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Nissan and IBM Outsourcing Agreement

2019-05-16 Business No comment

Introduction

In the year before the millennium, Nissan was a company that was in serious financial crisis. By 1999, debt had reached nearly $22 billion. The company is too complacent and has achieved priority success, of course [2].

Is Nissan’s decision to outsource its IT infrastructure to IBM in 1999 reasonable? Nissan was a very difficult car manufacturer in the late 1990s. The company's senior executives are known for their conservative view of business and their network of old boys, ' psychology. The sharp drop in profits unexpectedly forced the company to fall into the $22 billion debt it faced at the time. There is no indication that the market will change profit growth. Car sales need to be uplifting.

The merger was a one-day flavor of the automotive industry in the late 1990s. Nissan executives contacted DaimlerChrysler and Ford to discuss possible merger issues, but neither company was interested [2]. There is only one alternative, reinventing itself and reducing unnecessary administrative costs. This is the settlement point that leads to business process outsourcing decisions.

This article is designed to answer the question "Does the cost of implementing an internal solution outweigh the benefits or business process outsourcing [BPO] makes more sense?" We reviewed the example of automaker Nissan, who decided to outsource their rights information technology department to IBM at the end of 1999 to answer our questions.

Nissan – Brief History and BPO Decision Events

First, the period of prosperity

Nissan was established in Japan in 1933 and is a heavy industry manufacturer. After the Second World War, they turned their attention to the car. In the 1950s, with the launch of the Datsun brand sedan and small pickup trucks, they finally had an impact on the global market. The company eventually opened a full-time business in the United States in September 1960 [6].

With the launch of ' Z', the company has experienced significant growth. In the early 1970s, the series of sports cars, the 240Z became the fastest-selling sports car ever. This success made Nissan the leader in the US auto importer market in 1975. By 1970, US car sales exceeded 250,000 vehicles per year [6]. The company is very young, its leaders are full of energy, and the future looks very bright. They compete with companies such as Ford, Chrysler and General Motors for the US market, and their quality and productivity are improved compared to their competitors.

The company is growing at an alarming rate, regularly opening new manufacturing plants around the world, such as Australia [1976], Spain [1980] and the United Kingdom [1984] [6 years]. The company has no response to the pace of growth and the new generation of business.

In 1983, the company began marketing global vehicles under the Japanese product brand. The model was considered to have a higher quality image and began the transition from Datsun to Nissan's six-year vehicle, dealer, facility and marketing materials. Sales continued to grow, eventually reaching 830,767 [6] in 1985. For ten years, Nissan has achieved great success with its dominance of the North American market.

In 1993, the medium-sized Stanza sedan was replaced by a brand new Altima. The non-competitive Japanese-designed minivan was replaced by the new Quest in the United States, the first minivan with car handling. Sales soared to near the peak of 774,405 [6] in 1994.

In 1996, sales fell again due to changes in American car tastes. Trucks and SUVs gained market share at the expense of cars and sports cars [2]. Nissan's position as a manufacturing-driven company helped them in the 1980s and early years. In the 1990s, the USD/JPY balance showed new problems and began to weaken its competitiveness against market-driven companies.

Unlike their competitors Toyota and Honda, which focus on key product segments, Nissan does not dominate any of the individual market segments and competes in the same market segments as Toyota and Honda.
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  Unfortunately, Nissan's "bubble economy" broke down in the 1990s, and Europe's economic recession coincided with the time, so the pressure on the United States was even greater. Unfortunately, in addition to the "best price", US customers have no real brand reasons to buy Nissan. response.

Mr. Nakamura, former president of Nissan, announced the “Return to Basics” program. The key elements of the program are to reduce inventions, eliminate unrealistic sales targets, and increase dealer profitability. Unfortunately, for Nakamura and Nissan, this plan is not useful [2].

II. Car manufacturers in 1990 were in trouble

In the early 1990s, trouble began to brew in the organization. Nissan’s once respected executives are now seen as arrogant members of the Old Man’s Club, who know nothing about the changing needs of customers and the entire automotive market.

As the company turned defects into debt, it encountered more challenges. Nissan's business partners and suppliers charge additional fees for their goods and services. Nissan had to fulfill its financial commitments and therefore placed itself in debt. Finally, the company’s liabilities amounted to $22 billion. Even the company's financiers are tightening the noose around them. Nissan felt that the situation was hopeless.

III. Steps taken to resolve the issue

Nissan executives are looking for a way to save the company from bankruptcy. The first method is to find a partner. The newly formed DaimlerChrysler and Ford Motor Company have both contacted, but both companies rejected the idea of ​​merger [2]. Finally, the French car company Renault recovered from a similar dilemma and decided to negotiate with the troubled Japanese company. Carlos Ghosn, a senior manager at Renault, is a huge supporter of the merger concept.

After several rounds of negotiations, the Ministry of Economy, Trade and Industry agreed to allow Renault to purchase the basic equity of Nissan. Nissan – The Renault Alliance was born and Ghosn was appointed chief operating officer.
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  Nissan executive decision and major events

I. Building a global alliance vision:

Here are the best of Nissan/Renault's vision:
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  The Renault-Nissan Alliance is a unique group of two global companies that are shared across borders. Relative identity and brand. "[2]

The Alliance has set three goals with the goal of becoming one of the top three automation teams in the following areas:

1. Quality.

Recognize customers as quality and value-added products.

2. Technology.

Leading key technology development and implementation, with a focus on excellence in specific areas of the automotive business.

3. Operating profit.

Consistently generate high operating profit margins and vigorously pursue growth.

II. Appoint a new leader

Given his enthusiasm for the merger, his tenacity, and his experience in the automotive industry, Ghosn is a natural choice for Nissan's senior positions. His initial appointment as Chief Operating Officer [COO] was only a temporary task. In 2000, he was appointed president and was appointed CEO in 2001.

As CEO, Ghosn knows very well that "buck" stops with him and he is the last decision maker. In order to save the life-saving company, some important and very serious decisions were made. Ghosn had to use all his valuable experience gained from saving other organizations [such as Michelin and Renault] to save Nissan.

III. Decided to save the troubled car manufacturer

As Gon arrived in Japan in the spring of 1999, he immediately began to study the fundamental problems of Nissan. The newly appointed COO has a management philosophy that “you must always start with a piece of clean paper, because the worst thing you can have is a prefabricated solution… you have to think from scratch, Clean up everything you remember. "[2]

In the first few months, Ghosn flew to all parts of Japan to meet and greet employees at all levels, absorb information and make plans. He used this information to map Nissan from a global perspective and identify problems and problems that caused distracting, unprofitable organizations.

One of the many problems that Ghosn found was the lack of communication within the organization. Senior managers around the world are aware of some of the problems that have caused the company's wealth to be low. They even provided them with a solution, but lacked the necessary power to implement or communicate the solution to the company's headquarters.

Finally, the main issues boil down to five key issues: [2]

• Lack of clear profit orientation. Instead of focusing on improving profits, Nissan focuses on market share and ultimately has to buy market share at the expense of falling profits.

• Not paying enough attention to customers and paying too much attention to competitors. The company is too worried about the introduction of a new line of competition, which will tap Nissan's market share. For example, when Volkswagen launched their new Jetta sedan, Nissan's Maxima sales fell sharply.

• The company lacks cross-functional, cross-border and tiered work. Nissan seems to be an independent island scattered around the globe. There is no centralized purchasing function or virtually any other major business activity. The organization has not fully utilized its global influence or purchasing power.

• Lack of urgency. Executives…

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