In 1999, the Nissan was suffering under a decade of decline and unprofitability, in fact the company was on the verge of bankruptcy, with continuous loses for the past eight years resulting in debts of approx. $22 billion. Elements impacting Nissan's performance prior to the global alliance with Renault Internal factors: Emphasis on short-term market share growth instead of a long term success strategy; Advanced engineering and technology, plant productivity, quality management. However, less attention was given to design and innovation, on the assumption that consumers were looking for quality and safety. This implies a lack of knowledge of the market, consumer's changing tastes, and showed that Nissan management did not pay too much attention to what competition was doing.
External factors: The devaluation of yen from 100 to 90 yen for a US dollar; Moody's and Standard & Poors's rating agencies announced in 1999 that Nissan would be lowered from investment grade to junk unless it could not get any financial support.
Both formal and informal internal procedural Nissan norms, as well as Japanese cultural norms were holding the company back. Through keiretsu investments Nissan management believed would foster loyalty and cooperation between members of the value chain, hence they invested in real estate and suppliers' companies. 4 billion US dollars were invested in stock shares of other companies as part of keiretsu philosophy.
Nissan Company strategic alliance with French auto car manufacturer Renault was mutually beneficial for both companies, each of them expanding portfolio and becoming more competitive in the context of globalized mature automobile market.
With Renault assuming a stake of 36.8% at Nissan, the latter would retain its investment grade status. The alliance enabled Renault to penetrate and expand in international markets that it was looking for - Asia and North America. In turn, Nissan would gain market share in South...
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