Assignment : Renault and Nissan.
Question 1) Why are these two firms engaged in an alliance?
The alliance shaped in 2001 between Renault and Nissan was based on a quest for survival from both parties. Renault had been seeking a foreign partner; its’ focused strategy in Europe (middle class cars) was showing signs of tiredness. They had failed to expand to other regions organically (theywithdrew from the US in 1987 and only had tiny shares in Asia) and they had failed to expand through alliance with another European carmaker to increase their position there (Volvo.) The most viable option for them was an Asian player as US carmakers were too big for a sustainable alliance. They took the Asian crisis as an opportunity to find a partner that would help them in their geographic expansionstrategy.
On the other side, Nissan had been financially in the red for years. It desperately needed a partner to help put the company back in shape both financially and on the operational levels. It had hoped to partner with DaimlerChrysler but the latter judged the necessary investment in Nissan too risky to go through with the deal. Renault was the lesser option but the only one available indesperate times.
Hence, although Renault had done a bit of research prior to the alliance to find a suitable partner, there is a lot of opportunistic feeling to that alliance.
Question2) What is its’ rationale?
Although the alliance between Renault and Nissan seemed to the outside like an alliance of the weak, there were sound rationales to it.
Both firms had a geographic expansion strategybut lacked competencies to make that strategy a success. In that regard Nissan provided an access to Asian and Australian Market and Renault European and South American markets to Nissan. Nissan lacked in design and this was a strength of the Renault company, they also needed to lean the cost curve and Renault’s number two, Carlos Ghosn (nicknamed the Cost Killer) was clear competencies in thatarea. On the other hand Renault needed more profitable operation and quality management; before the alliance they had identified that, beneath the severe financial situation of Nissan, operational efficiency and quality were core capabilities. Hence both firms had complementary competencies that could be transferred to achieve the other’s strategy. Also although they were two competitors in thesame market, their core market differed –if only in terms of geography-This is why such an alliance despite the appearance, was sound and in effect successful.
Question 3) What strategic value does this alliance bring to either side?
Both firms are looking for a geographic expansion strategy at the corporate level. And the access to market each firm can grant the other (through common factorieslike in Brazil or Mexico) has therefore a lot of strategic value for the two. Another strategic value is the transfer of core competencies to both sides in strategic functions: quality and operational efficiency for Renault, cost management, supply and design for Nissan. Finally the alliance has a lot of strategic value in the unexplored possibilities of partnership. When first conceived thealliance was supposed only to put Nissan back together in shape and to help Renault expand. However the good management of the alliance made room for deepened relationship like in the RD department to share cost and progress in green technology research.
Question 4) What does each firm bring to the alliance?
As it has been established above, Nissan has geographic implementation in Asia, someAmerican countries. Nissan also has strong competencies in quality management, factory efficiency (101 cars made by each employee every year vs 74 for Renault) and strong economies of scale thanks to great production capabilities. They also bring in experts factory engineers ready to go out and help Renault factories become more efficient. On the other side, Renault brings in top executives to...
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