Nissan underwent a revival plan from 1999-2002 to address declining profitability and market share. The plan focused on cutting costs, improving productivity, and launching new models. Cross-functional teams were created to lead the operational changes. The alliance with Renault also provided benefits including cash injections and synergies. The revival plan was successful in returning Nissan to profitability and growing its market share. However, sustaining growth will require a continued focus on innovation and developing competitive strengths beyond cost cutting.
5. From falling to flying profitability
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6. From eroding to growing market share
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7. From deteriorating to improving liquidity
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8. Many root causes…
The industry The economy
New competitors
Weak yen
New distribution channels
New technologies Weak Japan Inc.
Superior
offers New value chains
Firm’s
decline
Organizational inertia
Extensive financial assets to write off
Ineffective
management culture Inferior skills/distribution network
The firm
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9. …but only 3 winning plans
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10. Strategic and operational advice to
the turnaround leaders…
Key issues Nice take-aways
• What makes the Strategic • develop strategic and operational
Alliance critical for Renault & guidelines for turnaround
Nissan? managers
• What makes Nissan Revival • provide lessons-learned about
Plan so effective? success factors in the industry
• What should Nissan do to • help managers review and shape
sustain profitable growth? their current strategy and
operational plans
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11. Key issue no.1: Renault & Nissan should
embark on a Strategic Alliance because…
Characteristics of a good target Comments
•Offers solid businesses Huge debt, declining profitability
•Offers potential for revenue New markets, superior technology
•Offers potential for synergies Economies of scale (R&D,
distribution, supply chain…)
•Fits culturally ? Only under specific conditions
•Is affordable Spot much lower than real option
value
•Is available …and willing
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12. The Alliance: a recipe for success
•Sign-in cash
•Sound turnaround plan
•Skill in execution
•Mutual respect of cultural
diversity
•Cross-cultural leverage
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13. Key issue no.2: From Following to
Leading the Change
Before NRP After NRP
Diagnosis •Limited scope •Large scope
•Mostly about symptoms •Only about causes
Effects Short-term Long-term
Focus Financial resources People & capabilities
Difficulty Simple, quick Complex, slow
Orientation Internal External
Task Denominator Numerator
Decisions Operational Strategic
Emphasis Cut costs, investments, Growth, share,
rationalize assets, efficiency innovate, brands,
effectiveness
Morale Negative Positive
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14. 9 Cross-Functional Teams (CFTs)
Business
CFT Names Purchasing Mfg & Logistics R&D
Development
•EVP GOM S&M •EVP Purchasing •EVP Manufacturing •EVP Purchasing
CFT Leaders •EVP Product Planning •EVP Engineering •EVP Product Planning •EVP Engineering
CFT Pilot •GM Product Planning •GM Purchasing •DGM Manufacturing •GM Engineering
•Product Planning •Purchasing •Manufacturing •Engineering
•Engineering •Engineering •Logistics •Purchasing
Members •Manufacturing •Manufacturing •Product Planning •Design
•S&M •Finance •HR
•Profitable growth
•Suppliers relationships •Manufacturing
Team review •New Products
•Product specifications efficiency & cost •R&D capacity
Focus •BI
& standards effectiveness
•PD leadtime
•Close 3 assembly
plants in Japan •Move to a globally
Objectives •Launch 22 new models •Cut number of
•Close 2 powertrain integrated organization
by 2002 suppliers by 50%
Based on •Introduce a minicar •Reduce costs by 20%
plants in Japan •Increase output
Review •Improve capacity efficiency by 20% per
model by 2002 in Japan over 3 years
utilization in Japan from project
53% in 99 to 82% in 02
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15. 9 Cross-Functional Teams (CFTs)
Phaseout of
CFT Names S&M G&A Finance & Cost products & Parts Organization
Complexity
•EVP GOM S&M •CFO •CFO •EVP Japan S&M •CFO
CFT Leaders •EVP Japan S&M •SVP Finance •SVP Finance •EVP Product Planning •EVP Manufacturing
•Manager Product
CFT Pilot •Manager GOM S&M •Manager Finance •DGM Finance
Planning
•Manager HR
•Product Planning •Product Planning
•S&M •S&M •S&M
•S&M •Manufacturing •Finance •Finance •Finance
Members •Purchasing •Finance •S&M •Engineering •Engineering
•HR •Purchasing •Purchasing
•Manufacturing •Manufacturing
•Advertising structure •Shareholding and other
non assets •Organizational structure
Team review •Distribution structure
•Fixed overhead costs
•Manufacturing efficiency
•Financial planning •Employee incentive and
Focus •Dealer organization structure
and cost effectiveness
pay packages
•Incentives •Working capital
•Move to a single global •Create a worldwide
advertising agency •Close 3 plants in Japan corporate HQ
•Dispose of noncore
•Reduce marketing by 2002 •Create regional MC
Objectives •Reduce G&A costs by 20% assets
expenses by 20% in Japan •Reduce 9 platforms in •Empwer PD
Based on •Close 10% of retail outlets
•Reduce global head count •Cut automotive debt in
Japan by 2002
by 21,000 half to $M8.8 net •Implement
Review in japan •Reduce the variation of performance-oriented
•Reduce inventories
•Create local business parts by 50% compensation and bonus
centers packages (incl. S/O)
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16. CFTs are built for leading consolidation
and transformation in parallel…
Impact on performance
CFT Short-Term Long-Term
Business Development
Purchasing
Manufacturing & Logistics
R&D
Sales & Marketing
General & Administrative
Finance & Cost
Phaseout of Products & Complexity
Management
Organization
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17. …but should also focuse on anticipating
the evolutions of the industry
Areas NRP Items
Market & customers
Industry & competition
Technology
Suppliers
Demographic & economic changes
Political, legal & environmental changes
Staff & skills
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18. NRP is a good start to help Nissan build
the most appropriate core competences…
World-class paths NRP Comments
Project teams
Training & development
Cross-deployment CFT, GNX…
Hiring Strong reduction but one major hire: Chief Designer
S.Nakamura
External experts High potential in research centers (CPUs, PhDs…),
global distributors (Wal-Mart, Carrefour…) , leading
innovators (Sony, Philips…)
Government research contracts High potential in research centers (zero emission…)
Partnership with customers & suppliers Keiretsu…
Licensing High potential in leading innovators (Sony, Philips…)
Equity stakes in emerging companies High potential in environmental start-ups
Strategic alliances Renault, hybrid, fuel cell…
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19. …but NRP provides limited directions to
formulate world-class strategies
NRP Comments
Analyze portfolios: priorities & High
divestments
Separate businesses into SBUs Low
Reduce HQ staff ? Strong central role
Develop local core strategies Low
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20. C.Ghosn: the right person at the right
place and the right time…
Roles Characteristics C.Ghosn
Decision-maker Authority 15-year experience as COO, CEO, President…
Blank cheque « no sacred cow »
Change agent Clear vision Straightforward, direct, and simple
Strong communications « dead serious and sincere »
Decisive follow-up No more ambiguity with precise and quantifiable
objectives
Stamina « Seven Eleven »
Ethical standards « I will resign if these commitments are not met »
Networking skills Connects with gemba and public
…but who’s next?
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21. Vox populi…
…but who’s next?
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22. Key issue no. 3: so what’s next?
Focuse more on strategy
formulation process than on
Implement Balanced strategy per se
Scorecard to relate
economic profit targets and
individual profit incentives Shift decision-making
power to SBUs
Control and sustain
profitable growth
Implement EVA process to
relate budgeting process to Shrink corporate staff
value creation
Generalize production system
tools to increase overall flexibility
in responding to changes in the
marketplace
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24. Back-up Slides:
•Automotive CFRIC vs. Change in Sales
•CFRIC Calculation
•Further Reading
•CFT
•Nissan Value-Up Program
Main sources:
• HBS Case « Nissan Motor Co. Ltd – 2002 » no. 9-303-042
• Robert M. Grant, Contemporary Strategy Analysis
• Peter Doyle, Marketing Management & Strategy
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25. 1999-2002: So much improvement in shareholders’ value
COGS/Sales Dep./Sales SG&A/Sales
ROS
74.8% -2.6% 2.4%
-0.5%
ROCE 73.4% 3.5% 9.6%
6.3%
-0.7%
8.4% Capital
PPE Inventory Cash
Turnover
Turnover Turnover Turnover
1.4 2.2 1.7 3.2
FY99
1.3
FY02 2.2 1.4 4.3
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26. 2002: NRP’s objectives are met but there is still a long way to go to
outperform the best-in-class… and surpass cost of capital!
COGS/Sales Dep./Sales SG&A/Sales
ROS
68.4% 2.6% 6.0%
6.3%
ROCE 73.4% 3.5% 9.6%
6.3%
8.4%
8.4% Capital
PPE Inventory Cash
Turnover
Turnover Turnover Turnover
1.6 5.3 1.4 7.1
Best-in-class 1.3
2.2 1.4 4.3
Nissan
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29. En route to become a world-class player
WORLD-CLASS
HIGH
LEVEL
effect of NRP
R3
leveraged by the C3 C4
RELATIVE STRENGTH
R4
Strategic Alliance R6
U P
K - C2 R2
C
BA R8
R5 C6
R1 C1 C5
LOW
R7 C7
LOW HIGH
STRATEGIC IMPORTANCE
Resources: R1=Financial, R2=Physical, R3=Technology, R4=Reputation, R5=Culture, R6=Skills & Know-How, R7=Communication
&Collaboration, R8=Motivation – Capabilities: C1=Corporate, C2=MIS, C3=Innovation, C4=Manufacturing, C5=Marketing & Brand,
C6=Sales & Distribution, C7=Supply Chain & Purchase
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