PSA Peugeot Citroen - Strategic Alliances for Competitive Advantage
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Case Code: BSTR211 Case Length: 22 Pages Period: 1966-2006 Pub Date: 2006 Teaching Note: Available |
Price: Rs.400 Organization: PSA Peugeot Citroën Industry: Auto and Ancillaries Countries: France, Western Europe Themes: Mergers, Acquisitions, Strategic Alliances |
Abstract Case Intro 1 Case Intro 2 Excerpts
"I don't want to boast, but I can say that we are probably the champions in the sphere of the joint projects."
- Jean Martin Folz, President, Board of Directors, PSA Peugeot Citroën in 2003.
Introduction
In February 2005, PSA Peugeot Citroën (PSA) entered into an agreement with Mitsubishi Motor Corp. (Mitsubishi), the ailing Japanese car maker. According to the terms of the deal, Mitsubishi agreed to supply 30,000 units of a new sports utility vehicle (SUV) every year to PSA, which would then be sold under the Peugeot and Citroën marques. The deal enabled Mitsubishi to utilize its idle production capacity, and PSA to fill a major gap in its product range. The deal with Mitsubishi was typical of PSA's strategy of entering into alliances with other major automobile makers. Over the years, PSA has entered into long-term relationships with Renault S.A (Renault), Fiat Auto SpA (FIAT), Ford Motor Co. (Ford), Toyota Motor Corp. (Toyota), and BMW AG(BMW). Such alliances have helped PSA share costs, risks and investment. In January 2006, PSA announced that its profits for the year 2005 would be less than previously estimated.
This profit warning - the second in three months - reflected the poor sales performance of the company's cars in Europe. The competition in the automobile market in Europe remained intense and this contributed to lower margins. PSA had launched several new models in 2005. Even so, worldwide sales of Peugeot branded cars in 2005 fell by 1.5%. However, Citroën car sales were 3.5% higher in the same period. The Peugeot arm of PSA expected to sell two million cars in 2006. The company hoped to sell half a million units of its new model, the 207, a compact car launched in January 2006 by the end of 2007....
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