Global Management Models in Thailand - Essay Example

Global Management Models Project Task 4 - Research Questions Research questions How committed and supportive is Thailand’s government to allowing the eco-car to be produced in its country? 2. What are the trends for costs of labor, raw materials, and tax rates in Thailand? 3. How well is the auto industry in Thailand prepared to function as a supplier and repairer of auto parts for Nissan’s proposed car? 4. Are Thailand’s economic growth rates and socio-political environment conducive to realizing the expansion program and as scheduled? 5. What are the actions of Nissan’s competitors that could either delay or be detrimental to Nissan’s production of the eco-car? 6. What are the global trends for economic growth, remaining oil and gas reserves, environmental degradation, and demand for eco-friendly cars? The research questions and objectives of the proposed study are categorized and detailed as follows: Category Description (A) Interested parties Business units and third parties involved in this venture Thailand’s government People of Thailand Suppliers of auto parts Environmental groups in Thailand and international promoting eco-friendly cars Available workers Potential buyers (B) Data needs The data reporting and tracking requirements for this venture Costs of labor in Thailand Costs of raw materials in Thailand Tax rates in Thailand Economic growth rates in Thailand and other main countries to which the eco-car will be exported World oil and gas reserves Stability of social and political environment in Thailand Level of global environmental degradation due to vehicle emissions Forecast of demand for eco-cars in both Thailand and globally (C) Timing and implementation The deployment time frame for this venture and special factors that may affect its implementation The eco-car model is planned for launch in early 2010. The main factors that may effect its implementation are: Availability and cost of labor and raw materials Demand for eco-cars Improvement in the current economic climate (D) Success matrix and review Factors that will determine this ventures success and timeframe for a review of these metrics Positive support of Thailand’s government and environmental groups Stable or improving social and political environment in Thailand Stable or declining costs for labor, raw materials and tax rates* Availability of labor and raw materials* High demand from people of Thailand and globally for eco-cars* Readiness of suppliers of auto parts High rate of decline in world oil and gas reserves Pickup in economic growth rates in Thailand and globally* Delays in the actions of competitor car makers These metrics will be assessed prior to implementing the expansion program, and the ones which are marked* will be reviewed periodically as they are more critical for success. (E) Alternative action plan and contingencies Other actions the company could take to address the business issues discussed here if this venture cannot be implemented Given the decline in reserves of fossil fuels, increasing concern of the environment and potential for the eco-car etc., a complete abandonment of the eco-car project would be unwise though possible at the loss of the investment put into the project. Instead, alternative courses of action could be to: Delay the expansion program until for instance, the economic climate improves for sure Relocate to another country if for instance, costs of labor and raw materials become prohibitive, these are in short supply, or the socio-political environment becomes volatile Provide for auto parts if other suppliers are unable or unwilling Combine efforts with another company planning an eco-car in Thailand if practical, or make use of global alliance with Renault for the eco-car as well Course Project Task 5 - Methodology SWOT Analysis for Nissan’s Expansion Program Strengths Nissan is one of the largest Japanese car manufacturers Nissan already has a firm grip in Thailand with the popular one-ton pick-up truck known as the Nissan Navara/Frontier, which is in alignment with people’s needs Nissan already has an established network of suppliers for raw materials Nissan has invested heavily for the eco-car project (5.5 billion) (Bangkok Post, 2009) Nissan already has an established R&D centre in Thailand Nissan has a strong alliance with Renault, which it can use to its advantage. Weaknesses Nissan needs to properly assess the condition of the economic climate not only in Thailand but also globally in consideration of future exports Nissan must be clear and open in its justification for the eco-car on business grounds and justify its huge investment and intrepidity given the competition and financial climate Nissan was until recently in the doldrums and underwent corporate reconstruction. (Ito, 2006) As part of its Recovery Plan, Nissan has had to cut capital expenditure and slash labor costs to trim its workforce. (Rowley, 2009) Opportunities The eco-car will pave the way for Nissan’s future hybrid and electric models Labor and raw materials are cheap in Thailand Success of the program will make Thailand Nissan’s “third largest Asian production base of auto parts for Nissan” (Thomas, 2009) Success of the program will make Thailand a low cost production base for exporting the eco-car to other countries. Success of the program will make Nissan identified with the eco-car revolution and raise the esteem of its Green Program Being first to produce the eco-car will give Nissan an equally large edge over its competitors. The potential revenue is enormous both within Thailand and the countries to which the eco-car will be transported. Threats There are other companies that are also planning the same in Thailand. They are Honda, Mitsubishi and Suzuki. China has similar ambitions as well on the global stage There is currently a worldwide economic recession The stability of Thailand is in question. It is already considered to be the next least stable country after India in the region (Jakarta Post, 2009). Political turmoil, street protests, and separatist violence dogs Thailand that could delay stimulation of the economy. (Turkish Weekly, 2009) “Thailand is being eaten away by the surrounding sea… and some experts fear the capital Bangkok could disappear altogether by the end of this century. (Technorati, 2009) Assessment of the company’s strategy and competitive position The company is in a strong competitive position because it has the potential to gain an edge over others who are likewise planning eco-cars. It has invested heavily and its schedule for the eco-car is ahead of others. However, it is not so financially sound as it should be, but then this is due largely to the current financial climate, which affects all businesses. The corporate level strategy has a good chance of succeeding because Nissan’s management is not new to Thailand. Nissan already enjoys an established presence in Thailand. In order to turn its weaknesses into strengths, Nissan must steer its expansion program carefully so that justification for the eco-car is clear, and the investment pays off. Further, since Nissan is already in the process of corporate restructuring under the Recovery Plan, it can use this to its advantage by molding the new structure so that it specifically supports the expansion program in Thailand. Also, as Thailand has cheaper labor than Japan, the expansion program in Thailand will further help Nissan in slashing labor costs. This would make it a leaner company that can focus on the eco-car and lead the future more profitably. There is thus a greater chance for profitability in Thailand than in Japan with the strong yen. Analysis of the relationships among Nissan’s businesses and an evaluation of the strategy As Nissan already has a presence in Thailand, it has established access to suppliers and dealers. This enables Nissan to use its existing business relationships as a springboard for carrying out the expansion programs. Development of the eco-car specifically is also of special interest to Thailand’s government and to environmental groups. Therefore, gains can definitely be made from synergy and the environment of Thailand is supportive. Nissan’s corporate strategy could identify the new eco-car more closely with Thailand to consolidate the relationship and open up new opportunities for moving beyond Japan and its alliance with Renault. The change would make business sense for Nissan to further its Recovery Plan on one hand and set the stage for the future with its new eco-car on the other. Change is necessary if Nissan wants to thwart its troubles of the past and invent a new eco image for itself in promotion of its Green Program. Dealing with threats As for turning threats into opportunities, if Nissan is confident of the schedule to launch the eco-car, the current recession would be to Nissan’s benefit by making its competitors hold back their plans thereby allowing Nissan to be first in the race for the eco-car. As with the recession, the socio-political stability of Thailand is not something that Nissan can deal with directly. Rather, it can devise coping strategies, and contingency plans for the worst-case scenario such as relocation to another country in the region. The threat from China, and particularly from other Japanese companies that are also pursuing eco-car projects in Thailand as well, should be taken seriously although it does seem that Nissan is spearheading the eco-car revolution. Therefore, if global economic conditions improve soon, and the schedule to bring out the eco-car proves by meeting demand, and Nissan’s can manage to sustain its momentum, it will leave many of its competitors behind. The opportunities that will present themselves may be just what Nissan has been seeking all along to restore its name in the global arena. The degree of fit between the company’s strategy and structure It appears that Nissan’s strategy is highly ambitious (though achievable) in relation to its structure, which has been weak over the past few years, hence necessitating the Recovery Plan including corporate restructuring. Nissan also has a much decentralized control structure than its rivals such as Honda. In fact, teams feature significantly in Nissan. A lot of the structural aspects are attributable to the alliance with Renault and the attempt to rejuvenate the company by Ghosn. This is a highly functional structure. Indeed, “Carlos Ghosn has been hailed as one of the greatest managers of the 20th century, for having masterminded the astonishing turnaround of Nissan…” (George, 2005). Nissan also rewards its other level managers, and its management is characterized by multiculturalism. But Nissan is not only caring towards its own staff; it also values its customers as demonstrated for instance, when Nissan became the first car company to join the e-Points network (ameinfo, 2007). References Ameinfo. (2007). Nissan becomes the first car company to join the e-Points network. AME Info. Jordan, September 26, 2007. Retrieved October 6, 2009 from http://www.ameinfo.com/133121.html. Bangkok Post, (2009). Nissan eco-car is on track but excise tax cut needed. Bangkokpost, September 9, 2009. Retrieved September 11, 2009 from http://www.skyscrapercity.com/showthread.php?p=42904508. George, S.S. (2005). Shift – Inside Nissan’s Historic Revival. ICMR Case Studies and Management Resources. Retrieved October 6, 2009 from http://www.icmrindia.org/free%20resources/Bookreviews/Shift%20-%20Inside%20Nissan%20Historic%20Revival.htm. Ito, Takuya. (2006). The Light and Shadow of Corporate Reconstruction: Nissan and Mitsubishi Motors Corporation. Electronic Journal of Contemporary Japanese Studies. Discussion Paper 2. Retrieved October 6, 2009 from http://www.japanesestudies.org.uk/discussionpapers/2006/Ito3.html#Top. Jakarta Post. (2009). RI will be more stable than India, Malaysia and Thailand in 2009. The Jakarta Post, Tuesday, October 6, 2009. Rowley, Ian. (2009). Honda, Nissan Beat Expectations: Despite weak sales and a strong yen, profits at Japan’s second and third largest carmakers are beginning to recover. Business Week. Retrieved October 6, 2009 from http://www.businessweek.com/globalbiz/content/jul2009/gb20090729_936593.htm. Technorati. (2009). Thailand threatened by surrounding sea. Technorati. Retrieved October 6, 2009 from http://technorati.com/videos/youtube.com%2Fwatch%3Fv%3DljOFUHJYxMQ. Thomas, Ryan. (2009). Nissan to Expand Production in Thailand. Retrieved September 11, 2009 from http://www.streetdirectory.com/travel_guide/52087/car_focus/nissan_to_expand_production_in_thailand.html. Turkish Weekly. (2009). Thailand’s Economy Threatened By Protests, Political Uncertainty. The Journal of the Turkish Weekly. Monday, April 13, 2009. Read More