Reference no: EM133257514

Case 1 (international business subject)

Carlos Ghosn: Leading for Global Success at Renault-Nissan

Nissan Motor Co. (www.nissan-global.com), based in Tokyo, is Japan's number-two automobile manufacturer. Sales in 2009 were nearly $90 billion, and management is planning to launch forty-eight new car models. A few years ago, Nissan, with 160,000 employees, was on the verge of bankruptcy. The French automaker Renault stepped in, took a 44 percent stake, and installed Carlos Ghosn as Nissan's CEO. In a dramatic turnaround, Ghosn (hard G, rhymes with "stone") returned Nissan to profitability and became a celebrity in Japan. Born in Brazil, raised in Lebanon, and educated in France, he is charismatic leader who speaks four languages. Smooth in public, he works constantly and is committed to organizational goals. He is featured in Japanese comic books, mobbed for autographs during factory tours, and idolized for saving one of the world's premier car companies.
Ghosn close inefficient factories, reduced Nissan's workforce, curbed purchasing costs, shared operations with Renault, and introduced new products. Under his watchful eye, Nissan evolved from a trouble carmaker to a corporate success story in just a few years. How did Ghosn do it?
Nissan's Organizational Culture
One of Ghosn's biggest tests was overcoming the denial inside Nissan about the firm's
perilous condition. Ghosn cut through antiquated thinking, defying Japan's often bureaucratic and clubby business culture by, for example, reducing Nissan's steel suppliers from five to three. The CEO of NKK Steel protested that "Toyota would never act in such a way".
Corporate Japan often moves slowly and reactively. Ghosn introduced a proactive style, with fast decision making and a culture of anticipating problems and eliminating them before they happen. Senior management at Nissan now operates with a sense of urgency, even when the firm is not in crisis. Ghosn is always in a rush, relying on decisiveness and delegation---but yielding to consensus when it is passionate. He dislikes long meetings. Instead of squandering time analysing and discussing, he prefers action. At Nissan, he pushes staff to meet tough sales target and once publicly promised the management team would resign if it didn't meet them. He inspires the workforces, regularly visiting them on the factory floor. Even the most mundane events are handled like big media shows. One Nissan earnings news conference opened with loud music and dazzling video shots of zooming cars.
Ghosn's Global Orientation
In the style of true globalist, Ghosn states, "It's irrelevant where you are headquartered... the keys are where the jobs are located and where the profits go." To reinforce his global aspiration, Ghosn made English, not Japanese, the official languages of Nissan. Managers who learn English advance faster than those who speak only Japanese. The move proclaimed Ghosn's intension to reorganize Nissan as a global firm.
Ghosn took over as CEO of Renault in 2005. He now runs both companies, commuting between Paris and Tokyo in his Gulfstream jet. The unusual arrangement underscores the demand for proven leaders in the global auto industry, which suffers from oversupply and intense competition. In a typical month, Ghosn might spend the first week in Paris, focusing solely on Renault, and the third week in Japan, focusing on Nissan. He carries two agendas: one for Nissan and one for Renault. He personally oversees Nissan's North American business, where half of Nissan's profits are earned.
The Role of Innovation
Nissans constantly invest in R&D for breakthrough technologies and innovate products. Roughly 5 percent of net sales are reinvested in new technologies. At its new Mississippi plant in the United States, Nissan launched four models in less than eight months, rolling out a small car (the "Versa"), a re-engineered Altima midsize sedan, a heavily redesigned Nissan Quest minivan, and a redesigned Infiniti G35. It established a design subsidiary in Shanghai, China, to produce cars that fit that country's growing market.
In green technology, Nissan is stressing all-electric vehicles. In 2009, Ghosn unveiled the Nissan LEAF, the world's first affordable, zero-emission car, based on size hatchback with a range of more than 160km (100miles). In 2010, it was launched in Japan, Europe, and the United States.
Global Production
Renault-Nissan has factories in Britain, France, and the United States, to be close to key markets. It also manufactures in China, Taiwan, and the Philippines to leverage low-cost, high-quality labour. Nissan uses modular architecture: Suppliers manufacture single modules, which are the bolted into a car or a truck body rolling the assembly line. The modular approach minimized the total cost of manufacturing cars.
Nissan consolidated its U.S. manufacturing operations, moving thousands of jobs from southern California to its new plant in Tennessee. The move centralized manufacturing and made it easier for senior management to keep tabs on U.S. operations. The Tennessee plant it Nissan's most productive factory in North America, producing a car under 16 labour hours, several hours fewer than rival carmakers.
Additional Global Strategy Elements
The integration of Nissan with Renault has gone smoothly. Renault-Nissan's board of directors consist of four members from each organization. The Combined firm is globalizing engineering, productions, and purchasing operations. Management established a joint design centre in Amsterdam - Renault-Nissan BV - that provides a neutral forum to map out common strategy for products development and engineering. A $45 million engineering centre near Tokyo consolidates global production and engineering.
Renault-Nissan minimizes the number of platforms (chassis) used in manufacturing. Every shared platform saves $500 million annually for each carmaker. Renault shares eight engine designs with Nissan. Roughly threequarters of the parts used by the two automakers are sourced jointly, generating economies of scale. Common parts, such as door handles, windshield wipers, and seatbelts, are shared among different models. Such moves have allowed both firms to slash purchasing costs and shave months off the development time of new vehicles. One result is the world's most global car, called the Nissan Versa in the United States, the Renault Clio in Europe, The Nissan Tiida in Asia, and the Renault Logan in the Middle East. In total, Nissan offers seven different vehicles based on the underpinnings that go into the Versa, creating scale economies that improve profits.
Nissan has a presence in the most important markets worldwide. While the United State is relatively expensive place to make cars, it is also the world's biggest market. Thus, Nissan has a major manufacturing and marketing presences there. It now exports its U.S. - made Quest minivans to China, considered the next big market. It exports other U.S. - made models - the Altima sedan and Infiniti QX56 SUV - to the Middle East and Latin America.

Emerging Markets: The Next Big
Target In the coming decade, millions of consumers in Brazil, China, India, and other emerging markets will join the middle class. Many dreams of owning a car. Estimated indicate the market for automobiles priced under $10,000 will soon grow roughly 20 million cars. India's car market will double to 3.3 million cars by 2014, and China's demand will grow 140 percent, to 16.5 million cars in the same period. In 2009, India's Tata motors launched a new car, the Nano, priced at around $2,500. The Chinese have launched a similar car. Automaker in China and India leverage low wages in their countries to squeeze down manufacturing cost.

Ghosn is making emerging markets a cornerstone of Nissan's global strategy. Renault-Nissan launched the Logan, built in Romania, with a base price around $7,500. The company is building a low-cost pickup truck based on the Logan for sale in Southeast Asia, South Africa, and the Middle East. Demand is high because of the high quality and low price. Nissan-Renault teamed with India's Bajaj Motors to build a $2,500 car to compete with Tata's Nano. The ULC (for ultra-low-cost) was launched in India and is being targeted to other emerging markets as well. Renault acquired full control of Samsung Motors, making South Korea an important base for Renault-Bluebird sedan is produced in a 50-50 joint venture with a local Chinese firm. The Nissan Tsuru subcompact is the top-selling car in Mexico, accounting for 20 percent of new-car sales. It is increasing its presences in other emerging markets, such as Russia and India.

Global Recession
Like other automakers, Nissan hit a downturn in 2009, leading the firm to post its first loss to the global financial crisis, the negative impact of a strong yen, and the loss of consumer confidence around the world. In response, Ghosn moved quickly to cut productions at several plants in Japan and Europe, especially those that make vehicles for advanced economies. Nissan also reduced its worldwide workforce by some 20,000 employees. Nissan is increasing its presences in China, Russia, and India, and further shifting engineering, production, and purchasing to low-cost countries. The firm will source more parts and component outside Japan, in emerging markets.
(Source: Cavusgil, Knight & Riesenberger (2012). International Business: The New Realities. 2nd ed. Pearson)

Question 1. What is the nature of Nissan international strategy? Explain your answer.

Question 2. Explain TWO (2) advantages does Nissan derived from the strategies it pursues.