Nissan's Turnaround Story|Business Strategy|Case Study|Case Studies

Nissan's Turnaround Story

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Case Details:

Case Code : BSTR073
Case Length : 18 Pages
Period : 2003
Organization : Nissan Motors Ltd.
Pub Date : 2003
Teaching Note : Available
Countries : Japan
Industry : Automobile

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This case study was compiled from published sources, and is intended to be used as a basis for class discussion. It is not intended to illustrate either effective or ineffective handling of a management situation. Nor is it a primary information source.

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Nissan - Renault Alliance

Initially, Nissan had talks with three players - Daimler (Germany), Ford (US) and Renault (France). Nissan was more interested in either Daimler or Ford picking up a stake in the company as both these companies were bigger and had more financial muscle than Renault (which had just re-established itself in 1997). But both Daimler and Ford backed out and Nissan was left with only one possible partner - Renault...

Enter Carlos Ghosn

Three of Renault's top executives - Carlos Ghosn (Executive vice president, Renault), Patrick Pelata (Senior vice president, vehicle development) and Thierry Moulonguet (Vice president, capital expenditure controller) were appointed on Nissan's board as Chief Operating Officer, Executive Vice President-Product Planning and Strategy, Managing Director and Deputy Chief Financial Officer of Nissan respectively. When the executives from Renault headed by Carlos Ghosn (Ghosn) came down to Japan, Japanese newspapers reported that Ghosn was a 'cost killer' and would take drastic cost cutting measures. Contrary to the reports, immediately after taking over as the COO of Nissan, Ghosn did not announce any plan for Nissan's revival, nor did he announce any cost cutting measures...

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Implementing The NRP

One of the objectives of the NRP was to reduce the purchasing costs by 20% by 2002. Ghosn said, "This is a crucial objective, because purchasing represents 60% of our total costs, or a minimum of 58% of our net sales." In order to reduce purchasing costs, the NRP stated that it would focus on:

Centralizing purchasing activity
Including services in global purchasing strategy
Decreasing the number of suppliers...

Profitable at Last

Though Nissan had set the official target for returning to profitability as FY 2002, it announced profits in FY 2001 due to successful implementation of the NRP. For the FY 2001, Nissan announced an operating profit of $3.92 billion and an operating margin of 7.9%. Nissan's debt was reduced to $3.48 billion and its stock also moved up hitting a 52 week high of $15.97 per share on NASDAQ. Announcing Nissan's 2001 financial results Ghosn declared - "The Nissan Revival Plan is over. [The record results] are the fruit of the NRP, fruit that even the most optimistic of outside observers in 1999 didn't think of." After the implementation of the NRP, Nissan saw its market share slowly increasing with the launch of new products...

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Exhibit I: Consolidated Financial Statements Before NRP
Exhibit II: Consolidated Financial Statements After NRP Implementation
Exhibit III: Profile of Renault

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