Renault/Nissan pioneered frugal innovation

1. Analysis & Outlook
Case Study - Frugal Innovation – Renault/Dacia Logan played a major role in Renault
Group Growth& continues to be critical part of product portfolio
In 2006, Carlos Ghosn, the CEO of the Renault-Nissan Alliance coined the term “frugal
engineering” by which he meant achieving more with fewer resources.Carlos Ghosn was
referring to unique ability of engineers in India to innovate cost-effectively and at a faster
pacewhen faced by severe resource constraints. As Ghosn said, “In the West, when we face huge
problems and we lack resources, we tend to give up (too) easily. Jugaad is about never giving
up!” Renault-Nissan has successfully adopted frugal engineeringand thefundamentally jugaad
mindset—and turnaround itself into a major global manufacturer of both low-cost vehicles as
well as electric cars—two of the fastest growing segments in the global automotive market.
According to Wikipedia, in India, the words "Gandhian" or "jugaad", Hindi for a stop-gap
solution,are sometimes used instead of "frugal". Other terms with allied meanings include
"inclusive innovation", "catalytic innovation", "reverse innovation", and "BOP innovation", etc.
Business organizations across the globe are forced to offer products and services to frugal
consumers as the global business environment turns volatile due to the 2008 financial crisis and
the European Sovereign Debt crisis which led to businesses facing tough conditions to maintain
their sales and profitability.
In September 2004, Renault launched Logan, an Logan Sales by year ( Volumes)
affordable, robust, and well-designed car with many Source: http://en.wikipedia.org/wiki/Dacia_Logan
simplified features to keep costs down (has 50% fewer
Year Dacia Renault
parts than a high-end Renault vehicle and has a limited
number of electronic devices) and priced at 5,000 euros
2004 22,833 −
(Current retail price is US$10,000). The Logan is based on
the B0 platform used for the Renault Clio II and for other 2005 135,184 9,915
Renault and Nissan models.The Logan's design lines are
simple and straight and cheaper to repair. Some parts are 2006 184,472 63,134
also much simpler than those of its competitors like rear-
view mirrors are symmetrical and can be used on either 2007 230,294 136,742
side of the car, the windshield is flatter than usual, and the
dashboard is a single injection-molded piece. The car was 2008 218,887 206,059
developed with a focus on developing countries as the
climatic and road conditions significantly vary from the 2009 160,120 150,603
developed countries like strong and soft suspension, and
height of the chassis is high when compared to most other 2010 126,598 189,898
compact cars so that it can run effectively on dirt roads
2011 95,365 253,698
and negotiate potholes on ill-maintained asphalt roads.
The engine is specially designed to handle lower quality
2012 102,175 221,752
fuel and the air conditioning has to be powerful enough to
lower the temperature by several degrees (temperatures Total 1,275,928 1,231,801
above 40 °C are common in the Middle East and the

2. Analysis & Outlook
Mediterranean Sea). Despite the fact the car was made exclusively for emerging markets, the
Logan has become Renault’s cash cow and big success in recession-hit European markets
particularly in developed markets like France.
The Dacia Logan is a small family car produced jointly by the French manufacturer Renault and
its subsidiary Dacia of Romania. It is manufactured at Dacia's automobile plant in Mioveni,
Romania, and in Colombia, Brazil, Russia, Morocco, Iran, India and South Africa. It is also
marketed as the Renault Logan, Nissan Aprio, Mahindra Verito or Renault Tondar 90 depending
on the existing presence or positioning of the Renault brand, according to Wikipedia. In India,
the Logan was launched in 2007 and marketed as the Mahindra Renault Logan. In April 2010,
Mahindra &Mahindra ended the joint venture when it bought Renault's 49% share and according
to the deal Logan would be marketed with the Mahindra-Renault logo until the end of March
2011. Mahindra retained the rights to produce and sell the Logan under its own name of
Mahindra Verito with minor alterations to the front but retaining Renault petrol and diesel
engines. The car is sold as the Dacia Logan in the markets where Renault has presence, such as
European, African and Asian countries (i.e. Romania, France, Italy, Belgium, Netherlands,
Germany, Greece, Hungary, Poland, Serbia, Czech Republic, Croatia, Slovenia, Morocco,
Turkey and many others) and marketed as the Renault Loganin South Africa, Argentina, Russia,
Ukraine, Colombia, Ecuador, Israel, Egypt, Brazil, Chile, Perú and Venezuela.
The Renault group is continuing its focus on improving the Dacia Logan range of passenger cars
and the company revealed the second generation Dacia Logan in 2012 Paris Auto Show.Dacia
Logan has a more modern shape with flowing lines that confer an elegant appearance while
retaining the conventional styling that is its strength. The new front face, designed around
Dacia’s new styling identity, suggests quality and strength. The Dacia logo on the grill and the
broad headlamps make for a more expressive front end. The perceived quality of the previous
generation has been enhanced through the choice of materials and improved fit and finish.
This model features a new dashboard with an updated appearance (including chrome dial
surrounds) and more ergonomic controls. Dacia Logan is built at the plants in Pitesti (Romania)
and Casablanca (Morocco), both of which are ISO 14001 certified. In France, prices for New
Dacia Logan start from €7,700 andcome with a three-year/100,000km warranty.Four engines
will be available for New Dacia Logan from launch, including the 1.2 16V 75 petrol power plant
and the brand new TCe 90 petrol engine, which marks a significant saving in terms of fuel
consumption and CO2 emissions. (Source: www.renault.com )
Renault Group is keeping the price of the Dacia Logan cheap compared to its competitors in
some markets where in the cheapest version of the car is €5,900, and the price can reach
€11,200, depending on equipment and customs duty. (The base model for Western Europe,
where it is badged as a Dacia but generally sold in Renault dealerships, is somewhat more
expensive). For Renault group Dacia Logan is a critical part of its revenue growth strategy
particularly with a focus on emerging markets as the developed markets are facing tough
economic conditions. Even customers in developed markets particularly in European region are

3. Analysis & Outlook
also looking to buy Logan as its price is low, easy to maintain and also provides good comfort.
Logan started as a no frills sedan focused majorly at the emerging markets but it saw most of its
success in developed markets where customers received this car well. The car did not perform to
the level of expectations and the joint venture with Mahindra group ended in matter of three
years and the only car that came out of this joint venture is Logan. In other emerging markets
Logan was well received and Renault too has launched many variants of Logan and also has
launched an upgraded version at the end of 2012.Logan is also a case where in over a period of
time the frugal innovation of low cost no frills version can also be supported by launching higher
cost versions of the base version.Customers would definitely buy the higher cost variants also as
evident in the Logan case. Also the portfolio of offerings can also be expanded by launching
various other types of vehicles like in the case of Logan there are Light Commercial Vehicles,
Sports Utility Vehicles, Vans, and Pick-up trucks along with base version low cost sedans.
Discussion points:
1. How important is Renault/Dacia Logan for the growth of Renault group?
2. What should Renault do to increase sales further in emerging markets?
3. How effective has been the Dacia Logan Product strategy?