Question

Group PSAplans its US return Group PSA, headquartered in Paris, France is the second largest European-based auto-manufacturer in the world. In early 2000s, the group had to eliminate its American operations due to extraordinary price competition resulting from a lack of unique features, the ease of entry into the market by new auto makers, well-financed local (US) auto makers and a series of mergers, acquisitions and joint ventures happening in the automobile industry in the 1990 s. The group has been plotting to come back to the US due to post-COVID demands of its most popular and recognized brands Peugeot and Citroën. Group PSA has recently acquired Opel, and Vauxhall from GM and planning to either acquire or partner with European brands (such as, Fiat and Renault) and Japanese brands (Lexus and Mazda CX60), which have large presences in the US and have a profitable market share in the US auto industry. PSA has invested heavily in research and development on product innovation (in particular, to come up with unique features) and promotion as well as meeting the US safety and emissions rules. In addition, to tackle the exceptionally competitive US market, the company has opened its US headquarters in Atlanta with a core team to build its US strategy, particularly deciding on acquiring or partnering with either or both European and Japanese brands. Questions A. What factors led to the troubles of the Group PSA in the 1990s? B. What can PSA gain by entering the US market? C. Which partner(s) would be more strategic and why?

Answer 1

A. The troubles faced by Group PSA in the 1990s were primarily caused by a combination of factors:

1. Lack of unique features: Group PSA faced intense price competition in the US market due to a lack of distinct features in their vehicles. This made it difficult for them to differentiate themselves from their competitors.

2. Ease of entry for new auto makers: The US market allowed for easy entry by new auto manufacturers, leading to increased competition for Group PSA. This further intensified the price competition they faced.

3. Well-financed local auto makers: Local US auto manufacturers had significant financial resources, allowing them to invest heavily in product development and marketing. This gave them a competitive advantage over Group PSA.

4. Mergers, acquisitions, and joint ventures: The automobile industry in the 1990s witnessed a series of mergers, acquisitions, and joint ventures. This led to the consolidation of resources and market share among competitors, making it challenging for Group PSA to compete effectively.

B. By entering the US market, Group PSA can gain several advantages:

1. Increased market share: The US auto market is one of the largest in the world. By establishing a presence in the US, Group PSA can tap into a large customer base and potentially increase its market share.

2. Profitability: The US market offers the potential for high profitability. Group PSA's popular and recognized brands, such as Peugeot and Citroën, can leverage the post-COVID demands to generate significant revenue and profits.

3. Access to technology and innovation: Partnering with or acquiring European and Japanese brands, which already have a presence in the US, can provide Group PSA access to advanced technology and innovative features. This can help them enhance their product offerings and compete effectively in the market.

4. Meeting safety and emissions rules: Group PSA has heavily invested in research and development to meet US safety and emissions regulations. By entering the US market, they can demonstrate their compliance with these rules, which is essential for gaining customer trust and maintaining a competitive edge.

C. The choice of a strategic partner(s) for Group PSA depends on various factors, including:

1. Complementary strengths: Group PSA should consider partnering with brands that have complementary strengths, such as technological expertise, market share, or a strong distribution network. This can help them leverage each other's resources and enhance their competitiveness in the US market.

2. Market presence: Brands with a significant market presence in the US, such as Fiat, Renault, Lexus, and Mazda CX60, can provide Group PSA with immediate access to a customer base and distribution channels. This can accelerate their market entry and expansion.

3. Brand reputation: Partnering with brands that have a positive brand reputation in the US can help Group PSA gain credibility and trust among consumers. This can contribute to the success of their products in the competitive US market.

4. Alignment of values and objectives: Group PSA should assess whether potential partners share similar values and long-term objectives. A strategic partnership should be based on a mutual understanding and alignment of goals to ensure a successful and sustainable collaboration.

Ultimately, the choice of a strategic partner(s) for Group PSA should be based on a thorough evaluation of these factors to maximize the potential benefits and synergies for both parties.

SHORT ANSWER:
A. Group PSA faced troubles in the 1990s due to a lack of unique features, easy entry for new auto makers, well-financed local US auto makers, and industry mergers and acquisitions.

B. By entering the US market, Group PSA can gain increased market share, profitability, access to technology and innovation, and compliance with safety and emissions rules.

C. The choice of a strategic partner(s) for Group PSA should consider complementary strengths, market presence, brand reputation, and alignment of values and objectives.