1

Renault-Nissan:
2010 The Making of a
Global Alliance
International Business Assignment
Prepared by:
Mohit Malhotra (67)
Monisha Sinha (68)
Nirmal Kandth (71)
Ranjit Pisharody (75)
Sujith Valsalan (113)
 Table of Contents

EXECUTIVE SUMMARY 1

INDUSTRY BACKGROUND 2

COMPANY BACKGROUND: RENAULT 4

COMPANY BACKGROUND- NISSAN 8

THE ALLIANCE PROCESS 12

HANAWA AND SCHWEITZER 14

ANALYSIS OF RENAULT- NISSAN GLOBAL ALLIANCE 17

1. MARKETING PERSPECTIVE 18
2. FINANCIAL POSITION OF NISSAN V/S RENAULT 20
3. OPERATIONS PERSPECTIVE 21
4. HR PERSPECTIVE 21

RECOMMENDATIONS 25

CONCLUSION 25

BIBLIOGRAPHY 27

Bibliography
Executive Summary
This case provides us with two different perspectives of Renault- Nissan partnership deal.
Renault, which was the ninth-largest automaker in the world with 4.3% of market share, was
struggling to make its presence felt outside European market. Recent attempts to form an
alliance with Volvo had failed. So Renault was on a lookout for a strategic alliance in Asia, so
that it could enter the Asian market.

Nissan, on the other hand, despite being a producer of excellent quality cars, was suffering from
major financial problems. The company had problems with its purchase policy and relations
with suppliers. It also had a very diverse product range resulting in a high manufacturing cost.
All these factors had pushed the company on the brink of bankruptcy. In 1998 it had a total debt
of 23 billion Euros.

Renault approached Nissan with the proposal of an alliance; this elicited a positive response
from Nissan. But during the same time period Daimler Chrysler, the German car maker which
was also interested to takeover an Asian carmaker, also approached Nissan with an offer of
merger.

But after all the due diligence Nissan concluded that synergy with Renault was greater as
compared to Daimler and alliance with Renault would allow Nissan to maintain its individual
identity, the deal went in favour of Renault. As part of the deal, Renault invested 643 Billion
Yen and acquired 36.8% equity of Nissan Motors and 22.5% of Nissan Diesel. For the purpose
of restructuring Nissan’s operations and finance, three French representatives left Renault and
joined Nissan’s Board: Carlos Ghosn as COO, Patrick Pe`lata responsible for strategy and
Thierry Moulonguet, in charge of finance.

OBJECTIVES
The primary objective of the case analysis was to identify various issues related to Nissan’s
financial decline as well as Renault’s stagnant market share. The case also deals with the
scenario leading to the alliance and post-alliance synergy that would be achieved by both the
companies.

RECOMMENDATIONS
The recommendations are given keeping in view the financial and other benefits that both the
companies would enjoy post the alliance.

To avoid brand confusion in the minds of customers Nissan and Renault should keep brand and
product identities different where as they should exploit synergies in geographical presence and
product categories.

1
Industry Background
In 1999, 55 million vehicles were sold worldwide, out of which 32 million were
passenger cars. 90% of the demand came from the “triad” of the USA (26%), Europe (40%) and
Asia (24%). In the US and in Europe, sales increased by 8.7%, while in Asia the rate of growth
was 5.1%. In 2001, the number of vehicles sold worldwide was almost the same as compared to
1999. The automobile market was slowly stagnating in mature markets of the US and the
Western Europe. Both these markets were also affected by rising oil prices and interest rates in
2001. The shrinking of these main markets was not sufficiently compensated by growth in other
markets.

CHALLENGES OF THE AUTOMOBILE INDUSTRY (1995 – 2002)

Benefiting from the weak position of the Japanese car industry, due to the deflationary
crisis that hit Japan in 1991, the automobile industry entered a phase of complete transformation.
In November 1998, Daimler-Benz acquired Chrysler, initiating a trend of mergers and
acquisitions amongst the car manufacturers of the US, Europe and Asia. Renault acquired Nissan
(effective on March 27, 1999), Dacia and Samsung. Overall, global consolidation led to six
major groups dominating 85% of the worldwide sales, directly or through alliances. The main
challenge of these newly formed groups was to make their alliances successful. This was not an
easy task as it involved all several important functions from the R&D to the after-sales services.
Alliances between western and Asian manufacturers added to these issues a cultural barrier
especially because of the strong corporate culture they had built.

“In these times of change, brand differentiation and services are the key aspects of
success”, reflected a senior marketing manager at Renault. To adapt to this changing
environment, manufacturers have to further modify their structure, enhance marketing services
as well as customer related services. Managing the value-chain in the industry has become
critical and essential. Overall, the automobile industry might find new sources of profit by
integrating customer into their value chain. Benefits of customer integration in the value chain
occurs at three stages: (a) in the front end processes: offering services like maintenance
management, second hand vehicles marketing, routine replacement sales (batteries, tires, brakes,
etc.) vehicle insurance sales, emergency services, etc. (b) in the intermediate processes: offering
services like customer profiling, customer analysis, market profiling and segmenting, spares
inventory management, etc (c) in the back-end processes: warranty analysis and quality
management services.

These could lead to unexplored (or partially explored) sources of profit. Manufacturers
need to restructure their organizations to be able to offer such services, either by themselves or
through third-parties operating in their name.
MAJOR CHANGES , WHICH TOOK PLACE IN THE AUTOMOBILE INDUSTRY :

Large scale mergers were happening in the world over that resulted in lot of
repercussions in the automobile industry
An Asian slowdown that was mainly observed in the financial markets had unfavourable
effects on the Japanese automotive industry.
Globalisation was leading to an irreversible change in the world auto industry.
A presence of over-capacity in the global auto market was observed. The demand the
world over was only 52 million vehicles, while the existing capacity was 70million
vehicles. This led to a greater importance for firms to seek size through consolidation.
The stringent environmental and safety regulations increased R&D expenses per car.
The strategic movement of auto majors was almost as important as the automobile itself
 Source: Renault 2002 Atlas

Source: Renault 2002 Atlas (CCFA - estimates for US and Japanese manufacturers)

Company Background: Renault

Renault, once owned by the French state, became a limited company in 1990 and was
finally privatized in 1996. It earned a reputation for their innovativeness and the
anticipating of market trends, which found their expression mainly in creative car designs
and in new forms of power trains. Renault had a complete product range, from small to
large passenger cars, including minivans, as well as light duty commercial vehicles,
trucks and buses. Overall the company sold 2.2 million vehicles worldwide in 1998
making it number ten among the car companies. Though Renault was mainly present in
Europe (responsible for over 90% of the revenues in 1998), especially in France with
57% of the revenues generated there. It had several manufacturing sites in Latin
America, but had nearly no presence in North America and in Asia-Pacific. The financial
situation was quite sound in 1998 with a net income of EUR 1.3bn from revenues at
about EUR 37.2bn, thereof 4.2% was invested in research and development maintaining
the companies very dynamic product renewal policy.

RENAULT’S NEED FOR GLOBAL STRATEGIC ALLIANCE

Within the globalizing and consolidating automobile industry, one of the only ways to ensure
long-term sustainability was to form a larger group in order to leverage market power. The
signal for the same was evident from the merger of Daimler Chrysler. Renault too had decided to
move on the same direction i.e. increasing the influence in the market by forming strategic
alliances. Renault had thus tried to form an alliance with a European Automobile Manufacturer-
Volvo. However, the presence of French state as a prominent stakeholder, lack of diplomacy
from Renault discouraged Volvo to nod yes. Thus, Renault had failed in its first attempt.

Renault had no presence in Asia. As financial and market power of its chief competitors was
increasing, it would have been difficult for entering this continent on its own. Further, the Asian
market was strategically important for Renault in order to build up its presence globally. Thus,
Mr. Georges Douin, EVP, suggested an international strategy that recommended finding a right
strategic partner in the Asian market.

PREVIOUS ATTEMPTS OF RENAULT IN ASIA

Renault had made many efforts to form partnerships with several Asian companies. It tried for a
research programme on diesel engines with Honda, which did not work. In addition, it had
conducted talks with Korean companies like Samsung and Daewoo. Even they were very keen to
form a partnership with Renault, as this would give them an easy way to enter European market.
However, these attempts too did not end fruitfully.

Renault had succeeded to form a relationship with Mitsubishi, as the latter was a partner of
Volvo. This gave them a glimpse of Japanese business culture. However, this association was
terminated once the Renault- Volvo merger was called off.

Though all the above attempts came to a dead end, these attempts helped Renault to get apprised
with Asian market. Also, these attempts gave an idea that finding a strategic partner in Asia
would be not an easy task.

HOW NISSAN WAS SHORTLISTED?

Renault decided to send a delegation, to Japan, to find the right strategic partner. Renault's
proactiveness in this regards helped, as it could be a step ahead of the other hungry competitors.

Nissan and Mitsubishi, being the likely candidates, were sent a letter and Nissan replied
immediately for the same. This gave positive vibes to Renault delegates and thus seeds got
planted for formation of a global alliance.

The letter sent by Mr. Louis Schweitzer, Chairman, Renault to Mr. Yoshikazu Hanawa,
Chairman, Nissan reinforced this development. Further, the leaders of both the organisation
shared a good rapport. Thus, the companies decided to go further check the synergic
opportunities available.

Renault was enthused of forming a strategic alliance with Nissan which evident from the quote
of Mr. De Andria, VP, Strategic Planning – “We went hunting for Rabbits and we found a deer.”

OPERATION PACIFIC:
The campaign named ‘Operation pacific’ was started by Renault to pin point and also to find the
cost cooperation opportunities by forming this alliance. With about 100 people from each
company forming the Franco-Japan teams started evaluating the main issues which will occur
due to this alliance and these joint studies played a major role in creating a climate of confidence
at grass roots level between the two manufacturers.

i) The question of synergies – The two teams worked on potential synergies and gradually
realized that situation was exceptionally promising and surpassing expectations.
– Renault was ahead in mid range cars and light commercial vehicles, while Nissan
were specialized in mid range vehicles and pickup vehicles
 – Both the companies had their market dominance spread geographically
– Renault is known for cost control, product innovation and global purchasing
whereas Nissan is known for quality control, R&D and technology. Both these
companies can exchange their strengths for mutual beneficiaries.
i) Nissan’s engineering culture presiding over managerial culture made them to face major
financial problems.
– Quest for performance and quality won over cost cutting which resulted in
increase in manufacturing costs and increase in product price
– Product range was too diverse and they never established a rational purchasing
policy or system of relations with suppliers.
– Japanese style of collective responsibility and collective decision making made
them difficult to find a decision maker outside Nissan.
Thus Nissan had a need to join forces with partner to bail out financially on short term and also
it was looking for somebody who would make them remain competitive by providing their
technology support in order to restructure the entire production system, purchasing policy and its
keiretsu.

Hence they were ready to form alliance with Renault rather than DaimlerChrysler group who
were financially strong on their surface, as they believed Renault will help them to find the way
out of their difficulties.

COMPETITION FOR AN ALLIANCE

French automaker Renault faced stiff competition from the German-American automaker
Daimler-Chrysler for the alliance with the Japanese automaker Nissan. Daimler was initially
interested in the tuck division of Nissan; but since the car and truck division were intertwined in
a complex manner, it decided to bid for the entire company.

Renault, on the other hand, accepted the condition that the deal has to include the truck division.

Now we examine the pros and cons of Nissan’s potential alliance with Daimler and Renault:

Daimler Chrysler

Pros

• Daimler was twice the size of Renault and had the financial capacity to absorb all the
accumulated loss of Nissan.
• Due to its financial strength, Daimler had the capacity to help Nissan in industrial
restructuring which would have been a long and difficult process in Japan.
Cons

• Most important issue in the Nissan-Daimler was that it was an acquisition deal, not a
partnership of equals. So Nissan would have lost face in front of Japanese as well as
internationally.
• The synergy in this deal would have been less. Both Nissan and Daimler were strong in
large car segment.
 • During that period, Daimler was struggling to make its previous merger with Chrysler a
success, so a second merger with an Asian company, so diverse in culture, could have
been difficult to handle.

Renault

Pros

• This was a partnership of equals. Nissan would have been able to maintain its individual
identity.
• Major issue for Nissan was cost management and rationalisation of its product portfolio.
At that time Nissan had 26 platforms for vehicles. Thus the cost of manufacture was very
high.

Renault was known for its low cost structure and global strategy for platforms and
purchasing. At that time Renault worked on only 8 platforms for its cars. Thus Nissan
could have benefitted more by having an alliance with Renault compared to Daimler.
Daimler was known more for its luxury cars and low cost manufacturing was not its
forte.
• The synergy between Renault and Nissan was very high. Their product portfolio
complemented each-others’.
• The geographic regions where both were strong were different. Renault was a major
player in Western Europe and South America while Nissan was strong in North and
Central America, Asia, Japan and Africa.
• Financial analysis showed that potential synergy would yield, at least on paper, a saving
of 1.5 billion in 2002.
Cons

• Since financially Renault was not very strong, a deal with Nissan could have pulled
Renault into red.
• Renault’s previous attempt to form a partnership alliance with Volvo had failed.
Thus we see that the pros outweigh cons in favour of Renault.

THE OUTCOME
Throughout the negotiation process Renault Executives maintained honesty and built an
environment of trust, without appearing arrogant in any way. This helped the deal go through in
Renault’s favour. Once Daimler pulled out of the deal, there was no other option for Nissan but
to accept Renault’s offer. But Renault Executives acted very honestly and did not take any
undue advantage of Nissan’s weak position.
Company Background- Nissan
Nissan was established in 1933 by Yoshisuke Aikawa to manufacture and sell small Datsun cars
and auto parts. In 1935, the first car was rolled out from the Yokohama plant and export of
vehicles to Australia was also started the same year. By 1936, as World War II appeared
imminent, the production shifted from cars to military trucks. After the war, many of Nissan’s
former auto dealers moved over to Toyota, leaving Nissan with a depleted sales force. However,
by 1945 and 1947, the production of trucks and cars resumed respectively. And by 1960 Nissan
got the Deming prize for engineering excellence.

During the 1960s, Nissan’s main competitor was Toyota and its cars were designed to directly
compete with Toyota’s products. It was also during this period that it established Nissan
Mexicana, S.A.de C.V, its first overseas manufacturing plant. In 1966, Nissan merged with
Prince Motors as per the advice of the Japanese Government since Nissan maintains close link
with the government. The twin oil crisis in the 70s resulted in greater demand for smaller and
more efficient cars which led to surge in exports.

In the 80’s Nissan set up manufacturing base in the USA and it was also looking to start a plant
in Europe. Nissan initiated rapid overseas expansion but the domestic sales were beginning to
fall. Nissan entered into a vicious cycle of over-capacity, falling sales and price cuts in the
domestic market while at the same time expanding in the overseas market. This led to conflicts
with the Japanese unions and the management. Nissan employees protested against the idea of
increasing production capacity overseas when their domestic plants were underutilised. The then
President of Nissan, Takashi Ishihara’s unilateral approach did not go down well with the union
and this badly affected Nissan’s image.

The succeeding President Mr. Kume launched a program to upgrade the image of Nissan. Many
new models of cars were released. He also started talks with the unions to mend the ruptured
relations. Mr. Kume success can gauged by the fact that all the employees including workers
came to address him as Kume-san rather than as Mr. President. Nissan was losing touch with the
customer needs of the current generation since the dealers, 50% of whom were company owned,
did not have the autonomy in selecting car models. .

With the burst of Japan’s bubble economy, Nissan’s profits plummeted. From a profit of 101.3
billion yen in 1992 Nissan went to a loss of 166 billion yen in 1995. It was during this time that
Mr. Yoshifumi Tsuji became president. He tried to improve the domestic sales by meeting
regularly with domestic dealers – but the sales showed no signs of improving. In 1993, Mr. Tsuji
announced a cost reduction program to cut costs by 200 billion yen by 1995, but the program
failed to achieve its target.
It was in this climate that in 1996, Mr. Yoshikazu Hanawa became the President of Nissan. At
that time, Nissan’s share of the domestic market was just 15.9%. Mr. Hanawa started plans to
increase the market share as well as to change the culture of the organization. Hanawa wanted to
integrate Nissan towards one vector in order to show better results. His initial plans focused on
new car development, with the aim of recovering domestic market share.

Hanawa’s main concern was to change the culture of the organisation. Nissan’s culture was that
of complacency and there was a lack of urgency. There was no cross-functional and cross-
regional communication. The design of the cars was out of touch with the market. There was a
bureaucratic culture rooted into the organization which made implementation of change very
difficult.

Nissan suffered a net loss of 14 billion yen in 1998 and it was clear that some initiatives had to
be taken to rescue the company. The Corporate Planning Department presented ‘Global Business
Reform Plan’ to Hanawa and the board. It proposed to achieve profit to sales ratio of 5% by
2001 and 6% by 2003. Two options were presented that would help the company achieve this
target. One was to undertake a drastic down-sizing and the second option to form a global
alliance and to survive through increased scale

NISSAN’S NEED FOR A GLOBAL ALLIANCE

Nissan had a greater need for a partner to pull it out of its financial instability. The other
non-financial considerations for a global alliance were:

• Technology access: Need to increase efficiency by concentrating on production of

smaller cars.

• Focus beyond quality: Nissan’s obsession with quality had driven the company away
from market reality such as customer orientation and importance of product designing.
The aspects of cost reduction, Marketing, innovative style and appearance could be
introduced to the company through an alliance. This was essential in steering the
company towards market reality.

• Global Presence: Though Nissan had a presence outside Japan, the company was unable
to leverage profitably from such a presence. A local partner or a well-established player
would assist in overcoming this shortcoming in Nissan. Also, the Asian slowdown called
the Japanese companies’ potential into question

NISSAN’S URGENCY FOR A REVIVAL

Mr.Yoshikazu Hanawa, Nissan’s 14th president was heading the global alliance with
Renault. He foresaw March 30, 1999 as a symbolic deadline for reviving the company’s
financial health. That was the period for the short-term credit lines to be renegotiated. While
Renault’s reason for a global alliance was more towards strengthening its current global
position, for Nissan it was a matter of survival. A partner was needed to keep Nissan’s high
manufacturing cost, trim its product range and make quality available at an affordable cost. The
declining global market share (4.9% in 1998) also reiterated the need for a global partner.
GLOBAL BUSINESS REFORM PLAN:
In May 1998, the Central Planning Department came up with a “Global Business Reform Plan”,
which was presented to Mr. Hanawa which contained proposals to increase the profits to sales
ratio to 5% in 2001 and 6% in 2003.
The plan gave two alternate methods of achieving the objectives:
• The first method was to implement a survival plan that included down-sizing, reducing
development cost, integrating platforms, streamlining sales, and divesting non-core
business assets.
• The second alternative was to establish a global alliance to survive through increased
sales.
It was in this climate that the letter from Mr. Lewis Schweitzer, Chairman and CEO of Renault
outlining terms of a possible alliance was received by Mr. Hanawa. The letter was clear in that it
proposed an alliance would only with Nissan Motors.
Mr. Hanawa immediately contacted Mr. Yutaka Suzuki, Director and GM at Corporate Planning
Department and Mr. Toshiyuki Shiga, Sr. Manager at Corporate Planning Department to look
into the proposal.
Mr. Shiga had in 1997 worked with Mr. Andre Douin, Head of Renault’s Planning Division to
talk about possibility of Renault producing pickup trucks under Nissans license. Therefore he
already had a considerable knowledge about Renault.
On the basis of the research carried out, Nissan found that a joint venture with Renault had three
main areas of benefit: One, Both the companies had market strength in different areas of the
world. Second, Renault was good at producing small cars while Nissan was good at producing
large cars. There was a possibility to integrate platforms and for cost reduction. Third, both
companies had similar market capitalization and thus the threat of takeover from either side was
less. In July 98, after extensive consultations between the two companies, 21 joint projects were
finalized. In September 98, Nissan started operational level studies – until the moment, only the
management was involved.
In November 98, as the joint project teams were working, Renaults top management team of
Louis Schweitzer, Georges Douin and Carlos Ghosn made a presentation to the Nissan
Management Committee. The presentation visibly shook up the Nissan team – both at the
Renault teams boldness as well as what they outlined (the problems of Nissan)
In December 98, all the 21 joint teams gave the final reports – there were some “win-lose”
projects but most of the projects were “win-win”.
It is important to note that in the beginning Mr. Hanawa never thought of forming an alliance but
was looking at Renault with intent of forming joint cooperation. It was only after repeated
interactions with Mr. Schweitzer that Mr. Hanawa came to think of the global alliance.
For Nissan, the global alliance was not an objective but a process through which it could learn
about Renault’s cost management and customer relations. Completing the negotiations for the
alliance was just a step as far as Nissan was concerned. It was in December that Daimler-
Chrysler who had been negotiating with Nissan to buy Nissan Diesel made an offer to acquire all
of Nissans operation. For Nissan this was offer that it could not resist. Given the size and
prestige of Daimler-Chrysler, it could easily pay off all of Nissan’s debts, increase sales – in
short remove all of Nissan’s problems. However, in agreeing to be acquired by Daimler-
Chrysler, Nissan would lose its independence.
THE COLLAPSE OF THE KEIRETSU HELPS NISSAN TO REMAIN GLOBALLY COMPETITIVE

As the other Japanese companies, Nissan has been supplied by keiretsu which is long-term
purchasing relationship, intense collaboration and the frequent exchange of personnel and
technology between companies and select suppliers (Okamura, 2005). Most of the Japanese
automakers depend on the keiretsu and it is very unusual for a Japanese firm to not be part of it.
However, when Carlos Ghosn arrived as CEO of Nissan, he didn’t want to follow these Japanese
traditional rules. In his Revival Plan, he states that purchase costs, which represent 60% of the
total cost, should be reduced by 20% in a three year period, and the number of suppliers, which
totals 1145, should be decreased to no more that 600 companies (Ikeda, M. & Nakagawa, Y.
2000) The CEO actually dropped all of the keiretsu suppliers, keeping only four of them.
Although many people in Japan disagreed with this idea of ending so many long-term business
relationships, Nissan prevailed. Ghosn claimed that the keiretsu system resulted in higher costs
when purchasing automobile parts. Also, it is difficult for keiretsu suppliers to have the most
advanced technology developed independently which decreases the competitiveness of Nissan in
the global market. Also the collapse of the keiretsu led to increased competition among
suppliers.
As a result, Nissan has been able to select better quality supplies at more affordable prices
(Okamura, 2005).
The Alliance Process
Schweitzer’s inner circle for the tightly guarded ―Pacific Project included Executive Vice-
Presidents (EVP) Georges Douin and Carlos Ghosn. Douin, who oversaw product and strategic
planning and international operations, conducted the early studies of potential Asian partners.
Ghosn was a cost-cutting expert who masterminded Renault’s post-1996 restructuring. It did not
take long for the group to look beyond a one-country relationship with Nissan. Renault and
Nissan had many common and complementary interests. Both CEOs were intent upon
improving their companies’ competitiveness, rebuilding the organizations, and enhancing the
companies’ reputations. There were no previous conflicts between the two companies or CEOs
to impede a relationship. Conversely, there was no strong foundation on which to build.

ISSUES
The meta-issue for the companies to negotiate was the basic nature of a relationship. Specific
agenda items included the scope of their collaboration, their respective contributions, and an
organizational structure. Whatever the basic relationship, management control and equity
valuations were bound to be Renault-Nissan sensitive issues. Given Nissan’s history and
prominence in Japan’s industrial sector, Hanawa and his team would be protective of the
company and determined to ensure that Nissan Motor had a future. At the same time, while
Renault had $2 billion in cash to spend, the company’s financial history and government
supervision necessitated that Schweitzer proceed prudently.

THE NEGOTIATIONS
The 9-month period may be divided into five phases:

1 – Preliminary Study (July - September 1998)

2 – Joint Study Teams (September - December, 1998)
3 – Reporting (December 1998)
4 – Alliance Formation Process (January-March 13, 1999)
5 – Employee Involvement

The following sections describe the various actors and each phase of the negotiation process.

I. Preliminary Study (July - September 1998)

i) Nissan’s corporate planning department which had people from all the fields started
off their investigations on the European car company and did a thorough internal
study of Renault and came out with findings mentioned below
– The main reasons for optimism was found based on research – Two companies
showing strength in different regions, Nissan’s strength in large cars, while
 Renault in small cars and also the common platform integration for
manufacturing the vehicles.
– Size of the two companies in terms of market capitalization were looking similar
and hence there is lessening threats of future dominance or possible take over
from either side.
i) With 80% of Renault’s sales are coming from Europe, they wanted to broaden the
coverage, gain scale and solidify market position

Both the company developed a shopping list of more than 100 projects and out of which 21
projects were prioritized first after numerous negotiations with both the company
representatives.

II. Joint Study Teams (September - December, 1998):

From September to December 1998, 21 intercompany teams assembled from specialists on each
side thoroughly examined the companies’ respective operations. The teams held meetings at
nearly every one of the companies’ sites worldwide, visited plants, and exchanged cost and other
proprietary information. Top management facilitated collaboration within the study teams and a
coordinating committee reviewed progress monthly. Communication between study teams was
prohibited; teams reported directly to the chief negotiators.
Engineers were asked to control to have an in depth study on projects and there was a greater
amount of secrecy between two companies. But as discussions progressed, companies were
opening up for better synergies and most of the projects resulted in ‘win-win’ situation.

III. Reporting (December 1998):

After the submission of reports the two companies decided to form a common strategy in order
to achieve the profitable growth for both the companies. Their basic policy was to distinguish
the brand identities from each other and to integrate the processes that were far away from
customers.

IV. Alliance formation (January-March 13, 1999):

The negotiation became aggressive focussing on the restructuring, finance and legal affairs. For
Nissan apart from finalizing the agreement, their main objective was how to examine the sharing
of best practices with Renault. But Renault was not ready to reveal until the alliances were
formed.

V. Employee involvement:

Renault laid its emphasis on communication comparatively more than negotiation, which
made Nissan employees easy to understand Renault.
For Nissan, Hanawa was always at the center of control and he communicated mostly to
his three lieutenants alone which made some key people to think why they were not
involved in the processes at all directly. This would have allowed the HR to plan for future
and to get ready to face issues after post alliance integration.
Hanawa and Schweitzer
PHASE ONE

In June 1998, after the Schweitzer-Hanawa exchange of letters, a select group of Renault and
Nissan representatives met secretly to explore their respective interests in strategic collaboration.
By the middle of the month, they were preparing for their CEOs to meet. Six weeks later,
Schweitzer and Hanawa met for the first time in Tokyo. They established rapport quickly and
put the wheels in motion for studies on potential benefits of collaboration.

PHASE TWO

During the 7 weeks from August 1-September 10, working groups in and from both companies
conducted preliminary analyses on purchasing, engines and gearboxes, car platforms,
production, distribution, and international markets. Results were promising. Nissan’s capabilities
in large cars, research and advanced technology, factory productivity, and quality control
complemented Renault’s talent in medium-sized cars, cost management, and global strategies for
purchasing and product innovation.
Highlighting the trust he felt they had established, Schweitzer proposed to Hanawa that they
strengthen their relationship by holding each other’s shares. Hanawa replied that Nissan had no
money to spend on buying Renault stock. Schweitzer said they could talk about the subject again
in the future though he also underscored how critical their collaboration was to Renault’s future.
On September 10, the two CEOs met in Paris and signed a memorandum of understanding
committing their companies to evaluate synergies more extensively in an exclusive arrangement
for the next 3½ months.

PHASE THREE

From September to December 1998, 21 intercompany teams assembled from specialists on each
side thoroughly examined the companies’ respective operations. The teams held meetings at
nearly every one of the companies’ sites worldwide, visited plants, and exchanged cost and other
proprietary information. As one reporter (Lauer, 1999a) later observed, information exchange of
this kind was remarkable in an industry where companies jealously guard their manufacturing
secrets.
Top management facilitated collaboration within the study teams as needed and a coordinating
committee reviewed progress monthly. The executives’ main concern during this period was
development of a business strategy; specific financial issues were left for the final rounds.
Schweitzer and Hanawa—and the negotiation teams—continued their meetings at venues
ranging from their headquarters to cities in Thailand, Singapore, and Mexico.
Within Renault, Schweitzer and his executives concentrated on refining their concept of an
alliance. They drew on their experience with Volvo and examined the Ford-Mazda partnership
as a model, paying particular attention to financial and cultural dimensions.
By October, the negotiations centered on a Renault investment in Nissan. For his part, Hanawa
set four pre-conditions for a deal: retaining the Nissan name, protecting jobs, support for the
organizational restructuring already underway at Nissan with Nissan management leading the
effort, and selection of a CEO from Nissan’s ranks.
In mid-November, Nissan’s board of directors took the extraordinary step of inviting
Schweitzer, Douin and Ghosn to Tokyo to present their vision of the alliance. The presentation
was so well-received that the Renault team deemed it a turning point in the negotiations.
Later in the month, Hanawa paid a courtesy call to DaimlerChrysler co-CEO Schrempp in
Stuttgart. Schrempp proposed to go beyond his interest in Nissan Diesel and make an investment
in Nissan Motor itself. Hanawa then flew to Paris to inform Schweitzer personally of his
intention to follow up on Schrempp’s offer. This was not Hanawa’s first contact with alternative
partners. He had also sounded out Ford CEO Nassar (Ghosn & Riès, 2003:176), who showed no
interest.
In December, as the Renault and Nissan negotiating teams discussed the legal form of a
relationship, they hit an impasse. Renault had suggested a subsidiary or joint venture. Nissan
rejected both concepts. EVP Ghosn, who did not regularly participate in the negotiations,
proposed an informal alternative that both sides accepted.
At the end of December, with the approaching expiration of the September memorandum,
Schweitzer and Hanawa negotiated over, among other things, a clause ―freezing Hanawa’s
contact with other potential partners until the completion or end of talks with Renault. Hanawa
demurred from locking in just yet. On the 23rd, the CEOs signed a letter of intent, minus a
freeze clause, for Renault to make an offer on Nissan Motor by March 31, 1999, Nissan’s fiscal
year-end. Hanawa asked Schweitzer to include Nissan Diesel in the offer.

PHASE FOUR

The fourth phase of the negotiations began with Renault’s first public, albeit guarded,
acknowledgement of its talks with ―potential partners … including Nissan, but the period was
punctuated by developments in the competing Nissan-DaimlerChrysler.
DaimlerChrysler was not simply a foil for Hanawa to leverage in the Renault negotiations; it had
real pull of its own with Nissan management. They admired Daimler (Mercedes) and knew
DaimlerChrysler had deep pockets. In contrast, they saw Renault as ―no better off than Nissan
in terms of future viability and survival.
On the Renault-Nissan agenda, Renault’s cash contribution was a tough issue. Nissan sought $6
billion. Renault initially expressed interest in a 20% stake, and if Nissan were valued between
$8.7 billion (market value) and $12 billion (a comparable companies valuation), a 20% stake
would yield no more than $2.4 billion for Nissan. Nonetheless, Nissan was not ready to move
quickly from its position. It had DaimlerChrysler in the wings and breathing space afforded by a
long term, ¥85 billion loan ($740 million) from the state-owned Japan Development Bank.
Fluctuating share prices and exchange rates further complicated matters.
The negotiating teams continued their discussions through the winter, meeting several times in
Bangkok. In late February, a Nissan spokesman denied that a Renault deal was imminent and
asserted that talks with DaimlerChrysler were ―continuing. This may have reinforced
Schweitzer’s fears that DaimlerChrysler was the favored partner.
Two weeks later, on March 10, Renault’s position completely changed when Schrempp formally
withdrew his bid for Nissan Motor. The DaimlerChrysler Board of Directors, leery of Nissan’s
financial condition and understated debt at Nissan Diesel, had pulled him back (Barre, 1999b).
Hanawa probed Ford’s CEO yet again about a linkage, but without success. Schweitzer realized
Hanawa’s choice was now ―Renault or nothing.

PHASE FIVE

On March 16, at the beginning of the 2-week final phase of the negotiations, Schweitzer
obtained the internal approvals he needed from the Renault Board of Directors and Work
Council (Renault Communication, 1999). These decisions centered on a 35% stake in Nissan for
$4.3 billion. This amount exceeded the 33.4% threshold for an investor to gain veto power on a
board in Japan and remained below the 40% level at which French accounting standards would
require Renault to consolidate Nissan’s debt. With the approvals in place, Renault issued a press
release about its intention to purchase 35% of Nissan. At this time, Schweitzer offered to start
exclusive negotiations with Nissan without delay.
The negotiations intensified. Nissan executives withheld their approval of an alliance for several
days (Lauer, 1999b). When an agreement was finally reached, Renault’s investment had risen to
$5.4 billion for 36.8% of Nissan Motor and stakes in other Nissan entities.

THE DEAL

The global partnership agreement signed by Schweitzer and Hanawa on March 27, 1999
committed Renault and Nissan to cooperate to achieve certain types of synergies while
maintaining their respective brand identities. The strategic direction of the partnership would be
set by a Global Alliance Committee co-chaired by the Renault and Nissan CEOs and filled out
with five more members from each company. Financial terms included an investment of ¥643
billion ($5.4 billion) by Renault. For ¥605 billion of the total, Renault received 36.8% of the
equity in Nissan Motor and 22.5% of Nissan Diesel. With the remaining ¥38 billion, Renault
acquired Nissan’s financial subsidiaries in Europe. The agreement included options for Renault
to raise its stake in Nissan Motor and for Nissan to purchase equity in Renault. With respect to
management, Renault gained responsibility for three positions at Nissan (Chief Operating
Officer, Vice-President of Product Planning, and Deputy Chief Financial Officer). One seat on
Renault’s board of directors was designated for Hanawa. At the alliance level, plans called for
the formation of 11 cross-company teams to work on key areas of synergy (e.g., vehicle
engineering, purchasing, product planning) and to coordinate marketing and sales efforts in
major geographic markets.  
 Analysis of Renault- Nissan Global
Alliance

SOURCE: The Use of Strategic Metaphors in Intercultural Business Communication by:

Sophie Cacciaguidi-Fahy and James Cunningham

Interpartner market commonality Collective Strengths

Resource
Alignment Alliance Performance
Complementarily, Interpartner Conflicts
Supplementary
 Resource Characteristics
Mobility, imitability &
Interdependencies
substitutability

Significant
Relationship

No significant
Relationship
F IG: RENAULT NISSAN’S DETERMINANTS OF ALLIANCE PERFORMANCE

1. MARKETING PERSPECTIVE

Renault and Nissan exemplify a cooperative agreement that can augment strengths in common
business areas. While the collaborators are major car companies in their respective countries,
their geographic locations suggest some differences in market focus. As can be seen from the
above diagram, Renault has a strong position in Europe, whereas Nissan strong in Asia. Thus the
alliance enjoyed the advantages of geographical synergies and thus can easily enhance its market
presence.

1) In each market, the partners should maintain different product and brand identities. This can
help them to exploit the synergies more effectively. Further, this will also avoid
cannibalisation of each other’s market share.

2) In Europe, where both Renault and Nissan have a presence, the alliance can plan and
reorganize the sales and marketing operations to achieve economies of scale in marketing
and sales. Specifically, the alliance can set up common hubs and pool all their back-office
functions, while keeping their distinct brand identities and customer contact points. This can
give increased brand presence and sales for both companies. This strategy will allow each
partner to boost its revenues and reduce distribution costs, while maintaining separate brand
identities through separate outlets.

3) In Asia, Renault can use the existing distribution network of Nissan and widen its market
reach in this region. It can produce the cars in Japan exploiting the excess production
capacity of Nissan in Japan. In other strategic countries of this region, where excess capacity
is not available, it can take assistance from Nissan to erect plants.

4) In South America, Renault and Nissan can have a wide cooperation in the area of sales,
purchasing, and manufacturing. Renault can enter Mexico with support from Nissan. The
distribution network should be developed using Nissan’s existing dealer network.
 In turn, Nissan can use Renault’s plant in Brazil and Argentina to enter those countries.
Also, the distribution network should be developed using Renault’s network. Each
partner should produce those models where the other has not much presence.

Model Categories of Nissan and Renault

Model Category Renault Nissan

Entry Level x

Sub-Compact x x

Compact x x

Mid-Size x x

Luxury x x

Minivan x x

4*4 x

Pick-up x

Utility x x

From the above table it can be inferred that in model categories too, Nissan and Renault shared a
medium commonalty. This again can result in excellent synergies. Thus each can market their
different models in others strong markets.

5) The alliance should start finance organisation, in developing countries, that provide vehicle
loans, to boost the sale of their products.

6) Nissan had a very extensive product line that they had high prices. As a result, they lost out
on market share and saw a slump in their market share from 6.4% in 1990 to 4.9% in 1998.
Renault could help Nissan streamline its product line to follow a focused strategy in terms of
products and pricing. Mr. Levy, EVP, Renault, said, “Renault’s expertise in cost reduction,
purchasing, production sites …Renault could rally help Nissan to find the way out of its
difficulties. Renault was more likely to teach them (the Japanese) the art of fishing”

1. FINANCIAL POSITION OF NISSAN V/S RENAULT

By 1998, Nissan Motors was under major financial problems. From 1992, the company has been
showing losses. This left the company with total debts of 23 billion Euros and a list of annual
repayments that was getting difficult to service. The company did not have a rational purchasing
policy nor did it have sound relations with suppliers. Production costs were high. Nissan’s global
market share slumped from 6.4% in 1990 to 4.9% in 1998. Quest for performance and quality at
Nissan came at a high cost.

The Renault group is the oldest French automaker. Operated as a public enterprise, it started the
internationalization process during the 1970’s and through the mid 1980’s enjoyed a strong
market position, until 1984 when the company started to falter by experiencing record losses of
$2B. Based on the setting of two clear priorities, quality and innovation, the company was able
to regain profitability as early as 1987, maintaining this record up until 1998. Throughout this
period however, the company could not achieve global status and reported productivity issues
that resulted in slim margins. Despite this situation, the company showed an enviable cash
position, no debt and a net worth of €7.9B. With such financial health and accumulated
international experience, Renault was in a good position to address possible mergers and/or
acquisitions to increase its global market share.

Key Financial Insights

The debt to sales ratio at Renault is very conservative. They rely mostly on internally generated
funds to finance their operations. While at the same time the debt in Nissan has been increasing
drastically over the years. According to the case, Nissan had debts amounting to 23 billion Euros
which it found increasingly difficult to service. Because of such high leverage Nissan was
heading towards bankruptcy and unable to respect its debt obligations.

Nissan has been reporting consistent Net Loss from 1993.This reduced net income can be
attributed to the increased inefficiency in operations of Nissan. Nissan actually suffered from
lack of global demand for cars. In Japan, there was a reduction of 12.58% from 1996 t0 1997.
The same can be said of demand for cars in different parts of the world. As a result Nissan was
hit with overcapacity and lack of demand. Nissan was one of the largest Japanese manufacturers
in terms of the numbers of units sold. However, in terms of profitability its performance was
very poor. If we compare the EBT margin of Honda with Nissan, we will find that Honda with
the similar number of units sold has a much healthier EBT margin of more than 8% while that of
Nissan was less than 2%.

2. OPERATIONS PERSPECTIVE

Engineering design cannot be harmonised soon since Japanese people work twice as much
as Renault engineering persons. It would not be easy for Renault to develop a car in two
years like Nissan. On the other hand they can agree on the validation markers which can
effectively be co-ordinated.
The difference in approaching the supplier relationship should be worked out properly.
Renault believes in complete freedom to its supplier after design but Nissan treats its
suppliers as partners and always has a control over it right from design to delivery. Mutual
understanding should be achieved in dealing the suppliers since company’s profit is reliable
on effective global purchasing.
The ten common integration platforms should be properly utilized for producing the
vehicles for obtaining the cost efficiency in manufacturing.
Nissan should quickly adapt the product innovation and design concepts from Renault in
order to revive their car segment to suit for younger generation
 Renault should learn the Quality techniques and productivity improvements from Nissan in
order to reduce the cost of the products and increase in efficiency.
Effective cost cutting techniques should be implemented in Nissan with the help of Carlos
Ghosn immediately to realize the benefits and in order to overcome financial crisis for long
term.
Toyota Production system of bottom up approach, effective communication and employee
effectiveness should be adapted in both the companies to realize the productivity
improvements.
Customer voice should be heard before designing the product through dealers and also
effective network of independent dealership network should be built instead of Nissan’s
complete control over them.

1. HR PERSPECTIVE
Rapid changes in both the scale and international scope of business required Renault to
pursue in-depth changes in habits, organization and management processes. One of the biggest
issues was to deal with the new international dimension of the Renault-Nissan alliance.
Before reaping the benefits of the joint synergies, people must be able to communicate
efficiently and understand each other’s culture, especially at the managerial level. Accordingly, a
special effort was made at Renault to develop foreign language skills, particularly in English
which is now the official language of the Renault-Nissan alliance. All new recruits for example
were required to achieve a score of at least 750 (out of 990) which is well above the average of
French TOEIC test achievers. This was indeed a major recruitment policy change for a former
French group.
International training programs were conducted to promote intercultural understanding of
the diverse cultures of the two distinct parent companies. The training sessions were devoted to
relevant aspects of Japanese and French culture. These were the first steps in the implementation
of the alliance to bring people closer through exchange of staff members between the two
partners.

NEW COMPANY, NEW HR STRATEGIES

Human Resource Department played a key role at Renault in managing and motivating
people. This is evident from the involvement of HR in matters of social relations and
negotiations with the Unions. This is also evident from the fact that the top-most Renault
management team includes the Corporate Secretary General, Human Resource, Renault Group.
The management committee of all major Group divisions and departments have a Human
Resources Advisor (HRA), who is responsible for assessing and monitoring all the executives
under his/her purview. HRAs are centrally co-ordained on a regular basis. This ensures that
human resource policies pertaining to optimization of individual careers in terms of mobility
assignments and training are properly implemented throughout the organization. They are in-
charge of summarizing assessments and judgments made by different managers. The overall
restructuring of Renault’s HR system was initiated in 1998 and resulted in the current form of
HR Department.
IMPROVE THE GROUP’S PRODUCTIVITY
The priorities of the HR department were three fold: (a) development of HR managers
who could play a strategic role in the organizational restructuring program (a) building an
international organization and (c) to be more people oriented by addressing the needs of
professionals working within the group.
Within the framework of organizational restructuring the primary role of HR was to
improve the productivity of the group. Although Renault was among the large global automobile
companies in terms of annual vehicle production, the company had suffered from decreasing
productivity since the 1990s, which had worsened due to sluggish vehicle sales both at home and
abroad. To improve productivity, Renault was pursuing its long-standing policy of regularly
scaling down the workforce through hiring freeze.

ALIGNING HR STRATEGY
The HR department introduced new career committees whose role was to review
positions of responsibility within the company and to assess the contributions of the incumbents.
One of the key contributions of these career committees is to forecast possible changes in the job
profile of individual staff members, and to provide a succession plan to persons designated to
replace them. The career committees meet once a month in all the Group's major divisions and
departments throughout the world. This system made it possible to update collective assessments
of individual staff members and enabled senior managers to submit the names of possible
employees in the succession plan. A General Careers Committee chaired by the Chairman and
CEO and composed of members of the Group Executive Committee, stated examining
nominations for 200 key positions (known as "A” positions). This committee is responsible for
manpower planning for the “A” positions. This facilitated planning of successions in the
organization. Special attention was paid to the development of young high flyers. Each year, the
careers committees meticulously update the "P List" comprising young high flyers with strong
professional and managerial potential likely to become senior executives. Similarly the "P1 List"
comprises of executives designated to become managing executives or senior managers. The
General Careers Committee decides on any additions to the P1 list. In 1999-2000, in an effort to
improve transparency, high flyers were duly informed of their status by their managers during
their annual performance appraisal. Prior to this, the selection was confidential.
Training and staff mobility was another key concern at Renault. Business was growing
international, and to reflect these demands two working groups were set up to define the ground
rules. The first group was devoted to internationalization while the second group was
responsible for mobility. The goal of the training program was to meet the needs arising from
three main areas: (a) Renault's strategy of profitable growth (b) evolving job profiles and
organizational structures, and (c) the need to ensure job satisfaction.
With over 1,860,000 hours of training, an average of 40 hours per employee, the total
outlay for training in 1999-2000 was € 86 million or 5.1% of the payroll. The main training
needs identified before the restructuring program were to enhance job skills (35% of training
hours), to anticipate changes in job profiles by preparing employees for retraining and mobility
assignments (29% of the training hours), to provide support for vehicle launches and cross-
functional projects (11% of training hours) and enhancing management skills (9%). In addition,
more than 7% of contact hours were earmarked for foreign language training and 9% for training
in quality skills. With the new HR strategies in place, management training programs for both
new recruits and other staff members have been revamped. It now focuses on issues relating to
international workforce, diversity of business projects and new operational needs.
Before the restructuring program, annual performance appraisal system was used to
make a precise review of the past performance and to project goals for the next year. After the
restructuring program, performance appraisal system plays a critical role in motivating
employees. Renault’s HR Department implemented 360-degrees performance appraisal review
system which included 12-20 people (immediate boss, employee himself/herself, boss's boss,
employees' juniors and peers). All managerial staff without exception (i.e., including senior
managers and managing executives) had to undertake that performance appraisal with their
immediate superior, and, when appropriate with their staff and project manager. The appraisal
was based on fourteen criteria which included among others "courage", "delegation",
"managerial skills", and “communicating abilities". Scales range from 0 – 6 and the results are
discussed between appraisee and two superiors. The evaluation is then sent to respective Human
Resource Advisor (HRA). It is at the discretion of the superior to store the evaluation form or
destroy it. Usually after sending the evaluation report the superior destroyed the evaluation
forms. The results of the session were reviewed and graded by the next level of management.
The performance appraisal provided the opportunity to precisely measure the appraisee's past
inputs and the importance of his or her future missions. It is also used to analyze the managerial
capacity and the progress to be made vis-à-vis benchmarks set by senior management. The same
benchmarks are used for the 360-degree evaluation shared between executives and their direct
superior alone. Approximately, 1000 members of management committees received their 360-
degree evaluation in 1999-2000 and 1700 employees in 2000-2001.
Renault created a stock option plan, considered as “one of the most comprehensive
plans”, according to one of Renault’s managers. The main aim of the plan was to involve
Renault executives worldwide, particularly the members of the management bodies, in building
value for the Group, by allowing them to participate in the ownership of the company. The plan,
associated to the performance appraisal’s results, made it possible to single out those executives
who, by their actions, made a differential positive contribution to the Group. The plan also
helped to secure the loyalty of those executives for whom the Group had long-term ambitions,
particularly "high-fliers" i.e., young executives with strong potential.
Together with the radical transformation, Renault decided to place special emphasis on
the empowerment of its managers and supervisory staff. One of the managers pointed out:
“Renault encourage[s] people to take the initiative at all levels in pursuit of our
objectives, for them to share responsibility and success”

Some of the organizational factors supporting the alliance are as follows:

• Leadership: Both the companies’ leadership could be said to be in fit with each other as
Mr. Louis Schweitzer, Chairman and CEO of Renault shared some values with Mr.
Yoshikazu Hanawa, President of Nissan. These values were:
– They were quite honest and frank to each other, irrespective of the results of the
negotiation.
– Trust between the two leaders: The two Chairmen built good trust amongst
themselves, which was very essential for the success of this strategic alliance.
– Despite various stumbling blocks, deviations and betrayals, there was mutual respect
and complementarities between Hanawa and Schweitzer. “The first handshake
 decides everything”. Mutual respect and admiration for each other’s leadership style
and companies.
• People: Despite the language and cultural barriers, the engineers from both the
companies got along together very well in joint study teams. This indicated a perfect fit
between the people of the two companies. The joint studies team played a fundamental
role in creating a climate of confidence at the grassroots between the two manufacturers.

Organization
Structure of
Nissan-
Renault
Alliance
Recommendations:
A part of the case study deals with Renault doubting its straight-forward approach in
dealing with its Japanese counterpart. This disposition may not have yielded a hostile
behaviour from the Japanese as there was a pressing need for a financial revival.
However, under normal conditions a direct approach towards a Japanese Management
may be tagged as brute and may strain the delicate fabric of Franco-Japanese
relationship. Cultural aspects must be well understood.

Handpicking personnel to spearhead the alliance should be based on competencies and

prior experience rather than undue importance over the financial situation of each
organization.

Fulfilment of the objectives of the alliance by both the companies. Both Nissan and
Renault had some mutual needs for which the alliance was formed. The alliance would
function successfully till both the companies satisfy their respective needs by mutual
cooperation.
Each firm should try to maximize the learning benefits from the alliance. Maximizing
benefits from an alliance involves building trust between the partners , learning from the
partners and applying them within its own organization
Preparing employees for a global alliance will bring about the required synergy between
the two organizations.
Conclusion
The case study highlights the thoughtful and careful progress required for a global alliance
between two culturally different companies. Key lessons from this study are:

Display of power and force may not be favourable to a global alliance. Dominance destroys
motivation. There must be a clear ‘win-win ‘cause for the alliance. Mr. Schweitzer’s
emphasis and practice of ‘equal status and participation in management’ assisted in gaining
the trust of his Japanese counterpart. Trust has always been an integral part of the Japanese
culture.

Change in management system to reflect the need of the hour is crucial for a global alliance.
Japanese management system mostly displays a management of consensus. This, however,
may challenge the single-minded thought process and conviction required at times of crisis.
Mr.Hanawa’s decision to not involve the larger portion of the management during the
realization of this alliance gave him the autonomy to make or change decisions without
wasting a lot of time. Also, Mr.Hanawa also highlights the need for change in the
implementation of Japanese Keiretsu culture.

Dedication of resources to study the pro and cons of a global alliance must be promoted by
both the parties. The team involved in this study should encompass personnel across all
functions in order to assess even the soft elements such as operational fit at engineering
level.

Exchange of knowledge during this process may be viewed as parting with company
sensitive information. Knowledge transfer should be made effective between the two
partner’s in order to depict trust, honesty and mutual consideration and understanding.
Secretive functioning may hamper the relationship building efforts.

For smooth functioning, each partner in the alliance should not be threatened by a future
dominance or a takeover by the other side. The complementary factors between two
companies in question would help to resolve this fear.

Thus, Renault and Nissan before leading towards formation of global strategic alliance, they
went beyond ostensible differences; probe other parties’ interests and capabilities for fit.
Schweitzer and his team focused on Renault and Nissan’s common long-term goals,
complementary interests and respective capabilities. Further, both the entities prepared
extensively, continuously, and jointly as well as internally. This led to a conception of a new
form of relationship as it was a not common internationally in the auto industry where one-way
holdings prevailed. Further, both the parties behaved not only as a negotiator but also as a
prospective partner. Thus, they effectively assessed the quality of an outcome by its effects as
well as its content. However, just the formation of alliance would not have solved the dilemma
faced by both the organisation. The alliance would have to effectively exploit the synergies of
both and thus propel their growth.
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