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Nissan Case

Nissan Case

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Published by: giadcunha on Dec 14, 2009
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11/13/2014

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Renault Nissan
The Making of a Global AllianceCase Analysis
Team members:Deepthi Raghunath - 24Gia D’Cunha - 30Gunin Mattack - 32Gurvir Singh Sangha - 33Hari Kumar M P - 34
Executive Summary
The following analysis of the case explains how the Nissan emerged from a small cars and auto-partsmanufacturer to a global company and finally the alliance with Renault. In the 80’s most of the majorcar manufacturers had increased their manufacturing capacity – thus there was an excess capacity in thewhole of the industry. Nissan’s domestic sales went down during the period. In early 90s the Japaneseeconomy bubble burst and with it went Nissan. Nissan’s revenue statements started showing negative
 
figures. One of the ways to overcome it was to establish a global alliance to survive through increasedsales. Nissan found a joint venture with Renault. Soon Nissan felt that it could learn about Renault’scost management and customer relations by alliance. Daimler-Chrysler also was in the run to go in foralliance with Nissan, given the size and prestige of Daimler-Chrysler, it could easily pay off all of Nissan’s debts, increase sales – in short remove all of Nissan’s problems. However, in agreeing to beacquired by Daimler-Chrysler, Nissan would lose its independence. On the other hand the deal withRenault would allow Nissan to have an independent existence and still have access to processes toaddress Nissan’s problems. Finally Nissan signed the deal with Renault.
Nissan’s Perspective
History of Nissan:
Nissan was established in 1933 by Yoshisuke Aikawa to manufacture and sell small Datsun cars andauto parts.In 1935, the first car was rolled out from the Yokohama plant and export of vehicles to Australia wasalso started the same year. In 1936, as World War II approached, the production of cars was cut back and the production of military trucks given more importance. This was a change in product portfolio tomatch the shift in needs.After the war, many of Nissans former auto dealers moved over to Toyota, leaving Nissan a depletedcompany.
 
However, in 1945 and 1947 the production of trucks and cars were started respectively. By 1959, theDatsun 210 produced by Nissan was taking part in the Australian rally and in 1960 it got the Demingprize for engineering excellence.In the 60’s Nissan’s main competitor was Toyota and its cars were designed to directly compete withToyota’s products. This is an aggressive marketing method to meet the opponent’s offensive moves.It was also during this period that it established Nissan Mexicana, S.A.de C.V, its overseasmanufacturing plant. It also opened two state-of-the-art plants: the Oppama in 62 and Zama in 65.In 66, Nissan merged with Prince Motors under the suggestion of the Japanese government with whichNissan had close ties. This shows a high degree of governmental control that governed the automobileindustry in Japan.In the 70’s the Oil crisis hit the world as result of which the demand for smaller & more efficient carswent up.In the 80’s Nissan set up manufacturing operations in the USA and it was also looking to start a plant inEurope – the Japanese company to look at doing so. Nissan went in for decentralized production tocapitalize on locational economies.However, most of the major car manufacturers during the time had increased their manufacturingcapacity – thus there was an excess capacity in the whole of the industry. Nissan’s domestic sales alsowent down during the period.The unions were agitated that Nissan was establishing plants in foreign countries when the local plantcapacity itself was in excess than demand. The President during the time Takashi Ishihara also didn’thelp matters by having a unilateral approach to management – this caused a severe breakdown of relationship between management and unions.In 85, Mr. Ishihara was replaced by Mr. Yutaka Kume as president of Nissan. Mr. Kume launched aprogram to upgrade the image of Nissan. Many new models of cars were released. He also started talkswith the unions to mend the ruptured relations. Mr. Kume success can gauged by the fact that all theemployees including workers came to address him as Kume-san rather than as Mr. President.Though Mr. Kume was able to change many things, he could not do anything about Nissans dealers –50% of the dealers were owned by Nissan and thus he feared that Nissan was losing touch with thecustomer needs of the current generation.In early 90s the Japanese economy bubble burst and with it went Nissan.From a profit of 101.3 billion yen in 1992 Nissan went to a loss of 166 billion yen in 1995. It wasduring this time that Mr. Yoshifumi Tsuji became president. He tried to improve the domestic sales bymeeting regularly with domestic dealers – but the sales showed no signs of improving. It was as Mr.Kume had feared the concept and style of Nissans cars were not in tune with the current market.In 93, Mr. Tsuji announced a cost reduction program to cut costs by 200 billion yen by 1995, but theprogram failed to achieve its target.

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