Toyota vs Nissan

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TOYOTA VS. NISSAN – A CONTRAST IN CULTURE, CORPORATE GOVERNANCE, OPERATIONAL STRATEGY, AND FINANCIAL PERFORMANCE Mohamad R. Nayebpour Graduate Faculty of Business Administration Keller Graduate School of Management DeVry University 2000 West Loop South Houston, Texas 77027 (713) 212-3610 H H

Akira Saito Visiting Research Fellow The Institute of Economic Research Chuo University Japan H H


Toyota Motor Corporation and Nissan Motor Corporation were established in 1937 and 1933 respectively. They have been facing the same global challenges as well as the same politicoeconomic changes domestically and globally. They have similar business resources such as work force, capital, products, technology, and information. How, then, can there be such major differences in their overall business performance? This case highlights the role of corporate culture, leadership, business creed, and corporate governance in the operational strategy and financial performance of the two corporations. It also addresses recent successes and challenges that Renault-Nissan alliance faces in the future. Keywords: Toyota, Nissan, Culture, Leadership, Governance, Strategy, Alliance Introduction

The automobile industry was born in France and emerged as a modern industry through the assembly line mass production of Model-T (1913) by Henry Ford who established the Ford Motor Company in 1903. William Durant established the General Motors in 1908, and Chrysler was founded in 1925. Nissan and Toyota were established in 1933 and 1937 respectively. The two major Japanese automakers have been in the same industry, facing the same global forces as well the same as the same politico-economic challenges domestically and globally. Although they have had similar business resources such as work force, capital, products, technology, and information, major differences in their financial performance began to emerge in the 1980s. Toyota had a healthy growth in its market share, revenue, and profit from early 1970s, but 567

Nissan did not fair well in the 1980s. Nissan’s performance turned for the worst in the 1990s, and it incurred seven years of annual losses in eight years of operation from 1992 to 1999 (Figure 1). Its automobile production declined significantly in the 1990s; its domestic market share declined from 18.6% in 1989 to 13.3% in 1999; and its global market share declined from 6.6% in 1991 to a low of 4.9% in 1998. Toyota widened the gap in total number of automobile production in the early 1980s and by the end of 2000 it was producing two million more cars annually than Nissan (Figure 2). The purpose of this paper is to discuss factors that contributed to the gap in the performance of the two automakers before Nissan’s alliance with Renault. It is argued the performance of the two firms can be related to their business creed, leaders, corporate culture, corporate governance, operational strategies, and consequently their corporate competitive strategies. We will learn how culture, leadership, and corporate governance play significant roles in gaining and sustaining competitive advantage for the two corporations. Furthermore, the recent successes and challenges that Renault Nissan alliance faces in the future will be addressed.

Figure 1 - Toyota vs. Nissan Net Income

Figure 2 - Toyota vs. Nissan Production
Nissan Toyota

Income/Loss (Million Yen)

1500000 1000000 500000 0 -500000 -1000000
1990 1992 1994 1996

4,000,000 2,000,000 0

Toyot a Nissan

Ye a r
Sou r c e : D a t a mo n i t o r . c o m


Corporate Governance and Business Structure

The corporate structure and governance of Toyota and Nissan can be better understood in light of general corporate development of the Japanese industrial Zaibatsu and Keiretsu. Since early 1600s, the mercantile dynasties of Mitsui, Mistsubishi, Yasuda, and Sumitomo had partial control of...
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