Fiat (2FI) SWOT Analysis / TOWS Matrix / MBA Resources
Auto & Truck Manufacturers
Strategy / MBA Resources
Introduction to SWOT Analysis
SWOT Analysis / TOWS Matrix for Fiat (Germany)
Based on various researches at Oak Spring University , Fiat is operating in a macro-environment that has been destablized by – technology disruption, increasing commodity prices, there is increasing trade war between United States & China, central banks are concerned over increasing inflation, talent flight as more people leaving formal jobs, there is backlash against globalization, increasing transportation and logistics costs,
increasing government debt because of Covid-19 spendings, cloud computing is disrupting traditional business models, etc
SWOT stands for an organization’s Strengths, Weaknesses, Opportunities and Threats . At Oak Spring University, we believe that Fiat can use SWOT analysis as a strategic management tool to assess the current internal strengths and weaknesses of the Fiat, and to figure out the opportunities and threats in the macro environment – technological, environmental, political, economic, social, demographic, etc in which Fiat operates in.
According to Harvard Business Review, 75% of the managers use SWOT analysis for various purposes such as – evaluating current scenario, strategic planning, new venture feasibility, personal growth goals, new market entry, Go To market strategies, portfolio management and strategic trade-off assessment, organizational restructuring, etc.
SWOT Objectives / Importance of SWOT Analysis and SWOT Matrix
SWOT analysis of Fiat can be done for the following purposes –
1. Strategic planning of Fiat
2. Improving business portfolio management of Fiat
3. Assessing feasibility of the new initiative in Germany
4. Making a Auto & Truck Manufacturers sector specific business decision
5. Set goals for the organization
6. Organizational restructuring of Fiat
Strengths of Fiat | Internal Strategic Factors
What are Strengths in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The strengths of Fiat are -
Sustainable margins compare to other players in Auto & Truck Manufacturers industry
– Fiat has clearly differentiated products in the market place. This has enabled Fiat to fetch slight price premium compare to the competitors in the Auto & Truck Manufacturers industry. The sustainable margins have also helped Fiat to invest into research and development (R&D) and innovation.
Digital Transformation in Auto & Truck Manufacturers industry
- digital transformation varies from industry to industry. For Fiat digital transformation journey comprises differing goals based on market maturity, customer technology acceptance, and organizational culture. Fiat has successfully integrated the four key components of digital transformation – digital integration in processes, digital integration in marketing and customer relationship management, digital integration into the value chain, and using technology to explore new products and market opportunities.
Low bargaining power of suppliers
– Suppliers of Fiat in the Consumer Cyclical sector have low bargaining power. Fiat has further diversified its suppliers portfolio by building a robust supply chain across various countries. This helps Fiat to manage not only supply disruptions but also source products at highly competitive prices.
Operational resilience
– The operational resilience strategy of Fiat comprises – understanding the underlying the factors in the Auto & Truck Manufacturers industry, building diversified operations across different geographies so that disruption in one part of the world doesn’t impact the overall performance of the firm, and integrating the various business operations and processes through its digital transformation drive.
Organizational Resilience of Fiat
– The covid-19 pandemic has put organizational resilience at the centre of everthing Fiat does. Organizational resilience comprises - Financial Resilience, Operational Resilience, Technological Resilience, Organizational Resilience, Business Model Resilience, and Reputation Resilience.
Training and development
– Fiat has one of the best training and development program in Consumer Cyclical industry. The effectiveness of the training programs can be measured in – employees retention, in-house promotion, loyalty, new venture initiation, lack of conflict, and high level of both employees and customer engagement.
Superior customer experience
– The customer experience strategy of Fiat in Auto & Truck Manufacturers industry is based on four key concepts – personalization, simplification of complex needs, prompt response, and continuous engagement.
Ability to lead change in Auto & Truck Manufacturers
– Fiat is one of the leading players in the Auto & Truck Manufacturers industry in Germany. Over the years it has not only transformed the business landscape in the Auto & Truck Manufacturers industry in Germany but also across the existing markets. The ability to lead change has enabled Fiat in – penetrating new markets, reaching out to new customers, and providing different value propositions to different customers in the international markets.
Innovation driven organization
– Fiat is one of the most innovative firm in Auto & Truck Manufacturers sector.
Learning organization
- Fiat is a learning organization. It has inculcated three key characters of learning organization in its processes and operations – exploration, creativity, and expansiveness. The work place at Fiat is open place that encourages instructiveness, ideation, open minded discussions, and creativity. Employees and leaders at Fiat emphasize – knowledge, initiative, and innovation.
Analytics focus
– Fiat is putting a lot of focus on utilizing the power of analytics in business decision making. This has put it among the leading players in the Auto & Truck Manufacturers industry. The technology infrastructure of Germany is also helping it to harness the power of analytics for – marketing optimization, demand forecasting, customer relationship management, inventory management, information sharing across the value chain etc.
Successful track record of launching new products
– Fiat has launched numerous new products in last few years, keeping in mind evolving customer preferences and competitive pressures. Fiat has effective processes in place that helps in exploring new product needs, doing quick pilot testing, and then launching the products quickly using its extensive distribution network.
Weaknesses of Fiat | Internal Strategic Factors
What are Weaknesses in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The weaknesses of Fiat are -
High dependence on Fiat ‘s star products
– The top 2 products and services of Fiat still accounts for major business revenue. This dependence on star products in Auto & Truck Manufacturers industry has resulted into insufficient focus on developing new products, even though Fiat has relatively successful track record of launching new products.
Slow to harness new channels of communication
– Even though competitors are using new communication channels such as Instagram, Tiktok, and Snap, Fiat is slow explore the new channels of communication. These new channels of communication can help Fiat to provide better information regarding Auto & Truck Manufacturers products and services. It can also build an online community to further reach out to potential customers.
High bargaining power of channel partners in Auto & Truck Manufacturers industry
– because of the regulatory requirements in Germany, Fiat is facing high bargaining power of the channel partners. So far it has not able to streamline the operations to reduce the bargaining power of the value chain partners in the Auto & Truck Manufacturers industry.
Need for greater diversity
– Fiat has taken concrete steps on diversity, equity, and inclusion. But the efforts so far has resulted in limited success. It needs to expand the recruitment and selection process to hire more people from the minorities and underprivileged background.
Aligning sales with marketing
– From the outside it seems that Fiat needs to have more collaboration between its sales team and marketing team. Sales professionals in the Auto & Truck Manufacturers industry have deep experience in developing customer relationships. Marketing department at Fiat can leverage the sales team experience to cultivate customer relationships as Fiat is planning to shift buying processes online.
Lack of clear differentiation of Fiat products
– To increase the profitability and margins on the products, Fiat needs to provide more differentiated products than what it is currently offering in the marketplace.
Slow decision making process
– As mentioned earlier in the report, Fiat has a very deliberative decision making approach. This approach has resulted in prudent decisions, but it has also resulted in missing opportunities in the Auto & Truck Manufacturers industry over the last five years. Fiat even though has strong showing on digital transformation primary two stages, it has struggled to capitalize the power of digital transformation in marketing efforts and new venture efforts.
Increasing silos among functional specialists
– The organizational structure of Fiat is dominated by functional specialists. It is not different from other players in the Auto & Truck Manufacturers industry, but Fiat needs to de-silo the office environment to harness the true potential of its workforce. Secondly the de-silo will also help Fiat to focus more on services in the Auto & Truck Manufacturers industry rather than just following the product oriented approach.
Products dominated business model
– Even though Fiat has some of the most successful models in the Auto & Truck Manufacturers industry, this business model has made each new product launch extremely critical for continuous financial growth of the organization. Fiat should strive to include more intangible value offerings along with its core products and services.
High cash cycle compare to competitors
Fiat has a high cash cycle compare to other players in the Auto & Truck Manufacturers industry. It needs to shorten the cash cycle by 12% to be more competitive in the marketplace, reduce inventory costs, and be more profitable.
Compensation and incentives
– The revenue per employee of Fiat is just above the Auto & Truck Manufacturers industry average. It needs to redesign the compensation structure and incentives to increase the revenue per employees. Some of the steps that it can take are – hiring more specialists on project basis, etc.
Fiat Opportunities | External Strategic Factors
What are Opportunities in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The opportunities of Fiat are -
Use of Bitcoin and other crypto currencies for transactions in Auto & Truck Manufacturers industry
– The popularity of Bitcoin and other crypto currencies as asset class and medium of transaction has opened new opportunities for Fiat in the Auto & Truck Manufacturers industry. Now Fiat can target international markets with far fewer capital restrictions requirements than the existing system.
Creating value in data economy
– The success of analytics program of Fiat has opened avenues for new revenue streams for the organization in Auto & Truck Manufacturers industry. This can help Fiat to build a more holistic ecosystem for Fiat products in the Auto & Truck Manufacturers industry by providing – data insight services, data privacy related products, data based consulting services, etc.
Learning at scale
– Online learning technologies has now opened space for Fiat to conduct training and development for its employees across the world. This will result in not only reducing the cost of training but also help employees in different part of the world to integrate with the headquarter work culture, ethos, and standards.
Harnessing reconfiguration of the global supply chains
– As the trade war between US and China heats up in the coming years, Fiat can build a diversified supply chain model across various countries in - South East Asia, India, and other parts of the world. This reconfiguration of global supply chain can help Fiat to buy more products closer to the markets, and it can leverage its size and influence to get better deal from the local markets.
Reconfiguring business model
– The expansion of digital payment system, the bringing down of international transactions costs using Bitcoin and other blockchain based currencies, etc can help Fiat to reconfigure its entire business model. For example it can used blockchain based technologies to reduce piracy of its products in the big markets such as China. Secondly it can use the popularity of e-commerce in various developing markets to build a Direct to Customer business model rather than the current Channel Heavy distribution network.
Lowering marketing communication costs
– 5G expansion will open new opportunities for Fiat in the field of marketing communication. It will bring down the cost of doing business, provide technology platform to build new products in the Auto & Truck Manufacturers industry, and it will provide faster access to the consumers.
Finding new ways to collaborate
– Covid-19 has not only transformed business models of companies in Auto & Truck Manufacturers industry, but it has also influenced the consumer preferences. Fiat can tie-up with other value chain partners to explore new opportunities regarding meeting customer demands and building a rewarding and engaging relationship.
Changes in consumer behavior post Covid-19
– consumer behavior has changed in the Auto & Truck Manufacturers industry because of Covid-19 restrictions. Some of this behavior will stay once things get back to normal. Fiat can take advantage of these changes in consumer behavior to build a far more efficient business model. For example consumer regular ordering of products can reduce both last mile delivery costs and market penetration costs. Fiat can further use this consumer data to build better customer loyalty, provide better products and service collection, and improve the value proposition in inflationary times.
Manufacturing automation
– Fiat can use the latest technology developments to improve its manufacturing and designing process in Auto & Truck Manufacturers sector. It can use CAD and 3D printing to build a quick prototype and pilot testing products. It can leverage automation using machine learning and artificial intelligence to do faster production at lowers costs, and it can leverage the growth in satellite and tracking technologies to improve inventory management, transportation, and shipping.
Identify volunteer opportunities
– Covid-19 has impacted working population in two ways – it has led to people soul searching about their professional choices, resulting in mass resignation. Secondly it has encouraged people to do things that they are passionate about. This has opened opportunities for businesses to build volunteer oriented socially driven projects. Fiat can explore opportunities that can attract volunteers and are consistent with its mission and vision.
Using analytics as competitive advantage
– Fiat has spent a significant amount of money and effort to integrate analytics and machine learning into its operations in Auto & Truck Manufacturers sector. This continuous investment in analytics has enabled Fiat to build a competitive advantage using analytics. The analytics driven competitive advantage can help Fiat to build faster Go To Market strategies, better consumer insights, developing relevant product features, and building a highly efficient supply chain.
Redefining models of collaboration and team work
– As explained in the weaknesses section, Fiat is facing challenges because of the dominance of functional experts in the organization. Fiat can utilize new technology in the field of Auto & Truck Manufacturers industry to build more coordinated teams and streamline operations and communications using tools such as CAD, Zoom, etc.
Loyalty marketing
– Fiat has focused on building a highly responsive customer relationship management platform. This platform is built on in-house data and driven by analytics and artificial intelligence. The customer analytics can help the organization to fine tune its loyalty marketing efforts, increase the wallet share of the organization, reduce wastage on mainstream advertising spending, build better pricing strategies using personalization, etc.
Threats Fiat External Strategic Factors
What are Threats in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The threats of Fiat are -
Increasing wage structure of Fiat
– Post Covid-19 there is a sharp increase in the wages especially in the jobs that require interaction with people. The increasing wages can put downward pressure on the margins of Fiat.
Stagnating economy with rate increase
– Fiat can face lack of demand in the market place because of Fed actions to reduce inflation. This can lead to sluggish growth in the economy, lower demands, lower investments, higher borrowing costs, and consolidation in the Auto & Truck Manufacturers industry.
Increasing international competition and downward pressure on margins
– Apart from technology driven competitive advantage dilution, Fiat can face downward pressure on margins from increasing competition from international players. The international players have stable revenue in their home market and can use those resources to penetrate Fiat prominent markets.
Learning curve for new practices
– As the technology based on artificial intelligence and machine learning platform is getting complex, Fiat may face longer learning curve for training and development of existing employees. This can open space for more nimble competitors in the field of Auto & Truck Manufacturers sector.
High dependence on third party suppliers
– Fiat high dependence on third party suppliers can disrupt its processes and delivery mechanism. For example -the current troubles of car makers because of chip shortage is because the chip companies started producing chips for electronic companies rather than car manufacturers.
Environmental challenges
– Fiat needs to have a robust strategy against the disruptions arising from climate change and energy requirements. EU has identified it as key priority area and spending 30% of its 880 billion Euros European post Covid-19 recovery funds on green technology. Fiat can take advantage of this fund but it will also bring new competitors in the Auto & Truck Manufacturers industry.
Shortening product life cycle
– it is one of the major threat that Fiat is facing in Auto & Truck Manufacturers sector. It can lead to higher research and development costs, higher marketing expenses, lower customer loyalty, etc.
Trade war between China and United States
– The trade war between two of the biggest economies can hugely impact the opportunities for Fiat in Auto & Truck Manufacturers industry. The Auto & Truck Manufacturers industry is already at various protected from local competition in China, with the rise of trade war the protection levels may go up. This presents a clear threat of current business model in Chinese market.
Technology acceleration in Forth Industrial Revolution
– Fiat has witnessed rapid integration of technology during Covid-19 in the Auto & Truck Manufacturers industry. As one of the leading players in the industry, Fiat needs to keep up with the evolution of technology in the Auto & Truck Manufacturers sector. According to Mckinsey study top managers believe that the adoption of technology in operations, communications is 20-25 times faster than what they planned in the beginning of 2019.
Technology disruption because of hacks, piracy etc
– The colonial pipeline illustrated, how vulnerable modern organization are to international hackers, miscreants, and disruptors. The cyber security interruption, data leaks, etc can seriously jeopardize the future growth of the organization.
Aging population
– As the populations of most advanced economies are aging, it will lead to high social security costs, higher savings among population, and lower demand for goods and services in the economy. The household savings in US, France, UK, Germany, and Japan are growing faster than predicted because of uncertainty caused by pandemic.
Consumer confidence and its impact on Fiat demand
– There is a high probability of declining consumer confidence, given – high inflammation rate, rise of gig economy, lower job stability, increasing cost of living, higher interest rates, and aging demography. All the factors contribute to people saving higher rate of their income, resulting in lower consumer demand in Auto & Truck Manufacturers industry and other sectors.
Barriers of entry lowering
– As technology is more democratized, the barriers to entry to Auto & Truck Manufacturers industry are lowering. It can presents Fiat with greater competitive threats in the near to medium future. Secondly it will also put downward pressure on pricing throughout the Auto & Truck Manufacturers sector.
Weighted SWOT Analysis of Fiat Template, Example
Not all factors mentioned under the Strengths, Weakness, Opportunities, and Threats quadrants in the SWOT Analysis are equal. Managers at Fiat needs to zero down on the relative importance of each factor mentioned in the Strengths, Weakness, Opportunities, and Threats quadrants.
We can provide the relative importance to each factor by assigning relative weights. Weighted SWOT analysis process is a three stage process –
First stage for doing weighted SWOT analysis of Fiat is to rank the strengths and weaknesses of the organization. This will help you to assess the most important strengths and weaknesses of the firm and which one of the strengths and weaknesses mentioned in the initial lists are marginal and can be left out.
Second stage for conducting weighted SWOT analysis of Fiat is to give probabilities to the external strategic factors thus better understanding the opportunities and threats arising out of macro environment changes and developments.
Third stage of constructing weighted SWOT analysis of Fiat to provide strategic recommendations includes – joining likelihood of external strategic factors such as opportunities and threats to the internal strategic factors – strengths and weaknesses. You should start with external factors as they will provide the direction of the overall industry. Secondly by joining probabilities with internal strategic factors can help the company not only strategic fit but also the most probably strategic trade-off that Fiat needs to make to build a sustainable competitive advantage.