Industry Examples Pack EL Cars July - November 2014 Sample of 3 examples from our 60 focused industry examples Tailored to the Car Industry as well as specific issues relevant to the EL Cars preseen 1 Nissan’s partnership with Renault Example Relevance to Preseen Renault and Nissan developed a joint venture in 1999.Today, Renault has a 43.4% stake in Nissan, while Nissan has a 15% stake in Renault. The companies aim for 70% joint development of vehicles, shared components, joint purchasing to reduce prices, shared platforms, common IT systems, and shared projects in areas such as tax reduction and marketing and sales. EL have grown independently, while most other car manufacturers have merged or developed joint ventures. A joint venture could be a way to make costs savings and further improve quality. “Together, Renault and Nissan have significantly expanded their global footprint and generated economies of scale vastly larger than either company could accomplish on its own,” said Renault-Nissan Alliance Chairman and CEO Carlos Ghosn. Synergies are estimated to total €2bn – the graph below demonstrating savings made and how these are increasing: Unseen issues where you can use this Joint venture opportunity; Alternative to a merger if that is the suggested strategy, future strategy development Example exam paragraph The Nissan/Renault alliance estimates combined synergies of €2bn from working together. The companies aim for 70% joint development of vehicles, use shared components, joint purchasing to reduce prices, shared platforms, common IT systems, and shared projects in areas such as tax reduction and marketing and sales. The partnership [suggested in the unseen] could offer similar benefits and the success of this partnership indicates that it is a viable option. 2 Compact cars – profits to be made! Example For car manufacturers, selling the largest cars that used to bring in the highest margins became almost impossible in 2009 and sales of large sports utility vehicles (SUVs) in Europe fell almost 45%, sales of large cars and people carriers fell almost 30% and executive saloons also suffered. One trend of new releases was the growing group of small and luxurious concept vehicles such as the Audi A1, the BMW X1 (a tiny SUV) and the Mini crossover. The idea behind these is that drivers shouldn’t have to compromise to downsize, while the manufacturers shouldn’t have to compromise their profit margins. Kia Soul, a new Mazda city car, Toyota's iQ, Hyundai's i20, Nissan's Pixo and Ford's rereleased Ka added to a line-up of even smaller cars entering this increasingly crowded but fast growing segment of the automotive market. Relevance to Preseen Shows that compact cars are a fast growing segment of the automotive market and can be successful with the right strategy. It is a currently a weakness at EL. Unseen issues where you can use this New market segments, product mix, issues around compact car range. Example exam paragraph In 2009 sales of large SUVs in Europe fell almost 45%, sales of large cars and people carriers fell almost 30% and executive saloons also suffered. A trend that grew from car manufacturers needing to reduce costs and trim labour forces were small, luxurious concept cars which meant they did not need to compromise profit margins. We could revisit our compact range strategy and ensure we are competing with the best possible margins and using the correct strategy to make the range as profitable as it can be before divesting the range as sugested by the [unseen] issue. 3 Nissan Inventory days Example Relevance to Preseen Nissan’s inventory days in 2013 was 18 days. This compares to EL cars inventory days of 42 days, and demonstrates the need for further improvements in EL’s JIT system to reduce their stock levels down to industry norms. EL uses JIT, but does not have long term supplier agreements which is a typical element of good JIT. Regular comments about this problem in the preseen and the high inventory days makes this a likely exam question. Nissan uses Just-In-Time inventory management to manage their stock levels including: • Long term supplier agreements • Advanced purchasing systems linked to suppliers • Parts delivery directly to the production line area • Kaizen (continuous improvement) Unseen issues where you can use this Inventory issues; Supplier issues. Example exam paragraph Nissan’s inventory days in 2013 was 18 days. This compares to EL cars inventory days of 42 days, and demonstrates the need for further improvements in EL’s JIT system to reduce their stock levels down to industry norms. One key element of Nissan’s lower inventory levels is long term relationships with a relatively small number of suppliers, and the suggested change of [issue in the unseen] would support this. 4