Collaborative Partnership Between Renault, Nissan

¶ … collaborative partnership between Renault, Nissan and Daimler Managing strategy and change: Nissan, Renault, and Daimler AG Alliance The current global business climate is challenging given the fiscal pressures in Western Europe and the United States. The automotive industry would feel the pinch because of the nature of the industry. It is, therefore, essential for any organization to examine its approach to strategy and change taking into account the unique aspects of the industry in which it operates (Worthington and Britton, 2009).

This report looks into strategy and changes taking into account the Nissan, Renault, and Daimler alliance. Strategy, in the simplest form, is determining outcomes the organisation should achieve and then seeking to understand the nature of circumstances or events that will shape these outcomes (Thompson, 2004). Strategy, therefore, leads to decision making, implementation, and evaluation in a continuous ever changing process that should engage all within the organisation.

Similarly, when it involves bringing together of different entities, it is about synergy and achieving more than the individual firm would achieve working alone. An analysis of the three organisations and the auto-market in the world will come first. This involves a close look at the macro-environment using PESTEL analysis, a competition analysis using Porter's Five Forces, and a SWOT analysis. The next part will involve describing reasons for the alliance and any challenges that arise in the collaboration (McGee, Thomas, Wilson, 2005). 2.

The Alliance The Nissan, Renault, and Daimler alliance represent the new approach to collaboration in the automotive industry. The three companies retain their identities such as brands and company culture while gaining from increased cooperation between the three entities and any other partners. This is not a merger or an acquisition in the traditional sense, but it involves exchange of equity to ensure all parties have a financial interest in one another. A proper understanding of this alliance is only possible with background information on the three companies.

Nissan is a Japanese company with experience in production of heavy and light vehicles. Renault is a French company with wide interests in the automotive industry. The two companies, Renault and Nissan have a worldwide presence. However, each company has significant advantages in terms of market penetration and brand strength in different parts of the world. These companies have been successfully in an alliance since 1999.

Daimler AG, a German company, is the owner of the premier automotive brand "Mercedes Benz." The company has wide interests in the auto-business and is present worldwide. In 1998, Daimler merged with Chrysler in a deal that went sour and necessitated separation in 2007. The complexities of the industry and other factors are to blame, but the bottom line matters regardless of the challenges in the industry. It is, therefore, a step forward for Daimler to join the Nissan-Renault alliance and benefit from the synergy resulting from the cooperation.

It is essential to note that prior to this alliance, Nissan and Renault had a shareholding agreement of considerable magnitude. Nissan owns 15% of Renault while Renault owns 43% of Nissan. The members can negotiate terms with other additional partners independently as long as it is good business. Furthermore, the Renault-Nissan alliance provides a model for alliances in the industry and valuable lessons for the alliance under discussion. 3. Analysis 3.1 the Macro-Environment This refers to influences that affect many businesses locally and internationally and usually make up the list for PESTEL analysis.

PESTEL "consists of the Political, Economic, Socio-cultural, Technological, Environmental, and Legal aspects of the environment" (Lynch, 2009, p. 82). An analysis of these aspects by an organisation is a key success factor in strategy formulation. The global automotive industry is particularly dynamic and weighs in on each of the aspects differently. Daimler and Renault are in the European Union and are under the influence of the political climate of the block. The sovereign debt crisis was a political issue as much as it was fiscal.

This means there is much sensitivity about foreign manufacturing, labour issues, and company policies, not in line with the government in power. On the other hand, Nissan is Japanese, and the political issues may have an impact on sales. For example, Japan and China have long standing territorial disputes that may threaten Nissan key market, China. European and Japanese economies are in different continents, but the companies in question have a global presence.

The European market has had a reduction in demand which would affect any company dependent on this market. However, it is noteworthy that emerging economies have sustained growth through the crisis. Therefore, it is necessary to ride on this demand in order to reap benefits down the line. The economic factor affects the demand, production, and sales decisions. Socio-cultural issues have a strong impact on company strategy. Japan, France, and Germany have different cultures, but the companies have similar cultures that complement.

Social issues like unemployment, social unrest, and public perceptions have far reaching consequences. There is a general perception of high unemployment in Europe especially among young adults. These issues would drive social agenda and may even influence tastes and preferences. Technology is the biggest driver in the auto-industry. It is almost a panacea in a broad sense of the term. There is extensive research within the industry as companies seek to maintain the competitive edge and give customers exactly what they want.

Technology can become out of date within a period of two and half years requiring an improvement in order to maintain the market share. Furthermore, information technology is integrating more and more into the structure and functions of machines. The manufacturers have to keep up with new developments while actively seeking to be first with these developments. There are many other issues to consider under environmental aspects. The customer is increasingly concerned about emissions right from production to usage of the automobile.

Furthermore, issues such as energy efficiency, responsible resource utilisation, and overall sustainability integrate visibly into policy decisions in order to stay ahead. The European Union has good rules but global organisation must ensure a high degree of compliance in all their locations. The legal aspects affect organisations more than any other factors since they are legal entities. Laws and policies on labour, discrimination, environment, materials, patents, and transportation are just few examples that noncompliance would result in massive losses for companies that have sales in millions of units.

Other issues are anti-trust laws that promote competition in the industries. The design process should integrate the possibility of lawsuits and have mechanisms to avoid them. The governments also have emission laws that require cars to have low carbon emissions. 3.2 Competitive Environment "Porter's five forces analyses industry rivalry by looking at threat of new entrants, power of suppliers, power of buyers, and threat of substitutes" (Porter, 1979, p.141).

In order to maintain competitive advantage, an organisation must sharpen the collective competitive intelligence by having a clear picture of the competition in the industry. This is a matter of survival in the auto-industry. Suppliers in the industry provide raw materials such as steel, leather, rare elements, and plastics. The companies source these in large quantities from limited large scale suppliers and with intense competition from many companies and other industries. This increases the power of the suppliers of the raw materials considerably.

However, the global nature of the auto-industries would reduce the power of suppliers considerably since the manufacturing concerns are in many countries (Johnson et al., 2011). The buyers have considerable power in the auto-motive industry. There is overproduction and similarity in the automobile on offer, giving the buyer choice and hence much power. However, organisations manage this through advertisement and market segmentation. As an individual, the buyer has little power and can only negotiate the price to the extent that dealers can accommodate.

Large organisations and governments can have a strong negotiating power given that the number of units they buy can translate to a stronger brand presence. There is no substitute for the car in this era. People may choose environmentally friendly ways like walking and cycling but given an equally green alternative they would take it. Any other way would require a behavioural and structural change on enormous magnitude. The only worry for manufacturers is products from rivals that offer the same experience.

This is a headache for the auto-industry given the capacity in the industry. The emerging economies like China have small companies that are growing in leaps and bounds (Carpenter and Sanders, 2009). These companies enter the global stage and threaten established players like Nissan, Renault, and Daimler. This is because some governments and conglomerates have sufficient capital to fund these ventures. The BRIC countries are leading in this arena of new entrants.

All the issues constitute industry rivalry that will intensify as production capacity increase and smaller company develop the expertise to produce quality products. Nissan, Daimler, and Renault have to be aware of these threats. 3.3 Resources & Capabilities This includes human, financial, physical, and other assets that enable the organization deliver its core functions. The identification of resources, as well as capabilities, enables a comparison of strengths and weaknesses against opportunities and threats (McGee et al., 2005). The value of these resources should increase in the event of an alliance.

The three companies have considerable financial resources given their global presence and a combined equity of almost a hundred billion Euros. They have manufacturing facilities within the NAFTA area, the EU, and the BRIC countries. These two resources represent a strong position within the industry since the companies can save cost by manufacturing parts in a location that is least costly. This list of resources is not exhaustive since each member in the alliance has other partnership agreements.

Renault and Daimler have a strong research tradition that will drive the production of new engines. Nissan, on the other hand, has a production method that it has perfected over the years. Each of the members of the alliance has brand strength that is a valuable resource. Daimler has a global presence. Renault has a strong European presence while Nissan has a strong Asian and North American presence.

Each of these resources comes with a human resource replete with experience, tradition, and expertise that represent the strongest point of the synergy (Gladwell, 2000). It is, therefore, quite clear that each member has brought so much to the alliance for mutual benefit. 4. Rationale for the alliance The rationale is simply the Strength and Opportunities section of a SWOT analysis. The first is financial since a combination of three global enterprises brings so much power and the potential for profitability.

It is, therefore, possible for the alliance to finance capital intensive projects like the research into the development of electric cars (Carpenter & Sanders, 2009). The companies have swapped shares in order to deepen their financial interests in each other. The companies share knowledge in research and processes. Further, the members pool resources together to share platforms and even facilities such as warehouses and factories. This results in economies of scale that lower cost margins and result in higher profits even in an extremely competitive environment.

It is also less costly for an alliance to fail than when a merger fails. The members within the alliance reap benefits of each brand and corporate image without the complexities of coming up with fresh brands. This is a significant advantage of the model of the alliance. Each member has exceptionally strong brands on which other platforms can ride. It is essential to note that the borrowing of technology from each other would strengthen brands which did not have an edge (Carpenter & Sanders, 2009).

The biggest gain is when the companies provide each other with a means to enter new markets. This results in fast market penetration for members of the alliance. Daimler has a worldwide presence, but Nissan and Renault have to complement each other. Furthermore, the knowledge base, brand presence, and competitive edge the established player provides the new player is essential (Kotler and Armstrong, 2012). This makes it easy to market, distribute, and provide services for a consistent brand.

There is a trend in globalisation where the organisations try to make sure there tailor their products to the local region. The alliances provide this touch since the individual members bring necessary expertise within their region of dominance. Furthermore, an alliance maintains the brand names and corporate image ensuring that previous associations made by the customers are still useful. The model of operation involving an alliance has several challenges. First, some of the members may underperform either in terms of total sales, total revenue, or model development.

This is a key issue since the general image of the alliance involves the sum of the individual images of the members. Secondly, there can be ownership conflicts especially for patents, images, research materials, and many other resources especially those that are intangible. There emerges a dominant player in alliances who may push the other plays into oblivion. The result would be the disappearance of brands especially when they share common platforms.

This would also translate into a fight for control of the various shared aspects in the alliance like facilities and brands. These.