Nissan: the Effects of a Political Conflict

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NISSAN: THE EFFECTS OF A POLITICAL CONFLICT

During the last months, Nissan has been suffering the effects of a rising political battle between Japan and China. The two countries have become involved in an escalating diplomatic conflict ever since China stepped up its presence near a chain of uninhabited islands located in the East China Sea and claimed by Japan since the late XIX century.

The conflict over those islands, known as Senkaku in Japan and Diayou in China, has resurfaced historical tensions between the two nations, which has triggered a sudden and violent anti Japanese sentiment in the Chinese mainland. There have been a number of boycotts and even violent protests taking place all over Chinese cities, with Japanese car makers counting themselves among the victims of those.

Nissan, the Japanese carmaker with the biggest exposition to the Chinese market, is suffering greatly from this situation. With over 30% of its sales coming from the mainland, the 35% plunge suffered by the company has translated to a reduction of profit estimated at around 20%. This makes for a dangerous comparison with other Japanese carmakers which have far lower dependence on the Chinese market, with sales there estimated at ranges of 10% of total global sales.

It is important for Nissan to consider what are the roots for this situation, and how should it react to them. It is clear the plunge in sales is caused by non-market factors, with clients being driven away from Nissan car dealers for fear of reprisal on the grounds of sympathizing with Japanese companies. The Chinese government has been slow to quell these protests, even going so far as to fuel them in some cases, and the political scenario is undoubtedly unlikely to come to a resolution as the Japanese government cannot afford to simply relinquish control of the islands, having just recently acquired them from a private owner. The Chinese, on the other hand, cannot afford to appear wear before their...
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