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Ghosn started working on the rescue mission even before his appointment dates by conducting firsthand research of the company. Ghosn conducted an in-depth SWOT analysis, which is a tool of conducting situational analysis, aligning internal operations with external realities (Pahl & Richter, 2009). This gave him a basis for developing a strategy for turning around the company. Business needs effective change for survival and success as 98% of business fail over 50 years time period (Nystrom & Starbuck, 1984).
Ghosn had an intuition that enforcing change by an outsider would not be acceptable by the employees. Therefore he made cross-functional teams, following first and second steps of Kotter’s successful change (1995), to make them realize the dire need of transformational change for company revival. Initiating a drastic change in culture termed as being very effective as teams were able to identify the problems existed within the value chain and also proposed their solutions.
Case study analysis: According to the study in journal of Academy of Management, (Randel & Jaussi, 2003) on efficiency of cross-functional teams, managers should promote social identification accompanied by rewards and encouragement of individuals for gaining on individual performance. Ghosn’s considered the difference of member’s self and collective-focus in cross-functional teams therefore the strategy worked in his favor, incorporating the sixth, seventh and eight step of Kotter’s successful change.
Focusing on business process is less threatening to colleagues than focusing on employees who do the work (Page, 2010). Next, Ghosn proposed change to the process by closing five factories and decreasing the number of car platforms and power train combinations in the remaining factories. This change in process improvement was to overcome the loss incurred due to working under capacity. This action was effective in saving the company from plant, building, equipment and maintenance cost of five factories and direct labor cost of 21,000 employees, as they were laid off. This change was economically effective but employees started feeling insecure about their jobs.
Case study analysis: Therefore, he made another change in organizational structure by overcoming restraining forces in human resource practices. He challenged restraining forces like balance of power and management hierarchy politics (Katz & Kahn, 1978). According to an article by Sunil in the journal of American Academy of Business, employees expect to be rewarded significantly for their increased effort and performance than their counterparts who perform at or below the norm. Ghosn proposed financial incentives against performance measured in defined areas of accountability.
This change was effective as it supported the journal research and made employees confident, that their commitment and hard work would earn them rewards and promotions.
Japanese companies have little collaboration across functions, no sense of profit orientation, personal or team accountability, no clear focus on consumers which led to declining financial performance (Gill, 2012). Ghosn followed Lewis three step model, by reducing restraining forces likes promotion on seniority bases, developing new competitive attitudes and behavior, implementing change by increasing driving forces like good delivery of service, promising a move up the ladder of management chain, thus successful in creating a healthy competitive environment. This termed effective in the short-term but might backfire in the long- run as it challenged the senior management positions.
Following the third and fourth Kotter’s step of Succesful change, Ghosn had a clear vision for the company; therefore he put forward realistic goals. This focused employees to work together achieving reduction in production cost by 20%. Nissan had a 25% higher production cost than Renault. Ghosn proposed a change in the operations management. Buying large quantities from suppliers give’s one negotiating leverage (Neu, 2013).
Case study analysis: This was effective as now the company did custom designed bulk buying from a few numbers of suppliers. As a result company got discounted rates from suppliers and the company reached its goal of 20% reduced production cost within a period of three years.
A major deficiency in sustainability strategy is lack of direct focus on the customer (Sheth, et al., 2011). Ghosn needed to make a cultural change in the company as out of Nissan’s vast portfolio of 43 models of cars, only 4 models gave profits. Reason being Nissan’s products were not customer driven rather engineers driven, focusing only on improving performance.
Ghosn proposed a customer centric approach which focused on the preference of the customer in designing models. Shiro Nakamura, an innovative designer was recruited to design customer appealing products. Innovative change resulted in designing of 12 new models within 3 years, which stood indifferent and appealing to the customers. The change brought innovation in the product design.
In automobiles dealership customer expectations are high, as they expect sales executives to not only know product details like features, make, model, benefits but also the technical side (Kohli, 2002). Ghosn proposed closing Nissan’s 10% company owned dealership stores as company was losing its market share due to non-serious attitude of the hired staff, Nissan’s executives nearing retirement.
They were not making efforts in promoting the product and customer dealings were made unprofessionally. Ghosn and team incorporated dealer training programs in remaining stores, these were effective as it followed the conclusive research that brands should focus on functional and operational factors involved in..
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