Renault-Nissan Strategic Alliance, Case Analysis
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-An analytical approach to define Key Success Factors of the Renault-Nissan Strategic Alliance. -Strategies, Goals, and achievements of Renault-Nissan Strategic Alliance -How to eliminate distances in Renault-Nissan Strategic Alliance (the CAGE model)
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Renault-Nissan Strategic Alliance, Case Analysis
- 1. Group 1: - Ramin Navvabpour - Nhung Ho Van - Shah Naoaj Ahmed - Emil Qasimov 23/2/2018
- 2. 23/2/2018 Agenda Background Information Macroeconomic environment PEST analysis Industry Level analysis ( Porter’s five forces) Firm level Analysis (SWOT, Ansoff Matrix) Strategic Alliance (Advantages and Risks) Strategy Implementation Value chain analysis K.S.Fs of Strategic Alliances Strategies’ Outcomes and Effects The Future Globalization Strategies of Renault-Nissan Recommendations Question and Answer
- 3. 2/12/2018 RENAULT – NISSAN BACKGROUND INFORMATION
- 4. Background Information Renault: •Renault is a French multinational automobile manufacturer •Established on February 25, 1899 •Headquartered in Boulogne- Billancourt, France •Strong market in share in Europe and Latin America Nissan: •Nissan Motor Company Ltd, is a Japanese multinational automobile manufacturer •Establish on December 26, 1933 •Headquartered in Nishi-ku, Yokohama, Japan •Pioneer in the Manufacturing of the automobiles •Strong market presence in Japan, North America and Asia •Faced financial Distress in 1990
- 5. Strategic Alliance Strategic alliance is an agreement for cooperation among two or more independent firms to work together towards common objectives. It is not a formation of new identity but a cooperation to reach their common goal while remaining apart and distinct. • Renault Nissan alliance was signed in March 27th, 1999 • Headquartered in Amsterdam, Netherlands • Based on cross shareholding agreement • Renault acquire 36.6% stake in Nissan ( 44.4% in 2003) • Nissan took a stake of 15% in Renault
- 6. Objectives of the Strategic Alliance
- 8. PEST analysis Political: Political uncertainty Oil price Various policies and regulations in the automotive industry Economic: U.S & Western Europe accounted for 65% of the auto industry Hyperinflation Globalization and less trade restrictions Customers demand for more value on their product Social: The demand for more Eco-friendly and sustainable automobiles Urbanizing and restructuring the public transportation system to be more eco- friendly Interconnectedness Rising population and rising demand Technological: Technological Innovations Technological value addition in the cars such as GPS, Heating cars, automatic functions etc. High number of internet users and online marketing opportunities Interconnectivity of the devices with the automobiles
- 10. Industry Analysis: Porter’s five forces Bargaining power of the suppliers: High Few companies in the supplier sector Common source to buy raw material High switching cost Industry Rivalry: High Many automobile manufacturing company Tuff competition among the rivals for market share Strong market leaders Threat of substitutes: Low Not fully substitutable Different substitutes such as: Public transport, Taxi, Trains, Airplane are available But there will still be demand for luxury cars Bargaining power of Buyers: High Consumers are unwilling to pay for automobiles at higher price Consumers want more value for their money Manufacturers have been implementing more technology into lower level cars Demand for better MPG Threat of new entrants: Low Requirement for very high investment Complex manufacturing process Difficulties to capture market share
- 12. S & W Analysis before Strategic Alliance Atlas Renault 2015- Edition 2016
- 13. SWOT Analysis after the Strategic Alliance
- 15. ANSOFF Matrix
- 16. Strategic Alliance (Advantages and Risks)
- 18. Strategic Alliance Atlas Renault 2015- Edition 2016
- 19. Main Values of alliance Trust Work fairly, impartially and professionally. Respect Honor commitments, liabilities and responsibilities. Transparency Be open, frank and clear.
- 20. How to implement strategies by overcoming distances (CAGE Framework) Dimension Solution Culture Joint-Culture study teems for cross-cultural training , Six months initiation stage, All top-level meetings were held in English, Intensive language courses for all Nissan Employees, employing female managers Administration Encouraged open debate and open disagreement, Building Revival committee, Boundary-Spanning Leadership, Cross-company teems, Cross-Functional Teams, a performance-oriented compensation and promotions are based on performance not on seniority, Terminate the relationships with most Keiretsu suppliers Geography Huma Resource Exchange, Building Joint Teams (Inter-Organizational Teams), Encouraging the use of e-mail and office automation Economy Cross shareholding and Financial supports by Renault Group
- 21. Strategies derived from Strategic Alliance Strategy Activities Aggregation Renault-Nissan Purchasing Organization (RNPO) Renault-Nissan Information Services (RNIS) Adaptation Producing new brands and models based on the local or regional customer preferences and purchasing power Arbitrage Knowledge and Technology Arbitrage Human Resource Arbitrage Market Arbitrage
- 22. The Alliance Structure Schmid S., Grosche P. 2008
- 26. Put Strategy First Invest in joint upfront planning Plan the end Create trust Start small Keep track Build Enterprise-wide capability Factors for a successful strategic alliance McGahan G., 2016
- 28. Financial Results • Reduced the costs by 20% over 3 years • Reduced plantation, inventory and automotive debts • Improve capacity utilization from 53% to 82% in 2002 • Increase output efficiency • Reduce SG&A costs by 20% • Dispose noncore assets
- 30. Non - Financial Results • A phenomenon of strategic alliance in automobile industry • New model of organizational structure in terms of business communication, cross-cultural alliance as well as management revolution
- 31. 2/12/2018 Future Globalization Strategies of Renault – Nissan
- 32. Future Globalization Strategies of Renault – Nissan Strategy of profitable growth with three objectives - To be among the top three automakers in terms of: • Technology innovation, • Revenue and operating profit and • Quality and customer satisfaction. The alliance was the world’s largest automaker in 2017 with 10.6 million autos sold around the world. Supporting future world by funding for start-ups with $1 billion, established other collaboration like Renault – Nissan – Mitsubishi with other global automakers. Build ethically, socially and environmentally responsible business at every stage.
- 34. 2/12/2018 Alternative strategies/Recomendation • Establish new alliances with leading companies to develop their products and markets in electric mobility, smart mobility and autonomous driving sectors. • Formulating and implementing specific strategies to differentiate and diversify products based on local sensitiveness • Investing in R&D for product renovation as well as alliances with Technology Institutes to optimize and maximize the product development
- 35. Thank you for your attention! 23/2/2018
Editor's Notes
- They following marketing penetration approach and , market development they have a good acces to the
- Japanese: collectivism, masculinity, High-power distance, High-context--------100 employee, Drop mental and cultural stereotypes, without pre-established goals and prejudices ------- social capital and social network, 2 teams focused on benefits and drawbacks-------- achieve to level of confidence in working cooperatively with mutual trust----- Main goal : develop the business and reduce the cost----- NRP-----keiretsu: cross-shareholding and long-standing tie ( lack of flexibility and efficiency)
- 22 new models by 2002 and introduce a minicar in Japan
- Cross-boundary rotation of executives------5000 auto-parts suppliers---- Quality, Cost, Delivery, Development and Management (QCDDM)-------- Selection for each project , transparent process of Request for Quotation (RFQ)------Joint Optimization through Collaboration: Technical, Process Improvement ,Supply Chain management, Award System-----
- Overall, after alliance company turned from being threaten by bankruptcy into profitable enterprise due to reducing cost, sales and marketing strategies Nissan Revival Plan (NRP). In 2004, the alliance made $109 billion in sales and $4 billion in profit Net income in fiscal before the alliances of Nissan was negative at ¥27.7 million equals to loss in $229 millions and the total debt was roughly $20 billion which had high possibility to resulted in bankrupt situation for Nissan.
- However, after alliance, net income of company has increased dramatically 1290% at 331 million dollars positive and this number is almost doubled in 2004. Besides that, the number of dividends was zero for 2 years of recovering, that turned into positive in 2001 and tripled in 2004 Profitability ratio: Nissan got back to high profitable with ROA and ROE around 5% and 21% in 2004 respectively That means company know how to utilize its resources efficiently. In 1999, when the alliance was set, the equity of Nissan dropped down 50% compared to previous year. However, it increased doubled in 2000 and continued rising until 2004 with ¥2.5 trillion. ● Leverage ratio company decreased its dependency on debts versus equity because the debt to equity, debt to asset and financial leverage index (FLI). FLI fell down slightly from 7 to 4 which means the return on equity is slightly higher than the return on assets. Therefore, company still performed well to magnify the return to its shareholders. ● Current ratio: increased significantly during the period, especially the current liability position went down from 70% to 40%, which indicates the ability of company to pay off its short-term liabilities improved over the period.