25th of August of 2010

AN ANALYSIS OF THE RENAULT-NISSAN

ALLIANCE

Roger Robert Kock

UWL ID: 29002666
CTL ID: 100123-84
MBA Human Resources Management
1. TABLE OF CONTENTS

2. EXECUTIVE SUMMARY..................................................................................................................3
1. INTRODUCTION.............................................................................................................................4
2. HISTORY........................................................................................................................................5
3. METHODS......................................................................................................................................6
4. ANALYSIS.......................................................................................................................................7
4.1. ALLIANCE HISTORY AND CONTEXTUALIZATION.....................................................................7
4.1.1. Before............................................................................................................................7
4.1.2. Signing the Contract.......................................................................................................7
4.2. THE RENAULT-NISSAN ALLIANCE...........................................................................................8
4.2.1. Early Stages....................................................................................................................8
4.2.2. Change and Leadership................................................................................................11
4.2.3. Renault-Nissan today and tomorrow...........................................................................16
5. CONCLUSION...............................................................................................................................19
6. APPENDIX A.................................................................................................................................20
6.1. SWOT ANALYSIS OF RENAULT AND NISSAN.........................................................................20
7. APPENDIX B.................................................................................................................................21
7.1. CORE COMPETENCES OF THE RENAULT-NISSAN ALLIANCE.................................................21
8. APPENDIX C.................................................................................................................................22
8.1. RENAULT-NISSAN ALLIANCE HISTORY..................................................................................22
9. APPENDIX D.................................................................................................................................24
9.1. ALLIANCE FIGURES AND MARKET POSITION........................................................................24
10. BIBLIOGRAPHIC REFERENCES..................................................................................................25

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2. EXECUTIVE SUMMARY

The Renault-Nissan alliance, established in March 1999, is the first industrial and
commercial partnership of its kind involving a French and a Japanese company. It has
formed the world’s third largest global automaker (2009 Renault Annual Report), with a
significant presence in major world markets (United States, Europe, Japan, China, India,
Russia and Brazil) (2009 Renault Annual Report).
But this alliance was possible mostly due to Carlos Ghosn, chairman and CEO of
Nissan-Renault Alliance. Ghosn was able to deal with both companies cultural differences
and canalise their strengths towards a common goals:
 Save Nissan.
 Increase their global presence.
And after 11 years the alliance is considered the most successful of the automotive
industry, being able to share car platforms, plants and even marketing strategies.

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1. INTRODUCTION

Signed on March 27, 1999, the alliance between Renault and Nissan is a unique
partnership of two global companies, and it is based on a couple of founding principles:
 Developing all potential synergies by combining the strengths of both companies
through a constructive approach to deliver Win-Win results (2009 Renault-Nissan
Annual Report).
 Preserving each company’s autonomy and respecting their own corporate and
brand identities (2009 Renault-Nissan Annual Report).
More than eleven years already gone by since this partnership began, period in which
several changes struck both sides. This report proposes to discuss the history and the
outcomes of the Renault-Nissan Alliance and how the leadership of one man, Carlos Ghosn,
made the difference for these companies.

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2. HISTORY

The Renault Motor Company was founded by Louis Renault and his brothers in 1898
(Renault History and Culture, 2010). Since then, they went from a national corporation to a
world class private company, selling cars in more than 100 countries.
The history of Nissan is more complex and it dates back to 1914, year in which the
Kwaishinsha Motorcar Works launched the first DAT car. In 1925 the company changed its
name to DAT Motorcar Co. and a year later due to weak sales of its products, it began a long
series of mergers, including one with a recently established company called Nissan, that
would have full control of DAT in 1933 (The History of Nissan Motor Company, 2010).
After further setbacks in the early 90's, the now called the Nissan Motor Co. got into
financial difficulties, which led her to make an alliance with Renault Motor Company in
1999, selling to her 36.8% of its shares. Later, in 2002 Renault increased this percentage to
44.4% (The History of Nissan Motor Company, 2010).

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3. METHODS

The methodological approach adopted for this report was initially a literature review
which consisted of a bibliographic search through books, journals, articles and documents.
Besides the literature, we performed a visit to the technological centre of Renault in
Guyancourt. At the site, we were provided with access to internal documents and the
opportunity to examine the technological level that Renault is, with an already advanced
development of a revolutionary zero-emission vehicle, the LEAF.

Image 1: Renault Technocentre in Guyancourt.

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4. ANALYSIS

4.1. ALLIANCE HISTORY AND CONTEXTUALIZATION

1.1.1. Before

In the year of 1999 Renault and Nissan were living completely different situations.
While the first was coming from a privatization process, eager to explore new markets,
Nissan was in a very delicate moment.
Main victim of the car crisis of the 1990s, which remain in the history of Japan as "The
Lost Decade", Nissan had been in deficit every year (except 1996) since 1992. It had
accumulated more than 20 billion dollars in debt and exhausted its resources fighting
against their number one rival: Toyota. Its share of the global car market fell from 6.6% in
1991 to 4.9% in 1998, and it kept decreasing for 27 years on its domestic market (Nissan
Confidential Document, 1999).

4.1.1. Signing the Contract

By the end of the 1990’s what Nissan needed the most was money, and fast. At the
time, the president of Nissan, Yoshikazu Hanawa, was seeking a partner in the automotive
sector ready to inject large sums of money in his company. Two companies were shortlisted:
DaimlerChrysler and Renault. In March 1999, DaimlerChrysler withdrew from the race,
claiming internal problems (Nissan Confidential Document, 1999). The way then, was free to
Renault, the only suitor.sa
The CEO of Renault at the time, Louis Schweitzer, who wanted to increase Renault’s
market share in the automotive industry, was determined to go forward. He offered to buy
36.8% stake in Nissan for five billion dollars. Nissan accepted the offer and the two
companies started a unique alliance, in which each partner would absorb strengths and
retain its identity and independence.

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 Image 2: Renault’s and Nissan’s complementary strengths (Nissan Confidential Document, 1999)

4.2. THE RENAULT-NISSAN ALLIANCE

4.2.1. Early Stages

In a global environment characterized by high competitiveness, organizations are

establishing partnerships with companies in other countries, rival firms and/or even
companies that operate in different businesses. Among the types of partnerships, the
strategic alliance is being increasingly used as an alternative.
According to Sutherland, 2006, the alliance between Renault and Nissan is one of the
first examples of that kind, enabling both companies to exploit each other strengths, to
achieve improved revenue and earning growth. The image 3 shows a TWOS analysis of the
Renault-Nissan Alliance, in which is possible to observe both companies strengths,
opportunities, threats and weaknesses combined. In the Appendix A are available two
SWOT analysis, one from Nissan and one from Renault, showing separately the companies
characteristics before the alliance.
Accordig to Manktelow (2010) the TWOS Analysis is a variant of the classic business
tool, SWOT Analysis. TWOS and SWOT are acronyms for different arrangements of the
words Strengths, Weaknesses, Opportunities and Threats.

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 1. Create strategies where
multicultural teams can
work more efficiently
(O2W1W2).
Image 3: TWOS analysis of the Renault-Nissan Alliance.

Combining their SWOTs, Nissan and Renault were able to eliminate most of its
weaknesses and combine strengths. Analysing the TWOS matrix it’s possible to conclude:
 OS: In general, successful firms build on their strengths to take advantage of
opportunities. Renault and Nissan are no exceptions. They plan to take
advantage of the economical growth of developing countries and build a low
cost car, with the aim to lead this profitable market. And also launch a zero-
emission car, which would be very well accepted by a growing share of the
costumers, the ones that are concerned about the environment.
 TS: one of the greatest threats to Renault and Nissan was the high taxes applied
in Europe countries (Baldoni, 2006). They saw themselves forced to build
production plants in strategic countries with lower taxes, such as Brazil , Mexico
and the United States. The same strategy would also help them to avoid strikes
in ports, since they could export all their production without using naval
transportation. But in those countries usually the population don’t have a big
concern about the environment, so the alliance tries to differentiate itself by
showing that they care about the future generations.
 TW: since Renault and Nissan formed the alliance, they’ve eliminated most of
their weaknesses, overcoming those and transforming into strengths.
Specifically, the strategy was to reduce the competitive threat by developing a
more flexible product line that would accommodate the needs and desires of
the car-buying public.
 OW: being stronger together, the alliance now faces only weaknesses that can
be solved internally with more flexible policies and a better multicultural
approach by both sides.
Using this strategies, Renault and Nissan were able to share car components and
technologies right from the beginning, resulting in an almost immediate cost cut in

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production lines and logistics (2000 Nissan Annual Report), specially for Nissan, that just one
year after already enjoyed a stronger financial health.

Chart 1: Nissan’s financial data (2000 Nissan Annual Report)

But in reality, the collaboration between Nissan and Renault constituted a real
challenge: the companies did not know each other, and they had very different corporate
cultures and strategies (Segrestin, 2003). As a result of that, some problems appeared, for
example in the fuel tank project. This was a joint project of Renault and Nissan, but the
choice of the supplier clashed with the institutional interests of each manufacturer. For
other parts, as an innovative concept was suggested by a supplier, both manufacturers
wanted to develop the components separately to better assimilate the technology and to be
able to replicate the innovation for other vehicles of the brand (Segrestin, 2003).

4.2.2. Change and Leadership

Renault’s investment in Nissan was compared at the time with a family taking its
savings from the cookie jar to invest in a risky venture. That money was all the company had
to offer. If project problems continued to happen and Nissan continued to lose money, both
companies would be jeopardised (Ghosn, 2005).

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 Because of that, for all parties involved, there was no other choice than Carlos Ghosn
to be Nissan’s CEO, giving his multicultural experience and his cost-cutter reputation.
Ghosn knew Nissan products, having driven the Cima and the 240Z on a test drive
while at Michelin. He liked the precision and performance of the Nissan cars, in short, he
knew enough about the company to realise that they had the ability to design and build
good products. Being so, Ghosn concluded that Nissan problems were at management level,
a primary strength of Renault.

Image 4: Nissan Cima 1997 (Source: http://nissan-cima.info/gallery/1999/nissan-cima-photo-large.html).

To solve these management problems, Carlos Ghosn suggested the creation of Cross
Company Teams (CCTs), which would elaborate strategies, make decisions on those, and
then have them executed within Nissan and Renault as independent companies. In other
words, each company would incorporate the decisions into its own strategies which will be
implemented in the global market.

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 Image 5: Strategic command and operational coordination of the Cross Company Teams (1999 Nissan Annual Report)

The teams studied issues in depth, using actual cases, so that both sides could see
strengths and weaknesses of an alliance. Both companies opened and shared design and
manufacturing files and secrets normally held only in the strictest confidence, using
translators to bridge communication gaps, which frequently showed up. With the the
Lewin’s model is possible to observe what the CCTs were trying to do, especially with
Nissan.

Image 6: Lewin’s model demonstrating how the CCTs were trying to change both companies.

Convincing the Japanese that Renault was Nissan’s answer was difficult since
European companies don’t always have strong reputations in Japan, particularly when it

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comes to manufacturing. Nissan might have been struggling financially with old models and
overcapacity but it was a company that arguably could build a car better that any other in
the world.
“Give them management and give them money, but please
don’t get in their way when it comes to building cars” (Magee,
2003: 45)

Yoshifume Tsuji
Former Nissan CEO

The CCTs recommended by Ghosn helped the executives and managers at both
companies sort through the issue of whether Renault and Nissan could work together in a
very preliminary, but concrete way (Rivas-Micoud, 2007: 122). The teams leveraged
strengths of both companies, finding specific areas in which one company had needs and
the other solutions..
Observing the CCTs work it’s possible to clearly see that many tactics and techniques
were used to make the alliance between Renault and Nissan possible and successful, but it
would not have occurred without extraordinary vision at the top.
Carlos Ghosn is a man who follows facts and reason, not conventional and
stereotypical wisdom when it comes to people and places, allowing him to see Nissan and
Japanese business traditions differently than others. Conventional wisdom said that none of
what has happened during Nissan’s three-year rocket ride (from significant losses in 1999 to
huge profits in 2002) should have happened. When Renault acquired control of Japan’s
beleaguered automaker, global observers predicted a disastrous clash of cultures (Magee,
2003: 103).
Carlos Ghosn saw it, and he was not afraid to face it.
He arrived with a multicultural, energetic flair, thinking complex and talking simple.
First, he looked for answers within. Then, he gave Nissan employees a bigger view of the
company and its place in the global market in ways they had not seen or heard before and
could not help but follow. It made all the difference in the world and turned an ailing
company into an industry leader (Magee, 2003: 105).
“Leadership that lasts is leadership that delivers because
that’s what feeds credibility. People are willing to go the extra
mile, they’re willing to work much more, they’re willing to

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 sacrifice, but they want some kind of achievement” (Baldoni,
2006, p.226).

Carlos Ghosn.
CEO, Renault.

At this point, with the CCTs’ work and Ghosn’s leadership, the Renault-Nissan alliance
was in a completely different level, they weren’t sharing a few parts on each car anymore,
but an entire platform, as is shown on image 7.

Nissan
Lafesta, Serena,
Qashqai/Dualis
X-Trail, Sentra
Rogue

Renault
Scénic, Koleos/QM5
1 Mégane, Kangoo Image 7: Shared platforms between Renault’s
and Nissan’s cars (Renault Internal Presentation, 2009)

Since Renault and Nissan are two different companies, they don’t have joint
engineering departments, but they have regular exchange of engineer knowledge. As
explained with the fuel tank project, this is not an easy task, but avoiding redundancy and
encouraging job split both companies were able to generate a significant cost reduction cars
(Renault Internal Presentation, 2009).
And as a result of this cost reduction they are now able to not just invest in different
projects but also penetrate different markets with different brands. As Renault owns the
Dacia and Samsung brands and Nissan has the Infiniti division, the Alliance tries to achieve
as many segments as possible in order to maximize sales.
Narrow Target

Image 8: Renault-Nissan generic strategies.

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 According to Porter(1980), the low cost leader in any market gains competitive
advantage from being able to many produce at the lowest cost.
Being an expert in cost-cutting, Renault is positioning itself and Nissan as low cost
options for the broad target, marketing affordable but high quality and very well engineered
products. Also, by advertising its products as well engineered and with high quality
standards, both companies create opportunities to launch cars for the differentiation
market too.
As the main brands, Renault and Nissan try to sell cars for broad markets and publics,
but they also target specific costumers with three other companies: Dacia, Samsung and
Infiniti. The first specialized itself in selling ‘ultra low cost’ cars in developing countries,
targeting families that increased their incomes and want to buy their first car. With a cost
focus a firm aims at being the lowest cost producer in that niche or segment (Porter, 1980).
With Infiniti and Samsung the target is also a specific public, the costumers that want
an exclusive product, and are willing to pay for it. With a differentiation focus a firm creates
competitive advantage through differentiation within the niche or segment (Porter, 1980).
Renault and Nissan are constantly looking to Dacia’s, Samsung’s and Infiniti’s markets,
because they know that there is one potential problem with the niche approach. Small,
specialist niches could disappear in the long term.

4.2.3. Renault-Nissan today and tomorrow

Eleven years have gone by since the alliance was first signed with Nissan on March
27th, 1999. During this period Renault and Nissan have actively exchanged know-how and
implemented best practices in the area of manufacturing. Renault has upgraded its
production system with the support of Nissan experts, while Nissan has adopted Renault
standards and analytical tools for workstation ergonomics and cost-control methods.
The two partners have also boosted capacity utilization by sharing production
facilities, thus cutting production, purchasing and related costs. The Renault Curitiba plant in
Brazil, for example, produced two Nissan vehicles in 2009 (2009 Renault Annual Report).
As a result of this synergy, the alliance achieved a noticeable growth, as chart 2
demonstrates.

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 Chart 2: Number of vehicles sold by Renault and Nissan from 1999 until 2008 (2009 Renault Annual Report)

The two groups now have proven experience and maturity in handling cross-cultural
management and cooperation while also respecting the identities of each organization
(2009 Renault Annual Report).
That’s why Nissan and Renault already started to look at the future, as Renault aims to
become the first full-line manufacturer to market zero-emission vehicles accessible to the
greatest number, by 2011 (Renault Confidential Document, 2010). And in 2009 both
companies made a substantial progress toward this goal, but this was only possible because
the two partners have joined forces, investing €4 billion into research, engineering, product
development and manufacturing of vehicles and batteries (Renault Confidential Document,
2010). A new business unit was created in 2009 to ensure maximum coordination and
synergy development across the two companies, supported through RNBV.

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 Some 2,000 employees from Nissan and Renault are now working on the EV (Electric
Vehicle) project. The first electric vehicle, the Nissan LEAF, will be launched in late 2010 and
a further seven vehicles have been confirmed for production across the Renault, Nissan and
Infiniti brands.

Image 9: Nissan LEAF (Source: www.nissan.co.uk/leaf)

By 2009, the Alliance had confirmed five battery production plants to be built in Japan,
France, the United States, the United Kingdom and Portugal. When fully operational, these
plants will give the Alliance 500,000 units of battery production capacity a year (Renault
Confidential Document, 2010).

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5. CONCLUSION
The Renault-Nissan alliance was established in 1999 when Renault acquired a 36.8%
stake in the Nissan company. Renault wanted to establish a stronger presence in Asia and in
North America. Nissan, on the other hand was in financial difficulty and was looking for a
saviour. Although both of the partner firms appeared to have matching goals, the cultural
distance was large. It took considerable effort and commitment on part of both firms to
bridge this cultural divide.
And as it turns out, the alliance was successful. Careful preparation, cross cultural
sensitivity, and the vital contribution of Carlos Ghosn, who led the new company, all played
a vital role. Carlos Ghosn had a multicultural background (French mother and a Brazilian
father), was fluent in five languages, and had graduated from Ecole Polytechnique, one of
France's most prestigious institutions. His credentials were impeccable and he successfully
won the confidence of his Japanese colleagues and made the alliance work.
As an outcome of this success both manufacturers shared costs of development and
production. The penetration into various markets also enhanced their economies of scale,
which from a supplier perspective, was a huge potential.
So it’s possible to conclude that the Renault and Nissan alliance helped both
companies to achieve their goals and continues to help them to soar even higher.

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6. APPENDIX A
6.1. SWOT ANALYSIS OF RENAULT AND NISSAN

According to Bartol et al.(1991), in its simplest form, a SWOT analysis can be

understood as the examination of an organisation's internal strengths and weaknesses, and
its environments opportunities, and threats. It is a general tool designed to be used in the
preliminary stages of decision-making and as a precursor to strategic planning in various
kinds of applications. An understanding of all external factors, (threats and opportunities)
together with an internal examination of strengths and weaknesses assists in forming a
vision of the future.
The images 10 and 11 show the main weaknesses, threats, opportunities and
strengths of each company and also how they complement each other, making possible to
understand why Renault was so interested in Nissan and why Nissan thought that Renault
was a suitable partner.

Image 10: Renault SWOT analysis.

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 Image 11: Nissan SWOT analysis.

7. APPENDIX B
7.1. CORE COMPETENCES OF THE RENAULT-NISSAN ALLIANCE

According to Prahalad (1990), core competences are the most significant value
creating skills within the corporation and key areas of expertise which are distinctive to it
and critical to the company's long term growth.
In other words, core competencies are an unique set of skills, knowledge, and
expertise that allows an organization to remain competitive and provide value to
customers.
"A core competency is an area of specialized expertise
that is the result of harmonizing complex streams of
technology and work activity."

C.K.Prahalad

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 Image 12: Renault-Nissan core competences.

As a result of the Alliance, Renault and Nissan combined their core competences,
bringing together the innovative styling and cost management from Renault, and the high
quality standards and advanced technology from Nissan.

8. APPENDIX C
8.1. RENAULT-NISSAN ALLIANCE HISTORY

Image 13 shows the history of the Renault-Nissan alliance, since the contract signing
until the launch date of the LEAF (Renault confidential document), first zero-emission car
made by the companies.

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Image 13: Renault-Nissan Alliance history.

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9. APPENDIX D
9.1. ALLIANCE FIGURES AND MARKET POSITION

Image 14: Renault-Nissan market capitalisation in 1999 and in 2009 (EUR million), compared with their
competitors (2009 Nissan Annual Report).

Image 15: Renault-Nissan global market share, based on 2008 new vehicle sales. The Renault–Nissan alliance
commands 9.6 percent of the relevant global market share — fourth largest, behind GM, Toyota and Ford
(Renault-Nissan?, 2010).

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10. BIBLIOGRAPHIC REFERENCES
1999 Nissan Annual Report. [Online]. Available: http://www.nissan-
global.com/EN/IR/LIBRARY/AR/. [29 Jul 2010].

2000 Nissan Annual Report. [Online]. Available: http://www.nissan-

global.com/EN/IR/LIBRARY/AR/. [29 Jul 2010].

2009 Nissan Annual Report. [Online]. Available: http://www.nissan-

global.com/EN/IR/LIBRARY/AR/. [20 Jul 2010].

2009 Renault Annual Report. [Online]. Available: http://www.renault.com/en/

finance/presentations-et-documents/Pages/documents-et-presentations.aspx. [23 Jul
2010].

2009 Renault-Nissan Annual Report. [Online]. Available: http://www.nissan-

global.com/EN/DOCUMENT/PDF/AR/2009/AR09E_P14_Renault-Nissan_Aliance.pdf. [07 Jul
2010].

Baldoni, John. (2006) How great leaders get great results. New York: McGraw-Hill.

Ghosn, C., Riès, P. (2005) Shift: inside Nissan's historic revival. Translated from the French by
John Cullen. New York: Currency/Doubleday.

James Manktelow, Using the TOWS Matrix. [Online]. Available:

http://www.mindtools.com/pages/article/newSTR_89.htm. [16 Aug 2010]

Magee, David. (2003) Turnaround: how Carlos Ghosn rescued Nissan. New York:
HarperBusiness.

Prahalad, C.K. and Hamel, G. (1990) The Core Competence of the Corporation, Cambridge:
Harvard Business Review.

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Renault History and Culture. [Online]. Available:
http://www.renault.co.uk/about/historyofrenault.aspx. [13 Jul 2010].

Renault-Nissan?. [Online]. Available: http://www.ideamerge.com/leasing/faq_2.html. [29

Jul 2010].

Rivas-Micoud, Miguel. (2007) The Ghosn factor: 24 inspiring lessons from the world's most
dynamic CEO. New York: McGraw-Hill.
Porter, Michael E. (1980) Competitive strategy: techniques for analyzing industries and
competitors. New York: Free Press.

Sutherland, Michael. (2006) Global Strategy of the Renault-Nissan Alliance. [Online].

Available: http://www.slideshare.net/eonemo/renaultnissan-alliance-case-study. [24 Jul
2010].

Segrestin, Blanche. (2003) Towards a new form of governance for inter-firm cooperation:
Lessons from the Renault-Nissan Alliance. Available:
http://www.scribd.com/doc/11501886/B-Segrestin-Towards-a-New-Form-of-Governance-
for-Interfirm-Cooperation. [24 Jul 2010].

The History of Nissan Motor Company. [Online]. Available: http://www.nissan-

global.com/GCC/Japan/History/history/index-e.html. [13 Jul 2010].

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