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
Excerpts
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 Française de Mécanique (LFM) - to produce long-series components and engines which were to be used in Peugeot and Renault cars...
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...
Going it Alone
PSA was well aware that in an increasingly competitive market, it could sell more only if its vehicles were superior, distinct and offered unique advantages. Therefore, in spite of its many alliances, PSA was investing in excess of € 2 billion in exclusive research & development facilities and projects. Pascal Henault, Vice-President (Innovation and Quality) said, "Innovation is a way to differentiate our cars in terms of concepts, styling and features that deliver perceptible customer benefits at affordable cost." At its R&D centers at Belchamp La Garenne-Colombes and Velizy, hundreds of engineers and scientists were working towards new and innovative solutions, with the result that PSA filed more than 300 patents every year. In October 2004, PSA unveiled a new design center named Automobile Design Network near Paris to give a further thrust to its research initiatives...
Challenges
Volkswagen was the undisputed leader (in terms of the number of cars sold) in the European car market in 2005. Even though PSA continued to retain its second position in Europe, the gap with Volkswagen was widening. Volkswagen managed to increase its market share from 18.6% in 2004 to 19.3% in 2005, while PSA's share fell from 13.8% to 13.5%. Though Toyota was a distant eighth in the rankings, it had improved its sales in a shrinking market. Moving towards its goal of capturing 15% of the world automobile market by 2010, Toyota was intensifying its efforts in Europe - an important market for the carmaker...
Outlook
The Peugeot 207 was unveiled in early 2006, and was a successor to Peugeot 206 - the company's most popular car ever. In 2005, PSA had launched several models including the Peugeot 407 (saloon), the 407 coupe, the 1007 - a small car with electric sliding doors, the 107, the Citroën C1 city car, and the Citroën C6 luxury limousine. In January 2006, PSA launched a new fuel cell called 'Genepac'. Genepac was considered a major step in fuel cell technology because it could power a car for a distance of upto 500 kms, which was much more than all other fuel cells available in the market...
Exhibits
Exhibit I: Peugeot Logo and Citroen Logo
Exhibit II: New Model Launches Between 1977 and 2005
Exhibit III: Region-Wise Sales* of PSA
Exhibit IV: List of Models
Exhibit V: Strategic Alliances in the Automobile Industry
Exhibit VI: Making Alliances Work
Exhibit VII: PSA's Worldwide Production Sites
Exhibit VIII: Financial Data of PSA Consolidated Sales and Revenue
Exhibit IX: Worldwide Sales and Production of PSA
Exhibit X: Europe Automobile Market Shares in 2005
Exhibit XI: World Automobile Market in 2005
Exhibit XII: A Photograph of the Peugeot 207
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