The current world market has been very competitive and grim. The automobile industry has not been left out of the current problem. With a huge decline in car sales and massive lay offs, the car industry has felt the pinch as much as everyone else. The Nissan –Renault alliance has also been hit. This alliance was formed in order to help sustain the competitive edge of these two companies.
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According to Kim and Massy-Beresford, (2009) “when the alliance was formed in 1999, Nissan was experiencing extreme financial difficulty and Renault offered the necessary capital to enable them to smoothly progress forward.” The areas of cooperation have increased over the years, with each firm gaining in terms of skill, technology and lower production costs, and as a result sky-rocketed to the top five international car makers (Alliance facts, 2009).
The alliance between these two companies brought a wide brand variety. Alliance facts (2009) shows that “Nissan brought two brands: Nissan and Infiniti while Renault brought three brands: Renault, Samsung and Dacia. The merger was indeed a logistical success in that it enabled the companies to experience economies of scale when the market was good.” So how do the individual brands work out now that the financial forecast is grim?
“The Infiniti brand is the luxury arm of Nissan” according to Revolution (2009). “This marque brand has done well, having overcome a poor start in the early 90s to pick up in the international market recording increased sales until the fatal financial crunch” (Edmunds, 2009). The synergy created between Nissan and Infiniti and later on the Nissan-Renault alliance stands to help this brand even in the current situation.
Let us examine this using a SWOT model (see table 1). The alliance enables the brand gain strengths that it could not achieve on its own. “One of the major let-downs of this brand during its initial start was lack of advertising power” as cited by Edmunds (2009). The Nissan-Renault alliance offers the Infiniti brand more market recognition. David (1987, 3) agrees with this citing “the increased monopoly due to more market share and recognition as the causing factor.”
Another strength that enables this brand to competitively stay afloat during this period is the technical expertise offered by this alliance. The alliance allows for consultation between the engineers of both Renault and Nissan, allowing the company to access a greater knowledge pool (Alliance facts, 2009). The result has been “a good reputation for quality and luxury that this brand now enjoys” (Edmunds, 2009). This recognition of quality has seen the introduction of the G35 and redesign of the Q45 that gave the brand a much needed car sale boost.
However, the brand has a few weaknesses. Ratnam (2009) points out “the recent recall in 2008 of 4854 of its EX35 showed that the brand has not gained fault free production”.
He adds that “these kinds of recalls affect the view of potential buyers, even in the future.” Another weakness is the inability of the brand to take full advantage of the newly created hybrid car segment (Nissan, 2009). This is an opportunity that the alliance has not effectively taken advantage of despite being touted as the next big thing in the automobile world. Such delays are not good and present a threat to the company’s command of the market share.
The opportunities that have presented themselves are many, and sometimes not taken full advantage of. For example, “the inability of Nissan, the parent company to introduce the hybrid technology is seriously affecting their competitive performance” according to Kim and Massy-Beresford (2009). However, there are opportunities that the brand has used very well.
Revolution sees one of them is “internet advertising” (Revolution, 2009). “The launch in London of Infiniti was preceded by a big blog and opinion campaign that resulted in huge cost savings on advertisement. The strategy has also been adopted by the Infiniti sales teams with the teams recording high sales volumes for very low advertising costs”, a clever strategy noted by Pasch (2009). Their competitive edge in the world market therefore is increased as they are able to register less sales related expenses per vehicle.
The threats to the competitive ability of the brand are indeed big, more so in the current financial landscape. With the global slump causing reduced new car sales, the companies are facing steeper financial problems. The financial performance report of Nissan Motor Co. third quarter for 2008 state that the operating loss encountered was 92.5 billion yen. This kind of financial performance has been reflected across the worldwide industry, even extending to other sectors.
The poor financial performance Kim and Massy-Beresford (2009) note “has caused the joined factory building projects underway by the Nissan-Renault alliance to be stalled”. This kind of stalling is not good for the brand. The imminent threat of reduced production ensures that the brand cannot have enough output in case the market demands more, thus losing out to other competitors. Even with the global recession on, the continual increase of capacity is important so as to take advantage of a boom in the future.
The competitive edge of this brand is also threatened by its exorbitant price range, especially in this time. Being a luxury brand the car’s shop price is not something that an economy that is facing job redundancy and wage loss would indulge in. The manufacturer must strive to ensure that the car’s price is reasonable with respect to the current market condition.
The brand is high quality and has international recognition for the same. The alliance between Nissan and Renault can greatly enhance its competitive edge by causing technical and production economies of scale. However, there are some factors that curtail the competitiveness of the Infiniti brand. First, the brand must strive to avoid anything that would result in negative publicity, such as vehicle recalls.
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It must also ensure that the brand takes full advantage of its capital base to launch into newly created market segments as quickly as possible. In this way, it would be able to capitalize on the consumer taste and fashion trends while they still exist. Infiniti stands a good chance of weathering the financial crisis if it makes affordable, relevant and yet quality products.
Table 1. SWOT Analysis Framework.
|Strengths ||Weaknesses |
|Opportunities ||Threats |
Alliance Facts 2009 Alliance Facts and Figures: Nissan Renault. Web.
Chang-Ran K. & Massy-Beresford H., 2009, Is Nissan-Renault tie-up success story overblown. Web.
Edmunds 2009 Infiniti. Web.
Gopal R., 2009 Nissan Recalls Murano, Infiniti SUVs for Air Bags. Web.
Nissan 2009 Financial Results Material. Web.
Pasch Consulting 2009 Group Infiniti of Santa Monica Case Study. Web.
Quick MBA 2009 Swot Analysis. Web.
Revolution 2008 Case studies-Nissan Infiniti. Web.
Ravenscraft J. D., & Frederic M. S., 1997 Mergers, Sell-offs, and Economic Efficiency Brookings Institution Press.