Globalisation of the Car Industry Samples for Students-Myassignment

Questions: 1.Why have there been a large number of International Mergers in the Car Industry? To what Extent have these Mergers been Beneficial for the Companies Concerned?2.Why do Competing Firms Frequently form Alliances?3.What Benefits has the Renault-Nissan Joint Venture brought for each Company? Why was this alliance a Significant step for a Japanese Company to take? Answers: 1. the automobile industry is one of the largest industries in the world and contributes significantly towards the global economy. Automobile industry was started in 17th century and since then the industry has been evolving throughout the world. In the beginning, the US dominated the automobile market and automobiles were considered to be a rich mans toys (Mergers and Acquisitions in Automobile Sector). During the late 1950s, all the major developed economies of the world had more than one automobile brand and many of these brands had expanded their businesses by acquiring smaller brands. It was only in the late 1960s when the Japanese started to export cars to other countries. The cars manufactured by Japanese companies were a threat to the European and American brands because of a high difference in quality and features. Thus, the competition amongst the automobile companies started becoming global because of international expansions, imports and exports. After a number of initiatives to protect the local markets from foreign car manufacturers, a number of countries failed to restrict foreign companies as they established their own manufacturing units in countries that banned them from exporting their products to that country. Soon, mergers and acquisitions started taking place. The basic motive behind a large number of mergers and acquisitions in the automobile industry was to es tablish synergies by getting into business contracts with companies that had complementary strengths and weaknesses. Mergers and acquisitions allowed car manufacturers in expanding their businesses into foreign markets because mergers and acquisitions provided them with an easy way to enter foreign markets. Further, mergers and acquisitions also helped automobile manufacturers in coping up with the increasing market competition and to stay competitive. Because of globalization, almost all major and minor car manufacturers wanted to expand their reach and started to enter foreign markets by merging with other companies or acquiring smaller companies. Thus, the remaining brands were left with no other option and had to start looking for overseas mergers and acquisitions (Top 5 Mergers Acquisitions in Automotive History , 2016). Mergers and acquisitions in the automobile industries have been beneficial for some companies and have failed in many other cases. Some companies, such as Nissan and Renault, have been able to exist till date because of their mergers and acquisition strategies while some companies have failed miserably and have failed to exist even after merging or acquiring other companies. On the overall, mergers and acquisitions in the car industry have been beneficial for the world economy, customers as well as for the companies (Extinction of the predator, 2005). It became easier for the companies to enter into new markets where their entry could not have been possible otherwise. It allowed companies to expand their reach and customer base beyond the local market and become more competitive. Further, some of the concerned companies were even able to revive their market position and outperform their competitors in the global market. Many car companies were also able to make use of the economies o f scale and increase their revenues. 2. the present day business world is complex and is changing at a very fast pace. Business organizations are becoming vulnerable to a number of global external and internal environment factors that can demand frequent changes in strategies, operations and processes. Thus, in order to remain competitive and to cope up with the market trends, business organizations have to bring about changes in their strategies and have growth plans for the future. Strategic alliance allows two or more companies to work together under a business arrangement and achieve the mutual benefits of being together. Many countries that are seeking expansion in foreign country tend to form alliances with other companies that are operating in the same industry (Vale, n.d.). there can be a number of reasons that can motivate a company to form strategic alliances with a company that is competing with it in the same industry. Some of the reasons are discussed below: First of all, by forming strategic alliances with competitors, business organizations are able to kill a certain degree of market competition and become more competitive in the market due to the synergy effect. Secondly, by forming alliances with competitors, some companies are able to make good use of the other companys resources, knowledge and assets and can become more competitive by preforming better. Thirdly, strategic alliances can also help business organizations in gaining a great deal of industrial knowledge. Getting into an alliance with a foreign company can help a company in increasing its profits, making its employees more competitive and gaining knowledge about the foreign market too. Fourthly, when a company alone is not able to undertake a large project that can be beneficial for it in the long run, it can form a temporary alliance with any of its business competitor for that particular project and both the companies can achieve the benefits of the project because of the alliance (D'Alimonte, 2014). Fifthly, one of the biggest reasons because of which competing companies form an alliance is to share the risk of business. When companies are planning to try something new, they can partner up with each other and can share the risk of the new business while still competing with each other in their primary business (Faiza, 2014). For example, two companies operating in the same industry can share a transportation and distribution system, which will help each of them in saving money, ensure faster delivery of products and sharing the risk of the transportation business together. Lastly, forming an alliance with a competitor can help the two companies in reducing the dominance of a major market player and increasing their own competitiveness. In certain conditions, strategic alliances between rival firms not only reduce the competition but can also increase the barriers to new market entrants. 3. Renault is a France based car manufacturing company while Nissan is a Japanese car manufacturing company. Both the companies have a considerable market presence throughout the world. During the late 1990s, Nissan was facing tough situations because of huge losses and a large debt (Renault-Nissan Alliance: Success by Integration, 2013). On the other hand, Renault was a rising star while Nissan had an efficient system of production and had very strong products. In 1999, the two companies formed a strategical alliance when Renault acquired 36.8% of Nissans shares. The alliance was one of the biggest alliances in the global automobile industry because it allowed both the companies to retain their separate identities and still have a stake in each others businesses (OUR ALLIANCE WITH NISSAN: TOGETHER STRONGER, n.d.). It allowed the two companies to build synergies using each others knowledge and resources and helped Nissan in overcoming its financial crisis and re-establishing itself in the global market (Levin, 2014). Nissan was able to revive its market image and the alliance helped both the companies to become more competitive an in increasing their respective foreign reach The two companies developed a paradigm through which they were able to cut down their operational costs and become more innovative. The strategic alliance between the two companies allowed them to share several systems, manufacturing plants, platforms and best practices. At present, the two companies are still into their strategic alliance and have maintained different identities. The companies have recently decided to develop 70% of their vehicles jointly by making use of a common module family method. The strategic alliance between the two automobile manufacturing companies was an important step towards the development of the automobile industry because Japan was coming up as a great car manufacturing market and was posing a great threat to other car manufacturing markets in the world. In order to curb the rising competition and to boost the local manufacturers, many countries started putting a ban on foreign imports of automobiles. Europe and America banned the import of Japanese automobiles while even the Japanese became strict with their import export policies. In such a scenario, an alliance between a Japanese and a French company helped in widening up the market and promoting globalization of the industry. As a result of the alliance between Nissan and Renault, the market started to expand and more and more mergers and acquisitions between foreign firms started taking place. Thus, when the global automobile industry experiences an alliance between a Japanese and a French comp any and saw them ripping the benefits of globalization, they started to reduce the barriers to the global expansion of the industry and the industry started to expand at a very fast pace. Therefore, the alliance is considered to be a significant step for a Japanese company to take. References Mergers and Acquisitions in Automobile Sector. (n.d.). Retrieved April 12, 2017, from www.academia.edu: https://www.academia.edu/8530339/Mergers_and_Acquisitions_in_Automobile_Sector Top 5 Mergers Acquisitions in Automotive History . (2016, July 12). Retrieved April 12, 2017, from www.automotive-iq.com: https://www.automotive-iq.com/powertrain/articles/top-5-mergers-acquisitions-automotive-history Extinction of the predator. (2005, September 8). Retrieved April 12, 2017, from www.economist.com: https://www.economist.com/node/4369762 Vale, S. (n.d.). Why Do Firms in Different Countries Form Alliances With One Another? Retrieved April 12, 2017, from smallbusiness.chron.com: https://smallbusiness.chron.com/firms-different-countries-form-alliances-one-another-74529.html D'Alimonte, D. (2014, December 12). 6 Reasons for forming strategic global business alliances - See more at: https://www.tradeready.ca/2014/fittskills-refresher/8-reasons-forming-strategic-global-business-alliances/#sthash.3CqAKE5i.dpuf Original article: https://www.tradeready.ca/2014/fittskills-refresher/8-reasons-forming-strategic-global-business-alliances/. Retrieved April 12, 2017, from www.tradeready.ca: https://www.tradeready.ca/2014/fittskills-refresher/8-reasons-forming-strategic-global-business-alliances/ Faiza. (2014, August 8). Six main reasons why firms opt for strategic alliances. Retrieved April 12, 2017, from www.linkedin.co: https://www.linkedin.com/pulse/20140808175646-51667091-six-main-reasons-why-firms-opt-for-strategic-alliances Renault-Nissan Alliance: Success by Integration. (2013). Retrieved April 12, 2017, from www.icmrindia.org: https://www.icmrindia.org/casestudies/catalogue/Business%20Strategy/BSTR422.htm Levin, D. (2014, March 5). Renault-Nissan alliance pushes economies of scale to new level. Retrieved April 12, 2017, from fortune.com: https://fortune.com/2014/03/05/renault-nissan-alliance-pushes-economies-of-scale-to-new-level/ OUR ALLIANCE WITH NISSAN: TOGETHER STRONGER. (n.d.). Retrieved April 12, 2017, from group.renault.com: https://group.renault.com/en/our-company/a-group-an-alliance-and-partnerships/our-alliance-with-nissan/