Renault Nissan Case Study
Renault Nissan Case Study
Renault Nissan Case Study
Renault-Nissan
Strategic Partnership:
A Multicultural Analysis
Miles BENETASSE
Julien BERNARD
Bruno DE SALINS
Mehdi RAIS
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Summary :
- Bibliography..23
I.
The alliance between Renault and Nissan have been made in March 27, 1999, only four days
before the cloture of the Japanese fiscal year. It has saved Nissan from the inevitable
bankruptcy. As a matter of fact, during the 26 last years, Nissan had lost substantial market
share in Japan: from 34% in 1974 to 17% in 1999. It was the seventh annual deficit out of
eight years and the debt reached twenty billions of euros.
At this moment, Renault just got out of a difficult situation. In 1984, the fiscal year had been
catastrophic and Renault lost 12 billions of francs. The company avoided bankruptcy thank to
a big State intervention and to the working capabilities of the two CEO, Georges Besse and
Raymond Levy. During this period, to get out of the crisis, Renault sold AMC and Jeep to
Chrysler and unfortunately for the Company the alliance project between Renault and the
Swedish giant Volvo failed. In 1996, Renault's cars were too expensive for the market despite
the scenic success and the company lost market share.
In fact the two automobile constructor knew at this period that they were condemned if they
did nothing. They decided to share some core value in order to avoid bankruptcy such as
cooperation, serious work and the passion for the automobile.
Staff reduction:
The decrease of production capacity impacted the employees. The NRP planned to reduce
4.000 employees in manufacturing, 6.500 in the Japanese dealer network, and 6.000 in selling
and administrative, 5.000 in spin-off, but increased 500 employees in Research and
Development. Those firing represented 21.000 employees and 14% of the Nissan staff.
Clear comment:
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N e t S a le s
O p e ra t in g In c o m e
O p e ra t in g M a rg in
N e t In c o m e
T o ta l N e t D e b t
T o ta l A s s e ts
FY1999
5 .9 7 7 B Y
8 2 .6 B Y
1 .4 %
684 BY
1 .3 4 8 B Y
6 .5 4 1 B Y
FY 2003
7 .4 2 9 B Y
829BY
1 1 .2 %
503BY
13BY
7 .8 5 9 B Y
The Success
Despite the anxieties of the Prime Minister Obuchi Keizo regarding to the 21,000 employees
cut, the NRP reached the goal and changed the Japanese business way.
Carlos Ghosn said: The Nissan Revival Plan represented a revolution of sorts for the
Japanese economy. Not for its social effect, which were as moderate as implementation of the
plan would allow but for its effects on standards and practices that had been in place for
decades and were associated with the success of the Japanese economic model ( Ghosn and
Ris, 2005)
During this strategic partnership, all the eyes of the world were focus on Carlos Ghosn and
Nissan. At this time Ghosn promised that if the NRP failed, all executives would resign.
Hopefully the project was a success, and Nissan re-became a wealthy Multi-National
Company and Carlos Ghosn was congratulated by the employees and the media in Japan and
abroad.
Moreover, Carlos Ghosn knew a celebrity beyond the border because in 2001, he was named
Businesssman of the year by Fortune, Top CEO by Automotive News and Executive
of the year by American Industries.
After analysing multicultural aspects and theories through the Renault-Nissan case, it seems
relevant to get our attention focused on the leadership of Carlos Ghosn, Nissan and Renaults
C.E.O in 2009.
Indeed, this charismatic businessman brought all of his cultural background and his particular
strategic vision of a company into this ambitious project.
Before analysing his multicultural management methods and his particular strategic vision, it
is important to point out Carlos Ghosns cultural background:
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operations in South-America.
In 1989, he moved to the United-States and became C.E.O of Michelin North-
America.
As C.E.O, he managed the acquisition of Uniroyal-Goodrich and successfully merged
CEO of Nissan
This directly leads us to analyse his managerial approach through the Renault-Nissan project
and to examine how he could have implemented some of his relevant multicultural
background aspects to conduct a wise strategy.
First of all, according to the case study led by Koji Nakae at Massachusetts Institute of
Technology in 2005: Cultural change: a comparative study of the change efforts of Douglas
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6) Decision-making Process:
Due to a fast changing environment and as we saw it earlier, with the concept of: "time is
money" Renault is used to make decisions quickly. This can be risky but it can also create a
surprise effect, effect that competitors had not expected and is crucial for the company. In
Japanese minds, people take their time, because a general consensus must be reached to
confirm a decision. Initiatives should be shared before their implementation and decisions
take much longer than in France.
Example: Renault also tried to find a solution within Nissan management in the decision
making process that was based on a consensus and take so much time. The number of
members of the Nissan's board were 37 before the alliance. And that what caused its failure in
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7) Enterprise loyalty:
French in Renault seem to be less loyal to their company because they have a more
individualistic behavior than Japanese within Nissan. French people are looking constantly for
others job in order to satisfy their own interest. After all when the opportunity to improve their
wages and consequently their living conditions comes, French don't hesitate to grab it.
Whereas Japanese workers who are very loyal to their companies expect to remain in the
same enterprise for a lifelong period in exchange of lifelong job security. That is what we call
the concept of "Shushin koyo". It is the practice to hire workers directly out of school and
retaining them until the mandatory retirement age".
Example: An example of the application of the "life time employment system" is the closing
in 1995 of the plant at Zama. People who worked there have been transferred to the plant at
Kyushu because the priority for Nissan is to guarantee this principle no matter what happens.
In a larger extent labor unions laws in Japan forbid layoff. Although Japanese traditions on
employment are very important, Ghosn removed with principle saying that Japanese can not
be stuck by this old principle and had to adapt to nowadays management in order to stay
powerful in the automotive industry.
The partnership made between Renault and Nissan has created a successful global Company
in the Automotive Industry, the fourth company in the sector regarding volume of sales 8, 3
million cars sold in 2013-, selling more than 10% of all cars manufactured in the World. With
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Finally, the Oitsuke-Oikose , has also change thanks to Ghosn. Shortly after his
arrival, he convinced Nissan's executive not to pursue market shares in sectors that
were not profitable to the firm. In fact, by insisting both about brand identity and
attractive products such as the Z car-, Ghosn insisted to focusing on the value of
products, and not on increasing market shares.
Commitment: Following Ghosn's pace, commitment is now a key word inside Nissan,
in the day-to-day management. Mister Matsumara Norio, executive of Nissan, declares
for instance: In the past, we tried to put off the problem. Today, we are encouraging
everyone to put forth the problem immediately so we can solve it. This commitment,
which initially interferes with Japanese cultural background, is now shaping Nissan.
Respect for other cultures: As a result of the partnership between two major
automotive companies, the biggest challenge was to implement a mutual respect
between two corporate cultures. This respect was succeeded by the happening of
multicultural working environment, where such a respect was essential. The fact that
both French and Japanese managers came in each other's society to work and give
sense to this new multicultural atmosphere.
The clear identity of both companies: As wanted when the partnership was constituted,
the Renault-Nissan alliance was concluded with the clear intention to respect and
maintain both company's identity, while creating in the same time all possible
synergies. And a positive result of this alliance for Nissan, as already mentioned, was a
shift in its strategy, from constantly trying to increase its market share to focus on
brand identity, in order to enhance Nissan's attractiveness for its customers.
The sense of urgency: This was probably the problem that urged Nissan's changes: the
necessity to adopt inside company's business model, by having employees excited and
happy about their work. Motivating employees was the key success factor for Nissan's
necessary reform, and this was maybe the most important change brought by Carlos
Ghosn.
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How both companies have been impacted by each others good practices?
The good practices of Nissan applied at Renault:
The strategic partnership has allowed Renault to increment two good practices coming from
the Nissan's side: manufacturing and quality processes.
In terms of manufacturing, changes have been very rapidly accepted by employees of Renault,
mainly because there was no competition between the two companies. Thus, there has been a
lot of technological transfers between Nissan and Renault. Those transfers notary helped the
Partnership to become the first automotive company in the sector of zero-emission vehicles
for instance.
In terms of quality, changes were implemented in two times. There was first a refusal from the
employees of Renault, at the time were Carlos Ghosn was appointed at Nissan, partly due to a
bad management from the new Director of the quality. During his three years, quality at
Renault has been constantly decreasing, as shown by all indicators at the time. This led to a
strong crisis and to the appointment of a new Director, Jean-Louis Ricaud, which came to
Japan and brought back with him all the good practices he had learnt over there -including
stronger quality analysis for instance.
Another Director, Japanese this time, was then appointed, a situation that led to important
improvement in the field of quality for Renault, in both fields of management and
manufacturing -in terms of motor engineering for instance.
Finally, Carlos Ghosn also brought back in 2005 some implementation he had learnt in
Japan. He created for instance the function of Regional Directors they are five now-,
in order to have Renault's senior management closer to the field, an innovation that
was not at all in Renault's corporate culture. Thus, senior management have moved
closer to customers and profits over the past years. Management by profits as well as
focus upon customers need were also implemented at this time by Carlos Ghosn.
The concept of stretch target , that consists in making the difference between
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The concept of learning company, which means that the company is constantly
learning and implementing processes that are found to be interesting and applicable to
Nissan.
The Performance driven management that seeks profitability in all sectors, and is
tied to a constant benchmark of sectors and activities, in order to develop better
strategies.
This new management philosophy is expressed by Nissan with its Management Institute, open
to corporate staff as well as people from outside the company. By seminars, it seeks to
develop a sense of transversal cooperation and multicultural collaboration, in order to help
people tackle new challenges of a globalized market.
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Bibliography
http://www.nissannews.com/site_library/coporate/news/1999speeches/2_25_2000.shtml (Jan.
12, 2005)
http://dspace.mit.edu/bitstream/handle/1721.1/32114/63201635.pdf : Koji Nakae MITs MBA
thesis 2005
http://www.tokyo-motorshow.com/show/history/history-01.html, Mar. 19, 2005
Nissan's annual report 2003
http://www.nissan-global.com/EN/
http://www.nissan-global.com/EN/IR/MESSAGE/index.html
The true story of Carlos Gohsn (Togashi;2002)
Cultural change: A comparative study of the change efforts of Douglas Macarthur and Carlos
Gohsn in Japan. by Koji Nakae (June 2005)
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