This paper will provide an analysis of the Product Life Cycle of Fiat S. p. A a non-North American organization and identify one of the company’s products that have reached maturity. In addition, this paper will also accesses the public and private financial sources available for global investments of the product in the home country and foreign markets with a proposed optimal source for financing this product, and provide two foreign markets for extending the products life cycle.
Product Life Cycle
A Product Life Cycle is the “period of time over which an item is developed, brought to market, and eventually removed from the market” (Investopedia, p 1). The Product Life Cycle (PLC) is the foundation upon the biological cycle of life. •Seeds are planted (introduction) •The seed begins to sprout (growth) •The sprout develops leaves and roots as it becomes an adult (maturity) •After a long period as an adult the plant begins to shrink and die (decline) The Product Life Cycle (PLC) uses the same concept as the biological cycle of life. •the product is developed and introduced to the marketplace
•The product grows it gains more customers
•The market for the product stabilizes and the product is mature
•The product is overtaken by competitors or loss of consumer needs and sales decline and the product is eventually taken of the market Non-North American Organization – Fiat S. p. A. Fiat S. p. A, (Fabbrica Italiana Automobili Torino) is on the largest companies in Europe and is best known for the manufacturing of automobiles. Fiat also manufactures airplanes, tractors, railroad stock, engine components, construction machinery, commercial vehicles, and telecommunications equipment. Fiat is also the owner of La Stampa, Italy’s leading newspaper.
In 1899, Giovanni Agnelli founded Fiat in Turin Italy. The city of Turin was developed by the existence of Fiat and their money. In 1990, almost half the population of Turin remained dependent of Fiat for their incomes. Fiat started their automotive and engine parts manufacturing product lines in the early 20th century. With the onset of World War 1, Fiats production expanded, and Fiat became a conglomeration of many manufacturing enterprises. After the postwar years, Fiats manufacturing products became so extensive that Giovanni Agnelli thought it was time to develop his administration.
In 1921, Fiats goal was to reduce their dependence of foreign suppliers by taking control of all of the manufacturing processes. Fiat started producing their own plastics, paints, and steel so they would not need to rely on other suppliers. In 1927, Giovanni Agnelli formed the Industrial Fiduciary Institute (IFI) holding company, by 1990 IFI was one of the most influential and wealthiest holding companies in Europe. Today, Fiat is still privately owned and operated by the Giovanni Agnelli heirs. ? Fiat Panda Product Life Cycle Maturity The Fiat Panda was introduced in 1980 at the Geneva Motor Show.
This vehicle celebrated its 31st year in production and produced six million cars, which established it as the most widely sold city-car. The Panda was offered as a new concept car with “a new way to see the daily relationship with car: more immediate, more natural, and easier” (Autoviva, p 1). Fiat launched a new model of the Panda in 2003, which had a more modern look, but kept the original concept. With the new launch of the Panda product from 2003 to 2009 was 1. 5 million cars produced and 300,000 cars sold in 2009 alone. The Fiat Panda was rewarded the “Car of the Year Award 2004” (Autoviva, p 1).
In 1983, the Panda was the first car in its range to offer eco-friendly engines. In 1986, the Panda became the first spacious compact car that featured a diesel engine. In 2004 the Panda 4×4 “became the first little off-road vehicle to have ever reached Everest’s high tech base camp at an altitude of 5. 200 metres” Autoviva, p 1). In 2010, the Panda received a makeover with a new range of engine that included the petrol and diesel engine and alternative methane and LP engine, which had both 4×4 and front-wheel drive models. In p 1 the Panda still is synonymous
for it maneuverability, reliability, space, deign, and comfort. In 2009, Fiat S. p. A. and Chrysler USA entered into an alliance where Fiat will hold 35% of the Detroit Chryslers’ automakers ownership with an option to take stake later of 55 % [The of Chrysler ownership. The deal does not require Fiat to pay Chrysler any cash up front, but instead Fiat will get equity in Chrysler investments and the Chrysler plant makes Fiat model cars for the United State market. Fiat Panda 1980 Fiat Panda 1990 Fiat Panda 200 Fiat Panda 2012 ?
Financial Sources – Public and Private
The home country has 1,092,247,485 outstanding shares of stock. As of December 31, 2009, private shareholders that held more than 2% of shares are EXOR S. p. A. 30. 5%, Capital Research & Management Co. 5. 2%, FMR LLC 5. 05%, and IPL Investments S. p. A. 30. 45 % , Barclays Global Investors EU – 3. 18%, BlackRock Inc. 3. 0%, Institutional investors EU: 22. 37%, Institutional investors outside EU 7. 01%, Other shareholders: 28. 93%, Fiat S. p. A. treasury stock 3. 04% (Fiat, p 1). “Italy’s biggest conglomerate splits itself in two to promote a car making merger” (Economist, 2010) .
Fiat has exceeded its target goals for restoring Chrysler’s health, which will take Fiat’s stake in Chrysler up to 35%. “John Elkann, a 34-year-old scion of the Agnelli family which holds a controlling interest in Fiat cheered investors. John Elkann is also chairperson of EXOR S. p. A, in the support of dividing the two markets. EXOR S. p. A is an optimal financing source for Fiat as they are one of the leading investment companies in Europe and controlled by the Agnelli Family. EXOR S. p. A is headquarted in Turin, Italy and holds a net asset value of approximately seven billion Euros and has over a century of investment history. EXOR S.
p. A makes mostly lone-term investments in Europe, the United States, and emerging markets in the diversified sectors. Available Financial Sources – Bilateral or Multilateral The Brazilian division of the Fiat Italian auto maker Fiat will invest about $4 billion in Brazil over the next five years in a bilateral agreement, which will be used to increase production and develop new models at Fiat’s Betim plan in the south central state of brazil anticipating a production of nearly 800,00 cars per year. With Brazil being Fiat’s leading automaker outside the home country, these sales are a key to the market share of car production and sales.
Serbia investments in 2010 included approximately $200 million by the Italian carmaker Fiat Group for reconstruction of the Zastava plant in Kragujevac, which will allow this plant to become a dedicated Fiat production site. The civil refurbishment will consist “of the elevation of selected parts of the existing roof structure to host state-of-the-art car production lines, structural strengthening works to comply with the local construction code for a seismic area as well as facades and MEP provisions consistent with the high corporate standards of the Fiat Group” (US Department of State, p 2).
The five main process-related buildings of the car manufacturing plant occupy an area of approximately 220,000m2 when operational and the projected production of cars will be 200,000 per year. Optimal Financial Sources – Bilateral and Multilateral The optimal source of financing is the Brazilian division of Fiat. Since Brazil is the leading manufacturing of Fiat cars outside the home country of Italy, and the economic crisis with the cost of gas and fuel, this makes the best choice for Fiat to further saturate the South American market with their economic line of cars. Foreign Markets
Fiats domestic fortunes weakened in 1974 when Fiat lost $30 million after a three-month strike to the point that seemed likely for a partial state ownership. The Socialist Labor Minister decided to approve the union to make a pay increase much higher that Fiat had offered. Fiat protested, but the government imposed ceilings on the prices that Fiat could charge for their cars during a time when sales were down 45% due to the worldwide energy crises. It was thought that days of government protection were over for Fiat as the politicians listened to the constituents, whom viewed Fiat as an enemy of the people.
The scrutiny by the Italian Government did not help Fiat, as the Agnelli brothers refused to reveal their value of IFI, the Angelli’s family-owned holding company that had their funds in Swiss banks, which was off limits to the Italian government. Fiats foreign holdings actually offset their troubles in the home country, and Fiat’s sales thrived in the unsaturated markets of Turkey, South America, and Eastern Europe. Brazil was the largest overseas investment at $86 million the first year of operation in 1976.
Another foreign venture was with American Allis Chalmers Company, a manufacturer of earth-moving equipment with divisions in Brazil, Italy, and the United States. In 1976 Colonel Khadafi of Libya, acquired 10% interest in Fiat, which cost Khadafi $415 million which rocketed Fiat shares on the Milan Exchange. Libya paid more than three times the market price, which raised questions about Khadafis’ motives, but Fiat was not concerned as it eased their cash flow to of $4 million in which Fiat could pay their shareholders. Domestic issues continued in 1974 and Fiat laid off 15% of the Italian labor force.
The management of Fiat was sure that it could beat their competitors by manufacturing the lowest cost cars. The subsidiary of Comau, retooled and robotized their factories with standards specific for the Fiat car parts. These assembly lies provided Fiat with a more flexibility on the production lines because the machines could be programmed to perform several jobs on several different models. Fiats production rates went from 14. 8 units per worker in 1979 to 25 units in 1983 per worker. Fiat was successful with striving to modernize the automotive manufacturing process abroad.
Fiat removed itself from the United States market choosing not to be competitors against the Detroit moguls, such as Ford, General Motors, and Chrysler’s import market. Fiat also closed their operations in Chili, Uruguay, and Argentina, but retained their operations in Brazil. In 1980, Fiat leads the way in Europe for factory automation, which is a move that Renault, Volkswagen, Peugeot, and General Motors copied. Fiat purchased Alfa Romeo in 1986 for $1. 75 million, in 1989, Fiat purchased part o Maserati, and paying $120 million with a 49% interest and in 1992 Fiat purchased the remaining 51% for 51. 2 million.
With the addition of Alfa Romeo and Maserati, Fiat’s operations broadened to include luxury lines to their established Ferrari (acquired in 1969), Innocenti (acquired 1979), and Lancia (acquired 1986). 1986 was the turning point for Fiat’s success with an increase in revenue that doubled the prior years by 7. 2%. In 1990, Fiat had another setback due to a global recession, which hit all car manufacturers hard. Fiats profits dropped by 51% until the mid when Fiat showed signs of recovery. In an effort to expand to the global marketplace, Fiat introduced new cars that were designed for a broader competitive market.
In 1993, Fiat introduced the Punto as an intermediate car for European drivers. In 2000, Fiat developed an alliance with General Motors enhancing their purchasing and production power. The same year Fiats BV Holdings was developed and became a substantially section in the car and light commercial vehicles sector. In 2000, Fiat had several production sectors; Agricultural, Commercial, Cars, Construction, Metallurgical Products, Production Systems, Insurance, Aviation, Services, Newspapers, and Production Systems. Fiat operates in 61 countries and 242 manufacturing plan and 131 research and development facilities.
Fiat has generated a46% increase in their home country and outside the home country and exports account for 67% of sales. is the key to Fiat’s globalization strategy, as they focus on emerging markets such as China, Brazil, Argentina, and India. “In order to operate with greater agility and flexibility in this challenging environment, the Group is implementing decisive measures throughout its industrial organization, from the redefinition of its processes, to the structural reduction of its inventories, from the restructuring and streamlining of its manufacturing facilities to the reorganization of the entire Automobile Sector” (Fiat, p 1)
Conclusion .Fiat began as one of the leaders of the European motor industry and has expanded to markets, such as Agricultural, Commercial, Cars, Construction, Metallurgical Products, Production Systems, Insurance, Aviation, Services, Newspapers, and Production Systems and has proven their enterprise as a well establish segment of the global marketplace. Fiat will continue to follow their original growth strategy and continue to penetration the foreign markets of the world while focusing on innovation.
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