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Case Study

Nissan Motor

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CALENDAR OF EVENTS1999 March 27: Alliance Signed with RenaultMay 28: Transaction ClosesJune 25: AGM Elects new Board of Directors

June 25: Board Appoints CEO, COO, EVP, SVPJuly 1: New Executive Management TeamSept 1: 17 Expatriate Renault ManagersAssigned to NissanOct 18: Announcement of Revival Plan

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5 main reasons1.Lack of clear profit orientation

2.Insufficient focus on customer and too muchfocus on chasing competitors

3.Lack of cross functional, cross-border, intra-hierarchal lines, work in the company

4.Lack of sense of urgency

5.No shared vision or common long-term plan

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Class AssignmentDevelop a Revival Plan on the basis of inputs

which you have received so far

The Revival Plan should havea. SWOT analysisb. Develop a Strategy for Internal & External

Communication

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CHRONOLOGY: Key Dates for Nissan Motor Company Ltd. 

1918: Kwaishinsha Motor Company in Tokyo introduces the Datson, a two-seat sports car

1932: Name is changed to Datsun 1933: Company is renamed and incorporated as Nissan Motor Company 1951: Becomes a publicly traded company 1958: Nissan enters the U.S. market by establishing the Nissan Motor

Company U.S.A 1975: Revenues top $5 million 1981: Changes name of U.S operations from Datsun to Nissan 1992: Posts a pre-tax loss for the first half of 1992 of ¥108.1 billion 1999:Posts a net loss of ¥791 billion for the fiscal year; Renault buys a 37

percent interest in the company; Carlos Ghosn is named chiefexecutive officer

2000: Company restructuring under the Nissan Revival Plan leads to a netincome of ¥187 billion for the fiscal year

2001: Posts a net income for the second year in a row 2002: Introduces to the Japanese market the Moco, the company's newest

minicar 2010: First half of FY net income of 270 billion yen (Nov-2010)

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SWOT Analysis Layout

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Ghosn’s (as a cost cutter) Finding

Culture of Blame GameDismantling the Keiretsu

The Revival Plan

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Global Business Innovation:

increasing the operating profit of consolidated net sales by fivepercent, and reducing the consolidated interest-bearing

liabilities by one trillion yen in year 2000; reducing the number of kinds of car body from 25 to 14 by the year

2000, then to 10 kinds by 2002; downsizing the domestic sales channel from the current four

systems to two systems;

rebuilding the business in the US; rearranging the production lines to increase production efficiency; reducing overall costs by 400 billion yen by year 2000; realising a ‘small headquarter’ under the business innovation

scheme; selling its real estate and securities; reducing the inventory by 250 billion yen by year 2000.

*Disclosed in May 1998 by Nissan’s then president, Mr Hanawa

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REVIVAL PLAN OUTLINE

I) Diagnosis

¦ Past Performance: Facts/Figures

¦ Past Performance: Analysis + Opportunities

II) Revival Plan¦ Elaboration

¦ Key Contents

¦ Impact

III) Commitments

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REASONS EXPLAINING PASTPERFORMANCE1) Lack of profit orientation2) Not enough focus on customers3) Lack of cross-functional, cross-border,

intra-hierarchical lines work4) Lack of a sense of urgency5) No shared vision or common long-term plan CLEAR OPPORTUNITIES FOR PROGRESS

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 NISSAN’S STRONG BASE FOR RECOVERY

International presence and global reachWorld leading manufacturing systemLeading edge in selected technological fields

Alliance with RenaultNissan’s people

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Elaboration:9 Cross Functional Teams Decided by Executive

Committee on July 5Business DevelopmentMarketing & SalesPurchasingSG & A (Selling, General & Administrative)Manufacturing

Financial ManagementR & D (Research & Development)Product Phasing OutOrganization & Decision Making Process

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NISSAN REVIVAL PLANIMPACTHEADCOUNT REDUCTIONS:

¦ 21,000 people worldwideBreakdown

¦ 4000 in manufacturing¦ 6500 in Japanese dealer network¦ 6000 S, G & A¦ 5000 spin-off’s¦ (500) R&D

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Outcome:

200 people directly involved from Japan,USA, Europe

2,000 ideas assessed400 proposals submitted to Executive

Committee

Decisions made official by Board Meeting Oct

18th

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Key ContentTarget: Profitable Growth

Actions:New product opportunities

Associated businesses developmentBrand identity and brand powerLead time reductions

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Reduce Product Lead TimesCar/powertrain development timeOrder to delivery timeForeign market “Start of Sales”

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NISSAN REVIVAL PLANPURCHASING STRATEGYTarget: 20% front-loaded cost reduction over

3 years

Actions:

Centralize parts and material purchasing Include services in global purchasing strategyReduce the number off suppliers

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NISSAN GLOBALMANUFACTURING 1999/2002Target: Achieve optimum manufacturing

efficiency and cost effectiveness

Actions: Reduce vehicle assembly and powertrain

manufacturing capacity

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Target:

Achieve optimum manufacturing efficiency and costeffectivenessActions:

Reduce vehicle assembly and powertrain manufacturing

capacityRationalize and simplify industrial organizationReduce operating costs by globalizing1. logistics 2. best practices 3. benchmarking

Extended use off F.M.S. (Flexible Manufacturing System)

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NISSAN REVIVAL PLANS, G & A

Distribution Structure Streamlining:Revamp domestic dealer organization reducing dealer affiliates by 20% closing 10% of the retail outletsopening longer hours create Prefecture business centers (common back

offices)Streamline regional structure in North America

Restructure European dealer network by leveraging the Alliance with Renault with common

hubs and back officesE-commerce alliance with Carpoint

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NISSAN REVIVAL PLANFINANCIAL MANAGEMENTTarget: Improve Financial Management Reduce

Financial CostsActions:Centralize financial operations worldwide

i. develop global financial controls and riskmanagement

ii. create global treasury, funding and cashmanagement

No shareholdings are considered strategicDispose off land, securities and non--core assetsReduce inventory to sales by 30%Alliance with Renault

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 NISSAN REVIVAL PLANORGANIZATION

Target: Move from multi-regional to globalorganization

Actions:Create a worldwide headquarterstrategycorporate planningmanagement controlbrand managementGlobally controlled functions¦ R & D ¦ Finance ¦Manufacturing system¦ Purchasing ¦ H.R.

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Move from a multi-regional to aglobal

organizationEmpowered Program Directors for cross-

functionality and profit orientation

Performance oriented compensation: bonuses,Performance based career advancement

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Financial Impact:

200 billion Yen provision* booked in FY 99

* Provisions cover write-down of assets and socialcosts

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Commitments

Profitability targets:

FY 00 Return to profitability

FY 02 Operating profit > 4.5% of sales

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Lessons from Nissan “No matter how promising your resources

are, you will never be able turn them intogold unless you get the corporate cultureright.”

---Carlos Ghosn “ In deed, after just three years with

Nissan, I doubt anyone would say that thepeople I brought with me still belong toRenault”

---Carlos Ghosn