CASE: GS-62 DATE: 04/29/08
RENAULT’S LOGAN CAR: MANAGING CUSTOMS DUTIES FOR A GLOBAL PRODUCT There are some commodities with very high levels of complexity with respect to customs duties. Because of this, we must have some specific knowledge of what duty optimization, drawbacks, specific regime, and automotive laws are. —Isabelle Roca, Customs and Trade Manager, Renault
Renault designed the Logan car to address the needs of new, high-potential markets around the world. Initially launched in 2004 in Romania, plans for the Logan called for it to be distributed throughout South America, Asia, Eastern Europe, Africa, and the Middle East. The Logan was an important part of Renault’s strategy to grow revenue and increase profitability. The initial results looked promising—by the end of 2006, the company had sold over 400,000 Logan cars. Due to the global scope of Logan’s sales, customs duties were an important consideration. Effective customs management was essential both to getting product to the customers, and to minimizing costs—and the customs landscape was constantly changing. As Isabelle Roca, Customs and Trade Manager for Renault, considered the progress of the Logan program, she knew that Renault had some very important decisions to make in 2007. In addition to selling in new global markets, the Logan had unexpectedly taken off in Europe. Romania had just entered the European Union (E.U.). The trade policies of many countries, such as Morocco and South Africa, were evolving. She wondered about the strategic importance of these countries and how Renault should proceed with its operations. As Roca considered the options, she knew that her position in the Customs Consulting Group required her to think carefully about how to minimize the global cost of customs duties.1
Interview with Isabelle Roca, February 4, 2008. Subsequent quotations are from the author’s interviews, unless otherwise noted. Amanda Silverman prepared this case under the supervision of Professor Hau Lee as the basis for class discussion rather than to illustrate either effective or ineffective handling of an administrative situation. Copyright © 2008 by the Board of Trustees of the Leland Stanford Junior University. All rights reserved. To order copies or request permission to reproduce materials, e-mail the Case Writing Office at: firstname.lastname@example.org or write: Case Writing Office, Stanford Graduate School of Business, 518 Memorial Way, Stanford University, Stanford, CA 94305-5015. No part of this publication may be reproduced, stored in a retrieval system, used in a spreadsheet, or transmitted in any form or by any means –– electronic, mechanical, photocopying, recording, or otherwise –– without the permission of the Stanford Graduate School of Business.
Renault’s Logan Car GS-62
RENAULT BACKGROUND In 2006, Renault sold passenger cars (PC) and light commercial vehicles (LCVs) throughout the world. By the year’s end, the company reported 2.4 million units sold worldwide, a 4 percent decrease from 2005. The revenue picture was slightly better, as Renault had amassed €41.5 billion in sales in 2006, up from €41.3 billion in 2005. Unit sales throughout Europe and AsiaAfrica had decreased, while those in Euromed and the Americas had both increased.2 (See Exhibit 1 for full details on worldwide sales by region, for 2005 and 2006. See Exhibit 2 for a list of countries by Renault’s regions). Margins were also deteriorating. Renault’s operating margin and net income had decreased from 2005 to 2006. The company reported roughly €1.0 billion in operating margin for 2006, down from €1.3 billion. Net income fell from €3.4 billion to €2.9 billion.3 (See Exhibit 3 for more details on Renault’s financials in 2006). Company History By 2006, French-based Renault S.A. was in the business of manufacturing automobiles and offering financing, and acted as a parent company for its subsidiaries throughout the world. It operated as two divisions:...
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