Sustainability in Business - Fiat - Essay Example

Sustainability in Business Table of Contents 4 Introduction 5 Company-Fiat 5 About the Company 5 History 6 SWOT 7 Criticisms by the Media 9 Discussion 9 Company- Pirelli 9 About the Company 9 History 10 SWOT 11 Sustainable Strategies 11 Criticisms by the Media 12 Discussion 12 Company – Luxottica 13 History 14 Sustainable Strategies 15 Criticisms by the Media 16 Discussion 16 Conclusion 16 References 18 Abstract The project attempts to study the concept of sustainability which has gained much relevance in the contemporary business organisations. Sustainability as the key feature to success has been discussed briefly in the project. In this regard three different companies, namely Fiat, Pirelli and Luxottica have been studied. Firstly, a brief overview of each company has been provided. Then the history of the company has been traced along with its strengths, weaknesses, opportunities and threats. It is followed by a study on the means with which each company has attempted to gain sustenance. Finally, the project presents some of the criticisms that the companies had to face and the steps taken by them to counter the charges. Introduction Every business strives to attain sustainability in today’s world. Sustainability is an idea that every business tries to portray. A sustainable organisation is one, which tries to maximise profit for its shareholders while protecting its environment and improves the lives of those it interacts with. The business operates with the view to meet the interests of society and environment. A sustainable business always stands the chance to achieve greater success in future and remain successful for decades and generations. This project talks about three such corporations which thrive on sustainability. They are the three Italian companies, namely Fiat, Pirelli and Luxottica. Each company has its own way of maintaining sustainability. Each has been discussed in brief in this project. The project also discusses the way each company has paved its way to recovery and success. Company-Fiat About the Company Fiat is an Italian automobile manufacturer company that also deals with financial services, media, engine manufacturer and metallurgy. The company was founded in 1899 by a group of investors in Italy. With time the company diversified its operation in different parts of the world. In 2009, Fiat was considered as the sixth largest car manufacturer in the world and the largest in Italy (Ramsey & Forden, 2009). Fiat is a multinational in true sense. The company has invested in many locations outside Italy. It has announced to invest 10 billion reais in Brazil by 2015; for developing facilities for cars, auto parts and agricultural machineries (Reuters, 2010). History The company came into existence in 1899 and soon it was a great hit in the automobile industry. The company faced its first crisis after World War-I. At that time the company acquired a low cost mass production technology and introduced several new models. Fiat established many holding companies in different parts of the world. The management realised the needs of its employees and invested in developing health care centres, sports clubs and special schools. With time, the company paid special emphasis on increasing its production capabilities. In 1989, Fiat Tipo was named as “Car of the year” (Life in Italy, n.d.). During 1990s, Fiat faced increased market competition as many new companies entered the automotive sector. The company decided to further expand its presence in worldwide market and make Fiat one of the most recognised cars. As a result, 60 percent of the company’s sales were derived from international market outside Italy. The company tried to achieve a new identity and thus modified its logo. This was a turning phase in the company’s history. Fiat invested in innovation and technology, the results of which were soon visible in the newly launched models. Most of these cars succeeded in gaining high market share in the international market. By 2004, the new Panda was awarded as “Car of the year (Life in Italy, n.d.). SWOT Strengths Many cars under the brand name of Fiat still have a strong market share. The company has gained expertise in innovative technologies. The strategy of aggressive growth assists in expanding the market shares. Opportunities Growing demand for automobiles in developing nations, especially in BRIC nations. High economic growth and increasing purchasing power of consumers in developing nations where the company already has its presence. Weaknesses Too much reliance on Italian suppliers that has resulted in low competition and high cost. Threats The growing cut throat competition in automobile industry. The fast changing technological environment. Changes taking place in consumer behaviour. Slow economic recovery in western nations. Increase in price of steel and aluminium. Sustainable Strategies With time, the company diversified its business and entered several sectors. Soon it realised that it is losing its core competency in the traditional automotive sector. Therefore, in 2003, the company restructured its business model and sold out business units which are not a part of core business and concentrated mainly on manufacturing and service activities in automotive sector. The company also paid special attention on cost cutting measures to reach operative break even. All these changes in the corporate strategy assisted the company to post healthy profit in 2005. The company was always cautious to the changing needs of its target customers, as a result of which its model never failed to appease its customers. Fiat group, as a part of its corporate social responsibility, undertook to educate the human resource for the betterment of the society (CSR Global, n.d.). As per Dow Jones Sustainability Index, Fiat scored 93 out of 100 and thus it retained its leadership position for the second year. The average score of the companies operating in automobile sector is 70 out of 100 (Fiat Group, 2010). Criticisms by the Media Chrysler was the worst victim of 2008-2009 economic crises and was on the verge of bankruptcy. This adversely affected the profitability of the company as a whole. The market experts pointed out that Fiat’s home market (Italy) is the only place where the car manufacturer is losing money. According to the labour union, Fiat should revive it policies to make them more business friendly. The labour union is unhappy with the management and it is demanding more flexibility. Discussion The company used cost leadership and other innovative policies to gain sustainability in automotive industry. Undoubtedly, company’s ability to understand customer’s needs and changing consumer behaviour assisted in developing innovative cars that resulted in high market share in Italy as well as in the international market. However, in this post recession phase the management needs to introduce some changes in its policies to settle the issue with labour union and to increase profitability. Company- Pirelli About the Company Pirelli is a company in Italy, which is primarily known for its tyre manufacturing sector. The tyre business has been its main business for a long time. The company develops designs and manufactures tyres for motors, industrial vehicles, motor cycles and steel cord. The company’s manufacturing plants are situated all across the globe. The company’s commercial network covers more than 160 companies. The company’s basic objective is to expand its business by the developing high quality and high technology products and services which have minimal impact on the environment. The company tries to attain maximum profitability along with maintaining its social responsibility (Pirelli-a, 2010). The sales growth of the company in different segments is represented in the following diagram. Figure 1: Sales of Pirelli Group according to business segments (Source: Pirelli-b, 2010) History The company came into existence in the year 1872 and is known for having a remarkable industrial tradition and its ability to innovate and produce quality products. It has also successfully strengthened itself as a brand. For a long time Pirelli has contributed most to the history of car business. “A history built on high performance tyres, in which Pirelli is the world leader in both original equipment and the aftermarket: with 20 factories in 11 countries around the world” (Pirelli Tyre, 2010). Its most successful business is the tyre business. It manufactures tyres suited for the needs of buses, cars, motorcycles and other light vehicles. Pirelli Tyre takes the fifth position in terms of turnover in the world tyre market. The company’s profitability is one of the highest in the tyre sector. SWOT The strength of the company lies in its ability to produce car tyres suitable to withstand extreme and unfavourable weather conditions. Among the weaknesses, it is worth mentioning that the company has still to grow as a multinational company. Its well established relationship with the different cultures it has transacted with, accounts for an opportunity the company may use for its benefit. The most important threat is that it has been out of business since 2005. In order to make a comeback, the company has to struggle against major players in the field, which are numerous in number. Sustainable Strategies The key sustainable strategy of the company is not just the export of production, technologies, expertise and investments. Along with this, it tries to maintain sustainability by exporting progressive personnel policies, state of the art protection systems for the environment, and “standards of behaviour that are at least at par with those adopted in the other regions of the world in which it operates” (Pirelli-c, 2010). Being a multinational corporation, the company respects the cultures in which it operates and interacts with. It believes in running its business successfully by mutual interaction between cultures and traditions by importing new ideas from them. It also believes in exporting social responsibility. It does not only aim to enhance its available wealth but also raise the level of ethics prevailing in the economic environment of its business (Pirelli-c, 2010). Criticisms by the Media A number of articles have been published by the press in favour of the company. Most of the articles speak in favour of the company’s introduced car tyres. The most important of these has been the one which speaks of the company’s successful introduction and running of wet tyres in Valencia. The company has manufactured tyres fitted to withstand extreme weather conditions. The most commendable part of the company’s activity is that it produces product using such technologies that most other companies produce much later. This gives the company a competitive edge over other companies. At one point of time, the media had criticised Pirelli as being a questionable choice as a tyre supplier to the Formula One car. Gerhard Berger, the famous driver of Formula One cars has claimed the reports as ‘nonsense’. It is expected that the company will replace the Bridgestone to become the new tyre supplier of the sports car. Michelin is another famous company Pirelli has to compete with. The conspicuous absence of the company from the sports field since 2005 has proved disadvantageous. But it is surprising to note that the company has gained maximum support from the media even after being out of business for long (EXPN F1, 2010). Discussion The company has successfully surpassed all major criticisms levelled against it and emerged as the most competitive producer and supplier of car tyres. Its long absence from business has not been able to wash out its presence in the same field. It has made the most remarkable comeback and stands as one of the best tyre suppliers in the world. Company – Luxottica About the company Luxottica is considered as a leader in premium, luxurious and sporty eyewear. It is an Italian company that has presence in several parts of the world. At present the company has 6200 retail stores located in North America, South Africa, Europe and Asia pacific region. From 2005 onwards the company performed quite well. Figure 2: Financial information (Source: Luxottica Group-a, 2009) The company employs approximately 60,000 employees with a strong presence in the international market. The eyewear manufactured by the company is a symbol of fashion and luxury. History Luxottica was established in 1961 with ten people who were engaged in manufacturing eyewear parts. In 1974, the company identified the importance of direct distribution and adopted the strategy of vertical integration. This resulted in acquisition of Scarrone S.p.A. The company realised the growing demand for fashionable eyewear among customers and hence in 1988 it entered with a licensed agreement with Giorgia Armani. The company opened One-Sight clinics and One-Sight van for children’s eye care. In 1997, the Luxottica Group’s production was awarded ISO 9001 certificate. Again in 1999, One-Sight received award for excellence in corporate community services. With time, the company diversified its business and entered several international markets. In 2005, the vision van helped 6,155 people who were affected by hurricane Katrina in US. At present the company is operating in 130 countries and 30 brands are offered under company’s portfolio (Luxottica Group-b, 2009). SWOT Strengths The company is growing at a fast rate. It has diversified the business risk through vertical integration. The company manufactures frames and sunglasses as well as operates in distribution and retail business. The company pays special attention towards CSR to gain positive market image. The company possess a well balanced brand portfolio. Opportunities The growing demands for fashionable and branded eyewear in the developing markets like China, Brazil and India. The strategic acquisition done by the company assists in developing a strong brand image in emerging market. Weaknesses It has a narrow supplier’s base that increases the risk associated with proper functioning of supply chain. The company has weak top and bottom line Threats Enhanced competition in fashionable eyewear is resulting in price war and lower profitability. Consolidation in retail sector is also responsible for high threat for the company. Slow rate of economic recovery in developed countries. Sustainable Strategies The main feature which distinguishes the company from the rest of its competitors is its production of eyewear based on high technical and stylistic quality. Its strategies are implemented keeping in view the primary objective of satisfying its customers and value creation for employees and communities in which it operates. Every kind of product it produces results from extensive research and development. Its products reflect the company’s strong manufacturing and technical knowhow. The company strives to achieve maximum customer satisfaction along with social and economic development (Luxottica Group-c, 2010). Criticisms by the Media The company had to face serious criticisms for laying-off its employees during the time of recession. It curtailed the number of executives in the company dramatically. Many people were forced to resign as a step to curtail expenses. This had serious impact on the company as it lost the knowledge and expertise of the company’s staff. But now the company is working for the welfare and growth of its employees. It is even regarded by many as an extremely favourable place to work (Overheard.com, 2009). Discussion Though the company has been the leader in fashion business, it has been through severe booms and depressions. The company has been striving hard for uplifting its product quality by applying innovative technologies. The company’s human resource policies had suffered a setback during the time of recession but now the conditions are on the path of recovery. Conclusion To attain sustainable growth, companies have to pay special attention towards their corporate strategies. Each nation has its own external environment comprising of political, social, economic and technical environment. Therefore, the companies are required to take into account the external environment to develop their corporate strategies. In the given project three well known companies in Italy were selected to analyse the manner in which they have gained sustainability. Although these three companies are operating in different sectors, yet there are some similarities in the sustainability strategy followed by them. Therefore, it can be concluded that in order to gain sustainable growth, a company needs to pay attention to quality and innovation. The products and services should be developed after analysing changing customer needs and environmental conditions. Apart from customers and employees, a company should think about the development of the society as a whole. References CSR Global. No date. FIAT Group. [Online]. Available at: http://www.csrglobe.com/login/companies/fiat_group.html [Accessed on October 25, 2010]. ESPN F1. June 18, 2010. Gerhard Berger slams Pirelli criticism. [Online]. Available at: http://en.espnf1.com/f1/motorsport/story/20683.html. [Accessed on October 25, 2010]. Life in Italy. No date. Fiat History. [Online]. Available at: http://www.lifeinitaly.com/italian-cars/fiat-history.asp [Accessed on October 25, 2010]. Luxottica Group-a. 2009. Company. [Online]. Available at: http://www.luxottica.com/en/company/quick_view/ [Accessed on October 25, 2010]. Luxottica Group-b, 2009. Timeline. [Online]. Available at: http://www.luxottica.com/en/company/history/ [Accessed on October 25, 2010]. Luxottica Group-c. May 14, 2010. Objectives and Strategies. [Online]. Available at: http://www.luxottica.com/en/company/quick_view/objectives_strategies/. [Accessed on October 25, 2010]. Overheard.com. November 8, 2009. Luxottica Retail is cutting lots of jobs. [Online]. Available at: http://eyeoverheard.wordpress.com/2009/11/08/luxottica-retail-is-cutting-lots-of-jobs/. [Accessed on October 25, 2010]. Pirelli-a. August 6, 2010. Pirelli Tyre. [Online]. Available at: http://www.pirelli.com/web/group/business_sectors/tyres_sector.page. [Accesses on October 25, 2010]. Pirelli-b. June 28, 2010. Pirelli Group. [Online]. Available at: http://www.pirelli.com/web/group/profile/default.page. [Acessed on October 25, 2010]. Pirelli-c. 2010. Sustainable Development. [Online]. Available at: http://www.pirelli.com/web/sustainability/default.page. [Accessed on October 25, 2010]. Pirelli Tyre. July 29, 2010. About Pirelli Tyre. [Online]. Available at: http://www.pirellityre.com/web/company/about-pirelli-tyre/default.page. [Accessed on October 25, 2010]. Ramsey & Forden. June 10, 2010. Fiat Forms Sixth-Largest Carmaker on Chrysler Assets (Update1). [Online]. Available at: http://www.bloomberg.com/apps/news?pid=newsarchive&sid=aJ9dgGdiUU1A [Accessed on October 25, 2010]. Reuters. October 19, 2010. Fiat Group to invest $6 bn in Brazil by 2015. [Online]. Available at: http://www.moneycontrol.com/news/business/fiat-group-to-invest-366-bnbrazil-by-2015_492452.html [Accessed on October 25, 2010]. Read More