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Selected Case

published: 28 Oct 2016

  • Topic: Leadership & Organisations
  • Industry: Motor vehicles and passenger car bodies
  • Region: Global

Abstract:
In 1998, Renault proposed an alliance with Nissan, the Japanese auto manufacturing giant which was in financial trouble. Subsequently, a Renault team led by Carlos Ghosn helped Nissan achieve one of the most spectacular turnarounds in recent history. The alliance partners continued to grow through synergies of distribution, manufacturing and know-how that enabled significant cost reductions. Yet within a decade it became apparent that Renault was growing less quickly and less profitably than its partner. Whereas Nissan profited from better access to the US market and from selling upscale models under the Infiniti brand (which later attracted Daimler to join the alliance), Renault competed mainly in the small and mid-size car segments in Europe, a congested, competitive segment with low margins. In 2015, the French government sought to consolidate its control over Renault, and by extension Nissan, which was 43.4 % owned by Renault. Clearly the alliance had reached a turning point in which Nissan’s relative advantages had to be taken into account.

Pedagogical Objectives:
1. To analyse how the governance of an alliance must evolve to reflect the contributions and benefits of each partner. Nissan’s superior profitability raises the question of why ownership and governance structures still assume Renault predominates. 2. To analyse the potential and limits of cooperation among partners over time. The case shows the mechanisms used to deepen cooperation as well as the phases of development that ultimately upset the internal balance of the alliance as Nissan becomes the dominant partner. Simultaneously, Renault restructures and its workers are asked to make sacrifices, setting the stage for government intervention. 3. The role of alliance leaders in addressing various stakeholders. As CEO of two major firms bound by a close partnership, Ghosn’s turnaround of Nissan is unique. Yet his succession remains unclear, and a period of turbulence sets in as the government votes against a proposed pay increase for the Renault chief. 4. To discuss the specific nature of state owned or influenced companies in global competition and international alliances. By 2015 Renault’s viability rests on dividends from Nissan and its “Entry” product line and brand. Cuts in production in France to remain competitive become a major source of tension with the French state, still the majority shareholder.

Keywords:
Renault, Nissan, Renault-Nissan Alliance, Carlos Ghosn, Automobile Manufacturing, Strategic Alliance, Alliance Synergies, Daimler, Logan, Louis Schweitzer, France, Japan, Cross-Functional Teams, Cross-Cultural Alliances, Corporate Governance, Value Creation, Strategy and Implementation


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