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Case Study: The Strategic Alliance Between Renault and Nissan

Renault and Nissan are two major automobile brands working independently as well as are in a 19-year old alliance where Renault holds 43.4 percent stake in Nissan and Nissan owns 15 per cent in Renault.   The Renault-Nissan Alliance  is the first of its kind involving Japanese and a French company. Renault was identified for modern design and Nissan for the excellence of its engineering. The two companies had just decided to a most important strategic alliance in which Renault would take for granted $5.4 billion of Nissan’s Debt in return for a 36.6% equity share in the Japanese company. Before the alliance it was concluded that the combined company would be the world’s largest car-maker.

Strategic Alliance Between Renault and Nissan

In the case of Renault-Nissan, it is preferable to have an alliance than merger for many reasons. Alliances would facilitate more than mergers the entrance for companies to new geographical phases where there are some restrictions on foreign investments . The two companies had their own capabilities in their own market. Renault for instance, already existed in Europe and North America, and was well-known for its design and marketing. At the same time Nissan was the powerhouse engineering in Japan, Europe and North America. Therefore, there was a good chance for Renault to enter the Japanese market where there are many barriers from the Japanese government.

Synergy however, is vital for alliance. Alliance would be more rational when the two firms look for further synergy in their financial, technological aims.  This synergy between two companies was the key element for choosing Nissan-Renault alliance. According to Carlos Ghosn, the manager of the Renault-Nissan alliance : “we said from the beginning that we were not looking for a merger, but rather to get greater value from synergy between the two companies”. According to Ghosn, the reason for choosing alliance rather then merger was that both companies were looking for “turnaround”. Although alliance was more risky than merger, yet they chose it because they thought it would give them more opportunities to develop.

However, despite the advantages Nissan-Renault gained from the alliance, they faced challenges. One of the challenges is whether the alliance would lead to an increase or decrease in the price share. This was a real challenge for Nissan, whose share price fell when it entered the alliance. Furthermore, the two companies had a challenge of cross-culture problems. However, with their ability to focus on the work objective they were able to succeed.

Renault: Before and After the Alliance

The alliance between Renault and Nissan was an outstanding paradigm of a successful alliance around the world. However, before 1999, the prospective of forming an alliance between these two firms was not such rosy.

From Renault’s point of view, various factors were strengthening the former opinion. Firstly, Renault was recovering during 1996 and 1998-9 turning losses of US$680 million into combined profits of US$1.65 billion. Moreover, the failure to merge with Volvo in 1995 had left its mark on the company and any further attempts to a new alliance were confronted distrustfully. In addition, the fact that both firms were playing a dominant role in the auto industry of their countries was indicating that a potential alliance was going to collapse in a decision-making stalemate.

Nevertheless, the supporters of the latter argument were gainsaid. The mutual benefits that they were going to absorb from the alliance laid aside the potential problems and both parties focused on the success of the alliance. This was a crucial challenge, which they managed to handle by learning to trust each other, be truthful and honest during the negotiations. Additionally, by forming joint study teams, in order to test their companies’ ability to work cooperatively, they minimized the cultural stereotypes and set the base for exploiting joint synergies. The two companies were so complementary in terms of geography, product ranges and personality that inevitably the future was foreboding promising. Besides, this process gave Renault an advantage over competitive suitors such as Ford and Daimler-Chrysler , which focused only on finding synergies on past and current advantages rather than on a prospective productive future.

On this basis, Renault, through the alliance with Nissan, achieved to gain international structure which enabled it to deal successfully with the changes which were taking place on the world automobile stage. Thereby, Global synergies and the expansion of its production to foreign , until then, markets like Japan, North America and Asia enhanced its potential and made it a countable member in the auto industry.

Nissan: Before and After the Alliance

Nissan’s history starts from the early of 1933. Nissan is a Japanese automobile manufacturer which achieves, through the years to have strong market presence in Asia and US. Except for the fact that Nissan was a highly emblematic symbol of Japan’s industrial strength, had also a number of strong points such as technological and engineering competence, and also was good at making large cars.

In late March 1999 Nissan and Renault sign an agreement for a Global Alliance. Aim for this agreement was to provide an advantage and achieve profitable growth in both companies. However, Nissan was nearly bankrupt and faced significant debt problem when the alliance formed. One of the major reasons for this debt and financial difficulty was the fact that Nissan invested a lot of money in different companies and this has a result, Nissan not be in position to invest money in the company and its products. Therefore the company for a long time did not have any profit and this made the debt for Nissan in 1999 to reach the US $22 billion. Furthermore, during the same year (1999), the domestic market share had fallen from 17.4% to 13%.

Have in mind this and after that Daimler Chrysler and Ford refused the idea of a partnership and broken of the alliance talk with Nissan, the company resorted to the strategic alliance with Renault, where both companies had clear idea of what they wanted. The alliance was vital for the two companies as Nissan needed Renault’s cash in order to reduce its debt problem and Renault wanted to learn from Nissan’s success in US and Asia which was essential for the expansion in its market. During the period of social initiation process, of six months, many advantages arose over competitors as they carried out static analytical evaluations and they focused on finding collaborations based on their past and current strengths rather than on jointly future.

In order to accomplish this, Nissan had change significantly to redeem its profitability and competitiveness . First Nissan quit the investments in other companies, in other words the keiretsu which is “a Japanese traditional rule” that requires all the companies in Japan to have long-term purchasing relationship, intense collaboration and frequent exchange of personnel and technology between companies and selected suppliers. The personal management also had changed and whereas Nissan in the past appraised their employees based on the period that they were working for the company, now they changed the criteria of evaluation by looking on the performance of each employee . Further they set up a common language i.e. English and they have created nine Cross-functional teams. By the implementation of the above changes, Nissan manage to cut down in purchasing cost, to reduce suppliers, to close overlapping outlets and plants and finally to reduce the work force.

Through the alliance of Nissan and Renault, the benefits that arose were obvious and determinant. Transparent bench-marking allows two culturally diverse companies to share best practices and also the common platform and shared purchasing strategy had delivered huge cost of savings . Noticeable is the fact that in order to preserver corporate identities they decide to remain as separate managements, separate brands and separate companies while every decision was affecting both brands.

The operation recommendation which arise from this alliance case provide valuable elements on how two companies, that are in the same situation like Renault and Nissan which show strength in different competence and regions of the world (Nissan had strong presence in Asia and US while Renault had presence in Europe), can approach the growing and competitive auto manufacturing global market.

Therefore the success of this alliance is also interrelated with the synergy among the two companies and the framework of equality help the transfer of knowledge between foreign engineering teams.

Finally Nissan successfully achieve to jump from seventh most valuable automobile company in the world to the fourth.

Structure of the  Strategic Alliance Between Renault and Nissan

Strategic alliances are said to be a source of competitive advantage . However there is a growing concern over their failure rates. One of the major causes is the inability to implement the appropriate governance structure and management control systems in the newly formed association. Most of the companies form an alliance management teams which manage across the organisation using Cross-Company Teams, Cross functional teams, Steering Committees and Alliance Board.

By observation, Renault’s was interested in creating respect between two alliance partners and respectively followed an Andean civilization approach to work together for six months before forming an alliance. The social initiation process provided Renault-Nissan an advantage over its competitors such as Daimler-Chrysler. The later company did not experiment social collaboration to develop the ability of sharing knowledge and building trust. Therefore the structure in Renault and Nissan was the result of, what the companies experienced during the social initiation stage. They formed a new board having 5 members each from the host companies. Further to speed the integration and improve communication process they created 9 Cross-functional teams (CFT) and 11 Cross-company teams (CCT). More importantly, these teams had a Chair person from Renault, Vice Chair person from Nissan or vice-versa. Moreover the CFT was limited to 10 members from different departments such as purchasing, manufacturing which ensured progress between these departments. As a result the alliance was able to launch 22 new car models in the next three years and increase the manufacturing capacity in Japan.

Moreover the CCT created efficient synergies. One of the examples of amalgamation process was in Mexico. Renault had left the market in 1986 and Nissan was facing overcapacity in 1999. So alliance decided to put the managers from both the companies together and recognize synergy opportunity. In just five months Renault cars were being manufactured out of Nissan plants and the capacity utilization of the plant increased from 56% to nearly 100%.

In summary cross-company teams allowed Renault-Nissan to first go through a social initiation experience and then move into a formal framework of collaboration and knowledge exchange. Similarly cross functional teams enhanced the process of integration.

Cooperative Operation

Supply chain management is one of the areas of key concern for global car manufacturers. Major players in Car Industry are looking for revolutionary methods of management of their suppliers. In Renault-Nissan case, RNPO or Renault Nissan Purchasing Organization is a unique joint organization responsible for integrating purchasing Strategy. As a result of mutual engineering efforts, Renault and Nissan cars can share components. This fact allows the alliance to combine their purchasing orders. Therefore, not only the cost of order has reduced but RNPO “defines worldwide purchasing strategy” and now it is accountable for full purchase of Nissan and Renault.

Another area for mutual cooperation between two companies is engineering which could be a lesson for other car manufacturers to reach economic of scale and scope. The key difference in Renault-Nissan case is concentrating on designing and producing components of car jointly instead of developing whole car from scratch. The alliance achieves economic of scale by producing in larger scales and economic of scope by manufacturing components which are compatible for different models of both brands. Moreover, one of top priorities of MNC is to find a way to reduce R&D cost as well invest in new technologies with lower cost. For instance, according to Renault website, the alliance helps two companies to invest in advance technology like hybrid vehicles.

To conclude, Renault and Nissan  successfully integrate their complimentary competencies to standardize their purchase orders and components manufacturing. Therefore they can reduce their cost and achieve greater outcomes.

The Role of Corporate and National Culture

Corporate culture is the combined beliefs, values, ethics, procedures, and atmosphere of an organization. One of the important issues raised in the Nissan-Renault alliance is the management of two different cultures. While Renault strategy was liked western strategic orientation and Nissan was under the influence of corporate and national culture. Accordingly, the collective share of ideas and strategic management were effective and the employees of both companies could understand each other culture background, subsequently respect the identities of their colleagues as well as their values. Thus, Ghosn put cross- culture training programs for over 1500 employees from Renault to learn about the Japanese culture and 400 Nissan employees study the French culture. It was a first positive step in terms of creating a successful alliance of two different cultures. After presenting the French and Japanese culture, it was significant to understand their differences. Japanese societies are well-known to be more collectivist and in opposite, French societies are based on individualistic efforts from employees. As the decision making process in Nissan was working the precept of group-think, mostly the people who thought alike. Moreover, Nissan had a problem in terms of excess capacity that was based on an unofficial contract that existed between Japanese auto companies and their employees. Ghosn closed five factories and cutting some 21,000 jobs to broke this custom. He also took on the close network of relationships between auto companies and their suppliers, relationships denoted by a specific Japanese word, keiretsu . Also after this situation he employed new engineers in to the Nissan organisation, he decided to put English as formal language for company to deal with diversity of language spoken. In addition, in the Japanese culture, is not possible for a young employee to be manager for a colleague who is older in terms of age and seniority. However, the ECO’s new system of promotion to begin restructuring the management process in company, was based on performance and efficiency, not employees age.

As a result, the Renault-Nissan alliance has been hugely successful. There is broad acknowledgement by many at senior levels inside both companies that much credit for this must be given to their conscious effort to build cross-cultural understanding from the start.

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The Renault-Nissan-Mitsubishi Strategic Alliance: Past Accomplishments and Future Challenges

The 1999 strategic alliance between Renault and Nissan made this partnership the longest ever among large firms in the automotive industry. Together, the alliance partners are active in every important territorial market and in every customer segment worldwide.1 As the alliance was announced, automotive industry experts were very skeptical2 because both companies were having difficulties. The initial alliance partners started from weak positions as the collaboration was formed; however, today the alliance is a leader in electric vehicles,3 ranks among the top-three largest car manufacturers worldwide,4 and sold more than 10.6 million vehicles5 in 2017. Although the alliance encountered a number of challenges and difficulties over the years (e.g., increasing industry competition, pressure to generate synergies, the financial crisis of 2008, and recent trends disrupting the automotive industry), it has been extended over time, most importantly by the inclusion of Mitsubishi in 2016, as Nissan acquired a stake in its Japanese rival. Twenty years after its formation, the Renault-Nissan alliance is a prime example for strategic alliances because of its financial success in the past.

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Designing Durable Alliances: Lessons From Renault-Nissan

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Renault has been on both sides of strategic alliances. In 1993, Renault had to digest the humiliating failure of its strategic alliance with Volvo. The final blow to the three-year-old alliance came when the French government, Renault’s main shareholder, raised the expectation of a controlling “golden share” in the possible merger of the two companies. Three years of intense cooperation with significant effort from both Volvo and Renault, underpinned by cross-shareholding, ended in a clumsy, costly and hasty disentanglement. Both automakers incurred significant opportunity costs due to reduced strategic manoeuvrability at a time when competitors, e.g. Daimler-Benz , were preparing their own moves.

Charging back into the fray, Renault formed an alliance with ailing Nissan in 1999. The Japanese carmaker’s dire status led to a cross-participation in which dominant Renault injected US$5.4 billion for 36.8 percent of Nissan. By 2001, Nissan had gone from nearly bankrupt to raking in record profits.  

The success story continued almost without pause until 2015, when the French state increased its shareholding in Renault to more than 19 percent and sought to double its voting rights. Since Renault held 43.4 percent of Nissan stock by that time, with full voting rights, whereas Nissan held 15 percent of Renault stock, without voting rights, tension within the alliance immediately spiked. In 2016, Nissan rescued a struggling Mitsubishi, tying that firm to the alliance and creating the world’s biggest carmaker . Yet the alliance finds itself in a contentious state.

In light of the recent developments around the Renault-Nissan-Mitsubishi Alliance – including the controversies and allegations around its iconic leadership –  several relevant observations emerge for other strategic alliances.

Alliances vs. acquisitions

After an early period of success, strategic alliances can falter when a transactional mentality sets in among senior management. Partners focus more on extracting value for themselves and less on creating mutual value – the ostensible purpose of the alliance. This is more likely to happen when the design of the alliance is too rigid or fails to consider how the alliance might later be dissolved by common agreement.

If the design of the alliance is too much of a straitjacket from the outset, it may well become irrelevant from the perspective of ongoing mutual value creation – i.e. an M&A in disguise. The key success factors for stimulating cooperative behaviour and mutual value creation don’t mix well with the transactional aspects of ownership and control. Power struggles among the various partners-in-name-only are a probable outcome.

Revisiting mutual strategic dependency

Companies enter into strategic alliances bound by their respective strategic assessments of how their corporate structures and values may mesh. The strategic fit, the resource fit, the organisational fit and the cultural fit are important areas of consideration when assessing potential alliance partners. That being said, the economic reality of the alliance partners is explicitly intended to change because of the alliance. As the strategic dependency evolves, the potential for turning-table effects is inherent and prominent, necessitating an adjustment in governance and processes, without which the foundations of the alliance may be undermined.

In Renault-Nissan’s case, the strategic goals of the two partners were divergent from the start. Nissan required emergency surgery, which it received with Carlos Ghosn’s Nissan Revival Plan, while Renault wanted access to the Asian growth markets where Nissan was already well entrenched. These goals do not add up to a recipe for long-term harmony. Indeed, Renault’s response to a revitalised Nissan becoming the larger of the two companies was to reinforce its own power position within the alliance.

Transitioning to alliance leadership

In the early days of the alliance, Carlos Ghosn clearly understood how to translate the differences and gaps between Renault and Nissan into highly successful management practices. His boundary spanning approach was a textbook example of how inspirational leadership can create common goals and lift the parties over and beyond the mere sum of the parts. The strategic, operational and management challenges for all layers in both organisations generated cohesion and commitment.

Yet once an alliance has achieved its “obvious” goals – and in the absence of strategic re-adjustments – leadership legitimacy tends to be challenged. After all, the success of the alliance proves it has served its purpose. The implicit expectation of both parties is often a return to a more classical management model, including a self-effacing, humble role for alliance leadership. Further, the shift from visionary to collaborative leadership is a prerequisite for strategic re-adjustment, enabling senior executives on both sides to redefine the governance equilibrium.

It is a strong possibility, then, that Renault-Nissan has long outgrown Ghosn’s famously autocratic leadership style.

Cultural awareness and trust

Cultural fit is instrumental to the success of strategic alliances. It is probably the most complicated dimension in the overall relationship as it tends to surface in unexpected places at unexpected moments. Company culture and national culture are inevitably intertwined and tend to reinforce one another in dire times.

Japanese culture is sensitive to honour and its opposite, shame. This is especially true with affairs that are highly public, such as the fortunes of a prominent (and emphatically Japanese) firm like Nissan. In 1999, Renault had offered a cooperation model by which the two companies would retain their own identities, have their own corporate strategies whilst cooperating with each other as global partners. After seven consecutive years of losses and two failed internal turnaround attempts, Nissan’s alliance with Renault brought renewed success and, consequently, a restored sense of national-corporate pride. However, frustration has been building up among Nissan’s management in recent years, because of Renault’s refusal to equalise power relationships within the alliance.

Any unilateral attempt to alter the core philosophy of the alliance can be seen and exploited as a token of disrespect and create a trust breakdown. Ironically, the same abhorrence of dishonour that initially cemented Nissan’s compact with Renault now threatens to poison relations between the pair.

Alliances must be revisited

Strategic alliances are perhaps more important than ever in today’s world of fast-changing market conditions and rapid innovation. In these disorienting times, two (or more) heads are better than one for finding strategic advantage. But the dizzying rate of change requires that partnerships, once formed, are routinely revisited to ensure they are still generating value for all parties . If the benefits are no longer distributed evenly, or one or more partners have undergone a serious shift since inception, big changes may be necessary. And that is where the once-exemplary Renault-Nissan alliance now stands.

Bart De Roover is an INSEAD Adjunct Professor of Partnerships & Strategic Alliances. He teaches at Managing Partnerships and Strategic Alliances, one of INSEAD’s Executive Education programmes.

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Bart de roover.

Bart De Roover is an INSEAD Adjunct Professor of Partnerships & Strategic Alliances.

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Cooperative strategy: Renault-Nissan’s Bumpy Ride

By Professor John Child and Dr Linda Hsieh The Department of Strategy and International Business, University of Birmingham

Alliances can be very successful – if led by the right people, designed around a sound cooperative strategy supported for the long run by all stakeholders.

It’s not just in international relations that politics can sabotage opportunities to cooperate for mutual economic benefit. Much the same can happen to cooperation between firms. Organisations form alliances because they make strategic and economic sense. Yet often their collaboration is undermined by distrust between the partners, especially if it comes under financial strain.

The strategic alliance between Renault and Nissan (later joined by Mitsubishi) provides a salutary example. Formed in 1999, the alliance became the world #1 auto producer in 2017. It illustrates how a cooperative strategy can offer strong economic benefits for the partners involved. Cooperation between the two auto giants saved Nissan from bankruptcy, while Renault (also in poor shape) gained first-rate engineering and access to new markets. A variety of joint activities, including shared production, pooled procurement, and technology development projects, led to improved efficiency for all parties involved. At the same time, the partners retained their separate identities with customers and employees, building confidence and loyalty. For some years, the Renault-Nissan alliance worked brilliantly under the leadership of Carlos Ghosn. Yet today it is struggling to survive.

What went wrong? The alliance’s unbalanced governance structure has been one factor. Renault has a 43.4 percent fully voting stake in Nissan, but Nissan holds only a 15 percent non-voting stake in Renault.  This effectively gives Renault control.  Nissan’s grievance at this imbalance grew because it sells about 30% more cars than Renault and contributes more to the alliance’s profits. Joint activities such as the launch of a low-cost car in India in 2014 came to be hampered by failing cooperation. Ghosn’s centralised leadership eroded the separate identities of the firms and supplanted the need for actual cooperation between firms. Then, the prospect of a full merger driven by French voting interests threatened Nissan’s cherished cultural identity as a leading Japanese industrial firm. The arrest in Japan of Ghosn on charges of financial misconduct in November 2018 exposed the simmering rivalry between the French and Japanese nationalists in each camp of the alliance.

Collapsing sales and internal politics have put their partnership in peril. Following a report in January 2020 that Nissan was secretly planning for a potential divorce from Renault , the two companies recently confirmed that a merger is off the table . They have decided to give their strategic alliance another go, because it is unlikely that the three companies could survive on their own . So in announcing their plans to weather the economic storm and repair their fractured alliance, they have gone back to the drawing board. The alliance’s recently announced their survival plan involves major cost-cutting and the further sharing of production capacity and electric vehicle development costs, but within a looser less centralised structure.

What can we take away from this story? Alliances can be very successful – if led by the right people, designed around a sound cooperative strategy supported for the long run by all stakeholders. Yet conflicts often arise between partners, and studies suggest that around 50 per cent of alliances are terminated by the time they reach their fifth anniversary. Even with a good economic and strategic fit, personal and political tensions can develop between partners, reflecting differences in cultural identity and expectations. An understanding of human perception and behaviour is essential to enable the economic payoffs from alliances to be achieved and maintained.

Two insights are particularly important. First, while cooperation provides mutual gains that partner firms cannot generate on their own, it is important for the partners to develop and maintain a  perception  of mutual and equitable benefit . Second,  trust between firms is essential and requires a lot of psychological investment to overcome cultural and other sources of misunderstanding . 

Cooperative strategies are ever more common today. Firms often use alliances in order to pool technologies and development costs in search of innovation. Cooperation between auto and artificial intelligence companies to develop autonomous vehicles is an example. The most successful policies to deal with the Covid-19 crisis have involved close cooperation between companies and public agencies, as in Taiwan . However, managers must recognise that the strategic and economic benefits of cooperation cannot be sustained without a lot of effort to overcome human and organizational divisions.

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Strategic Management pp 748–753 Cite as

The strategic alliance between Renault and Nissan

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This industry is one of the most important in the modern economy. Its origins go back to the period before World War I. It has also always been a focus for rapid and significant organizational and technical change. It is one in which many novel management techniques have received their first application. Indeed strategy was first systematically tried out in this industry. The importance of and fierce competitiveness in the industry have ensured that this was the case.

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Carlos Ghosn — a Brazilian-born Lebanese with a history of fixing French companies. (White, 2003)

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White, C. (2004). The strategic alliance between Renault and Nissan. In: Strategic Management. Palgrave, London. https://doi.org/10.1007/978-0-230-55477-1_26

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The Renault-Nissan-Mitsubishi Strategic Alliance: Past Accomplishments and Future Challenges

By: Markus Kreutzer, Valentin Pfeffer

The 1999 strategic alliance between Renault and Nissan made this partnership the longest ever among large firms in the automotive industry. Together, the alliance partners are active in every…

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  • Publication Date: Jan 1, 2020
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The 1999 strategic alliance between Renault and Nissan made this partnership the longest ever among large firms in the automotive industry. Together, the alliance partners are active in every important territorial market and in every customer segment worldwide.1 As the alliance was announced, automotive industry experts were very skeptical2 because both companies were having difficulties. The initial alliance partners started from weak positions as the collaboration was formed; however, today the alliance is a leader in electric vehicles,3 ranks among the top-three largest car manufacturers worldwide,4 and sold more than 10.6 million vehicles5 in 2017. Although the alliance encountered a number of challenges and difficulties over the years (e.g., increasing industry competition, pressure to generate synergies, the financial crisis of 2008, and recent trends disrupting the automotive industry), it has been extended over time, most importantly by the inclusion of Mitsubishi in 2016, as Nissan acquired a stake in its Japanese rival. Twenty years after its formation, the Renault-Nissan alliance is a prime example for strategic alliances because of its financial success in the past.

Learning Objectives

The case illustrates to students how Renault and Nissan used an alliance to overcome individual difficulties and jointly become a major automotive group in the global automotive industry. Using the example of the RenaultNissan (later including Mitsubishi) alliance, the case displays the following universal themes of strategic alliance management and their challenges:

• alliance formation and negotiation

• setting alliance goals and defining founding principles

• alliance governance

• alliance evolution

• balancing power and interests between alliance partners

• partnering mode choice

• international partner selection. Furthermore, the case is a useful basis for discussions on general management topics such as:

• corporate restructuring

• change management

• international management and intercultural collaboration

• partnering versus acquiring

• economies of scale in the automotive industry

• competitive rivalry and competitive dynamics in the automotive industry

• contemporary developments in the automotive industry

• electric vehicles

• the future of mobility and mobility-related business models.

Jan 1, 2020

Discipline:

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France, Japan

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Automotive industry

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case study the strategic alliance between renault and nissan

Case Analysis: Renault-Nissan Alliance Negotiations Case Study

Executive summary, introduction, how renault negotiation team worked, how cultural differences influenced the negotiations, why nissan and renault reached an agreement, failure of daimler-chrysler and success of chrysler-fiat merger, the success of renault-nissan alliance, works cited.

The international partnership agreement made between Renault and Nissan Companies in 1999 came due to numerous key decisions. The agreement committed the two companies to forging certain form of synergies while preserving their individual brand identities.

The companies agreed to give the Global Alliance Committee the mandate to direct their partnership through the leadership of the chief executive officers from the two companies. The Renault Company provided financial capital worth $5.4 billion (¥643 billion).

In return, the company purchased 36.8 per cent of the Nissan Motor’s shares 22.5 per cent of the Nissan Diesel. The total equity was worth ¥605 billion and to compensate for the remaining ¥38 billion, Nissan Motor agreed to transfer ownership of its European financial subsidiaries to Renault Company.

In addition, the agreement gave the Renault Company the freedom to increase its share in Nissan Motor and gave the Nissan Motor the freedom to buy equities from Renault. On management issues, the two companies agreed to give Renault Company the duty to manage three positions in Nissan Motor.

The companies made the decision to allocate one of the seats in Renault’s board of directors to a leader from Nissan Motor. The seat was given to Hanawa (Nissan Motor chief executive officer).

At the alliance level, the companies decided to come up with eleven cross-company teams to run the different fields of synergy as well as to coordinate sales and marketing efforts in the various markets dominated by the two companies. Some of the teams included the purchasing team, engineering team, and product-planning team, among others.

In 2010, the Renault and Nissan formed one of the major global alliances in the automotive industry. In return, they gave rise to over 350,000 job opportunities and they had operations in 190 states. The alliance had done well for the past ten years to a level that many people considered it as the representation of a successful partnership.

When news of their intended alliance first became public, many auto executives perceived it as an impossible exploit (Tagliabue 41). They claimed that the two companies practiced different cultures. Besides, the executives claimed that their intention would face stiff opposition from the stakeholders.

During the negotiation process, Renault’s chief executive officer (CEO) had reached the verge of losing hope of striking a deal with Nissan Motor (Betts 18). Nevertheless, the deplorable condition of the auto industry and stiff competition from major automotive companies kept the CEOs from the two companies negotiating.

This paper looks at what the two CEOs did during the negotiation process to reach an agreement, the influences of cultural differences during the negotiation process, why the companies reached an agreement, and how the they benefited from the alliance.

Lax and Sebenius coined six critical steps to a successful negotiation. In a bid to strike a deal with Nissan Motor, the Renault negotiation team made sure that it did not overlook any of the six steps. According to Lax and Sebenius, negotiators ought to consider their interests as well as that of their counterparts (92-94). The team went past the apparent differences, investigated parties’ interests, and capacities for “fit”.

The majority of news reporters considered linguistic, cultural, and organizational differences as some of the factors that could have hindered the negotiations between the two companies (Donnelly, Morris, and Donnelly 435-437). Nevertheless, Renault’s negotiation team, through the assistance of Schweitzer, went to the extent of focusing on the long-term goals of the two companies to establish their negotiation strategies.

Besides, they considered the complimentary interests of the two companies as well as their respective capacities. Their stoutness on copious dimensions directed, motivated, and made sure that the negotiators continued with the negotiation process.

Not all the differences mattered equally between the organizations. Moreover, not all differences meant incompatibility. Indeed the Renault’s negotiation team used these differences to establish sustainable benefits for the two companies, which gave them an upper hand during the negotiation process.

The negotiation team ought to make broad preparations in cooperation, incessantly, and within (Lax and Sebenius 95). The team carried out systematic internal analysis and took time to work with staff from Nissan Motor long sending a letter to Nissan Motor expressing their intensions.

The joint preparation prior to official negotiations gave the team a chance to understand the interests of Nissan Motor and thus include them in their negotiation process (Woodruff 63). In addition, the negotiation team had enough time to avoid rushing during the negotiations.

The majority of negotiation processes fail for the negotiating teams do not have adequate time and they end up hastening during the process, thus not addressing most of the crucial issues. By preparing thoroughly, the Renault’s negotiation team had enough time to identify and address all the critical matters.

In a bid to facilitate in the negotiation, the team considered the possibility of adopting a novel form of alliance. The team came up with an alliance model that would allow the two companies to work together and at the same time preserve their individual brands.

Cross-shareholding and high-level coordination were common phenomena in both Japan and France (Woodruff 63). Nevertheless, they were not prevalent globally in the automotive industry. The Renault’s negotiation team came up with negotiation model that upheld the principle that the negotiating parties hold the power of establishing the design of their relationship.

The team ought not only conduct itself as a negotiator, but also as a potential partner (Lax and Sebenius). In most cases, negotiators work to achieve their interests at the expense of their counterparts. Nonetheless, Renault’s negotiators put into consideration the Nissan’s interests and they considered their future relationship after the alliance (Donnelly, Morris, and Donnelly 434).

They were conscious of the companies’ short history together, the chance that the negotiation provided them to prove their persona as a long-term partner, and the effect that their negotiation behavior would possibly have on the execution of an accord. These considerations earned the negotiators a reputation, thus winning the trust of the Nissan Motor leadership.

Lax and Sebenius (97-100) posit that negotiators need to work on making sure that they influence their counterparts and draw them away from their alternatives. Renault’s negotiators worked extra hard to control the influence of the Nissan’s alternative. For the Nissan’s CEO, he had a formidable alternative, and thus he did not take serious his possible alliance with Renault.

He was working towards enhancing his relationship with Chrysler. Therefore, to ensure that they won in the negotiations, the Renault team worked towards reducing the chances of Hanawa’s maneuvers in influencing the final decision. In addition, they stayed right to their dream of an alliance and tried to lure Nissan Motors through publications like the mock press release (Ghosn 37-39).

Besides, they made their commitment public and even requested Hanawa to sign freeze agreements. Eventually, they managed to draw Hanawa’s attention away from Chrysler and he ultimately agreed to collaborate with them.

In the attempt to strike a deal with Nissan Motor, the negotiation team assessed the possible outcomes of their alliance. In most cases, people appraise negotiations based on their instantaneous results.

Nevertheless, even though the alliance between Renault and Nissan received a lot of media attention, its outcomes could only be felt after several years (Donnelly, Morris, and Donnelly 440). The negotiation team knew that it was impossible to get immediate results, but the future looked promising.

The cultural differences between the two companies played a significant role throughout the negotiation process. One of the cultural aspects that stood out as a barrier in the negotiation process was communication. The parties in the negotiation process could hardly communicate due to language barrier (Ghosn 39).

This aspect led to the delay of the negotiation process, as the Renault’s negotiation team had to enroll for Japanese classes to equip themselves with the basic skills in the Japanese language. Besides the language barrier, the two companies practiced different forms of leadership, which led to the two disagreeing on the form of relationship to embrace.

While the Renault team advocated for a joint venture or subsidiary, the Nissan’s team was strongly opposed to the same (Ghosn 39-41). The two companies had to compromise and settle for an informal relationship proposed by Ghosn. Moreover, Nissan Motor highly valued its brand name.

The company was not willing to lose the name in the process of the alliance. Hence, the two companies were forced to look for a way that would facilitate their alliance and at the same time allow the companies to continue using their brand names.

There were problems with decision-making processes in the two companies. In Nissan Motor, the management propagated a culture that promoted consensus decision-making system. This culture aimed at ensuring that all the staff worked in harmony and participated in making critical decisions on matters affecting the organization.

Every employee in the company was keen in all his or her actions to avoid chances of making mistakes, which could see him or her lose the job (Ghosn 42-43). These cultural norms were the major hurdles in the decision-making process in the company.

In addition, they contributed to the negotiation process as stakeholders from Nissan Motor sought to understand how decisions would be made in the event of the alliance.

Therefore, to ensure that all parties were satisfied, the two companies agreed to come up with a committee that would be responsible of making a decision on matters affecting the companies through the assistance of the two chief executive officers.

Generally, the reason behind any alliance between two or more companies entails the possibility of future growth. Companies agree to collaborate whenever they sense that an alliance would help them to gain access to advanced technology and market development in the future. The same thinking informed the alliance between Renault and Nissan (Ghosn 45).

The alliance helped the companies to share their geographical coverage and improve on their weaknesses. Renault dominated both the Latin America and the European markets. On the other hand, Nissan dominated the Japanese, North America, and Asian markets. According to Renault, the alliance would help it to expand its market coverage beyond the Latin America and Europe.

Hence, Renault saw the alliance as the only way through which it could establish a lasting competitive survival. The alliance would help it to reduce its dependence on the European market and to be credible in an international context; Renault needed to establish itself in the Asian Pacific and North American markets (Korine, Asakawa, and Gomez 41-43).

Nevertheless, it could hardly achieve this goal without collaborating with another company because of the cost. Renault could not merge with an American company since most of the American motor companies were busy trying to consolidate their alliances with European motor companies. Therefore, Renault turned its attention to Japan where it found Nissan Motors, which was operating independently in the market.

General Motors was already controlling most of the Japanese motor firms like Isuzu and Subaru. Therefore, Nissan Motor was the only company that offered a chance to venture into new markets and Renault was not ready to lose the opportunity. On the other hand, Nissan Motor saw the alliance as a good chance to help it expand its market coverage across the globe (Korine, Asakawa, and Gomez 44-46).

Through the alliance, Nissan could venture into the untapped European markets. In return, the company could now make use of its half-idle manufacturing plants. The new markets would increase the demand for Nissan cars, and thus increase the amount of work in all the manufacturing platforms.

The two companies possessed different technologies and expertise. Renault had expertise in research and development as well as concept design and marketing. On the other hand, Nissan Motor had expertise in engineering. By combining their expertise, the two companies would stand a chance of countering competition in the market as well as in the products.

Relatively, Renault would use the Nissan’s engineering and technological skills to revive its Safrance (Korine, Asakawa, and Gomez 47). Moreover, Nissan would help Renault to complement its products through its reputation in off-road and pickups vehicles as well as quality models. On the other hand, Nissan would take advantage of marketing experience of Renault to increase its sales volume.

Apart from forming an alliance, the two companies had the option of operating independently. For instance, Renault had enough money to assist in venturing into the North American market. Besides, it had the opportunity to liaise with smaller automakers in the United States to address its operational challenges.

Nevertheless, this alternative would not have helped Renault to improve its market coverage across the United States (Korine, Asakawa, and Gomez 47-49). In addition, Renault did not have adequate engineering and technological expertise to manufacture quality and modern vehicles.

Consequently, failure to collaborate with Nissan would have rendered the company uncompetitive and thus lose most of its market shares to other superior companies. The partnership did away with competition between the two companies. Failure to form an alliance would have led to Renault suffering from stiff competition from Nissan’s quality products.

In spite of the Nissan Motors having the technological and engineering skills, the company would have also suffered if it did not form an alliance with Renault. In a bid to pursue its interests, Nissan Motor had the opportunity to raise capital through borrowing from commercial banks. Besides, the company could have raised capital through equity.

Nevertheless, the company’s shares had significantly depreciated and spinning off some of its subsidiaries would have negatively affected its market dominance (Korine, Asakawa, and Gomez 50). The alliance proved as the only alternative that could be of mutual benefit to the two companies.

It not only helped to counter competition between the two companies, but also helped to improve the market share and profit margin of the two companies through sharing their distinct expertise.

Numerous factors contributed to the failure of the merger between Daimler and Chrysler. Some of the factors included cultural differences, lack of due diligence, mismanagement, and Asian challenge. One of the challenges that affect cross-boarder mergers is cultural differences.

Cultural differences affect the work attitude as well as the management system. Daimler and Chrysler hailed from two different cultural backgrounds. The two companies were different with respect to working style, organization, and compensation (Das and Rajesh 686). Daimler considered itself as superior in terms of innovation in the motor industry.

On the other hand, Chrysler was popular for flexibility, efficiency, and vehicle design. In spite of their merger having a lot of potential to improve the companies, the differing cultures made it hard for the companies to operate amicably. Daimler felt superior and thus tried to use its management style to manage Chrysler’s operations in the United States.

Daimler advocated for methodical decision-making while Chrysler advocated for equal representation and employee empowerment (Das and Rajesh 698). The attempt by Daimler to apply a hierarchical system of leadership in Chrysler led to conflicts between the two companies.

At the beginning, the management teams from the two companies claimed that the companies had equal powers over the merger. However, Daimler purchased Chrysler and took absolute power over its management. This dominance led to the mismanagement of Chrysler Company eventually leading to the collapse of the merger (Das and Rajesh 700).

Most of the managers that had contributed to the success of Chrysler Company ended up moving to other companies that had a promising future like the General Motors. According to Das and Rajesh, “the American vigor faded under restrained German influence; however, the Germans were unable to enforce their own managers” (699).

The success of Chrysler and Fiat merger is credited to proper management, and observation and respect of cultural diversity of the two companies. While Daimler overlooked the culture practiced by Chrysler, Fiat embraced the diversity in cultural practices and endeavored to preserve it (Harvey 132-136).

In an interview, Marchionne posited that the merger between the companies would not lead to the erasure of their distinct heritages. Instead, the two companies would work on modalities to preserve their heritages while at the same time to improve on their performance, and thus aspect underscores where the Daimler’s leadership went wrong.

Rather than respecting the cultural diversity between the companies, the management sought to stamp out the Chrysler’s culture and replace it with its culture (Harvey 138-142).

This move not only led to challenges in the company’s management system, but also left most of the managers that saw the company grow with limited influence over the company’s management. Eventually, the managers felt betrayed and opted to look for other companies where their contribution would be of value and appreciated.

Ten years after the alliance between Renault and Nissan, the companies were still enjoying the fruits of their alliance. Based on the reasons for the alliance, one may claim that Renault Company benefited from the alliance more than the Nissan Company.

Through the assistance from Ghosn, Nissan managed to cut down on the number of its plants in Japan, a move that helped the company reduce its operational costs (Donnelly, Morris, and Donnelly 428).

By 2000, Nissan Motor had already started enjoying profit and it maintained that until 2008 when all the motor firms suffered from the economic crisis. The company’s operating margin improved thus ranking it among the best four motor companies in the industry. By 2004, Nissan had paid off all its debts and it increased its sales volume by over 78 per cent by 2007.

The alliance had immense benefits to Renault. The company managed to recover the money it invested in Nissan. By December 2009, the value of its shares in Nissan was worth more than its total market value (Donnelly, Morris, and Donnelly 429-432). In addition, Renault managed to work on its defective parts ratio through the skills it acquired from Nissan Motor.

Renault’s productivity went up because of adopting Nissan’s production mechanisms. In 2005, Ghosn assumed the leadership of the two companies. He set high targets for Renault as a way to improve its operating margin (Betts 18). Nevertheless, he did not achieve the targets.

Renault continued with its effort to internationalize its operations by acquiring majority of shares from Samsung Motors in South Korea (Donnelly, Morris, and Donnelly 435-438). Additionally, the company went on and purchased 25 per cent of the shares from AvtoVAZ in Russia and collaborated with automotive firms from India and China.

Since Renault was yet to establish itself in the United States market, the alliance approached some of the smaller companies in the United States to see if they could help them in this venture. Finally, the alliance agreed to work with Daimler, which led to Renault gaining access to the United States market (Donnelly, Morris, and Donnelly 440).

The Renault-Nissan alliance has grown since 1999. Besides welcoming other partners into the alliance and sharing a common chief executive officer, the two companies have significantly augmented their cross-shareholding and inflated their organizational linkages (Das and Rajesh 699). Nevertheless, Renault has benefitted more from the alliance relative to Nissan Motor.

Automotive firms have negotiated for global alliance for many years and they will continue negotiating in future due to the high levels of competition in the motor industry. Nevertheless, the alliance between Renault and Nissan Motor is of its own kind.

Most observers believed that the alliance would not last for long due to cultural differences between the companies, but to their surprise, the alliance turned out to be very successful to the extent that it became a representation for industrial alliances.

Numerous factors contributed to this success. One of the factors was the decision by the two companies to accommodate their cultural differences and run their operations separately. This move avoided cases of the two companies disagreeing on various issues during their daily operations. Culture contributes to organizational success.

The reason why the merger between Daimler and Chrysler failed was that Daimler undermined Chrysler’s culture and tried to substitute it with its culture. The move altered the management system in Chrysler leading to a majority of the company’s managers leaving the company. Besides embracing their cultural differences, the Nissan and Renault were in need of alliance to help them enhance their competitiveness in the motor industry.

While Nissan had all the requisite engineering and technological skills, the company lacked the marketing skills. On the other hand, Renault had the marketing skills, but lacked the requisite technological and engineering capabilities. Hence, the alliance gave them a chance to share their capabilities, which gave them an opportunity to enhance their competitiveness.

Betts, Paul. “Carlos Ghosn gets second chance to rev up Renault.” Financial Times 29 April 2010: 18. Print.

Das, Titiksava, and Rajesh Kumar. “Learning dynamics in the alliance development process.” Management Decision 45.4 (2007): 684-707. Print.

Donnelly, Tom, David Morris, and Tim Donnelly. “Renault-Nissan: A marriage of necessity?” European Business Review 17.5 (2005): 428-440. Print.

Ghosn, Carlos. “Saving the business without losing the company.” Harvard Business Review 24.7 (2002): 37-45. Print.

Harvey, Francis. “National cultural differences in theory and practice.” Information Technology and People 10.2 (1997): 132-146. Print.

Korine, Harry, Kazuhiro Asakawa, and Pierre-Yves Gomez. “Partnering with the unfamiliar: lessons from the case of Renault and Nissan.” Business Strategy Review 13.2 (2002): 41-50. Print.

Lax, David, and James Sebenius. “Deal Making 2.0: A Guide to Complex Negotiations.” Harvard Business Review 90.11 (2012): 92–100. Print.

Tagliabue, John. “Renault pins its survival on a global gamble.” The New York Times 02 July 2000: 41. Print.

Woodruff, Chris. “Renault bets Ghosn can drive Nissan.” Wall Street Journal 31 March 1999: 63. Print.

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COMMENTS

  1. Case Study: The Strategic Alliance Between Renault and Nissan

    The two companies had just decided to a most important strategic alliance in which Renault would take for granted $5.4 billion of Nissan's Debt in return for a 36.6% equity share in the Japanese company. Before the alliance it was concluded that the combined company would be the world's largest car-maker.

  2. The Renault-Nissan-Mitsubishi Strategic Alliance: Past Accomplishments

    Using the example of the RenaultNissan (later including Mitsubishi) alliance, the case displays the following universal themes of strategic alliance management and their challenges: • alliance formation and negotiation • setting alliance goals and defining founding principles • alliance governance • alliance evolution • balancing power and inter...

  3. PDF s 10 & 14 to the financial

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  4. Designing Durable Alliances: Lessons From Renault-Nissan

    Since Renault held 43.4 percent of Nissan stock by that time, with full voting rights, whereas Nissan held 15 percent of Renault stock, without voting rights, tension within the alliance immediately spiked. In 2016, Nissan rescued a struggling Mitsubishi, tying that firm to the alliance and creating the world's biggest carmaker.

  5. Cooperative strategy: Renault-Nissan's Bumpy Ride

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  6. The strategic alliance between Renault and Nissan

    Abstract This industry is one of the most important in the modern economy. Its origins go back to the period before World War I. It has also always been a focus for rapid and significant organizational and technical change. It is one in which many novel management techniques have received their first application.

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    The strategic alliance between Renault and Nissan Carlos Ghosn - a Brazilian-born Lebanese with a history of fixing French companies. (White, 2003) ... The case study con-centrates the attempt by Renault-Nissan to be one of these survivors. Why is it forecast that only six major manufacturers

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    The Renault-Nissan Alliance was created in 1999. For the first time in the automotive history a French car company gained a major interest in a Japanese car company. The aims of our paper are to carry out a review of the definition of a strategic alliance, to present the history of the Renault-Nissan Alliance and to briefly analyze its strategy.

  11. Strategic Alliances and Intercultural Organizational Change: The

    This case study focuses on a strategic alliance formed between the French company Renault and the Japanese company Nissan. This bilateral agreement associates actors and teams from two different national and corporate cultures.

  12. Renault and Nissan alliance comes unstuck without Ghosn's glue

    The difficulty created by the Ghosn-era IP regime, say people close to both Nissan and Renault, is that while the alliance will always demand a certain level of loyalty, success in the electric ...

  13. Strategic Alliances and Intercultural Organizational Change: The

    ... Even the once touted Renault-Nissan exemplar that propelled Carlos Ghosn as a paragon of cross-cultural leadership (cf. Barmeyer & Mayrhofer, 2016) ended in disaster. Ghosn's imprisonment...

  14. The Renault-Nissan-Mitsubishi Strategic Alliance: Past Accomplishments

    The 1999 strategic alliance between Renault and Nissan made this partnership the longest ever among large firms in the automotive industry. Together, the alliance partners are active in every important territorial market and in every customer segment worldwide.1 As the alliance was announced, automotive industry experts were very skeptical2 because both companies were having difficulties. The ...

  15. Cultural Impacts on international strategic alliances

    This paper focuses on studying the cultural impacts on the international strategic alliances through analyzing Renault-Nissan case; whereby trying to prove that the cultural differences...

  16. Case Analysis: Renault-Nissan Alliance Negotiations Case Study

    Case Analysis: Renault-Nissan Alliance Negotiations Case Study Exclusively available on IvyPanda Table of Contents Executive summary The international partnership agreement made between Renault and Nissan Companies in 1999 came due to numerous key decisions.

  17. The Determinants of Alliance Performance : Case Study of Renault

    Based on a revised framework proposed by Das & Teng (2003), this paper attempts to examine the determinants of alliance performance, using a case study of Renault & Nissan Alliance. (JEL F23, L62 ...

  18. The Renault-Nissan-Mitsubishi Strategic Alliance ...

    On March 27, 1999, Louis Schweitzer, CEO of Renault, and Yoshikazu Hanawa, president of Nissan, signed a strategic alliance agreement between Renault and Nissan in Tokyo, thereby bringing a 10-month negotiation, which had started with an exchange of letters between Schweitzer and Hanawa in June 1998, to a successful end.

  19. Opportunism and trust in cross- national lateral collaboration: the

    To this end, we sought a case where the parties involved took lateral collaboration seriously over an extended period of time, which led us to the Renault-Nissan Alliance (RNA). Though the RNA case has been studied previously, most research has focused on leadership (Gill, 2012; Toma, Marinescu & Constantin, 2016). In the current study we apply ...

  20. Globalization: How strategic alliances bring production and market

    Globalization: How strategic alliances bring production and market advantages. The case of Renault/Nissan Author: Jean-Jacques Chanaron Subject: Humanities and Social Sciences/Economics and Finance Keywords: globalization, strategic alliances, Renault/Nissan Created Date: 12/17/2023 6:55:23 PM

  21. (PDF) Exploring Critical Success Factors of Competence ...

    Strategic Management Business Administration Strategic Alliances Exploring Critical Success Factors of Competence-Based Synergy in Strategic Alliances: The Renault-Nissan-Mitsubishi...

  22. Renault-Nissan Alliance: Success by Integration

    In the late 1990s, Nissan was debt-ridden and making huge losses. In 1999, Renault initially acquired 36.8% shares of Nissan and entered into a strategic alliance with the Japanese company. The Renault-Nissan Alliance was unique in the sense that Renault allowed Nissan to maintain a separate identity while developing synergies.

  23. Solved Case Study: The Strategic Alliance Between Renault

    Business Operations Management Operations Management questions and answers Case Study: The Strategic Alliance Between Renault and Nissan Renoult and Nissan are two major automobile brands working independently as well as are in a 19-year-old allianee where Renault holds 43.4 percent stake in Nissan and Nissan owt.515 15 per cent in Renault.