The

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Case Facts:

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Industry: Automotive Industry

Field: Manufacture and sale of passenger automobiles, as well as the
supply of automobile parts.
Company: Nissan (1999-2005)
CEO: Carlos Ghosn
Case subject: Leadership and Strategic Management
Case Summary:
In 1999, Ghosn had been brought over to Japan by Renault. When he
took over, Nissans share in the global market had been on continues
decline; annual production had fallen by 600,000 vehicles, a volume
equivalent to the total annual output of an automaker of the size of say,
Volvo or Mercedes. In six of last seven years, Nissan had record net losses; a
gigantic debt of almost two trillion yen (About US$ 20B); a debt burden of 1,
400 billion, more than twice the companys equity capital.
Earlier, both Daimler Chrysler and Ford had taken a look at Nissan and
backed off.
When Carlos Ghosn was named COO of Nissan in 1999, the company was
running out of gas and careening toward bankruptcy. Eighteen months later,
Nissan was back in the black, and within several more years it had become
the most profitable large automobile company in the world.
Problem Statement
Reconstruction and revival of Nissan. Therefore, a profitable company
and restoring Nissans former glory.

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SWOT Analysis
Before June 2000.
Strengths

Weaknesses

One of Major carmakers in

Japan.
Network of suppliers,
Storehouses of expertise and
technological

Nissans

undervalued.
Poor brand image, selling its

share

price

products at lower price than

knowledge.

(Such as JATCO.
Existing assets in the Japanese

its competitors.
Too
many

culture.

economy of scale in orders.

Imposing specifications that

suppliers/No

didnt take into account the

current industry standards.

Engineering didnt listen to the

suppliers.
Factories running

capacity,
High general expenses,
Lack
of
entrepreneurial

at

53%

initiative, company spirit and

completion among dealers in

Marketing.
Threats

Opportunity

significant

international

The failure to concentrate on

profit making;
The companys neglect of its

customers;
Cross-functional

presence deployed on global

scale,
On cutting-edge of technology
in several crucial areas,
2

distribution network.
Mediocre distribution network.
Weakness
in
Sales
and

teams

with

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Nissans alliance with Renault,

the

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limited vision of its domain;

The general absence of

sense of urgency;
The lack of common long-term

vision.
The competition.

Analyzing the situation

Upon Ghosn arrival at Nissan, he began his new position by embarking
on a three-month intensive examination of every aspect of the business. By
October 1999 he was ready to announce his strategy to turn the company
around with the Nissan Revival Plan. In the plan, he consistently challenged
the tradition-bound thinking and practices of Japanese business when they
inhibited Nissans effectiveness. Ghosn closed plants, laid off workers, broke
up long-standing supply networks, and sold off marginal assets to focus on
the companys core business. But slashing costs was just the first step in
Nissans recovery. In fact, Ghosn introduced changes in every corner of the
company, from manufacturing and engineering to marketing and sales. He
updated Nissans car and truck lineup, took risks on dynamic new designs,
and demanded improvements in qualitystrategies that quickly burnished
Nissans image in the marketplace, and re-established the company in the
minds of consumers as a leader in innovation and engineering.
Actions done by Ghosn in order to reconstruction and revival of Nissan:
-

Impose a plan for the companys revival,

Mobilized Nissans own managers,
Through a set of cross-functional teams, identified and spearheaded

the radical changes.

Formed Renault-Nissan Alliance and Renault remained sensitive to
Nissans culture at all times with the following objectives:

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A) To be recognized by customers as being among the best three
automotive groups in the quality and value of its products and

services in each region and , market segment.

B) To be among the best three automotive manufacturer group in
key technologies, each partner being a leader in specific domains
-

of excellence.
Develop a new-culture that built on the best elements of Japans

national culture.
Set up of nine cross-functional teams to cover the entire spectrum
of the reforms he intended to make. Each team headed by two
leaders, members of Nissans executive committee. Cross-functional

and cross-cultural teams to overcome internal problems.

Restructure of peoples mindset.
Transformation of Nissans corporate culture without destroying its
moral.

Summary of Results of NRP

The turnaround at Nissan was phenomenal, with the following
statistics:
From seven out of eight years of operating losses to profitability
within the first 12 months. Since 1999, Nissan has shown four consecutive
semi-annual operating profits, and the year 2001 was marked by the bestever, full-year earnings at Nissan.
Net automotive debt in the lowest it has been in 24 years (down from
$10.5 billion to $4.35 billion).
Purchasing costs were reduced by 20%, as per the NRP, mainly
through sourcing and other strategies to minimize exchange rate issues, as
well as the reduction of the number of parts suppliers by 40% and the
number of service providers by 60%.
Five plants have been closed, according to the NRP.

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Headcount was reduced by 21,000, according to the NRP, mainly

through natural turnover, retirements, pre-retirement programs, and by

selling off non-core businesses to other companies.

SWOT Analysis after Ghosen Revival Plan

Strengths

Weaknesses

Nissan Became number two as

the

domestic

carmaker

in

Japan. In less than five years.

Broad cross-functional Teams

headed by two leaders.

Frequent meetings with cross-

functional teams.
Reduction of costs by more

Lack of diesel technology,

Product innovation time lag.

than $9 billion and debt to

$6.4 billion by 2002.

Improved
communications,
Listening

to

lower

level

employees,
New transparent policy,
Reconstructed public image,
Motivation of employees.
Necessity and attention to
details.
Opportunity

Ghosn has reformed Nissan

Threats

Competitors strength in sales

and achieved a result that did

and distribution networks such

not seem possible in Japanese

as Toyota dealers.

framework.
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Nissan and Renault Alliance.
Ghosn Leadership Attributes

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A) Achievement-oriented. He generates superior corporate performance

in four criteria:
- Profitability and productivity
- Continuity and efficiency
- Commitment and morale
- Adaptability and innovation
B) Embraces cultural differences
C) Transformational Leader:
- Create strategic vision
- Model the vision and acting consistently
- Build commitment to the vision.
The moral of the story
The root of the problem was the areas of executive responsibility were
vague. Managers responsibility were even diluted by the coterie of
advisers and coordinators. They had undermined the authority of those
with operational responsibilities.
From management point of view, speed is of the essence.
Ghosn was also able to balance the strengths of the two car companies and
leverage these strengths to penetrate new markets.
A great CEO would put himself on the line, and go through difficult times with
the rest of the company.
According to Ghosn, the first social responsibility of a CEO is to be the leader
of the company; from top level managers to lowest level production workers
and to those who deal with the companys customers.
In general a great CEO and leader should have an ability to gather group of
people and get certain things done.
Solving the companys problems does not require that you understand them
in very detail; what you have to do is to make sure you have gathered
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colleagues capable of analyzing subjects in depth and summarizing them in
such a way that you can make, or let someone else make, the most
appropriate decisions.
Finally, Ghosn found very quickly that Nissans bureaucratic culture was a
major impediment, and he identified five important problems that he wanted
to address.
He noted:
1) Lack of a clear profit orientation;
2) Insufficient focus on customers and too much focus on competitors;
3) Lack of a sense of urgency;
4) No shared vision or common long term plan; and
5) Lack of cross-functional, cross-border or cross-cultural lines of work.
Addressing each of these issues involved changing completely the decision
making and feedback structures

of the corporation. The age-based

promotion system, common to most Japanese companies, was replaced with

a merit and incentive-based system with ideas and innovation awarded
instead of longevity with the company.