Leading to High Performance

19 May 2010

Renault-Nissan

Introduction of the company Industry dynamics The Alliance of Nissan and Renault Objectives and Goals Current business model Turnaround strategy Leadership of Carlos Ghosn Current Performance of the company
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27 August 2012 19 May Dhawan.herry@gmail.com 2010

Renault-Nissan IBT

NISSAN RENAULT

Renault Nissan

Founded 1898 Cooperation with Volvo 1990

Alliance with Nissan 1999 Alliance with Renault 1999

Founded 1911

Financial distress 1990

By 1999, the environment of car manufacturers has become super competitive:

globalization driven by market internationalization need for Renault and Nissan to reach critical size saturation of certain geographic areas for production and distribution.

Opportunities for survival - 4 million vehicles; new areas (Asia, Latin America) Address market saturation in Europe Cope with Asian leader Toyota

19 May Dhawan.herry@gmail.com 2010

Renault-Nissan IBT

NISSAN RENAULT

 HHI - competitiveness in an industry - Automotive Vehicles 2754.0

Porters five forces Industry life cycle Mature

Supplier power Medium

Threat of new entrants Low

Buyer power - High

Rivalry among competitors - High

Renault-Nissan

Threat of substitutes Medium

19 May 2010

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

The alliance between Renault and Nissan was signed on 27th of March, 1999

19 May Dhawan.herry@gmail.com 2010

Renault-Nissan IBT

NISSAN RENAULT

Nissans problems before the alliance company was falling apart $ 20 billion in debt The reasons of the problems Recession in early 90s in Japan There was complacency and a lack of urgency in the culture There was no cross-functional and cross-regional communication The design of the cars was out of touch with the market A high degree of bureaucracy There was an emphasis on engineering culture rather than managerial culture and promotions Sticking in the Keiretsu model
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Renault-Nissan 27 August 2012 19 May Dhawan.herry@gmail.com 2010 Renault-Nissan IBT

Main source of revenue - small to medium size cars in Europe 85 % of sales in Western Europe
-> go international

19 May Dhawan.herry@gmail.com 2010

Renault-Nissan IBT

NISSAN RENAULT

Two principles

Developing all potential synergies by combining the strengths of both companies through a constructive approach to deliver WinWin results Preserving each companys autonomy and respecting their own corporate and brand identities

Three objectives

Quality and value of products and services in each region and market segment Key technologies in engines, electronics and the environment Operating profit

19 May Dhawan.herry@gmail.com 2010

Renault-Nissan IBT

NISSAN RENAULT

Renault Respective objectives Improving quality Internationalize Common objectives

Nissan

Reduce Costs Reduce Debt

Economies of Scale Technological Know-How Leader for the quality and attractiveness of products & services

19 May Dhawan.herry@gmail.com 2010

Renault-Nissan IBT

NISSAN RENAULT

Quality between the relationships among the managers and engineers of Renault and Nissan Business experience Technical skills Core values:

Balanced relations between the two companies and the development of strong identities for each of the brands Alliance charter Capital contributions and equity participations Management structure and exchange of personnel
Renault-Nissan IBT

Other factors:

19 May Dhawan.herry@gmail.com 2010

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Third largest global automaker (based on sales for the year 2008) Global market share of 9% (by volume) Significant presence in major world markets (United States, Europe, Japan, China, India, Russia)

19 May Dhawan.herry@gmail.com 2010

Renault-Nissan IBT

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Renault-Nissan BV strategic management company

Alliance Board of Directors Carlos Ghosn

Renault-Nissan Purchasing Organization

Renault-Nissan Information Services

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Raw materials Information resources Financial resources

Input

Transfo rmation Process

Output

Products and Services

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01/07/02 31/12/95 Renault

44,4%

Renault
20%

Nissan
92,7% Dacia Renault VI / Mack VI
100%

AB Volvo

Renault VI / Mack

70%
Samsung

19 May Dhawan.herry@gmail.com 2010

Renault-Nissan IBT

NISSAN RENAULT

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Current Business Model Post Merger Strategy

Common platform with Nissan for small cars Joint research projects and exchange of components (leading to standardization of these products) The decision to return to the Mexican market, using Nissans powerful industrial and commercial presence

19 May Dhawan.herry@gmail.com 2010

Renault-Nissan IBT

NISSAN RENAULT

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Further expansion in Europe and growth in Asia To draw on the strengths of complementary expertise in sales and technology, and to reduce costs and enhance performance.

19 May 2010

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The aim of this restructuring was to be profitable and competitive Sales & Marketing, Distribution, Human Resource were the key areas where restructuring initiatives have taken place. The first important step taken by Renault was to broaden the notion of service to its customers. That led to the creation of two new entities: the Service department and the Distribution Project department.

19 May Dhawan.herry@gmail.com 2010

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New Orientation Partnership

Trust, addition of value to both sides, high commitment Equity, fair dealing, both profit Electronic linkages to share key information, problem feedback and discussion Mechanisms for close coordination, people on-site Involvement in partners product design and production, shared resources

Long-term contracts
Business assistance beyond the contract

19 May Dhawan.herry@gmail.com 2010

Renault-Nissan IBT

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Assets and resources are dispersed worldwide into highly specialized operations that are linked together through interdependent relationships. Structures are flexible and ever-changing. Subsidiary managers initiate strategies and innovations that become strategy for the corporation as a whole. Unification and coordination are achieved primarily through corporate culture, shared visions and values, and management style rather than through formal structures and systems

19 May Dhawan.herry@gmail.com 2010

Renault-Nissan IBT

NISSAN RENAULT

RENAULT-NISSAN Organizational Structure and Design

Dhawan.herry@gmail.com

IBT

NISSAN RENAULT

Lewins model

Unfreeze
Admit change was needed Establishing new company teams Closing plants Cutting jobs Reducing purchasing costs

Change
Introducing new models Establish common pool for resources Inter-cultural and management trainings Common marketing and sales approach New HR policy

Refreeze
Ensure acceptance Promote freedom of operations Establish close reporting system Common value creation Involvement in design and production

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Automakers face legislation increasingly restrictively on the fuel consumption Market has become hyper-competitive Heavy investment in R&D Strategy of cost becomes the major issue
The opportunities in Asia :

Country

China

Malaysia

Singapore

Hong Kong

Japan

Qualification of workplace
Cost of labor PIB per person Politic Stability Taxes Unemployment
Very Favorable
19 May Dhawan.herry@gmail.com 2010

Favorable
Renault-Nissan IBT

unfavorable

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To stay competitive Renault must diversify geographically by integrating a company that already has strong position in Asia, particularly in the regions identified - Nissan meets these criteria geography. However, the settlements are a necessary but not sufficient in the choice of partner

19 May Dhawan.herry@gmail.com 2010

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Strengths Renault Cost Control Debt Innovation, creativity, imagination Overall management and strategic platforms production and supply Privileged relationship with suppliers Capacity Management Strengths Nissan Quality Products of poor quality 37% of the total distribution in the U.S. and 28% Japan 18.5% of cars with engines up to range on all of their production

Weakness Nissan Recurring Losses Lack of creativity and renewal of its Products Poor management capacity Supplier relationships (vertical Keiretsu) in mismatch with a globalization strategy Management & slow conformist Weakness Renault Timeliness of Filing Delay in production time Lack of notoriety in Japan & USA (0% of the distribution) Opportunities insufficient to justify the development and production of top-end engines (4.5%)

The majority of the weaknesses are strength for Nissan Renault and vice versa: we can say that they are complementary in many respects. Moreover, we note that Nissan weaknesses are only due to a bad optimization from their resources and skills.
19 May Dhawan.herry@gmail.com 2010 Renault-Nissan IBT

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In the market for car manufacturers, the only appropriate strategy is that allows the rapid acquisition of new skills. Strategy of horizontal diversification.
Merger Acquisition Alliance

economies of scale, geographically diversification, the reputation, the bargaining power

Complementarities between the strengths and weaknesses of both companies Distinctive resources and competencies Learning: major challenge - little degree of synergy would cause a high cost of restructuring Advantages of the alliance before merger and acquisition

19 May Dhawan.herry@gmail.com 2010

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