Reference no: EM132410601

In the 1980s, Lee Iacocca became a legend by rescuing Chrysler Corporation from bankruptcy. Today Chrysler faces another challenge: surviving the heated competition and predicted overcapacity of the world car industry. To respond to this crisis and compete successfully, Chrysler must overcome major problems.

First, the production overcapacity of the world car industry means that all car manufacturers will be fighting to maintain or increase their market shares. Not only have U.S. companies invested to improve their efficiency; Japanese automakers continue to build factories in America, thereby contributing to the problem. In addition, European and Korean producers want to increase their penetration of U.S. markets. To respond to these threats, Chrysler, plans to do whatever is necessary to buy additional market share. Iacocca recognized that price cuts on some models were required, and he instituted generous rebates and other incentives to lure customers to Chrysler showrooms.However, Iacocca and Chrysler realized that price is only one way to gain more buyers. In fact, it is not the best way, particularly over the long term. Instead, Chrysler must solve its second problem: improving the cars it produces, in terms of both quality and performance.Iacocca acknowledges he made a mistake by focusing primarily on marketing and finance while delegating product development to others. Also, Chrysler must emphasize high standards for the service provided to customers after a sale.

Industry analysts agree that excellent customer service is essential in a glutted market.

A third major problem for Iacocca was merging American Motors Corporation (AMC) with Chrysler's operations. The merger meant Chrysler had to lay off many other employees, both blue and white collar. The remaining employees; responses to these layoffs ranged form outrage to fear. This placed great pressure on Chrysler management to work closely with labor to avoid unrest and ensure quality and productivity.To survive, Chrysler recognized that managers and employees from all parts of the firm (design, marketing, engineering, and production) must work together as a team to develop and manufacture quality products that match the wants of buyers. Chrysler's future is also based on its ability to improve efficiency. Today Chrysler is focusing on cutting costs, improving the quality and speed of product development with a teamwork approach, and developing better relations with suppliers and customers. Among other things, Iacocca asked suppliers to provide suggestions for cutting costs- and he received thousands. Iacocca stated that the key to cost cutting is "to get all 100,000 employees talking about it."

Iacocca is not retired as chair. Some analysts foresee hard times for Chrysler. Stated one former manager, " The feeling is that time has really passed {Chrysler} by. {Iacocca} was as much liability as an asset." One current executive counters that Chrysler has one big advantage: It has been in a crisis before, and it survived and turned around. Thus, it can learn from its past.

Questions:

How can the contemporary approaches to management be used to solve the problems Chrysler faces?

• How can the contingency approach be used to address the problems Chrysler faces?
• Using an open-system perspective, describe the system that exists at Chrysler and between Chrysler and its environment.