Nguyen Hoang | SE03997 FIAT A GOOD PRODUCT WITH A WRONG STRATEGY Case study analyzed by: Nguyen Hoang Roll number: SE03997 Write down the reasons in the failure of FIAT Brand: FIAT introduced Fiat 500 which was produced by Premier Automobiles Limited (PAL) in 1951 and the Fiat 1100 Delight in 1954 After that, a lot of models were released and became popular this time However, since the liberalization in India, many rivals came in the market and competed with FIAT The company met the labor problem which immediately thwarted its expansion plans FIAT always wanted its products to be strong, modern and powerful among the car market in India FIAT created the joint venture with Tata Motors in 1997 with the purpose of increasing the distribution network of the brand in India However, the combination was considered as one of the biggest failure of FIAT The main reason here was FIAT wanted to produce “luxurious” cars for those who have money whereas Tata focused on the lower-price segmentation of the market FIAT India launched Palio which was a very good product as most of FIAT’s products are In just one year more than 32,000 cars were sold However, the sales momentum plummeted due to expensive ancillaries Product: FIAT introduced a lot of car models in India Punto and Linea were offered very good car but the fact that sales were not strong The sales for fiscal year 2011 for FIAT Nguyen Hoang | SE03997 fell by around 15 percent, which is a dismal performance in the highly competitive and concentrated passenger car industry of India During the same period, other companies had registered higher growth rates The problem here was the lack of variety in the product portfolio In the third quarter of fiscal year 2012, Fiat’s market share was less than percent while Volkswagen was commanding more than percent market share since its entry in 2007 The manufacturing facilities were underutilized at Ranjangaon, Pune In addition, Palio Stile was not widely available in the bigger markets and was discontinued as the sales were not high enough to upgrade it to the BS-IV pollution norms The Grand Punto was launched by Fiat in Punto while competitors are launching cars every year Moreover, no matter how good a product, India market – where most of people are in middle and lower middle class – was not the place of luxurious things People chose a not-too-much modern but acceptable-price car instead of expensive one Distribution channel: The 50-50 joint venture between Tata Motors and FIAT aimed mainly at unification of the distribution network Nevertheless, it also compounded problems for FIAT They became dependent totally on Tata for sales, service and spares and this became a weak point for them It was difficult for dealers to justice to both car companies in one single outlet The dealers focused more on Tata’s cars as they received better margins through its sales In addition, the product portfolio offering from Tata was higher than that of FIAT that had just two products – Linea and Punto Hence, Tata cars dented the market share for Fiat drastically In 2012, both Tata and FIAT decided to part ways for the distribution channel while the manufacturing collaboration still exists Continued poor showings in the Indian market and increasing congestion in the showrooms prompted them for separating ways as the potential FIAT customers had been unable to have a feel of the brand Tata Nguyen Hoang | SE03997 Motors and FIAT have uttered their disappointment with the joint venture, which terribly performed The joint venture model did not move towards achieving its objective of gaining a foothold in the emerging market of India The fall in the sales is attributed to customer feedback, which said that the customers need to have an experience of the brand at the retail end To sum up, there are some reasons that brought failure to FIAT in India: - Choosing local partners wrongly - Poor brand image and reliability - Noncompetitive price - Poor after sale services - Using distribution channels ineffective Suggestions for FIAT There are some suggestions in FIAT India case: Brand: To be adopt in a particular market, a wise brand has to research carefully and modify its features to fit for the market At FIAT case, they need to choose a different dealer to be in partnership with to relocate their position in India market Clarifying the market segmentation, which they are really in, is an important part of research Product: They need to care about sales service and after sales service Establishing service centers is a good way to follow customers’ demand Moreover, if FIAT wants to put their customers in the place of “to make a decision”, they need to diversify in production Distribution channel: Dealers always want to make afford for high-resale value, not low-resale value FIAT should run some discount campaigns for the dealers It may be good for sales activities and also good for promoting activities to target customers