis is an effective strategy because it has contributed to improved organizational performance because the company was named the twelfth automobile company across the globe. However, low value for dollar and competitive rivalry threatened the performance of the company. Unresolved legal issues and lack of effective strategic management structure also are among the weaknesses to the effective organizational performance. Strategic Implementation, Organizational Structure, Use of Power and Control Chrysler Group Company employs varied strategic approaches that can enable them to manage their global business operations effectively. One of the approaches is optimizing fuel economy by manufacturing vehicles with conservative engines. Thus, the pressure to reduce costs has forced the company to employ varied strategic choices including the transnational and global strategies with an aim of meeting the demanding business goals effectively (Okpara 2008, p. 102). Another strategic implementation is the sustainability approach and this strategy has forced the company to increase use of alternative car fuels and design systems in order to reduce environmental emissions. Ghemawat (2010, p. 55) argues that sustainability is the foundation that should define the company, guide their decision and action; thus achieving demanding needs of customers efficiently. The company is deeply committed to production of sustainable car products by minimizing product impact on the global environment while striving at the same time to achieve their business objectives effectively. The company has expanded their sustainable mobility efforts through working closely with Fiat; thus leveraging and strengthening their business activities. For instance, Fiat brand is one of the leading products that are recognized in Europe for their highly effective engine technologies with lowest emission of carbon dioxide. The Chrysler Group Company is structured basing on varied principles implemented by the new management team. The first structure is a brand-focused or commercial organizational structure, which comprises of the Chrysler brand, Dodge brand, Jeep brand and Mopar brands (PR Newswire 2013, pr.9). Moreover, each of these brand structures share full profit of loss. The aim of focusing on brand or commercial structure is the need to reconstruct and augment the four brand of the company starting with the strong to the weakest one. Therefore, the company designed this structure by focusing on external threats such as competition, thus avoiding brand overlap. This structure aligns with its supply chain networks with the brand positions; thus restoring the brand promise and delivering effective services. Secondly, industrial organizational structure, which supports the organizational developments, product design, distribution and product sales of diverse brands. This structure supports the industrial operations or activities of the company; thus enabling the company to achieve their objectives efficiently (Peng and Pleggenkuhle-Miles 2009, p.56). In this case, employees are appointed and allocated varied responsibilities depending on their capabilities, skills or experience. Therefore, they have power to oversee or manage product development processes successfully. Lastly, there is corporate or functional structure, which is extremely flat with leadership span control. These are very wide to streamline communication flow across the organization and these speeds up decision making in the company (PR Newswire 2013, pr.7). In the functional or corporate structure, there is use of power and control in order to put everything in the rightful place. The company support varied function with critical roles and the organization structure offer effective knowledge and tools vital for achieving the business in the goals. They also ensure that laws and applicable regulations are followed across the globe. Recommendations The successful business managers in the contemporary business environment know the way of designing and implementing a global strategy, but they should be cautious when choosing a global strategy. Therefore, the company should address varied urgent issues and pay attention to them throughout the company’s global strategy. One of the recommendations is that the company should finds ways of addressing environmental, social and economic factors that impacts their business while balancing conflicting needs on other resources and time. They can increase corporate executives but lay emphasis on CSR with their business strategy. This is because this will help them to define clear priorities, build social and effective business values, as well as, integrate social responsibilities across the business. Secondly, the company can strengthen their ability by defining and implementing powerful CSR strategies, as well as integrate effective knowledge based management in their business; this will position their company, its reputation and the way of performing business for enduring in a competitive business environment. Carr and Collis (2011, p. 22) argue that implementing effective CSR strategy is crucial because it enables the company to be socially, economical and environmentally responsible in varied business activities; thus achieving sustainable business advantage. Thirdly, the company should understand the organizational culture and carry out effective marketing research before entering into the foreign markets. Organization culture can impact the performance of the company; thus carrying out partner analysis is crucial. This will enable the company to understand each other, communicate effectively and understand the business logics each industry employ in organization operations. They can carry organizational analysis in order to determine in case there are effective decision making process, efficient monitoring and control mechanisms vital for achieving successful business performance. Moreover, cultural change is crucial, but culture will not change its significance unless the merged corporate managers change some basic underlying assumptions. Briscoe, Schuler and Claus (2009, p. 74) note that changing organizational culture is crucial and this include teaching or training employees about preferred values, beliefs, behaviors and organizational expectations. Lastly, the company can employ effective objectives and carry out partner fit analysis when employing strategic alliance model. Peng (2009, p.56) argues that employing effective corporate management theories in an organization and being accountable are among ways of creating successful corporate governance. Therefore, the management can examine whether partner are capably fit and willing to contribute to the critical resources, assets and competences necessary for achieving competitive advantage. They can analyze their strategy in order to determine whether the respective objectives are compatible. Conclusions In conclusion, the research project focused on Chrysler Group Company’s global strategy and relevant theories, which the company employs in order to improve their business performance in the global competitive market. Many companies have attempted to employ varied theories and strategic approaches with an aim of achieving effective business performance. Therefore, Chrysler Group Company is one of the automotive companies that have increased their performance level since the implementation of the strategic business alliance. This strategic alliance is build on an innovative culture ; thus the company has improved due to adequate resources, improved technology and global distribution network necessary for competing on a global level. Despite the internalisation strategic process, Chrysler Group Company is currently facing varied external environmental challenges including macro and corporate environmental challenges. The company employs Five Forces framework in order to achieve effective competitive advantage but it faces some challenges in an attempt of using this strategic framework. Chrysler Group Company employs varied strategic approaches that can enable them to manage their global business operations effectively. The company is structured including the brand-based or commercial structure, the corporate or functional structure and the industrial structure, but each play significant roles. From the research analysis of the company, the researcher provided some recommendations including finding ways of addressing environmental, social and economic factors. The company can strengthen their ability by defining and implementing powerful CSR strategies. Lastly, they should understand the organizational culture and carry out effective marketing research before entering into foreign markets. Bibliography Blenkhorn, D. L., & Fleisher, C. S. (2005). Competitive intelligence and global business. Westport, CT: Praeger Publishers. Bartlett, C. A., Ghoshal, S., & Birkinshaw, J. M. (2004). Transnational management: Text, cases, and readings in cross-border management. Boston: McGraw-Hill. Briscoe, D. R., Schuler, R. S., & Claus, L. M. (2009). 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