Nissan: Structural reform through "business rationalization" and "prioritization and focus"

Change from expansion strategy, building profit-focused business utilizing the Alliance

2020/06/15

Summary
Initiatives by the three-company alliance of Renault, Nissan, and Mitsubishi
Leader-follower scheme
Framework of "reference regions" principle
"NISSAN NEXT" Transformation Plan
Business rationalization
Prioritizing core markets
Concentrating resources on core products
Nissan recorded a large deficit in its financial results for fiscal year 2019 including restructuring cost and impairment loss

Summary

Nissan announced its "NISSAN NEXT" transformation plan
(Source: Nissan FY2019 Financial Results and Transformation Plan)

On May 28, Nissan Motor Co., Ltd. unveiled its four-year business structural reform plan to be achieved by 2023, in conjunction with the release of its consolidated financial results for the fiscal year ending March 31, 2020 (FY2019).

This business roadmap is the first medium-term plan initiated under Nissan’s new management structure formed at the end of 2019 and led by Nissan’s President and CEO, Makoto Uchida. The plan is designed to achieve a steady recovery and restore profitability by streamlining unprofitable operations and surplus facilities, and focus its resources on Nissan’s core competencies, reflecting a shift from the company’s previous growth strategy that focused on excessive sales expansion.

The transformation plan is comprised of the two axes "business rationalization" and "prioritization and focus" to improve efficiency and profitability, and focuses management resources on core competitive products, technologies, and markets. In other segments and business areas, the company aims to restructure its operational foundation and ensure solid growth by leveraging the assets of the Alliance partners Groupe Renault and Mitsubishi Motors Corporation.

In 2011, under the leadership of CEO Carlos Ghosn (at that time), Nissan aimed to significantly increase sales by expanding its business in emerging markets such as Russia and Brazil and by introducing a large number of new vehicles. In 2017, Nissan began a new (six-year) midterm plan, Nissan M.O.V.E. to 2022, that inherited the unachieved targets of its previous midterm plan, Nissan Power 88 (8% global market share, 8% corporate operating profit), and although the targets were adjusted downward in 2019, the plan continued to adhere to maintaining its basic strategy for achieving growth and profitability across extensive markets and segments. Since then, Nissan's global market share has declined from 6.4% in 2011, 6.2% in 2017, and to 5.8% in 2019, leading to huge financial losses.

The new NISSAN NEXT transformation plan announced clearly corrects the trajectories of its previous business plans, and demonstrates the determination of the new management team. On May 27, the day prior, the leaders of the Renault-Nissan-Mitsubishi alliance announced the new Alliance business model, which also showed that Nissan's new midterm transformation plan was in line with the new Alliance cooperation business model.

This report focuses on the specifics Nissan's new transformation plan, the Alliance business model announced on the previous day, and provides a summary of the fiscal year 2019 financial results released on the same day as the transformation plan.

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