Negotiations are part of our daily activities. In commerce, effective negotiations are the pillars of all successful businesses (Fowler 3). Companies who adopt effective negotiation strategies can be able to generate assessable business values for themselves and for their clients. Unlike in the past, negotiations have become very important to every business organization.
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This has been brought about by deals becoming more complex, more professional buyers joining the marketplace, competitive behaviors in the market, and increase in internal negotiations within companies. Business experts classify negotiations into several types based on critical variables such as time, conflicts, and participants (Sparks 12).
In this regard, this case study seeks to analyze the Renault-Nissan alliance negotiations. Through this, this paper will bring into light the negotiation strategies that enabled these companies to reach a winning coalition despite the mutual challenges that faced the two companies.
Prior the year 1999, Renault and Nissan companies were faced with numerous fiscal challenges that threatened their future business successes. As such, Nissan was virtually insolvent in the year 1999. From the year 1990, the automobile company had progressively lost its money and market share.
By the year 1998, its automobile production had decreased by 600, 000 units. On the other hand, Renault was slowly regaining its production and market share after a devastating loss of $ 680 million in the year 1996. Equally, before the alliance Renault was still trying to come into terms with their much-publicized alliance with Volvo that failed to materialize.
In the year 1999, the two companies initiated approaches towards an alliance. Several meetings were later held to assess the prospects of their alliances. Notably, the media and the business experts have applauded Renault’s approaches during the negotiations for their unique negotiation strategies.
As such, the Renault negotiating team applied the six steps needed to reach the target and a winning coalition as described by Lax and Sebenius in their article A Guide To Complex Negotiations Published in the year 2012.
According to the Lax and Sebenius, a successful alliance can be achieved by identifying the right parties and grouping them into fronts, assessing inter-dependencies among fronts, determining whether and when to combine fronts, determining how much information to share and when, and being ready to learn and adapt to changing situations.
In the year 1998, Renault’s executive Schweitzer wrote to Nissan’s executive informing him of his strategic plan to form an alliance with Nissan. Schweitzer’s initiatives were against the bankers and investors’ wishes. After identifying the barriers that existed between their companies, Schweitzer was determined to convince all the parties involved of the importance of their alliance.
To carry out its initiatives, Renault had to get the approval from the government, their employees and the shareholders. The French government helped the company overcome most of its regulatory roles since they had power over board decisions. Equally, for successful negotiations Renault had to convince Nissan’s stakeholders, which included the Japanese government, labor unions, and investors.
These investors were Fuji Bank, Fuyo, and Industrial Bank of Japan. Renault was able to convince these parties with the help of Japanese government officials from the ministries of business, international trade, finance, and fair trade. By assessing the inter-dependencies among Nissans shareholders, Renault was able to determine how they affect one another (Lax & Sebenius 4).
Through this, they were able to negotiate with the Government and the relevant ministries to convince the Nissan Corporation to accept their decision in forming an alliance with them. In the end, the company was able to gain the backing of the company’s shareholders. The effectiveness of the above negotiations depended on the way Renault sequenced their campaigns.
Initially, Renault’s CEO sent a letter to Nissan’s CEO before meeting him. The letter was meant to inform the Nissan’s executive of his plans to form an alliance with the firm. Later on, Renault’s CEO arranged for a meeting with Nissan’s CEO. Soon after, though the French government the company was able to convince the Japanese Government in convincing the Japanese authorities.
During the negotiation process, Renault ability to learn and adapt to the situations enabled them to reach to an agreement with Nissan. Initially, Renault plan was to convince Nissan to buy part of their stock. In return, Renault was going to buy part of Nissan’s stock.
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Nissan were unable to buy Renault’s stock, as they were bankrupt by then. As a result, Renault never dropped their plan to form an alliance with Nissan. They proceeded and bought part of Nissan’s stock. Through this, their ability to adapt was illustrated.
The two companies reached an agreement with the aim of enabling each company achieve its desired goals and overcome its fiscal challenges that were threatening the existence of the two companies. Renault had identified several benefits it were to gain from their union with Nissan. These benefits were meant to increase its global competitiveness, increase quality, increase sales, increase momentum as a revived firm, safeguard its market shares, internationalize the firm, and gain global reputation.
Through the initiatives, Schweitzer was determined to reduce the company’s R&D cycle from 36 months to 24 months. Similarly, unlike his predecessors Schweitzer wanted to shift the company’s focus from increasing the number of units produced and sold per year to increasing the quality of the cars produced and sold. Equally, before their alliance, Renault had no market share in the USA.
In the same way, the company’s reputation in Asia and Europe was progressively deteriorating. To achieve these initiatives, Schweitzer noted that Renault needed to improve their products’ designs and qualities (Harford 540). With these variables considered, the company had no option but to unite with a key automaker.
In the same period, Nissan was being faced with numerous fiscal challenges. Its sales were dropping drastically in the USA. As the drop in sales was being witnessed, the company’s debts increased with each passing year. To overcome these challenges and restore their financial glory, Nissan had to form an association with Renault.
Their association with Renault could enable Nissan to protect their identity, return their profitability, improve their worldwide competitiveness, ensure their future survival, preserve jobs, and develop efficient answers to debt-ridden Nissan Diesel. Similarly, the two companies reached an agreement out of their executives’ ambition to develop an alliance, which could enable the companies to uphold their operational freedom.
The basis of their alliances relied on their ability to form a joint equity venture that relied on their partners’ equities, capabilities, and willingness to cooperate (Donnelly & David 430). In the same way, the two companies were willing to come up with a common platform that could enable them create considerable economies in the development of their products.
In general, the association of the two companies could enable the two firms to cut their cost of production, gain from the economies of scale, and boosts their bargaining power. In case the two parties had failed to reach into an agreement it is eminent that they could have faced numerous challenges. For instance, there are higher chances that Nissan could have closed down their operation completely due to bankruptcy.
Before their alliance, their sales were dropping drastically both in Asia and the USA. Similarly, at home Nissan was facing numerous operational challenges owing their inability to repay their debts. Therefore, if it could have failed to reach an agreement with Renault it could have been forced to shut its operations.
If the company could have shut down its operation, more than 130 million people could have lost their jobs. Equally, the Japanese government could have lost huge revenue generated from the company. Alternatively, if Renault could have failed to reach a deal with Nissan it could not be enjoying the success and the market share they currently command in the international automobile market (Magee 123).
Before their joint ventures, Renault’s profits were increasing progressively following Schweitzer’s appointment to head the firm. This implies that without their association with Nissan the company could have continued to increase their profits. However, the company could not have been able to improve their products’ designs.
Equally, without the association the company could have been able to conquer the American Market, as before their alliance they had no sales in the USA. In the same year the Renault-Nissan alliance was initiated, Daimler-Chrysler alliance was ongoing. After the two automobile firms were merged in the year 1998, their manufacturers agreed to combine their efforts.
The alliance became the third largest automobile firm in the world. The rankings were based on their revenues and capitalization. In the same year, the joint firmed sold 4 million units and generated $155.3 billion. However, in the year, 2000 the joint firm’s revenues dropped drastically. It is estimated that in the same year the company recorded a loss of $500 million.
In the year 2001, the company losses increased forcing the company to cut more than 26000 jobs. During the year 2009, after Daimler exited from Daimler-Chrysler alliance Fiat merged with Chrysler to form Fiat-Chrysler alliance. In the alliance, Fiat owns 53.5 % of the company. Before their alliance, the two companies’ executives noted that their union would increase on their returns.
Fiat was to bring in more capital and technologies in the ailing company. These technologies would help the company to develop competitive and efficient cars. On the other hand, Chrysler have been designing and producing cars that have gained international appeal for the last few decades. With the two companies merging, several benefits were going to be realized.
Among these benefits are decrease in the cost of production, increase gains from the economies of scale, and boosts in their bargaining power (Giessner & Viki 78). It should be noted that the negotiations that led to the merger between Daimler and Chrysler failed while the merger between Chrysler and Fiat succeeded. In my opinion, the union between Daimler and Chrysler made business sense.
However, I believe that the differences between the two companies’ organizational culture and management should be blamed for the failure of the alliance to realize their goals. For instance, Daimler’s officials were accused of running Chrysler USA operations in the same manner they run their affairs in Europe. The company failed to realize that the operation methodologies in the USA were different from the operating methodologies in Europe (Brown & Nicole 45).
Worldwide, Chrysler is reputable for their innovative products, while Daimler is reputable for its focused decision-making. Due to the differences in their organizational culture, the alliance between the two companies was not destined to last (Hurn & Brian 32).
After more than 10 years, the alliance between Renault and Nissan is considered successful. In the aftermath of the alliance, Ghosn assumed the leadership of Nissan Corporation. Prior the end of 2000, Nissan profits had increased. Increased in the company’s profits were witnessed until the year 2008 when the world experienced global recession.
Between the years 1998 and 2008, the company managed to settle its all debt, which had before threatened their existence in the world market. Since the formation of the alliance, Nissan’s personal management has changed (Brown & Nicole 46). Currently, the company evaluates its workers based on their performance.
Through this, the company has been able to dismiss more than 14, 000 ineffective workers in the last decade. Through this initiative, he managed to cut the cost of operation by $9.48 billion in three years. From the above initiatives, the company has been able to reduce the number of its personnel while increasing its returns.
Equally, through the alliance the company managed to increase its sales by 78% by generating $92 million between the years 2004 and 2007. In general, through the alliance Nissan managed to meet its objectives. On the other hand, Renault’s revenues were inconsistent unlike Nissan’s revenues. For instance, the company experienced an increase in revenue up to the year 2000.
In the year 2000, its revenues dropped up to the year 2004. During the year 2004, its revenues increased. Equally, after the alliance the company’s production increased. The alliance between the two companies led to developments in Renault’s defective parts ratio. Similarly, Renault managed to improve their production through its Nissan productions.
During the year 2005, Schweitzer retired from Renault Corporation. Upon his retirement, Ghosn took over as the president of the two companies. After Ghosn took over the leadership of the two firms, he set out some ambitious goals for Renault. In the end 2009, it was realized that his goals had failed to materialize by a huge margin. By the year 2010, the company had made a loss of $ 4.5 million.
Based on the above analysis it is clear that Nissan benefitted greatly from the alliance. Generally, after the alliance Nissan with the help of Renault’s cash was able to settle its debts and increase its production. Though Renault recorded some improvements in its operation after associating with Nissan, it should be noted that its gains from the alliance are far less than what Nissan gained from the alliance (Deresky 43).
For instance, currently Nissan controls approximately 8% of the global automobile market, while Renault controls approximately 4% of the global automobile market.
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