Individual Case Study BLICE

8/8/2019 Individual Case Study BLICE

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BEN 401 BLICE

THE PARADOXICAL

ALLIANCE OF

RENAULT & NISSAN

CASE STUDY

Oran Rochrungrangsee

S00404092



Introduction

It had been many years since March 1999, the day when Renault and Nissan had

signed a partnership agreement that would make a bi-national automobile group of

global scale making it the fourth largest in the world. Now, many papers and case

studies have been written about their successes and how they had been a leader

creating such bold vision and strategy. However, it had not always have been this

way as stated in the first paragraph of this case by Deresky H (2008). The idea of

the alliance of such nature itself can still be considered revolutionary today. This is

so from the obvious contrasting French and Japanese culture or rather the West

meeting the East that would create difficulties during the cooperation. It would also

be harder for the two to work together under pressure and stressful environment of

Nissan being in great debt. Both companies also had no prior experience in one

another’s market.

This paper will explore deeper how Renault had turned the situation around in

Nissan and created synergies by structuring in 4 stages explained by Sales and

Mirvis’s (1999) framework of cultural integration.

By applying the cultural framework of Hall, Hofstede, Schwarts and Trompenaars,

the main body of this paper will be structured further accordingly mainly to answer

these 2 questions:

1. Why did the cross-border alliance between Renault and Nissan succeed

when early signs had been less than promising and after many

commentators predicted it would be a disaster?

2. What strategies did Carlos Ghosn employ to ensure effective integration of

global operations within the new alliance and to what extent were they

based on cross-cultural awareness?

With these additional 2 questions to be answered as supplementary:



3. Can cultural differences be transcended and overcome through the right

leadership qualities, ones that are respected no matter what the culture?

4. What else can we learn about effective cross-cultural management,

communication team working and leadership from this case study?



Pre- Cultural Integration Stage

There is a difference between synergy potential and synergy realization. 2

companies may have a lot of synergy potential to gain from an alliance or merger

but to actually gain the synergy is a completely different story.

Most merger and acquisitions did not enjoy success because they fail to make this

distinction at the start. This can be seen from Daimler-Benz and Chrysler deal. By

using the traditional approach, the two companies only assessed the conventional

one-sided analysis of financial performance and value on maximization of profit

through finance and consulting firms. They thus only avoided the cultural clashes

and had proclaimed the deal to be the merger of equals. This later applied to

policies having both chairman remain in their positions causing the new company to

still have two headquarters. This also created separated fragments of divisions

preventing synergies. By the time they admitted to the fact that it was Daimler-

Benz who actually acquired Chrysler and had the authority, the damage had been

done. 2 years of miscommunications and unclear goals had caused two thirds of the

valuable management team at Chrysler to be fired or resigned and the company left

unprofitable and deeper in debt.

This was a different case for Renault and Nissan. In Japan even until today, the term

merger or acquisition still does not have a welcome tone in the business world of

the rising sun. In this still much an enclosed circle, businesses and companies are

believed not to be for sale. According to Ishizumi K (2005), despite globalization and

the rapid development of the world, the Japanese Ministry of Finance and the Legal

Affairs Bureau, who are responsible for all of the Japanese companies registry, still

advice and incline in the tone that it is still against the spirit of law to permit a

Japanese corporation to engage in such businesses as selling its own assets to other

corporations. There are also various studies on foreign companies in Japan

confirming that there exist still ‘invisible’ trade barriers in the Japanese market

based on attitudes, cultures, values, and tradition. Knowing this, Renault and Nissan

had chosen a longer alternative path of broad strategic cooperation instead of a

direct traditional one. They chose to invest 6 months of their own management

teams’ time to investigate the potential of their synergies and find plans to make

them practical. They had prepared for the integration by making the beginning



process to be interactive and gradual in which it enabled the two parties to have an

environment where they could both learn to work together and co-operate in the

goal of transferring of strategic capabilities and creating synergies. Trompenaars’

universalism and particularism dimension can be applied here. Here Renault

understood that an alliance with its Japanese partner will take time to develop

which will help form the basis of trust which is crucial in order to do business in

Japan. They also help Renault to understand that contracts are only a rough

approximation of guidelines. They thus had emphasized on both parties’ strategic fit

which focused on the compatibility beyond the normal finance value to those of

their cultures, management styles, decision-making approach, and communication

systems. By this, they had not just recognized the synergy potential but also the

existence of cultural friction and resistance that would result from within both

parties. From this, they had started the integration process successfully and on the

path to merge their culture and successfully realize the synergies.

3 Stages of Cultural Integrations

Sales and Mirvis (1999) have identified three main stages of the cultural integration.

The first stage being "threat against the own culture" is the phase where acquired

firm employees will have a resistance due to their feelings of shock, fear and

uncertainty.

The second stage being "cultural confrontation" is the phase when the two

companies’ employees will feelings such as anxiety and frustrations from having

difficulties accepting other different culture when they start to meet and work

together.

The third stage is "acculturation" being the last phase where the two companies can

decrease the unnecessary cultural clashes, create a common language, mutual

consideration, better understanding of others, and finally being able to

achieve meaningful synergies.

First Stage



Hall Hofstede considers culture to be a collective phenomenon that is because it will

always at least be shared and learnt by the people living in the same social

environment. He thus believes that culture is learned and not inherited. He further

distinguishes three levels in human mental programming as below.



This means that with Hofstede’s school of thought, company executives can

actually create and enforce cultures on their employees to learn if done the correct

way. This was the foundation of how Carlos Ghosn had the confident to take the

helm of Nissan and knew how to direct it.

He first started by making sure that the new culture of Nissan was transparent and

was full of factual clear communication which were to be instilled not just by himself

but also the rest of the top management in the manner of “walking-the-talk’’. This

helped not just eliminating Hall’s high and low context communication barrier but

also prevent future mistrust among employees. The scope of this policy also

spanned to others implementations making it clear to all the situation of the

company.

Decision making

At Renault, the top management took quick decisions, which created fast results

while in Japan the decision-making process took a long time and was done through

long discussions which could only be reached through a consensus. Ghosn foresaw

that this was due to Nissan's board comprising of 37 members and thus reducing it

to 10 enabling it to take a clearer and sharper decision.

Boundary –Spanning Leadership

By creating new mixture of management teams, Ghosn enabled the full utilization

of his bi-cultural team giving him both sides of opinions and thus synergized

capabilities. These teams later helped him came up with strategies and helped him

implemented them. He also gave them more authority and flexibility to enable them

to manage more effectively.

Language

Ghosn tackled this obvious difference between France and Japan by making Englishthe official language of the alliance. He went on further to eliminate the high low

context by making sure that the 100 hundred special words be focused on to make

sure there would be no miscommunication.

Individualism and Collectivism



Ghosn knew that the Japanese Nissan was collectivist based while his French

company puts emphasis on the individual. Nissan like other Japanese companies

also had their rewards system dominated by the seniority based promotion system.

He thus established a new reward system at Nissan, which assessed results based

on merits. This also included clear promotion plan once set objectives had been

met. This thus promoted more individualism within Nissan and attracted and

retained more new talents. This is also supported by its earlier policy of non-census

decision making encouraging initiative and individual advancements. This balanced

out the power distance and also promoted Schwartz’s value inventory of power and

achievement.

Long term orientation and short term orientation

The French multinationals believe in “Time is money” concept. This in other words

mean that the Western companies are more short-term oriented while the Japanese

perception of time, which is found in the Makimono time pattern, is the notion of

continuity or in other word they are more long term oriented. Ghosn thus

established a set plan for Nissan’s employee to have return of profit by 2001. This

made them more realistic and more stimulated with clearer goals. This also relates

to Schwartz’s stimulation and self-direction. This also helped to reduce the

uncertainty avoidance since goals can be known clearly now.

Second Stage

Ghosn continued on the integration of French culture into Nissan. He waited for the

right time and made the changes more gradual to make sure that his new Japanese

employees would be able to accept them. This could be seen when he tackled the

more sensitive issue and how he had respected the Japanese slower way of dealing

with matters and time orientation and also the understanding that the cutting of old

relationships would require more time. Thus he gave the Nissan management team

a deadline to abolish the Japanese sacred way of keiretsu if the companies in

relation could not meet the restructuring requirement. This meant that he was firm,

got the job done while still leaving room for the Japanese to absorb the new policy.

Masculinity and Femininity



The Japanese society is very masculine and this was profound in Nissan. This also

had helped fuel the collectivism root in its culture by focusing on the group and

ignoring on the voices of the minor individual. Ghosn decided to tackle this only

after other policies had been in place and started for the equal opportunity for both

sexes. This then indirectly helped to be a good support for his earlier policy of merit

based performance which promoted individualism and creativity. This is like

Trompenaars’ achievement and ascription dimension. This had further helped

Nissan made use best of its human resources and treated them fairly.



Third Stage

With all of his polices and teams in place, Ghosn had successfully reached the

“acculturation” stage where he had brought Renault to enjoyed the synergies

created under his management of the French-Japanese new cross-functional team.After 5 years Nissan had a new culture brought by Ghosn. Now the company had

less power distance since upper management are made more available even Ghosn

himself. This increases clarity in company’s vision, strategy and communication

enabling the company to be unified in one direction. Nissan also now had a

successive group of values instilled in place and those were Schwartz’ Stimulation,

self-direction, universalism and achievement. This helped the Nissan employees to

be proactive and less on the old tradition way of sitting and waiting for themselves

to be more senior to advance in work. This promoted efficiency and the strive to

excel in work and promote the overall productivity of a single person. This overall

also had help reduced the undesirable values from Schwartz such as tradition and

conformity that only had prevented Nissan from being effective.

Leadership

It is very clear in the case that leadership was a crucial key in the success of this

alliance. From the important beginning stage, the presidents from both companies

showed similar positive qualities that went beyond their conventional national,

culture and boundaries. Despite the differences, both showed openness to change,

flexibility, respect for others, virtue and the ability to give trust responsibly. This

could be seen when they did not hold back on sharing of information to optimize the

effectiveness of the deal rather to conform the normal standard of self-preservation.

They were also willing to invest time and money to make sure that the rest of their

companies would be able to synergize one another cultures and structures. Without

these two starting the way correctly, the alliance might have not been successful so

quickly in the first place.

Schweitzer also had picked the right man Carlos Ghosn for the job. Being Lebanese

French might also have been one of the factors for Ghosn himself to be more

tolerant of other cultures. However, the rest was purely his qualities and abilities to

lead people despite their cultures. His leadership helped his people from both



companies to develop, understand and embrace the acquisition's purpose and see

their role in it. He had made sure that across the levels from bottom to up, the

managers and employees in the combined organisation did not return to their

former, more familiar behaviour but strive to change, be more receptive to change

and finally following together in one new direction. Ghosn had made sure that it was

know the purpose of the alliance and that was his NRP. He knew exactly that the

new combined firm would need direction and guidance and he gave just that

security and clear communication by articulating a new clear purpose. His virtue to

do as he said also helped tremendously to gain acceptance, respect and in turn the

loyalty and trust from his subordinates. He had been a role model. He also had the

tolerance and respect for other cultures. He did not completely and instantly abolish

keiretsu but gave the Japanese time to revise according to the factual standard. He

also embraced both cultures and this was also his key to success. He could

differentiate between good values and bad values to suit his company and did not

simply just destroy them. He created cross-functional with most mixture as he could

to gain most input from both cultures. This meant that he allow himself to trust

others while also teaching them to learn and make use of other cultures. By doing

so, he created more people with the same vision and direction. He was a team

builder.

Additional things that can be learnt

The most notable thing mentioned in the case is that to instead of avoiding the

culture differences and clashes, companies and executives should seek an embrace

them. By doing so, they would understand the situation more, know their

employees better and eventually gained more by doing so. This is a very refreshing

and new way to look and tackle the cultural issue. The key is also that the gain is

actually from the synergy of two different cultures.

Clear communication also had shown to be a vital part. Most companies did not

have this in place and caused delay which escalates down the levels of the entire

company. It shows how even the best idea can be useless if it is not heard thus it is

up the top management to find effective ways to get the message across and also

making sure that the listeners understand it.



The next thing is that team working is also important since culture is about people

and instead of enforcing the new culture or rules on them, it is better to build team

so that they can evaluate themselves and organically learn to adapt. By doing so,

they would have each other to motivate and provide constant support for one

another being sustainable by themselves without much help from the organization.

This proves to be very effective in this Renault and Nissan case.



Conclusion

No doubt Carlos Ghosn was the hero in this case. However he also had shown us

that it was not a one man show. He showed us that it was not just his quality or

knowledge as a leader to successfully lead and manage but a combination of allother things like cross-cultural management, clear communication policy, team

working and building and effective leadership. He had been patient and tolerance.

He also knows the right time to be harsh or soft showing respect when it is required

and not too much to obscure the set goal of the company.



Reference

Geert and Hofstede (2004) Gert-Jan. Cultures and Organizations: Software of the

Mind. New York: McGraw-Hill U.S.A

Hitiris Theo (1999) "European Union Economics", Prentice Hall Europe

Ishizumi Kanji (2005) "Acquiring Japanese companies", Basic Blackwell

Pascal Clerc (2005) Managing the Cultural Issue of Merger and Acquisition

Sales A.L. & Mirvis P.H (1999) "When Cultures Collide: Issues in Acquisition", 1984,

through Friberg E. & Persson L., "Managing Cultural Differences in M&A in South

Korea", 1999, Gothenburg School of Economics and Commercial Laws

Shalom Schwartz (1994) 'Schwartz Value Inventory' (SVI)

Trompenaars and Hampden-Turner (1997) Riding The Waves of Culture on seven

value orientations

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