Renault-Nissan alliance strategy after successful turnaround

Renault-Nissan alliance has successfully resuscitated the Japanese automaker and proven the alliance's skeptics wrong. Now, in 2004, the two companies must analyze how they are to proceed. Since Carlos Ghosn is soon to become the CEO of both companies, he must decide on the future strategy for the two companies, to maintain the alliance's positive momentum. At present, there are few existing problems. Both companies are performing well and the alliance has proven to be a success. In future, however, there are some problems looming. One is that the sense of urgency which has driven these companies to their current level of success may wane now that they are both on stable footing. The second problem is whether or not to integrate the two companies further or to maintain the current level of integration. The third problem is more fundamental -- to build more market share and profits for Renault and Nissan.

Information

The success of the past five years provides insight into the ways in which the future problems can be addressed. While the two companies have had a strong alliance over the past five years, the intensity of that alliance was held at a constant level. Managers worked in cross-functional teams and the two companies worked to find areas of synergy that they could leverage to improve their market share and profit position. This provides a road map for building future market share and profit growth.

What is unknown, however, is how the managers at these two companies will react now that the sense of urgency is reduced. The two companies came together at a time when both were in crisis. They needed each other. They likely still do, but with both companies being profitable, managers may not be driven to give the same high level of dedication to the organizational change process. The transformation of Renault-Nissan is complete, what we do not know is if the same people who drove that change are going to be able to lead this company through a period of slower growth and less dramatic cultural and operational shifts.

Recommendation and Implementation

I would recommend that Ghosn maintain the same level of integration between the two companies, but initiate a new set of strategic objectives. The current model of managerial collaboration has been successful thus far, so the structure should be maintained. The strategic focus, then, should be on continued market share and profit improvements. The two companies have demonstrated that the existing structure is powerful enough to transform an established company like Nissan. With strong objectives set that build upon the work that has already been done, the companies can continue along their existing path.

The structure of the company, with the cross-functional teams, is already in place to carry out the recommendations. The most challenging part of the recommendation is the building of motivation among managers who have spent the past five years working hard to restore Nissan to profitability. This element of the strategy will require a further cultural shift, from one that emphasizes cooperation in the name of recovering the business to one that emphasizes pushing the company into a position of global dominance. The first step will be the ascension of Ghosn to Renault CEO. This will serve as the flashpoint for the cultural shift. Ghosn needs to emphasize now the ways in which Nissan can help Renault, in addition to Renault helping Nissan. In addition, Ghosn needs to set new strategic goals, such as becoming the #4 automaker, building share in key markets, or expanding market Nissan into Renault territories and vice versa. The emphasis needs to be replaced not just on revised goals but on continued improved synergies.

Marketing

The two companies are addressing multiple problems, but there is a high degree of congruence between these problems. Improving synergies between the two companies, however, will require a strong marketing emphasis. At present, it is recommended that the product and distribution functions of the marketing mix be the key point of focus, as this is where the expertise and infrastructure of the two companies can best be shared. While the companies may not be any further integrated structurally, the marketing message should also be shifted, to reflect the high level of cooperation between Renault and Nissan. As dealerships begin to carry products from both lines, as in the Mexican model, the companies will become as one in the eyes of the consumer. Combined with complementary product lines, there is tremendous opportunity to build Renault Nissan as one singular brand, superior to either of the two constituent brands. Furthermore, it is recommended that the marketing message promote the aligned companies as one of the world's leading automakers. Managers, employees and even consumers could be forgiven for viewing these brands as bit players in the auto industry, but the vision for the future that it recommended and that Ghosn should pursue is one of a major global automaker. This image needs to be presented both internally and externally, in order to support the other elements of the recommended strategy. When all of the stakeholders view Renault Nissan as a global powerhouse, it will provide additional motivation to the managers to live up to that reputation.