Allegro Automotive Case Analysis

The current state of the automotive industry is one of shrinking margins, changing consumer expectations and demands, as well as pressure from the government to increase fuel efficiency. There is increased competition in the American market as foreign companies challenge the “Big Two” automotive manufacturers. Costs increase while the price for their products has remained stagnant. One way that manufacturers have managed to stay profitable is actively working to decrease costs while needing to keep the selling price the same in order to be competitive. The most successful ones have changed their relationships with suppliers to a partnership between the two companies. Supply companies now work with the automakers to design and manufacture

They worked with suppliers to re-engineer the car parts to be used on different models and thereby to reduce the complexity and cost to manufacture their cars. Furthermore, Allegro Automotive is expanding their market reach by building a manufacturing facility in the United States to take advantage of new tax laws. They are expanding into new markets by building electric cars as well as traditional fuel platforms. In order to become more responsive to changes in the industry, Allegro found it beneficial to bring the design experts and the safety testing team together. This improved communication between the two groups and fostered a collaborative environment. Several of these advancements could be used on the Correre as well as Allegro’s other car

They then determined the percentage of total for each of the various function grouping. The chart below shows this information.

Component Cost Percent of Total

Chassis 5000 19

Transmission 1000 4

Air Conditioner 700 3

Electrical System 5000 19

Others 15000 56

Total 26700 101.00 Next Allegro determined how each of the components contributed to the consumer satisfaction rating. These are combined into a matrix as shown below.

Component Safety Comfort and convenience Economy Styling Performance

Chassis 30% 30% 20% 10% 30%

Transmission 10% 0% 20% 0% 20%

Air Conditioner 0% 10% 10% 0% 0%

Electrical System 10% 10% 10% 0% 10%

Other 50% 50% 40% 90% 40% 100 100 100 100 100

Next, an importance index is created as shown below. Customer Criteria Component Safety Comfort and Convenience Economy Styling Performance Importance Index

Chassis 8.4 7.2 0.4 1.2 10.2 27.4

Transmission 2.8 0 0.4 0 6.8 10

Air Conditioner 0 2.4 0.2 0 0 2.6

Electrical System 2.8 2.4 0.2 0 3.4