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1.1 Overview
This chapter briefly considers the competitive strength of
Renault and Nissan as a joint company. The purpose of this
chapter is to address the reasons for the Renault Nissan Alliance
(RNA) in terms of objectives and group goals, and to identify
the activities and strategies that the group will be [has
been] implementing in order to meet the terms and objectives
of the alliance (joint venture). This chapter will help the
author to evaluate the impact of the alliance on the group's
suppliers in the fifth chapter of this dissertation, as it
provides useful background information on each of the companies
involved; illustrating why Renault and Nissan decided that
a joint venture would offer "profitable" synergies
in terms of future achievements and industry challenges. However
firstly, the author reviews individual company background
for Renault and Nissan respectively.
1.2 Case Company Background: Renault Brief History
Renault was established in 1898 by Louis Renault. After designing
and patenting the first small four-wheel vehicle
and direct drive system respectively, the company achieved
international renown through its success in motor sports.
Renault was based in the Paris Suburb of Billancourt
where the Societe Renault Freres (SRF) was established. In
1922, having expanded strongly in the passenger car and commercial
vehicle markets, Renault became a limited company, and gradually
emerged as the French market leader.
 After the First World War, as a result of competitive pressures
from North America (mostly Ford Motor Company), Renault was
re-organised, and set up an all in one firm called Societe
Anonyme des Usines Renault (SAUR). The SAUR focussed on the
core business of making cars, with a varied range of production
units and sites, buying in about 80% of the components. Renault
acquired its own foundries and ironworks in order to reduce
its dependency on other companies (the opposite of Renault
today). After the Second World War the French government nationalised
the company.
It wasn't until 1990 that Renault became a limited company
again and in 1996 the first steps towards privatisation were
put in place. More recently, the agreement signed with Volvo
in 2000 came into effect, making Renault the main shareholder
in the second largest truck manufacturing company. In 2001,
Renault also increased its stake in Dacia
to 80.1% and acquired Samsung motors of Korea. 1999 however
marked the start of a new era for Renault, with the signing
of an alliance with Nissan on March 27 in Tokyo.
It would seem that the main reason why Renault has been forming
alliances is to spread brand awareness and to penetrate world
markets where the Renault brand was unknown. According to
Proutat and Quainon (1999), increased global pressures of
which the French state could not afford to finance, drove
the privatisation of Renault and led to the company finding
alternative means to counter global competitive pressures.
In other words by investing and acquiring other brands Renault
has been able to fund its activities and invest in its future
growth, reducing its dependency on the French state.
1.3 Case Company Background: Nissan Brief History
Nissan was previously known as Automobile Manufacturing Co, which was established
1933, and initially involved in the production of Datsuns,
which according to Nissan (Nissan website company information)
symbolised Japans rapid advances in modern industrialisation.
In 1914a box
type small car made its debut on the market in the name of
Dat Car. Nissan
was handicapped in the early post-war period when many leading
dealerships, previously affiliated with the old Nissan network,
switched to Toyota after the disbanding of Japans Motor Vehicle
distribution network.
In a move to recover, in 1952 Nissan concluded a "tie
up" with Austin Motor of the UK. During the 25 years
that followed, a number of models revolutionalised the Nissan
brand which is why the company is said to be responsible for
the quickened the pace of motorisation of Japan (Nissan corporate
website, 2003). Still it was the two energy crises in the
1970s that triggered rapid increase in exports across the
world of small Japanese cars, which were known for their excellent
quality and fuel economy. All of which essentially led to
the Japanese infiltration of the US and European markets.
However in the years that followed the pressures of globalisation
increased and Nissan struggled financially, particularly regarding
the European market where Nissan only held a small percentage
of the market share (Woodruf, 1999). Up until the agreement
Nissan was an independent company, where inflexibility combined
with a lack of market-concern and unwillingness to change
are the key reasons identified for Nissan's debt (Autozine,
2002a). In order to resolve the financial difficulty Nissan
entered into an alliance with Renault, who was also looking
to expand its brand into other world markets, it was reported
by Bursa (1996) that Renault would not survive as an independent
car manufacturer and consequently the Renault Nissan Alliance
(RNA) was formed.
1.4 The Renault Nissan Alliance (RNA)
As part of the original revival plan (NRP),
Nissan has been working to address global environmental issues
that have caused increasing concern over recent years; the
next stage of the NRP is known as Nissan 180, which is a mid-term
3-year plan, designed to move Nissan from the stability created
by the NRP to sustainable growth. Renault has been expanding
its activities into other world markets by improving core
competencies; it is argued that if Renault had not found a
partner, it could have found survival difficult when faced
with global competition (Autozine, 2002b).
The RNA is an agreement concerning a global alliance aimed
at "achieving profitable growth for both companies".
According to the 2001 Renault Annual report, the RNA has a
number of objectives:
" The globalisation of individual brands
" To cut costs by combining product platforms, sharing
of common components
and the use of Powertrains
" Joint use of alliance manufacturing facilities
Both companies have a reciprocal interest in one another
as a result of cross shareholding. Renault's stake in Nissan
is a stake in its performance, and vice versa, which immediately
moves the alliance away from the likes of Rover-Honda, where
no such arrangement existed.
1.5 The Command Structure of the RNA
From the beginning, the alliance has had its own informal
co-ordination structure, the global alliance committee (GAC), with the aim of establishing a comprehensive strategic command
structure. In May 2002 a governing body called the Alliance
Board replaced the GAC. A single strategic management company
(called Renault-Nissan bv) hosts the Board, which is responsible
for both medium and long-term plans of the alliance, including
the co-ordination and control of activities and of Cross Company
Teams (CCT)and Functional Task Teams (FTT). In addition each company has its own Steering Committee,
which works with the Alliance Co-ordination Bureau and co-ordinates
the work of the CCT's and FTTs. The point is that one of the
strengths of this alliance from the start is the existence
of a decision-making unit responsible for defining a common
strategy, which is one other thing the Rover-Honda alliance
lacked. According to Renault's website, this structure has
enabled the group to anticipate the future development needs
of both members in the alliance, and has helped to achieve
a better allocation of resources, of which has been applied
to various projects (including RNPO and RNIS) aimed at enhancing
the competitive nature of the RNA.
1.6 Activities of the RNA
The Renault-Nissan Purchasing Organisation (RNPO) is probably
the most significant. It was sep up to handle 30% of purchases
for the group, but has since been raised to 70%. It is believed that cost
savings of 5% can be generated from joint projects (i.e. sharing
platforms and engine families), in all of the worlds regions,
across the organisations value chain .
The Technocentre
is another project, whilst not directly related to the RNA,
its main function is to bring vehicle designers, suppliers
and development specialists together in a single location,
and has come about as a result of an increased requirement
to reduce vehicle development times and costs, and therefore
will most likely play an important part in the Renault-Nissan
relationship in terms of learning from one another and cutting
costs.
The Renault-Nissan Information Services organisation (RNIS),
is a second joint company responsible for standardising both
groups' information systems on a worldwide scale. Set up in
2001 on the back of the RNPO, with the objective of putting
in place common processes and operations to make both the
information systems and information technology operations
more cost efficient and user friendly. Renault and Nissan
have a 5% stake in Covisint
in order to facilitate strategies involving cost reduction,
delivery times and inventories.
E-commerce is also an important part of the alliance's agenda,
and the RNA is developing an online site for products and
services, where users who are connected to the site can access
a variety of services ranging from new vehicle configuration
to arranging finance and warranties. A joint distribution
organisation was also deployed across Europe in 2002, which
according to the Renault corporate website, gave a competitive
edge to the RNA as a result of the arrival of new players
in the distribution sector.
So far the RNA has put into practice several objectives and
plans in order to achieve "profitable growth" for
both companies on a global scale, in line with the changing
environmental conditions and demands of lean production. The
above combined with the on-going activities of the alliance
including the use of powertrains, platform sharing, joint
vehicle components, double badging and cross badging, as well
as joint use of alliance manufacturing facilities across the
globe; illustrate the relationship between Renault and Nissan
and extent to which cost saving is an integral part of the
agreement.
1.7 Co-ordinated Purchasing [Suppliers]
The RNA to date has proven to be extremely complementary in
terms of markets, products and know-how. The writer adds that
it has the potential to present in all the major motor markets,
and do so at lower costs by drawing support from the others
manufacturing facilities and distribution networks, and it
is possible to note two elements within the agreement.
Cost cutting is the most significant, in order to respond
to the intensifying competitive and regulatory environment,
where prices are trending downwards, and pollution and safety
standards are becoming more stringent. It is argued that savings
will be made in purchasing, via tighter partnerships with
alliance suppliers, participation with Covisint, and development
of Business-to-Business (B2B) activity (Renault 2001 Annual
Report). It is also believed that restructuring the network
and making the existing system more efficient will also reduce
costs. As a result the alliance is also working towards enhancing
individual network competitiveness, (new distribution project),
which focuses on dealerships and new channels of distribution
such as e-commerce.
Secondly the author notes that cutting development times
whilst improving quality and accelerating innovation is of
key importance to the RNA. Shorter development times will
enable the alliance to respond more quickly to shifts in demand,
and promote product variation, improving the group's product
variety. Renault is relying on Nissans' recognised expertise
in this area and in the technocentre, which would suggest
that one of the benefits of this alliance is the ability to
learn from each party - as described by Graves (1993) in the
literature review chapter of this dissertation.
To forge closer links with its suppliers, the alliance opened
an industrial supplier park in 1999 on the grounds of its
Sandouville plant for five of its main parts suppliers - a
similar facility for suppliers was also installed at the Curitiba
production site in Brazil. Having suppliers located as close
as possible to assembly lines offers advantages in terms of
logistics as well as permitting sequenced JIT delivery, which
has added benefits for the groups platform sharing initiative.
The issue of learning is bought to light here, as Renaults
improved competitiveness in terms of costs and delivery times
has been accompanied by steady progress on the quality front.
For instance Renault can derive important benefits from its
alliance with Nissan, who is recognised in matters of quality,
therefore the writer proposes that shared progress on product
and service quality is also an integral aspect of the synergies
expected from this alliance.
1.8 Review
The author has been briefly trying to highlight that many
of the activities of the RNA are for cost cutting purposes.
From sharing components to the platform sharing initiative,
it illustrates the full extent of the ongoing collaboration,
and for Renault and Nissan it's quite clear that to operate
globally cost savings are vital. However, in order to achieve
global success it will also require the alliance to enhance
the capacity for partnerships with suppliers. According to
the 2001 Annual Report, that was the main reason for the alliances
5% investment in Covisint
alongside Ford, GM and DaimlerChrysler. The author argues
that this international online platform has a part to play
in bringing more efficient relations for the RNA in terms
of its component makers and suppliers.
Therefore, the success of this alliance will depend upon
the group's ability to work with one another effectively.
Many of the organisations that have been established in light
of this agreement (e.g. RNPO) are to enable the group to operate
more effectively as one company. Whether or not Renault will
be strong enough to cope with Nissans debt in the long term
remains to be seen (Woodruf, 1999). From this it is also unclear
as to the extent of the effects on the organisations suppliers
and customers, but the competitive strength of the group makes
the RNA the world's 5th largest car manufacture in terms of
production volume (Renault, 2002) in an industry where according
to Anonymous (2003), smaller manufacturers are absorbed by
larger more competitive ones, but where success "comes
not from size and scale but from developing competitive advantages
in operations and from marketing them internationally"
(Anonymous 2003).
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