Case Study Nissan Motor
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Case Study
Nissan Motor
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CALENDAR OF EVENTS1999 March 27: Alliance Signed with RenaultMay 28: Transaction ClosesJune 25: AGM Elects new Board of Directors
June 25: Board Appoints CEO, COO, EVP, SVPJuly 1: New Executive Management TeamSept 1: 17 Expatriate Renault ManagersAssigned to NissanOct 18: Announcement of Revival Plan
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5 main reasons1.Lack of clear profit orientation
2.Insufficient focus on customer and too muchfocus on chasing competitors
3.Lack of cross functional, cross-border, intra-hierarchal lines, work in the company
4.Lack of sense of urgency
5.No shared vision or common long-term plan
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Class AssignmentDevelop a Revival Plan on the basis of inputs
which you have received so far
The Revival Plan should havea. SWOT analysisb. Develop a Strategy for Internal & External
Communication
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CHRONOLOGY: Key Dates for Nissan Motor Company Ltd.
1918: Kwaishinsha Motor Company in Tokyo introduces the Datson, a two-seat sports car
1932: Name is changed to Datsun 1933: Company is renamed and incorporated as Nissan Motor Company 1951: Becomes a publicly traded company 1958: Nissan enters the U.S. market by establishing the Nissan Motor
Company U.S.A 1975: Revenues top $5 million 1981: Changes name of U.S operations from Datsun to Nissan 1992: Posts a pre-tax loss for the first half of 1992 of ¥108.1 billion 1999:Posts a net loss of ¥791 billion for the fiscal year; Renault buys a 37
percent interest in the company; Carlos Ghosn is named chiefexecutive officer
2000: Company restructuring under the Nissan Revival Plan leads to a netincome of ¥187 billion for the fiscal year
2001: Posts a net income for the second year in a row 2002: Introduces to the Japanese market the Moco, the company's newest
minicar 2010: First half of FY net income of 270 billion yen (Nov-2010)
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SWOT Analysis Layout
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Ghosn’s (as a cost cutter) Finding
Culture of Blame GameDismantling the Keiretsu
The Revival Plan
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Global Business Innovation:
increasing the operating profit of consolidated net sales by fivepercent, and reducing the consolidated interest-bearing
liabilities by one trillion yen in year 2000; reducing the number of kinds of car body from 25 to 14 by the year
2000, then to 10 kinds by 2002; downsizing the domestic sales channel from the current four
systems to two systems;
rebuilding the business in the US; rearranging the production lines to increase production efficiency; reducing overall costs by 400 billion yen by year 2000; realising a ‘small headquarter’ under the business innovation
scheme; selling its real estate and securities; reducing the inventory by 250 billion yen by year 2000.
*Disclosed in May 1998 by Nissan’s then president, Mr Hanawa
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REVIVAL PLAN OUTLINE
I) Diagnosis
¦ Past Performance: Facts/Figures
¦ Past Performance: Analysis + Opportunities
II) Revival Plan¦ Elaboration
¦ Key Contents
¦ Impact
III) Commitments
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REASONS EXPLAINING PASTPERFORMANCE1) Lack of profit orientation2) Not enough focus on customers3) Lack of cross-functional, cross-border,
intra-hierarchical lines work4) Lack of a sense of urgency5) No shared vision or common long-term plan CLEAR OPPORTUNITIES FOR PROGRESS
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NISSAN’S STRONG BASE FOR RECOVERY
International presence and global reachWorld leading manufacturing systemLeading edge in selected technological fields
Alliance with RenaultNissan’s people
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Elaboration:9 Cross Functional Teams Decided by Executive
Committee on July 5Business DevelopmentMarketing & SalesPurchasingSG & A (Selling, General & Administrative)Manufacturing
Financial ManagementR & D (Research & Development)Product Phasing OutOrganization & Decision Making Process
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NISSAN REVIVAL PLANIMPACTHEADCOUNT REDUCTIONS:
¦ 21,000 people worldwideBreakdown
¦ 4000 in manufacturing¦ 6500 in Japanese dealer network¦ 6000 S, G & A¦ 5000 spin-off’s¦ (500) R&D
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Outcome:
200 people directly involved from Japan,USA, Europe
2,000 ideas assessed400 proposals submitted to Executive
Committee
Decisions made official by Board Meeting Oct
18th
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Key ContentTarget: Profitable Growth
Actions:New product opportunities
Associated businesses developmentBrand identity and brand powerLead time reductions
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Reduce Product Lead TimesCar/powertrain development timeOrder to delivery timeForeign market “Start of Sales”
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NISSAN REVIVAL PLANPURCHASING STRATEGYTarget: 20% front-loaded cost reduction over
3 years
Actions:
Centralize parts and material purchasing Include services in global purchasing strategyReduce the number off suppliers
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NISSAN GLOBALMANUFACTURING 1999/2002Target: Achieve optimum manufacturing
efficiency and cost effectiveness
Actions: Reduce vehicle assembly and powertrain
manufacturing capacity
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Target:
Achieve optimum manufacturing efficiency and costeffectivenessActions:
Reduce vehicle assembly and powertrain manufacturing
capacityRationalize and simplify industrial organizationReduce operating costs by globalizing1. logistics 2. best practices 3. benchmarking
Extended use off F.M.S. (Flexible Manufacturing System)
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NISSAN REVIVAL PLANS, G & A
Distribution Structure Streamlining:Revamp domestic dealer organization reducing dealer affiliates by 20% closing 10% of the retail outletsopening longer hours create Prefecture business centers (common back
offices)Streamline regional structure in North America
Restructure European dealer network by leveraging the Alliance with Renault with common
hubs and back officesE-commerce alliance with Carpoint
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NISSAN REVIVAL PLANFINANCIAL MANAGEMENTTarget: Improve Financial Management Reduce
Financial CostsActions:Centralize financial operations worldwide
i. develop global financial controls and riskmanagement
ii. create global treasury, funding and cashmanagement
No shareholdings are considered strategicDispose off land, securities and non--core assetsReduce inventory to sales by 30%Alliance with Renault
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NISSAN REVIVAL PLANORGANIZATION
Target: Move from multi-regional to globalorganization
Actions:Create a worldwide headquarterstrategycorporate planningmanagement controlbrand managementGlobally controlled functions¦ R & D ¦ Finance ¦Manufacturing system¦ Purchasing ¦ H.R.
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Move from a multi-regional to aglobal
organizationEmpowered Program Directors for cross-
functionality and profit orientation
Performance oriented compensation: bonuses,Performance based career advancement
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Financial Impact:
200 billion Yen provision* booked in FY 99
* Provisions cover write-down of assets and socialcosts
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Commitments
Profitability targets:
FY 00 Return to profitability
FY 02 Operating profit > 4.5% of sales
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Lessons from Nissan “No matter how promising your resources
are, you will never be able turn them intogold unless you get the corporate cultureright.”
---Carlos Ghosn “ In deed, after just three years with
Nissan, I doubt anyone would say that thepeople I brought with me still belong toRenault”
---Carlos Ghosn