The Renault-Nissan Alliance

Table of Contents

A List of figures and tables

1 Introduction
1.1 Executive Summary
1.2 Introduction into the case study

2.2 Objectives

2.3 Methodology

2 Basic facts: Resources and capabilites
2.1 The culturalweb
2.2 Globalization drivers
2.3 Cultural differences

3 Critical analysis
3.1 Factor conditions
3.2 Firm strategy and structure
3.3 Related and supporting industries
3.4 Demand conditions

4 Results

5 Conclusion

6 Bibliography

A List of figures and tables

Table 1: Hofstede's dimensions

Abbildung in dieser Leseprobe nicht enthalten

Source: GPM Projekt Management (4/2008) & Hofstede (2005

Table 2: Renault-Nissan Alliance: Total sales world wide in 2008

Abbildung in dieser Leseprobe nicht enthalten

Table 3: Renault-Nissan Alliance: Total income 1997-2008

Abbildung in dieser Leseprobe nicht enthalten

1 Introduction

1.1 Executive summary

It is several decades since the invention of the car, strictly speaking 125 years. Since then the number of sold cars increased every year forced by industrialization and the growing individualization and mobility of today's society^[1]. Not taken serious by others in the beginning, Carl Benz didn't have a premonition of the success his patent application he has filed on 29th January 1886 would have. In itself, today one in seven is working for the car industry in Germany, directly or indirectly.

In 1999, 55 million cars have been sold worldwide, 32 millions from that were passenger cars. 90 percent of it to Europe, the USA and Asia. The annual increase in Europe and the USA has been 8,7 percent and 5,1 percent in Asia - a symptom of the financial crisis which took Asia a long time to recover from. The US market also had to struggle with increasing oil prices and a high rate of interest These problems also reached Europe, albeit in lower dimensions.

Fifteen years before, in the middle of the 1980's, it was the japanese car manufacturers, such as Nissan, Honda and Toyota that dominated the world market. In a triumphal procession that seemed unstoppable, they started the building of production facilities in Europe and the USA. The leading manufacturers in Detroit were forced to form alliances with the Japanese to last on the market.

In 1990, Japan sold 3 million cars to the USA, which corresponds to 30 percent market share during Europe only reached 4 percent. So, the USA and Europe reacted with innovations, revolutions, optimization of the supply and merging, which wasn't possible for Japan. The crisis that reached Japan in 1991 caused by a bursted bubble of real estate prices, weakened the country for the next 15 years. When Europe's biggest industrial concern Daimler-Benz bought Chrysler, one of the biggest American corporations in 1998 it ringed in the time of the mergers: in no time there were only six major groups left turning over 85 percent of the worldwide sale in 2000. But growing mergers also caused bigger troubles: cultural differences and the direct competition between the equal models of the single brands of the same manufacturer, for example VW Polo, Seat Ibiza, Skoda Fabia, were often underestimated. In response to the increasing individualization of the consumers the production was moved into a Produce On Demand (POD)^[2]. In the last years, the environmental regulations got stricter, so lots of companies got to work on expensive conversions to keep it up.

To get a closer look on mergers, two companies will be in the centre of attention: the car manufacturers Renault of France and Nissan ofjapan, who had a merger in March, 1999.

Renault was found in 1898 and got famous for the production of taxis during the battle of Marne in 1914. From 1945 on, Renault became car producer for the masses: the mass production was able to succeed. In 1984 the company refocused on two priorities after having record losses. These priorities were quality and innovation. It was Louis Schweitzer who became the new CEO in 1992 and got the company through a series of rationalization measures, quickly becoming famous for his aggressive international strategic switch. Renault got an economic upswing from that and strengthened its position on the markets of Europe, NorthAfrica, Brazil and Russia.

Nissan was established from two individual businesses in 1926 and caused a sensation during World War 2 with its small size Datsun, which was exported to Australia. Short after that, the first factory in the USA was opened. After the successful 1960s, it had an upswing of its exports thanks to economical and high technological cars created as a reaction to the energy crisis. More factories could be opened in Taiwan, Mexico, USA and the UK. Only in the 1990s earnings were lost and caused record losses later on. In 1998 the debts were 2.5 times bigger than the equity capital, by name 21 billion US$ .

In 1999, the Renault-Nissan-Alliance was signed after 8 months of negotiation. Renault hoped to expand on the markets of Mexico, japan and the Asia-Pacific-region while Nissan was interested in a financially strong partner, who could support the company on the European market as well as in the countries of Mercosur.

Through merging factories, cost savings, short-time work, supply chain rationalisations and last but not least the introduction of the Nissan Revival the company returned to the profit area in late 2000.

1.2 Introduction into the topic

Carlos Ghosn, CEO of Renault Nissan Alliance, after having signed the contract and the "Nissan Revival Plan" in May 1999 including changes in business development, purchasing, manufactoring, research & development, sales, costs and decision-making process^[3], announced that he will resign from his position if one of the following three goals was not achieved by March 2003: Return to profitability for FY 2000, Achieve consolidated operating profit of 4.5% of sales by FY 2002, Reduce net debt from 1.4 trillion Yen to less than 700 billion Yen by FY 2002. Ghosn brought 20 other Renault managers with him and began to revolutionize the Japanese company which was known as bureaucratic and sleepy. There were lots of doubts, if Ghosn can turn around the sleeping giant Nissan into profit. "I had all the press against me: How is a Brazilian-born French citizen of Lebanese origin who doesn't speak one word of Japanese and comes from little Renault going to change the mighty Nissan"^[4], he said once. Nissan and Renault both expect synergy effects notwithstanding huge cultural differences of both companies. "This is the beauty of the alliance. It is a synergy with a different identity, while a merger is synergy with one identity. But the problem of the one identity is always perceived that somebody loses and somebody wins"^[5]

Both companies aimed to develop synergies to develop procurement and research, to share platforms and save costs. Ghosn wanted to save USD 3.3 billion in total between 2000-2002.

This assignment paper analyzes the question, whether the alliance of two culturally different automobile giants was a success or not. Was Nissan be abled to use synergy effects of Renault and was Renault be abled to use Nissans benefits? In the analysis of the given case, the most common marketing strategies will be dopted: Michael Porter's Diamond / Five Forces, the cultural web, Hofstede's cultural dimensions, Porter's generic strategies, SWOT, PESTLE and Resource based view and Market based view.

1.3 Objectives

The objectives of the present work will be the following questions and issues:

1. The interaction between the organization and the environment in which it operates
2. The organization's utilization of its resources and capabilities
3. How these resources and capabilities are integrated and developed in the future
4. The values, beliefs and objectives of key stakeholders and decision makers
5. The organisation's recent performance, present position and future potential

1.4 Methodology

To analyse the case, these common marketing models are used in the present paper:

The Diamond Model of Michael Porter^[6] for the competitive advantage of Nations offers a model that can help understand the comparative position of a nation in global competition. The model can also be used for major geographic regions. The traditional factors (land, location, natural resources, labour and local population size) could hardly be influenced, which would fit in a passive view regarding economic opportunites. According to that, Porter introduces his concept of clusters (groups) of interconnected firms, suppliers, related industries and institutions which can be influenced in a pro-active way by the government. These clusters are: Factor conditions (resources and local advantages), demand conditions (local market, connection to global market), related and supporting industries (suppliers, labour, connected firms) and firm strategy, structure and rivalry. Porter's Diamond model will be the base for analysing the case, other models will be used to analyse similar clusters of Porter's diamond.

Hofstede's cultural dimensions^[7] (Table 1) are used to categorize different cultures and nations, to show what they tend to, how their management style is and how they plan their life and work. Hofstede therefore used these five dimension to analyse and to categorize cultures: Power Distance (PDI), Individualism vs. Collectivism (IDV), Uncertainty Avoidance (UAI), Masculinity vs. Feminity (MAS), Long Term vs. ShortTerm Orientation (LTO).

Gerry Johnson and Kevan Scholes developed in 1992 an approach for looking at and changing organization's culture. Using the cultural web with its six interrelated elements, one can analyse what is working, what is not working, what needs to be done. The six elements are: Stories, Rituals and Routines, Symbols, Organizational Structure, Control System, Power Structures.^[8]

Globalization drivers^[9] determine the potential of global business in the industry. These drivers are uncontrollable and each has a level of globalization potential. The four external drivers which can affect the potential of globalization are: Market drivers, Cost drivers, Governmentor Environmental/technological drivers, Competitive drivers.

The SWOT analysis sums up the relevant company's strengths, weaknesses, opportunities and threats.

A PESTLE analysis shows all forces which influence the company. They are divided into five categories: Political, Economic, Social, Technological, Legal, Environmental.

SWOT and PESTLE can be used to show Porter's Diamond's Factor conditions.

Michael Porter developed the Market Based View^[10] (MBV) to get an outside-in perspective of a company, means to have a closer look at the external environment.

The MBV can be used to show Porter's Diamond's related and supporting industries as well as demand conditions.

The Resource-Based View^[11] (RBV) shows the company's potential key resources. It is therefore the inside-out perspective.

Porter as well developed the Five-Forces model^[12] to show which forces impact on the company: Bargaining power of suppliers, Bargaining power of buyers, Threat of substitutes, Threat of new entrants and Rivalry inside the industry.

RBV and Five-Forces model can be used to show Porter's Diamond's Firm strategy, industry structure and rivalry.

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^[1] http://www.faz.net/themenarchiv/multimedia/jahrestage/29-januar-1886-carl-benz-erhaelt-patent-auf- erstes-benzinauto-1137 3590.html

^[2] See case page 4

^[3] See case, p. 18

^[4] BloombergBusinessweek Magazine (Dec 08, 2011), Diane Brady, Online

^[5] Reuters (Feb 25, 2010), Chang-Ran Kim, Online

^[6] Porter (1990), p. 90

^[7] Hofstede (2005), p. 351 ff.

^[8] Johnson (1988)

^[9] Baier & Bergstrand (2001)

^[10] Wayland & Cole (1997), p. 3

^[11] Wayland & Cole (1997), p. 3

^[12] Havard Business Review (2008), Online