Renault Nissan Merger Case Study

• 1. Case Study: A Marriage of Necessity?

2. Overview Case Context Introduction Renault Nissan What is a Merger? Why Merger? Pre Merger Renault Nissan Negotiation Post Merger Discussion/Conclusion 3. Case Context Renault-Nissan Alliance merger (1999) between French auto manufacturer Renault and Japanese manufacturer Nissan. 2013 Captured 10% global market share. Partnerships with Daimler and AvtoVAZ 4. What is a Merger? Combination of two or more companies which is restructured to create positive growth. Horizontal Merger Two entities competing in a similar industry producing similar goods. 5. What is a Merger? Most effective in oligopolistic industries for achieving growth. Advantages: Economies of scale and scope Increase international competition Penetration into new markets Access to new design, tech and processes Supports a declining company 6. What is a Merger? Disadvantages: Culture clash between companies Leadership disputes Layoffs from either company Companies go through a courtship period where they assess each other. 50% of all mergers are unsuccessful either in pre- merger or post-merger stage. 7. Overview Pre-merger stage Contextual conditions and differences of the companies before merger. Post-merger stage How they overcame these issues. Discussion 8. Why Merger? 1. Increase industry concentration for long term profitability. 2. Earning participation into global markets 3. Expansion is prohibitively expensive 9. Pre Merger Renault (Expanding company) 1. Full capacity 2. high concentrate in Western Europe. 3. High profit 4. Intend to be global 1. Failed to materialize to complete Toyota 2. 54% capacity utilized 3. Overall economic stagnation 4. Poor internal communication 5. A lack of urgency & strategic future 6. Lack of cost control Nissan (Declining company) 10. Similarity Large & Long history Pariotism & Bureaucratic Strong hierarchical structure A high proportion of senior management Little formal business education & 11. Difference Social & culture difference Language Decision-making Communications system Labour regulations Currency & 12. 13. Merger Benefits 1. Renault as a rescuer to Nissan 2. Nissan has strong market in United States and Asia 3. Renault present in Europe and the Mercosur market 4. Combined technological strengths 5. Renaults considerable expertise and development, design, in market experiences. 6. Nissans engineering technology strength 14. After Negotiation Agreement Renault required 38.8% of capital of the Nissan Motor Co. 22.5% of Nissan Diesel 100% Nissans European sales and financing subsidiaries 15. Post Merger A Successful merger involves : Swift implementation of post merger policy Strong credible leader who is able to recognise differences and similarities and is able to implement policy to fit both companies ault required 38.8% of capital of the Nissan Motor Co. 22.5% of Nissan Diesel 100% Nissans European sales and financing subsidiaries 16. Credible leader - Ghosn Ghosn was a manager from Renault who clearly understood the need for speed and integration in the merger process through : English classes New managerial structure One vision Flow of personnel Streamline procedures through the establishment of the Nissan board 17. The Nissan Board Role was to put in place policies to reduce costs to enable short term recovery as well as put in place plans for future growth. To achieve this: Closed 5 plants and concentrate production to areas with competitive advantage Improved design capabilities by leveraging skills from experienced designers Standardised components Increase research and development Cutting down on suppliers 18. Was the Merger Successful? Renault had access the Asia and Australian market Nissan is now a major competitor Boosted market share by 17% 19. Summary 20. Con 80 per cent of the original tasks had been carried out in 50 per cent of the allotted time (Donnelly, Morris, and Donnelly 2005, p.438) Key Advantages By taking advantage of economies of scale & Technological innovation (Research and Development) This also allowed the two firms to expand their product mix Increase revenue by appealing to wider customer base Conclusion/Discussion 21. Con Key Decision Factors Deciding on the foreign market Timing of entry Scale of entry and strategic commitments Conclusion/Discussion 22. Con Advantages Partners local market knowledge and connections Sharing costs and risks Complementary skills and assets Politically feasible entry mode Conclusion/Discussion 23. Con Disadvantages Give more then receive Culture clash Conclusion/Discussion 24. ConConclusion/Discussion 25. Con 1. Could the merger strategy work effectively in another industry? (Examples) 2. Is there a more effective entry strategy? (E.g. Greenfield, Acquisition etc.) 3. Could Nissan have achieve long-term success on its own? Discussion Questions