1.0 CASE SUMMARYChryslers future may be uncertain, but its past is full of notable moment. Since Chryslers start in early 1900s, they have held a substantial amount of respect and leverage within the automobile industry. After long journey in the automotive industry passing by highlights of failure and others of success they encountered a tricky financial situation. Chryslers has been caught up by some bad decision while they are struggling for survival. A few changes in management also influence the decision making of Chrysler especially after merging with Daimler where there are a lot of problem arises.

Chrysler have introduce several car model design in 1934 where it introduce aerodynamic automobile but it does not get much response during that period of time. In 1950, Chrysler has become popular by introducing the HEMI engine, power steering, power window, fuel injection and other product. In 1973 Lee Iococca has become the CEO of Chrysler where he introduce Dodge Caravan and Plymouth that gives a huge success to Chryslers sales.

In 1998, Chrysler forms merger of equal with Daimler which is a German automaker. These merge does not found to be successful and Daimler eventually take over Chrysler. Upon taking over Chrysler, the Daimler management which emphasize on bureaucratic have cause come cultural difference problem within the organization. Furthermore, Daimler runs the Chrysler separately from its luxury Mercedes Benz.

On May 2007, Daimler sells 80.1% stake of Chrysler to Cerberus and Crysler has become Chrysler Motor LLC. Nardelli was appointed as the CEO of Chrysler. In 2008 Chrysler have asked for financial aids the company is facing Global Crisis 2008. Chrysler also have done major restructuring to cut cost in 2009. Nardelli have request for US$9 billion in order to restructure and achieving long term viability of its operations. U.S government have agreed to give Chrysler the loan with one condition that is Chrysler must merge with Fiat. On May 2009, Chrysler has filed for bankruptcy and reach a global strategic alliance with Fiat. Sergio Marchionne has become the new CEO of the alliance and remain positives that he will be able to run both Fiat and Chrysler.

2.0SWOT ANALYSIS2.1 Internal environment analysis (Strength) Financial Support from the Government.In January 2009, Chrysler has obtained US$4 billion from the US government after Chrysler has request for US$7 billion during its struggling period. On April 2009, the US government also has make a deal with Chrysler to make an alliance with Fiat in order to get additional loan as Chrysler has requested an extra US$2 billion above US$7 billion for long term restructuring. In the past also Chrysler has been helped for financial aid by former U.S. President Jimmy Carter in 1979. This indicates that Chrysler has a strong relationship with the U.S. government.

Efficient in Managing CostMajor restructuring plan of Chrysler such as discontinued four vehicles models, eliminate 12 production shifts have improves the cost competitive.

Form Alliance with Fiat According to Nardelli, by forming alliances with Fiat Chrysler can enhance more global strategic alliances. Furthermore, alliance with Fiat also make Chrysler the availability of powertrain technology, worldwide distribution capabilities.

Established Brand NameChrysler is one of the most popular automotive manufacturer in the industry. Chrysler developed the Firepower, the first hemispherical-head V8 engine which later become popularly known as HEMI engine. Furthermore, Chrysler become more popular with the introduction of power steering, power window, electronic fuel injections and others to the market. Even the U.S. president Barrack Obama have acknowledge the alliance of Chrysler and Fiat is a good thing.

Good Negotiation SkillChrysler top management has a very good negotiation skill where they has negotiate successfully with UAW and CAW to reduce cost..

2.2 Internal Environment Analysis (Weakness) Lack of Innovation Chrysler remained focus on SUV and trucks only and come out very little innovation in producing new car. This cause Asian manufacturer to be in leading as they focus more on consumer preference. Lack of innovation also due to the Chrysler poor investment in Research and Development as Chrysler focus more on cost cutting. Chrysler was once perceived as a good innovator because they have come up with a lot of innovation such as power steering and power window.

High Debt BurdenChrysler has a very high debt burden until Chrysler have to fail for bankruptcy protection. Although Chrysler has done major restructuring yet it still suffers from poor sales and debt burden. Previously, Chrysler also face some high burden under Iacocca but manage to overcome the debt by emphasizing on manufacturing Dodge Caravan and Plymouth Voyage.

Poor Decision MakingSome analyst criticize the decision of Chrysler to merge with Daimler because they perceived that Chrysler was generating more profit and doing well at that time. Furthermore, Chrysler have an opportunity to buy Daimler but instead they form a merger of equal and then eventually sold it.

Tarnished ReputationDue to major revamp and restructuring, Chrysler have produced low quality cars whereas Asian car like Toyota and Honda produced a high quality and good performance car. This have created a negative impression on Chrysler.

Employee DemotivatedFrequent change in management has given impact to the employee as they need to frequently adapt to the new change that has been brought up by new management. For example, when Daimler take over the management, the employee have to adapt to the Germans style management culture that is more bureaucratic compared to American culture that values efficiency, empowerment, creativity and informal relationship among employee.

2.3 External Environment Analysis (Threat) New Advance TechnologyChrysler have an outdated technology as compared to the Asian manufacturer. Asian manufacturer can come up with small and efficient car along with the customer preference for these design of car.

Global Financial CrisisChrysler has survived the period of Great Depression and 2008 Financial Crisis but the impact on the crisis still can be seen by the manufacturer. The Global Financial Crisis 2008 have affected the automotive industry with great impact because the crisis initiated from U.S. With the high debt and fail for bankruptcy protection, it is still a doubt that Chrysler can survive another Financial Crisis.

Bargaining Power of ConsumersThere are a lot of car manufacturer with high level of competition in automotive market that creates more option for the customer. This will cause the customer have high bargaining power. Automotive manufacturer that produce vehicle according to the customer preference will generate more profit and increase in sales.

Threats of Substitute Products Automotive industry has wide range of substitute product in the market. During the fuel price hike the customer prefer a small and fuel-efficient car. Chrysler have only big cars and not fuel efficient meanwhile Asian car manufacturer has these kind of car. Thus, the Asian manufacturer car has become a substitute to the Chryslers car.

Threats from CompetitorChrysler have a lot of internal and foreign competitor like Chevrolet, Nissan, Toyota, Honda and Volkswagen. Different automotive manufacturer have different strategy to market their product and manage cost efficiently.

2.4 External Environment Analysis (Opportunity) Demand for New car ModelThe demand for new car model is always preferred by the customer. A new car model that satisfy the customer need is important in order remain in the market. Customer desire and preference change according to the current change of the environment..

Environmental Pollution Awareness Severe environmental effect on global warming and other environment destructive event has been opposed by the consumer. Increase awareness in preserving the environment has led to new opportunity to the entrepreneur to come up with product that is environmentally friendly.

New Global MarketAlliance with Fiat creates an opportunity to Chrysler to expand their market globally and come up with new global strategic alliances.

Bargaining Power of the SupplierChrysler has previously initiates dialogues with the suppliers to reduce substantial cost during their cost restructuring period. This can be an advantage of Chrysler to manufacture a vehicle with lower cost.

Limited New EntrantHigh competitive automotive market often demotivate the new entrant from entering the market.

2.5 EFE Matrix and IFE Matrix2.5.1 Internal Factor Evaluation Analysis (IFE Analysis)StrengthWeightRatingWeighted Score

Financial Support from Government 0.10(15%)30.30

Efficient Cost Management0.10(10%)20.20

Form Alliance with FIAT 0.10 (10%)20.20

Established Brand Name 0.08 (8%)20.16

Good Negotiation Skills 0.08 (8%)30.24

Weakness

Lack of Innovations 0.15 (15%)20.20

Employee Demotivated0.07 (7%)20.14

Poor Decision Making0.10 (10%)30.30

Tarnished Reputation0.10 (10%)30.30

High Burden Debt0.12(12%)20.24

Total Weighted Score 1.0(100%)2.28

The ratings in IFE matrix refer to how strong or weak each factor is in a firm. The numbers range from 4 to 1, where 4 means a excellent strength and 1 is major weakness. According to the analaysis, the total weighted score is 2.28 which is below 2.5. It means that Chrysler has some weakness internally and worse than other rivals. They must improve their internals if they expose to competitors in future. 2.5.2 External Factor Evaluation (EFE Matrix)OpportunitiesWeightRatingWeighted Score

Demand for New Car Model 0.15 (15%)20.30

Environmental Pollution Awareness 0.08 (8%)20.16

New Global Market0.09 (9%)20.18

Bargaining Power of the Supplier0.06(6%)30.18

Limited New Entrant0.06 (6%)20.12

Threats

New Advance Technology0.12 (12%)20.24

Global Financial Crisis0.05 (5%)20.10

Bargaining power of consumer0.15 (15%)20.30

Threats of Substitute Products0.12 (12%)20.24

Threats from competitors0.12 (12%)20.24

Total Weighted Score 1.0(100%)2.04

It should be noted that the highest possible total weighted score of a firm is 4 whereas the lowest possible total weighted score is 1. If a company get the highest weighted score, it means the company is effectively taking advantage of the existing opportunity as well as has the capacity to minimize the risk. In the contrast, if the total weighted score is 1, it means that the company is not able to take good advantage of current opportunity and avoid risks. In the case of Chrysler, the total weighted score is below average 2.5 which means that the company is not performing well, the company strategy is not really effective. Thus the ability of Chrysler to take advantage of current opportunity and avoid potential risks is weak.2.7 Competitive Profile Matrix (CPM)ChryslerToyota

Critical sucess factorsWeightedRatingWeighted ScoresWeightedRatingWeighted Scores

1Research and Development 0.2520.500.2541.00

2Competent Employee0.1530.450.1530.45

3Organizational Efficiency0.1530.450.1530.45

4Product Quality 0.2520.500.141.00

5Financial Strength0.2010.200.2040.80

12.1013.70

The CPM matrix shows how the competitive advantage of a company compare to other competitors is. It is obvious that the highest weighted score get, the stronger the competitive advantage is. In the case of Chrysler, the weighted score is much lower than Toyota and KFC which means that Chrysler has weak competitiveness.

3.0 LIST OF PROBLEMS AND PROBLEM STATEMENT3.1 List of Problems 3.1.1 Lack of InnovationChrysler having a very high debt that it cannot focus on the development of new product. The world is changing and lack of new model can become an advantage for the competitors. Chrysler only focus on the SUV and trucks whereas their competitor have come with new models that satisfies the customer needs. During the oil price hike, the demand is for the small and fuel efficient car. Asian manufacturer like Toyota and Honda have come up the new model but Chrysler unable to come up with the new model because lack of investment in the R&D.3.1.2 High Debt Burden Chrysler is facing a very high debt from the U.S government loan. Chrysler also have file bankruptcy protection under Chapter 11 as the amount of debt is hike up. Chrysler have survive a few crisis before like the Global Financial Crisis but the impact is still very high. It is still doubtful if Chrysler could survive another similar crisis in the future if the situation remains the same. According to Karl Brauer Fiat taking over Chrysler is a huge gamble because Chrysler have been losing money for years.3.1.3 Poor Decision MakingAnalyst believe that Chrysler have been made a few fault decision such as merging with Daimler. Chrysler was doing very well on the time they form a merger of equals with Daimler. Furthermore, Chrysler can buy Daimler that time rather than for a merge that eventually cause Daimler to take over Chrysler. The consequences of this decision is employee become more demotivated because they need to adapt to the new management with different culture. Analyst also criticise the decision made by Daimler to separately run Chrysler from its luxury Mercedes Benz. By doing this Daimler does not take advantage working together with Chrysler to produce vehicles.3.1.4 High Competitive MarketAutomotive industry is a very high competitive industry where new entrant unable to enter into this market. High competition between the automotive manufacturers cause the customer to have more variety of choice that can be a substitute. This has create the bargaining power of the customer and the automotive industry has to satisfy the customer needs in order to stay competitive in the market. Chrysler has many competitor in U.S and from foreign country like Toyota, Honda and Nissan.

3.2 Main Problem Statement The Fundamental for all the problem can be deduce to inability to react to customer demands and industry changes. The cause of all the problem that has been listed above is mainly due to Chrysler fails to meet customer preference. Furthermore, Chrysler also become a victim of fast changing automotive industry. The problem for Chrysler is a going around a cycle. The design and certain model that has been produced by Chrysler does not meet the preference of the customer. This causes the sales of the product decreases and Chrysler in high debt. Competitor has fulfilled the customer preference and give them a high bargaining power. For example, Asian manufacturer come up with small and fuel efficient car whereas Chryslers stick to large cars due to lack of allocation for Research and Development.