Chrysler Group LLC. and Fiat SpA announced that they would partner to bring the subcompact Fiat 500 to be sold in the U.S. sometime in 2011. The Fiat 500 will be positioned as a direct competitor to BMW AG’s Mini Cooper. The Fiat 500 will be sold through a select group of about 165 Chrysler dealers. The chosen dealers will also have the opportunity to sell the high- performance, luxury brand, Alfa Romeo, made by Fiat SpA, which will become available in 2012. But in order for the dealers to get the franchise to sell the Fiat 500 and Alfa Romeo cars, they will need to build special facilities including two separate showrooms for the cars. Each dealer will have to spend as much as $1 million to provide these separate facilities while also providing for staff to sell and service the cars. Both Chrysler and Fiat believe that for the Fiat 500 and Alfa Romeo brands to successfully penetrate the U.S. market, the channels through which they are sold must appear to consumers to be dedicated only to Fiat and Alfa Romeo rather than be mixed in with Chrysler, Dodge, and Jeep brands. Do you agree with Chrysler and Fiat’s channel design strategy? Why or why not?
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