Chrysler-Fiat Strategic Alliance - Case Study Example

International Business Management: Chrysler-Fiat Strategic Alliance Elmuti and Kathawala (2001) the prominencethat strategic alliances have adopted in the global economy nowadays with the aim of gaining sustainable competitive advantage. According to Savatore and Sasson, strategic alliances refer to “co-operative relationships between two or more independent organizations, designed to achieve mutually beneficial goals for as long as is economically viable” (2002, p.3). Hutt and Speh (2009) refer to access to complementary skills as the driving force in organizations entering a strategic alliance.

There has to be a firm desiring to leverage the core competencies it has by linking with another that has complementary expertise. In the case of Fiat-Chrysler alliance, Fiat had failed to prevail in North America. Nonetheless, it had a considerable market distribution in Europe. To penetrate the North American market which it had exited in the 1980s, it had to partner with Chrysler which already dominated the market. Chrysler on the other hand fought with increased debt and inefficient cars thus always trailing behind other giant car manufacturers like GM.

Through the alliance with Fiat, the manufacturer would acquire technological expertise in building small, fuel efficient cars thus allowing for funding from the American government. Fiat would also provide the European market distribution. With the leadership of Marchione, Chrysler could become profitable and service its debts effectively. The partnership should be long term as argued by Savatore and Sasson (2002) and Grant and Baden-Fuller (2004). The alliance between Fiat and Chrysler was to hold beyond 2013.

It involves processes, people and technology to enable companies to acquire know-how as Chrysler had the objective of acquiring the technology to manufacture fuel efficient vehicles. Global alliances are subject to international market environment (Savatore & Sasson 2002; Aswathappa 2010). The Fiat-Chrysler alliance was subjected to global trends in the auto market including strategic partnering that could have triggered their alliance. The proposed 51% share for Fiat after 2013 would make the company the major shareholder hence would have more authority in decision making.

Elmuti and Kathawala (2001) point out at probability of future global competitor as a risk factor in entering into alliances. In this case, Chrysler could turn out to be Fiat’s greatest competitor in future as Obama pointed out that the main objective for the alliance was to learn how to manufacture low cost autos. Planning is a critical part in strategic alliance. This is the phase where each partner would be allocated specific roles (Elmuti & Kathawala 2001; Hutt & Speh 2009). This cut the role for Fiat to offer technological assistance to Chrysler while Chrysler sought to give the North American auto market.

It would be a strategic phase to determine the leadership of the alliance and decide on whether Marchionne would be the CEO in the partnership. The vision to have Fiat acquire 35% in the partnership by 2013 and later to 51%should have been a product of planning. Other than planning, Nester also points out at relationship building and timing as important components of a successful strategic alliance (2008). Strategic alliances face a myriad of disadvantages other than the advantages that accrue.

Hitt, Ireland and Hoskisson (2011) point out at economies of scale and increased geographical coverage as the major advantages in strategic alliances. Center for Management Research (20090 on the other hand note a mismatch in brand portfolio, changing markets and corporate integration as weaknesses of Chrysler-Fiat strategic alliance, common to strategic alliances globally. References Aswathappa, K 2010, International Business, 4th ed., Tata McGraw Hill Education Private Ltd, New Delhi. Center for Management Research (2009), Case 7: The 2009 Chrysler-Fiat Strategic Alliance, 300 – 309 Elmuti, D & Kathawala, Y (2001), An Overview of Strategic Alliance, MCB University Press, 205 – 217 Grant, RM & Baden-Fuller, C 2004, ‘A Knowledge Accessing Theory of Strategic Alliances’, Journal of Management Studies, vol. 41, no. 1.

Hitt, MA, Ireland, D & Hoskisson, RE 2011, Strategic Management: Competitiveness and Globalization Concepts, 9th ed., South-Western Cengage Learning, Mason, OH, USA. Hutt, MD & Speh, TW 2009, Business Marketing Management, 10th Edition, South-Western Cengage Learning, Mason, OH, USA. Nester, AC 2008, ‘How to Identify, Form and Capitalize on Strategic Alliances’, viewed 16 March 2012, http://www.bizstrategies.biz Savatore, P & Sasson, L (2002), ‘Leveraging Knowledge Management across Strategic Alliances’, Ivey Business Journal, IBM Corporation.