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Business strategy file: PSA Peugeot Citroen History of PSA Peugeot Citroen PSA (Peugeot Soci©t© Anonyme) was founded in 1966 by the Peugeot family in order to be the holding of the Soci©t© des automobiles Peugeot. This company was founded in 1810 originally producing wind Moulin, but then focusing on the car sector in 1891, becoming one of the first company of the world in this sector. It officially became Soci©t© des automobiles Peugeot in 1896. PSA will become PSA Peugeot Citroen in 1976 after the acquisition of Citroen from Michelin in 1974.

Right after this cquisition PSA will launch a new series a Citroen cars, the Citroen LN using the technology available from the Peugeot brand. Following good results and good management, PSA decided to acquire Chrysler France in August 1978, who represented 4,5% of the European market at that time, then becoming the first car manufacturer in Europe and the fourth worldwide. At the beginning of the 80’s, facing a difficult rebirth of the brand Talbot (former Chrysler France) and facing issues with their other brands Peugeot and Citroen due to the consecutives Oil Shocks in the 70’s, PSA announced 7371 cut Jobs (9% of the total labour).

Facing high osts and a lost in competitiveness, PSA decided in 1984 to hire Jacques Calvet as a CEO in order to restructure the group. Jacques Calvet from 1984 to 1997 When Jacques Calvet arrived in 1984, his main goal was to develop the synergy between the brands in order to benefit from the knowledge of each and start benefiting from possible important economy of scale and maintain competitive prices. His will is to develop project on the same basis for the three brands in order to limit the production costs.

But he will mainly focus on Peugeot and Citroen, the historical brands, leading to the vanishing of the brand Talbot in 1986, sign of the ailure of the acquisition of Chrysler France. Until 1997, the two brands Peugeot and Citroen will continue to be produced in different factories and the gap between the two brands will start to appear significantly. During Calvet’s mandate as a CEO he will be criticised for having lower the quality and appeal of Citroen while focusing more on the historical brand Peugeot. However… financial datas) Jean Martin Foltz from Jean Martin Foltz replaced Jacques Calvet in 1997 with the aim to deploy the company worldwide with a focus on Brazil and China. He also instituted a new manufacturing rocess with now the production of the two brands gathered in the same factories to reduce the costs. During this period PSA will earn a lot success with its new Peugeot 206 and their new diesel engines. Jean Martin Foltz will also reinforce the historical collaboration PSA has with Renault (since 1966) and Fiat (since 1978) but also launch new ones with Ford (diesel engine), Toyota, BMW and Mitsubishi to extend their product offer.

From 2004, PSA started to encounter more difficulties, with the sector shifting to an even more competitive market, especially in Europe, with an intense rice war due to the number of competitors. Also the expecting growth of the car market in China did not happened and the market went oversupplied, leading to a loss in the industry margin. During the first semester of 2006, despite the launch of new cars like the 1007, the results are cut by half and Foltz is forced to fire people. Christian Streiff will become the new CEO in 2007.

Christian Streiff from 2007 to 2009 PSA announces the launch of CAP 2010 which is based on a strong growth in foreign markets, a decreased in the fixed costs, a bigger differentiation between the two rands and increased synergy. The global goal of CAP 2010 is to reach a ROE of 6%. This means a 15. 5% market share in Europe. 2007 proved to be a good year for PSA with an increase in sales of 1. 8%, with 13. 8% of market share in Europe. In 2008, Peugeot announced a number of project ready to be launch between 2010 and 2012 which should prepare the company to resist the declining diesel market.

PSA also followed its objectives of growth with an increase of 4. 6% during the first semester. But the financial crisis of the end of 2008 forced the company to reduce drastically the production in Europe. PSA is majorly hurt by the crisis, recording a net result of – 343M‚¬ and a decrease in sales of 7. 4%. The forecasts for the following years are not good with an expected decrease in sales of 20% in 2009 and stable sales in 2010. This shows the first limits of the strategy issued by PSA. This bad results coupled with some tension with the major shareholders will results in his limogeage.

He will be replaced by Philippe Varin. Philippe Varin 2009 to now When Philippe Varin arrived as a CEO he reaffirmed PSA’s strategy as stated in 2009: “We want to strengthen our technical cooperation with our partners and to create lliances in the emerging markets in order to take the opportunity of those growing market. We will do this with the aim of creating value and to remain independent”. Its strategy was clear: reducing costs by sharing R&D costs and investment and strengthening PSA’s position in the emerging market by starting alliance with experienced actors of those markets.

Discussion: Shared Practice: Variance Analysis

Several tools are available to managers when evaluating organizational performance. Variance analysis is one such tool used to evaluate performance. Variance analysis compares actual costs with standard costs. The results from a variance analysis are important for helping managers control costs as well as identify areas were organizational performance and efficiency can be improved.

To prepare for this Discussion: Shared Practice, review the Learning Resources for this week and reflect on how actual costs, standard costs, and variance analysis will contribute to your current or future role as a manager or in decision making. Consider the role of variances when engaged in decision making and how variance analysis might help contribute to improved organizational efficiency.

By Day 3

Post the following:

Describe a scenario in which there are both highly favorable and highly unfavorable variances. Be sure to include the actual and standard costs in your scenario.

Analyze how and why you, as a manager, would prioritize the variances for analysis and how knowing these variances might help you improve efficiency.