IT IS ESSENTIAL TO MAKE CHANGES FOR AN ORGANIZATION TO TAKE COMPETITIVE ADVANTAGES

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IT IS ESSENTIAL TO MAKE CHANGES FOR AN ORGANIZATION TO TAKE COMPETITIVE ADVANTAGES

Introduction

In the challenging business environment, it is essential to make changes for an organization to take the competitive advantages. Change, in the free market economy, is inevitable and the change manner management plays an integral role in the failure or success of business. Before changing, there are lots of required plans to ensure that all problems are identified in order to avoid any uncertainties . Nissan has realized the immediate change after recording a loss of more than $6 billion in the year of 1991 and was going to bankruptcy. After the seven-year loss, Carlos Ghosn is assigned to be the CEO of Nissan Motor Corporation . He had transformed Nissan to one of the most profitable organizations worldwide by rapidly changing the leaderships in the business environment in two to three years. Ghosn had applied various leadership approaches to rescue the Nissan.

Leadership is the ability to influence others’ way of thinking, behaviours and attitudes in order to achieve the common goals . To motivate others, leaders need to understand the goals, the needs and expectations of people because leadership is culturally contingent . Leaders are responsible for the organizations running and deciding the proper leadership styles in different countries, situations or cultures . The effective leaders should carry out the vision and mission of the organization successfully. Effective leaders know about the world of global business, so they can adapt any cultures, flexible in leadership styles that could be applied in any organizations around the world.

This study will analyse the organizational culture at Nissan before the organizational change initiated by Ghosn after introducing about the situation of problems and company history. Then, the decision making in Nissan before and after the changes is also determined.Carlos Ghosn is recognized as the successful leader to rescue Nissan from the financial crisis and has significant contributions to the society and industry .Hence, Ghosn’s leaderships styles in general and about the specific organizational change within the business are examined using various leadership models and theories . Also, the effectiveness, efficiency and the business value added to Nissan through Ghosn’s leadership are illustrated.

Main body

1. Background of Nissan

Nissan was a famous automobile manufacturing which established in 1933, in Yokohama and took over the manufacturing of Datsun Ltd and renamed as Nissan in 1934. In the following year, 1935, Nissan started to produce sub-compacts cars, Datsun and exported to Australia. According to The Short History of Nissan Motor Company, 2013, Nissan bought new production lines intent to small passenger cars in the year 1936 . Then, The Second World War came in which had significant effects on the business operation, hence, the company had to shift to ships and military vehicles . In order to recover from the war impact, Nissan cooperated with Austin Motors and introduced new cars in 1958 and then win The Deming prize in the year 1960 . Later, in the years 1980 and 1984, Nissan introduced two new manufacturing operations in the United Kingdom and the United States and started to expand globally. And, the firm was well-known about the advanced technology and engineering, quality management and productivity . However, Nissan management had not focused on long term strategy or profitability, it only concentrated on the short term growth of market share. Also, the retain earnings are put into the suppliers’ equity instead of reinvesting in the development of new products . The Asian crisis together with the business inappropriate strategies led to the depreciation in Yen and resulted in bankruptcy . The firm had been under huge debts for many years, hence the financial and new strategic management are needed to foster the turnaround. Nissan had found and built strategic alliances with Renault, who was looking for partners in order to reduce the European market’s dependence, for mutual benefits and growth in 1999 to ensure the survival of the business . The Renault had assumed Nissan’s debts of $ 5.4 billion will be returned for 3.6 % of equity stakes in Japanese businesses . This deal was made sense for both Renault and Nissan in which cashes of Renault would decline the Nissan’s debts while Nissan would fill the significant gaps in the North American for Renault . These two well-known companies about innovating designs and quality of its engineering were complementary. Furthermore, the NRP (Nissan Revival Plan) was reconstructed and aimed to reach the continuous and sustainable global growth in 2001 . Carlos Ghosn took over the COO role of Nissan and was assigned as a key person for implementing the changes by meeting all employees from various departments to discuss the ways to move on . Carlos Ghosn, who was born in 1954 in Brazil and moved to Paris for university and career . He had learned the management of large operations under any adverse conditions after 18 years of working. After taking over the company, he concentrated on improving costs efficiencies and achieving goals in order to increase margins as a global leadership . Based on the Beer’s model, Nissan had combined the Theory Economic and Organizational Development for effective change strategies (Beer & Nohria, 2000) . Currently, the company manufactures cars in twenty locations worldwide where sold more than 4800 million units in 2011.

2. The organizational culture at Nissan prior to the organizational change initiated by Ghosn.

Culture plays essential roles in shaping management and employees’ behaviour that direct impact the business operations. It is one of the significant factors to be considered for the changing implementation, highlighted by many researchers . Organizational culture, or corporate culture, related to the set of the beliefs, customs, values, experiences and systems that are created within the organization and have competitive advantages . Organizational culture is defined as “the specific collection of values and norms that shared by people and groups in an organization and that control the way they interact with each other and with stakeholders outside the organization” . Implementing the organizational culture change is difficult because employees are resistant to change after long time comfortable with their jobs and the businesses . According to Burnes (1992), a more considered and organizational specific approaches could be adopted in the cultural change . The changing process relies on the managerial judgment together with the certainty in order to manage and maintain the existing culture to fit the environmental change.

Nissan culture is strongly developed within the organization in Japan, so it is not easy to accept the change in the progression system by the staffs . The Nissan culture affected its competitors as the culture is ensure the lifelong career for employees in the company . However, Nissan was not able to accept the responsibilities of having the culture of blame. Hence, Nissan needs to have a radical changing process in order to improve its performance . That was the reason why Nissan adopted the Schwartz and Davis suggests in which make the culture changes ultimately . The culture changing had impacted on the employees work orientation, so they need about one-year period to adapt the changes and change their attitude . The resistance to change had impacted significantly to the success of the change implementation which based on the attitudes, beliefs, and the perceptions to enhance the pleasure and avoid the pain . As a result, the change needs to be aware by the employees through a clear vision and well strategies in order to get the effective implementation process . To ensure the effective changes, the top management, who plays fundamental role in supporting the changes, has to be engaged actively for the effective particular culture change.

Nissan leaders does not focus clearly on the business’ priorities and successful planning executed with good leader backup . The transparency is established as a new organizational culture that allows everyone, rather than management, to give ideas and make discussion within the organization. This results in a consistency in the business thinking and doing daily operations . In addition, the Nissan management adopted the decision making mechanism in order to reserve the harmony so that the employees avoid to make mistakes to operate in an efficient manner . Those norms were hampered the risk taking and led the decision making slower for all levels. Furthermore, the top tunnel vision management had been developed regrading to its strategic focus on regaining the market shares instead of restoring the margin because the management only focus on the maintaining the size of organization and its employees. In addition, the communication between organizational layers or departments was difficult that resulted in no long term potential plan or no sharing vision . Also, the employees were almost believed that their respective divisions or departments was optimally operating, the business problems were created by other employees and divisions . Employees seemed to be uninformed to the key organization decisions . In the consequent, the employees lacked of sense of the possibility of bankruptcy of Nissan due to the tradition of Japanese companies . The tradition indicated that the Japanese government would always bail out the big troubled employers, so this implication was based on the partnership between the businesses and the government in ensuring the employment and the exporting to the foreign markets . In generally, Nissan culture prior to the organizational change initiated by Ghosn could be five main components of bottom line objectives including the lack of cross functionality leadership. In addition, lack of orientation of profit and common long term planning also need to be considered (Nissan Revival Plan, 2013) . Last but not least, the insufficient customer focusing and lack sense of urgency are important factors that impact on the business performance (Sulejewicz, 2003) .

Carlos Ghosn entry was bringing out the essential guns. Firstly, he targeted to the keiretsu system, which is the traditional relationship between co-ownership and the fixed pricing of some main manufacturers and their chief suppliers in Japan. This system contributed to the bringing Nissan out of the bankruptcy. There was conflicted in culture between Ghosn and Japanese because of the cultural differences. Therefore, the the channels and paces were correctly, the company rapid innovation could be provided opportunities. According to Manz & Henry (1990), if the strength of different cultures were accepted and built, it would give an opportunity to growth for both employees and Ghosn himself through the different perspectives consideration. Carlos Ghosn implied that no one leader should try to impose their cultures on other people who are not ready to change the culture. He realized that if he imposed reforms his culture in Nissan, then the turnaround he sought would likely backfire. Nissan corporate culture could be divided into three categories as transparency, execution, and the communication within the company. Ghosn believed that the business could be effective if the followers believe on what the managers or leaders thinking. In addition, the strategy is only 5 % of the organizational prosperity that directly measure to improve the quality, cost and the customer satisfaction. Lastly, the only way to get truly unified effort was communication even the organization is facing layoffs. Carlos Ghosn concentrated on the performance based incentive system that including the cash incentives and the stock options in which directly impact to the company operating profits and revenues. In Japan traditional compensation system, managers did not receive any bonuses or stock options, however, Ghosn’s system was different that the highest rewards and promotions would be achieved by the highest achievers.