Chrysler Company in American Automotive Industry

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Table of Contents

Industry Analysis: Current Trends and What They Imply
Competitive Advantages of Chrysler
Bibliography
Footnotes

Industry Analysis: Current Trends and What They Imply

The U.S. automotive industry is of a rather impressive size; in fact, it ranks as huge among some of the greatest industries of the American economy. There is a plethora of reasons for assuming that the identified area of the American economy can be deemed as one of the primary tools for increasing the economic growth of the state.

Indeed, a closer look at current statistical data will reveal that the industry has been experiencing rapid progress over the past few decades. According to information released recently, the gross output of vehicle and vehicle parts manufacturing made $61,002,000,000 in the United States in 2015 (see Fig. 1).¹ Therefore, the recent change in the automotive industry toward the use of green technologies and the incorporation of the latest IT tools into the design of cars can be viewed as the factor that must have defined the consistency of the progress.

Figure 1. Manufacturing Gross Output (Automotive Industry, U.S.)

One may argue, however, that the recent rise in the revenues across the industry can be explained by the surge of innovative decisions made by the American automotive organizations, the design and the production of hybrids being among the essential ones. Although the focus on the e-cars can also be considered a significant game-changer in the realm of the automotive industry, one must admit that the concept is comparatively raw, whereas hybrids have gained impressive popularity despite the price and the associated expenses.²

As Fig. 1 shows quite clearly, the automotive industry experienced a significant rise in 2014. The identified phenomenon can also be explained from an economic perspective. There has recently been a propensity among the members of the global market to focus on the improvement of the communication processes across the supply chains. Therefore, it would only be reasonable to expect that the use of IT tools will be considered by the leaders of major automotive companies as the means of strengthening their supply chains in the environment of the global market. Further, the disruptive technology that has recently emerged in the context of the target market can be viewed as a factor of considerable importance.

It is also expected that the worth of the automotive aftermarket of the United States will grow exponentially in the next few years. One must admit that the 2008 crisis has had its toll on the progress of the automotive industry. As the International Trade Administration of the USA points out, vehicle sales have been rising since 2009 and have reached an impressive $17,400,000 in 2016.³ As stressed above, the rapid growth of the industry is defined to a considerable extent by the opportunities that disruptive technologies and the associated innovations have provided.

Furthermore, a closer look at the identified environment will show that the state investments in the automotive industry have increased significantly over the past few years. As the International Trade Association points out, approximately $23,000,000,000 has been invested in the development of the automotive industry of the United States since the day it was created. Therefore, it can be assumed that, with the support of the state authorities, the industry is going to become increasingly more profitable.

Competitive Advantages of Chrysler

Much to the credit of the organization, it uses the available resources in a very careful and wise manner. Particularly, it manages to retain sustainability, at the same time investing extensively in the R&D processes. As a result, the opportunities for exploring the target market in a more careful and elaborate manner can be created. Indeed, Chrysler has been known as a big name in the U.S. automotive industry for years. Having introduced a range of innovative solutions into the industry, the organization has gained an impressive competitive advantage in the target environment. Even now, when the availability of IT devices has made it possible for literally any organization to gain an impressive competitive advantage by using the available information in a sensible manner, Chrysler manages to retain its position as one of the top companies in the automotive industry.

Furthermore, the cost management strategy deployed at the organization could use a significant improvement. According to the latest information, the leverage of the organization has been declining, and the prognosis for 2017 are rather poor (see Fig. 2).⁴ Similarly, the stock valuation issue needs to be touched upon as one of the reasons for concern.

It should be noted, though, that Chrysler’s cost of capital has recently experienced an increase, reaching the total of 4.28%.⁵ The identified mark can be considered a rather impressive achievement in light of the fact that the firm has obviously been experiencing difficulties with addressing some of the sustainability issue and investing in its development. The identified phenomenon can be attributed to the fact that the company has been putting a very strong emphasis on the technological aspect of its functioning. The way in which the organization carries out its data management, particularly the process of communicating with its customers, also defines its stock value significantly. Despite the drop in the leverage rates, the firm has recently experienced an increase in the stock index ($7.62, i.e., a 0.03 increase).⁶

However, one must bear in mind that the suggested approach requires that the principles of sustainability and resource management must be enhanced. As stressed above, the active use of the available information is what makes the company stand out in the range of similar entrepreneurships. However, apart from the identified strategy, the company may also need to deploy the system that will allow for a reduction in waste. Furthermore, a general concept of a consistent quality improvement will have to be introduced.

For these purposes, the principles of the Total Quality Management (TQM) system will have to be considered. Furthermore, the regular update of quality standards will require that the quality control system should be designed. It is suggested that the principles of the Six Sigma model should be implemented at Chrysler. Particularly, the DMAIC (Define, Measure, Assess, Improve, and Control) tool needs to be promoted as the basis of the quality management framework. Given that it allows for a fast and efficient change in the quality of the end product, it has to be viewed as an important element of the company.

Building a competitive advantage is a challenging task, especially in the context of the global economy. However, with a close focus on the opportunities that technological innovations have to offer, as well as the promotion of sustainability principles in the organization, the leaders of Chrysler strive to maintain the company’s competitive advantage high. With the company’s assets, particularly the IT tools used to maintain the quality levels high and the communication processes consistent, it is expected that Chrysler will retain its competitive advantage and even increase it.

Bibliography

“Could Fiat Chrysler’s Leverage Improve in 2016?” MarketRealist.com. Web.

“Fiat Chrysler Automobiles N.V.” MarketWatch.com. Web.

“Fiat Chrysler Automobiles NV FCAU.” MorningStar.com. Web.

“Fiat Chrysler Automobiles NV (NYSE:FCAU) Weighted Average Cost of Capital (WACC).” GuruFocus. Web.

International Trade Administration. “The Automotive Industry in the United States.” SelectUSA.com. Web.

“Statistics and Facts about the U.S. Automotive Industry.” Statista.com. Web.

Footnotes

“Statistics and Facts about the U.S. Automotive Industry,” Statista.com, Web.
“Fiat Chrysler Automobiles NV FCAU,” MorningStar.com, Web.
International Trade Administration, “The Automotive Industry in the United States,“ SelectUSA.com, Web.
“Could Fiat Chrysler’s Leverage Improve in 2016?,” MarketRealist.com, Web.
“Fiat Chrysler Automobiles NV (NYSE:FCAU) Weighted Average Cost Of Capital (WACC),” GuruFocus, Web.
“Fiat Chrysler Automobiles N.V.,” MarketWatch.com, Web.

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Chrysler Company in American Automotive Industry

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