Use Of Strategic Management In The Turnaround Of Nissan.
Jr. Thompson, A. A (2009) confirms that the job of the management is to fulfill the objectives of the organization. Management uses different approaches and tactics to succeed in the task. These tactics and approaches are referred as strategic management. Collins, C. J (2001) says there is need of a leap in strategic management in some cases. Here the discussion will be on the rebuilding of Nissan after its successful collaboration with Renault. Carlos Ghosn who is termed as genius in turnaround did his magic. Nissan overcome it’s over $200 million losses and near $20 billion debt and made profit only in two years. Here the study will try to understand how Ghosn applied different strategies in business to make this successful turnaround in so quick time. His model and methods will be studied under the light of various methodologies of business strategy.
Strategy making and its application is highly important. It requires proper study and knowledge to make the strategies purposeful and worthy. Here the study will try to see how the Carlos Ghosn applied the strategies for the turnaround of the Nissan. This will clear how the strategies can be used in favor of the organization. It will help the management in future to understand the how the process of making and implementing strategy should be done to make the organization successful.
Process of strategic planning
Contribution of organizational goals, objectives and competencies in business strategy
Pearce II, A. J (2010) in his book opines that organizational objectives, goals and competencies are very important in making of business strategy. In the case of Nissan Carlos at first made the objectives very clear. It was to make the company profitable. In this process the goals were to cut down the extra costs, enhancing the quality and quantity of production. It was all planned according to the competencies of the company. As the objectives and goals were clear and the competencies were well studied it helped to make best suited strategies. In generally this is the base of the successful business strategies. This base work helps in making realistic targets and also helps in reaching those.
Understanding and using the impact of external internal and competitive factors in making business strategy
According to Heath. C (2010) every organization has these three factors in it function. Let’s discuss the factor and its impact in the strategy making of Nissan:
External: Heizer, J. H (2003) briefly describes that external factors mainly mean the economy of the country, market scenario and polices of the state regarding business. These factors create impact on the making of objectives and goals. Thus it also impacts on the strategy making of the organization. In the case of Nissan, Carlos made the decision of stopping the functioning of few plants in Japan. But in Japan jobs are considered to be permanent. Thus to solve the problem Nissan offered voluntary retirement to many employees and transferred some employees in new plants. The plants were required to close to make production costs less but the external factor created problem. Carlos handled it will made the strategy work by understanding the factor.
Internal: internal factors are considered to be as the employees, work environment and infrastructure. These are very important factors in understanding the competencies of the organization. Mintzberg. H (2005) thoughts are properly applied by Carlos at the start tried to understand the employees through on field experience. Japan was completely unknown to him but he didn’t try any books to know about Japan. He gave importance on field experience. This helped him to understand the Japanese well and this experience was used in strategy making.
Competitive: David, R. F (2006) says this is factor that silently works with every business strategy. Strategy making must consider the position of its competitor firms in the market, there current stand and policies etc. in 2005 when Carlos Ghosn joined Nissan as CEO, the company was lagging behind in the car making competition. It was still dealing with its old designs. Carlos made the Change by understanding the weakness of the organization and quickly focused on developing new designs. This gave the organization competitive advantage in the later years.
Planning techniques used by Carlos in Nissan
Senge, M. P (2006) opines that there are different planning techniques applied in business strategy. Here the techniques applied showed by Carlos Ghosn showed that there is need to regard different aspects of the organization to construct successful planning technique. Here the strategy considered all the factors involved, internal, external and competitive. It made the strategy strong from every angle. Thus they didn’t have much problem from different aspects linked with organization. They used those factors and made the strategy successful for the company.
Kaplan, S. R (2004) says audits are very important to make strategies. This was carefully done by the manager. At first he tried to find out the strengths of the company by understanding the Japanese work culture. It seemed that the managers and superiors are very much respected by the employee in the country. The employees also maintained a very good relation among their sector of work.
But soon it was discovered that there are some weaknesses too. Goldratt, M. E (2004) explains employees are less keen to take responsibilities. They are also not accustomed to work in different groups. This pointed out the failure of the company. It was the system that was not urging the employees to take responsibilities and didn’t ask them to take charge. Soon it was change by Carlos, employees were urged to spoke about their ideas, and they were compelled to work in combined groups.
Opportunities were also clear to the management. It knew the markets of cars are growing all over the world and Nissan has the strength to capitalize on that. This is why the importance was given in smart production. It was done by deducting the costs and applying new methods and techniques in work.
In the end the task of auditing the scenario was completed by understanding the threats the organization. It was soon very clear to the management the organization was having production plants that were not contributing to the cause of the company. Those were running under lose. It was clear that the organization was running with extra number of employees than they required. It was posing threat the company might continue spending extra in their production cost and they will keep running in lose. It forced the decision of ending the function of different plants in Japan. Many employees were given voluntary retirement through the process of ‘’Golden Handshake”. Many of the employees were transferred to new plants. Thus the balance was restored in the company and its methods.
It is clear from the above analysis that the processed SWOT analysis was applied by the management to understand the actual situation of the organization. SWOT analysis is always been very successful to understand the success of the organization. Here the organization and its management prove the fact that it is also very crucial to implement useful strategies in the organization.
Environmental audit and purpose in strategy making
Internal environment: Bossidy. L (2002) makes clear that internal factors and its impact in the organization is already stated. Here this audit showed that employees were not interested and were not also able to work in cross functional group. These cross functional groups were formed by the organization to make the process of organization smooth and successful. But the employees were not interested. Thus they were urged and motivated to participate in such groups. Transparency was also made to keep the employees aware of the strategies and processes. This compelled the management to organize several meetings to maintain the transparency in the hierarchical Japanese system.
External environment: management knew they were required to make the numbers of employees and plants less to reduce the extra cost. Osterwalder. A (2010) says in Japan jobs were treated as permanent. This made the management to take new ways to stop production in plants ad detain employees. They took the note from the external factors and offered “Golden Handshake” to the employees. It was voluntary retirement scheme. Many employees accepted that and some employees were transferred to other plants to reduce the costs in production.
Competitive environment: Pink, H. Daniel (2009) makes it evident that competition was always there in car market. Nissan was lagging behind in that competition. It was happening due to the old models of the cars and use of old technologies. On the other hand the competitors were using new techniques and models in the market. Thus initiatives were taken to build new models and application of new technologies was done to make the process of car making worthy and up to the mark.
This analysis shows the organization was able to make changes in the organization. This was happened due to the proper analysis of the organizational environments. This helped the organization and the management to take proper decisions to apply methods that can give advantage to the organization (David, 2006).
Stake holder analysis and its importance
Fried. J (2010) says often people don’t consider that the how much important role the stakeholders play in the development of the organization. A management must consider the mindset and the demands of the stakeholder to apply the strategies properly. Ansof, I. H (1970) states that stakeholders are those who play important role in the functioning of the organization. This is why after joining Nissan Carlos took the steps to rebuild and change the strategies of the organization so that the stakeholders feel motivated and interested in the organization. He announced that the main aim will be to make Nissan profitable. This was a very important announcement for the stakeholders. As their money is involved in the company, it encouraged them.
Drucker, F. P (2006) says it is highly important to make strategies in a way that it balances the interest of the stakeholders with the organization. Stakeholders are also very important part of the organization. Thus strategies must consider their views and objectives.
Importance of strategy evaluation and selection
Analyzing factors involved in business and using them in strategy
Pricing: Hill, W.L. C (2009) opines in his book that pricing is a factor that should be cautiously handled in the competitive market. Pricing gives a great amount competitive advantage if it is rightly made. In the case of Nissan it was important to make changes in the procedure of car making to develop the quality. But the organization also kept it is mind that they can’t raise the price too much. This is why the importance was given in the cost cutting. Management was putting importance to reduce the cost of production they took different measures to ensure that.
Advertising: Kotter, P. J (1996) says advertising of the products are very much required in the modern market. Strategies must include proper advertising techniques to ensure that organization and its products are getting enough lime light. It ensures that the products are there in the consumer’s mind. This is why Carlos met with the dealers continuously to make sure that the cars reach to the prospective consumers. He ensured that organization makes proper advertising to get into the market. Advertisings were used to rebuild the image of Nissan. It was dome to highlight the new models in the market. This gave the organization a new branding in the consumer mind.
Customer Relationship management: Lencioni. P (2002) describes it as a part that can harm the organization badly if not taken care properly. It gives a great scope to the organization to make a good image in front of the consumers. Nissan management knew that. Thus Carlos Ghosn held several meetings with showroom owner and car dealers so that Nissan gets proper importance in the showrooms. He wanted to make sure that the consumers get impressed with the products of Nissan.
(STP) Segmentation- Targeting- Positioning: Hill, W.L. C (2008) opines that implementation of strategy will be rightly done only if these three mentioned attributes are well placed. STP gives the chance of getting into right position by deciding the purpose of the strategy. It confirms the targets and methods of application. Studies from Gladwell. M (2008) clears this is why it is very important to maintain the STP in the strategy making process. It helps the organization to utilize the work power available in the organization by making the process transparent easy to follow.
Here the process of strategy making regarded all the mentioned factors. Management took note from all the factors and tried to improve them by applying different strategies. This showed that they intent of the management were to understand the different aspects of the proper strategy making. This is why the steps taken by the Nissan management fall under the proper strategy making process. As the evaluation of the organization and the factors involved in the process was done rightly, it was easy to understand the requirements. This helped the management to form proper strategy. As the requirements were clear to the management they were supported by the purpose. This made sure that organization reach the point where it can get benefit from the mentioned factors in the strategy making. This is why understanding the factors and their evaluation is so important in strategy making.
Implementation of strategy
Roles of different sectors of organization in strategy making
Gladwell. M (2008) says that the three important sectors of the management are managers, leaders and the employees. Here the study will consider the roles of these three different sectors.
Strategies are developed by the managers. Management is the place from where the strategies come from. Management understands the requirements and makes the strategy for the organization that will suit the scenario.
Job of the leaders is to understand this strategy properly. As the leader will take are that the process to implement the strategies are being followed in the organization.
Employees are the base of the success. They fulfill the strategies made by the management and supervised by the leaders. Pedersen, T. (2014) shows an employee carries the process of implementing the strategies.
Management must understand different factors involved in the strategy making. This is important because it is important for making helpful strategies.
Pedersen, T. (2014) says Leaders should also understand the scenario of the company, state of the employee’s mind. As the leaders are required to work in the field it is important for them to understand the scenario well.
Employee must remain aware of the strategies and the procedure. Employees are those who people who carry out the orders. This is why awareness is very important part in the strategy implementation.
Management handles the organization. This is why management must give attention to the employees and leaders on the subject of strategy implementation. As they are working on the field, they know the actual circumstances very well. Advices from them can make the implementation process and the strategies more worthy and successful.
Leaders should communicate with management and the employees properly. They are working in the middle. Their communication is very important to keep the things clear in the application of the strategies. This helps all the parties to remain clear about the task and makes the chances less of miss management.
Employees should make responsible efforts to implement the strategies. They should play proper role in the implementation as it is very much depended on their behavior. They should give inputs to develop the process of strategy implementation.
Management of the Nissan understood the different roles of the participants in the organization. This is why the management put importance in the participation of the employees. They are required to implement the strategies properly. This is why management gave immense importance on the understanding of the employees. Meetings were held in the organization to make the employees aware. Transparency was the main factor in the implementation of the strategy. It was given the most importance to make the strategies worthy and purposeful.
Understanding the required resource for implementation of strategy
Implementing the strategies require various kind support from the organization. This requirement must be understood by the management. Nissan made this possible by understanding the state of the organization. Carlos Ghosn made investigation to understand the requirements and made the following steps.
1. Cost cutting: Management saw that the company must reduce the cost of production. The production cost was rising due to some reasons. These reasons include extra number of plants, old methods in production. To recover from these problems, management closed plants those were not contributing to organization. It also used it collaboration with Renault and held meetings with their engineers to develop new processes of production. This helps the cause and production cost were less in no time.
2. Developing man power: Man power is an important factor in implementation of strategies. Right quality and quantity is very much required to implement strategies. This is why management put efforts to make the employees responsible. They also took care that the employees come out of their comfort zone to work in different ways and to implement strategies. The employees were urged to work in cross functional groups. This was done to make the employees understand about the whole scenario involved in the production (Yin, 2009).
3. Infrastructure: infrastructure helps organization to reach new heights. This is why every organization make efforts and to keep the infrastructure level high. Nissan understood that their infrastructure was not up to the mark. Thus they made changes in the infrastructure level and made changes to enhance the quality of the infrastructure. It was done by implementing methods that are modern and enable to give high performance.
Targets and timescale in implementing strategies
Targets are important part of strategy implementation. Every strategy has some targets. This target marks the success of the strategies. Strategies should divide the targets in small parts. As soon as the targets are divided into parts, those should be ascertained to achieve part by part. This helps the process; it helps because as soon as the first target is made then the second target comes into the redder. It ensures that the strategy is in the right path.
These require the following steps:
Monitoring: monitoring is an important part of strategy implementation. Monitoring helps the management to understand that the strategy is working. It also helps in achieving the short term goals. Thus the monitoring process should have proper time lapse and methods to make it successful.
Timescale: this is perhaps the most important part to make the monitoring successful. As every objectives and targets are divided into small parts, it requires proper time also to achieve. Thus the monitoring must have proper time gap so that it can rightly examine the facts.
In the case of Nissan, the management made proper structure in the monitoring. It made purposeful monitoring to understand the progress. This progress is important to know make changes in the strategy. If the strategy is not working well then management will be able to know it. It will also help the management to make changes in the strategy if required.
It is highly important for management to make strategies after considering various facts attached with the organization. There are various factors involved in the organizational functions. Management must take care of these different factors. Strategies are more likely to be successful if the associated facts are well regarded. In the case of Nissan, Carlos Ghosn understood these various factors. He made efforts to understand the culture of Japan, the employees, problems of those employees and the production process. Only then the useful strategies came out. The strategies were so helpful because it considered all the factors related. It took measures to rectify the wrong practices (Boone & Kurtz, 2012)
It is recommended the management should give patient look to the organization and the related factors to develop useful strategies for the organization. Only then the strategies will be worthy. It is also important to make the process transparent. One can see that the strategies worked in the Nissan because it was very velar to the employees. It created the scope for those employees to contribute in the strategy. This is also very important; organization must make the employees responsible. If employees feel motivated to contribute then the process is more likely to be successful. Employees are the back bone of the organization. It is advised the organizations and management give importance to their understanding properly. (McNabb, 2013)
The study has showed various factors involved in the organization and its strategies. The importance of these factors are shown in the light of Nissan and its successful CEO. It shows that the success of Nissan is achieved by these proper understanding of factors and rightly application. Factors involved in the strategy making deals with various sectors of the organization also. These sectors also require proper guidance and monitoring. Carlos Ghosn was successful in understanding these different sectors of the organization. It helped him to apply the strategies so that it can contribute in the development of these sectors.
Robbins, S., Judge, T.A. and Millet, B. (2013) says organization is constructed with different people. Carlos in his process made steps to connect with this people. He made efforts to influence this people in favor of the organization by holding meetings. This helped the organization to attain the goals by combining the efforts of different peoples (Tan, 2012).
It can be also seen that from the study the making the objectives clear is also important. As the objectives were clear for the Nissan, it helped them to make the strategies pointed. It helped the organization in application.
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