Strategic Distribution Channel Design and Customer Care at Alfa Romeo

Today's FT ran an interesting article about Alfa Romeo, the Italian carmaker. The story makes a nice showcase for outlining how important it is to align the different building blocks of one's business model.

Alfa's cars have a very distinctive style and are known for their high-quality workmanship. However, as the FT article points out, Alfa has a tarnished reputation for distribution and customer care. The former, car perception, is high-end while the latter, car and distribution, has been handled carelessly. Both are completely unaligned. It is as if Alfa Romeo thought it's sufficient to through a nice car model on to the market and success will follow by its own. However, JDPower, a consumer ratings group, has helped Alfa understand that their existing and potential customers had a huge problem with customer care and the way the cars were sold. For example, some dealers

sold the luxury cars alongside cheaper brands, with vehicles crowded into small spaces


Potential customers' expectation of the brand was that it was like Audi or BMW, but it was being sold alongside volume brands

This is clearly a case of unaligned business model building blocks... In my language of describing business models this means that "distribution channel" and "customer relation" are not aligned with the "value proposition" and the "target customers" (as outlined in the slides below). The open question is if Alfa's managers were unable to understand this or if they were simply sluggish in the execution.

However, today the company is serious about its strategy execution. As the FT outlines, this reorientation is part of a broader turnaround at Fiat, the Italian industrial group that owns Alfa. The initiative has been led by Sergio Marchionne, Fiat's CEO since '04 (by the way, Marchionne is very well known to Swiss business as a turn-around manager...).

Alfa is now taking care about its distribution channel design and is, for instance, reviewing all its UK car dealers to assure a high-end distribution style. They've hired SGS, a Swiss auditing company (formerly turned-around by Marchionne) to improve compliance with the required quality and in case necessary replace existing car dealers with new ones.

An example of this new channel design is Alfa's collaboration with HR Owen, an upscale chain, whose other brands include Bentley, Rolls-Royce and Ferrari...

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