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Nissan Revival Plan 1999-2002: Why, How and So What?
- 1. Groupement Automobile NISSAN REVIVAL PLAN 1999-2002: Why, How and So What? F.Ramiandrasoa GM DG 91 - Paris, 19 Jan. 2006
- 2. Nissan before 1999… F.Ramiandrasoa Paris, 19 Jan. 2006 UTC Auto 19JAN06.ppt |2
- 3. …Nissan today… F.Ramiandrasoa Paris, 19 Jan. 2006 UTC Auto 19JAN06.ppt |3
- 4. …Nissan tomorrow? F.Ramiandrasoa Paris, 19 Jan. 2006 UTC Auto 19JAN06.ppt |4
- 5. From falling toflying profitability F.Ramiandrasoa Paris, 19 Jan. 2006 UTC Auto 19JAN06.ppt |5
- 6. From eroding togrowing market share F.Ramiandrasoa Paris, 19 Jan. 2006 UTC Auto 19JAN06.ppt |6
- 7. From deteriorating toimproving liquidity F.Ramiandrasoa Paris, 19 Jan. 2006 UTC Auto 19JAN06.ppt |7
- 8. Many root causes… The industry The economy New competitors Weak yen New distribution channels New technologies Weak Japan Inc. Superior offers New value chains Firm’s decline Organizational inertia Extensive financial assets to write off Ineffective management culture Inferior skills/distribution network The firm F.Ramiandrasoa Paris, 19 Jan. 2006 UTC Auto 19JAN06.ppt |8
- 9. …but only 3winning plans F.Ramiandrasoa Paris, 19 Jan. 2006 UTC Auto 19JAN06.ppt |9
- 10. Strategic and operationaladvice to the turnaround leaders… Key issues Nice take-aways • What makes the Strategic • develop strategic and operational Alliance critical for Renault & guidelines for turnaround Nissan? managers • What makes Nissan Revival • provide lessons-learned about Plan so effective? success factors in the industry • What should Nissan do to • help managers review and shape sustain profitable growth? their current strategy and operational plans F.Ramiandrasoa Paris, 19 Jan. 2006 UTC Auto 19JAN06.ppt | 10
- 11. Key issue no.1:Renault & Nissan should embark on a Strategic Alliance because… Characteristics of a good target Comments •Offers solid businesses Huge debt, declining profitability •Offers potential for revenue New markets, superior technology •Offers potential for synergies Economies of scale (R&D, distribution, supply chain…) •Fits culturally ? Only under specific conditions •Is affordable Spot much lower than real option value •Is available …and willing F.Ramiandrasoa Paris, 19 Jan. 2006 UTC Auto 19JAN06.ppt | 11
- 12. The Alliance: arecipe for success •Sign-in cash •Sound turnaround plan •Skill in execution •Mutual respect of cultural diversity •Cross-cultural leverage F.Ramiandrasoa Paris, 19 Jan. 2006 UTC Auto 19JAN06.ppt | 12
- 13. Key issue no.2:From Following to Leading the Change Before NRP After NRP Diagnosis •Limited scope •Large scope •Mostly about symptoms •Only about causes Effects Short-term Long-term Focus Financial resources People & capabilities Difficulty Simple, quick Complex, slow Orientation Internal External Task Denominator Numerator Decisions Operational Strategic Emphasis Cut costs, investments, Growth, share, rationalize assets, efficiency innovate, brands, effectiveness Morale Negative Positive F.Ramiandrasoa Paris, 19 Jan. 2006 UTC Auto 19JAN06.ppt | 13
- 14. 9 Cross-Functional Teams(CFTs) Business CFT Names Purchasing Mfg & Logistics R&D Development •EVP GOM S&M •EVP Purchasing •EVP Manufacturing •EVP Purchasing CFT Leaders •EVP Product Planning •EVP Engineering •EVP Product Planning •EVP Engineering CFT Pilot •GM Product Planning •GM Purchasing •DGM Manufacturing •GM Engineering •Product Planning •Purchasing •Manufacturing •Engineering •Engineering •Engineering •Logistics •Purchasing Members •Manufacturing •Manufacturing •Product Planning •Design •S&M •Finance •HR •Profitable growth •Suppliers relationships •Manufacturing Team review •New Products •Product specifications efficiency & cost •R&D capacity Focus •BI & standards effectiveness •PD leadtime •Close 3 assembly plants in Japan •Move to a globally Objectives •Launch 22 new models •Cut number of •Close 2 powertrain integrated organization by 2002 suppliers by 50% Based on •Introduce a minicar •Reduce costs by 20% plants in Japan •Increase output Review •Improve capacity efficiency by 20% per model by 2002 in Japan over 3 years utilization in Japan from project 53% in 99 to 82% in 02 F.Ramiandrasoa Paris, 19 Jan. 2006 UTC Auto 19JAN06.ppt | 14
- 15. 9 Cross-Functional Teams(CFTs) Phaseout of CFT Names S&M G&A Finance & Cost products & Parts Organization Complexity •EVP GOM S&M •CFO •CFO •EVP Japan S&M •CFO CFT Leaders •EVP Japan S&M •SVP Finance •SVP Finance •EVP Product Planning •EVP Manufacturing •Manager Product CFT Pilot •Manager GOM S&M •Manager Finance •DGM Finance Planning •Manager HR •Product Planning •Product Planning •S&M •S&M •S&M •S&M •Manufacturing •Finance •Finance •Finance Members •Purchasing •Finance •S&M •Engineering •Engineering •HR •Purchasing •Purchasing •Manufacturing •Manufacturing •Advertising structure •Shareholding and other non assets •Organizational structure Team review •Distribution structure •Fixed overhead costs •Manufacturing efficiency •Financial planning •Employee incentive and Focus •Dealer organization structure and cost effectiveness pay packages •Incentives •Working capital •Move to a single global •Create a worldwide advertising agency •Close 3 plants in Japan corporate HQ •Dispose of noncore •Reduce marketing by 2002 •Create regional MC Objectives •Reduce G&A costs by 20% assets expenses by 20% in Japan •Reduce 9 platforms in •Empwer PD Based on •Close 10% of retail outlets •Reduce global head count •Cut automotive debt in Japan by 2002 by 21,000 half to $M8.8 net •Implement Review in japan •Reduce the variation of performance-oriented •Reduce inventories •Create local business parts by 50% compensation and bonus centers packages (incl. S/O) F.Ramiandrasoa Paris, 19 Jan. 2006 UTC Auto 19JAN06.ppt | 15
- 16. CFTs are builtfor leading consolidation and transformation in parallel… Impact on performance CFT Short-Term Long-Term Business Development Purchasing Manufacturing & Logistics R&D Sales & Marketing General & Administrative Finance & Cost Phaseout of Products & Complexity Management Organization F.Ramiandrasoa Paris, 19 Jan. 2006 UTC Auto 19JAN06.ppt | 16
- 17. …but should alsofocuse on anticipating the evolutions of the industry Areas NRP Items Market & customers Industry & competition Technology Suppliers Demographic & economic changes Political, legal & environmental changes Staff & skills F.Ramiandrasoa Paris, 19 Jan. 2006 UTC Auto 19JAN06.ppt | 17
- 18. NRP is agood start to help Nissan build the most appropriate core competences… World-class paths NRP Comments Project teams Training & development Cross-deployment CFT, GNX… Hiring Strong reduction but one major hire: Chief Designer S.Nakamura External experts High potential in research centers (CPUs, PhDs…), global distributors (Wal-Mart, Carrefour…) , leading innovators (Sony, Philips…) Government research contracts High potential in research centers (zero emission…) Partnership with customers & suppliers Keiretsu… Licensing High potential in leading innovators (Sony, Philips…) Equity stakes in emerging companies High potential in environmental start-ups Strategic alliances Renault, hybrid, fuel cell… F.Ramiandrasoa Paris, 19 Jan. 2006 UTC Auto 19JAN06.ppt | 18
- 19. …but NRP provideslimited directions to formulate world-class strategies NRP Comments Analyze portfolios: priorities & High divestments Separate businesses into SBUs Low Reduce HQ staff ? Strong central role Develop local core strategies Low F.Ramiandrasoa Paris, 19 Jan. 2006 UTC Auto 19JAN06.ppt | 19
- 20. C.Ghosn: the rightperson at the right place and the right time… Roles Characteristics C.Ghosn Decision-maker Authority 15-year experience as COO, CEO, President… Blank cheque « no sacred cow » Change agent Clear vision Straightforward, direct, and simple Strong communications « dead serious and sincere » Decisive follow-up No more ambiguity with precise and quantifiable objectives Stamina « Seven Eleven » Ethical standards « I will resign if these commitments are not met » Networking skills Connects with gemba and public …but who’s next? F.Ramiandrasoa Paris, 19 Jan. 2006 UTC Auto 19JAN06.ppt | 20
- 21. Vox populi… …but who’s next? F.Ramiandrasoa Paris, 19 Jan. 2006 UTC Auto 19JAN06.ppt | 21
- 22. Key issue no.3: so what’s next? Focuse more on strategy formulation process than on Implement Balanced strategy per se Scorecard to relate economic profit targets and individual profit incentives Shift decision-making power to SBUs Control and sustain profitable growth Implement EVA process to relate budgeting process to Shrink corporate staff value creation Generalize production system tools to increase overall flexibility in responding to changes in the marketplace F.Ramiandrasoa Paris, 19 Jan. 2006 UTC Auto 19JAN06.ppt | 22
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- 24. Back-up Slides: •Automotive CFRIC vs. Change in Sales •CFRIC Calculation •Further Reading •CFT •Nissan Value-Up Program Main sources: • HBS Case « Nissan Motor Co. Ltd – 2002 » no. 9-303-042 • Robert M. Grant, Contemporary Strategy Analysis • Peter Doyle, Marketing Management & Strategy F.Ramiandrasoa Paris, 19 Jan. 2006 UTC Auto 19JAN06.ppt | 24
- 25. 1999-2002: So muchimprovement in shareholders’ value COGS/Sales Dep./Sales SG&A/Sales ROS 74.8% -2.6% 2.4% -0.5% ROCE 73.4% 3.5% 9.6% 6.3% -0.7% 8.4% Capital PPE Inventory Cash Turnover Turnover Turnover Turnover 1.4 2.2 1.7 3.2 FY99 1.3 FY02 2.2 1.4 4.3 F.Ramiandrasoa Paris, 19 Jan. 2006 UTC Auto 19JAN06.ppt | 25
- 26. 2002: NRP’s objectivesare met but there is still a long way to go to outperform the best-in-class… and surpass cost of capital! COGS/Sales Dep./Sales SG&A/Sales ROS 68.4% 2.6% 6.0% 6.3% ROCE 73.4% 3.5% 9.6% 6.3% 8.4% 8.4% Capital PPE Inventory Cash Turnover Turnover Turnover Turnover 1.6 5.3 1.4 7.1 Best-in-class 1.3 2.2 1.4 4.3 Nissan F.Ramiandrasoa Paris, 19 Jan. 2006 UTC Auto 19JAN06.ppt | 26
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- 29. En route tobecome a world-class player WORLD-CLASS HIGH LEVEL effect of NRP R3 leveraged by the C3 C4 RELATIVE STRENGTH R4 Strategic Alliance R6 U P K - C2 R2 C BA R8 R5 C6 R1 C1 C5 LOW R7 C7 LOW HIGH STRATEGIC IMPORTANCE Resources: R1=Financial, R2=Physical, R3=Technology, R4=Reputation, R5=Culture, R6=Skills & Know-How, R7=Communication &Collaboration, R8=Motivation – Capabilities: C1=Corporate, C2=MIS, C3=Innovation, C4=Manufacturing, C5=Marketing & Brand, C6=Sales & Distribution, C7=Supply Chain & Purchase F.Ramiandrasoa Paris, 19 Jan. 2006 UTC Auto 19JAN06.ppt | 29
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