Nissan Shifts Into Higher Gear

Nissan Motors was going through a serious decline for the last decade due to poor management and strong competition of today. In addition, they were mostly concentrated on the older market population. Just when Nissan was close to failure, the new CEO, Carlos Ghosn had arrived to give the Nissan industry a promising future. In addition, the very active and determined Ghosn is promising to put Nissan in the top sixth ranks of automakers by 2005. Nissan applies strategies from Levitt, Minzberg and Greiner's articles to their business growth and their recent and future success. The following paragraphs will discuss further the main claims of the article "Nissan shifts into higher gear" by Alex Taylor III.

According to the article of Theodore Levitt "Marketing Myopia", the success or failure of a company depends on its management and not on the market saturation. If management defines its industry incorrectly, it will have a wrong orientation to the success of the company. Nowadays, one of the most common means of transportation is the automobile industry, which has many competitors. Therefore, each automotive company has to know how to stay on top. In the article of Alex Taylor III, "Nissan Shifts Into Higher Gear," (see Appendix A) it has stated that competition requires risk taking, in depth knowledge about the market demand, and constant innovation in order to succeed. Despite its massive production and saturated market, it still has room for improvements and possibilities for gaining bigger market share. This article examines some strategies that the CEO of Nissan Motors, Carlos Ghosn, uses to make the company with the highest operating margin of 10.8% in 2003. The author uses the development of the new minivan Quest 2004 as an example to describe the focus of Nissan's CEO towards the future of their company.

In order for a company to succeed, it is necessary to innovate products that are adaptable to customer's needs. In a highly competitive market, new designs have the importance of creating differentiation from others. Today, there are many choices of cars for buyers. Carlos Ghosn said "You don't build your character by doing what everybody else is doing." His statement is the reflection of the strategy that he uses to improve Nissan. Ghosn made several improvements to make Nissan a stronger team by taking risks at doing what the competition does not do and by innovating models that correspond to customer needs.

Creating new concepts in hope that customers can accept them is not innovation; it needs to come from marketing research and finding out what are the real needs that customers are lacking with the existing products. In order to increase profitability, every company has to use resources to conduct marketing research while trying to decrease costs. In other words, each company has to do its best to search for the highest competitive advantage in every decision to fit customer needs and production costs. There are companies that diversify their production in different parts of the world to save costs. Others are closing plants so they can use their most efficient ones.

According to the last statement, Nissan is trying to cut down costs of production and instead, they are spending more money and time on improving their designs in order to regain a greater market share. The CEO is focusing more on customers' needs to improve designs that can satisfy the demands of the market. Each design has to be authorized by him and he takes each design very seriously. In other words, there are many designs and types of products, but only a few that really fit the demands of customers. Nissan's future depends on how efficiently they use their car development and production to regain the market they were previously losing.

Risk taking is part of the strategy Nissan uses to compete with others. Alex Taylor has stated "Automakers normally replace 15% to 20% of their product line annually with new models. In each of the next couple of years Nissan will be turning over 25% to 30% of its lineÐ'...while other Japanese manufactures prefer to start production at a new plant with an older vehicle that has already had its bugs worked out. But Ghosn plans to build only new vehicles in Canton." By doing this action, Nissan has done the sufficient market research and redesigned the new model. Ghosn has the confidence of success to be on top of other competitors. As a matter of fact, taking a risk does not always lead a company to become successful. A company must consider the amount of risk that they are capable of taking in order for that strategy to be a success.

As previously mentioned, another crucial part for profitability is creating products that are consumer-oriented. Instead of making products for customers to choose, it is important to make products that customers want and need. Ghosn ensures an orderly evaluation process for every new model because each design has to be a logical, rational decision. This type of decision also means that, "Ghosn wants Nissan to stand for passionate innovation and insists that new products satisfy an unmet customer need." In the previous designs, Nissan took into consideration two groups of customers: "active young families and recreation-minded empty-nesters." Based on the marketing research, they have decided to target another group, which are the working mothers who are also defined as "women trying to balance their own lives with responsibilities for home and family."

The result of the marketing research as mentioned previously helps Nissan to determine some areas that contribute to the design of the car such as the psychology of a mother who drives the car. The result has showed that mothers do not feel sexy driving a minivan. Thus, this reflects a lot of how the design of a minivan needs to be improved. Also, they figured that the texture of the seat covering is very important. They lowered the base of the front window for better visibility and raised the sides of the second and third rows to make the car more comfortable. Another example of the innovation for customer needs is the way they differentiate their minivan with the other companies' minivans. While other minivans have a square shape, the Quest changes this concept by sloping the front and adding a curved with high arched roof. The rear has a sunroof that allows passengers to have sunlight around them. All this shows that Nissan has made the innovated minivan more suitable for consumer's desires by making it look like a fashion accessory rather than just a plain device used for transportation.

This newly designed minivan is what customers are looking for in order to satisfy their needs. This model called Quest isin