Introduction:

Case example:

Nissans change (1999-2002):

Back in late 1990s, Nissan, a Japanese motor company was on a verge of bankruptcy, forced to find a partner in order to rescue itself back on profitability. In October 1999, Carlos Ghosn, who was appointed as CEO of Nissan by Renault, revealed a revival plan to rebound Nissan. On 18th October 1999, after initially 7 months in charge of Nissan, Carlos Ghosn revealed his plan to reform his company in the Tokyo Motor show. He also pointed out five major problems that why Nissan had been struggling in the Japan car market for eight years. They were: Lack of a clear profit orientation Insufficient focus on customer and too much chasing on competitors Lack of cross function, cross border and intra-hierarchical of work in the company Lack of sense of urgency No share vision or common long term plan

Reason for change:

According to Ghosn (2002), he pointed out two major problems such as Nissan made no profit since 1992 lead to the increasing huge debt and Nissans culture like many other Japanese companies. In 1951 Nissan was first appeared on the Japan Stock Exchange, 42 years later the company announced expecting loss up to 20 billion Yen (80 million) on profit for the first time (Fagan, 1992). This was an obviously result of companys market share decline in both Japan and United States, a biggest exporter. For example: in Japan, Nissans market share was below 19% in 1998, it was dropped 15% compared to its 34% market share in 1974 (Anon, 2003). In addition, company also reported that its profit before tax in 1991 were $1.23 billion, however in the following year 1992, its pre-tax profits were only $615 million. As it can be seen as pre-tax profits decreased by 50% only in one year. Many analysts agreed that the decline of Nissan in early 1990s due to the poor quality of previous top management during that time. After Ghosn arrived at Nissan headquarter in Tokyo, he soon discovered that although the sale in Japan and USA declined every year of 1990s, many factories still had produced almost a million cars per year than markets demand due to over capacity (Ghosn, 2002). In addition, Nissans productions exceeds up to 3040% of the cars sold by 1999 (Anon, 2003). In order to reduce the overcapacity, the Nissan s top management tried to restructure many plants in Japan in 1993

and 1995; however, the strength of Labour union at that time has made both plans unsuccessful. In addition, Ghosn (2002) also stated that : Nissan gave away $1000 for every car sold in the U.S due to the lack of brand power. It also can be noticed that in in the early 90s Nissan did not improve in the new car model, which customers trends were changing fast in the U.S market. Moreover, the price of productions cost, Nissan had to pay to the suppliers, were too high when Carlos compared it to the costs of Renault. Thus, the profits per car of Nissan were quite lower than many carmakers such as Daimler-Benz, Toyota, Chrysler, Honda, Ford (refer the table below): Company name Profits per car ($) in 1998 Daimler Benz 1792 Chrysler 1577 Honda 1376 Ford 1245 Toyota 1105 GM 905 Nissan 305 Source: The Economist, May 14, 1998. Accordingly to the reports, Nissan announced the huge debts in 1998, which was about $22 billion (around 2.6 time compared with its equity). Even after merged with Renault, this number was still too high as more than $11 billion. In the press, many analysts had believed that Nissan on the verge of bankruptcy due to the crash crunch as company had to pay alone almost $1 billion interest charged on the debt (Hughes et al, 2003). Although, Nissan has taken various steps to turn it around, but with no money left, it faced a do-or-die situation. As mentioned above, culture of Nissan was one of many problems. According to Nakane (1970), she argued that every department of Nissan formed closed groups, which was not communicated with each other. For example: the operations between Nissan North America & Europe were separate when it came to finance, sale and marketing. This typical structure is known as based on the vertical on horizontal relationship (Nakane, 1970). When Nissan faced problems, company blamed the affected of external environment and there were also lack of communication among the departments in the company.

Change Management Process:

In 2002, Carlos Ghosn reported that his revival plan to turn Nissan around was successfully, even one year ahead of plan. How could a foreigner and non-Nissan make an incredible changes and leading Nissan back to profits again? In what following, Carloss strategy will be explained in two stages, which are organisation stricter changes and corporate culture. According to Hughes et al (2003), Carlos Ghosn quickly set up 9 teams in companys organisation, were called Nissans cross-functional teams(CFT) to

support for the changes, not only in Japan, also in global too. These teams will give idea and any recommendations to the revival plan. In the past, Carlos already built this structure twice effectively and successfully in Michelin and Renault turnaround, thus Ghosn were confident to use it again to destroy the lack of communication between divisions in Nissans hierarchy (Hughes et al, 2003). This powerful tool also helped Ghosn can define where line manager responsibilities if something goes wrong or fixing it. In addition, every area in Nissans organisation from research &development to product department was all working together to contribute to Nissans performance. At the end of each quarter, every team will report and feedback to the head of CFT, therefore the top management will able to make decisions based on the reviews from CFT. The first stage of plan, Ghosn wanted to reduced the cost of productions by 20% by 2002 (Anon, 2003). In order to achieve this plan, he tried to break into the Japanese traditional parts suppliers network, as called keiretsu. Accordingly to Magee (2003), Nissans suppliers were paid too much compare with the others automobile companies, thus in Carloss revival plan, the numbers of suppliers will be reduced nearly two third by 2002.

Reference: Cole, G (2004). Management Theory and Practice. 6th ed. London: Thomson Learning. p204-206 FAGAN, M. (1992). Jobs to go as Nissan predicts loss. Available: http://www.independent.co.uk/news/business/jobs-to-go-asnissan-predicts-loss-1543064.html. Last accessed 20th Feb 2012.
Ghosn, Carlos. (2002). Saving business without losing company.Harvard Business Review. 80 (3), p37-45. Anon. (2003). Nissan's Turnaround Story. Available: http://www.icmrindia.org/casestudies/catalogue/Business%20Strategy1/BSTR07 3.htm. Last accessed 20th Feb 2012. Hughes, K et al.. (2003). Leading change. Redesigning change . n/a (B), 1

Nakane, Chie. Japanese Society. Berkley and Los Angeles: University of California Press, 1970.
Magee, David. (2003). How Ghosn set stage for Nissan's rebound.Autimotive news. 77 (n/a), n/a.