Nissan Case Study

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Nissan Case Study:

Q1. Using theory and research to inform your answer describe why some of the changes Ghosn made were effective.

An alliance was formed between automakers Nissan, Japanese, and Renault, French, in which Renault assumed part of Nissan’s recurring dept during the period 91 – 99. In this arrangement, Carlos Ghosn was hired as COO of Nissan. Ghosn, based on his prior experiences of turnaround assignments, immediately started researching about Nissan Case Study. He spent three months mingling with the company’s stakeholders, employees, shareholders, end users and competitors. SWOT analysis gave him a clear view of where the company stood and why it was suffering financial losses for a number of years.

External and internal factors both demanded a major change within the company Nissan Case Study in order to turn around the losses to profits. Ghosn had a hunch that that enforcing change by an outsider would not be acceptable by the employees. Employee’s corporation and commitment were required to improve the situation, therefore Ghosn made cross-functional teams in order to make them realize the dire need for transformational change to revive the company. Identifying problems is the first and most important step towards success. This action of Ghosn was very effective as different departments within the company got to interact with each other and they not only had an idea about the problems but also came up with solutions to smoothen the value chain process. The problems identified by employees were in sync with those which Ghosn had come across during his own research conducted.

Nissan needed deployment of new business strategy, therefore Ghosn made the following changes:

• Process Improvement
The company  was occurring losses as it was not utilizing its full capacity. Company’ s same facility could manufacture Million more cars. This spare space was only adding cost to the company, therefore Ghosn proposed to shut down five factories and decrease the number of car platforms and power train combinations in the remaining factories. This action saved the company from plan, building, equipment and maintenance cost of five factories and direct labor cost of 21,000 employees, as they were laid off.

• Reducing production cost
Ghosn put forward a goal of reducing production cost by 20%.
Production cost usually account for 60% of the operating cost in manufacturing companies. When Ghosn compared Nissan with Renault, he observed that Nissan’s production cost were 25% higher than Renault. This was because of the two reasons; one, Nissan’s engineers imposed specifications to suppliers for raw materials and second, Nissan bought raw materials in small quantity from a large number of suppliers. For this Ghosn proposed a change in the buying pattern. This was effective as now the company did custom designed bulk buying from a few number of suppliers. This action was effective as company now got raw materials of standard design and large quantity at discounted rates and reached its goal of 20% reduced production cost within a period of three years.

• Culture change.
Nissan’s products were not customer driven…