Nissan Leaf Market Competition - Case Study Example

Case Study on Nissan Leaf Strategic Issues and Problems The ripples of technological expansion and advancement have found their way into the automotive industry. The Nissan Company has taken the advantage and developed the Nissan Leaf, a four-door passenger sedan running on a lithium-ion based battery fitted with an 80KW AC electric motor that generates about 107 horsepower (Ghosn 1). Nissan, however, faces a couple of strategic problems concerning the marketing of the Leaf to consumers, technological deficits concerning the size, reliability and price of its lithium-ion battery, which costs about half the price of the car (1). It also faces the problem of strong competition from hybrid producing companies such as Tesla’s Roadster, Mitsubishi, Think and Daimler, Toyota, GM, and Honda among other automobile producers (2). Conversely, Nissan faces financial challenges after it almost went bankrupt (1999-2000), thus hampering it from achieving its intended core objectives as stated in the mission statement of providing innovative and unique automotive services and products that offers superior quantifiable value to stakeholders in conjunction with Renault. Nature of the Industry and Market Environment The automobile industry is a very competitive market with the world’s well-established automaker companies such as Toyota, GM, Mitsubishi and Tesla among many others. For this reason, there is there is intense competition in the industry that necessitates the players to adopt new technology to produce innovative and quality products. However, as the case study analysis indicates, the Nissan’s Leaf is anticipated to do better in the niche market because there is no much competition currently, from the perspective of availability of a commercial all-electric vehicle in the U.S. market (2). Nevertheless, it is imperative to note that there is intense competition from the many hybrid electric/gasoline vehicles being produced many manufacturers. However, being a new technology in the market with its pros and cons, the Leaf is competing mainly on technological grounds as compared to the other automotive market products. To understand the market and industry’s nature, however, in detail it is important to examine the environment using the Porter’s five forces model. Porter’s Five Forces Threat of Competition As already noted above, the Leaf faces intense competition in the market from hybrid vehicles from other manufacturers (7). However, from the perspective of the EVs, the Leaf is competing on technological grounds and thus, there is no immediate, intense competition. For this reason, the company has a chance to develop competitive advantages to be able to compete with the other manufacturers. Threat of Entrants The threat of entrants is high in the industry because many of the manufacturers in the industry are well-established businesses with strong financial and human capabilities and thus can easily diversify into these market easily and still enjoy economies of scale. Thus, the limitation of heavy capital requirements to venture into the industry will not be a hindrance to the competitors to join the automobile industry. Bargaining Power of Buyers The power of purchasers is high in the industry as they have alternative choices to choose from. For instance, the reliability and efficiency of the Leaf have not been fully accepted by many consumers. Thus, the consumers will need to be convinced into accepting the newly developed technology powered Leaf vehicle as opposed to the other hybrid vehicles from other manufacturers, which have become gasoline efficient (4). Bargaining Power of Suppliers The bargaining of power of suppliers is relatively low in the industry. Nissan has partnered with many of its suppliers such as NEC to establish Automotive Energy Supply Corp. (AESC) for the manufacture of its car batteries and Renault to create capacity for mass production of the market of their projected 500,000 EVs (13). Threat of Substitutes The threat of substitutes is relatively low in the industry because, the EVs is a new technology that is being explored and enhanced. Moreover, given the high differentiation of the products manufactured by the different producers, for instance, between the hybrids gasolines based vehicles and Nissan’s Leaf, implies the threat of substitutes is minimal. SWOT Analysis of Nissan Company Strengths The Nissan-Renault strategic alliance is one of the significant strengths of the company (Banu, Paraschiv, and Voicu Dorobantu 292). The alliance, for instance, provides the company with capacity to produce about 500,000 ZEVs for mass marketing, thus enabling it to obtain economies of scale as well as a platform for sharing and acquiring technical expertise, knowledge and experience in electric vehicles (EV) (Ghosn 2). Creation of a joint venture, Automotive Energy Supply Corp. (AESC) with NEC for the production of batteries for the Leaf enabled the company to control the supply of the batteries to ensure the company had sufficient quantity for its EVs (13). Conversely, this enabled the company to leverage from the talents of the electrical and chemical engineers of NEC in combination with its mechanical engineers to develop more innovative products at much lower costs (13). This JV also enabled Nissan to obtain the newest technology based batteries for its EVs. Nissan has developed over 2000 EV infrastructure, charging stations in its dealerships across the globe and about 400 in the U.S. with its California-based partner, ECOtality by 2011, thus laying the ground for mass market production (16). Nissan has a large pool financial and capital assets as well as human resources as mentioned above that can facilitate the manufacture of the Leaf (Dehkordi, Yonekura, and Kohnepushi). Weaknesses The company faces the challenge of transforming its market leadership of producing EVs for a mass market due to the shortcomings associated with the Leaf, especially concerning its battery reliability and price. Lack of financial resources is another significant factor facing the company after it almost collapsed due to bankruptcy during the fiscal year (199-2000). The company also faces the challenges of human resources. According to Goshn, “the skills that are required for the development of EVs are very specific, and so the company cannot rely on most of its top executive and engineers (20).” Nissan did not carry out an initial media marketing but relied on Toyota’s model of using influencers, which was insufficient considering this was a new technology coming into the market (10). Opportunities Global presence. Nissan has penetrated many global markets where it has launched the Nissan Leaf. For instance, the company launched the Leaf in Israel in summer 2011, Denmark, Latin America, home market, Japan among many other markets. Technological advancement. Nissan managed to develop a joint venture with NEC for the production of the batteries and thus, stands a chance to benefit heavily from new technology and technical expertise of the chemical and electrical engineers of NEC, thus gaining control of the market of batteries. Nissan should take advantage of the current global paradigm advocating the use of renewable sources of energy by capitalizing on tax rebates and incentives offered by various governments to produce EVs to utilize these energy sources (5). Threats The threat of competition from hybrid and ICE manufacturers is the most significant factor threatening the market of the Leaf. Moreover, other automobiles manufactures producing gasoline vehicles have started producing fuel economical and efficient vehicles, which are attractive to many consumers (5). Culture is another factor threatening the market of the Leaf. Many Americans prefer reliable products that are effective and gives them satisfaction (3). Therefore, convincing customers that the Leaf was a reliable vehicle was a problem even though it was environmentally friendly. Organizational Evaluation Organizational Capabilities Human Resources-The Nissan-Renault Alliance has a strong and diverse management team lead by the group’s CEO, Carlos Ghosn. Nissan has a strong team of efficient mechanical engineers and electrical and chemical engineers in its joint venture AESC. The company also has a strong R&D team that is focused on value creation to contribute to societal mobility in the future. This has, for instance, partnered with NASA to develop self-driving cars and this is greatly impacting on the company’s R&D (Szondy). Capital resources- Nissan has several manufacturing plants located in Japan and the U.S. where it has partnered with other businesses such as ECOtality to build charging stations for the manufactured Leaf as well as Car battery plants such as the AESC joint venture plant in which it owns 51% stake. This is an essential capability given the battery of the EVs is one of the critical components of zero emission vehicles (ZEVs) (Ghosn 13). Financial Resources-Even though Nissan was almost going bankrupt, the company has greatly recovered from its financial difficulties. For instance, from the company’s 2013 sustainability report, the Nissan-Renault Alliance sold more than 100,000 EVs from which about two-thirds accounted for the Nissan Leaf. Moreover, in 2012, the alliance’s sales were about 43,826 units representing an 83.8% increase from 2011, implying the sales were on an upward trend and the company was regaining its financial capabilities (Kane). Possible Causes of Action From the SWOT and Porter’s five forces, it is evident that the company’s overall strategy and position concerning the manufacture of EVs is line with the company’s missions statement of delivering innovative and unique automotive products to consumers. The possible cause of actions Nissan can take include the following. To turn weaknesses into strengths, the company cannot continue pursuing its current strategy of mass market with the projected sales of 1.5 million EVs by 2016. It should create new business functions with new management and engineers with expertise in EVs manufacture because its current executives and workers have no expertise in the production of EVs (Goshn 20). The company can, thus be able to leverage from the skills of the electrical and chemical engineers at its joint venture, AESC to produce batteries, which are critical components for its manufactured EVs. Thus, having achieved mass production, the company can go ahead to do aggressive media advertising by creating a marketing functional unity lieu of relying on influencers to commercialize the product for the mass market. Thus, the company will have turned its weaknesses into strengths. To turn threats into opportunities, Nissan must realize it is competing on a new platform that is technology based. Thus, to be able to create competitive advantage over the rivals, the company should create a new R&D business function for its EVs to be able to create new efficient and reliable EVs that can change the perception of the American consumers, by enabling them to realize the value that EVs brings to their lives as well as the environment. Thus, the company can be able to utilize its opportunity of the new global paradigm of renewable energy to create value in the minds of the consumers by articulating how efficient EVs are and their ability to use renewable energy unlike the hybrid and ICE vehicles. Through this the company will be able to overcome the threat of culture and minimize competition by turning them into opportunities. Recommended Action and Possible Outcome Nissan should pursue its current strategy to meet its projected sales of 1.5 million EVs by 2016, by focusing on turning its weaknesses into strengths as opposed to focusing on turning threats into opportunities. Nissan’s main challenges are technology and human capital to enable to create an efficient and reliable EV that creates value to consumers. Thus, it is imperative that the company invests acquiring the best talented engineers and executive for the manufacture of the Leaf to increase production as well as developing reliable batteries that can sustain the charge for a long time. By creating the new functional business units of executives and engineers and the marketing unit, the company can, thus create unique, innovative, reliable and superior products for the mass market. Ultimately, since EVs is a new technology, the company faces little competition as this is a new line of products, thus justifying the reason for focusing on weaknesses and threats lieu of threats and opportunities as they can be suppressed by the latter as articulated above. Works Cited Dehkordi, Majid, Seiichiro Yonekura, and SeyedHadi Kohnepushi. "Descriptive analysis of Nissans electric vehicle commercialization strategies." Journal of Product & Brand Management 22.5/6 (2013): 393-403. Banu, Elena, Dorel Paraschiv, and Roxana Voicu Dorobantu. "Achieving eco-innovation through strategic alliances: study case of Renault strategic alliances." Romanian Economic Journal 15.45 (2012): 291-302. Ghosn, Carlos. Nissan’s Electric Vehicle Strategy In 2011: Leading The Way Toward Zero-Emission, Case study. (2011). Pdf. Kane, Mark. Nissan’s 2013 Sustainability Report Highlights Automaker’s Unmatched Commitment to Electric Vehicles. Web. 12 Jan. 2015. Szondy, David. Nissan and NASA team up for autonomous drive vehicle development. Web. 12 Jan. 2015. Read More