Essay on Nissan Motors

In this paper, we analyze the Nissan Company’s business activities to show the strategies of development applied by modern transnational companies, as well as the problems they may be facing and the solutions in terms of marketing and management they find to stay competitive and successful in the constantly changing conditions of today’s global market. In the paper, we provide our overview of the literature on business strategy of Nissan in the 21^st century, as well as the analysis of these strategies. We also summarize the goals and strategies set by the company through a SWOT-analysis, and further reveal the essence of some strategies in detail. Below we will describe the basic strategies of the company in the global market, in particular, the choice of market segments, strategies of distribution in foreign markets, as well as the merger strategy in crisis conditions. Based on this, we consider the company’s new plan of development with the focus made on long-term prospects of emerging markets. We also describe the updated corporate objectives, and future key strategies based on current market conditions.

Introduction

Nissan Motor is a Japanese industrial corporation specializing in the production of cars, trucks and buses under the trademarks of Nissan and Datsun. Today the factories of Nissan Motor Co. producing cars are located in 16 countries; the official sales are conducted in 190 countries. The Nissan Company is focused on consumers belonging to different social classes, with different tastes and preferences, and varying income (Nissan-Global, 2012).

The global model range of the company includes more than 60 different models. Nissan is committed to creating cars that can offer the buyer economical fuel consumption, low level of emissions of harmful substances into the atmosphere, cutting-edge safety technology.

Research centers of the company are working on the development of new technologies that would allow cars to be competitive and at the same time carry some additional value for customers. Globally, the company is working to minimize the negative impact of their activities on the environment, and also carries out social programs designed to improve the welfare of society, which is essential for successful business development. Below we will describe the basic strategies of the company in the global market, in particular, the choice of market segments, strategies of distribution in foreign markets, as well as the merger strategy in crisis conditions.

Literature Review

Over the years, Nissan cars have had a reputation of high quality Japanese cars. And today they are still characterized by high reliability, unique design and excellent handling. Nissan brand has become synonymous to high quality vehicles around the world; it has been also repeatedly recognized the safest car. Today, Nissan Motor Co. is an excellent example of a fast-growing company that builds its success on the principles of a strong positioning and strategies which are expressed in the company’s global mission: to produce unique and innovative vehicles and service representing the highest value to customers, employees, dealers and suppliers (Nissan Global, 2012; O’Regan and Ogata, 2007).

Currently, Nissan has turned into a giant transnational concern. Each year, Nissan produces and sells about 3 million vehicles, making it one of the world’s largest manufacturers. Since the beginning of production in 1934, Nissan released more than 77 million vehicles (Shimokawa, 2010).

The goal of Nissan is not just to make everybody like it, but to become truly favorite brand for those who want to stand out and appreciate the original design and style, technological excellence and quality. But today, as well as a few years ago during the Asian crisis the company faces a number of difficulties.

Thus, the high exchange rate of the Japanese yen makes Nissan Motor Co. consider the possibility of changes in production plans and development strategies. Yen reached record highs against the US dollar in late October 2011, which was a strike to Nissan’s profits, which are mainly made from the production of cars in Japan for foreign markets.

According to Voisey (2010), strong yen may force Nissan to transfer the production to countries outside Japan. Rising of yen allows automakers to buy cheaper raw materials and, possibly, foreign assets. However, it also reduces the profit obtained on the major automotive markets such as Europe and the US (Ayoglu, 2011).

Indeed, despite the fact that today the plants of Nissan Motor Co. are located in 16 countries, and official sales are made in 190 countries, focus only on the U.S. market, which is the largest in the world, is now inappropriate (Khanna and Palepu, 2010; Jindal et al., 2011). Almost half of Nissan’s profit depends on the U.S. market, but car sales are falling there rapidly. Because of this, Nissan finished the last fiscal year worse than expected (Jindal et al., 2011). The concern has announced 11% decrease in profit due to the lack of new model in the U.S. Also, Nissan has become another automaker to announce a fall in sales in Europe – in June, the sales of the Japanese brand vehicles decreased by 1.6% to 57,196 vehicles. Nissan sales fell by almost 30% in Italy and Spain, where the ongoing economic slowdown caused a decline in demand in the market of new cars. According to Nissan, the sales of the company in the UK fell by about 10% (Nissan Global, 2012).

Apart from that, a strategic alliance with Renault brought a great potential for changes in strategy. Renault-Nissan Alliance created on March 27, 1999, marked the first industrial and commercial convergence of this kind between the French and Japanese companies, each of which brought its corporate culture, as well as the name and reputation of its brand in a new alliance (Donnelly et al., 2005; Segrestin, 2006; O’Regan and Ogata, 2007; Loska, 2011). Both companies follow a common strategy for profitable growth and are connected by common interests, in particular the prospects for the development of hybrid car models, which today is one of the most successful innovations in the automotive market (Pohl, 2012).

In addition, Nissan has recently announced the return of Datsun brand unveiled a new logo of the brand. According to the medium-term business plan Nissan Power 88, the company intends to strengthen its position in fast growing economies. That is why the decision was made to return the brand Datsun, as a basis for future profitable growth in these markets (Nissan Global, 2012; Khanna and Palepu, 2010). Indeed, today the world is changing rapidly, and in countries with high rates of economic growth, people look to the future with optimism and looking for the best deals that meet modern needs (Quelch and Deshpande, 2004). Not surprisingly, Nissan is seeking to respond to requests of new groups of consumers in these countries.

In general, having examined the literature on business strategy of Nissan in the 21^st century and coming to the analysis of these strategies, we can summarize the determination of goals and strategies of the company through a SWOT-analysis, and further reveal the essence of some strategies in detail. Thus, Nissan’s

Strengths:

1. Ability to respond to market conditions and consumer preferences;
2. Strong competitive position;
3. High levels of production and technological experience;
4. Ability to changes and innovations;
5. Wide range of products.

Weaknesses:

1. The decrease of company’s share in the market;
2. Customer’s entanglement in the image of the brand;
3. Rigid corporate rules and conservatism in culture.

Opportunities:

1. Increased sales in the new markets;
2. Technological breakthroughs;
3. Increase in production for export to the new markets;

• Development of new models with regard to consumer preferences;
• Implementation of technological breakthroughs, using the technical experience;
• Expansion of dealer network to increase sales rates;
• Increasing the share in the world market by increasing sales in the new markets;
• Creating unified corporate rules to create a good image of the company;
• Focus on sales in the new markets with great potential;
• Increased investments in advertising to maintain the competitive level;
• Establishment of production in the emerging markets;
• Conducting promotional, familirization activities to improve knowledge of brand among consumers;
• Improvement of the quality of service in Nissan dealerships, maintaining a high level.

Threats:

1. Car sales fall in the key market – the S.;
2. Difficulties to find local partners in the emerging markets;
3. More investment is needed in the creation of a developed distribution network in the emerging markets;
4. Big competition and developed corruption in the new markets important for Nissan;
5. Exposure to currency risks, fraudulent products and changing environment.

Analysis and Findings

Market choice strategies

Like most automakers, Nissan is trying to compensate for their problems by increasing sales in new markets such as Russia, China, and India. It is due to car sales in these countries that Nissan Company can expect to achieve the previously set goals for the fiscal year: to achieve sales of 3.7 million cars and get a net income of 480 billion yen (that is 4.3% more than last fiscal year) (Jindal et al., 2011; “Nissan hones its global strategy”, 2011).

According to data of the global research company CSM, in the next six years the emerging markets will account for about 76% of global car sales. By 2014, the U.S. market will grow by only 1.5% to 17.9 million vehicles. In the countries of BRIC (Brazil, Russia, India, and China) the growth will be much higher – from 6% to 16%. The sales in China will grow by 7.3%, in India by 15.5%, in Russia by 6.2%, and in Brazil by 5.7%, as projected by CSM (Ayoglu, 2011; “Nissan hones its global strategy”, 2011).

For example, the volume of the Russian automotive market grew by 57% in 2007, and made over $50 billion (Jindal et al., 201). Today the Russian passenger cars market is the sixth largest sales market in the world and third in Europe (Ayoglu, 2011). These are the results of the annual review of the automotive industry conducted by Ernst & Young, the leading international auditing and consulting company. In 2013, Russia will overtake Germany and Italy and become the largest market in Europe for car sales (Khanna and Palepu, 2010).

According to the forecast of the Russian market development, in 2012 Russia will have 5.2 million vehicles, of which 4.6 million will be new cars (Jindal et al., 2011). The growth forecast is based on the plans of producers, comparative data on the density of the fleet, improving living standards and the development of loan products. Therefore, Russia currently can be considered one of the most attractive countries for the promotion of Nissan brand.

The choice of customer segments and strategies of innovative production to meet their preferences

The Nissan Company is focused on consumers belonging to different social classes, with different tastes and preferences, and varying income. For example, Nissan Infiniti is rightfully considered one of the stately, expensive and high-quality vehicles, and a car like Nissan Micra is a dream of any modern girl (Hendry, 2012).

Nissan has announced that the target audience of Nissan Murano is young people aged around 30, who are already married but have no children yet. Also the car is aimed at men aged 50 whose children have already started independent life (Hendry, 2012). The car, according to company representatives, is designed for free-thinking young people who have already determined their life values (Nissan Global 2012). The car is designed for the young couples who live in the city and lead an active life. Engine volume and the body with the length of 1880 mm are ideally suited to the conditions of urban roads and parking lots. However, apart from Murano, the Nissan’s new model Teana can become a particular sales hit. It is oriented on the conservative-minded self-sufficient middle-aged people.

Moreover, by returning the brand Datsun on the market, the company aims to make an offer to consumers, which takes into account the values and preferences of customers in each concrete new market through using local features. The target audience of this brand has a lot of vital interests, and it is important for this audience to get the optimal choice without unnecessary or undesirable options.

In addition, in 2007, Nissan entered into an agreement with the rival Toyota to use some of the hybrid drive technology in the new Altima, thus initiating a new direction of its activity – the production of hybrid electric vehicles (HEV), running on both petrol and electricity (Pohl, 2012; Freyssenet, 2009). In our opinion, this decision is one of the most promising in today’s automotive market: the popularity of hybrid models is growing faster than the competition in this segment. Thus, production and sales of hybrid models has great potential for high dividends, and therefore this strategy has a right to be included in long-term plans of the company.

In general, the introduction of innovations to meet consumer preferences is the main goal of the company. This, since 2008 up to 2013, Nissan has planned to bring 60 new models to the market and annually present 15 technological innovations starting from 2009 (Sum Chau and Witcher, 2008). In addition, Nissan Motors proposes the strategy of unifying all the automobiles, advocating for global unification by the type of standard connectors used in computers and communication means (Shimokawa, 2010). This desire of the Japanese manufacturer can be explained that nowadays the process of developing a vehicle should necessarily consider several factors: on the one hand, cost reduction is the major factor in maintaining product competitiveness; at the same time, the raising demands for environmental friendliness and safety of a car are becoming increasingly important but often cause an increase in the cost of production.

To solve this problem once-for-all-time, Nissan has presented its new strategy for designing vehicles of the next generation, called Nissan Common Module Family (CMF) (Nissan Global, 2012). This designing strategy involves a modular system for creating future car models in conjunction with the Japanese company’s own engineering developments. Its essence lies in the fact that CMF will apply four modules – engine compartment, cockpit, front lower and rear lower tail panel, as well as the structure of electronic components. In this case, each module will have the required amount of variations, while various combinations of these modules will allow Nissan to create multiple vehicles – from compact city cars up to full-size offroadsters.

In our opinion, the ability to quickly introduce changes into the product is especially important in today’s conditions of highly competitive market, where every new car must have unique features, distinguish by lower fuel consumption, higher safety levels and equipment with modern IT-solutions, as well as the possibility of fast implementation in the process of new technologies development. At the same time, achieving efficient production volumes should take place with the maximum possible application of common parts and components. Until today, these mutually exclusive factors were virtually impossible to balance, but as we can see, the Nissan CMF concept of new-generation designing of cars is factually created to handle these tasks.

Renault-Nissan strategic alliance

The alliance concluded in the Asian crisis of 1998, in our view, certainly has a number of advantages (based on Culpan, 2002; Loska, 2011; Donnelly et al., 2005; Segrestin, 2006; O’Regan and Ogata, 2007; Sum Chau and Witcher, 2008):

– The mutual practice of adaptation and sales of partner’s products under one’s own brand (double-badging), interchange of parts and units, cross-production of commercial vehicles. Thus, in September 2002, the models Renault Master and Trafic became prototypes for the Nissan models Interstar and Primastar.

– The use of two common platforms in segments B and C. The first platform was put into production in 2002 for the new Nissan Micra, and will serve as the basis for the cars that will replace the Renault Clio and Twingo. The second platform is used since 2002 for the Megane II. Renault and Nissan aim to have 10 common platforms in 2012.

– The common use and development of engine and gearbox. In 2010, they had eight common lines of engines and seven common lines of the gearboxes.

– Consolidation of resources of Renault and Nissan in research, particularly in the areas of advanced technologies, including the fuel cell.

– Significant reduction in costs due to combined purchases and the establishment of common supplier base. In January 2004 the amount of procurement operations performed by RNPO (Renault-Nissan Purchasing Organization) has increased from 43% to 70% of the total purchases of the alliance, which makes $33 billion a year.

– Exchange of experience in the field of production technology, which allows both companies to combine their achievements: for example, AVES – car assessment system – has been applied to all Renault et Nissan factories since January 2003.

– Reducing delivery times and reduce costs by unifying the logistics operations of both companies.

– System support for joint projects. In July 2002, the company RNIS (Renault Nissan Information Services) was created, whose mission is to provide cost-effective systems and optimization of infrastructure of IS/IT departments of both companies.

In 2007, the Renault-Nissan Alliance has advanced on all fronts, laying the foundation for its future growth. Thus, in the further development of products and technologies, Nissan can expand its range by using the Logan platform from Renault. In turn, Renault has the opportunity to take advantage of the undoubted achievements of Nissan in the field of manufacturing 4×4 all-wheel drive models. Nissan has taken an active part in the development of the newest crossover for Renault and Renault Samsung Motors. The new car, the style and concept of which is developed by Renault specialists, will be manufactured at production facilities of the company Renault Samsung Motors in Korea (Loska, 2011; Freyssenet, 2009).

Developing a critical initiative today aimed at reducing automobile emissions of carbon dioxide and soot particles in the environment, Renault-Nissan Alliance and the Israeli company Project Better Place has already paved the way for rapid progress in the creation of a vehicle with an autonomous electric traction, which entered the markets of Israel in 2011 (Pohl, 2012).

In our view, it is the mutual cooperation that allows the alliance partners to achieve growth in emerging markets. They have made significant investments in China (Nissan and Dongfeng), India (Renault and Mahindra & Mahindra), and Russia (Renault and Avtoframos). Thus, December 8, 2007, Renault group signed a memorandum of understanding with the management of AvtoVAZ plant (Russia), production capacity of which will allow producing more than 750,000 cars a year (Loska, 2011). In the Moroccan city of Tangiers, Renault-Nissan Alliance and the Kingdom of Morocco will deploy the construction of one of the largest automobile plants on the Mediterranean coast with the designed annual capacity of 400,000 cars per year. In the Indian city of Chennai, Renault and Nissan plan to build for the State of Tamil Nadu one of India’s largest automobile plant with the capacity of 400,000 vehicles a year (Shimokawa, 2010; Nissan Global, 2012).

Thus, the Partners of the Alliance will continue their further development on the basis of a successful and mutually beneficial cooperation and sharing of advanced technologies, leading both companies to further prosperity.

Conclusion

Successfully implementing the abovementioned business strategies, Nissan has all chances to fulfill its five-year strategic plan for international marketing called “Nissan GT 2012” (where G means “growth”, and T stands for “trust”) and operating in the period from April 1, 2008 to March 31, 2013 in all countries of production and sales of Nissan brand (Sum Chau and Witcher, 2008). Based on this, the focus in the new plan of the company should surely be given to long-term prospects, as well as accountability to shareholders, the company should demonstrate in leading business on a global scale.

Thus, under the current conditions, the long-term plan for Nissan Motors should contain the following corporate objectives of the company (based on Barney and Hesterly, 2012; Johnson et al., 2011; Quelch and Deshpande, 2004; Smith et al., 2011):

1. Leadership in the sphere of providing high quality (In addition to the continuous improvement of product quality, the company should pay great attention to improving the quality of provided services and management, as well as to strengthening the brand on a whole).
2. Leadership in creating vehicles with zero content of harmful impurities in the exhaust gases.
3. Annual revenue growth on average by 5% over the next years (At the same time, in our opinion, revenue growth should be provided by the active output of new products).

In general, the key strategies of the company are to be focused at:

– Product Development, which includes the development of new Nissan models for new and existing markets;

– Market Development, which includes identification and application of new segments of the auto market;

– Product Modification, which includes modifications to the existing Nissan models, so that they will acquire new functions or become attractive to other buyers.

These key objectives must be supported by such business breakthroughs:

1. Leadership in quality;
2. Leadership in the development and production of hybrid cars;
3. Business development (maybe, through production of light commercial vehicles and instruction of an “entry level” car on the global market;
4. Developing such markets as Russia, India, Middle East, Brazil and China;
5. Leadership in the efficient usage of resources.

Operating in the global market and playing an important role in the development of the modern mobile community, Nissan Company should necessarily find a balance between the potential growth of the world market and the desire to keep the planet clean. From this point of view, the wide access of consumers to the purchase of affordable cars with a zero content of harmful impurities can be seen as the most significant strategic achievement, which can only be provided by the global automotive industry and Nissan Motors in particular.