NISSAN’S TURNAROUND STORY
BY
RAMESH.CAMIT KUMAR.M
NISSAN BACKGROUND
1933 – Started as Jidosha Seizo Co. Ltd
1934 – Changed to Nissan Motor Co. Ltd.
1944 – Headquarters Shifted to Tokyo
1950 – Acquired Stake in Minsei Diesel Motors Co. Ltd.
1952 – Technological Cooperation with Austin Motors
1958 – Exports to USA
1959 – First overseas factory at Taiwan
1966 – Merged with Prince Motors Ltd.
1980 – Garner the worlds biggest auto market
1990 – Nissan’s decline started
DECLINE OF NISSAN
PROFITS
COMMUNICATION
H R MARKETING
PRODUCTS
INVESTMENTS
PRODUCTION
PRODUCTION
• High Costs
• Production Lag
• Over Capacity
• Outdated Product Line
• Keiretsu System
PRODUCT
• Outdated Models
• No New Designs
INVESTMENT
• Unrelated Investment
• Deep Debts
• High Interests
PROFIT
• Low Margin
• High Fixed Cost
MARKETING
• Poor Marketing
• Poor Brand Perception
• Dealers
HR
• Labour Problems
• Culture
COMMUNICATIONS
• Between Branches
• Between Departments
• Between Global Divisions
WHAT NISSAN DID?
GBRP – Global Business Reform Plan
• New Products
• Higher Margins
• Reduction of Over Capacity
• Disposal of Assets at Throw away Prices
WHY NISSAN FAILED?
• Concentration on Profits – Not on Volumes
• Lack of Funds
• Stocks Declared as Junk
• No Reduction in Employee
NISSAN JAPAN MARKET SHARE
GLOBAL MARKET SHARE DECLINE
TURN AROUND
THE TURN AROUND PROCESSSTAGE 1DECLINE
STAGE 2RESPONSE INTIATION
STAGE 3TRNSITION
STAGE 4OUTCOME
NADIR INDETERMINATEFAILURE
SUCCESS
TURNAROUND - DECLINE
• K-extinction
Macro & external factors responsible.
• R-extinction
Internal factors
• Sources of intervention triggers decline.
TURNAROUND – RESPONSE INITIATION
• Strategic response
Changing or adjusting businesses firm is currently involved in.
• Operating response
Way the business is being conducted, cost cutting and revenue generation.
TURNAROUND - TRANSITION
• Time taken for the results of the turnaround strategies to be seen.
TURNAROUND - OUTCOME
• Whether turnaround is accomplished or not• Determined using performance measures.
RENAULT – NISSAN ALLIANCE
• $ 5.4 bn for 36.8% stake
• Option for Renault – 44%
• Option for Nissan – 15%
• Renault bought out Nissan's European subsidiaries for $ 320 Mn
HIGHLIGHTS OF THE ALLIANCE
• Three Renault executives were appointed to the Nissan board
Yoshikazu Hanawa, President and CEO, Nissan was nominated for Renault board
• Formation of transnational organization
• Cross company teams
CARLOS GHOSN
MISSING ELEMENTS
• Clear profit orientation
• Focus on customers
• Sense of urgency
• Proper communication (internal and external)
• Employee empowerment
NRP OVERVIEW• Reducing operating costs by ¥1trillion.• Reducing number of suppliers.• Reducing new debt from ¥1.3trillion to
¥700billion by FY 2002.• Introduction of around 22 new products by 2002.• Reducing employees by 21000.• Reducing the assembly plants from 7 to 4 in
Japan.• Reducing manufacturing platforms from 24 to 15
in Japan.
NRP-OPERATING COSTS
REDUCING PURCHASING COSTS BY 20%• Centralizing the purchase activity.• Decreasing the number of suppliers.• Including services in global purchasing strategy.
YEAR 1999 2002
SUPPLIERS 1612 600
NRP-FINANCIAL COSTS
REDUCING FINANCIAL COSTS.• Centralize financial operations.• Disposing off land, securities and un related
investments.• Reducing sales inventory by 30%
YEAR 1999 2000
BANKS 200 15
FIN COSTS ¥90BN ¥24BN
NRP-S,G&A COSTS
REDUCE S,G&A COSTS BY 20%• Cut down sales incentives.• Streamlining dealer network.• Centralizing the advertisement function.
Japan 20%
Rest of the world 10%
REDUCTION IN DEALERS
NRP-PRODUCTS
INTRODUCE 22 NEW PRODUCTS & IMPROVE BRAND IMAGE.
• Centralizing the designer’s .
• Integration with engineering, sales & marketing team.
• Global brand identity strategy.
NRP-MANUFACTURING
ATTAINING THE MANUFACTURING EFFECIENCY.
• Reduction in over capacity.
• Establishing new plants, where necessary.
YEAR 1999 2000
PLATFORMS 24 7
ASSEMBLY PLANTS 15 4
NRP-HUMAN RESOURCES
TO REDUCE EMPLOYEES BY 21000.• Centralized hr function.
• Laying off, closing down plants, compensation strategies.
• Introduced performance based payments.
• Tie bonus with successful implementation of NRP.
RETURN TO TRACK
Announced profits in FY 2001.
profits - $ 3.92 Bn, operating margin – 7.9%
Debt reduced to $ 3.48 Bn.
Market shares started increasing.
Won car of the year award 2002.
WHAT LIES AHEAD?
NISSAN 180
• To sell 1 Mn additional units.
• Achieve op margins of 8%
• Zero net automotive debt.