Strategic Alliances: The Renault & Nissan Alliance – Celebrating 10 Years of Synergies

Table of Contents

1. Executive Summary

2. Introductive Information
2.1 Overview of Industry
2.2 Overview of Company
2.3 Industry Dynamics

3. The Renault-Nissan Alliance
3.1 Beginnings of the Alliance
3.2 Selected Key-Factors of Success
3.3 Continuously Development of the Alliance

4. Conclusion

Table of Figures

Figure 1: Key Financials Nissan Motor Co, Ltd

Figure 2: Renault-Nissan Organization Form

Figure 3: Renault's and Nissan's Net Income 1997-2008

1. Executive Summary

Strategic alliances have become a very popular form of partnerships, regard­ing to the increased number in the last decades. However, they are not natu­rally successful. This paper briefly describes the prominent Renault-Nissan alliance, mostly from Nissan’s view, and tries to analyse the key-factors of its success. Due the fact that Nissan was in a very bad financial condition during the 90s and on the way to face bankruptcy, this paper argues how successful allying companies can be if each of them has that what the other needs. Furthermore it will be shown that alliances continuously develop.

2. Introductive Information

2.1 Overview of Industry

The automobile industry is one of world’s most important economic sec­tors. It is focused on designing, developing, manufacturing, marketing, and sell­ing of motorcars. Particularly passenger cars form the largest segment of the global automo­bile industry with a share of 80.3 % in 2009 among passenger cars, light trucks, and motorcycles (Datamonitor, 2010a).

2.2 Overview of Company

Both Nissan and Renault, being on the 8th and 11th rank in world ranking of manufacturers, are global players in the automobile industry (OICA, 2009). Estab­lished in 1933, Nissan is one of Japan’s leading car manufacturers. It is head­quartered in Tokyo and employed about 151,698 people as on March 2010 (Nissan, 2010). The product range includes passenger cars, trucks, SUVs, light utility vehicles and mini vans. Figure 1 shows that Nissan had a continuous in­crease of its revenues until 2008. In financial Year 2009 Nissan generated reve­nues of $81,543.3 million. This was, however, a decrease of 22.1 % compared to 2008 and is due to the reaction on the financial world crisis (Datamonitor, 2009).

Figure 1: Key Financials Nissan Motor Co, Ltd.

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Source: Datamonitor (2009)

2.3 Industry Dynamics

Japan’s post war car industry always has been headed by Nissan and Toyota. However, Nissan’s assistance to the government during World War II established it in a favourable position. Thus, the Japanese government during a long period of time has funded it. A major issue of being in this favourable posi­tion was that Nissan did not focus on competitiveness instead it preferred to build cars with excellence and used to expand quickly without having a view on the costs. Therefore Nissan possessed very good manufacturing skills however it leaked with organizational knowledge (Stevens, 2008).

The 90’s were a hard decade for the Japanese economy because its ancient post-war economical structures were not suitable to globalisation, driven by mar­ket internalisation. Also Nissan struggled to handle the more cosmopolitan view of the Japanese economy due to the fact that it leaked with managerial skills.

3. The Renault-Nissan Alliance

3.1 Beginnings of the Alliance

Signed on March 27, 1999, the Nissan-Renault alliance became the first inter­national strategic alliance between a French and Japanese company. Both had several incentives for that international alliance. Renault was a relative small car-manufacturer and therefore it looked for a bigger partner to help it grow and became a global player (Nissan & Renault, 2009).

Nissan, Japan’s second largest carmaker was in a bad condition during the 90s. It had been constantly losing market share and had sustained several finan­cial losses since 1991. Overall, Nissan had a debt of US $ 20 billion in 1998 (Stevens, 2008). In this respect the alliance was an opportunity for Nissan to dis­close its internal problems, using Renault as a “mirror”, and to enforce changes in the company during the alliance formation process (Korine et al., 2002).

In spring 1999 Renault bought 37 % (extended to 44,3 % in 2002) of Nis­san’s capital and latter acquired a 15 % stake in Renault. However, both have kept its identity and independence but agreed to share their core skills (Nissan & Renault, 2009). For Nissan it was manufacturing and engineering, for Renault design and management (Stevens, 2008). The Renault-Nissan b.v.¹, founded in 2002, is responsible for strategic management of the alliance, and, as you can see in figure 2, equally owned by both partners. Further common organisations are the Renault-Nissan-Purchasing-Organization and “Renault-Nissan-Information-Services”.

Figure 2: Renault-Nissan Organization Form

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Source: Nissan & Renault (2009)

3.2 Selected Key-Factors of Success

In fact, Carlos Ghosn, contemporary president of the alliance board, plays a key-role in the alliance track record. Referring to Ghosn’s view, the alliance form­ing process went through several stages. At the beginning of the alliance in 1999, as Ghosn was the executive vice president of the Renault Group, he joined the Nissan board of directors and announced the Nissan Revival Plan, shortly af­ter he has analysed the major leaks in Nissan’s structure. (Nissan & Renault, 2009). To help Nissan to recover financially, by providing Nissan the managerial ex­pertise and financial resources, was the first stage of establishing the alliance. The second stage of the alliance building process was widely focused on identify­ing and exploiting of synergies (Burgelman & Gaviser Leslie, 2008). Ghosn’s success is also reflected by Nissan’s significantly increased net income after 1999, you can see in the figure below.

Figure 3: Renault's and Nissan's Net Income 1997-2008

illustration not visible in this excerpt

Source: Nissan & Renault (2009)

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¹ b.v.: “Besloten Venootschap” is the Dutch terminology for a private limited liability company (Wikipedia, 2010 [online] Available at: http://en.wikipedia.org/wiki/Besloten_Vennootschap )