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Renault-Nissan: The Challenge of Sustaining Strategic Change - Essay Example

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This paper attempts to answer the questions on the rationale for the alliance, the strategic value of the alliance to either side, the key steps involved in executing the alliance and the critical elements that made the alliance successful…
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Renault-Nissan: The Challenge of Sustaining Strategic Change
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Download file to see previous pages This research will begin with the statement that Renault and Nissan are both automobiles manufacturing and marketing companies. The two companies were facing different challenges and were performing unsatisfactorily at the time of alliance formation. Nissan was facing marketing and financial crisis while Renault lacked engineering and production know-how. The rationale for the alliance was mainly on the bases that the two companies, Renault and Nissan, were facing challenges and were likely to collapse since they could not support themselves. Each of the two companies had attempted to find other partners to form alliance with but the searches had been fruitless. The alliance between Renault and Nissan and was formed in 1999 in which Renault signed a deal to invest $5.4 billion in the alliance. At the moment, Nissan was at the verge of collapsing since it was facing serious marketing and financial crisis resulting from a vast debt, deteriorating global market prices, as well as indistinct future prospects. Renault lacked the relevant skills in production, which resulted in high production costs. In 1986, Renault had to terminate its operations in United States since the Car models it was manufacturing were becoming increasingly unpopular due to their small size. Additionally, American buyers felt that Renault cars were underpowered and below par. By 1999, Renault was at the verge of collapsing. On the other hand, Nissan had been undergoing financial crisis and a lot of competition from larger companies within Japan. Additionally Nissan’s management was poor, the decision making process was too bureaucratic and had previously demonstrated poor performance culture. The above factors made it hard for Nissan and Renault to get other companies to partner with since most of the other companies were unwilling and had large and widespread market. In 1998, Renault and Nissan were both performing poorly and they started exploring the possibility of possible partnership. They started cooperating in their operations and realized their collaboration was becoming fruitful. Nissan was then under the leadership of Yoshikazu Hanawa who had proved to be somehow competent than the previous CEOs. Renault had been quite profitable particularly in Europe but lacked engineering as well as production techniques which heightened the cost of production. Nissan had production knowhow but lacked market for its products. Formation of the alliance would benefit both parties since Renault would gain from Nissan on production knowhow while Nissan would be in a position to expand its market. The formation of the alliance entailed signing of an agreement to agree on the management style as well as way to carry out the operations. Some of the aspects incorporated in the agreement include a pact for joint purchasing which enabled the companies share most of their supplies. The two companies also established common platforms such as similar parts, common design requirements and mutual manufacturing processes. The Alliance also enabled Nissan and Renault pool their resources which enabled them pursue excellent technologies as well as manufacture fuel-efficient engines that were preferred by most car dealers. The Alliance enabled the two companies to establish shared factories in region such as South Africa, Mexico, Brazil and Spain which enhanced capacity utilization. The Alliance aided Nissan to expand its market and operations in North America while Renault penetrated regions such as Australia, Indonesia and Taiwan. The alliance turned out to be successful and beneficial to both companies due to several reasons. ...Download file to see next pagesRead More
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