Comparative Case Study: Nissan-Renault VS Hyundai-Kia
Businesses, especially the global ones like Nissan-Renault and Hyundai-Kia are increasingly facing more and more challenges every day. Ranging from stiff competition to fast technological advancements, the organizations are left with no alternative to devising the ways of ensuring the constant progress (Eden & Ackermann, 2013). The executives of these corporations are tasked with the responsibility of implementing both business and corporate level tactics in a bid to achieve a sustainable competitive advantage. Strategic management has, thus, been incorporated in most business operations, including manufacturing and human resources management. At the same time, these automotive concerns are continuously discovering new opportunities, which go along with numerous caveats and risks that they should deal with later in time. Organizations are also faced with the challenges of having to empower their strengths, while at the same time minimizing their weaknesses. Strategic management is now seen as the only set of actions through which organizations can align the goals and the efforts of the different business units with the overall aims of a corporation. Without this kind of alignment, the businesses will surely suffer from sub-optimal goal realization problems. Strategic management helps the enterprises determine their mission, vision and business values. As opposed to the past times, when corporate values were somehow irrelevant for organizations, now they have to be fostered and adhered to by every individual within the entity. Similarly, business ethics has become a larger part of the firms’ strategic management process. Additionally, the issue of environmental scanning has become inevitable in organizations. For instance, companies are now simply forced to diagnose their political, economic, cultural and social environments. In fact, performing the SWOT analysis is nowadays crucial in enabling firms to focus on their strengths and opportunities, while at the same time trying to deal with their treats and weaknesses (Eden & Ackermann, 2013). Analysis of the business environment, governance, strategy, organization and performance, which has generally been referred to as EGSOP analysis, is an integral instrument of the organization’s environmental scanning process. In designing and implementing business strategies, the global corporations must consider corporate social responsibility (CSR) strategies, which entails creating value for the community through the undertaking of projects, which enhance the welfare of the society around the firm’s operation.
Nissan-Renault
Brief Introduction
Nissan-Renault is a Japanese-Franco strategic partnership, formed between two automobile manufacturers; Nissan which is based in Yokohama in Japan, and Renault, which is based in Pars, France. The companies have been in the alliance since 1999 and together are control eight large brands – Dacia, Datsun, Lada, Infiniti, Renault Samsung Motors, Venucia, Renault, and Nissan. The alliance also employs more than 450 00 employees (Nissan Global, 2013). It sells one out of every ten cars sold in the global automobile market. By the end of 2015, the cooperation between Nissan and Renault was the world’s leading manufacturer of plug-in electric vehicles. The strategic alliance between the two cannot really be classified as a merger or an acquisition. However, the companies are joined together through an arrangement of cross-shareholding. The structure was quite unique in the motor industry at the time, but has however been adopted by some other companies in the field since then.
Strategy
A strategy provides a general direction followed by a particular organization. Specifically, a business may implement strategies on two major levels; the business level and the corporate level. In order to design and employ certain tactics, strategic planning is needed (Hesterly & Barney, 2015). Strategic planning can be defined as a formally documented and systematic process, through which the key decisions that affect the organization’s operations are based on. These decisions are aimed at fostering steady growth of the organization (Nissan Global, 2013). Without the planning process, business cannot establish grounds for thriving and, hence, will most definitely fail to outperform. The Nissan-Renault motor alliance has adopted quite a number of strategies. These action plans, which are aimed at ensuring the overall well-being of the alliance, can be divided into two main categories – the business and corporate-level ones.
Business Level Strategies
A business level strategy focus on a single business unit instead be applicable to the wide line of operations undertaken by an underlying organization. The Nissan-Renault alliance has formed several business units, which are individual enterprise-like units or entities, which are in most cases oriented towards a particular product, market or industry. They are created within the corporation and primarily are related to aspects such as managing the activities of the business units so as to ensure that they conform to the overall organizational objectives. Similarly, strategies ensure that the business units work in harmony and in total conformity with the other business units so as to achieve the long term goals of the organization. Additionally, the business units of this alliance are geared towards developing some distinctive capabilities, competitive advantage and resources in each and every unit. The business units of the Nissan Renault alliance have the responsibility of identify a product market as well as developing a strategy for success in each of the markets so identified (Nissan Global, 2013). The business units have been specifically critical in monitoring the automotive industry and the business environment to implement lower level strategies, which are appropriate to the overall needs of the markets. It is done with the view to identify the needs at the current developmental stage of the different products produced by the motor group.
In Nissan Renault, the aim has been to create business units which focus on increasing the economies of scale of both companies without leaving a chance of either of the companies being consumed up by each other. In so doing, the group has created business units located in different parts of the world as a way of capturing different international markets. Specifically, the business units created operate in countries such as Brazil, China and in the United States. Each business units is mandates with the responsibility of having to reach the set targets in terms of sales and production quantities. Through these joint targets, the combination of the overall results of the business units is able to drive the achievement of the overall objectives of the larger alliance. By jointly developing batteries, engines as well as some other key components required in the manufacture of the vehicles, the alliance between Nissan and Renault has been able to achieve a high scale of production as well as speed. Differentiation at different business levels has enabled the organization in achieving the overall differentiation strategy. Ideally, the alliance has differentiated its products based on several business units it has established (Hesterly & Barney, 2015). For instance, this differentiation has been able to bear the fruits in building strong different brands, which all attract customers who have different needs. By doing so, the organization is able to achieve its larger goals in terms of profitability, growth and sales.
Corporate Level Strategy
Corporate level strategies cover the strategic scope of the whole organization. As opposed to the business level strategies which deal with strategy formulation and implementation in the business unit levels, the corporate strategies have a wider focus. It means that the corporate strategy is responsible for the overall direction of the organization. The top management of the firm has the responsibility to formulate and enforce the implementation of a corporate level strategy. In the Nissan-Renault alliance, the corporate strategy is a product of a well-designed corporate strategic planning.
The alliance between Nissan and Renault is a very strategic one. It is based on a given rationale, which states that due to the substantial cross-shareholding in the two companies, each company acts in the financial interests of the other (Hitt, Ireland, & Hoskisson, 2012). It is done while maintaining the individual brand identities as well as independence of the firm’s corporate culture. In doing so, the operations of each company are put under consideration when making decisions in the other one. Such a tactic assists the organizations in maintaining their overall identities while working in an effort to ensure that the overall profitability of the group is not compromised. Although some other companies have tried to implement this kind of structure as a way of strategic alliance, it has turned out to be very controversial. However, the structure has worked quite well in this case of Nissan and Renault (Nissan Global, 2013). The alliance has continuously advocated for some form of evolutionary approach and whose result has been an increased integration as well as synergy in the partnership within this particular alliance. The management of the partnership is keen to ensure that the short term goals of the organization do not destroy the efforts of building successful long term endeavors.
The corporate strategies implemented in the Nissan-Renault corporation focus mainly on global expansion, overall profitability of the company, value creation and market definition. For instance, in terms of global expansion, the business has been able to formulate a strategy which aims at expanding its operations to most parts of the world where the organization lacked roots initially. Specifically, the main motive behind the alliance of Nissan and Renault was to capture the European market, since Nissan, being a Japan based company, had not penetrated the European market successfully enough. By forming a partnership with a European based company, then the chances of the company penetrating the European market was high. Moreover, the overall profitability of the company is achieved by implementing corporate performance strategy. Additionally, the alliance has been able to ensure that the costs of the alliance remain low by jointly producing the raw materials used in the production process. Ideally, this strategy has focused on cost leadership where they aim at minimizing their production costs, which in turn has an effect of increasing the profits per unit and overall in the alliance.
The goal of the alliance between these two companies is to bring about an increase in the economies of scale for both Nissan and Renault. The collaboration is focused on some form of capital intensive projects which have been undertaken jointly by the two companies. Examples of these projects undertaken include zero emission transportation, production of automobiles targeting new markets such as India and Brazil and projects which focus on sustainable modes of transportation. Importantly, it has been a corporate strategy where the two companies try as much as possible to borrow from each other. The results of this is the strengthening of the other company financially. Hence, such a strategy has enabled the companies to benefit mutually from each other. The strategy implemented in the alliance has been keen in ensuring that the two companies borrow the best production systems and technologies from each other. For example, the production system used in Nissan was borrowed by the Renault, which, in turn, led to a spike in production outputs of Renault by over fifteen percent.
The corporate level has also adopted a value creation strategy, according to which the alliance seeks to edge out the competitors in the automobile industry through capturing a bigger market share. In doing so, the alliance has sought to add both perceived and real value to the products of the business. This has been made possible through the exploitation of economies of scope created as a result of this strategic alliance (Marsh, 2013). The resources of Nissan and Renault have been shared among the two companies so as to enhance efficiency in production while at the same time ensuring that the cost is minimized. The basic idea behind such strategy of the Nissan-Renault alliance is diversification. The partnership is able to offer more products to customers who are within the automobile industry in their attempt to dominate the whole market.
Environment for Nissan Renault
Since the car group is a strategic alliance between two companies – Nissan and Renault – there is no common headquarter of the group. However, Nissan is a Japanese company that is headquartered in Yokohama, Japan. On the other hand, Renault, being a European company, is headquartered in Paris, France (Nissan Global, 2013). The political environments of these two countries have been quite stable during the recent years. For instance, Japan has proved to be stable, both economically and politically. The country has a high number of investor who creates a good environment for business and production. Japan as a country has been keen in attracting investors, especially in the automobile industry. It has helped the country gain a competitive edge in the sector. Similarly, Japan has been known for its lead management techniques and which has been key to establishing the automobile sector in the country. However, the state in question faces stiff competition within the automobile industry. More specifically, companies such as Toyota are continuously offering a lot of competition to Nissan. In the case of Renault, the environment is also quite conducive. The European countries, especially France, are known for their political stability and highly developed institutions. At the same time, the environmental conditions in these countries are quite stable as well. The company is therefore not expected to face a lot of problems emanating from the political and economic environments. However, there is also stiff competition in Europe, especially from to other automobile industries based in Europe. Notably, companies such as Mercedes Benz and BMW, which are locate in Germany continues to offer a lot of competition to Renault. However, through differentiation and cost leadership, the alliance can be able to implement policies which are crucial in dealing with the challenge of competition in their respective environments. The cultural environment is also quite conducive in both states. The respective communities do not suffer from major cultural bias that can threaten the automobile products.
Conclusion for Nissan Renault
The alliance between Nissan Renault cannot be termed as a merger or acquisition per se, but rather is a form of a strategic partnership. With its establishments, the companies at hand have been able to develop joint production of automobiles of a higher quality and that are still affordable. The strategic management in the company has been effective in designing both corporate level and business level strategies which focus on the larger objectives of the two companies. In terms of environment, the two companies operate in environments which are quite stable, of particular importance being the political and economic stability in the countries. However, the competitive environments pose a substantial threat due to presence of some other powerful competitors both in Europe and Japan, as well as in the Asian world in large. Specifically, BMW, Mercedes and Toyota are considered to be the main and strongest rivals of the alliance.
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Hyundai-Kia
Brief Background
Hyundai-Kia is a strategic association between two South Korean companies, Hyundai Motor Company and the Kia motor company (Hyundai Motor Group, 2013). Hyundai Motor Group is a multinational conglomerate, headquartered in Seoul, South Korea. The company boasts being the largest automobile producer in South Korea and the second largest automobile manufacturer in Asia. It is also the fourth largest manufacturer of automobiles in the world after General Motors, Volkswagen and Toyota. The Kia motor corporation is also headquartered I Seoul, South Korea and is the second largest manufacturer of automobiles in Korea after the Hyundai.
Strategy
Business Level Strategy
The group has formulated a couple of business level strategies. Despite the existence of an alliance, each corporation still performs its functions in a way that leads to the overall realization of the goals of the group. Every business unit in the partnership has been mandated with clear responsibilities that focus on the overall objective of realizing the overarching goal of the alliance (Hyundai Motor Group, 2013). For instance, Hyundai motor company has seemed to pursue the internationalization strategy, which has in turn enabled the group to capture larger market share worldwide. The company has set up some several offices in other countries in the world. Each of these offices has been taken as separate business entities, which are mandated with the responsibility of formulating as well as implementing their strategies. However, these strategies should be aligned to the overall goal of the organization .Through these strategies, the business units have been able to capture the specific needs of consumers in different parts of the world.
Each firm, Kia and Hyundai, will continuously expand its target customer base by offering differentiated products. At the same tim, these products must meet the quality threshold of big considered world class products. Through the offering of differentiated products in each business level, the organization will also be able to achieve long term sustainability. This business level strategy will be crucial in market development, which will entail the creation of new sales to be sole din either the existing or the new markets (Bettis et al., 2015). Additionally, by implementing the business performance strategy, which is a business unit level strategy, the conglomerate will be able to trace the overall profitability of each group, which will, in turn, lead to achievement of the overall profitability of the whole organization.
Corporate Level Strategy
As already discussed, a corporate level strategy focuses on the larger goals of an underlying organization. It is responsible for the overall direction of the group (Hitt, Ireland, & Hoskisson, 2012). The Hyundai-Kia Automotive group developed a corporate strategy, which focuses on building a global brand. According to such a brand management strategy, Kia and Hyundai will pursue differentiated brand images as a way of boosting the overall market share of the group. The strategy is aligned with the market share aim, which seeks to increase the market share of the group in the automotive market. This is aimed at increasing the number of consumers purchasing the products of this group (Hyundai Motor Group, 2013). Together, the company has been able to penetrate new markets, whereas the individual firms would not be able to do so. By the same token, the tactic is focused on creating more value for the two brands. In pursuing this strategy, the promotion of Kia and Hyundai will be done under tow main separate and slogans. The slogan adopted by Hyundai will be ‘drive your way’. It will be aimed at communicating the refined and the more confident attributes found in this company’s products. The slogan associated wit Kia, on the other hand, is ‘the power to surprise’. The motto aims to embody the enabling as well as the exciting values present in the Kia brand.
The two brands were established with the view to ensure full differentiation between Kia and Hyundai (Interbrand, 2013). Moreover, the strategy aims to distant these two brands from the international competitors. The management of the company is confident that this action plan will be very instrumental in identifying as well as defining some new identities which will in turn create additional markets for the products of these two companies. The strategy is focused on ensuring that the group reaches the industry leading levels. The industry leadership strategy the alliance chose to pursue will not only be realized through size, but rather in terms of the overall brand value and the customer perception of the company’s products.
The overall financial plan followed by the company aims at building automobiles that are affordable and able to meet or even supersede the expectations of the customers. In a greater sense, the brand images of the alliance members are be steered towards securing that this objective is met. For Hyundai, the brand will reinforce the resolution of Kia to meet and surpass the expectations of its clients by offering sporty, dynamic products of a high quality. Kia and Hyundai also seek to employ a corporate level strategy, which integrates the respective brand strategies wholly in all facets of the businesses undertaken by the group. They will include the product development, marketing, design, after sales service and sales (Interbrand, 2013). These strategies will in turn be implemented simultaneously in the strategic regions served by the grip. These regions will include Europe, China and the US. The overall brand power will be enhanced through the differentiation obtained through the different brands. As a corporate strategy, the group has been committed to ensure that there is an effective and efficient management staff which can successfully run the firm’s operations. Each business unit is administrated by a qualified manager who coordinates with all other business unit managers in a bid to creating an overall direction for the group.
Environment for Hyundai-Kia Automotive Group
The two automotive giants have their headquarters in South Korea. The political and economic environment presents quite a good number of opportunities and threats as well (Interbrand, 2013). The technological environment is one that is moving at a fast pace, hence, allowing the companies build their production networks effectively and efficiently.
Conclusion for Hyundai-Kia Automotive Group
Hyundai-Kia automotive group was formed as a result of Hyundai motor company purchasing more than 50% of the shares of Kia in 1998. However, by the end of 2013m, 33.8% of the shares of Kia were owned by Hyundai Motor Company. The group of the two companies has set up strategies; both business level and corporate level strategies which are aimed at creating a sustained growth as well as market leadership in the world. Specifically the group has seemed to adopt more of the brand management strategy, which is achieved through differentiation between Hyundai, Kia and other automobile companies in the world. This is quite different from the alliance strategy formed by Nissan Renault group.
SWOT Analysis
SWOT analysis for Nissan Renault
Strengths
The following are the major strengths of the Nissan Renault alliance. Strong financial performance; due to the high number of sales realized, the group has a strong financial performance. Thanks to such financial results, the group is able to undertake more projects that are aimed at improving the company’s products so as to achieve more differentiation and more sales.
Substantial customer loyalty. The alliance has powerful customer loyalty in Japan and in European markets. This is due to the fact that Nissan is able to command more customer loyalty in Japan and in other Asian countries while Renault is able to do the same in the European market (Interbrand, 2013).
Strategic partnership. The strategic partnership itself is a strength on the side of the group. Through the formation of the strategic alliance, the company has been able to achieve a larger market share as well as increased economics of scale.
Growing brand reputation. Since the formation of the strategic alliance, the brand name of the group has been ever-increasing. Furthermore, hiked sales have been responsible for the growth in the brand reputation
Weaknesses
Product recalls. The company has faced a serious challenge witnessed in the product recalls. The group has recalled thousands of vehicles, which maybe an indication of poor operations in the group. These recalls might affect the brand image negatively.
Opportunities
Demand for more friendly vehicles. There has been a growing demand for environmentally fit vehicles (Stead & Stead, 2013). Nissan-Renault partnership has specifically invested heavily in the production of these vehicles. This is, therefore, a major opportunity for the companies to expand and grow.
Increasing fuel prices. The prices of fuel have been on the rise in the past few years. A bump in fuel prices tends to favor the electric vehicles manufactured by Nissan Renault automotive alliance (Interbrand, 2013). Such a tendency presents a great opportunity for the future success of the alliance.
Increased market penetration. Through establishing a partnership, the two companies have an ability to produce high quality products which are differentiated to meet the demands of the consumers. Threats
Stiff competition in the automotive industry; there are a lot of companies in the automotive industry which offer a lot of competition to the Nissan Renault automotive alliance. Examples include the Toyota Company.
Rising price of raw materials. The raw materials prices needed for production of vehicles has been increasing in the recent years. Such a trend threatens the profitability of Nissan Renault.
SWOT analysis for Hyundai-KIA
Strengths
String focus on Research and Development. The Hyundai- Kia alliance has focused greatly on research and development in their bid to manufacture products which meet the expectations of their customers.
Effective resource allocation. Both Hyundai and Kia have achieved to allocate their resources effectively. This in turn has led to higher returns ion the shareholders investments.
Successful marketing campaigns. The marketing campaign developed by the group have been successful. This has led to increased sales, which in turn has led to increased profitability.
Weaknesses
Past recalls. Past recalls of the group’s products is a major weakness. Vehicles’ braking systems were one of the main cause of such actions. The effect of recalls is a tarnished brand image.
The Hyundai-Kia partnership has not expanded aggressively with respect to geographical reach; the companies have tended to concentrate more on the Asian counties other than concentrating on the global markets.
Opportunities
Electric vehicles. The partnership has designed and currently manufactures electric vehicles such as the Pop City and Vega produced by Kia. These are grate opportunities especially in a period of increasing fuel prices.
Demanding customer needs. The rapidly changing customer needs are new opportunities for Hyundai -Kia, as it is now able to produce new models which meet the specific needs of these customers.
Threats
Stiff competition. The rivals in the global market have designed better technologies and hence are able to initiate better differentiation strategies than the Hyundai Kia group.
EGSOP Analysis
It entails the analysis of the environment, governance, strategy, organization and performance.
EGSOP analysis for Nissan Renault
Environment. The political, cultural and the economic environment within which these two companies operate are quite stable. At the same time, though, the competitive environment has been constantly changing in the recent years, which can be mainly attributed to the entry of new competitors.
Governance. The leadership of the Nissan-Renault alliance has proved to be efficient and effective. More specifically, the organization has been able to foster growth and strategic cooperation in a bid to foster an overall wellbeing of the group.
Strategy. Nissan-Renault motor alliance has adopted quite a number of strategies. These strategies, which are aimed at fostering the general wellbeing of the alliance, can be divided into two main categories or levels. These levels are the business strategy level and the corporate level strategy.
Organization. The association takes the form of a strategic partnership rather than the form of acquisition or mergers. The effect of this has been ability to create a mutual benefit which fosters the growth of the two companies.
Performance. Under the partnership rules, the performance of the company has been quite impressive. For instance, two companies have been able to achieve more than 8 million sales annually.
EGSOP Analysis for Hyundai-KIA
Environment. The business environment of the group is quite stable in terms of technological and environmental conditions. More specifically, South Korea has tried to foster economic stability, especially in the manufacturing sector (Hyundai Motor Group, 2013). However the political conditions still pose some serious challenges, especially due to the increasing threats from the neighboring country, North Korea.
Governance. The leadership of the group has been committed to creating differentiated products which can enable the companies achieve their overall targets.
Strategy. The group has formulated a couple of business level strategies. Additionally, the alliance has also formulated corporate level strategies, which has moistly concentrated on creating differentiation of the products of the group. The brand management strategy has been paramount in doing this.
Organization. The structure of the partnership is in a form of an acquisition rather han a strategic partnership. However, the group has been able to retain the autonomy of each company. Each company can therefore set their own strategies and objectives.
Performance. The performance of the group is quite impressive. For example, the association is largest manufacturer of automobiles in South Korea and the second largest in Asia.
History of Hyundai-Kia
In the year 1998, Hyundai motor company purchased fifty one percent of the shares of Kia motors. At the same time, as of 2013, Hyundai owned 33.88% of the total shares in Kia motors (Hyundai Motor Group, 2013). The acquisition of Kia by Hyundai motors was seen as a strategic move to consolidate the automotive industry in South Korea and in Asia in general. Together, the firms have pursued different strategies, mainly aimed at improving the overall profitability of the group as well as at increasing its market share. A globalization strategy has also been of a highest priority for the partnership.
Hyundai Mission and Vision
Vision
“Our Team provides value for your future”
Mission
“To create exceptional automotive value for our customers by harmoniously blending safety, quality and efficiency. With our diverse team, we will provide responsible stewardship to our community and environment while achieving stability and security now and for future generations”
History of Nissan Renault
At the time of formation of this alliance, the car manufacturing industry was in a phase of a rapid consolidation, with numerous companies being acquired or merged with each other. During this particular period, there were some high profile deals being reached, most notably being that between Daimler and Chrysler, which would be dissolved later. At the time of creating the strategic alliance between Nissan and Renault, Renault bought almost thirty seven percent of the Nissan’s outstanding shares (Nissan Global, 2013). Since then, the corporations have continued to employ their strategic policies, aimed at generating larger revenue streams as well as capturing more market share. The alliance has also undertaken some several projects in a bid to foster growth.
Nissan Vision and Mission statements
Vision
“Enriching people’s lives”
Mission
“Nissan provides unique and innovative automotive products and services that deliver superior measurable values to all stakeholders in alliance with Renault.”
