Global Leadership of Carlos Ghosn at Nissan Management Paper

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    • 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.
      1. APA Style Coversheet
      2. Introduction (high-level findings of the case study)
      3. As you work through this paper, analyze the following areas (6 pages):
        1. The strategic business objective pursued,
        2. The specific types of leadership styles employed,
        3. The challenges faced and results achieved,
        4. The causes of success or failure and
        5. Other areas you consider pertinent
      4. Recommendations
      5. Conclusion
      6. 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.

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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 ſat 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 日産ゴーン「成算ありやなしや」p. 26, 小学館文庫 (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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Running Head: CARLOS GHOSN LEADERSHIP CASE STUDY

Global Leadership of Carlos Ghosn at Nissan Management
Name
Institution
Course
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CARLOS GHOSN LEADERSHIP CASE STUDY

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Introduction
Carlos Ghosn is one of the global corporate leaders who have made remarkable
contributions to the corporate business world. His brief stint at the help of Japanese giant auto
manufacture Nissan Motors was characterized by various leadership styles that saw the company
turnaround its fortune at a time when the company was staring at a possible collapse. Ghosn
became the CEO of Nissan Company at a time when it was making huge losses for seven years,
prompting it to enter into a strategic alliance with Renault motor manufacture.
Despite pursuing strategic objectives aimed at reviving the company’s financial strength,
Ghosn still faced challenges during his struggle to achieve effective success. In some cases, he
failed, though his efforts to overcome such challenges remain unmatched. This analysis provides
an evaluation of the case study of Carlos Ghosn as a global leader of the Nissan automotive
manufacture form the perspective of the strategic business objective that Ghosn pursued, the
specific types of leadership styles employed, the challenges that Ghosn faced as the CEO of
Nissan and results he achieved. The analysis will also examine the causes of the success or
failure of Ghosn as the helm of the company.
The Strategic Business Objective Pursued,
Upon assuming the role of the CEO of Nissan, Ghosn began implementing strategic
business objectives to revive the company and bring it back to profitability. The first strategic
business objective was the restructuring of the company with a focus on short-term objectives
such as cost-reduction strategies. Ghosn believes that one of the drivers of the huge loses the
company had suffered in the past seven years was the high costs of operation that had become
untenable (Millikin & Fu, 2005). Even as Ghosn continued to pursue the cost reduction strategic

CARLOS GHOSN LEADERSHIP CASE STUDY

3

business objective, he took caution to prevent any attempt to compromise the quality of the
products of the company.
He also focused on reorganization the company through the NRP initiatives that aimed at
restructuring the company to create a cross-functional organization with distinct departments to
serve a unique product line. This strategic objective gave the staff clear visibility of the business
and thus focused on customer satisfaction and success of the company. Ghosn also created a
matrix organization was to improve transparency at the top-level management with each
manager assigned a functional and regional responsibility (Millikin & Fu, 2005). This strategic
business objective ensured that each top manager focused on the cross-functional department. He
also ensured that Nissan broke away from the Japanese cultural norm of the Keiretsu Partnership
and focused on creating customer-supplier relationships. His move to fire 21,000 and close five
plants were meant to remove redundancy in the company.
The Specific Types of Leadership Styles Employed,
Going by the strategic business objective that Ghosn pursued after taking over the
leadership of Nissan Company, it is evident that he aimed to transform the company from a lossmaking entity into a more profitable venture. Most of the strategies he sued, though some failed
were aimed at changing the status quo at the company and introducing a new order of activities,
culture, operations, and process (Millikin & Fu, 2005). Consequently, the specific type of
leadership style that Ghosn employed is a transformational leadership style.
Using the Globe Smart cultural assessment profiles, Carlos Ghosn's leadership traits at
Nissan can be evaluated form five different leadership traits and ten compared with that of Japan
where he was physically based as the company’s CEO. Taking cognizant of the fact that he was a

CARLOS GHOSN LEADERSHIP CASE STUDY

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non-Japanese, it is possible that his GlobeSmart cultural leadership traits were largely shaped by
his background
From the domain of independent vs. interdependent cultural dimension trait, Carlos
Ghosn exhibited the independent leadership traits going by the fact that he always acted and
implemented initiatives with less expectation from the seniors. Such a person is always regarded
and admired by others in the workplace. As an independent person, Carlos took independent
actions and made independent decisions. This globe smart cultural profile made Carlos a very
strong and competent leader in his daily brainstorming sessions (Ang & Van Dyne, 2015).
Carlos Ghosn My dimension of work culture from the perspective of egalitarian vs status
shows that he was a leader ...


Anonymous
Really great stuff, couldn't ask for more.

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