TUTORIAL 8: CARLOS GHOSN: LEADING FOR GLOBAL SUCCESS AT RENAULT-NISSAN

● Summary [Identifying key issues]
■This case discusses Japan’s number-two automobile manufacturer,. (www.nissan-global.com), its CEO Carlos Ghosn, his leadership style, and the company's strategy. The questions focus on these issues and whether the strategy of Renault-Nissan is global or multinational. The case provides a good example of a firm that uses a global, integrated strategy for its worldwide operations. It is also a good example of a large company with ambitious goals to produce high quality products and sell them on every continent.

BACKGROUND
■ Based in Tokyo
■ 2009- Sales were nearly $90 billion
■ Management planning to launch 48 new car models
■ A few years ago- on the verge of bankruptcy.
■ Renault- The French automaker took a 44 percent stake and installed Carlos Ghosn as Nissan’s CEO
■ Dramatic turnaround- Ghosn returned Nissan to profitability and became a celebrity in Japan
■ Ghosn- Born in Brazil, raised in Lebanon, and educated in France, he is a charismatic leader who speaks four languages and is idolized for saving one of the world’s premier car companies.
■ Ghosn closed inefficient factories, reduced Nissan’s workforce, curbed purchasing costs, shared operations with Renault, and introduced new products. NISSAN’S ORGANIZATIONAL CULTURE
■ Ghosn cut through antiquated thinking, defying Japan’s often bureaucratic and clubby business culture by, for example, reducing Nissan’s steel suppliers from five to three.
■ Ghosn introduced a proactive style, with fast decision making, and a culture of anticipating problems and eliminating them before they happen.
■ Ghosn is always in a rush, relying on decisiveness and delegation — but yielding to consensus when necessary. Instead of squandering time analyzing and discussing, he dislikes long meetings and prefers action.
■ He inspires the workforce, regularly visiting them on the factory floor.

GHOSN’S GLOBAL ORIENTATION
■ A true globalist, Ghosn made English, not Japanese, the official language of Nissan.
■ 2005- Ghosn took over as CEO of Renault and now runs both companies, commuting between Paris and Tokyo in his Gulfstream jet.
■ This unusual arrangement underscores the demand for proven leaders in the global auto industry, which suffers from oversupply and intense competition.
■ He personally oversees Nissan’s North America business, where half of Nissan’s profits are earned.

THE ROLE OF INNOVATION
■ Nissan constantly invests in R&D for breakthrough technologies and innovative products, reinvesting roughly 5 percent of net sales in new technologies.
■ At its new Mississippi plant in the U.S., Nissan launched five models in less than 8 months.
■ It established a design subsidiary in Shanghai, China, to produce cars that fit that country’s growing market.
■ 2009- In green technology, Ghosn unveiled the Nissan LEAF, the world's first affordable, zero-emission car, based on lithium-ion battery technology.

GLOBAL PRODUCTION
■ Renault-Nissan has factories in Britain, France, and the U.S., to be close to key markets.
■ It also manufactures in China, Taiwan, and the Philippines to leverage low-cost, high-quality labor.
■ Nissan uses modular architecture – suppliers manufacture single modules, which are then bolted into a car or truck body rolling down the assembly line- which minimizes the total cost of manufacturing cars.
■ Nissan consolidated and centralized its U.S. manufacturing operations to its new plant in Tennessee
■ The Tennessee plant is Nissan’s most productive factory in North America, producing a car in less than 16 labor hours, several hours fewer than rival carmakers.

ADDITIONAL GLOBAL STRATEGY ELEMENTS
■ Renault-Nissan is globalizing product development, engineering, production, and purchasing operations.
■ Nissan-Renault minimizes the number of platforms (chassis) used in manufacturing
■ Renault shares eight engine designs with Nissan
■ Roughly three-quarters of the parts used by the two automakers are sourced jointly, generating design and production economies of scale/scope.
■ Example- Nissan offers seven different vehicles based on the underpinnings that go into the Versa.
■ Nissan has a presence in the most important markets worldwide
■ The U.S. is an expensive place to make cars, but it is also the world’s biggest market.
■ The next biggest market is China- where it exports its U.S.-made Quest minivans to.

EMERGING MARKETS – THE NEXT BIG TARGET
■ In the coming decade, millions of consumers in Brazil, China, India, and other emerging markets will join the middle class..
■ Estimates indicate the market for automobiles priced under $10,000 will grow to 18 million cars by 2012. India’s car market will double to 3.3 million cars by 2014, and China’s demand will grow 140 percent, to 16.5 million cars in the same period.
■ 2008- Nano was launched for around $2,500 in India by Tata Motors. China has a similar car.
■ Ghosn is making emerging markets a cornerstone of Nissan’s global strategy.
■ Nissan-Renault teamed with India’s Bajaj Motors to build a $2,500 car to compete with Tata’s Nano- this was launched in India and targeted to other emerging markets.
■ Renault acquired control of Samsung Motors, making South Korea an important base for Nissan- Renault.
■ The Bluebird sedan (midsize) is produced in a 50-50 joint venture with a local Chinese firm.
■ The Nissan Tsuru subcompact is the top selling car in Mexico, accounting for 20 percent of new-car sales.
■ It is increasing its presence in other emerging markets, such as Russia and India.

GLOBAL RECESSION
■ 2009- Nissan hit a downturn leading the firm to post its first loss in a decade.
■ Reasons: ◘ Global financial crisis ◘ Negative impact of a strong yen ◘ Loss of global consumer confidence
■ Response: ◘ Production was decreased at several plants in Japan and Europe, especially those producing vehicles for advanced economies. ◘ Worldwide workforce reduction by some 20,000 employees
■ Nissan is increasing its presence in China, Russia, and India, and further shifting engineering, production, and purchasing to low-cost countries.

● SUGGESTED SOLUTIONS TO CASE QUESTIONS

1. In what ways is Carlos Ghosn a visionary leader? What traits does he possess that are typical of a visionary leader?

■ Global visionary leadership includes a global mindset, willingness to commit resources, global strategic vision, and willingness to invest in human assets.
■ Ghosn’s global visionary leadership is manifested by his charisma, his ability to speak many languages, his commitment to organizational goals, his tendency to be decisive and to delegate, his dedication to consensus, and his global vision for growth in emerging markets as well as developed countries.

2. What is the nature of Nissan’s international strategy? Is the firm’s strategy primarily multidomestic or global? What advantages does Nissan derive from the particular strategy(s) that it pursues? In what ways does Nissan demonstrate efficiency, flexibility, and learning?

■ Answers may vary, but the most defensible answer is that Nissan is following a global strategy.
■ The case discusses in great detail Nissan’s efforts to globalize or integrate engineering, production, and purchasing.
■ Nissan has taken the Infiniti luxury car to a global scale, such that all Infiniti dealerships conform to an interior design that gives them a uniform look and a global image.
■ Ghosn made English, not Japanese, the official language of Nissan.
■ Managers who learn English advance faster than those who speak only Japanese.
■ The move proclaimed Ghosn’s intention to reorganize Nissan as a global firm.

■ Efficiency, flexibility and learning are exemplified via the world’s most global car, called the Nissan Versa in the United States, the Renault Clio in Europe, the Nissan Tiida in Asia, and the Renault Logan in the Middle East. In total, Nissan offers seven different vehicles based on the underpinnings that go into the Versa, creating scale economies that improve profits.

3. Describe Nissan’s organizational culture. What are the characteristics of Nissan’s culture? In what ways has Carlos Ghosn contributed to Nissan’s culture? Elaborate.

■ Since Carlos Ghosn’s turnaround of Renault Nissan in the early 2000’s, the organizational culture can be described as proactive, based on fast decision-making and clear, ambitious performance targets.
■ Ghosn introduced a proactive style, with fast decision making, and a culture of anticipating problems and eliminating them before they happen.
■ He inspires the workforce, regularly visiting them on the factory floor.
■ The culture is also very global: English, not Japanese, is the official language of Nissan, putting the company on a clear path to become a global firm.
■ In sum, the culture changed from the typical Japanese bureaucratic and clubby style, to one that is faster, proactive, inclusive, and globally focused.

4. Global firms pursue a relatively centralized approach to international operations. What are the characteristics of the trend toward global integration of company operations? How does Nissan demonstrate these characteristics?

■ A firm using a global strategy is usually characterized by a high level of product and process standardization, and high application of the firm’s major objectives, policies, and organizational actions targeted to a relatively standardized marketplace.
■ Nissan demonstrates these characteristics through its global engineering, production, and purchasing operations.
■ Nissan has taken the Infiniti luxury automobile to a global level with a uniform look and global image.
■ Renault and Nissan share platforms and eight engine designs as well as engineering and parts purchases.
■ Another result of this global approach is the world's most global car, which is called the Nissan Versa in the U.S., the Renault Clio in Europe, the Nissan Tiida in Asia, and the Renault Logan in the Middle East.
■ Finally, Nissan manufactures in most of its most important markets, including the U.S., where it is relatively expensive to manufacture automobiles.

5. Examine Nissan in terms of the Integration-Responsiveness Framework. What are the pressures that Nissan faces for local responsiveness? What are the pressures that Nissan faces for global integration? What advantages do each of local responsiveness and global integration bring to Nissan?

THE INTEGRATION-RESPONSIVENESS FRAMEWORK
■ Integration-Responsiveness Framework - summarizes two basic strategic needs companies have: to integrate value chain activities globally, and to create products and processes that are responsive to local market needs.

PRESSURES FOR GLOBAL INTEGRATION

■ Seek cost reduction through scale economies.
■ Capitalize on converging consumer trends and universal needs.
■ Provide uniform service to global customers.
■ Global sourcing- raw materials, components, energy, and labor
■ Monitor and respond to global competitors.
■ Leverage media that reaches buyers in multiple markets

What are the pressures that Nissan faces for global integration?
■ Globalization of product development, engineering, production, and purchasing operations
■ Minimization of the number of platforms (chassis) used in manufacturing
■ Sharing eight engine designs between Nissan Renault
■ Sourcing parts jointly, generating design and production economies of scale/scope.
■ Example- Nissan offers seven different vehicles based on the underpinnings that go into the Versa.

PRESSURES FOR LOCAL RESPONSIVENESS
■ Leverage natural endowments available to the firm.
■ Cater to local customer needs.
■ Accommodate differences in distribution channels.
■ Respond to local competition.
■ Adjust to cultural differences.
■ Meet host government requirements and regulations

What are the pressures that Nissan faces for local responsiveness?
■ Nissan needs and has a presence in the most important markets worldwide
■ India pressures- Nissan-Renault teamed with India’s Bajaj Motors to build a $2,500 car to compete with Tata’s Nano- this was launched in India and targeted to other emerging markets.
■ South Korea pressures- Renault acquired control of Samsung Motors, making South Korea an important base for Nissan- Renault.
■ China pressures- The Bluebird sedan (midsize) is produced in a 50-50 joint venture with a local Chinese firm.
■ Mexico pressures- The Nissan Tsuru subcompact is the top selling car in Mexico, accounting for 20 percent of new-car sales.
■ Nissan is increasing its presence in China, Russia, and India, and further shifting engineering, production, and purchasing to low-cost countries.

What advantages do each of local responsiveness and global integration bring to Nissan?

Benefits of global integration: ◘ Maximize worldwide value chain efficiencies ◘ Reduce operational redundancies ◘ Avoid costly market tailoring of products/services ◘ Promote learning and cross-fertilization of knowledge within their global network, in order to enhance innovation and gain competitive advantages. ■ Global integration justification ◘ Converging buyer demand ◘ Spread of global brands ◘ Diffusion of uniform technology ◘ Availability of pan-regional media ◘ Need to monitor competitors on a global basis. Nissan
■ Nissan uses modular architecture – suppliers manufacture single modules, which are then bolted into a car or truck body rolling down the assembly line- which minimizes the total cost of manufacturing cars.
■ Nissan consolidated and centralized its U.S. manufacturing operations to its new plant in Tennessee
■ The Tennessee plant is Nissan’s most productive factory in North America, producing a car in less than 16 labor hours, several hours fewer than rival carmakers.

Benefits of local responsiveness: ◘ Adjust the firm‘s practices to suit distinctive needs and conditions in each country ◘ Adapt to local customer requirements, language, culture, regulation, the competitive environment, and the local distribution structure ◘ Emphasize local responsiveness ■ Local responsiveness justification ◘ Countries, cultures, markets demand unique products/services ◘ Such demand differences must be addressed through customized products/services Nissan
■ Ghosn personally oversees Nissan’s North America business, where half of Nissan’s profits are earned.
■ Renault-Nissan has factories in Britain, France, and the U.S., to be close to key markets.
■ Nissan also manufactures in China, Taiwan, and the Philippines to leverage low-cost, high-quality labor.
■ With the predicted explosive growth in emerging markets, Ghosn is making rapidly emerging markets a cornerstone of Nissan’s strategy.