NISSAN’S ELECTRIC VEHICLE STRATEGY IN 2011: LEADING THE WAY TOWARD ZERO-EMISSION Case Study Assignment & Solutions.

NISSAN’S ELECTRIC VEHICLE STRATEGY IN 2011: LEADING THE WAY TOWARD ZERO-EMISSION Case Study Questions:

1. Perform SWOT Analysis of Nissan’s electric vehicle strategy in 2011: Leading the way towards zero-emission Case Solution.

Q2. To share your thoughts on the case ‘Nissan’s electric vehicle strategy in 2011: Leading the way towards zero-emission’, which discusses the decision by Nissan, the Japanese car manufacturer, to develop and sell a range of zero-emission vehicles (ZEVs).All students should contribute by posting your thoughts such as what went well for you on case? What did not go well or what did you find difficult? What will you try to do differently? Join the discussion, and add some of your own key learning points.

Q3. Analyse Nissan’s external environment and offer comments upon whether or not the group is as optimistic as Nissan that ZEVs will make up 10% of the global car fleet by 2021. As a group you should, briefly, make use of relevant BB835 concepts such as:

·         The PESTLE framework

·         Porter’s Five Forces framework

Q4. Undertake a comprehensive assessment of Nissan’s resources and capabilities. Your task is to identify and assess Nissan’s e-vehicle:

·         tangible, intangible and human assets

·         capabilities, including a value chain.

and then to evaluate these assets in terms of their VRIO attributes. By the end of this task you should have reached a conclusion as to the potential of these resources and capabilities to offer for competitive advantage in the context of the external analysis you undertook on Day Two.

Q5. Your task today is to bring all of the work together and prepare a final presentation of both the outcomes of your analysis and the implications of this analysis. As part of this process you need to revisit the strategic choice Nissan has made and which is reported in the case and offer your views on whether the strategy is appropriate for the competitive environment you have analysed. Would you make any recommendations to Nissan? These recommendations can take any form – they can offer alternative interpretations of the data, identify opportunities or threats that Nissan may not have identified, reflect different potential uses of resources or capabilities or identify underlying weaknesses in the resource portfolio – short of simply endorsing the strategic decision taken by Nissan. As part of this work, you should identify what is the main strategic issue Nissan is facing as well as offer Nissan the potential for competitive advantage in this industry. Outline what you have discovered about Nissan’s resources and capabilities, and what conclusions you have drawn about its strategy.

Q6. Discuss the findings of your analysis and review the process by which these outcomes were produced. You will also return to the main themes and learning objectives of the tutorial, reflecting on the activities you have undertaken and the learning that has taken place.

NISSAN’S ELECTRIC VEHICLE STRATEGY IN 2011: LEADING THE WAY TOWARD ZERO-EMISSION Case Study Solution

1. Perform SWOT Analysis of Nissan’s electric vehicle strategy in 2011: Leading the way towards zero-emission.

I. SWOT ANALYSIS

STRENGTH:

1. The LEAF, a five-passenger compact car, could go up to 100 miles (US LA4 mode)1 on a single charge and could be fully recharged with a home charger in about seven hours, or 80 percent recharged in 30 minutes at a quick charging station.

2. The LEAF‘s retail price was $32,780, and after the $7,500 federal tax credit the price dropped to $25,280 – less than the average price of a new car in the United States.

3. The Alliance had committed to the project included building assembly and battery plants, as well as designing, developing, and launching the LEAF and other ZEVs that would be released later.

4. The Alliance sold a total of 7.3 million vehicles – about 10 percent of total global sales.

5. While Nissan built the electric car’s lithium-ion batteries with Japanese joint venture partner NEC, Nissan’s partnership with Renault allowed for significant economies of scale.

6. Renault was developing its own electric cars and was a key partner for Nissan in its zero- emission projects.

7. The two companies shared technical learning and experiences about electric vehicles (EVs).

8. Ability to increase production capacity of EVs and battery at different geographical locations.

9. Nissan’s EVs was an exciting and lifestyle-changing car; it was quiet, had exceptional handling, and had advanced IT connections such as smart charging. Each car was monitored through IT support at Nissan’s data center, which connected to its service center and service provider. Drivers also could check the status of the car’s charge via the Internet. They could turn on the car’s heat or air conditioning from their house or mobile phone before getting into the car without draining the battery.

10. The LEAF also had on-demand driving support, which showed drivers where the nearest charging stations were or how to maximize their driving range. In the near future, for on-demand taxis, the system would be able to calculate which taxi had the battery capacity to pick up which customer, depending on the distance a customer wanted to travel. The LEAF would have functions such as the ability to download multimedia content like movies or newspapers, which the car would be able to read out loud to the driver. Nissan said that in essence it was selling a car plus its services.

11. The Alliance allowed the two companies to more efficiently negotiate with authorities, governments, or third parties. Renault dealt with the French government and Nissan dealt with the Japanese and U.S. governments.

WEAKNESS

1. Nissan had not invested in hybrid technology when its competitors were doing so because it was facing bankruptcy at the time (1999-2000) and did not have the necessary financial resources.

2. Power of Nissan to persuade governments to invest in the necessary infrastructure required for EV.

3. High cost of the battery and the sticker price of the car was also a concern.

OPPORTUNITY

1. Electric cars would make up 10 percent of the world car market by 2020.

2. Nissan and Renault each planned to produce four EV models: a family sedan, a small city car, a light commercial vehicle, and a luxury car.

3. Renault designed and developed EVs with some different technologies for the motor and a different battery recharging method. The two companies also had different EV business models. The Alliance wanted to have multiple technical options and business models so it could quickly adapt to the market demands of the future.

4. In the United States, 95 percent of Americans drove less than 100 miles per day, and 75 percent drove less than 40 miles per day.

5. Nissan is getting a lead in EV market.

6. Nissan wanted to make full use of its first-mover advantage to not only sell the LEAF, but to change the face of the industry by making all-electric vehicles an affordable, mass market reality.

7. Various governments offered tax incentives and rebates to EV and PHEV buyers, and some offered grants and loans to EV and PHEV manufacturers and battery manufacturers.

8. Very less or no competition in EV market as in current situation.

9. The company’s research showed that LEAF sales would come predominantly from the United States and maybe Europe.

THREAT

1. Competition that will come from the all-electric vehicles manufactured by Ford, Volkswagen, and Toyota, which had not come out yet.

2. There was a “range anxiety” among customers and they were afraid of getting stuck on the road after 100 miles because there was no back-up engine in an all-electric vehicle.

3. The top barriers to adoption of EV’s were price, concerns about performance and range, and availability of charging stations.

4. EV makers also faced increased competition with ICE vehicles that were becoming more fuel-efficient, offering customers more choices.

5. Buyers of EVs tended to fall into a very specific category: older, high income people who held post-graduate degrees and liked to be the first to adopt new technology.

6. If the narrow demographic of hybrid buyers was extrapolated to EV buyers, EV manufacturers might have a hard time finding mass market appeal.

7. For EVs to reduce the world’s carbon footprint, electricity generation from renewable resources would have to keep pace with the production of EVs.

2.  To share your thoughts on the case ‘Nissan’s electric vehicle strategy in 2011: Leading the way towards zero-emission’, which discusses the decision by Nissan, the Japanese car manufacturer, to develop and sell a range of zero-emission vehicles (ZEVs).All students should contribute by posting your thoughts such as what went well for you on case? What did not go well or what did you find difficult? What will you try to do differently? Join the discussion, and add some of your own key learning points.

Things that go well:

1. It had a first mover advantage in launching a global, mass market, affordable EV that had the same capabilities as an ICE car.

2. Costs of raw materials and commoditized parts were expected to remain relatively fixed over time.

3. NEC’s battery business was relatively small, but they knew how to make specialty electrodes that were critical for the EV battery. Nissan’s battery business unit itself employed about 50 people.

4. Nissan could control the number of batteries produced to ensure it would have sufficient supply for its EV line.

5. Through simultaneous engineering, they were able to coordinate and organize new ideas, which led to a quicker time to market and lower costs. With Nissan and NEC engineers working together, there were daily discussions about what Nissan needed for the LEAF, which eliminated bureaucratic layers and delays.

6. The collaboration also meant that at any moment Nissan could incorporate the newest battery technology into its cars. In addition, Nissan and Renault could start with the car design and specify how the battery must be, as opposed to the other way around. There also were advantages for NEC.

7. The Renault-Nissan Alliance wanted to tap into that market so that in addition to self-supplying batteries, it could sell batteries to other companies.

8. The Alliance expected to produce that many EVs annually by 2015, half by Renault and half by Nissan. These would all use manganese lithium-ion batteries, which were high in durability.

9. Although Nissan could not benchmark BYD’s batteries, technologically they were notably inferior to the batteries being developed in Japan and South Korea.

10. The Alliance had two distinct business models for their EVs. The first was to sell the car and the battery as one unit, so the buyer would own both. A second model involved selling the electric car but leasing the battery. Customers would pay a monthly lease fee of varying cost, depending on the region, with the ability to change the battery if there were problems. In some regions, most notably Israel, customers also could take advantage of Renault’s quick drop system; they could go to a special station and in less than five minutes have a battery that was running out of charge replaced with a charged battery. Thus Renault took on the uncertainty about the life of the battery so customers did not have to worry about it.

11. Joint venture 4 R would reduce the initial cost of the battery and help society accept the electric vehicle.

12. Nissan was developing both normal and quick charge systems and was working to standardize as much as possible in order to reduce the cost. The company had begun installing both regular and quick charging units around the world. Nissan also partnered with third parties all over the world to build the EV infrastructure.

13. In March 2011, Renault and Better Place opened the first European Better Place center in Copenhagen, where customers could test drive and order a Renault Fluence “Prime Time” ZEV sedan.

14. Nissan also joined forces with U.S. company ECOtality North America (formerly known as eTec) to build 12,750 charging stations and deploy 5,000 LEAFs in five U.S. markets: the states of Tennessee and Oregon, the cities of San Diego and Seattle, and the Phoenix/Tucson region.

15. The Nissan plant in Oppama modified its assembly line to produce normal internal combustion engine vehicles and EVs, making manufacturing capability quite flexible. Given Nissan’s capability to allow various type of vehicles to be produced in the same production line, there was no need to create a dedicated line for EVs, allowing the company to reduce investment costs significantly.

16. In addition to sharing technological information, Renault and Nissan could communicate about distinct business models for each region, which translated to significant synergies.

Things that did not go well or found difficult  

1. “Range anxiety” – the fear that the battery would run out and EV owners would be stranded on the road — had come into the lexicon of the debate pitting the EV against PHEV and ICE.

2. The people do not yet understand the electric car and the potential of the electric car.

3. Questions and concerns about the LEAF were mostly centered on the availability of charging stations, dealer locations, and price.

4. The battery was by far the most expensive component of the car.

5. Renault planned to buy some batteries from South Korea-based LG Chem.

6. The price AESC charged Renault for batteries were high. Renault wanted to buy the batteries as cheaply as possible, but Nissan wanted to sell the batteries at a high price. However, Renault planned to buy part of its batteries from LG Chem, which kept AESC’s prices competitive.

7. For battery development, Nissan was snatching up as many chemical engineers as possible. Chemical engineering had not been very popular among young Japanese, who saw a career path only to chemical factories.

Key Learning Points:

1. Battery cost in EV is very critical and reduction in its cost is utmost priority for the company.

2. Providing necessary infrastructure for EVs in market is second most important consideration to be taken care of while convincing customers to go for EVs.

3. Pricing is an utmost concern for the customers even after tax relief on EVs.

4.The first mover advantage can help Nissan and Renault to establish their brand in EV market if they were able to produce cost effective and efficient cars with necessary infrastructure facilities in first go.

5. Battery market can also help Nissan to increase their profit if they will be able to achieve economies of scale and get ways to reuse used batteries.

6. Looking into environmental concern, people will go for EVs but electricity is also generated from coal. Equilibrium with regard carbon is to be maintained which proves low carbon emission as compared to IEC.

Q3. Your task is to analyse Nissan’s external environment and offer comments upon whether or not the group is as optimistic as Nissan that ZEVs will make up 10% of the global car fleet by 2021. As a group you should, briefly, make use of relevant BB835 concepts such as:

The PESTLE framework

Porter’s Five Forces framework

PESTLE FRAMEWORK

POLITICAL

1. Customers will move toward EVs as Oil prices and availability were continuously volatile, affecting consumers at the gas pump influencing political decisions and even prompting military action.

2. Various governments offered tax incentives and rebates to EV and PHEV buyers, and some offered grants and loans to EV and PHEV manufacturers and battery manufacturers.

3. Tax incentives for buying electric vehicles were in place only for a few years

ECONOMICAL

1. Federal tax credit by government on EVs reduced the price of Leaf in USA. Many states had additional rebates for electric vehicles (EVs).

2. Nissan’s partnership with Renault allowed for significant economies of scale.

3. The Alliance’s goal was to sell a cumulative 1.5 million EVs by 2016.

4. During the oil price spikes in 2008, there was evidence that high gasoline prices affected drivers’ habits. Many consumers began to change their buying habits, switching from sport utility vehicles (SUVs) to more fuel efficient cars and motorcycles. SUV sales dropped precipitously in 2008. As oil prices dropped in 2009 and 2010, U.S. drivers began reverting back to buying less efficient cars.                                                      

SOCIAL

1. Nissan and Renault each planned to produce four EV models: a family sedan, a small city car, a light commercial vehicle, and a luxury car.

2. Americans had “range anxiety” and were afraid of getting stuck on the road after 100 miles because there was no back-up engine in an all-electric vehicle.

3. Buyers of EVs and HEVs tended to fall into a very specific category.

TECHNOLOGICAL

1. The two companies shared technical learning and experiences about electric vehicles (EVs), but Renault designed and developed EVs with some different technologies for the motor and a different battery recharging method. The two companies also had different EV business models.

2. They have multiple technical options and business models so it could quickly adapt to the market demands of the future.

LEGAL

1. To combat climate change and pollution, governments around the world began enacting emissions regulations.

2. New federal U.S. and global mpg mandates would act to accelerate improvements in ICE vehicles.

3. Nissan’s development of electric vehicle batteries was spurred on by new California regulations that required automakers to have a very small percentage of electric vehicles in the market, which for Nissan translated to about 100 or 200 EVs.

ENVIRONMENTAL       

1. Nissan want to change the face of the industry by making all-electric vehicles an affordable, mass market reality.

2. Transportation accounted for one-third of the country’s carbon emissions and two-thirds of total emissions from petroleum in USA.

3. Air pollution was an enormous problem created by ICE vehicles, especially in emerging nations.

4. Although electric vehicles were emissions-free, there was still the question of carbon footprint. A large percentage of global electricity generation came from coal. Coal-powered plants were environmentally unfriendly, and coal was the largest source of global carbon emissions.

5. For EVs to reduce the world’s carbon footprint, electricity generation from renewable resources would have to keep pace with the production of EVs.

Porter’s Five Forces framework

1.  Threat of new entrants

The top barriers to adoption of EVs were price, concerns about performance and range, and availability of charging stations. These factors reduce the entry of new companies into EV market in current situation..However auto companies will soon enter into EV market once they will be in a position to develop infrastructure for the same. Government is offering incentive to buyers in terms of tax incentive to promote use of EVs.

2.  Threat of substitutes

In the United States, the LEAF was often compared to General Motors’ Chevy Volt, which was a plug-in hybrid electric vehicle (PHEV) with an estimated retail price of about $41,000 ($33,500 with the federal tax incentive). EV makers also faced increased competition with ICE vehicles that were becoming more fuel-efficient, offering customers more choices. “Range anxiety” – the fear that the battery would run out and EV owners would be stranded on the road — had come into the lexicon of the debate pitting the EV against PHEV and ICE.

3. Bargaining power of suppliers

The bottleneck for the EV was the battery supply, which Nissan is producing in joint venture with NEC. One of the main objectives for Nissan, and all EV makers, was reducing the cost and complexity of the battery as quickly as possible. Costs of raw materials and commoditized parts were expected to remain relatively fixed over time. These costs equaled about 25 percent of 2009 battery costs.

4. Bargaining power of customers

New federal U.S. and global mpg mandates would act to accelerate improvements in ICE vehicles. A new competitive landscape also was opening up with the push for cheap, fuel-efficient cars (for less than $3,000), especially in emerging automotive markets. However price of Leaf was $32,780, and after the $7,500 federal tax credit the price dropped to

$25,280

5. Competitive rivalry

Competition that will come from the all-electric vehicles manufactured by Ford, Volkswagen, and Toyota, which had not come out yet, giving Nissan a lead in the EV market. These companies would be releasing EVs between late 2011 and 2014. Competition would then be on other features: external and internal design, acceleration, comfort, range reliability, charging, and IT interconnectivity. The only mass marketed PHEV was the Chevy Volt. Toyota had plans to offer a PHEV by 2012, but with a limited range of about 13 all-electric miles per charge. Right now, Nissan does not have direct competitive rivalry but substitute rivalry is present. The best known all-electric vehicle on the road was the Tesla Roadster, a sports car that cost $109,000 which was much higher than Leaf price. There was competition from the Chinese brands BYD and Chery, which were running some test programs in Europe. BYD’s electric car, the e6, was set to go on sale in the United States at the end of 2011 or in 2012 for about $35,000.

Q4. Your task over the next two days is to undertake a comprehensive assessment of Nissan’s resources and capabilities. Your task is to identify and assess Nissan’s e-vehicle:

·         Tangible, intangible and human assets

·         Capabilities, including a value chain. and then to evaluate these assets in terms of their VRIO attributes. By the end of this task you should have reached a conclusion as to the potential of these resources and capabilities to offer for competitive advantage in the context of the external analysis you undertook on Day Two.

Tangible Asset:

1. The Renault-Nissan Alliance was building capacity for 500,000 ZEVs. The $5 billion the Alliance had committed to the project included building assembly and battery plants, as well as designing, developing, and launching the LEAF and other ZEVs that would be released later.

2. Nissan would begin building LEAFs and batteries in its new plant in Smyrna, Tennessee, which had the capacity for 150,000 EVs and 200,000 batteries. Nissan was investing about $2 billion in this plant.

3. In 2007 Nissan decided to make battery production a separate business in Japan and set up a joint venture with Japanese battery maker NEC called Automotive Energy Supply Corporation (AESC). Nissan owned 51 percent of the JV, and NEC owned 49 percent.

Intangible Asset:

1. Nissan built the electric car’s lithium-ion batteries with Japanese joint venture partner NEC.

2. Technical knowhow of producing powerful lithium batteries for EVs.

3. Continuous R&D through 4 R to

Human Asset:

1. Nissan was using the same talents and analytical skills that it employed with the ICE to test crash modes and safety.

2. Nissan’s battery business unit itself employed about 50 people.

3. AESC combined the mechanical engineering talents of Nissan’s engineers with NEC’s chemical and electrical engineers, and together the two companies could come up with more innovation choices.

The collaboration with NEC meant that at any moment Nissan could incorporate the newest battery technology into its cars. In addition, Nissan and Renault could start with the car design and specify how the battery must be, as opposed to the other way around. The company got the perspective of the automotive world, which it could translate to its industrial applications. It also could scale up significantly, as the number and size of the batteries produced for electric vehicles was much larger than for NEC’s other products.

the increased number of units brought costs to a very competitive level. Yamashita noted that overall, “the volume effect is probably endless. significantly more benefit to purchasing raw materials like lithium and magnesium.”

Capabilities including Value chain:

The Nissan plant in Oppama modified its assembly line to produce normal internal combustion engine vehicles and EVs, making manufacturing capability quite flexible. Given Nissan’s capability to allow various type of vehicles to be produced in the same production line, there was no need to create a dedicated line for EVs, allowing the company to reduce investment costs significantly.

Value chain model According to Porter (1985),

The primary activities are:

Inbound Logistics 

The main components of EVs are battery which Nissan in joint venture with IEC manufactures itself. Raw materials for batteries and other components are bought locally.

Operations

Nissan has set up plants at different locations worldwide to manufacture EVs and fulfill the demand. They are also in process of setting up new plants.

Outbound Logistics

In 2010 and 2011 the LEAF was assembled in Japan at its Oppama plant, in Yokosuka. Nissan expected the Oppama plant to have a capacity of 50,000. Beginning in 2012, Nissan would begin building LEAFs and batteries in its new plant in Smyrna, Tennessee, which had the capacity for 150,000 EVs and 200,000 batteries. Nissan was investing about $2 billion in this plant. Plants were planned for the United Kingdom and Portugal by 2012, mainly to serve the European market.

Marketing and Sales

Nissan did not conduct an initial media blitz, but rather, was letting “influencers” do the marketing for the company. Nissan was Public relation to advertise it EVs.

Service

The Alliance had two distinct business models for their EVs. The first was to sell the car and the battery as one unit, so the buyer would own both. A second model involved selling the electric car but leasing the battery. Customers would pay a monthly lease fee of varying cost, depending on the region, with the ability to change the battery if there were problems. In some regions, most notably Israel, customers also could take advantage of Renault’s quick drop system; they could go to a special station and in less than five minutes have a battery that was running out of charge replaced with a charged battery. Nissan was developing both normal and quick charge systems and was working to standardize as much as possible in order to reduce the cost. The company had begun installing both regular and quick charging units around the world.

Secondary activities are:

Procurement 

Nissan procures raw material and other inputs from local markets to keep cost competitive

Human Resource management 

Across the Alliance, there were 2,000 people working on the EV, including 5 percent of the Alliance’s engineers.

Technological Development 

The Alliance had a structure called EVCCT (Electric Vehicle Cross Company Team), and a subcommittee that exchanged information between Renault and Nissan. So from a technical point of view, the two companies shared new findings and experiences throughout the development phase. Infrastructure – serves the company’s needs and ties its various parts together, it consists of functions or departments such as accounting, legal, finance, planning, public affairs, government relations, quality assurance and general management.

VRIO Framework

Valuable

The collaboration with NEC meant that at any moment Nissan could incorporate the newest battery technology into its cars. In addition, Nissan and Renault could start with the car design and specify how the battery must be, as opposed to the other way around. The company got the perspective of the automotive world, which it could translate to its industrial applications. It also could scale up significantly, as the number and size of the batteries produced for electric vehicles was much larger than for NEC’s other products.

Rare

The Alliance had two distinct business models for their EVs. The first was to sell the car and the battery as one unit, so the buyer would own both. A second model involved selling the electric car but leasing the battery. Customers would pay a monthly lease fee of varying cost, depending on the region, with the ability to change the battery if there were problems. In some regions, most notably Israel, customers also could take advantage of Renault’s quick drop system; they could go to a special station and in less than five minutes have a battery that was running out of charge replaced with a charged battery. Thus Renault took on the uncertainty about the life of the battery so customers did not have to worry about it.

In September 2010, Nissan and Sumitomo Corporation established a joint venture called 4R Energy Corporation to conduct research on second-life use of lithium-ion batteries previously used in electric cars. After the life of the vehicle, a battery typically had 70 to 80 percent capacity left. It would reduce the initial cost of the battery and help society accept the electric vehicle.

Inimitable

Recycling of used battery which was still unknown to auto industries. 4R was reusing batteries for non-EV applications and recycling or safely disposing of batteries. Its goal was to use materials from existing batteries for future batteries. The company first collected the battery pack, disassembled it, and checked for secondary use for each module. Then it added a battery management system to operate or control the battery. To add more value for customers, they were  thinking of making it an energy storage system by adding a power conditioner, a device that could convert energy such as solar power from direct current (DC) to alternating current (AC), allowing it to operate as a storage battery for the home.

Organization-wide supported

In setting up the EV business unit, Nissan very consciously protected it to make sure it did not get cut or lose resources. Nissan encouraged the team to take risks and not be scared to try new things. They didn’t want to bet everything on the project, but trial and error was a learning process. AESC combined the mechanical engineering talents of Nissan’s engineers with NEC’s chemical and electrical engineers, and together the two companies could come up with more innovation choices. Through simultaneous engineering, they were able to coordinate and organize new ideas, which led to a quicker time to market and lower costs. With Nissan and NEC engineers working together, there were daily discussions about what Nissan needed for the LEAF, which eliminated bureaucratic layers and delays.

Q5. Your task today is to bring all of the work together and prepare a final presentation of both the outcomes of your analysis and the implications of this analysis. As part of this process you need to revisit the strategic choice Nissan has made and which is reported in the case and offer your views on whether the strategy is appropriate for the competitive environment you have analysed.

Would you make any recommendations to Nissan? These recommendations can take any form – they can offer alternative interpretations of the data, identify opportunities or threats that Nissan may not have identified, reflect different potential uses of resources or capabilities or identify underlying weaknesses in the resource portfolio – short of simply endorsing the strategic decision taken by Nissan. As part of this work, you should identify what is the main strategic issue Nissan is facing as well as offer Nissan the potential for competitive advantage in this industry.

By the end of Day Five you should be ready with a short report/presentation (in Word, PowerPoint or another format of your choice) and post/upload the same on Day five thread. Outline what you have discovered about Nissan’s resources and capabilities, and what conclusions you have drawn about its strategy

Strengths

1. Successful Renault-Nissan alliance

The alliance allows both companies to:

  • Engage in costly R&D activities;
  • Invest in the new global projects;
  • Negotiate better contracts;
  • Enter new markets;
  • Share the design, manufacturing and procurement costs.

2. Effective R&D spending resulting into the best-selling electric vehicle in the world.

Focused R&D spending has allowed the company to produce the best-selling electric vehicle Leaf.

3. Strong presence in the leading and emerging automotive markets

Nissan through its alliance with Renault and various acquisitions have increased its market share in the global automotive market. The company successfully competes in the U.S. and grows its market share in other emerging markets.

4. Well-managed company’s operations

Carlos Ghosn, Nissan’s CEO, has been managing the company since 1999. His management style and reforms inside the ailing Nissan company, have been featured in many business cases. He successfully turned around the company’s operations and returned the company to growth.

Weaknesses

Poor marketing and advertising capabilities resulting in poor brand awareness

Nissan could improve its marketing and advertising capabilities. No major brand rating agency has included Nissan brand between the world’s top 5 automotive brands or the world’s top 100 largest brands, proving that the company has poor advertising and marketing skills.

Opportunities

1. Increasing government regulations

Many governments around the world are committed to reducing the greenhouse gas emissions and are encouraging fuel efficiency initiatives. Such environmental initiatives may increase production costs for the car manufacturers and these costs will be either passed to price sensitive consumers or will decrease the company’s profits. Nissan may take advantage of this by introducing more car models running only on electricity and bypassing all the government regulations associated with the greenhouse gas emissions.

2. Improving U.S. economy

Signs of an improving economy and rising consumer confidence have been reflected in the strongest increase in new vehicle sales for more than a decade in the U.S. market. 17.5 million new units were sold in 2015, a 5.7% increase over 2014. Interest rates in the U.S. have been low for several years and are forecast to remain that way for the foreseeable future. In such economic conditions, Nissan has an opportunity to capture the higher market share and increase its sales in the U.S. automotive market.

3. Timing and frequency of new model releases

The market share of the automotive companies is significantly impacted by the timing and frequency of new model releases. Historically, new models have tended to have major upgrades every 4 or 5 years with only minor modifications in between. However, due to the rising consumer expectations in relation to in-car technology and the competitive nature of the industry, there is an argument to release upgraded models more frequently. Nissan is well-positioned to be able to do this.

Threats

1. Increased competition

Nissan is faced with an ever increased competition from the traditional automotive companies and the new players. In China, one of the key company’s markets, new home based Chinese manufacturers are competing by offering lower prices and the similar features. Nissan’s international rivals, such as Toyota, Ford, General Motors and Volkswagen, all have bigger budgets and higher brand recognition and could easily expand in China, U.S. and Europe’s markets by taking the market share from Nissan.

New companies, such as Tesla with its electric cars are competing directly against Nissan’s Leaf. In addition, Google, which tries to build self-driving cars are also threatening the traditional automotive industry. The competition is further fueled by the fact that the global automotive production capacity far exceeds the demand. In 2015, there was an estimated global excess production capacity of 31 million units.

2. Rising Japanese Yen exchange rates

More than 50% of Nissan’s revenue come from the international markets, which means that the company has to convert foreign currencies to Japanese Yen in order to calculate its revenues and send profits back to Japan. Currency rates are volatile and company’s profits and revenue highly depend on the fluctuating exchange rates. The company cannot control currency exchange rates, therefore it is at risk, if Japanese Yen exchange rates would start to rise. In this case, the company’s profits would decrease significantly.

3. Natural disasters

Nissan has manufacturing facilities in Japan, Thailand, China and Indonesia. These countries, including others, are often subject to natural disasters that disrupt manufacturing processes and result in lower production volumes and profits.

4. Low fuel prices could negatively impact Leaf sales

Currently, fuel prices are the lowest in a decade. Such situation has encouraged consumers to buy big fuel-inefficient vehicles such as SUVs and pickup trucks. The company has its own SUVs and pickup truck lines, but suffers from the decreasing consumer demand for Nissan Leaf cars.

The trend of low fuel prices is likely to stay and Nissan may suffer from investing huge amounts of R&D into electric vehicles, for which the demand may significantly decrease.

Recommendations for Nissan

(1) Reflect EV development policy to national policy and prepare roadmap:

In order to produce a notable effect by EV development actions, it is necessary to introduce as many EVs as possible. For this, medium- and long-term policies on EVs should be carried in the coordination among the related agencies and organizations. Besides the central government, there are many other stakeholders whose opinion must be sought, including those groups which may be affected negatively by the introduction of EVs. Therefore, EV development should be included in the national policy to effectively promote the implementation of related projects and actions. Furthermore, showing concrete EV policy in the short, medium, and long term can help clarify the direction of relevant agencies, and facilitate the sharing of the progress of the policy among these agencies.

(2) Establish implementation system:

 There is no foundation to introduce and promote EVs. Because the full-fledged development of EV technology in developed countries is expected to start from around 2015, the period between 2012 and 2015 is a good opportunity to establish an implementation system.

It is advisable to conduct the following as preparatory steps:

(i) Establishment of EV preparatory committee:

The committee will be the core body which will conduct preparatory tasks to promote EVs. The MPWT will be the lead agency in coordination with relevant agencies.

(ii) Prepare EV master plan: This study will propose the basic directions for EV development. However, it is also necessary to further study by region and by issue, after which, the EV master plan will be formulated.

(iii) Build the basic regulations related to EVs: It is necessary to develop regulations on import, registration, as well as operation and management of EVs because private enterprises have already introduced EVs. Meanwhile, the minimum required regulations will be prepared to respond to market needs.

(iv) Develop human resources: The mechanism to develop human resources will be developed in both public and private sector.

(3) Conduct model project:

The implementation of the model project is very effective to evaluate the feasibility and the impact of EV introduction and to conduct capacity building which mentioned in the above. The model project can enable to collect the necessary information for full-fledged EV development and to strengthen the implementation capacity of relevant agencies. It is advisable to utilize the support from the developed countries to implement the model project.

Conclusion

1) EV Diffusion in the World

 Both developed and developing countries have become more active in EV introduction and diffusion. In developed countries, the government has led the promotion of next-generation environment-friendly vehicles. In the industrial world, not only conventional auto manufacturers but also large and small enterprises have joined the EV business as new business opportunities. In accordance with the implementation of many pilot projects and EV related events, public expectation on EVs is high. However, there is no clear indication for full-fledged diffusion. This is because of high prices of EVs, limited models, lack of charging infrastructure, and lack of trust in the market in terms of life span of EVs and safety. On the other hand, big auto manufacturers have become bolder in EV development, which is seen to address the above-mentioned problems and accelerate EV diffusion.

2) Significance of EVs

Countries can gain significant benefits from EV diffusion. One of the biggest benefits is energy saving. If all motorcycles and mini buses and 50% of other types of vehicles are replaced with EVs by 2030, world  will save fossil fuel and also reduce carbon emission and control pollution around the globe. The environmental benefit is clear. The emission of PM, NOx, CO and THC will be zero. The zero emission transport system will bring the positive impact on the society. The traffic pollution such as air pollution and noise will be disappeared. The attractiveness of cities will be increased. In addition, EV can change the value chain of vehicles which create new business opportunities.

3) Establish a System for Accepting EVs

EVs have been already introduced by the private sector without related regulations. However, it is important to establish a basic system to avoid the inappropriate operation of those EVs and to promote appropriate information of EVs to the society.

Q6.  To conclude the Online Day School 1, we will discuss the findings of your analysis and review the process by which these outcomes were produced. You will also return to the main themes and learning objectives of the tutorial, reflecting on the activities you have undertaken and the learning that has taken place.

Findings

1. Nissan had first mover advantage in terms of EVs in the whole world and the company had chance to establish itself as a world recognised brand in EV market.

2. Nissan in joint venture with NEC manufactured Lithium ion batteries which give them a competitive advantage in the market against other auto manufacturers who were still in process of developing batteries for EVs.

3. Nissan had done enough investment to fulfill demand requirements of EVs in future.

4. Company was working on recycling of used batteries to reduce its cost of operation thus availing EVs at lower price in future and compete with other EV manufacturers.

5. Both Nissan and Renault were developing EVs on different technological lines to adopt changes in near future and remain competitive in market.

5. Nissan in joint venture with local vendors, dealers and distributors were creating infrastructure for battery recharge stations in all its market where they were planning to sell EVs.

6. They were focused on increasing production line in Europe and USA to cater demand of those areas.

7. They were working on technologies which could reduce cost of batteries in future.

8. Nissan and Renault alliance were creating synergies to obtain loans in the market as well as convince governments of different countries to promote EVs.

9. there was a huge opportunity in the market in terms of selling EVs by convincing customers about zero carbon emission benefits of EVs and how it would help create a clean and pollution free environment.

10. Investment in EVs would get sound return if the product will be positioned rightly in the market and by eliminating the concern of customers with regard to EVs.


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