The document discusses the strategic alliance between Renault and Nissan. Renault and Nissan formed an alliance in 1999 due to both companies needing to expand globally. Nissan was facing financial difficulties and wanted to access overseas markets, while Renault only had a 4% global market share and was confined to Europe. The alliance gave both companies access to new markets and economies of scale. It involved Renault acquiring a 36.8% stake in Nissan in exchange for cash and loans to help turn Nissan around financially. The alliance provided both companies with strategic benefits like increased international presence, shared resources, and transfer of best practices.

1. Sumitro Dutta
EPGDBM-04
NMIMS BANGLORE

2. Strategic Alliance
• Definition
– Agreement for cooperation among two or more
independen firms to work together towards
common objectives
– Companies in a strategic alliance do not form a
new identity to reach their aims but cooperate
while remaining apart and distinct.

3. Rationale-Nissan
• Japan’s economy was under recession.
• Nissan net debts amounted to 2.1 trillion(Yen) in
1997.
• Nissan was facing acute liquidity crunch.
• Nissan couldn’t raise money by floating bonds
as it was classified to junk status.
• Hence seeking alliance with foreign carmaker was
the only option left.
• Talks failed with Ford and Daimler Chrysler

4. Rationale-Renault
• Renault’s total global market share was
around 4%.
• Renault was confined to European market.
• In order to gain access to global market,
Renault started looking out for strategic tie
ups.
• Talks failed with AMC and Volvo. Finally
Renault zeroed onto Nissan

5. Nissan-Renault
• Nissan could provide Renault access to Asian
• & U.S market.
• Renault would push Nissan out from the point
of bankruptcy.
• Neither Nissan nor Renault where top global
players, but in combination would become a
top world player.

6. SWOT ANALYSIS-Renault Nissan
Strengths-Nissan Weakness-Nissan
•Access to Asian and U.S market •2.1 trillion yen in Debts
• High Technological Acumen •Japan’s economy in recession
•No shared common vision on Nissan’s
future
• No cross functional & cross regional
communication
•Cars were out of trend
•Less emphasis on managerial culture
•Money locked up in keiretsu partnership
Strengths-Renault Weakness-Renault
•Strong Management Practices and •Too small to compete in world stage
Strategic long term vision •Access only to European Market.
•Cost control-debt reduction • No access to world market
•Resource optimization
•Good supplier relation
•Innovation & creativity

7. Cross-Share Holding Agreement
• Renault would acquire 36.8% stake in
Nissan(& could increase it to 44.4%), while
Nissan could take a stake of 15% in Renault by
subscribing to newly issued shares for 150
billion Yen. Renaults would exercise its options
in warrants worth 216 billion Yen. In effect
there will be a cash flow of 70 billion yen to
Nissan. Nissans stake in Renault was not given
any voting right. Also the agreement gave 82
plus billion yen worth profit to Renault.

8. Type of Alliance

9. Strategic Value for Renault
1.Acceleration of international deployment
2.Economies of scale (purchasing, common
engines & platforms, co-development)
3.Sharing of best practices (quality, industrial &
engineering)
4.Optimization of capacity utilization
5.Contribution to net result & dividend flow
6.Cooperation on leading technologies

10. Strategic value for Nissan
1.Initial financial input from Renault
2.New performance orientated culture
3.Cost and vehicle project management
4.Re-invention of a « product policy »
5.Turn-around in Europe
6.Development of captive finance business