Comparative Analysis of Nissans Competitive Advantage - Case Study Example

Introduction

Globalization is a change towards a more integral and interdependent global economy. Globalization has two components: the globalization of production and the globalization of markets. Globalization has influenced various organizations in different ways. The globalization of production (industries) refer to an overall integration of business in several countries where the multinational companies are present. This has been made possible by advancement in technological infrastructure, transportation, communication, and the ease of doing business worldwide. This has resulted in increased direct investment by foreign companies, and international trade flows. Due to the rapid technological advancements, companies have been able to expand into new markets and compete against itself among the countries in which it is operating. On the other hand, globalization of markets refers to a situation where customers have a homogenous demand preference across their borders. This means that they are looking for different suppliers of the same product. Therefore, to meet this market globalization, various companies are being forced to standardize their products throughout the world, creating a global market. According to Gallagher (2005), these two components of globalization are playing a critical role in the global strategy of different firms as far as international expansion is concerned.

Globalization has enabled companies to expand their market, operations, and profitability. Many multinationals have taken the advantage owing to cheap labor costs, lower taxation, and availability of competent workforce. Nissan Company, which is a leading manufacturer of automobiles have taken the advantage of market liberation and open outlets around the globe. The company has been able to increase its production, sales, customer services, and aftersales services. The increase market penetration and availability are critical concepts in business. The company has been able to invest heavily in human resource, technology, and research.

It is critical to note that Nissan faces same challenges just like other multinational companies. The business environment is dynamic, competitive, and technologically changing. Other factors such as economic, social, and political interference offer a challenge to the company. Since 1960, government rules and regulations have been affecting the company. This was a result of the customers need. The customers needed the assurance that the items manufactured were to be safe. The company has improved the economic state of many countries. This is by the creation of wealth and job opportunities. The society judges a person by the model or the type of car that one uses. People with latest models or new cars are termed or thought to be much wealthier than others were. Technology is known to affect all industry before people engage in buying and selling their Google information that they are required to have and to be conversant. Thus, it is important for the company to ensure a good flow of their external environment to remain competitive in the market and to satisfy their customers (Plunkett, 2007)

Changes in customer's preferences and taste also affect the company situations. Having unstable customers and the state where customers keep changing their needs due to the technological changes affects the market turbulence, thereby the company needs to be technologically aware of the upcoming and to change to satisfy their customers. They are also supposed to keep making good quality of product irrespective of the gradual changing needs of the customers (Gamble, 2007). The Nissan industry thereby is conversant with such needs and has been able to the company is flexible with the changing needs of its customers.

Comparative analysis using the Porters 5 Forces

It should be understood that the automobile industry is competitive and relies on fuel prices, the process of the vehicles, product innovation, and disposable income of the consumers. On the other hand, the supply of the vehicle market is influenced by the process of the materials and equipment costs. In the last five years, the industry is has been faced with increased cost of materials such as plastics and steel (Culpan, 2002). Consequently, this has increased the products prices and manufacturing expenses. Consumers are now well informed about the actual cost of vehicles and have become less likely to purchase products that are expensive. Porters, 5 are another analysis used to represent the external competitive environment.it is used to analyses the attractive states of the company. Quelch & Deshpande (2004) says that these are the threat from bargaining power of the buyers, new entrants, the threats of the substitute products, bargaining power of the supplier, and rivalry within the industry itself.

Threats of new entrants

According to Peshin & Dhawan (2009), there is a restriction for new entrants as the business requires the huge amount to capital for one to start manufacturing. Nissan enjoys the fact that for new companies to start a business, they will require huge investments to start producing. For instance, they will require a huge investment in marketing themselves, setting up the industry, require a huge amount of investment in research and development, as well as, acquiring competent workforce (Culpan, 2002). Competent employees will prefer working with companies that are known that the startups. Therefore, this means that Nissan does not think of new entrants as a threat to their business. Moreover, there is high competition from well-established companies, which means that new entrants should produce an innovative product (Czinkota, 2007). Many products in the market are patented, which means that the new entrant needs to start producing a unique design of cars, technologies, and models, which is extremely difficult. Nissan can decide to continue producing the same models and make profits, unlike new startups.

Culpan (2002) says that new companies are also faced with legal barriers are established to protect the existing companies, which restrict new entrants. The industry has established rules and regulations meant to protect the industry. Many countries have strict measures developed to protect their home industries, which means that setting shops in such countries is unlikely (Czinkota, 2007, p26). Many countries will not accept new companies to sell their products in their jurisdiction to protect their economy. It should be noted that the current companies have established a brand reputation and image, which makes it impossible for new entrants to sell. New companies will require huge amounts of capital to market themselves, which is difficult. Starting a company from scratch and competing with established industry is challenging (Quelch & Deshpande, 2004, p88). These startups need huge investment in advertising and

New companies face challenges of starting a business in countries that government has established measures in protecting their market will hinder new companies to bring competition. Protectionist countries will not accept business that is competing with their companies, which is a source of national pride and source of income. For instance, starting a new company in Germany to compete with Mercedes Benz Company is unlikely. The government will not allow such initiatives, especially if you are a foreign entity. Also, it is difficult for new entrants to realize economies of scale in the automotive industry (Culpan, 2002, p34). There are huge operational cost and sales need to be substantial. This makes it unsustainable for the company to realize profitability as sales need to be in million units for them to realize profitability. Moreover, products in the automotive industry are highly differentiated regarding engineering and design quality (Cooper, 2004, p27). Therefore, the company will require new skills and technology to edge competition. In other words, every industry must create barriers to regulate the entry and exit of the new entrants. Nissan Company has worked well enough to ensure a very slim possibility of entry of new companies that would want to diversify the company (Radcliffe, 2009, p98). There are very high entry barriers and low exist, this is like its starting capital is very high, its suppliers are difficult to be found, and they have ensured that there is usually high switching cost to the customers.

Threats from Bargaining Power of Supplier

There is a huge number of suppliers in the industry, which does not threaten the business operation of the company. Nissan does not have to worry about threats of suppliers since the company is well-established. Many suppliers in the market may want to work with Nissan Company (Gamble, 2007, p56). In its new strategies, Nissan needs to develop distribution channels that are effective and operational. This will make sure that the logistics and supply chain management is effective, and customers get products on time. The essence of improving the reliability and cost efficiency. The company needs to establish strategic partnerships that will help it to increase performance.

Ireland, Hoskisson & Hitt (2008) says that globalization has been effective in the strategic management of Nissan's operations since the materials for producing automotive are readily available, which makes it easier to manufacture. Therefore, the suppliers of raw materials such as wires, electronics, or steel are not a threat. Moreover, Nissan enjoys a choice of materials that they can use in the production of vehicle parts. When the supplier of one material threatens the business viability of Nissan, then the company should develop their products using the alternative materials. There is an option for the companies on the materials to use; for instance, they can use plastics instead of metals. In sum, suppliers do not pose risks or threat to Nissan (Gamble, 2007, p37). High competition in supply of materials in the market makes it easy for Nissan to leverage on suppliers

Threats from bargaining power of buyers

The bargaining power of the buyers in the industry s strong since there are many buyers willing to purchase the products (Culpan, 2002, p13). Many companies produce similar products with similar utilities, which makes it difficult for Nissan to leverage the industry. It is difficult for Nissan to have power over buyers since they are many companies producing same products. Therefore, Nissan needs to have well-established business strategies, innovativeness, and quality products at a cheaper price for them to reduce the threat from the power of suppliers. However, lower prices and higher operation costs mean loss, which is untenable. The buyers especially corporation who buy a fleet of cars do negotiate for lower prices, unlike individuals who buy a single piece (Martin & Chaney, 2006, p37). This means that the company will get lower profits or lose customers if they insist on the high pricing of their products.

The advent of technology and communication have enabled the customers to have adequate information on the prices of good in the market. They can be able to make comparisons of the products, their costs, and determine the companies that exaggerate their prices. This makes it difficult for Nissan since higher pricing will reduce sales; hence, low profitability (Gamble, 2007, p26). Many of the buyers have information on the real cost of the vehicles and are therefore price sensitive. Another challenge is that the buyers have an advantage since it doesn't cost them much to switch from one brand to another. In essence, they can purchase products from any company and still enjoy the same utility. Moreover, many customers do trust some brand over others, which means that they can choose which brand they wish to buy. It is not automatic that buyers have to place orders for Nissan Company products.

Threat of substitutes

The availability of substitutes do not provide the same convenience to the users; hence, would prefer buying cars (Quelch & Deshpande, 2004, p45). The company enjoys the fact that customers will have to buy cars compared with other means of transport owing to their price, convenience, and security. There is an alternative form of transport for users include trains, bicycles, planes, and buses, which means some cannot be owned on the individual level. Therefore, they do not offer comfort and convenience as personal cars. There is a perception that the alternatives form of transport is cheaper and environmentally friendly (Culpan, 2002, p44). However, Nissan can leverage on that if they produce economic friendly cars such as electric cars, which are also environmentally sustainable.

Threat from competitors or rivalry

The number of competitors is few, which means that Nissan can easily leverage the market. The company requires developing new and innovative products to sway customers into buying their products (Yang, 1995, p34). The company has an established distribution channels, brand name, and marketing tool. This makes it easier for the company to edge competition, unlike new startup. Another competitive advantage of the company is its workforce who are competent and experienced. As far as employment is concerned, they have a safety and occupational health policy that caters for employees at work (Gamble, 2007, p63). The goal of this policy is to eliminate all injuries, work related illnesses, unsafe work conditions and incidents of environmental harm from their activities. All this is seen as putting forward the welfare of the employee before work. The corporation gives employees the option of stopping to work if they feel the environment is unsafe. By creating a safe working environment, the Corporation has enhanced efficiency and limited the environmental impacts of its operations. Accidents and near misses within the working environment are reported and acted. Corrective action is usually taken to reduce a recurrence.

Part II

Why Multinational Companies Choose to Go Global

Quelch & Deshpande (2004) says that there are many reasons that can cause companies to go global. Expansion to new territories can be a costly move as well as being time-consuming, and complicated. However, expansion abroad presents the companies with favorable economic environments, new markets, cheap labor, and a conducive environment for doing business. One of the reasons why companies choose to go global is because of favorable taxes in the regions where they are moving. Companies can save huge amounts of money due in the form of corporate and export taxes (Culpan, 2002, p24). By funneling their profits in the countries that have more lenient tax structures for companies. Therefore, it is a beneficial move to expand to such countries to save on taxation.

Labor costs is another reason why companies can decide to take their businesses global. Countries of origin can have expensive labor, and this increases the expenditure of the company. Moving to countries where labor is readily available and is cheap can also lead to huge saving on the part of the company (Gamble, 2007, p56). Again, outsourcing the production of certain goods, and operation of some administrative services can have huge impacts on a company's operating costs. Other resources such as land and other natural resources can be cheap in this new territory, aiding the company to reduce additional operation costs.

Quelch & Deshpande (2004) says some of these new areas where companies expand to have an untapped potential market, and this can ensure a substantial growth of the company's market share. In the local market, most companies are usually at their saturation points as far as growth is concerned. Moving to new regions can ensure economic growth for the company. This can be done in various ways such as setting up shop in the new territory, entering into a partnership with a company that is already doing well in that economy, or even launching a subsidiary company in the new region depending on the local employment and tax laws. Companies expand to seek better or relaxed regulations (Czinkota, 2007, p60). Relaxed regulations mean that conditions by which the company can thrive are presented. The company is thus able to make business risks that it would not otherwise take in regions with stricter regulations. Countries with minimal government interference can be seen as ideal places for companies to expand.

Strategic alliances

The success of Nissan Company has been attributable to the strategic alliances that it forged with other business entities. Nissan Motor Company Limited is a multinational automobile manufacturer based in Nish-Ku, Yokohama, Japan. It is the world's seventh manufacturer of automobiles. However, it is the leading brand from Japan in Mexico, China, and Russia. When combined with Renault, the Renault-Nissan alliance becomes the fourth automobile in the world. Since 1999, Nissan has been a part of Renault-Nissan Alliance; a partnership entered with the French automobile producer, Renault. The CEO of the Alliance is Carlos Ghosn. As of 2013, Nissan held 15% non-voting stake in Renault, while Renault held 43.4% voting stake in Nissan (Gamble, 2007, p56). Better management and strategic alliances enabled the company to sustain its profitability.

The Nissan’s Revival Plan

Peshin & Dhawan (2009) say that in 1999 the move made by Nissan was known as its Revival Plan was announced. This was seen as a countermeasure to cope with the tough market conditions, such as increased competition from countries such as China and USA, and an unstable Japan economy. The poor Japan's economy was caused by the various issues in its automotive industry such as suppliers' interdependence, unproductive cost management, among others. The Revival plan included an Alliance with Renault, a French automobile company, the closure of five local plants, and cost reduction in the Nissan's structure of employment. The purchasing cost of Nissan valued at 60% was to be reduced to 20%, and the number of suppliers for parts who totaled to 1145 companies was to be reduced to 600 companies (Gamble, 2007, p25).

In March 2003, Nissan cut 21000 of its employees in Japan in a move to cut operational costs. However, the Research and Development (R & D) department was to increase its employees by 500 meaning that Nissan’s road to recovery was all about innovation. To achieve globalization, Nissan was set to expand to new regions including Morocco, Russia, and India. The aim of globalization was threefold: to ensure efficient global production, limit wastes, and improve the competitiveness of the various plants. Efficient global production was reached by using minimum investments, a factor made possible by the sharing of resources with Renault, and ensure an optimum utilization ration (Peshin & Dhawan, 2009, p89). Each plant was set to develop different car models and as a result, the global market was supplied with different vehicles. A new strategy was set for use to ensure global production preparation. To improve the products, a global training center for all plants would be established. A global production engineering center was set up to ensure better prototyping. To support launching, A Global Launch Expert was chosen. Finally, a Global Package Design Center was set up to ensure good branding and packaging. These strategies are commonly known as the 4G Strategy. To limit wastes, a minimum inventory had to be kept, improve overall quality and equipment efficiency (Yang, 1995, p56). Finally, to ensure the competitiveness of the various plants, friendly competition would be stated between the different plants, and effective information sharing through intranet would be enhanced.

Benefits of Corporate Globalization: Renault-Nissan Alliance

After Nissan entered into an Alliance with Renault, there has been a continued sustainability in the manufacturing company. The Alliance between the two automobile manufacturers was not a merger, but a decision by its leaders to work together while keeping their identities. Resources from both companies are combined hence a better job is done that if each company worked alone. During the Alliance, there were two parts of a globalization strategy: suitable mobility, and mobility for all. Sustainable (suitable) mobility refers to the reconciliation of transportation needs with the concerns of the environment. Ireland, Hoskisson & Hitt (2008) says that the Alliance is aimed at manufacturing zero-emissions vehicles that would be environmentally friendly. This strategy was due to the increasing global usage of vehicles which was bound to increase in the next years. There was a need to prevent emissions and reduce the dependence of the vehicles to oil. Mobility for all is a reference to the goal of provision of transport to every person who want it regardless of their geographical location. This included all models of transportation produced by the Alliance.

Cooper (2004) says that Nissan through its move to globalization achieved diversity. By setting up various manufacturing plants in different countries, Nissan can bring out the best out of each country. These countries then work together unanimously, each as a part of the whole system. Diversity also enabled Nissan to be a global producer. Due to the different plant in various regions, each plant is able to produce for the needs of its market, and the end result is a diverse production for almost any kind of market. The Alliance between Nissan and Renault has also led to a successful synergy (Martin & Chaney, 2006). The two automobile companies shared their resources including technologies related to engines, and platforms led to cut costs in investments by using the same technology with a variety of designs. This aided the development stages of the two companies to be quick. Additional investment costs are also reduced during expansion by the two companies to new territories by sharing plants.

Nissan’s Expansion to India

The strategic move to India was necessitated by the availability of cheap labor, competent staff, and huge market. The location was strategic as it helped the company to open other operations in Asia and Africa. Nissan together with its partner Renault as a strategic expansion move and penetration of the Indian market set up a manufacturing plant in Chennai India. It has also formed an Alliance with Ashok Leyland to construct light commercial vehicles, with Hover for sales and dealer development support, and marketing, with Bajaj for development of ultra-low cost vehicles and with Maruti- Suzuki to aid in the exporting of A-segment cars to Europe. Apart from development of the plant, Nissan Motors India Private Limited is spearheading the construction of a high-tech development and research plant in Chennai (Cooper, 2004, p57). The plant was developed to create Robotic painting that will aid boost quality, improve safety, ensure flexibility, and increase savings for its global business.

Quelch & Deshpande (2004) says that in India, Nissan Company has embraced the new technologies to develop products that are unique and differentiated. The competitive environment necessitated Nissan to embrace new technologies in making products that are appealing. The business process of the company has helped Nissan to edge competition. The competitive advantage in India was enhanced by its business structure and process such as manufacturing and distribution channel. This has helped the company to increase its sales and production. Effective promotional and marketing strategies have been essential in informing the consumers about the company's products and operations. The company has been able to inform its consumers the advantages of purchasing the products. Production processes have been enhanced to guarantee employee safety (Culpan, 2002, p14). The processes have enhanced efficiency by modernizing its manufacturing procedures and operational costs. The products of the company have been developed to guarantee environmental friendly and safety features.

The company decided to move to India owing to the Government of India policies that entitle multinational corporations with a weighted tax reduction of up to 150%. This will be due to its research in India, and R & D activities. According to Yang (1995), Nissan has established R & D facilities along with assembly plants. As a result, the products of Nissan will be cheaper. Nissan view the market in India as one with a potential rapid growth, thus their move to expand there. Vehicle penetration is small, typically less than 50 vehicles per 1000 nationals. Part of their marketing strategy was to add to the previously existing two models in the Indian market namely ‘Teana’ and ‘X-Trail’ a new sports car ‘Z370’ by 2010, and to redesign the X-Trail and Teana (Czinkota, 2007, p67). The country also increased its product range to 9 models in 2012, with five of the models being constructed from the Chennai plant.

The operation in India have been enabled by adherence to the Ansoff marketing strategy. The marketing strategy have been broad to provide positive results to the company; hence, able to meet its objectives. They wish to have an increased market share so that they can reach to larger population than they currently do (Gamble, 2007, p20). They also want to develop their market by ensuring low cost of sales. They aim in achieving this target by recruiting more specialists to improve their decision-making. They also believe that lowering their coast will result in more buyers. They also aim at improving the quality of their products and trading them all over the world; they want to ensure that their product can be reached from any part of the world

Nissan’s Morocco Factory

In 2012, Nissan together with its Alliance partner Renault opened a new plant in Tangier, Morocco. The plant’s main aim was the construction of ‘low-cost’ with an annual capacity of 40000 units (Peshin & Dhawan, 2009). The main driver of expansion to Morocco was globalization. The Moroccan government exempted the Renault-Nissan Alliance from corporate and export taxes for the first five years. This plant is set to zero industrial liquid discharges and zero carbon. This is enabled by optimization of the water cycle, and the use of renewable energy. The cost leadership strategy ensures that there is the low cost of goods produced by the company irrespective of their different qualities (Plunkett, 2007, p65). Differentiation strategy is whereby the company ensures that its product is unique as compared to their other competitive companies, Nissan ensures that they produce unique services that are valued by their customers. The firm uses combination strategy while trying to attain an advantage over the other companies.it is not necessary for the items combined to be compatible.by separating the many strategies that a firm engages in into separate units it will work efficiently. Combination of style, convenience, quality, and price is always considered the best. Focusing ensures maintenance of the core competence of the firm (Quench, 2004, p56). Rivals will never kick out focused people and can ever meet differentiation focused needs of the customers.

Future of Nissan: Electric Vehicles

Nissan aims at being the world's leader in the production of non-emission vehicles. It also aims at capturing developing markets by providing affordable global vehicles. As part of producing non-emission vehicles, Nissan launched a new electric vehicle powered by advanced lithium-ion batteries. This endeavor was with NEC Corp, an electronics maker. In 2010, Nissan launched its first all-electric vehicle to the market worldwide. Statistics show that by March 2014, this vehicle was the best-selling all-electric car ever (Ireland, Hoskisson & Hitt, 2008, p56). Global sales represented a 45% market share, totaling 100000 units by January 2014. In sum, it is difficult to analyze whether the globalization strategy set during the alliance with Renault was a success. However, it is clear that without the Alliance, Nissan was headed for a possible downfall. The globalization strategy employed by Nissan was influenced by the following reasons: low corporate and export taxes in new regions, transport mobility, affordable labor, untapped market, and better trade regulations in the new regions.

Martin & Chaney (2006) says the competitive of Nissan have been enhanced by its corporate social responsibility, where the company have been making charitable contributions to communities primarily in areas they hold strong business interests. The philanthropic contributions facilitate community engagements, a range of development projects, sponsorships for needy students and civic leadership. The corporation seeks to develop talent through BEEP - Business, Enterprise & Education Partnership; connecting schools, colleges and careers. An example of such a project is the project at Humber refinery, whereby employees and the community are involved in tree planting/caring (Martin & Chaney, 2006, p38). The Mayflower wood project is the largest of its kind that has created a community haven.

In addition, the employees of the company are involved in outreach programs that they identify, plan and implement with the corporations support. Exposure program are critical in creating awareness in the community through activities such as career fair and scholarship seminars. Information provided at such fairs includes interview/job opportunities and educational requirements for the same (Yang, 1995, p39). This way, the company has an open recruitment system, devoid of corruption, racism or other malpractices in hiring. Improvement may, however, be made by instituting similar projects even in areas the corporation is not based.

Conclusion

Nissan has to be alert due to the economic changes to put up with the challenges that are likely to occur. The company should use pest analysis to be able to identify the future trends .they will also identify the internal and external environmental factors that affect the company. This will always help the company to ensure that it remains competitive with other companies.it will also help the company in expansion and production of quality goods always. Business strategies are shown to improve the state of a company from one level to another. This is due to the investigations done that are used to identify the weaknesses and the strengths of the company.it are used to set reasonable and attainable goals and thereby are recommended in all companies or businesses. To enhance its competitive advantage, Nissan Company needs to develop cost leadership strategy ensures that there is the low cost of goods produced by the company irrespective of their different qualities. The differentiation strategy is whereby the company ensures that its product is unique as compared to their other competitive companies, Nissan ensures that they produce unique services that are valued by their customers.

As noted the firm should use the combination strategy while trying to attain an advantage over the other companies. It is not necessary for the items combined to be compatible by separating the many strategies that a firm engages in into separate units it will work efficiently. The combination of style, convenience, quality and the price is considered the best. They need to keep focusing on innovativeness to ensure that they can maintain the core competence. Rivals will never kick out focused people and can ever meet focused differentiation needs of the customers. For Nissan Company to remain competitive in the industry, they need to invest in human resource and retaining the competent workforce. They should be well motivated to make sure that they are productive and innovative, the industry thrives in the competitive market environment; hence, the need for the company leverage on human resource. The employees should be trained and retrained to make sure that they acquire requisite skills and knowledge in executing their responsibility. Financial help for the mechanics and other employees is critical in motivating employees. They should be proud of their company to increase productivity.

Similarly, Nissan should embrace corporate social responsibility by participating in charitable work. This is critical in enhancing the image of the company to the society. The management should be competent and organized so that there can deliver good judgment. The competent workforce will give Nissan innovative products to compete fairly. Moreover, the company should offer dealers with after sales service to attract established dealers. They will be able to promo the product of the company if assisted. In essence, investing in people will enable Nissan to increase their market share and retain brand loyalty. Irresponsible management makes it difficult for companies to progress. People associate the behaviors of the management and employees to the product that the company produces.