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Chrysler Business Strategy: Move away from the cliff September 17, 2010

Posted by David Dirks in business strategy.
Tags: , , , , ,

The underdog of the automotive world, namely the company called Chrysler, is a case study in what business strategy NOT to pursue.  Even before the economic crisis, Chrysler has been the well-known laggard against global competitors like Ford, GM, Toyota, and just about every other car maker you can think of. It’s been a rough road for an American icon.

So what was Chrysler’s business strategy?  Beats me.  No one is quite sure what the target market was for cars like the troubled Sebring were aiming for.  Doesn’t much matter because Chrysler has long stubbed its toes in three critical areas: quality, fuel economy, and interior design.  I can’t think of three core areas of a higher order of ‘worse’. 

You could also throw in the fact that Chrysler’s previous financial condition (and its previous hedge fund owners) precluded it from refreshing the brand with new or even updated models in a very long time. 

Times may be changing though.  Enter the dynamic and passionate Sergio Marchionne, the new CEO of Chrysler who also oversees the Fiat empire.  Marchionne took over Chrysler when it looked like there was nothing left to do but turn out the lights. 

According to most reports, Marchionne dived in and reached an immediate conclusion:  we have to fix what is obviously broke and fix it fast.  Stabilize Chrysler sales and start building the resources needed for market development through increasing profitability. 

You need to see what Marchionne did here to see how business strategy is more evolutionary than revolutionary.  His deep dive into what ailed Chrysler pointed to many key priorities and lots of places he could have invested time and resources.  What he did instead was prioritize and limit his focus to those three areas first.  Marchionne wanted to move Chrysler away from the cliff it was on the very edge of.

When faced with more internal things to fix than you can shake a stick at, often the best business strategy is to fix those areas that will then allow you to attack other challenges.  Marchionne knew immediately that nothing was going to get Chrysler on the path to sustained growth without fixing those three issues first and foremost.

Whether Chrysler succeeds is a matter of many other variables, some of which are beyond its control.  Still, the lesson here clear:  When your business is on the edge of a cliff, focus on moving a few steps away from the cliff as your first priority.



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