Critical Analysis of the Operations Management Challenges faced by Nissan and their Approach to overcome such Challenges. (CLO1&3)
Companies come across many operations management challenges that call for the rethinking of strategies to keep them in business. The automotive industry is renowned for its significant contribution to the global economy. The continued demand for motor vehicles has seen the sector grow at a rapid pace since the end of World War II. Companies such as Nissan have experienced a steady growth curve until the occurrence of the 2011 three-fold disaster that gave rise to numerous challenges, forcing the multination corporation to review its strategic approaches to management.
The Nissan Motor Company was started in 1933 as a successor to Datsun. Since then, the business has developed into one of the largest multinationals in the design, manufacturing, and distribution of superior and reasonably priced automobiles. After many years of business prowess, Nissan has expanded its operations by establishing production facilities in over fifteen countries (Rezapour et al., 2017). Currently, the company carries out its operations through a well-organized distribution channel in almost 200 countries globally.
Nissan’s management challenges began in 2011 when an earthquake struck the coast of Japan, giving rise to a tsunami and a nuclear emergency. This unprecedented humanitarian crisis led to the damage and shutdown of six of the company’s production plants. The Nissan Motor Company began grappling with low production, risking bankruptcy. Furthermore, the company suffers an inability to maintain its position in the automotive industry. Recently, Nissan lost a significant percentage of its market to rival companies such as Toyota and Honda. This scenario is linked to the company’s rigid principles and limited flexibility to assimilate modern technology into its automobile products (Sadgrove, 2016). The automobile manufacturer has continuously failed to design, develop, and produce brands that appeal to the changing tastes of American buyers, who have a high preference for trucks and sports utility vehicles as opposed to Nissan’s sedans.
Recent surveys have also shown that the company’s profits dropped by almost 55% due to management problems at the home-based factories. The automobile maker is facing various scandals, which have led to the loss of top talent (Rezapour et al., 2017). Its partnership with Renault is also at stake, and Nissan risks adverse financial breakdown if the company decides to withdraw its 43% share. This state of affairs has led to reduced operations in many of its branches globally.
Some of the strategies to avert these challenges include the implementation of a differentiation strategy to make products that suit varying customer needs in its foreign markets. The company’s leadership is geared towards gaining power in the organization rather than development. There is an emerging need to set aggressive operational strategies such as reducing overreliance on Japanese-made car components (Rezapour et al., 2017). Currently, the company is aiming at cutting the number of Japanese parts exported to North America by 70% at the end of this year.
The automobile company has also learned from the occurrence of unprecedented events in the 2011 earthquake, which disrupted its operations.
Evaluating Nissan’s Supply Chain Philosophy in the Context of enhancing Organizational Performance. (CLO3)
As a multinational corporation, various challenges experienced in the modern world, including global warming, shifting financial markets, and energy issues, directly affect the company. The Nissan Motor Company needs to invest in research to identify pertinent issues at each level of the supply chain with a view of formulating relevant solutions (Sadgrove, 2016). The company’s supply chain extends across transnational boundaries. As a result, there is a need to ensure consistent procurement practices that align with its vision and operation management principles. The corporation aims at establishing a sustainable development strategy that hinges on exclusive mutual trust with its business partners. Equally, it has developed a robust communication system that inspires listening to the views of suppliers in a bid to create and maintain sustainable relations to support its production processes both in Japan and overseas.
Flexibility is a debatable topic when it comes to enhancing Nissan’s organizational performance. For a long time, the company has suffered from rigid rules that prevent the integration of modern technology and transformational leadership theories. However, it is now leveraging a global strategy with a decentralized structure that will see the company execute consistent and autonomous controls and coordination from its Japanese headquarters. Creating a flexible supply chain framework will enable the Nissan Motor Company to integrate a variety of viewpoints from diverse cultural origins (Rezapour et al., 2017). Unlike other rival Japanese automobile makers such as Honda and Toyota, Nissan is on the frontline in ensuring representation of a vast range of nationalities, especially in its overseas branches. The company recognizes that embracing diversity at the international level buttresses its global performance besides facilitating its ability to handle different constrictions and prospects in different markets (Sadgrove, 2016). The urge to ensure flexibility in the supply chain structure has compelled the company to develop a simplified product line to gain a competitive advantage over its rival automobile manufacturers. A build-to-stock strategy helps the company to manufacture several units before demand arises. Besides, a build-to-order approach complements this plan to ensure adequate stock for its vast local and foreign markets. In this manner, the company sustains constant production at its plants, which has boosted sales in the past few years.
Furthermore, the company has begun recognizing that the existence of motivated and passionate staff is its greatest asset. To ensure high performance, Nissan is geared towards defining a clear corporate vision that will be easily understood and internalized by its vast audience (Rezapour et al., 2017). The company believes that a compelling mission will inspire everyone to buy its ideas. The Nissan Motor Company also plans to keep its management consistent with a view of promoting honesty, empowerment, and a solid foundation that stimulates confidence in the actions and decisions of the organization.
Analysis of Operational Risk Management Measures: Devising a solution to overcome the Operational Disasters faced by Nissan in Relevance with the Best Practices of Operations Management. (CLO2&3)
Operational risk management at the Nissan Motor Company can be viewed from the automotive and sales finance segments. At the outset, a vehicle production business must have sufficient capability to meet short-term financial requirements for human capital, research and development, and settlement of existing credits. Liquidity can be obtained through cash, internal cashflows, or external funding.
Nissan had about 1190 billion Japanese Yens in cash and cash equivalents as of March 31, 2017 (the end of the 2016 fiscal year). The company obtains external funds through a variety of sources such as bonds and issuance of commercial paper in capital markets and loans from credit facilities (Rezapour et al., 2017). Nissan should review its liquidity risk-management policy to ensure stable business operations to lessen risks such as incontrollable credit maturity.
The automobile maker also has exposure to risks associated with financial markets, such as product prices, foreign exchange, and interest rates. Numerous studies have shown that it is impossible to get rid of such business pressures. Nonetheless, Nissan should choose currencies and product price risks by carefully assessing the available opportunities for favorable operations to assuage the possibility of jeopardizing its capital resources. The company’s automobiles and components are manufactured in 20 countries and sold in over 170 countries across the globe. Consequently, its procurement activities take place in diverse regions exposing the company to shifting foreign exchange rates (Rezapour et al., 2017). To minimize currency volatility, the company should move production to only those countries that have a vast market for its vehicles and parts.
Interest rates also pose risks to the company’s operations in both short-term and long-term investments. To hedge the possibility of losing capital due to fluctuations in the financial markets, Nissan should use derivative products in line with the internal policies and risk management plans.
The corporation obtains raw materials from various suppliers through both direct purchase and credit lines. This business undertaking exposes the company to fluctuation risks in the prices of materials. Thus, Nissan should make efforts to lessen the use of some metal catalysts by integrating modern technological innovation. Commodity price volatility can also be moderated by the use of derivative products following the company’s principles on operational risk management.
Furthermore, Nissan should continuously monitor the liquidity of sales finance providers to circumvent overwhelming debts and sustain operations (Rezapour et al., 2017). It is essential to align the maturity of debts with the maturity of assets in countries that have established long-term capital markets.
Finally, the company should ensure thorough quality checks for any new model projects at all levels, including design, production, and distribution, with a view of achieving product excellence and prevention of periodic issues and likely risks. Quality improvement should be realized through informed research and insights from consumers and rival companies to ensure continued design, production, and distribution of state-of-the-art automobile solutions.
Rezapour, S., Farahani, R. Z., & Pourakbar, M. (2017). Resilient supply chain network design under competition: A case study. European Journal of Operational Research, 259(3), 1017-1035.
Sadgrove, K. (2016). The complete guide to business risk management. Routledge.