Case Study on Nissan and Renault Strategic Alliance with focus on merger strategy.

1. Case Study: A Marriage of Necessity?

2. Overview
• Case Context
• Introduction
Renault
Nissan
• What is a Merger?
• Why Merger?
• Pre Merger
Renault
Nissan
Negotiation
• Post Merger
• Discussion/Conclusion

3. Case Context
• Renault-Nissan Alliance merger (1999) between French
auto manufacturer Renault and Japanese manufacturer
Nissan.
• 2013 – Captured 10% global market share.
• Partnerships with Daimler and AvtoVAZ

4. What is a Merger?
• Combination of two or more companies which is
restructured to create positive growth.
• Horizontal Merger – Two entities competing in a similar
industry producing similar goods.

5. What is a Merger?
• Most effective in oligopolistic industries for achieving
growth.
• Advantages:
 Economies of scale and scope
 Increase international competition
 Penetration into new markets
 Access to new design, tech and processes
 Supports a declining company

6. What is a Merger?
• Disadvantages:
Culture clash between companies
Leadership disputes
Layoffs from either company
• Companies go through a courtship period where they
assess each other.
• 50% of all mergers are unsuccessful either in pre-
merger or post-merger stage.

7. Overview
• Pre-merger stage – Contextual conditions and
differences of the companies before merger.
• Post-merger stage – How they overcame these issues.
• Discussion

8. Why Merger?
1. Increase industry concentration for long term
profitability.
2. Earning participation into global markets
3. Expansion is prohibitively expensive

9. Pre Merger
Renault
(Expanding company)
1. Full capacity
2. high concentrate in
Western Europe.
3. High profit
4. Intend to be global
1. Failed to materialize to
complete Toyota
2. 54% capacity utilized
3. Overall economic
stagnation
4. Poor internal
communication
5. A lack of urgency &
strategic future
6. Lack of cost control
Nissan
(Declining company)

10. Similarity
• Large & Long history
• Pariotism & Bureaucratic
• Strong hierarchical structure
• A high proportion of senior management
• Little formal business education
&

11. Difference
• Social & culture difference
• Language
• Decision-making
• Communications system
• Labour regulations
• Currency
&

12. <http://www.1-focus.com/e/mergers1.php>

14. Merger Benefits
1. Renault as a rescuer to Nissan
2. Nissan has strong market in United States and Asia
3. Renault present in Europe and the Mercosur market
4. Combined technological strengths
5. Renault’s considerable expertise and development,
design, in market experiences.
6. Nissan’s engineering technology strength

15. After Negotiation Agreement
• Renault required 38.8% of capital of the Nissan Motor
Co.
• 22.5% of Nissan Diesel
• 100% Nissan’s European sales and financing
subsidiaries

16. Post Merger
A Successful merger involves :
• Swift implementation of post merger policy
• Strong credible leader who is able to recognise differences and
similarities and is able to implement policy to fit both companies
• ault required 38.8% of capital of the Nissan Motor Co.
• 22.5% of Nissan Diesel
• 100% Nissan’s European sales and financing subsidiaries

17. Credible leader - Ghosn
Ghosn was a manager from Renault who clearly understood the
need for speed and integration in the merger process through :
• English classes
• New managerial structure
• One vision
• Flow of personnel
• Streamline procedures through the establishment of the Nissan
board

18. The Nissan Board
Role was to put in place policies to reduce costs to enable short
term recovery as well as put in place plans for future growth.
To achieve this:
• Closed 5 plants and concentrate production to areas with
competitive advantage
• Improved design capabilities by leveraging skills from
experienced designers
• Standardised components
• Increase research and development
• Cutting down on suppliers

19. Was the Merger
Successful?
• Renault had access the Asia and Australian market
• Nissan is now a major competitor
• Boosted market share by 17%

20. Summary

21. Con
• “80 per cent of the original tasks had been carried out in
50 per cent of the allotted time” (Donnelly, Morris, and
Donnelly 2005, p.438)
Key Advantages
• By taking advantage of economies of scale
• & Technological innovation (Research and Development)
• This also allowed the two firms to expand their product mix
• Increase revenue by appealing to wider customer base
Conclusion/Discussion

22. Con
Key Decision Factors
• Deciding on the foreign market
• Timing of entry
• Scale of entry and strategic commitments
Conclusion/Discussion

23. Con
Advantages
• Partner’s local market knowledge and connections
• Sharing costs and risks
• Complementary skills and assets
• Politically feasible entry mode
Conclusion/Discussion

25. Con
Disadvantages
• Give more then receive
• Culture clash
Conclusion/Discussion

26. ConConclusion/Discussion

27. Con
1. Could the merger strategy work effectively in
another industry? (Examples)
2. Is there a more effective entry strategy? (E.g.
Greenfield, Acquisition etc.)
3. Could Nissan have achieve long-term success
on its own?
Discussion Questions