Tuesday, March 22, 2011

Fiat: why does not win in emerging markets?

The recent history of the Fiat Group with the advent of Sergio Marchionne despite having seen a strategy characterized by a series of successes in more mature markets, has so far miserably failed all attempts to gain a leading role in emerging markets. The German manufacturers have now their success almost entirely to the markets of Russia and China have become the paradise of all the premium brands that matter.

BMW, Mercedes, Volkswagen and Audi have a strong position that they have built over the years with foresight. And yet these markets help ensure the giant Toyota, Hyundai, Honda. But the direct competitors of Fiat, as PSA Peugeot / Citroen and Renault Nissan are much stronger position in emerging markets, as well as the American GM and Ford.

What's wrong? Why all the efforts already undertaken and local production arrangements have failed and Fiat is bringing up the rear among the major manufacturers on their markets with attractive growth prospects as well? In addition to the brands that have always had a strong image, like German ones, even the global generalists such as Toyota, Peugeot, Nissan more than Renault, Hyundai, GM still has a brand awareness that Fiat does not have.

In addition, these manufacturers are well established in developing markets either through direct production on site or through agreements with local manufacturers that provide cost and flexibility in production. Fiat has not had so far neither the one nor the other lever. As a general manufacturer, thus intended to bring strong and reliable car, has not and has never had, if not in the USSR at the time of 124, a product image is particularly robust or efficient.

Result the reputation and esteem for the Fiat brand in developing countries are very weak. An exception is Brazil, where just the association between the Fiat brand and the product Low cost, robust, no frills, it worked. Would not work on the Asian markets where the Japanese and the Koreans in this type of offer much more credit and produce too cheaply.

So the low image and product uncompetitive. It is no coincidence that today the image of the Fiat brand in all those markets is linked only to the success of the trendy 500, only car that the collective imagination fails to bind to the Italian brand. In my opinion, Fiat has only two product lines that might work in emerging markets.

On the one hand, the small, but strong differential image, just like the 500, unique, personal, fashionable and very well built. On the other stake everything on the Jeep brand, a strong reputation and image with which you could also carry Crossover and SUV. This type of product has no major direct competitors and would not suffer in a race likely to undermine the useless products of other manufacturers generalists.

In short stand to succeed, it would be much harder for others to follow their own ground. Indeed it has often been discussed in recent months of "mission" to be given "to the Jeep brand as the only true worldwide brand of Chrysler. The other big problem is that they failed, despite repeated agreements duly canceled or never left, to strengthen local production and low cost to enable an effective distribution network.

For this Marchionne reiterated that, for example in Russia, Fiat intends to make its own, with its direct production and factories. After many delays and failures, is also essential to enable a strong partnership, or rather, a real integration between Chrysler and an Asian manufacturer.

For both solutions continue to offer Tata ideal partner and in fact even if the recent failure of the agreements between the two would seem to contradict it, both parties confirm their intention to continue to seek strong agreement. Personally I think the best partnership, a prelude to full integration in a big group could be followed by Honda.

For variety and complete range of products for advanced technologies, the presence in the markets and the organization of production, this marriage would be really interesting and would open the door Fiat's presence in Asia from a position of strength. For this belief, and I hope that something big is about to become reality, perhaps with an agreement already resounding in the year.

Chrysler certainly can not afford to stay further out of the game.

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