Philippines Business Economy

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advantage for the Alliance, and a key reason for commercial success.

As of 2016 the 18-year old partnership of Nissan and Renault, Alliance sales reach 9,961,347 vehicles– one in nine cars sold worldwide. The Alliance confirms its zero-emission leadership. Its cumulative sales reach 424,797 electric vehicles worldwide and sees boost in innovation for the vehicle of the future.

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Reasons for an alliance instead of merger and the benefit from synergies. The making of the alliance was motivated by the enthusiasm of Ghosn to develop potential synergies, where both firms maintain their operational freedom. The foundation of the alliance focuses on the need for the negotiation of a formal equity

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joint venture because Renault and Nissan must evaluate their partners’ equities, capabilities and willingness to cooperate before selecting the right hierarchy (Segrestin, 2003). Indeed, Carlos Ghosn, former Renault CEO before the alliance, has always been focused in preserving the identity of the two companies as he strongly formulated: “If you don’t respect people’s identity, they will not get motivated and you will not get a strong corporate performance”(web.mit.edu). Renault was willing to implement a common platform, which would generate significant economies in development costs (design studies, prototyping, and validation protocols), industrial equipment and purchasing (Segrestin, 2003). This strategy has been frequently adopted by automakers such as Daimler-Chrysler in the United States or Volkswagen and Skoda in Eastern Europe, as a means of bringing the engineering teams together and of sharing and developing knowledge.

From an economic point of view, the alliance between Renault and Nissan can be perceived as a mean of integrating two companies in order to improve coordination and achieve cost reductions (Segrestin, 2003). Furthermore, even in case of integrating conflict, stimulating competition between Renault and Nissan, they would both reduce their costs by benefiting from economies of scale, and thus, increasing their bargaining power towards suppliers (Susini, 2003). It can be noticed that the engineering teams weren’t merged, but worked independently from one another in the first years of the alliance in order to reduce management costs and avoid permanent commitments (Segrestin, 2003).

The teamwork is open-ended to preserve a sense of equality between the partners and encourage both sides to contribute in their own fashion. As a matter

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of fact, both Renault and Nissan were free to withdraw from the alliance at any moment should an irreconcilable divergence of interests arise. As a result, the removal of shared components from the span of the platform could be necessary when its development appeared too difficult or too hazardous because it isn’t worth producing and developing a common component if expenses exceed projected benefits.

Besides, since October30, 2001, Renault owns 44% of Nissan, which owns 15% of the French firm similar to keiretsucross-sharing operation. This strategy secures operational independence to both firms in the long-run, allowing them to forecast cooperation strategy in the fields of expertise and resources required for successful co-development project (Segrestin, 2003).

In an interview, Carlos Ghosn outlines the future approach for the alliance Renault-Nissan in the following direct talk: “We will never merge the two companies. Why? Because my job is to create value and a merger would destroy value”. By conserving its autonomy and the Japanese-based corporate culture, Nissan successfully implemented a management decision-making process elaborated by Renault. He maintained that there will be more mass purchasing efforts and vehicle platforms as well as growing exchange of technologies, but he is convinced that the global market strategies of the two companies will remain disconnected and independent. Carlos Ghosn gives a lesson of liberalism to explain his vision where two foreign firms build mutual respect and trust to pursue a common goal: “We ask every single team not to do anything for the sake of the other teams. Pursue your own interests, growth and profitability. Because you are

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doing this, you will seek synergies”.) This is the reason why Renault decided to build an alliance not a merger.

Importance of Corporate Culture. An important issue in the Nissan-Renault alliance relies in the management of two different cultures. In order for the combined share of ideas and strategic management to be effective, the employees of both companies must respect the identities of their fellow colleagues as well as their values. If this critical first step isn’t met and members in a particular team act disrespectfully and selfishly towards their teammates, an organization is bound to self-destruct in a short time of period. This explains why when a French worker happens to interact with a Japanese co-worker, for example when Carlos Ghosn is communicating with a Japanese executive at Nissan, one does understand the cultural background of the other. This outcome results from Ghosn excessively investing in cross-cultural training programs, having over1500 employees from Renault learn about the Japanese business culture and 400 Nissan employees study the French culture (Pooley, 2005). This is a positive first step in order to create a successful alliance of two different cultures. After mentioning the French and Japanese cultures, it’s important to thoroughly understand their differences in order to view how Ghosn will go about them. To achieve this, it would be considered relevant to demonstrate how certain of “Hofstede’s Cultural Theories” (Clerc, 2000) can apply to the case of Nissan and Renault.

Firstly, Japanese societies are known to be more collectivist, and the contrary can be affirmed about French societies relying heavily on individualistic efforts from employees. As is, Nissan was previously working and abusing the concept of

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groupthink, where the decision process evolved around people who thought alike. Then Ghosn arrives and right away cuts 21,000 jobs, closes down five factories and terminates most of the relationships with the suppliers within the keiretsu (Harney, 1999), procedures that11.almost caused a major cultural crisis in Japan thus possibly resulting in the failure of the alliance. Moreover, in the Japanese culture, a young employee is prohibited from managing a colleague who is older in terms of age as well as seniority.

As such, when Ghosn arrived in the company and began restructuring