PSA Peugeot Citroen - Strategic Alliances for Competitive Advantage

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Case Details:

Case Code : BSTR211
Case Length : 22 Pages
Pages Period : 1966-2006
Organization : PSA Peugeot CitroŽn
Pub Date : 2006
Teaching Note : Available
Countries : France, Western Europe
Industry : Automobile

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This case study was compiled from published sources, and is intended to be used as a basis for class discussion. It is not intended to illustrate either effective or ineffective handling of a management situation. Nor is it a primary information source.

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Forging Alliances

PSA could be considered the pioneer of strategic alliances in the automobile industry. Its first alliance with Renault started way back in 1966. Over the years, the company has gained considerably from its strategic alliances with several automobile and auto component companies. Subsequently, other automobile companies have taken the cue from PSA, and entered into alliances and partnerships of their own, with their competitors.

PSA and Renault SA

PSA and Renault had a series of agreements that involved several industrial and technological projects.

Peugeot and Renault first collaborated in 1966, when the two companies entered into a cooperation agreement for the joint production of mechanical subassemblies.

In 1969, the two companies further strengthened their partnership by establishing a joint venture - La FranÁaise de Mťcanique (LFM) - to produce long-series components and engines which were to be used in Peugeot and Renault cars...

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The Rationale Behind the Alliances

In the 1990s and 2000s, intense competition in the auto industry led to a wave of consolidation. Several auto companies bought stakes in their competitors. For example, DaimlerChrysler bought a 37% stake in Mitsubishi, Ford bought a 33% stake in Mazda, GM held a 20% stake in Fiat Auto, and Renault acquired a 44% stake in Nissan.

PSA did not make any effort to buy or acquire stakes in other auto companies. "We can definitely get by on our own," Folz said. PSA, however, concentrated on entering into strategic alliances to counter the challenges posed by its competitors.

A major advantage of such strategic alliances over a merger or acquisition was that PSA did not have to look for massive debt financing and years of inefficiencies due to duplications in manufacturing. PSA entered joint ventures mostly with strong players - Ford, Renault, Toyota, and BMW. And the purpose of these alliances was to share costs and investments and create synergies...

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