Fiat Chrysler Automobiles (FCA) SWOT Analysis
SWOT Analysis of Fiat Chrysler Automobiles (FCA)
FIAT Chrysler Automobiles or simply FCA is a global automotive group with operations in 40 countries and sales across 140 nations. It designs, engineers, manufactures and sells vehicles, their components and production systems globally. FCA has 159 manufacturing facilities and 87 R&D centers. The group formed after the union of Fiat and Chrysler in early 2014 when Fiat group acquired a 100% stake in Chrysler group resulting in the union of an Italian and an American brand. Full integration of the two businesses resulted in the creation of a multinational auto giant with a distribution and sales network in 140 countries. FCA group has a large portfolio of several brands including Abarth, Alfa Romeo, Chrysler, Dodge, Fiat, Fiat Professional, Jeep, Lancia and Ram. Maserati is FCA's brand of luxury vehicles.
In 2017, FCA made 4.4 million vehicle shipments. Its Mopar sells vehicle parts and accessories as well as service agreements worldwide. Net revenue of FCA group for 2017 was 110.9 Billion Euros and net profit 3.5 Billion Euros. After the official union of FIAT and Chrysler, FCA formulated its 5 years plan to reorganise its business. As a part of this plan, the focus as to be on differentiating and strengthening the portfolio, globalizing Jeep and Alfa Romeo, achieving cost efficiency, enhancing profit margins as well as strengthening its capital structure. FCA has accomplished several of its most important targets and while consumer trends and market situation have continued to change, it updated its business plan in 2016 to respond to the changing trends. The automotive industry has seen significant changes happening in recent years. Apart from competition, technological changes and changing economic scenario and consumer trends are also making the situation challenging for FCA.
Read more about Fiat Chrysler Automobiles (FCA) and its strengths and weaknesses in this SWOT analysis:-
Global sales and distribution network :-
FCA is a global automotive brand. Apart from its operations in 40 countries, it has a global sales and distribution network spanning around 140 countries. It has its main office in London, UK. Its business operations are divided into four geographical segments - NAFTA, LATAM, APAC, & EMEA. NAFTA includes United States, Canada, Mexico and Caribbean islands. LATAM includes South and Central America, mainly Argentina and Brazil. APAC includes the Asia Pacific region and mainly China, Japan, Australia, South Korea and India. EMEA includes Europe, Middle East and Africa. The European market of FCA includes the 28 members of EU and the members of EFTA. In more than 140 countries of these geographical segments, the brand sells its products directly or through dealerships. In 2017, FCA sold around 4.4 million vehicles.
Large portfolio :-
FCA group has a large portfolio of brands that offer vehicles in several categories. Brands in FCA's portfolio include Abarth, Alfa Romeo, Chrysler, Dodge, Fiat, Fiat Professional, Jeep, Lancia and Ram. FCA carries out sales of accessories and parts through its Mopar brand. these vehicle brands cater to the choices of modern customers within various segments. From affordable to luxury, FCA sells a wide range of vehicles offering its customers a large range of vehicles to choose from. The large product range allows FCA to cater to a large customer base from the higher end of the market to the customers who want stylish cars at affordable rates.
Focus on innovation :-
FCA has maintained heavy focus on research and innovation and invests a large sum each year in R&D. It is carrying out research and development in several important areas through its 87 R&D centers. The spending on R&D went up from 4.2 Billion Euros in 2016 to 4.3 Billion in 2017. Most of the research carried out at FCA R&D centers is targeted at two major areas to control fuel consumptions and emissions and to improve fuel efficiency. These areas are vehicle energy demand and powertrain technologies. Moreover, FCA has intensified its research efforts in the area of automated driving. In the area of vehicle energy demand, FCA's research focuses upon reducing weight, aerodynamic drag, tire rolling resistance and driveline losses. It has also continued to research conventional and hybrid vehicle technologies. This research is aimed at improving recovery of kinetic energy and reuse of thermal energy for lower overall energy consumption and CO2 emissions. Several smart technologies like ESS and smart charging that FCA introduced have been successfully adopted in several of the vehicles produced by FCA.
Brand Image & market share :-
FCA is considered a reliable brand by millions around the globe. Apart from its large sales, distribution and support network, it also invests a large sum each year in advertising. In 2017, it spent more than 3 Billion euros on advertising. In 2017, FCA was trailing GM, Ford and Toyota in US in terms of market share whereas it was ahead of brands like Honda, Nissan and Hyundai. While its market share in USA has fallen a little in 2017 from 12.6% last year, it is still around 11.7%. In the European markets too, it has maintained a significant market share in the passenger cars segment at 6.7%. It is ahead of Ford, GM and Toyota in the European markets. It is a leading brand in the Brazilian and Argentinan markets too.
Differentiated products :-
Since the formation of FCA, the focus of the brand has been on differentiation of its product range. FCA has a large product range and it has also been successful at differentiating its products from its competitors. 2016 was a highly active year for FCA. apart from Ferrari spin off, the brand made several more important changes. The group entered six new product segments - Maserati launched Levante, its first ever SUV. Alfa Romeo launched Giulia and Fiat too launched several other products. In 2017, Alfa Romeo launched its first ever SUV called Stelvio and Jeep started producing Compass in India. There are several products by FCA that have their own unique style and design which makes them stand out of the crowd. Dodge, known for making bold aggressive and distinctive cars, offers a complete lineup of performance vehicles each of which stands out in its segment. In North America, Dodge and SRT are the ultimate and mainstream performance brands of FCA. Maserati offers both matchless luxury and sportiness. Chrysler is known as the maker of minivan and as an innovative brand.
Declining market share in key markets :-
In 2017, FCA's market share decline in several of its key markets. Even if the fall is small, a reduction of even one percentage point matters in the vehicle industry. FCA is trying to reorganize its business. However, a decline in market share could still be a bad sign. On the one hand, it shows high competitive pressure, on the other it can also be a sign of low customer engagement. In US, the market share of FCA fell from 12.6% to 11.7% whereas in Canada the market share of FCA fell from 14.2% to 13%. Market share of FCA climbed in Argentina last year but has kept falling in Brazil for the previous three years having come down from 19.5% in 2015 to 17.5% in 2017.
FCA has been forced t make several recalls in the recent period. Even if there was no loss or damage to human life related with these recalls, they can be risky for its brand image. It is not just FCA, but the US automotive industry in general has seen the number of recalls surging due to product safety and compliance related issues. In mid 2018, FCA reportedly made 210,000 recalls, a very large part of which were from the NAFTA region. the recalls were related to brake safety issues. Moreover, the brand was forced to recall around 6 million vehicles overall in 2018 related to cruise control fault and tailgate locking issues. A high number of recalls can damage brand image and also lead to higher direct costs.
Automated driving is a major area of focus for all the large and global vehicle brands. Most of the large brands including FCA are investing heavily in automated driving. Apart from being the most desired innovation, this is also an important area in terms of branding. In 2016, FCA partnered with Waymo to include its self driving technology into Chrysler hybrid minivans. It has also launched Highway Assist autonomous vehicle technology on several Maserati models in 2017. Automated driving is one of the most exciting areas of technological innovation and a major opportunity for the early entrants.
Electric and hybrid vehicles :-
The demand for electric and eco-friendly vehicles has continued to grow in the recent years. FCA has recently grown its focus on research and development in this area. The Chrysler Pacifica hybrid by FCA has achieved some important milestones in terms of efficiency. Moreover, the brand is investing in growing its range of electric and hybrid vehicles. Growing demand for electric and zero emission vehicles gives FCA extra scope for investing in such projects. It will not just help grow demand and popularity but also create higher sales and revenue.
Digital Marketing :-
While, FCA has been investing a major sum in advertising, there is a lot more scope in terms of marketing and branding. Apart from social media and its own website, the brand can sue more digital channels to make its marketing strategy stringer and more attractive. FCA is not heavily aggressive in terms of marketing. It could use digital tools as well as AI and virtual reality to create superior customer experience and for marketing itself more effectively.
Asian markets :-
The Asian markets are among the fastest growing in the world and offer attractive opportunities for the leading auto brands. China and India are currently the most important markets for the vehicle brands. FCA has extended its Jeep brand to India already and is planning to expand in presence in both the major Asian countries through partnerships and joint Ventures. Apart from these investing in marketing in these two major Asian nations could also help FCA grow its customer base and revenue there faster.
Competition in the auto industry is too high. It has continued to intensify over the recent years and each of the major vehicle brands is investing heavily in research and development. Apart from automated driving and zero emission cars, brands are investing in other technological innovations for faster growth. They are using aggressive marketing techniques involving digital advertising, celebrity marketing, sponsorships as well as direct to the customer tactics for promotions. Growing competition has led to erosion of customer base in several key markets. FCA would need to focus on customer engagement and retention strategies to grow its market base around the globe.
Regulatory challenges before the automotive industry have grown a lot during the recent years. After the VW emissions scandal and the heavy fines involved, auto brands are now highly cautious about compliance and safety. This is also a reason behind the increased number of recalls in the US auto industry. from product quality to passenger safety, emissions and labour there are several areas where they have to remain legally compliant. This has led to growth in the operational costs of auto brands. Moreover, rising size of fines has also made them move cautiously. The result in pressure on sales growth. While the regulatory pressures and challenges cannot be ignored, it is important to remain compliant for the sake of brand image. Non compliance also hurts brand image.
Economic fluctuations can affect an auto brand's financial health severely. While on the one hand, currency fluctuations affect revenue, economic fluctuations in key markets can affect the level of demand there. the US auto market has grown fast in the recent years leading to fast rise in demand for cars. However,a strengthening dollar worldwide is also affecting the revenue of these businesses negatively.Fluctuating interest rates and currency exchange rates can also lead to disadvantage. These things affect both the growth rate and the revenue.
Changing Consumer trends:-
Fast changing consumer trends are also affecting auto businesses. Apart from the changing preferences of consumers worldwide, need for more style, efficiency and safety has eld to higher focus on innovation. The next-gen customers want stylish cars, that are technologically efficient, low on fuel emissions and come with an affordable price tag. The rise of the middle class is also affecting demand patterns and how brands have marketed their products. Challenges have continued to grow day by day and apart from technological factors, there are economic factors affecting these trends. Auto-businesses are innovating keeping these changes in mind so as to cater to customer demand with highest efficiency.
FCA is a global brand with a highly differentiated product portfolio including nine major brands. It is among the four largest auto brands in USA. US is also its largest market where it sold more than 2 million units in 2017. Since the formation of FCA during early 2014, its focus has remained on differentiation and innovation. during these four years, the brand also achieved some important milestones. however, reducing market share in some markets can be a cause of worry for it. In 2018, it was also forced to make a large number of recalls. While no injuries or losses resulted form these faults, compliance is still a major consideration for auto brands after the recent VW fiasco. To achieve sales growth, FCA is focusing on the Asian markets which are among the fastest growing in the world and offer major opportunities of market expansion for automakers. FCA is also investing in research and innovation in several areas including automated riding, electric/hybrid cars and higher fuel efficiency. Based on the brand's performance during the last four years, analysts expect that FCA's market share and revenue could rise in the coming years. However, FCA must focus on digital marketing and customer engagement. the brand's net revenue in the three quarters of 2018 has been higher than 2017. Its net revenue in the first three quarters touched 80.9 Billion dollars against 78.15 Billion dollars during the same period last year. However, operating expenses as well as selling, general & other costs of the brand have also grown leading to reduced net profits.
FCA Annual Report 2017.