Strategic Management

1. A Case Study on
MGT 504: Strategic Management
Prepared by: Nurer Rahman Asif
asif.taxadvisers@outlook.com

2. 1. CURRENT SITUATION
The company was founded by Walter Chrysler (1875–1940) on June 6, 1925 when the Maxwell Motor
Company (est. 1904) was re-organized into the Chrysler Corporation. Walter Chrysler arrived at the ailing
Maxwell-Chalmers company in the early 1920s. He was hired to overhaul the company's troubled
operations (after a similar rescue job at the Willys-Overland car company). In late 1923 production of the
Chalmers automobile was ended. In January 1924, Walter Chrysler launched the well-received Chrysler
automobile. The Chrysler was a 6-cylinder automobile, designed to provide customers with an advanced,
well-engineered car, but at a more affordable price than they might expect. (Elements of this car are
traceable to a prototype which had been under development at Willis during Chrysler's tenure). The
original 1924 Chrysler included a carburetor air filter, high compression engine, full pressure lubrication,
and an oil filter, features absent from most autos at the time. Among the innovations in its early years were
the first practical mass-produced four-wheel hydraulic brakes, a system nearly completely engineered by
Chrysler with patents assigned to Lockheed, and rubber engine mounts to reduce vibration. Chrysler also
developed a wheel with a ridged rim, designed to keep a deflated tire from flying off the wheel. This wheel
was eventually adopted by the auto industry worldwide. In 2014, Chrysler Group LLC is the seventh
biggest automaker in the world by production.
Chrysler is the quintessential American brand as seen in its popular advertising campaigns. In 2011, the
Chrysler brand launched the popular Imported from Detroit campaign with a Super Bowl ad this
invigorated the brand and led to record-breaking sales.
Chrysler Group invested nearly a billion dollars into the Sterling Heights, Michigan manufacturing plant
for the production of the All-New 2015 Chrysler 200. Redesigned from the ground up, the All-New 2015
Chrysler 200 debuted in January 2014. The vehicle features craftsmanship of the highest quality with a
beautiful exterior design, a thoughtful, exquisitely crafted interior and an exceptional driving experience,
thanks to a segment-first nine-speed automatic transmission+ and 36 hwy mpg+.
The Chrysler brand, with its ambitious American ingenuity, continues to stand for substance and style. At
its core are the hallmarks of quality, design, craftsmanship, performance, efficiency, innovation and
technology, all at a very affordable price.
Corporate Governance
Board of Directors
 Sergio Marchionne, Chairman and Chief Executive Officer
 Steven G Beahm, Vice President, supply chain management
 Reid Bigland, Dodge brand; U.S. sales chief & President and CEO Chrysler Canada

3.  Bruno Cattori, Ram brand; Chrysler Mexico/Latin America
 Olivier Francois, Chrysler brand and marketing
 Ralph Gilles, Design and SRT brand
 Michael Manley, Jeep and international sales
2. EXTERNAL ENVIRONMENT
General Environment
On May 5, 2009, Chrysler filed for bankruptcy. The company announced that it had reached an agreement
to establish a global strategic alliance with Fiat. The company also made a reference to all its efforts to
enter into partnerships with different automobile companies, including GM, Volkswagen, Toyota, Honda,
Nissan, and Hyundai. However, except for Fiat, no other options had been viable for it, the company said.
Thomas La Sorda, Vice Chairman of Chrysler, said, “Despite continual efforts over the course of
approximately two and a half years, no party except Fiat has emerged as a viable and willing alliance
partner for us.
As part of the alliance, Chrysler decided to sell all its assets to Fiat except eight factories: a sedan plant in
Sterling Heights, Michigan; a St. Louis-area pickup-truck plant; a Dodge Viper sports car plant in Detroit;
factories in St. Louis and Newark, Delaware; a metal stamping plant in Twinsburg, Ohio; an engine plant
in Kenosha, Wisconsin; and an axle plant in Detroit. Virtually all of the labor associated with these
facilities will be offered employment with the new company.
The general environment often has a substantial influence on an organization’s level of success, executives
must track trends and events as they evolve and try to anticipate the implications of these trends and
events. PESTEL analysis is one important tool that executives can rely on to organizes factors within the
general environment and to identify how these factors influence industries and the firms within them.
P is for “Political”
The political segment centers on the role of governments in shaping business. This segment includes
elements such as tax policies, changes in trade restrictions and tariffs, and the stability of governments.
E is for “Economic”
The economic segment centers on the economic conditions within which organizations operate. It includes
elements such as interest rates, inflation rates, gross domestic product, unemployment rates, levels of
disposable income, and the general growth or decline of the economy.

4. S is for “Social”
A generation ago, ketchup was an essential element of every American pantry and salsa was a relatively
unknown product. Today, however, food manufacturers sell more salsa than ketchup in the United States.
This change reflects the social segment of the general environment. Social factors include trends in
demographics such as population size, age.
T is for “Technological”
The technological segment centers on improvements in products and services that are provided by science.
Relevant factors include, for example, changes in the rate of new product development, increases in
automation, and advancements in service industry delivery.
E is for “Environmental”
The environmental segment involves the physical conditions within which organizations operate. It
includes factors such as natural disasters, pollution levels, and weather patterns.
L is for “Legal”
The legal segment centers on how the courts influence business activity. Examples of important legal
factors include employment laws, health and safety regulations, discrimination laws, and antitrust laws.
Industrial Environment
Industry analysts were also apprehensive about whether the small cars that the new company was to
produce would be successful in the United States. According to Dennis Defrosters, a Canadian Automotive
Analyst, “First, Americans have to embrace smaller cars, which they never have. Second, they have to buy
Italian small cars, which they never have. Third, Fiat/Chrysler has to find a way to make small cars
profitable in North America, which no one, including the Japanese, has been able to do. Analysts were also
worried about the rising competition in the car market. According to them, companies like Chevrolet, Ford,
Toyota, and Honda had already launched their small car models in the United States. They were of the
opinion that Fiat’s entry into the United States, especially at the time of an economic slowdown, may not
be a success. The threat of substitute products: The existence of close substitute products (i.e., high
elasticity of demand) increases the propensity of customers to switch to alternatives in response to price
increases. The threat of the entry of new competitors: Unless there are significant barriers to entry,
profitable markets that yield high returns will attract firms (i.e., perfect competition), and effectively
decreasing profitability. The intensity of competitive rivalry: As in the case of oligopoly markets, rivals
may choose to compete aggressively, non-aggressively or in non-price dimensions. The bargaining power
of customers: The ability of customers to put the firm under pressure due to availability of existing
substitute products, buyer price sensitivity, uniqueness of the products, etc. The bargaining power of
suppliers: The cost of factors of production (e.g. labor, raw materials, components, and services such as
expertise) provided by suppliers can have a significant impact on a company's profitability. As such
suppliers may refuse to work with the firm or charge excessively high prices for unique resources.

5. 3. INTERNAL ENVIRONMENT
Marketing
There was a market test of the Chrysler plan, but unfortunately it was a test that no one could believe
adequately revealed Chrysler’s underlying value, as what was put to market was the sub Rosa plan itself.
Chrysler and the government asked the court to only permit the firm to be marketed with multiple pre-
bankruptcy claims on Chrysler intact, including the United Automotive Workers’ retiree claims. But that’s
exactly what was at stake: whether Chrysler’s assets were more valuable without those claims.
On March 30, 2009, the U.S. Treasury and the U.S. Auto Task Force rejected Chrysler’s stand-alone
Viability Plan. The U.S. Auto Task Force announced that it would provide another US$6 billion federal
loan to Chrysler. However, in order to get the additional loan, Chrysler would have to form an alliance
with Fiat by April 30, 2009. In addition, the company would have to restructure its debt and would have to
negotiate with the UAWand CAWunions to reduce employee benefits and increase productivity.
Finance
In 2007, Chrysler reported a net loss of US$1.6 billion. The company’s financial problems continued in
2008, due to declining sales. (See Exhibit 1 for Chrysler’s annual U.S. sales between 2000 and 2008.) In
October 2008, Cerberus and General Motors Corporation (GM)26 engaged in discussions regarding the
merger of GM and Chrysler. Under the deal, it was proposed that GM would acquire Chrysler’s
automotive operations and Cerberus would get a 49% stake in General Motors Acceptance Corporation
(GMAC).27 However, the deal did not materialize.
In November 2008, NarChrysleri announced in the media that Chrysler required US$4 billion to run its
operations until March 2009. Overall, Chrysler sought US$7 billion financial aid from the U.S.
government. On December 17, 2008, Chrysler announced that on December 19, 2008, it would close its 12
North American plants due to weak demand. In December 2008, the sales figure of Chrysler declined by
54% as compared to the sales reported in the corresponding month of 2007.
Operation and Logistics
Chrysler Group Logistics Operations began developing plans to minimize the impact of such actions and
were approached by officials of Canadian Pacific Expressway Division to consider using their newly
launched intermodal system, which runs between Detroit and Montreal with a stop in Toronto, as an
alternative.

6. A major crisis never materialized but Steve Tripp, Senior Manager of Chrysler Group Logistics
Operations, was intrigued by the possibilities this new system presented, particularly with such a positive
impact on the environment and on the congestion in the Windsor-Toronto corridor. The concept was given
to the Plant Delivery Analysts for further investigation. A preliminary market study was done to determine
the financial viability of the program. While the study was under way, I was contacted by delivery
operations to investigate this option from the standpoint of the DaimlerChrysler, Brampton Assembly
Plant. A small team was assembled which consisted of myself, Debbie Hall – Brampton Assembly Just-In-
Time Coordinator and Markus Gerlinger, a Just-In-Time Team Leader from the Mercedes plant in
Sindelfingen Germany, who was working at Brampton as part of an ongoing information exchange
program between the two plants.
Human Resources Management (HRM)
Chrysler Group LLC is an American multinational automaker headquartered in the Detroit suburb of
Auburn Hills, Michigan. Chrysler was first organized as the Chrysler Corporation in 1925. On June 10,
2010, Chrysler Group LLC emerged from Chapter 11 reorganization and announced a plan for a
partnership with Italian automaker Fiat. Fiat holds a 25% stake in the new company, with an option to
increase its stake to 35%, and up to 51%, if it meets financial and developmental goals for the company.
Fiat's stake cannot go beyond 49% until the government has been paid back in full.
Information System (IS)
Despite heavy investment in information technology, GM's information systems were virtually archaic. It
had more than 100 mainframes and 34 computer centers but had no centralized system to link computer
operations or to coordinate operations from one department to another. Each division and group had its
own hardware and software so that the design group could not interact with production engineers via
computer. GM adopted a "shotgun" approach, pursuing several high-technology paths simultaneously in
the hope that one or all of them would pay off. GM also believed it could overwhelm competitors by
outspending them. GM does spend more than its competitors on information systems. It spends 2.5 percent
of sales on information systems, whereas Ford spends 1.6 percent and Chrysler 0.9 percent of sales on
information systems budgets. GM also tried to use information technology to totally overhaul the way it
does business.
Recognizing the continuing power of the divisions and the vast differences among them, Roger Smith,
CEO of GM from 1981 to 1990, sought to integrate their manufacturing and administrative information
systems by purchasing Electronic Data Systems of Houston for $2.5 million. EDS supplies GM's data
processing and communications services. EDS and its talented system designers were charged with

7. conquering the administrative chaos in the divisions: more than 16 different electronic mail systems, 28
different word processing systems, and a jumble of factory floor systems that could not communicate with
management. Even worse, most of these systems were running on completely incompatible equipment.
Core Competencies of the firm
In 2002 companies will continue to grow and become market leaders only if their ability to examine the
company's core competencies by identifying, cultivating, and exploiting these competencies continues now
and beyond into the future. Failure to do so could be catastrophic for even the most powerful of
companies, not in the short run but over time competitors will get ahead and the technology gap is so
significant in core competencies that these corporations will never be able to catch up. That is why as we
progress into the 21st century core competencies of a company is what is going to keep the company
competitive and ahead of the rest, and on the brink of technological breakthroughs in their specified area.
The goal of core competencies is “to build world leadership in design and development of a particular class
of product functionality” (Brad more, Joy, Kimberley, & Walker, 1997). Having advantages and control
over core products is critical for several reasons. A dominant position in core competencies and core
products enables a company “to shape the evolution of applications and end markets” (Jain, 2000).
Strategic core products born from the evolution of core competencies leads companies to economies of
scale and scope.
4. ANALYSIS OF STRATEGIC FACTOR
SOWT Analysis
Strengths:
 High Fleet Sales way above industry average. In US, over 1 million sales per annum
 Strong brand recall in North American markets
 Reputation for V-8 Hemi engines
 Domination in minivan market
 Strong customer focus and a strong employee base of over 50,000
Weaknesses:
 Due to high fleet sales there is also seen a non-preference by customers for few of the model of
Chrysler
 Management problems have been a concern.
 Limited market share owing to increasing competition.

8. Opportunities:
 Change in the management for better
 It may also assist it for selling its cars in new geographical markets
 Increasing demand for green vehicles where Chrysler has presence
Threats:
 Decreasing confidence of dealers & other associates in the Company
 Strong reliance on the North American market
External Factor analysis summary
Weighted
Score
Opportunities:
1.Change in the management for better
2.It may also assist it for selling its
cars in new geographical markets
3.Increasing demand for green
vehicles where Chrysler has presence
Threats:
1.Decreasing confidence of dealers &
other associates in the Company
2.Strong reliance on the North
American market
10
15
10
8
7
30
20
4
5
3
2
2
3
3
2
3
2
40
75
30
16
14
45
60
30
90
40
As per the cal.
Change in the
management
for better
2.It may also
assist it for
selling its cars
in new
geographical
markets are
most
considerable
opportunities
for Chrysler.
Statistics says
Decreasing confidence
of dealers & other
associates in the
Company is the most
considerable threat for
Chrysler.

9. Internal Factors analysis Summary
Weighted
Score
Internal factors Weight Rating comments
Strength:
1High Fleet Sales way above
industry average. In US, over 1
million sales per annum
2. Strong brand recall in North
American markets
3. Reputation for V-8 Hemi engines
4. Domination in minivan market
Weaknesses:
1. Due to high fleet sales there is
also seen a non-preference by
customers for few of the
models of Chrysler
2. Management problems have
been a concern
3. Limited market share owing
to increasing competition
15
10
13
12
20
15
15
4
4
2
4
3
2
1
60
40
26
48
60
30
15
1. Statistics says High
Fleet Sales way
above industry
average. In US,
over 1 million
sales per annum.
And Strong brand
recall in North
American markets
is most
considerable
strengths for
Chrysler.
2. Statistics Says that
Due to high fleet
sales there is also
seen a non-
preference by
customers for few
of the models of
Chrysler is the
most considerable
weakness for
Chrysler Inc.

10. TOWS: Threat, opportunity, weakness & strength
External Factors
Internal
Factors
Strength:
1. High Fleet Sales way
above industry average.
In US, over 1 million
sales per annum
2. Strong brand recall
in North American
markets
Weakness:
Due to high fleet sales there is
also seen a non-preference by
customers for few of the models
of Chrysler
Opportunities:
 1)Change in the
management for
better
2) It may also assist
it for selling its
cars in new
geographical
markets
SO- Chrysler needs technology
to expand its growth around the
world for its board range of
products
WO- In order to enter into new
market, Chrysler needs to balance
supply chain to survive get success
as efficiently as possible.
Threats: .Decreasing
confidence of dealers &
other associates in the
Company
ST- TO take competitive
advantage, Chrysler might adopt
new technologies.
TW- Chrysler needs to turn the
weak supply chain into strong one
to gain dominant position in the
international competition

11. Identification of Strategic issues
Chrysler’s largest problem is its inability to react to customer demands and industry changes. It has fallen
into a ³competency trap´ since its successes with large passenger vehicles. Right now, Chrysler is a
regional player, with all but 8% of its $62 billion in sales coming from North America. (Muller) In order to
increase its market share and remain competitive, Chrysler must increase its global presence. The company
has shown little product innovation since its introduction of the minivan in 1984, which has led to a
stagnant product line. Additionally, Chryslers past management failed to respond to increasing oil prices
and environmental issues. As U.S. vehicle sales decelerate, Chrysler is actively attempting to strengthen
their international presences, which have led to rising international sales. (Reed) The newly separate
Chrysler stated that sales growth in Asia and Latin America fueled a 26% increase in sales during August
2007.
Strategic Alternatives and Recommendation
1. Chrysler can formulate innovative strategy for the future
Pros: It will help Chrysler to have better guarantee of quality of its products and services with more new
features.
Cons: It might be expensive and risky for the company. Because, at the beginning, it might cut down the
amount of sales by a particular percent.
2. Chrysler can adopt expansion strategy to enter new countries to gain market share
Pros: It will lead to an increase in sales volume, revenues and finally market share and reduce operational
cost and overcome shortage of outlets as well.
Cons: This strategy is the most time consuming as they will be competing against well-established
competitors like Wal-Mart and maximum number of competitors have existence over there.
3. Chrysler should obtain differentiation strategy to maintain leading position in its industry
Pros: This strategy will help Chrysler to take competitive position.
Cons: It might be expensive, risky and time consuming as well to put into execution
EVALUATIONS AND CONTROLS
We would strongly evaluate all alternative strategies because Chrysler’s not sales, return on investment,
profitability, quality of its products and services and market share would positively upward but ensure its
dominance position in its industry. For the controlling these alternative strategies, Chrysler needs to set
standards by which it can measure its performance being done according to strategic plan (alternatives) and
can spot out deviation between planning and performance being done.
The end