When the Fiat Research Center (CRF) changed it's mission, explain how the new mission led to an expansion into transaction costs?
1)In economics and related disciplines, a transaction cost is a cost incurred in making an economic exchange (restated: the cost of participating in a market). For example, most people, when buying or selling a stock, must pay a commission to their stockbroker; that commission is a transaction cost of doing the stock deal. To eliminate the price of transactions cost, companies are headed towards outsourcing and other methods to reduce costs.
Throughout the 1990’s and early 2000’s it’s no question that the automobile industry was heading into economic chaos. Fiat is an Italian based manufacturer, who like most other companies, felt the hard times. For most car companies 20-30% of sales fell, and Fiat, having 12% of share in the European market, was hit hard. The CRF, Fiat’s research and development team, was very important to the Fiat Company, and sought to help it rise out of troubling economic times. CRF leader Gian Michellone aimed to radically innovate for the CRF, and lead Fiat as well as others out of economic hardships.
In order to initiate is plans for innovation, the CRF greatly changed its mission statement. The new mission stated “Instead of simply selling research, CRF is dedicated to providing competitiveness to its customers as a matter of principal.” Michellone aimed towards “competitiveness for customers at competitive prices,” and sought to understand specific needs of clients and customers. This new mission led into the world of transaction costs. According to the article, the CRF planned on reducing some costs through the form of outsourcing. The article states “CRF would open up to the external partners and clients in order to better exploit its technologies, and obtain significant financing from external