Question 1: Based on the complementary portfolio and geographical footprint explain the strategic fit of the acquisition. Use different frameworks: Tows analysis, BCG Matrix and related vs. unrelated diversification strategies to understand the rationale behind this purchase.
Related Vs Unrelated Strategies
The combined volumes of the twin groups exceed the contemporary second positioned Renault-Nissan except in the CIS and Russia countries considering the regional European aggregate of more than 3 million units as at 2016. Comparative numbers from the market also indicate that the Volkswagen Group, which is the market leader, is slightly over four million units. The General Motors have been unable to make profitable of its European branch that had been operated by the Opel (Warwick, 2017). Hence, this advance is a mechanism for the group to cut down losses from the region.
TOWS analysis of the Acquisition
Boost on PSAs fiercely competitive Europeans market
Existence of a full market for expansion into Europe
Potential unlock of synergies, cost savings, and profits
Increased European market share to 16.8 percent up from 9.7 percent
Opportunity to expand to a leading lean manufacture of the low-cost automobiles Threats:
Uncertain gains due to the impact of post-European recession
High reliance on European market than today may restrain success in other markets
Large unit sales in Europe leave PSA less of a hedge against a potential economic downturn in Europe.
Resultant huge workforce may constrain the companys gains
Increased market size would mean increased sales volume for PSA
Rich R&D of the GMs Opel may benefit PSA with improved operational capacity
Improved access to European market due to the positive image of GM company
High profile managerial position may result in increased profitability from the European market for PSA
Increased production capacity via expanded physical facility SO
Increased output and market share position will be manipulated to tap into the lucrative European market ST
The PSA Company will invest largely in R&D to ensure that it safeguards its entities against uncertainty in the European market.
Labor challenges with Opel workers and sister brand
Problems in handling similarly priced models of Peugeot, Opel and Citrogen in the European market that is already saturated
The acquisition may limit the success of the Push to Pass plan of the PSA
Careful integration of the business operational framework may streamline the mergers labor force to take charge of the saturated European market WT
PSA will combine its marketing taskforce to ensure price mainstreaming and harmonization of the different models
The PSA may benefit from the rising scales that had not been available to the Opel, but it is likely to face many years of upheavals before it can realize success manifested through enhanced financial performance and a long-term viability of the expanded group. The new acquisition will be dependent on the European market for approximately 70 percent of its sales volume. This scenario implies that the new unit's success will be initially pegged on the success in the European market segment. The following BCG matrix that demonstrates market share change:
Peugeot units will augment the European model's supplies to recap its market share PSA
Opel market share will penetrate and interbreed with the European models
DS & Nitrogen, despite its constrained market share, will boost the overall stock value of the company Opel
New marketing and management of the brand will promote its potential to venture into the new market
Question 2: Consider the complementary manufacturing capabilities of Opel and PEUGEOT as well as using the same platforms for car production. Analyze also the companys usage of the same technologies and R&D recourses.
Despite the fact that there is the major automotive company is gauged by the level of total sales per annum, the measure of success for the company after the Opel and Peugeot deal is that a minimum of three million automobiles produced within a single market to realize economies of scale is a significant milestone for the company. All the leading carmakers have production share value of about three million cars within a single market. Subsequently, the acquisition of the Opel will assist the PSA group to enhance productive capacities. Despite the fact that the combination of the French and German carmakers will raise the overall group's exposure to the European market, the brands remain principally complementary, an aspect that may derail the marketing process unless strategies are initiated to recap resource expansion base and equate it to the sale volume increase.
The primary challenge of the PSA-Opel will, however, be the troubled execution of their manufacturing changes besides managing three brands that operate primarily within the same segment of the same market. The execution risk within these areas is very critical. Subsequently, the strategic logic behind the acquisition of the Opel is perceived as sound and the proof of excellence will only be realized as the integration proceeds into future. Another major challenge of the group is related to increased concentration of its sales within a single region at the expense of global growth. The acquisition of the GM's European Opel unit by the PSA provides an opportunity for both parties. In previous times, GM had been unable to withstand losses from the European market segment even as major European markets recover the majority of the sale volumes between 2009 and 2013 periods. This move, therefore, marked a critical decision to reduce the losses (Warwick, 2017).
The Opel brand has been strong in the market where the PSA brand has been a week as noted by the Peugeot family via the management unit of Robert Peugeot. The Opel is credited with selling more cars across the Germany market relative to its Peugeot, DS, and the Citrogen counterparts combined. On the other hand, the Vauxhall sells a large number of cars in the Great Britain compared to the entire aggregate sales of the PSA brand. Besides, there has been very minimal cannibalization between the brands. The deal established between the German and the French has been considered for years before 2012 when the Peugeot and the GM signed an agreement to deal with passenger cars through a combined approach.
A Larger share of unit sales into the European market characterized with the expansion of the market by expanded market scope may, however, limit the PSA's safeguard against potential market fallout. For instance, there has been a projection by the analysts and European automakers that the regional sales will be almost flat by 2017 after experiencing progressive growth of 6 percent in 2016. The procedural restructuring of the Opel may take a considerable amount of money and time from the anticipated investments by the PSA to make use of the emerging high profile markets of India, Iran, and Southeast Asia. This situation is both dangerous and beneficial amidst emerging prospects between the two units.
Warwick, P. (2017). The rise of the global company, multinationals and the making of themodern world, by Robert Fitzgerald. Personnel Review, 46(1).
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