Global Leadership of Carlos Ghosn at Nissan Management Paper Start working on an initial draft due in Week 3 and the final draft due in Week 4. Read and an

Global Leadership of Carlos Ghosn at Nissan Management Paper Start working on an initial draft due in Week 3 and the final draft due in Week 4.
Read and analyze the case study on Nissan from the course pack. Instructions will be available on accessing and paying for the course pack. The paper should be 10 pages long with the analysis up to 6 pages and the recommendations up to 4 pages. Recommended Structure is as follows and the APA coversheet and references do count towards the page limit. It is double-spaced and 12-point.
APA Style Coversheet
Introduction (high-level findings of the case study)
As you work through this paper, analyze the following areas (6 pages):

The strategic business objective pursued,
The specific types of leadership styles employed,
The challenges faced and results achieved,
The causes of success or failure and
Other areas you consider pertinent
Recommendations
Conclusion
References
NOTE: The final draft due later will also use the same above structure except that you will incorporate any feedback that I have suggested in the initial draft. THE GARVIN SCHOOL OF
INTERNATIONAL MANAGEMENT
The Global Leadership of
Carlos Ghosn at Nissan
“I did not try to learn too much about Japan before coming, because I didn’t want to have too
many preconceived ideas. I wanted to discover Japan by being in Japan with Japanese people.”
“Well, I think I am a practical person. I know I may fail at any moment. In my opinion, it was
extremely helpful to be practical ?at Nissan), not to be arrogant, and to realize that I could fail
at any moment.”
Carlos Ghosn, 20022
Introduction
Nissan had been incurring losses for seven of the prior eight years when, in March 1999, Carlos Ghosn
(pronounced GOHN) took over as the first non-Japanese Chief Operating Officer of Nissan. Many
industry analysts anticipated a culture clash between the French leadership style and his new Japanese
employees. For these analysts, the decision to bring Ghosn in came at the worst possible time because
the financial situation at Nissan had become critical. The continuing losses were resulting in debts
(approximately $22 billion) that were shaking the confidence of suppliers and financiers alike. Further-
more, the Nissan brand was weakening in the minds of consumers due to a product portfolio that
consisted of models far older than competitors. In fact, only four of the company’s 43 models turned a
profit. With little liquid capital available for new product development, there was no indication that
Nissan would see increases in either margin or volume of sales to overcome the losses. The next leader of
Nissan was either going to turn Nissan around within two to three years, or the company faced the
prospect of going out of business.
Realizing the immediacy of the task at hand, Ghosn boldly pledged to step down if Nissan did not
show a profit by March 2001, just two years after he assumed duties. But it only took eighteen months
(October 2000) for him to shock critics and supporters alike when Nissan began to operate profitably
under his leadership
Background of Carlos Ghosn
Bom in Brazil in 1954 to French and Brazilian parents, both of Lebanese heritage, Carlos Ghosn re-
ceived his university education in Paris. Following graduation at age 24, Ghosn joined the French firm,
Compagnie Générale des Etablissements Michelin. After a few years of rapid advancement to become
For use only in the course Global Leadership at Northeastem University taught by Under Guidance from Dr. Sriram Rajagopal from September 17, 2019 to December 31, 2020
“Decision-Making and Coordination Structures of the Alliance,” 20 October 1999, http://www.nissan-
global.com
“Nissan President Carlos Ghosn Talks about His Company’s Recovery,” Nikkei Business, 20 May 2002,
http://nb.nikkeibp.co.jp/Article/1142.
Copyright © 2003 Thunderbird, The American Graduate School of International Management. All rights reserved.
This case was prepared by Professor John P. Millikin and Dean Fu, Research Assistant, with assistance from Koichi
Tamura for the purpose of dassroom discussion only, and not to indicate either effective or ineffective management.
COO of Michelin’s Brazilian subsidiary, he learned to manage large operations under adverse condi-
tions such as the runaway inflation rates in Brazil at that time. Similarly, as the head of Michelin North
America, Ghosn faced the pressures of a recession while putting together a merger with Uniroyal Goodrich.
Despite his successes in his 18 years with Michelin, Ghosn realized that he would never be promoted to
company president because Michelin was a family-run company. Therefore, in 1996 he decided to
resign and join Renault S.A., accepting a position as the Executive Vice President of Advanced Research
& Development, Manufacturing, and Purchasing.
Ghosn led the turnaround initiative at Renault in the aftermath of its failed merger with Volvo.
Because he was so focused on increasing margins by improving cost efficiencies, he earned the nickname
“Le Cost-Killer” among Renault’s top brass and middle management personnel. Three years later, when
Renault formed a strategic alliance with Nissan, Ghosn was asked to take over the role of Nissan COO
in order to turn the company around in a hurry, just as he had done earlier in his career with Michelin
South America. For Ghosn this would be the fourth continent he would work on, which combined
with the five languages he spoke, illustrates his capacity for global leadership.
Background of Nissan
In 1933, a company called Jidosha-Seizo Kabushiki-Kaisha (which means “Automobile Manufacturing
Co., Ltd.” in English) was established in Japan. It was a combination of several earlier automotive
ventures and the Datsun brand which it acquired from Tobata Casting Co., Ltd. Shortly thereafter in
1934, the company
name was changed to Nissan Motor Co., Ltd. After the Second World War, Nissan
grew steadily, expanding its operations globally. It became especially successful in North America with
a lineup of smaller gasoline efficient cars and small pickup trucks as well as a sports coupe, the Datsun
28oz. Along with other Japanese manufacturers, Nissan was successfully competing on quality, reliabil-
ity and fuel efficiency. By 1991, Nissan was operating very profitably, producing four of the top ten cars
in the world.
Nissan management throughout the 1990s, however, had displayed a tendency to emphasize short-
term market share growth, rather than profitability or long-term strategic success. Nissan was very well
known for its advanced engineering and technology, plant productivity, and quality management. Dur-
ing the previous decade, Nissan’s designs had not reflected customer opinion because they assumed that
most customers preferred to buy good quality cars rather than stylish, innovative cars. Instead of rein-
vesting in new product designs as other competitors did, Nissan managers seemed content to continue
to harvest the success of proven designs. They tended to put retained earnings into equity of other
companies, often suppliers, and into real-estate investments, as part of the Japanese business custom of
keiretsu investing Through these equity stakes in other companies, Ghosn’s predecessors (and Japanese
business leaders in general) believed that loyalty and cooperation were fostered between members of the
value chain within their keiretsu. By 1999, Nissan had tied up over $4 billion in the stock shares of
hundreds of different companies as part of this keiretsu philosophy. These investments, however, were
not reflected in Nissan’s purchasing costs, which remained between 20-25% higher than Renaults.
These keiretsu investments would not have been so catastrophic if the Asian financial crisis had not
resulted in a devaluation of the yen from 100 to 90 yen = 1 US dollar. As a result, both Moody’s and
Standard & Poor’s announced in February 1999, that if Nissan could not get any financial support from
another automobile company, then each of them would lower Nissan’s credit rating to “junk” status
from “investment grade”.
Clearly, Nissan was in need of a strategic partner that could lend both financing and new manage-
ment ideas to foster a turnaround. In addition, Nissan sought to expand into other regions where it had
less presence. In March 1999, Nissan President and Chief Executive Officer Yoshikazu Hanawa found
such an alliance opportunity with Renault, which assumed a 36.8% stake in Nissan, allowing Nissan to
invest $5.4 billion and retain its investment grade status. Hanawa was also able to get Renault’s top
management to agree to three important principles during negotiations:
2
A07-03-0014
1. Nissan would maintain its company name
2. The Nissan CEO would continue to be selected by the Nissan Board of Directors
3. Nissan would take the principal responsibility of implementing a revival plan.
It was actually Hanawa who first made the request to Louis Schweitzer, CEO of Renault, to send
Carlos Ghosn to Nissan to be in charge of all internal administration and operations activities.
Why would Renault agree to all of these conditions in this bailout of Nissan? Renault was also
looking for a partner, one that would reduce its dependence on the European market and enhance its
global position. In 1997 85% of Renault’s revenue was earned in Europe, 32.8% of which came from its
domestic (French) market. Renault also had high market share in Latin America, especially Brazil. On
the other hand, Nissan has the second largest market share in Japan and a strong market share in North
America (see Appendix 2, Nissan’ market share). Nissan lacked, however, market share and distribution
facilities in Latin America. By creating the new alliance, Nissan and Renault expected to balance their
market portfolios and become more competitive. Renault wanted a partner that was sawy and estab-
lished in the North American and Asian markets. Furthermore, the merger of Daimler and Chrysler in
May 1998 gave Renault a sense of urgency about finding a partner to compete more effectively on a
globalscale. As a result, Renault and Nissan agreed to a Global Alliance Agreement on March 27, 1999,
with Carlos Ghosn designated to join Nissan as COO.
Addressing National Culture Issues
When Ghosn went to Japan, he knew that industry analysts were reasonable in doubting whether a no
non-
Japanese COO could overcome Japanese cultural obstacles, as well as effectively transform a bureau-
cratic corporate culture. Ghosn was going to have to address several Japanese cultural norms in order to
transform the company back into a successful one.
The following are some of the issues he faced.
Consensus Decision-Making and its Relationship to Career Advancement
Since the war, the Japanese business culture for decades had been producing leaders who were very good
at reaching consensus and working cooperatively within a department (a derivative of the mura-shakai
consensus based society system). Thus, the conventional wisdom in Japan was that conscientiousness
and cooperation were the key elements to maintaining operational efficiency and group harmony. This
paradigm often resulted in delays to the decision making process in an effort to achieve consensus.
As an unintended consequence of the emphasis on conscientiousness, Japanese professionals tended
to avoid making mistakes at all costs in order to protect their career growth. This can result in frequent
informal informational meetings and coalitions (called nemawashi that occur between professional
departments prior to a decision-making meeting. Through these informal contacts, participants try to
poll the opinions of other participants beforehand in order to test which positions have the strongest
support so that their position is aligned with the position most likely to be influential. Then, at the time
for a meeting with their superiors, participants tender their aligned positions one by one to the ultimate
decision maker with the feeling that if the decision maker agrees to the consensus, then no one indi-
vidual can be identified later for originating a faulty position if that decision results in failure. Rules and
conformity replace process.
In Japan, age, education level, and number of years of service to an organization are key factors
determining how an employee moves up the career ladder. Due to a cultural tenet called Nennkou-
Jyoretu, placing power in the hands of the most knowledgeable and experienced, promotions are nor-
mally based on seniority and education. In practice, the only things that usually thwart these time and
education-based promotions are performance errors that reflect poorly on the team and any behavior
A07-03-0014
3
2019 in Daramer 31 202
that causes disharmony among team members. When something goes wrong, the most senior person
accepts responsibility while accountability at lower levels is diffused.
This part of Japanese culture had been useful to reinforce control over operations and enhance
quality and productivity. During the postwar period of the company’s growth, it contributed to great
working relationships among everyday team members at Nissan, but these norms, by the mid 1990s,
were actually impeding the company’s decision making. Specifically, these cultural norms severely ham-
pered risk-taking and slowed decision making at all levels. Existing teams of employees routinely spent
much time on concepts and details, without much sense of urgency for taking new action, due in part
to the risks involved with actions that could result in failure. This mindset contributed to a certain
degree of complacency with market position and internal systems at Nissan, undermining the company’s
competitiveness.
In a related cultural issue, as employees became increasingly aware that Nissan was not performing
well, the Japanese culture of protecting career advancement led to finger pointing rather than accep-
tance of responsibility. Sales managers blamed product planning. Product planning blamed engineer-
ing. Engineering blamed manufacturing and so on.
When Ghosn first arrived in Japan, he was surprised to learn that, while most of the employees
sensed that there was indeed a problem within the company, they nearly always believed that their
respective departments were operating optimally. The consensus was that other departments and other
employees were creating the company’s problems. Ghosn also learned that many of the employees of the
company did not have
a sense of crisis about the possibility of bankruptcy at Nissan because of the
Japanese business tradition, which implied that large troubled employers would always be bailed out by
the government of Japan. This view was based on the long standing partnership between the govern-
ment and the major businesses to ensure employment and expand exports to world markets. The busi-
nesses for their part were committed to providing lifetime employment to their workers.
Addressing Corporate Culture Issues
Not only were there Japanese cultural norms for Ghosn to contend with, but there were procedural
norms at Nissan, both formal and informal, which were holding the company back. First, once deci-
sions were made at Nissan, the follow-up during implementation was often not effective. This was not
usually the case in other Japanese companies. Second, top management had developed tunnel vision
regarding its strategic focus on regaining market share, as opposed to restoring margin per unit sold.
This was in part due to a focus on what was best for maintaining the company’s size and its employees,
i.e. more units to produce, rather than what was best for customers (newer, better products to meet
market demands) or for investors (higher earnings and higher stock value). Additionally, in an unusual
break from Japanese business culture, there were communication problems between the layers of the
organization. Staffs seemed relatively uninformed of key corporate business decisions, while top man-
agement seemed out of touch with what policy execution issues were present at the middle and lower
management levels.
Ghosn realized that Nissan’s fundamental problem was the lack of vision from management and
the persistent problem of ignoring the voice of Nissan’s customers. Furthermore, identified the
following problems at Nissan:
1. Lack of a clear profit orientation
2. Insufficient focus on customers and too much focus on competitors
3. Lack of a sense of urgency
winder Guidance from Ir Sriram Ralammal from
For any in the course hall Radarshin at Northeastern
3*** ORRI p. 155, Carlos Ghosn (2001) (August 10, 2002).
4 ???????????????p. 26, ????? (2000) (August 8, 2002).
4
A07-03-0014
4. No shared vision or common long term plan
5. Lack of cross-functional, cross-border, cross-cultural lines of work.
Carlos Ghosn’s Philosophies of Management
Despite all of his doubters, Ghosn embraced the cultural differences between the Japanese and himself,
believing fervently that cultural conflict, if paced and channeled correctly, could provide opportunity
for rapid innovation. He felt that by accepting and building on strengths of the different cultures, all
employees, including Ghosn himself, would be given a chance to grow personally through the consid-
eration of different perspectives. The key, he reiterated many times, was that no one leader should try to
impose his/her culture on another person who was not ready to try the culture with an open mind and
heart. In this vein, Carlos Ghosn came to Japan knowing that if he were to start imposing reforms by
using the authority of his company position, rather than work through the Japanese culture, then the
turnaround he sought would likely backfire.
What he did bring with him was three overriding principles of management that transcended all
cultures. And he used these as a backdrop to give employees structure as to their efforts of determining
the proper reforms. These three principles are as follows:
1. Transparency—an organization can only be effective if followers believe that what the leaders
think, say, and do are all the same thing
2. Execution is 95% of the job. Strategy is only 5%-organizational prosperity is tied directly
to measurably improving quality, costs, and customer satisfaction.
3. Communication of company direction and priorities—this is the only way to get truly uni-
fied effort and buy-in. It works even when the company is facing layoffs.
The First Months in Japan and the Cross-Functional Teams
When you get a clear strategy and communicate
your priorities, it’s a pleasure working in Japan.
The Japanese are so organized and know how to make the best of things They respect leader-
ship.
Ghost
Even though Ghosn expected that his attitude toward cultural respect and opportunism would
lead to success, Ghosn was pleasantly surprised by how quickly Nissan employees accepted and partici-
pated in the change of their management processes. In fact, he has credited all of the success in his
programs and policies (described below) to the willingness of the Nissan employees at all levels to
change their mindsets and embrace new ideas.
Perhaps it was the way he started that set the foundation among the employees. He was the first
manager to actually walk around the entire company and meet every employee in person, shaking hands
and introducing himself. In addition, Ghosn initiated long discussions with several hundred managers
in order to discuss their ideas for turning Nissan around. This began to address the problems within the
vertical layers of management by bringing the highest leader of the company in touch with some of the
execution issues facing middle and lower
management. It also sent a signal to other executives that they
needed to be doing the same thing.
But he did not stop there. After these interviews, he decided that the employees were quite ener-
getic, as shown by their recommendations and opinions. With this in mind, Ghosn opted to develop a
program
for transformation which relied
on the
Nissan people to make
recommendations, instead of
hiring outside consultants. He began to organize Cross-functional Teams to make decisions for radical
5 Middleton, John. Express Exec.com, http://www.expressexec.wiley.com/ee/ee07.01.07/secto.html, Acquired
on Internet, 7 August 2002.
A07-03-0014
5

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