University
of Wollongong in Dubai
College
of Graduate Studies
Saving
the business Without Losing the Company
Group 14
Tarek
Sabagh, ID: 3319520
Mohamad Abou
Steiti, ID: 3250969
Alaa Naser
Hjouj, ID: 3254288
Employment
relation
Case Study
To
Dr.
Gwendolyn Rodriguez
Summer
2007
(Sunday, July
8, 2007)
Executive Summary
Saving the business of a
company and keeping its identity is a challenge. This assignment will present
one of the most successful turnaround stories in the modern business history.
In those next pages we will put the spot on Nissan and Renault alliance driven
by Mr.Ghosn the turnaround specialist, as most business people like to call
him.
The
article will briefly discuss Nissan history as one of the leader Japanese automakers
and the different eras on Nissan history. Moreover the assignment will focus on
Renault and Nissan alliance and the joining of Carlos Gohson. Challenges faced
by Ghosn and his tremendous achievements by the turnaround process. The
cultural and organizational contributions made by Ghosn. An example will be
stated.
Nissan
and Renault Alliance Figures and Statistics will be analyzed. SWOT analysis
after the alliance can show the all the aspects of the turnaround.
Conclusion
and comments will be detailed in the assignment.
Table of Contents
1. Introduction……………………………………………………………………………….4
2. Nissan History……………………………………………………………………………5
2.1. Nissan Rise
………………………………………………………………………………
2.2. Danger
Signs……………………………………………………………………………..
2.3. The
Reasons……………………………………………………………………..............
3. Nissan-Renault
Alliance……………………………………………………….……….8
3.1.
Structure…………………………………………………………………………………..
3.2. Alliance benefit…………………………………………………………………………..
3.3. Objectives
………………………………………………………………………………...
4. Carlos Ghosn……………………………………………………………………………10
5. Challenges………………………………………………………………………………10
5.1.
Cultural…………………………………………………………………………………….
5.2.
Organizational……………………………………………………………………............
6. Carlos Turnaround process…………………………………………………………12
7. Cultural
Turnaround…………………………………………………………………..13
7.1. Corporate
Culture………………………………………………………………………..
7.2. Carlos Cultural
steps……………………………………………………………………..
7.3. Theory to
practice………………………………………………………………………...
8. Organization Turnaround…………………………………………………………….15
8.1. Organizational
change………………………………………………………………….
8.2. Carlos Organizational
steps…………………………………………………………….
8.3. Theory to
practice………………………………………………………………………..
9. Organizational Culture………………………………………………………………...16
10. Cross Functional Teams…………………………………………………………….17
11. Statistics………………………………………………………………………………..18
12. SWOT Analyze………………………………………………………………………...19
13.
Recommendations……………………………………………………………………20
14. Conclusion……………………………………………………………………………..21
References…………………………………………………………………………………….
1.
Introduction:
The goal behind this
assignment is to study Nissan Company and basically in the last 8 years with
arrival of Carlos Ghosn the Turnaround champion.
The analysis will cover
Nissan history: Rise, Danger signs and reasons. Renault-Nissan Alliance effects
on both companies through: Structure, Benefits and Objectives.
We will have a glance on
the Nissan saver: Carlos Ghosn. The study will explore the challenges faced
Carlos Ghosn on Cultural & Organizational levels. The study will analyze
the cultural and Organizational changes by Ghosn with examples, followed by
applying theory to practice.
Cross Functional Teams will
be given as an example of Carlos changes.RNA statistics will provide the reader
with numbers of figures and evidence of the turnaround results. The SWOT
Analysis of the RNA will show all aspects and give an overview about all
possibilities.
Finally
recommendations can support and help the development and the growth of the
company.
2. Nissan History
2.1. Foundation
At
the beginning of the twentieth Century about 1910's the Nissan was found as DAT
it is was an acronym of its owners Mr. Den , Mr.Aoyama and Mr.Takeuchi
later in 1930's and exactly in the year 1932 the DAT company accorded with Jitsuyo
company . The name Datsun found in 1931 and it means the son of DAT, then they
changed the son to sun since the son in Japanese language means Loosing .The
sun were followed by DAT to formulate the DATSUN name from Tokyo to Osaka then
to Yokohama again the company has emerged in another alliance with car
manufacturer company called Nihon Sangyo or known as Ni san in this stage the
name Nissan have been known the public in the year 1934. In that stage the
Nissan was founded and directed by Mr. Aikawa. (Hitsmobile, 2007)
2.2. Nissan Rise
Nissan
were designing light trucks during the World War 2, it was manufacturing
military cars with variety of production mix starting with light vehicle,
luxury cars and heavy trucks. Nissan has the leadership for many years to the
car market producer beside Japanese manufacturer like Toyota and Honda.
Nissan
took throughout 70s & early 80s took the advantage of the oil prices hike
to expand its operations. Nissan is one of the earliest vehicles manufacturers,
who manufactured outside the mother country. Nissan had two major and strategic
bases overseas the first is in the U.S established in 1980, as well as in U.K
in 1984.
Nissan
has built up a reputation by playing a vital role in many fields of vehicles
production and high technology at that time. Many advanced Features
distinguished Nissan in the market (especially US market) such as economical
fuel consumption, reasonable weight, and stability on the road and Highly
Safety standards. By mid 80s Nissan became a global brand well known around the
world. (Hitsmobile, 2007)
2.2. Danger Signs
§
Declining Sales: Nissan
Experienced declined sales especially in 1990's. the Production of Nissan
Motors due to Fuel Crisis near 1970 were relatively high as Nissan Vehicles
have the comparative advantage of having less fuel consumption ,but this
changed with the declining of oil prices in mid 80s.Nissan didn’t revise its
plans to cope with this change.
§ Regional
Market loses: As a result for market surplus of Nissan during the
mentioned period. Nissan stocked to the profit of the U.S market and didn’t
expand its regional market. In spite the High competition from other Japanese
Manufacturer
§ Dis-functional
Outsourcing:
Nissan suffered from unorganized outsourcing. Along it is procedure they have
established many factories overseas and hired many employees, then start to
fire with unorganized manner. The U.S factories were good example of this
behavior.
§ Wages
cut (outside Japan):Unprofitable branches leads to decrease sales ,Nissan
management tended to reduce the cost by cutting wages of workers , worker
overseas were always the target.
§
Lack of cash: Among many reasons will be
listed in the next few pages Nissan
company have suffered of Cash flow
§ Acquisition
Offers:
Whenever a company is unprofitable, it will be the target of acquisition
offers. Nissan have received many acquisition offers from other companies like
General Motors and Ford.
2.3. The Reasons
The declining of Nissan the
Giant car manufacturer was due to many reasons the most important reasons are:
§ Weak
Management:
Unclear responsibility of Mangers leads to wrong decision making. The Japanese
Management system played a vital role in weakening the managerial system beside
the devotion to old corporate models.
§ Finance
Problems:
Financing problems were having direct impact of weakening of Nissan one of the
major issues was the highly debts, that was due to over paying, lack of manger
buy in and lack of shareholder buy in as shown as many wrong investments
decisions.
§ Marketing
Myopia: Less
Marketing Plans and integration in Nissan Company leaded to low sales and
ignoring many Global Markets. Out of date design had been clearly Shown the
market myopia and the lose communication between consumer and manufacturer.
§ Narrow
employment policy:
Old Japanese employment Policies had exhaust the developing of the production
team and lines as well as lacking of the employees intensives.
§ Cultural
Illiteracy: The
relatively Closed Environment of Japanese management Cultural against other
cultures have incorporated to Different levels the Japanese cultural in
employees level, which caused lack of communication between branches and that
leaded to reduce the harmony and constructed visible and hidden barriers among
the business operations.
§ Globalization
Misunderstanding: Globalization
lead to more cultural integrity and people became closer, information flow
became very fast. Japanese management didn’t understand these changes. Due to
the fact that their society is conservative and don’t accept change. This had
put them in far away behind their competitors.
3. Nissan-Renault Alliance:
3.1. Alliance Structure
In May 28, 1999, The Renault and Nissan have closed the alliance agreements. Renault has paid 44.3% for Nissan shares. In 2004 Nissan Have owned 15% of Renault shares this movement strengthen the alliance between the two companies.
Alliance
Structure
Source:
Nissan-Global
The Alliance Structure
seems to be huge success, both Renault and Nissan Staff is involved the
structure has been formulated in cooperative departments as follows:
§ Purchasing
§ Product
planning
§ Vehicle
engineering
§ Research
and advanced engineering,
§ Capital
contributions and equity participations Power trains,
§ Decision-making
and coordination structures of the Alliance
§ Capital
contributions and equity participations
3.2. Alliance benefit.
According to Nissan-Global (2004) the
following are the objectives of the alliance.
3.3. Alliance Objectives
According to Nissan-Global (2004) the
following are the objectives of the alliance.
|
The
Alliance develops and implements a strategy of profitable growth and sets
itself the following three objectives: § To
be recognized by customers as being among the best three automotive groups in
the quality and value of its products and services in each region and market
segment, § To
be among the best three automotive groups in key technologies, each partner
being a leader in specific domains of excellence, § To
consistently generate a total operating profit among the top three automotive
groups in the world, by maintaining a high operating profit margin and
pursuing growth. |
Source: Nissan-Global (2004)
4. Carlos Ghosn
Carlos Ghosn has born
in Brazil 1954, with more than 20 years experience with the French Tires
Manufacturer Michelin. Ghosn joined Renault as Executive Vice President in
1996, later in 1999 Ghosn joined Nissan Motor Corporation as executive vice
president and shortly in 2001 he became the president for Nissan. Ghosn trumped
his achievements at Nissan by becoming the first and the only person to head
two automakers on two continents.
Ghosn has been
nominated and chosen by his former boss at Renault Mr. Louis Schweitzer in
hopes that he could repeat the successes he had in Renault's headquarters in
France. In deed Ghosn was a challenge seeker, one of his famous comment as
being an outsider working in Japanese company "But being a
foreigner is a disadvantage. I don't speak Japanese and it's my first time
managing in a country where I don't speak the language." According
to Japanese Press he is starting to learn Japanese Language in addition to his
ability to communicate in English, French, Portuguese, Italian, and Spanish. It
is worth to mention that Ghosn is named Knight Commander of the British Empire
In October 2006(Wikipedia, 2007)
5. Challenges:
The challenges that faced
Carlos Ghosn in Nissan were on two levels:
§ The
Cultural level: related to the Japanese culture inside the organization
§ Organizational
level: related to the structure of the company.
5.1. Cultural challenges
§ Saving
Nissan's Identity:
Nissan identity as Japanese company is unique. Its importance comes from the
fact that it a global brand that represents the dignity and success of the
Japanese products in the global market. Also it’s a closed Japanese environment
with special cultures that affect the company from inside. Carlos Ghosn target
was to change the culture in a way that will keep this brand a global one.
§ Understanding
Globalization:
According to World Bank (2001) “Globalization – the growing integration
of economies and societies around the world” .To understands
globalization is to understand all the change that brings to company on
different levels like: Organization, Production, Marketing, Communication,
Finance and Social ecology. Using these changes later in rebuilding the
company.
§ Respect Concept: Changing a culture begins by respecting and understanding
its unique values such as: behavior, customs, rules and language. When you
respect a culture you own it and you have the ability to change
§ Adapting
Foreign Culture: Cultural
differences around the world make it hard to change. How to change the culture
by recreating its aspect and replacing it with new one is important. How to
convince people to adapt that change and practice it to the benefit of the
company.
§ Changing
Japanese HRM Culture: Japanese
HRM culture was 50 years old, although it was a success in it’s beginning, but it
became useless after globalization and emerge of SHRM, many weak points lead to
its failure.
1.
Culture of Blame: Whenever there is a
failure, departments will blame each other’s. No one wants to bear the
responsibility and take a part in finding the error and correcting it. Nissan
Managers had an undefined range of responsibility in this matter.
2.
Overstaffing: The success of Nissan in
the 70s & 80s, specially outsourcing and Demand & Supply, resulted an
exceeded number of employees comparing to capacity and production.
3.
Life employment: This system had lead
to employees staying years in the company without any contribution.
Competitiveness and creativity are important factors in any successful company
and were lost by this system.
4.
Window gazing: “Most madogiwazoku
employees are middle managers who have managerial titles, but no subordinates,
and little responsibility.”(Japanese123, 2007)
5.
Compensation System: Employees were
promoted and paid high wages based on their service days and age. Younger
employees were ignored even if their performance and activity is far more than
their old competitors.
5.2. Organizational
Challenges
§ Wrong
Investments: Most
of Nissan investment were either in wrong places (Fuji Heavy Industry) which
belong to other competitor, or too small to get a good revenue on the long run
(in spite that its sum is big).
§ Overspending:
During
80s, Nissan spent more money on the conformability and luxuriates of its car,
even when the car was not getting the minimum sales return. This was on the
expenses of other important field like R&D, which may help in reducing the
spending in different production section.
§ Old
Production Line: An
automobile market is highly competitive, while other companies produced new
model every 5 years. Nissan continued in only adding small changes to already
its old models (like Micra) through 8 years. While its nearest competitor
Toyota that introduced new models every 2 years.
§ Market
Surplus: Factories
(Production) supplies were much higher than the (Sales) demand of the market.
Japanese factories could cover the global demand with more than 1 million units
annually, while outside branches are producing additional units; this lowered
the prices of Nissan cars less than minimum production cost, which caused big,
loses.
§ Technological
Advance:
After the drop in oil prices in 90s, customers moved from efficient oil
consumption feature to other features in the cars, such as SUV, sport, cars.
Nissan didn’t take this market shift in consideration; Buy using the latest technology
in its production line like Airbags.
§ Recession
(late 1990): According
to Answers (2007). The East Asian Financial crisis affected Japan since 40% of
Japan exports go to there. Also the GDP decreased to 1.6% reducing the purchase
power of customers, which lead to recession in 1998 and effected many
companies, which went bankruptcies.
§ Huge
Debts: all
the above reasons gathered to form a huge dept on Nissan, which limited the
company ability to do any strong change or reconstruction. Nissan debt reached 20
billion dollar prior to the alliance with Renault.
6. Carlos Turnaround
process:
Carlos Turnaround evolved
around the cultural level and organizational levels, because he knew that
reconstructing the company should begin by understanding the importance of this
two factors and the necessity to work on both of them stimulatingly.
Turnaround
Management
Source:
(Intra, 2007)
7. Cultural Turnaround
7.1. Corporate Culture:
Carlos Ghosn began the process of
turnaround by confirming the Respect concept in the Japanese company. He wanted
to keep the unique identity of Nissan and to ensure that the change he will
bring to its Japanese culture will be accepted.
Five elements that distinguish the
corporate culture, which was changed by Ghosn:
§ Business
Environment:
Managers should have the ability to understand the work environment, and the
ability to change comes from the fact that environment in any business, has its
special conditions which need to be analyzed, whatever its related to
employees, customers, suppliers and government. These elements shape the
culture that needs the change.
§ Values:
Value
importance comes from the fact, it defines any corporate and distinguish it. It
is formed by the beliefs and vision of the employees and shaped by the management
to form its goal and identity. When values are defined employees will follow it
and cultural differences will vanish, and will become a clear identity for
them. The higher the values of the employees and organization the more
successful the corporate.
§ Heroes:
People who
achieve success in the organization, they become a role model and an icon for
the employees of the company. Those heroes inspire the others and provide them
with the motivation to work and achieve more.
§ Rites
& Rituals: The
annual parties, monthly lunches and weekly gatherings practice Organization
environment. These ceremonies strengthen the relationship between employees
themselves and with their management.
7.2. Carlos Cultural Steps:
7.3. Theory to practice:
According to Deal & Kennedy,
Carlos Ghosn changed Nissan Japanese culture (Tough Guy Culture) with all its
problems mentioned earlier. He believed in the company and employees and
considered them the key to success. (Bet-your company) was the new approach adopted
by him that proved its success.
According to Handy, Ghosn
believed that Role culture where employees are less important, no team work and
management is the only active player, should be replaced with Task culture
where organization is built on trust, respect and team work. Management will
back up its employees to achieve their company goals.
“…People are a company’s greatest resource, and the way to manage them is not directly by computer reports, but by the subtle cues of a culture” Deal and kennedy
8. Organization Turnaround
8.1. Organizational Change
Carlos Ghosn believed that the old
roll of managers to only give orders is gone. The new managers are those people
that are capable leading as a role model and to be the core of the change in
the company.Carlos begins the change by replacing the old HRM system in the
company with SHRM with its clear principles. The C factors are the 10
principles of SHRM:
§ Control: Understanding the mission
and supporting to reach targets
§ Contiguity: Management decides HR
strategies & integrated it with departments on all levels.
§ Coherence:
HR Management
is to lead the people in organized system.
§ Communication:
Open
culture among employees result clear strategies
§ Credibility:
Management
should be honest, clear and sincere with own employees.
§ Commitment:
Management
& employees are committed to organization goals
§ Competence:
Objectives
achievement dependent on employees & HRM development.
§ Compensation:
Managers
rewards & promotion on equals basis with staff
§ Creativity:
System to
encourage innovation & creativity among staff
§ Change:
Work
system, culture of innovation and skill training are essential for company
survival.
All the above factors result the Corporate Culture, it’s
the perfect environment that provide success. One of the real live examples of
this change is Nissan UAE branch (Nissan-arabianautomobiles, 2007), where SHRM
is put into use by focusing on:
§ Vision:
Where we want to go.
§ Mission: The reason for our existence
§ Core Values: Include (Integrity, Commitment, Adding Value, Never being
satisfied) what we believe in.
8.2. Carlos Organizational steps
§ Stopped
firms investment & returned stakes from 1400 supplier
§ Created
CFTs (Cross Functional Teams) to cut the spending & reduce cost
§ Used
the Renault designing experience to create new models annually.
§ Decreased
the prices by 20%. (Washington Post,2006)
§ Closed
5 plants (Detnews,2005)
§ Established
R& D department with only goal to implement latest technology.
§ Began
the expanding the market to new areas to widen the sales revenue.
§ Used
some of the old investment to pay debts
§ Lay
off 21000 workers (Washington Post,2006)
8.3. Theory to Practice:
According to Whittington,
Carlos Ghosn changed Nissan from Processual approach where the strategy emerges
from the conditions and the political & cultural conditions, also the
profits are not the main target. This is changed to Evolutionary approach where
the market & customers who are the main concern of the company and strategy
will be according to that.
According to
Bartlett and Ghoshal, Carlos Ghosn changed Nissan from the international
company with old model where there is no communications between the HQ and the
subsidiaries and these subsidiaries will not enforce the HQ rolls of the HRM
and thus it will deal with decisions according to location, but planning
decisions are from mother HQ. This was replaced with the Transitional Company
with integrated network sites, each site specialize in a particular role of
production. This will allow each site to adapt the different culture & meet
the local differentiation. Large information & knowledge flow, across the
different units along with the HQ. Decisions taking by sharing &
coordination
9. Organizational Culture
Carlos said, "When
Renault and Nissan signed the alliance, many people thought Renault would
ultimately take control, But Renault showed respect to Nissan. I think that
tone will be perpetuated." (Detnews, 2005)
Ghosn believed
that to success in his mission; beginning by change from management to
leadership. It is to lead the people to change and success, and to transform
each one of them to an effective contributor in the progress of the company.
Also the importance of the company in shaping the: culture, values and goals of
its employees. Carlos concept ((Respect & Change)) was the secret behind
his success. Respect the culture and later you have the power to change it.
Carlos Ghosn managed to redefine Nissan as global brand, and succeeded in
transforming it to one of the successful companies in the new millennium.
Carlos Ghosn Understood the
Globalization and Culture and managed to create an organizational culture where
the success of the company in inventible.
10. Cross Functional Teams
§ Concept: Cross Functional Teams
definition
|
Cross-functional
team is a group of employees from various
functional areas of the organization – research, engineering, marketing,
finance. human resources, and operations |
(1000ventures,
2007)
§ Roll: Carlos Ghosn redefined the CFTs, it’s consisted of 10
members from different department’s middle managers, and also to give the teams
the authority to change, each team was supported with 2 executive committee
managers. Their role was to:
§ Effect : Performance and Expenses of the different branches of
the company, where followed up by this team to get the best of them
§ Example :This when those teams managed to reduce the cost of
Head-Lamp production by 2.5% by reduction in standards and specifications
§ Future: Will ensure the revival plan is on right track, also
to continue the search for new ideas to improve the performance.
CFTs
Effect
(1000ventures,
2007)
11. Statistics
Nissan
Sales/Income Before & After Ghosn
Source: (Detnews, 2005)
The revenue in 1999 experienced a huge
loss at $ 6.46 Billion (Refer to section 2.3.)
Beginning of 2001 the RNA compensated all
debts and loses and became profitable again and reached $ 4.9 Billion in 2004.
NRA
Goal
Source: Nissan-Global (2004)
RNA managed to reach rank No.4 in
the list of biggest car manufacturer only in 4 years from its foundation. This
is an evidence of its success.
12. SWOT Analyze
12.1. Strength:
Nissan is a global brand,
since it is foundation has committed with customer satisfaction and the
alliance has strengthened this concept. The alliance has helped in important restructuring
process through cost reduction which saved a lot of the production cost without
sacrificing the quality .In addition to that it created a powerful market
combined from different customers around the world, this had leaded to a wide
range of models and prices that match all demands and desires. The transparency
of the alliance has created a strong stockholder backup and trust which
reflected in increasing the revenue. The alliance kept all those benefits
through updated value plan which contributed more and more to its growth.
12.2. Weakness:
The bigger the alliance is
the more difficulties rises, such as coordination’s problems and communications
problems, due to the fact that it needs more monitoring and supervision.
Horizontal expansion widens the bases of the company, which result an increase
in the production costs. Car manufacturers tend to keep high level of
competition by lunching new models, such alliance should avoid the imitation
models in the company two production lines. The new management should learn
from the past wrong investment decisions; it means that company should think
twice before starting any investment.
12.3. Opportunities:
South and Central America,
Nissan has an opportunity since Renault had already strong base and big market.
Africa and Middle East represent new market waiting for the alliance, Renault
had taken advantage of this market through Nissan operations.
Renault has been excluded
from northern America Market, it experienced two failures their, but Renault
had compensated that failure in the alliance and created good chances for it in
such huge market. The environment issue is now important for customers and
Hybrid cars are a good opportunities for the alliance profits. Infinity models
are a good opportunities to attract high class customers, especially that its
specifications are equal to its competitors. Heavy vehicles like trucks are one
of the old Nissan lines, and developing this line will open new market
opportunities.
12.4. Threats:
The new cars technological
innovations bring with it additional materials cost. Other competitors are
considering new alliances to face the successful RNA. The big SUVs/Vans and
trucks made by Nissan are under criticism for its environmental issues, such as
CO. Fuel crisis and fall of the dollar may affect RNA profits. Higher interest
rates can do the same.
13. Recommendations
14. Conclusion
Nissan is a living
proves that a successful leadership and devoted employee can turnaround the
companies from losing corporate to winning corporate. It’s not done in one day,
but it’s: employees, management, cooperation, motivation, culture, environment,
globalization and local. All these together give the winning formula.
Automobile industry
is governed by jungle laws. The winner is always the first who is one step
ahead of his competitors, and every day new technological advances give this
industry the fuel to create and invent more & more.
Nissan need to always
be one step ahead, this doesn’t involve management but also the employees
themselves as the main assist of the company. Carlos Ghosn is a hero for
Nissan, but heroes are human being and they make mistakes, and for this reason
Ghosn should always think about his steps because nothing will be full granted
in the future.
1914 2007
((It’s difficult
to reach the top, but the real challenge is to stay in))
References
