Why was the former Nissan Management unsuccessful in turning the company around? Why could they not prevent the slide of Nissan’s ranking market share, etc.?
The former managers of Nissan had been struggling to turn Nissan into a profitable company for eight years. Nissans major problem were the extremely low margins due to its lack of brand power and the very unprofitable cost structure (especially regarding purchasing costs).
Nissan’s organizational and financial structures where very traditional and typical Japanese (e. g. the cross-shareholdings within the kereitsu structures). All previous Nissan CEO’s where Japanese , probably each of them with a long tenure and history in the ...view middle of the document...
Regardless of their actual performance, the longer employees stuck around, the more power and money they received. Furthermore, a “culture of blame” existed because managers had no clear areas of responsibility.
What the former management not realized was that Nissan lost its vision. The traditional business practices wouldn’t help Nissan to recover. When Ghosn took over charge of Nissan he made fundamental changes to the company’s organization and operations and broke with many established Japanese business practices. In his report about the turnaround at Nissan he descriped himself as an outsider because he was neither Japanese nor belonged to Nissan before. This neutral position gave him the opportunitiy to analyze Nissan’s problems from an independent point of view and choose the best and most appropriate measures. Japanese business practices are not ineffective in general but they must apply to the corporation. Ghosn described this situation as “looking to national culture for an explanation of a company's failure or success almost always means you are missing the point”. First the corporate culture has to be set up, thus the corporation can recover. And changes in the corporate culture and tradition of a company like Nissan are much easier done by an independent person than by someone who grows into the structures of the previous corporate culture.
Ghosn said that some other major Japanese company’s even followed Nissans lead in breaking with traditions and made similar changes (e. g. loosing the ties of the kereitsu partnerships). They probably also realized that they do not have to stuck with their prevailing business practices but can decide independently what is the best for their company.
What was the rationale for the alliance? What strategic value does this bring to either side?
The rationale for this strategic alliance is that both companies fit together pretty well and are stronger as if they would operate seperately. Together they would be the world's fourth largest carmaker by that time. Both companies will benefit from the merger if the Nissan revival would be successful.Renault took $5.4 billion of Nissan's debt and in return they got 36.6% equity stake in the Japanese company.
Nissan benefits from the merger are pretty simple. Since Nissan had very high depts and no real growth opportunities they simply need capital. Althoug DaimlerCrysler as their preferred counterpart stepped aside during the negotiation process Renault still has the power to finance some part of Nissans dept. In today’s business most company break downs come frome scarcity of capital rather than from a low demand. Another assumption is that since Nissans business practices are aging the company hoped that a strategic shift could bring the turnover. As the time showed many effective business practices were transferred from Renault to Nissan to make the carmaker profitable again.
Renault’s benefits from the merger are pretty obvious, too. Nissan's...