STRATEGIC MANAGEMENT ANALYSIS
MGT 489.3
Final Project
Submitted By: Group 4
OliUllahChowdhury
122 0357030
1
Table of Content
Description
Page
Letter of transmittal
3
Acknowledgement
4
Executive summary
5
Renault history and development
6-7
Internal analysis
7-9
External analysis
10-11
Macro-environment analysis
11-14
SWOT analysis
15-16
Distinctive competencies
17-18
Financial performance
18-20
Business Model
21-22
Set of recommendations
23-24
Corporate level strategies
24-27
Business level strategies
27-29
Functional level strategy
29-31
Technological strategy
31-33
Revised business model
34
Company governance
35
Organizational structure
36
Strategic control system
36-38
Cultural recommendations
38-39
Global Strategies
39-40
2
References
41-45
Letter of Transmittal
March 27, 2016
Mr. Mohammad HannanMiah,
Here is the group report on the “Cohesive Amalgamation of the three parts” that you asked us to
prepare as a part of requirement for our MGT-489 (Strategic Management).
In presenting this report, we have our level best to include all information and explanation to
make the report informative and comprehensive.
It was a very enriching and enthralling for us to prepare this report. Our report writing skills have
improved a lot while doing it. If further any report is required, we will be available by any
means.
Thank you, sir for believing in us and giving us this opportunity.
3
Acknowledgment
We would like to acknowledge and extend our heartfelt gratitude to the following person who
have made the completion of this report possible.
We would like to give our deepest gratitude to our faculty, Mr. Mohammad HannanMiah, for his
in valuable guidance, encouragement and support. His invaluable suggestions and information
have taught us a lot and as a result our preparing this report has been a very positive and up
lifting experience.
Most especially we are thankful to Allah, Who has made all the things possible.
4
Executive Summary
Renault is an automotive industry having distinctive competencies on technological knowhow,
customer service and well known engineers. The company’s internal analysis indicates it has
great strength in both the primary and secondary activities for value chain. Although the external
industry analysis shows it is facing a good number of competitors and the industry environment
is very competitive and difficult according to porter’s five forces. The company has been strong
in engineering and brand association and has a decent number of opportunities for future growth.
However, the company is also facing some threats including active competitors and maturity of
the industry with some weaknesses.
So, with the current financial position of the company, we have up with a set of
recommendations with corporate, functional and business level strategies to improve the current
situation. The corporate level strategy includes merging with one of its previous competitors and
producing future energy driven cars. Besides, the company will also focus on its existing
business model toexpand globally. The business level and functional level strategies are
considered in such a way that are consistent with the corporate strategy. The technological
strategies are also considered to improve the situation of the company. Finally, the changes and
adjustments that are needed to maintain in order to implement the strategies are also considered
including the governance structure, control systems, the adaptation of the company culture and
the global strategies.
5
Part-1
1. History, development and growth:
History:
Renault is a French multinational automobile manufacturer company. The Renault Corporation
was established on December 25, 1898 by Louis Renault and his brother Marcel Renault and
Fernand Renault in Boulogne-Billancourt, France. According to OICA, in 2013 Renault was the
eleventh biggest automaker in the world by production volume. Now Renault-Nissan Alliance is
the fourth-largest automotive group. (Annual Report of group Renault, 2014, pp. 3-15)
Development and Growth of the company overtime:
1902-First two-cylinder engine: Renault designed the 1st two-cylinder engine, the basic module
for the four –cylinder engine.
1914-Requisition of 1000 Renault vehicles for the “Taxis of the Marne “effort: The French
minister ordered Renault to contribute to the war. Renault taxis transported 4000 men to the
front.
1946-Launch of the new 4CV: The 4CV was the 1st real-engine which was produced by Renault.
The 4CV consumed very little fuel and could comfortably transport four people. It was
manufactured in Japan and was sold in the USA.
6
1999-Signature of the Renault-Nissan Alliance: Renault signed an agreement with Nissan to
form cooperation. In here Renault acquired 36.8% share in Nissan and started a joint industrial
work.
2013-Renault sets up business in China: Renault signed a joint venture agreement with the
Chinese carmaker Dongfeng.
Internal Analysis of Renault: (The Value chain analysis)
Primary activities:
Research & Development:
Renault Group has been quite efficient in identifying the needs of the market and developing
vehicles that adjust to the core values of customers through their research and development.
Historically, it had produced direct drive gear with no drive belt and had been the first serial car
with four wheel disc brake system by Renault 8. Besides, it had been quite effective in producing
lucrative designs cars such as Laguna, Modus, Avantime (Privatization & Alliance Era, Renault,
Wikipedia) and user friendly cars for their customers. They also specialize in developing systems
to upgrade the value of cars for example, creating a real time system for location and weather
report through a device named CARMINANT (Innovations, Renault). The European company
had started establishing research centers in Silicon Valley and India to further strengthen their
innovations.
Production:
Historically, Renault production system was based on mass production system with its founder
Louis Renault establishing the process. But, nowadays, with Carlos Ghosn in power of the
7
company, has introduced a lean production system inspired by delegate responsibilities from
Japanese systems to reduce the waste and standardized the vehicles parts to minimize the cost
(Renault manufacturing subsidiaries, Wikipedia).
Marketing and sales:
Renault marketing and sales department had been quite effective in communicating the
customers need to the research and development centers. It had announced “Simpson’s family
car” by realizing the popularity of this famous cartoon. Besides, their marketing strategies had
been quite innovative in creating value to the customers by addressing the cars as “French Borat
with heart”. Moreover, the European inventor had been using the upcoming movies in
Hollywood as a medium in promoting their cars.
Customer service:
The customer service of Renault is to help the customers to get the best use of their purchased
cars and maximize the value of it to create long term relations. If any of the customers are
dissatisfied with the services provided by the dealers, there are motor codes and certificate of
conformity assures the customers to assist in any unpleasant situation.
Secondary activities:
Materials management:
Renault Group tries to ensure the quality and standards for their products through a guidebook
name “Suppliers Logistics Guidebook” to make sure that the suppliers deliver quality products.
8
The guide insures the logistic plans and solution with packaging designs and data exchange
ability.
Human Resources:
Renault group had always focused on having efficient and productive engineers and good
leadership skills are promoted through the board of directors.
Information System:
Renault has been using a goal seeking software system to ensure the optimization of the mix of
models, critical options and secondary options that can meet sales forecasts within the constraint
the production has. This software helps to ensure the fulfillment of the requirements set by the
company to its workers (Renault Information system: Managing the digital firms).
Company Infrastructure:
Renault group has a strong leadership under the operation of Carlos Ghosn after Louis Renault
had left. This strong leadership skill helps the top managers of the company to control the
operating system of Renault. The organizational structure of Renault is simple and effective.
Employees can share information and communicate with each other easily which increase the
work flow of manufacturing operations.
9
EXTERNAL ENVIRONMENT OF RENAULT CAR COMPANY:
To identify and analyze the external environment of Renault Car Company, we mainly focused
on the industry analysis of this company. We also analyzed the macro-environment and
competitor analysis of Renault Car Company which is related to industry also.
Industry Analysis:A company’s performance largely depends on the characteristics of the
industry in which it belongs and competes. Renault Car Company falls under automotive
industry. Basically Renault is a multinational company but in our project we only consider the
automotive industry of France. The main products of Renault are passenger car & light
commercial vehicle. Porter’s five forces model is a convenient framework to analyzing industry
environment. In our report we follow this model for industry analysis.
1. The risk of entry barriers (High): To start a new automotive company, a big large
amount of capital and equipment needed which is very difficult to arrange for any new
company. That’s why risk of entry barriers is high.
2. The intensity of rivalry among established companies (High): The intensity of rivalry
among established companies within this automotive industry are high. There is a strong
competitive struggle between Peugeot, Citroen and Renault to gain market share from
each other. There have also many minor manufacturers in the automotive industry which
are trying to do well in the market.
10
3. The bargaining power of buyers (High): For the buyers of automobile industry, they
have lot of choices to purchase car from different company. So the bargaining power of
buyers is high in this industry.
4. The bargaining power of supplier (Low): The bargaining power of supplier is low
because the manufacturers of Car Company are in strong position. Manufacturers are able
to produce material to make car rather than taking those materials from the suppliers.
Manufacturers can use machine in the manufacturing process instead of labor. The
products that suppliers sell have substitutes in the market.
5. Threat from Substitute products (High): Transport services are very well in France.
The Railway services, Marine transport, Air travel and public transport facilities are
available in France.That is why Threat from Substitute products is high for automotive
industry.
Industry Life Cycle Analysis:The automotive car industry is in a mature stage. The market is
totally saturated, demand is limited to replacement demand, and growth is low or zero. One of
the reasons for this thing is the population growth rate. Every year it is decreasing. In present,
growth rate is only 0.4%. The amount of new customer is also low in the market. In this scenario,
all manufacturers are trying to minimize production cost and building brand loyalty to sustain in
the market.
Macro environmental impact on car industry (PESTLE):
Political:
11
Global restriction is low at the present time and that creates positive impact on automobile
industry. It gives opportunity to expand business in other country as it lowers barriers. But
lowering barriers can put negative impact for business in home country because it increases
competitions among the companies of other countries.
Economic:
In present, price of fuel is running low and that can put positive impact on car industry. So
customer’s demand to buy car for lowering the price of fuel can be increased. So, selling of car
can be increased and earning profit can be possible.
Environmental:
At this present time, people of new generation are influenced by new stylish car. Now a days,
people also think about the safety of environment. So electronic vehicle and automobile with
new technologies is getting appreciated very much to new generation and that create very
positive impact on car industry as electronic car is also very popular in car industry.
Technological:
Technologies are upgrading day by day and these are creating positive impact on car industry.
New technologies are improving structure of car, minimizing cost, attracting consumer and
increasing demand and sales, maximizing profit.
Legal forces:
12
Legal forces of a country can put positive impact on car industry of that home country because
companies of other countries face difficulties to enter into that country and competition can be
minimized in that country. This force can put also negative impact on companies of other
countries if government put high tax or tariff and also put negative impact on car industry. Thus
the force can create obstacle for expanding to other countries.
Socio-cultural:
Social value of people like- giving importance to safety of environment and tendency of avoiding
fuel car for saving environment as well as appreciating car which is substitute of fuel car can put
negative impact on existing car industry. Because of this, sale of fuel cars can be decreased and
existing car companies have to change their strategy and process of production of both new and
existing cars, which is more time consuming and costly.
Competitor analysis:
Immediate competitors: Immediate competitors of Renault are1. Citroen- This Company has renovated and moderated its production line and has also
developed sales and service network. The company is well known for biggest mass
production. (French car brands, 2016).
2. Peugeot- This Company focuses on lowest emission of carbon-di-oxide and safety of
environment. Cars of this company are in hybrid model which is eco friendly. (French
car brands, 2016).
These two companies are main competitors of Renault in French. They are doing face to
face competition with Renault.
13
Impending competitors: These are the lists of impending competitors of Renault:
1. Bugatti
2. Venturi
3. Exagon engineering
4. PGO automobile
Those car companies are new in France and not popular to French customers. But in near
future, those can be got popularity among the customers with their brand and values.
Invisible competitors: These are some list of invisible competitors of Renault1. De clerq
2. DeLaChapelle
These all car companies are from French, but not very much well known in French and to
French customers. But maybe those have possibility to be well known to customers.
Those car companies are new in France and not popular to French customers. But in near
future, those can be got popularity among the customers with their brand and values.
Invisible competitors: These are some list of invisible competitors of Renault1. De clerq
2. DeLaChapelle
These all car companies are from French, but not very much well known in French and to
French customers. But maybe those have possibility to be well known to customers.
14
5. SWOT Analysis:
Internal Environment
Strength
Weakness
15
1.Global presence ( available in
over 110 countries with 125000
work forces )
2. Renault Group provides
Innovative, safe and
environmentally-friendly vehicles
worldwide.
3. Expertise in engineering,
manufacturing and adaptation to
meet customer’s requirement.
1. Poor management capacity
2. Too small to compete in world
market.
3. They mainly focus in European
market.
4. Low reputation in the world
market.
4. Strong brand associations with
Nissan motors, Mahindra etc.
helped in Global reach.
5. Strong Brand value as it is
France based and their target
market is Europe.
External Environment (Porters Five Force + Pestle)
Opportunities
Threats
16
1. According to the trend,
investing in emerging
technolodgies like hybrid
cars, environment friendly
technolodgy. So that they can
get the first mover advantage
before their competitors.
2. As they operate in
developed countries they can
target the preimium market
and focus on selling exclusive
vehicle.
3. The price of fuels are
rising. So offering better
milage or other technolodgy
than the competitors is a good
opportunity to grab market
share.
1. The market is at a mature
stage. Any new innovation or
technolodgy offering better
value is a threat.
2. The bargaining power of
buyers are high. So American
and Japanese car brands are a
big threat to Renaults market.
3. Better available substitutes
in public transports and also
new ecofriendly electric cars
as France is a developed
country.
6. Distinctive competencies and competitive advantage:
Renault is very popular for its innovations. They have unique cars with attractive design and
speed. They are also specialized for producing economic cars customized for other segments.
17
They have successful automated production system which produces both economic and luxury
cars.
Customer Service: Renault is also popular for their qualified Human Resource which ensures
good customer service. The customer relation department give quick replies within 24 hours.
They also have efficient and effective telephone request which are alse done in a very short time.
Technological advancement: A new technology of driving is introduced by Renault which give
the drivers an ease in driving the car. This technology is called ADAS (Advanced Drivers
Assistance System). It is helpful for drivers as it give extra vision. It also gives electronic driving
function.
Automated driven car: Renault is thinking of inventing a fully specialized car which will be
first automated driven car and named it Circa 2020 and it will be driven automatically. They are
also setting up center where this cars’ fuel will be recharged.
Less polluted car: Renault has designed cars that caused less pollution which is cost effective.
This type of engine is called Twin Turbo engine. It is more powerful and also it takes less fuel
than other traditional cars.
Rechargeable battery: A car that can charge their batteries and supply electricity to it. This type
of cars is once dreamed by people and that dream will be fulfilled by Renault.
Internet in the car: The drivers of the Renault car can now browse internet and make phone
while driving the car which will be 100% safety. While using this technology the wheel of the
car will be safe as well.
18
Eco-friendly: Renault also invented a technology where there will be reduction of carbon
emission from the car. To make the society more ecofriendly the hired experienced engineers to
the most environmental friendly car the world.
7. Financial Analysis of Renault:
Return on sales: Group Renault had a good sales turnover in 2012 with 4.2% than its competitor
GM (3.19) but Volkswagen outperforms both. In the following year, return on sales was only
1.7% despite of 40,932 million euro of sales because other operating expenses were increased in
addition high cost of goods sold and selling and general expenses which is lower than other two
competitors. In 2014, return on sales was 4.9% which shows the company had managed to
reduce the other operating expenses to some extent but could not surpass Volkswagen.
Return on sales
2012
2013
2014
Renault Group
4.2%
1.7%
4.9%
General motors
3.19%
2.13%
1.80%
Volkswagen
7.1%
2.8%
5.4%
Return on equity: The return on equity of Group Renault shows in 2012 that the company had
not perform well compared to its competitors based on return generated for every dollar of
investment from the shareholders. General motors and Volkswagen both outperform Renault in
2012 and 2013 in terms of generating return for the shareholders but in 2014 Renault had
managed to surpass General Motors.
Return on equity
2012
2013
Renault Group
7.1%
3.0%
general Motors
18.14%
11.54%
Volkswagen
20.29%
6.55%
19
2014
8.2%
7.48%
12.21%
Return on invested capital:
Besides, the return on invested capital of Group Renault in 2012 was 2.3%, in 2013 it was 0.9%
and 2.5% in 2014 which were consistently less in all the three years compared to general Motors
and Volkswagen. The low return on invested capital in 2013 was due to lower net income
generated in that year because of increase in other operating expenses. All those ratios showed us
that Group Renault had not been efficient in generating enough net income by utilizing their
invested capital properly.
Return on invested capital
2012
2013
2014
Renault group
2.3%
0.9%
2.5%
General Motors
11.16%
6.52%
3.78%
Volkswagen
7.80%
2.72%
5.32%
COGS/Sales Ratio: However, their Cost of goods sold to sales ratio was 82.6% in 2012, 82.1%
in 2013 and 81.1% in 2014 which shows that the company had a very strong percentage of sales
revenue used to finance the expenses varying with sales. This performance measure is quite
maintainable with Renault competitors since both Renault and Volkswagen had similar ratios
except General Motors which had failed to cope up with its competitors in this regard.
COGS/Sales ratio
2012
2013
2014
Renault group
82.6%
82.1%
81.1%
General Motors
92.9%
88.4%
91.1%
Volkswagen
81.75%
81.93%
81.96%
20
Working Capital to sales ratio: On the other hand, the working capital to sales of Renault was
4.3% in 2012, 4.8% in 2013 and 5.1% in 2014. This ratio shows us that Renault has been quite
effective in utilizing its money to fund operations and generate sufficient revenues than its
competitors General Motors but could not outperform Volkswagen. Compared to Volkswagen,
relatively a small portion of the working capital had been used to generate sales which they
should focus on improving.
Working Capital/sales
2012
2013
2014
Renault Group
23.12
20.81
18.75
general motors
1.61
Volkswagen
23.8
1.53
1.94
55.2
52.3
Sales to Property, Plant, Equipment ratio: The property, plant and equipment to sales ratio of
Renault was 3,585 in 2012, 3.72% in 2013 and 3.80% in 2014 which indicates that the company
investment in fixed assets were effective to generate enough sales than its competitors, General
motors and Volkswagen. The ratio also indicates that its plant and equipment are properly
fulfilling the company’s strategic goals.
Sales/PPE ratio
2012
2013
2014
Renault Group
3.58
3.73
3.80
General motors
1.69
1.78
2.18
Volkswagen
1.42
1.69
1.60
8. Current Business Canvas of Renault:
21
Regional &
Key Partners
national
Key Activities
dealers




Regional &
national
dealers
Alliance with
Nissan
Strategic
partnerships:
Daimler,
AVTOVAZ
and Mitsubishi
Raw material
Suppliers



Manufacturing
cars
Marketing and
Branding
Research &
Development
Value
Propositions





Quality
Sustainability
Affordability
Design
Performance




Key Resources



Strong
Manufacturing
Capability in
Europe (19
establishments)
Advanced
Research and
Development
sector
Strong Brand
Awareness
Research and Development (R&D)
Marketing and Sales (Sponsorship)
Variable costs
Fixed cost
After sales
service
Fast servicing
Specialized
dealer service
called Renault
Pro+
Customers can
expect green/
ecofriendly
cars with the
quality of
Renault
Customer
Segments


Mass market of
Europe
Segmented
market
according to
family oriented
people,
low
cost,
high
mileage.
Channels



Cost Structure




Customer
Relationship
Renault outlets
(12,ooo+)
Authorized
dealers
Website
Revenue Streams



Profit on sales
After sale services and additional part selling
Events and Roadshows
22
Partnership with
Daimler, Avtovaz&
Mitsubishi
Alliance
with
Nissan
Affordability
High
variable
cost
Low Fixed
Cost
Outlets
(12000+)
Authorized
dealers
Low cost, high
Mileage
Mass market
Website
Cost effectiveness
Strategic
partnership
Suppliers
After Sales
service
Differentiation
Customer
Responsiveness
Product quality
Faster
services
Quality
Control
Specialized
dealer service
called Renault
Pro+
Value Addition
Corporate
social
responsibility
Eco-friendly
Cars
Brand
awareness
Efficient Top
management
Strong
manufacturing
Capacity
Events &
Roadshow
Reliable quality
Research &
Development
Career
Growth
Sustainability
Performance
Design
Attractive
remuneration
Sponsorship
Marketing & sales
Association,
image and
value
Part-2:
23
Set of Recommendations
1. The Industry life cycle analysis revealed that it is at maturity stage. The growth is only at
only 0.4%. So Renault should focus on the existing market share. From Porters Five
forces, we can see that the bargaining power of customers ishigh.They have to
differentiate their product from the others competitors product. So they should secure
their existing market share by creating loyal customers. There are American, European
or Japanese cars which offer great service with reasonable pricing. So Renault should
focus on providing incentives and special recognition for their customers and create loyal
customers. This will bring them loyal customers as well as secure their existing market
segment.
2. The distinctive competencies indicate that Renault is very advanced in the environmental
aspects of the vehicle industry. Renault offer great design with Twin-turbo engine which
causes less pollution. They are offering rechargeable batteries for vehicle which can
supply the necessary power. So Renault should focus on the environment friendly cars
as they already have technological advancement in this sector.
3. The Return on invested capital is lower than their competitors; we can see that the
increased operating cost made it hard for Renault to make good revenue. Renault should
bring more focus on which countries they want to focus. They should cut down the
manufacturing plants where they are not earning the predicted revenue such as India,
U.K, and South Korea. They have less than 9% market share in these regions. They
should use it to their main European market. And let Nissan take care of the Asian
24
market. So, obviously they should start global expansion but systematically and
selectively.
4. Moreover, Renault ranges to almost 11 types vehicles in sedan category. But all the
designs don’t necessarily bring in the same amount of capital invested. So, they should
cut down operating expense of the Renault Laguna, Renault Fluencethat doesn’t earn
revenues. By the help of their excellent customer relation they can collect feedback and
stop producing the faulty or less popular products. This can save huge operating expense
and give them room for development.
5. The most common complaints from the customers received according to some popular
websites (http://www.autoexpress.co.uk, http://www.breakeryard.com,
http://www.carcomplaints.com, http://www.carnect.co.uk) are that the Renault cars don’t
offer a good body or build. Though the cars have a great millage and reasonable price.
Often the sunroofs, infrastructure of the vehicles are not up to the mark or faulty. The
vehicle body of the Sedans should be improvised with the help of R & D sector.
Corporate strategic plan:
Since Renault possess distinctive competencies including efficiency in technology, solid
customer service and eco-friendly concepts, the company should be pursuing two types of
strategies to increase their profit growth and profitability.
25
Horizontal Integration:
In our project first part, we considered Renault operations only in France. We also know that the
car industry is at maturity stage because of decreasing demand and decreasing rate of population
growth in France. Now in this situation, Renault has to innovate a new kind of car which will
attract the customers to buy their product. We already found out the Renault has strong
innovative skill to manufacture a new designed car. Renault also wants to expand their market
share worldwide. This is the reason that they can use to merge with Nissan because Nissan has
distribution channel internationally. If Nissan comes to merge with Renault, Nissan will also be
benefited from this process. Despite of having a worldwide distribution channel, Nissans
innovative idea of manufacturing new cars is not so good. So, in order to sustain in the long run,
they both should come together to merge with each other to produce new innovative designed
cars and distribute them globally in the period from 2017-2022. Then, both of the companies
will be following growth strategy. In the year 2017, both the company will make an agreement to
pool their resources and operations and join together to better compete within the industry. By
the year 2018 and 2019, they should start producing cars and in the year 2020, they will
distribute their cars globally and will be doing marketing and promotional activities. In the year
2021 and 2022, the customers might be start purchasing their cars and their company’s
profitability growth will be increasing.
Related diversification:
Renault Group is an automotive company having strength in technology and engineering and so
the company should focus related diversification. To create a related diversification for the
26
company, they will produce solar car merging with Nissan. Renault will also continue the
merging link with Nissan Group that would be producing and commercializing electro-magnetic,
electric and solar passenger and commercial vehicle. Since the world has been suffering from
lack of energy and the fuels will only last for at most 25 years to satisfy all future needs, the only
thing that the automotive companies should focus on is creating vehicle that run on other sources
of energy for example solar, electricity or electromagnetic power. And now, to take these issues
seriously many of the companies had started to build electric and solar cars and Renault is no
exception. Although, the market for such energy driven cars are at an embryonic stage and
demand is also at low level, the lack of energy in the upcoming days will simultaneously trigger
the market in near future. To have a sustainable competitive advantage in this market, Renault
Group should start commercializing the already produced electric vehicles such Renault ZOE,
Renault Kangoo Z. E, Renault twizy, SM3 Z.E in the European and American markets( Renault
electric vehicles, Group Renault). In short term, they should be establishing manufacturing plants
throughout the world and start producing “Green Cars” commercially. Besides, this alliance will
be funding a good number of researches conducted by the university to continually focus on
product development throughout 2017-2022.
Global Expansion based on existing business model:
Since, the market for automotive industry is at maturity stage and the demand for cost reduction
has turn into necessity, Renault should focus on reducing price by spreading their operations for
their automotive to survive in the market. They should start targeting the Asian automotive
market on global expansion with this merger. As the Asian consumers are more cost driven to
27
buying automobiles, Renault can utilize this demographic behavior to sustain in this competitive
marketing long run. Renault is usually popular among the middle income people of Europe since
the price of their automobiles are relatively low compared to their competitors. They have
already a gained a significant portion of European market and now to survive in the long run
they will enter the developing countries mostly in Asian countries like China, Bangladesh and in
middle eastern countries with their mostly popular cars including Renault KWID, Renault Pulse,
Renault Scala( Renault cars in India, Auto portal) and focusing on their existing business model.
Renault had already targeted the Indian market and realized a strong demand. So, to increase
their profitability, they can manufacture cost effective cars for the Asian market from 2017 by
producing Cars for Asian market in Nissan factories and cars for European and North American
market in Renault’s factories. By following it, they can start selling their product on a large scale
which will also help them realize economies of scale. Besides, they also should start focusing on
distributing the parts of the cars internationally so that people buying the cars won’t have to face
problems if any problem arises. This can create a sustainable profitability for the merger to
survive in the long run and create a competitive advantage.
Business Level Strategy:
According to corporate level strategy, Renault will manufacture solar, electric and
electromagnetic car merging with Nissan Car Company. And they will distribute their car
internationally. They will also continue their existing operation by commercializing electromagnetic, electric car.
To make successful the corporate level decision, we will take broad low cost strategy and broad
differentiation strategy in the area of business level strategy.
28
Broad low cost Strategy:
In the first three years from 2017-2020, Renault-Nissan will use broad low cost strategy for
making solar, electric and electromagnetic car. Renault-Nissan targets to reduce their
manufacturing cost so that they can charge fewer prices to the product which will increase the
demand of their product in the global market.
Renault existing corporate strategy is commercializing electro-magnetic, electric car merging with
Nissan. Now, to make successful this strategy, Renault-Nissan will follow broad low cost strategy.
As Renault will merge with Nissan Car Company, they can share their innovation cost,
manufacturing cost, and marketing cost with Nissan which will be good for both companies.
They can also increase their productivity by transferring support activities. They will take only
the efficient worker from both companies to produce those cars which will reduce labor cost.
Nissan already distribute their product globally, so it will less costly for both of them to
distribute those cars globally.
Broad differentiation Strategy:
From the year of 2021 to 2022, they will follow broad differentiation strategy. As RenaultNissan will supply their product globally, they cannot sell a single design car whole over the
world. To sustain in the market, they have to differentiate their product. Renault-Nissan will
consider the tastes and preferences of local country and then they will make car for them. We
will differentiate our product using superior materials, superior functions and features and better
points-of-sale service.
29
As electro-magnetic, electric and solar passenger and commercial vehicle are now in embryonic
stage, the innovators and early adopters will be their main customers.
From corporate strategy, we know that to survive in the long run Renault will enter in the
developing countries mostly in Asian countries like China, Bangladesh, India and Middle
Eastern countries.Now to deter entry in the Asian countries Renaults will follow product
proliferation strategy. That is why they are producing different model car at various prices so that
all classes of customers become satisfied on their product.
Now, there is strong competition in Asian market. Indian companies are now making passenger
car at low cost. To manage rivalry in Asian market as well as in global market, Renault will
penetrate the market by heavy advertisement of their product. As Renault has strong innovative
skill so they can also manage their rivalry by developing their product.
Functional level strategy:
According to business strategy, Renault should focus on low cost and differentiating strategy.
Based on business strategy, Renault’s functional level strategies are:
Achieving efficiency
From 2017 to 2022, lean production should use in production of cars that can increase the units
and reduce the time. Renault should develop mass customization for first 3 years 2020-2022
because from beginning years, it can be difficult to develop mass customization. Material
management of cars material can reduce the cost. Experienced workers for this production
should be hired from 2017 and that can also reduce damage and cost as well as increase time
30
efficiency. In every year, Production and marketing functional levels should share their
innovative knowledge to each other that can increase differentiation and can also increase sales.
Linking between those two function levels is very important for first 2 years 2017-2020, for
excellent and quickly developed marketing. Differentiation can be increased by supporting the
customers with after-selling service. As Renault is trying to do some difference by supporting
eco system, R&D should share their innovative knowledge to production level from first year
2017 so that they can produce innovative and eco-friendly but cost efficiency product that can
reduce cost as well as differentiate the products and attract customers. This innovative cost
cutting sharing is very much important for every year especially for first 3 years, 2017 to 2020 so
that cost efficiency can be developed from the beginning year.
Achieving quality:
Quality should be increased by hiring experienced and skilled workers from 2017. They can help
to reduce damage and ensure highest quality from the beginning year. Consultation should be
arranged with Renaults R&D for better and upgrading quality from the first year and every year,
it should be continued for better improvement. After production, quality should be approved by
senior production managers every year and it should be started from 2017. Feedback should be
taken from customers and skilled workers in every year continuously. For ensuring high quality,
good suppliers should be chosen from 2017 those can give good and durable raw materials with
low cost and should maintain the connection with those suppliers every year.
31
Achieving innovation and customer responsive:
Renault is trying to sale solar car beside existing electric cars that is getting identity among
people. So R&D should innovate some method from beginning year 2017, so that solar car can
also move in rainy day. Innovation should be developed continuously in every year. They should
innovate and develop the design for highest absorbing power for solar car and innovation should
also for existing cars. In every year 2017-2022, R&D should share all innovative ideas to
production level so that they can develop existing electric cars as well as produce solar cars
without damaging solar power. The solar cars are not very well known among people. So from
2017, media advertisement and website advertisement should be arranged for people. Renault
should share the information about solar car as well as existing cars on their website. Even they
should take feedback about new product and demands from customers by taking survey from
them with the help of social network like tweeter, face book, company website etc. After
knowing the demand and reactions of customers, it should be informed to R&D to develop the
products and production level to increase the quality what customers want and every year it
should be continued. For better customization, quick response should be given by selling the car
in minimum time and giving some after- sale services. It is better to develop different web sites
in different countries for quick response and for knowing demands of customers of different
countries. Publicity with the media is very important for both types of cars.
Technology Strategy:
Renault is mainly focusing on merging with Nissan and making cars that will fully run by solar
and electrical energy which will be environmentally friendly and also produce other cars that are
demanded by customers. Renault is currently dispersed across various different websites and
32
they have different market segments. They need to mainly focus on standardization. They should
reach the message to the people of Europe how it is effective to run a car with the help of solar
and electric energy. They should create a common place where all the customer of Europe can
come up together. That specific website should have a record of the number of goods
manufactured and sold. This will eventually shift their demand curve to the right.
Renault can develop a rearview mirror with a built-in LCD monitor displaying images from a
camera mounted on the rear of the vehicle. This Smart rearview mirror will allow the driver the
ability to switch between the LCD monitor and the standard rearview mirror, depending on the
driver's preference.
The driver will be able to see traffic conditions behind the car through the clear video imagery,
as well as use the rearview mirror to check on passengers and pets in the rear. This will help
make for a safer and more comfortable driving experience.
They can come up with a technology capable of “detecting the situation up to two cars ahead”
What is happening in front of the vehicle ahead? The system is able to detect the situation and
can provide an earlier alert to the driver if a potential risk is detected, which can help the driver
avoid a potential collision.
The “Predictive Forward Collision Warning” system can support the driver in making a
judgment by giving information about the situation which is going on outside his typical field of
view. A sensor will be installed to the front of the vehicle which can analyze the relative velocity
and the distance to a vehicle directly ahead, as well as a vehicle traveling in front of the
preceding one. When the system detects potential risks, the system gives an alert to encourage
33
the driver to decelerate in advance with a signal on the display, audible warning and also by
tightening the seat belt. These functions will work to help prevent pileup collisions which may be
caused by late brake application by the driver.
34
Proposed Business Model:
Regional &
national
dealers
Partnership with
Daimler, Avtovaz&
Mitsubishi
Alliance
with
Nissan
Affordability
High
variable
cost
Low Fixed
Cost
Outlets
(12000+)
Authorized
dealers
Low cost, high
Mileage
Mass market
Website
Cost effectiveness
Strategic
partnership
Suppliers
After Sales
service
Differentiation
Customer
Responsiveness
Product quality
Faster
services
Quality
Control
Specialized
dealer service
called Renault
Pro+
Value Addition
Corporate
social
responsibility
Eco-friendly
Cars
Brand
awareness
Efficient Top
management
Events &
Roadshow
Reliable quality
Research &
Development
Part-3:
Attractive
remuneration
Strong
manufacturing
Capacity
Sustainability
Performance
Design
Career
Growth
Sponsorship
Marketing & sales
Association,
image and
value
35
Changing Company Governance

As the company is following related diversification strategy, they should aware not only their
customer but also their employees about the benefits of “Green Vehicles” to motivate and
inspire the morale of the employees. The original vision and moto of the company should not
change. But these new values should also be promoted as a part of company’s goodwill.

Currently Renault does not have any reward policy for innovators, designers or engineers. As
Renault will be penetrating their R & D sector they should change this policy of governance
to inspire the employees and increase productivity.

According to Renault’s website, the Executive Committee (CEG) meets once a month, the
Management Committee (CDR) and the members of the Executive Committee hold seminars
twice a year. But the Board of Directors never attends these meetings. At least, once in 2
years, the Board of Directors should attend the seminars. This will boost up the overall
employee satisfaction and guide the company towards its objectives.
36
Organizational Structure
The organizational structure of Renault is very stable at this point. There is no structural
change needed in the executive body. But to focus on innovations they should extend the R&D
sector into segments. They should also have a sector for finding new innovations and talented
researchers from renowned universities.
Strategic control system:
Since Renault group will continue to have a merge with Nissan to produce electric,
electromagnetic and solar cars and this merger will further expand globally to meet the global
needs for lower vehicle, they need to have a strong strategic control systems to implement the
strategies taken. This alliance strategic planning has given below:
Financial control:
Renault and Nissan have been successfully paying dividends to their shareholders. In order to
implement the strategies, both of the companies need to retain all of its earnings and use it to
develop the electric, electromagnetic and solar cars. Besides, they need to low down their
operating expenses by reduction in fixed costs through cutting down some of the production
37
units and by focusing on reducing the inventory holding cost using JIT system. This cost
reduction may then be used for research and development.
Budget control:
The merger need to allocate a specified amount of budget needed for every function for 20172022 of how much will be used to conduct the research and development, manufacturing and
marketing the vehicles all over the world. They will track down expenses by balancing the cost
regularly and keeping proper information about it. They will also regularly forecast the budget
and resource usage and keep the upper management informed.
Responsibility centers:
The merger should establish responsibility centers where functional level managers will
regularly be questioned for their performance and analyze the situation and interact with the
corporate level managers to identify problems and come up with solutions.
Quality Control:
Since both of the companies produce consumer vehicles highly, they need to more focus on
ensuring their quality to outperform their competitors. The mergers’ produced cars will be going
through several phases to test the sustainability of cars and give proper safety tools in those cars.
If there is any kind of defects arise they will take proper necessary steps to ensure that the defects
are completely resolved. Total quality management should be given the most priority.
Inventory control:
The merger need to focus on their inventory control system and design it in such a way that they
will satisfy the demand properly and inventory cost will also be minimized. For example, they
38
can forecast the demand of their both electric and general cars using proper market tools and
produce accordingly or using just in time method.
Technological control:
Since both of the companies have distinctive competencies on technological knowhow, they
should create the merger in such a way that both of the companies’ technological resources are
protected. Besides, both of the parties will be respecting the terms of the contracts and so they
need to design the merger structure accordingly.
Cultural recommendation
It is known that Renault has already been made strategic alliance with Nissan and our strategy is
merging with Nissan. It is found that, existing organizational culture of strategic alliance is not
supportive and satisfactory. The existing company Renault which has been made strategic
alliance with Nissan is facing inertia. Working environment is not very supportive and workers
of one company do not help other company. There is lack of common culture and for this,
workers of both companies cannot share their ideas with each other (“Managing across culture”,
2005). There has also the matter of anti- trusting and company’s workers don’t share helpful
information to other company’s workers and create rival situation (T. Sammy, 2015). Egoistic
matters and abusing of group decisions have been found in the working place of existing
companies. Lacking of sharing and bonding among the workers, disrespectful and selfish nature
toward team mates’ create unethical environment (B. Miles et al, Renault-Nissan strategic
partnership).
This kind of environment is not expected and supportive. So there need changes in
organizational, organizational environment should be helpful and all should be supportive in
39
nature to each other. According to our perspective, companies can create common cultural
environment like- ethical policy for everybody, giving ESOPs, bonus pay to each of the workers
of both companies for motivating them, etc. Both companies can build good relations and
bonding by knowing and respecting to other’s culture. One should respects other’s belief and let
others to practice and also should not mock on them and their belief. Every department and
workers of both companies should stop rivalry behavior and should share ideas to other
department in same company as well as other company for better production and development.
Even every workers should get chance to share their idea to other workers or to managers.
Communication with managers is very important for sharing ideas and sharing problems for
better development rather than bureaucratic behaviors. Long term commitment to suppliers
should be made for best raw materials and this kind of commitment creates good relationship.
All information should be shared to every department and to every worker of both companies.
Additionally, all should give respect to other’s religions and should not be dominating and
aggressive to other’s cultures, beliefs and religions.
Global Strategy
Our corporate strategies were making solar car, electric and electromagnetic merging
with Nissan and distribute those cars worldwide. We want to make our product at low cost with
different model.
Now, our global strategy would be transnational strategy. In transnational strategy, it
achieves low costs, differentiates the product offering across geographic markets.
In our business model, we will also follow these things also. As we will distribute our
product globally, we have to differentiate our product considering the taste and preferences of
40
consumers across the world. Asian consumers are more price sensitive on the other hand
European consumers are more quality sensitive. So, local responsiveness is high to manufacture
solar car. We have to consider this thing when we will make solar car.
As we already mentioned that we will distribute our product internationally, we have to
face a lot of competition to sell those cars. Because in Asian market there are some companies
like Tata, Maruti Suzuki etc. which provide cars at low cost. We have to manufacture our solar
car at low cost to capture large market. So competition would be high to reduce the price of the
car.
41
References
History and development. (n.d.). Retrieved from Group renault: https://group.renault.com/en/
Groupe Renault History. (n.d.). Retrieved from Wikipedia: https://en.wikipedia.org/wiki/Renault
Baker, R. (2010, November 10). Renault to launch the simpson branded cars. marketing Week.
Retrieved from https://www.marketingweek.com/2010/11/10/renault-to-launch-thesimpsons-branded-car/
Chapman, M. (n.d.). Renault Megane launches Borat-style Campaign. marketing week. Retrieved
from https://www.marketingweek.com/2010/08/05/renault-megane-launches-borat-stylecampaign/
Customer relations. (n.d.). Retrieved from Renault passion for life:
https://www.renault.co.uk/services/owner-information/customer-relations.html
Laudon. (n.d.). Renault information system. In Laudon, Management information system .
Pearson education India.
Logistics and Packaging- Renault. (n.d.). Retrieved from Renault Nissan:
https://www.supply.nissan-ix.com/ASG2_3/EN/ANPQP/MAIN/CS/10110-en23_renault_specific_cs.htm
Renault. (n.d.). Retrieved from Wikipedia :
https://en.wikipedia.org/wiki/Renault#Marketing_and_branding
Renault Nissan to scale india research facility . (n.d.). Retrieved from Nasscom:
http://www.nasscom.in/Renault-Nissan-to-scale-up-India-research-facility55494?id=55494
42
Hill, C. W. L., Jones, G. R., & Schilling, M.A. (2009). Strategic Management. (11thed.).
Stanford, CT: Cengage Learning.
Automotive Industry. (n.d.). Retrieved February 06, 2016, from https://en.wikipedia.org/wiki
/Automotive_industry.
Carney, D. (2013). 10 new car companies aiming for the big leagues.Retrieved from
http://www.nbcnews.com/id/40887273/ns/business-autos/t/new-car-companies-aiming-bigleagues/#.VrXaDk9enIV
Ayre, J. (2015 , March 28). Electric car Demand Growing Global market Hits 740,000 units.
Retrived from http://cleantechnica.com/2015/03/28/ev-demand-growing-global-market-hits740000-units/
Groupe Renault History. (n.d.). Retrieved from Wikipedia: https://en.wikipedia.org/wiki/Renault
Combinig culture at nissan and renault. (2015, August 14). Retrieved from Exchange:
http://exchange.cim.co.uk/blog/combining-cultures-at-renault-nissan/
Dubois, J. (n.d.). What are the four types of strategic control. Azcentral. Retrieved from
http://yourbusiness.azcentral.com/four-types-strategic-control-24352.html
Managing across cultures. (2005, November 18). The economist. Retrieved from
http://www.economist.com/node/5156760
Shiga, T. (2015). Culture. Retrieved from Renault nissan culture: http://blog.alliance-renaultnissan.com/category/tag/culture
43
Hill, C. W. L., Jones, G. R., & Schilling, M.A. (2009).Strategic Management. (11th Ed.).
Stanford, CT: Cengage Learning.
Types of strategic control. (n.d.). Retrieved March 18, 2016, from http://smallbusiness.chron.com/fourtypes-strategic-control-14720.html
Carney, D. (2013). 10 new car companies aiming for the big leagues. Retrieved February 13,2016, from
http://www.nbcnews.com/id/40887273/ns/business-autos/t/new-car-companies-aiming-bigleagues/#.VrXaDk9enIV
Ayre, J. (2015, March 28). Electric car Demand Growing Global market Hits 740,000 units. Retrieved
March 19,2016, from
http://cleantechnica.com/2015/03/28/ev-demand-growing-global-market-hits-740000-units/
Our Company: Key Figures. (n.d.) Groupe Renault Website. Retrieved March 17,2016, from
http://rapport-annuel.group.renault.com/en/key-figures/
Lavell, T. ( 2015, September 15). European car sales rise as economy helps Renault SUV
demand. Chicago Tribune. Retrived fromhttp://www.chicagotribune.com/news/sns-wpblm-news-bc-europe-autos15-20150915-story.html
Cunningham, E. ( 2015, December 10). Renault takes new Megane upmarket as buyers demand
44
more from family. Independent. Retrived
fromhttp://www.independent.ie/life/motoring/renault-takes-new-megane-upmarketas-buyers-demand-more-from-family-cars-34274784.html
Best new cars for 2016. ( 2015, December 4). Auto express. Retrieved from
http://www.autoexpress.co.uk/best-cars/89189/best-new-cars-for-2016
Global car brands. (2015, July 4). Renault Logo, History Timeline and Latest Models
Retrived from: https://www.globalcarsbrands.com/renault-logo-history-and-models/
Bapna, A. & Bureau, ET. ( 2015, July 8). I wouldn't call car advertising backward, says Renault's
Michael Van Der Sande. The Economic Times. Retrieved from:
http://articles.economictimes.indiatimes.com/2015-07-08/news/64212059_1_renaultlodgy-duster
OICA is the voice speaking on automotive issues in world forums. (n.d.). Retrieved From:
http://www.oica.net/category/production-statistics/2014-statistics/
Barnat, R. (n.d.). Strategic management and formulation. Retrieved from Strategic control:
http://www.strategic-control.24xls.com/en201
Dubois, J. (n.d.). What are the four types of strategic control. Azcentral. Retrieved from
http://yourbusiness.azcentral.com/four-types-strategic-control-24352.html
45
Managing across cultures. (2005, November 18). The Economist. Retrieved from
http://www.economist.com/node/5156760
Todd, S. ( 2015, August 14). Combining cultures at Renault-Nissan [Web log post]. Retrieved
from
http://exchange.cim.co.uk/blog/combining-cultures-at-renault-nissan/
46