April 15, 2000
1) What benefits will Nissan gain if its procurement of parts is combined with Renault’s parts procurement on a global basis? Are there any costs to this change? What problems does Nissan create if it abandons the keiretsu system for purchasing parts? In what ways might the Internet facilitate this change?
Ghosn’s plan to combine, centralize, and globalize Nissan and Renault’s parts procurement would cut costs by 20 percent! Before this change, Ghosn estimated Nissan’s parts procurement costs were around 10 percent higher than Renault’s. To accomplish his goal, Ghosn had to prove that the precious keiretsu system of Japan was promoting inefficiency and mediocrity. Ghosn saw that the keiretsu affiliates were not continuing to innovate and provide cost cuts which were the main objectives of this system in the first place. This was a big controversy for Ghosn because the Japanese believed in the keiretsu system and did not want to stray from it, but Ghosn knew it would be a huge step for Nissan to regain its profitability. The benefits from such a move would be helping to reduce the 60 percent of Nissan’s costs found in its suppliers. It would also benefit Nissan to establish new, innovative suppliers to provide new, improved information and best practices. Nissan would purchase all of its supplies from only a FEW suppliers which would provide quality consistency and lower costs from the suppliers for a lot of Nissan’s business. The internet would help to facilitate this change by providing easy exchanges for Nissan and its suppliers. It would allow for easier access and smooth global business practices between Renault and Nissan. 2) Suppose natural attrition fails to allow Nissan to reach its goal of reducing its workforce by 21,000 people. If this occurs, what would you advise Carlos Ghosn to do? Should he abandon the planned job cuts? Or should he begin to fire...
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