Free Management Essays - Marriage of convenience or strategic alliance? - A case study on Renault and Nissan
The standard against which motor-industry get-togethers have been judged in the past five years has been the spectacular alliance of Renault and Nissan, which amounts to a virtual merger without the pain of fully fusing two companies. When the French group announced in early 1999 that it was taking a 37% stake in Japan's perennially loss-making second-biggest car company, virtually nobody in Japan thought it would work. But within two years the plan to rescue Nissan had turned it from loss into profit by closing factories in Japan and had also sped up the development of more attractive cars by Nissan's impressive engineers. Once it was clear that Nissan was starting to reduce its huge debt burden, Renault increased its stake to 44%; however the two companies are still keeping their separate identities in order to retain brand loyalty and employee motivation. (The Economist, 2004) Thus, the question must be asked: is this a true strategic alliance, with a clear goal for the two sides, or merely a marriage of convenience, offering Renault Nissan’s engineering quality, and offering Nissan an easy route back from the edge?
Relationship to Theory and underlying Literature
Segrestin (2005) is definitely of the view that Renault and Nissan have formed a strategic alliance, using it to support his argument that inter-firm cooperation and alliances often pave the way for new innovative business opportunities, whilst also being highly risky and difficult. His article analyses the emergence of the Renault-Nissan Alliance, through the cooperative development of the first joint platform, claiming that in such collaborations, the relationships are as precarious as the potential synergies are uncertain, especially when one partner, in this case Nissan, has so much to lose. He argues that the scale of this strategic alliance required the building of a new collective identity requiring specific managerial models to design simultaneously common purposes and collective identity.
As such, Segrestin (2005 relates the alliance to several theoretical and practical managerial implications relevant to inter-firm partnerships that aim at exploring new fields. However, given the difficulties managers faced in forming this alliance, the paper also discusses possible legal implications and suggests a new type of contract, which would actually support the development of exploratory partnerships. The view that this is a long term strategic partnership is backed up by de Oliveira and Feast (2005), who have reported that Renault may start building cars for Nissan in France very soon, with the first move of this kind possibly being producing the replacement for the Nissan Primera, currently made in Sunderland, England, in Sandouville, France, alongside the Renault Laguna.
In contrast, when Boyer and Freyssenet (1999) first discussed the merger deal between the companies, they focused on the risks and uncertainties faced by Renault in getting involved with the Japanese car company, claiming that this could at best be a temporary solution to save Nissan. Harbour (2002) also claimed that, when the deal was announced, many industry observers seemed to consider it as an “international car wreck waiting to happen” as conventional wisdom and theory believed cultural differences alone between the French and the Japanese would bring the merger to an ugly end. However, Harbour also reports that the crash never occurred, and today, the Renault-Nissan alliance is thriving, with one of the best signs of this partnership's success being in Mexico, where, like elsewhere, English is being used as the common language for communication.
Objectives
Given that the theory seems to suggest that the partnership between the two firms initially began as a marriage of convenience and opportunity, and, through hard work and managerial skill, became a strategic alliance; it seems wise to use the objectives of this work to chart its progress and the limits of the alliance. Therefore, I propose three key research questions to be answered as part of this piece.
1. When the merger was first contemplated, what was its initial scope, and to what extent was it planned to be a long term strategic alliance from both sides?
2. How has the structure and nature of the partnership changed over time?
3. To what extent has the partnership become a truly strategic alliance?
Methodology
To answer the first question, it will be necessary to examine the financial records and announcements from the time of the merger, to attempt to determine what was announced to shareholders when Renault purchased its stake. It would also be useful to gain interviews, ideally person to person, but if this is not possible, then to search for magazine and journal interviews conducted nearer the time, with key managers at Renault and Nissan to determine how they viewed the merger at the time.
For the second question, the best approach is likely to be an examination of how the two companies’ marketing, production and distribution strategies have changed over time, taking particular care to look at the development of the long term dependencies and synergies which signal the start of a major strategic relationship. It would also be useful to examine how the joint platforms have been developed, and whether one of the two firms has been dominant in them.
The answer to the second question should reveal much of the answer to the third, however analysis of pieces such as that by Segrestin (2005), will also be useful to reveal how analysts, and other parties, have viewed the extent to which the partnership has developed. It would also be wise to look at both the recently launched, and the proposed future, projects to see if the partnership is now viewed as a completely two sided alliance, or still just one partner supporting the other.
References
1. Boyer, R and Freyssenet, M. (1999) Renault-Nissan: a marriage they'll need to work at. Automotive Engineer; Vol. 24, Issue 6, p. 22.
2. de Oliveira, P. S. and Feast, R. (2005) Nissan may build next Primera in France. (cover story) Automotive News Europe; Vol. 10, Issue 2, p. 1.
3. Harbour, R. (2002) What Makes for a Good Marriage? Automotive Industries; Vol. 182, Issue 11, p. 24.
4. Segrestin, B. (2005) Partnering to explore: The Renault-Nissan Alliance as a forerunner of new cooperative patterns. Research Policy; Jun2005, Vol. 34, Issue 5, p. 657.
5. The Economist (2004) The new European order. (cover story) Vol. 372, Issue 8391, special section p. 9.
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