IBS Renault Nissan Alliance Final

Renault-Nissan Alliance

Presented by :Group 7Akshay(4A) Ashirvad(8A) Kavita(19A) Rakesh(30A) Sachin(36A) Shiv(40A)

Introduction to RenaultEstablished in 1898French AutomakerProducts:Automobiles,commercia

l vehicles, financingMain Market : Europe

Introduction to NissanEstablished in 1933Pioneer in manufacturing of

automobilesProducts: Automobiles, Outboard

motors, Forklift TrucksMain markets: Japan, United

States, Europe

Auto Industry ScenarioLarge scale mergers were taking

place around the world like that of Chrysler and Daimler

Asian slowdown had an adverse effect on the Japanese auto majors in particular

Saturated marketsGlobalization

Industry Dynamics

Rivalry among Competitors:

High

Need for Strategic Alliance

Renault•Lack of presence in international market•Presence only in European markets•Limited product line•Bland styling and poor product quality

Nissan•$20 billion in debt•Recession in early 90’s in Japan•Design of cars was not competitive•High degree of bureaucracy•Less emphasis on managerial culture and promotions as compared to engineering culture

Objectives of the Alliance

Objectives of the AllianceDeveloping all potential

synergies by combining the strengths

Providing global reachPreserving each company’s

autonomy and brand identitiesImproving quality and value of

productsBenefit from each other’s key

technological strengths

Common Ground•Long history•Strong hierarchical structure•A high proportion of senior management•Little formal business education

Barriers/Differences• Social & culture difference • Language• Decision-making process• Communication system• Labour regulations

Benefits to be gainedRenault as a rescuer to NissanNissan had strong market in United

States and AsiaRenault presence in Europe and the

Mercosur marketCombined technological strengthsRenault’s considerable expertise in

development, design and market experiences.

Nissan’s engineering technology strength

The Negotiation Process

Phase 1Exploring interest in

Collaboration

• Select group of representatives from Renault and Nissan met secretly to explore their respective interests in strategic collaboration

• After preliminary talks, preparations were made to organize a meeting of the CEOs

Phase 11Identification of

possible synergies

• Preliminary analyses on purchasing, engines and gearboxes, car platforms, production, distribution, and international markets was conducted

• Nissan’s capabilities were identified in large cars, research and advanced technology, factory productivity, and quality control

• Renault’s talent was identified in medium-sized cars, cost management, and global strategies for purchasing and product innovation

The Negotiation Process (Contd)

Phase 111Evaluation of

possible synergies

• Intercompany teams assembled from specialists on each side thoroughly examined the companies’ respective operations

• The teams held meetings at nearly every one of the companies’ sites worldwide, visited plants, and exchanged cost and other proprietary information

• Top management facilitated collaboration within the study teams as needed and a coordinating committee reviewed progress monthly

Phase IVStriking the Deal

•The negotiations were punctuated by alternative talks of Nissan with Chrysler Daimler•The talks between Nissan and Chrysler Daimler did not work out but Renault did not reduce its original offer •This was done to show consistency of intent to develop a cooperative relationship•Finally, both the companies committed to cooperate to achieve certain types of synergies while maintaining their respective brand identities

The Negotiation Process (Contd)

Phase VFinalizing

details

• Financial terms regarding investment and equity shares were discussed

• With respect to management, Renault gained responsibility for three positions at Nissan (Chief Operating Officer, Vice-President of Product Planning, and Deputy Chief Financial Officer) and one seat on Renault’s board of directors was designated for Nissan’s CEO

• 11 cross-company teams were formed to work on key areas of synergy (e.g., vehicle engineering, purchasing, product planning) and to coordinate marketing and sales efforts in major geographic markets

Initial Difficulties Irresponsible attitude of Nissan staff due

to huge cut down in staff

Constraints of 2 design programsUnclear functional requirementUnshared componentsDivergence between engineer teams in

implementation method

Initial Difficulties (Contd.)Barriers in international markets

export restraints, tariffs & European Commission’s new rules

Culture differences between 2 companiesJapanese are collectivists vs. French are

individualistsRestructure Nissan => confusion & frustration

among workers in Nissan

AftermathChairman & CEO Louis Schweitzer

made sure that VP Carlos Ghosn was willing to assume Nissan’s top operating position

Carlos’ main agenda was to put in

place policies to reduce costs to enable short term recovery as well as put in place plans for future growth.

Aftermath (Contd.)To achieve this:

- Closed 5 plants and concentrated production to areas with competitive advantage

- 21000 job cuts

- Standardised components, increased R&D work and design capabilities.

- Cost reductions of $9.48 billion over 3 years

ResultsBy 2002 Nissan cleared its debts, earned profit

and it continued to do so even in 2008-09 when all automakers were hit by the global recession.

By 2009 Nissan bought 15% shares of Renault

Renault’s investment of $5.4 Bn in Nissan easily paid off as income alone from it averaged more than $2 Bn per year from 2002-07

At present Renault’s shares in Nissan are worth more than Renault’s total market value.

The Alliance Structure

Achievements from the Alliance

Became Third largest global automaker in 2008. Currently 4th largest.

Global market share of 9% (by volume)

Significant presence in major world markets (United States, Australia, Europe, Japan, China, India, Russia)

Combined expertise and technology sharing

Increased presence in emerging markets

LessonsGo beyond differences; probe parties’

interests and capabilities for “fit”

Prepare extensively, continuously, and jointly as well as internally

Consider developing a new (unusual) form of relationship

Behave not only as a negotiator but also as a prospective partner

Lessons (Contd.)Manage the influence of the

counterpart’s no-deal alternative (options)

Assess the quality of an outcome (agreement) by its effects as well as its content

Thank You!!