Nissan Motor Companys Business Environment

Introduction

Major changes in the global business environment have led to the decline of major players in many industry segments. The automotive industry, for instance, is experiencing a major disruption associated with the increase in demand for electric vehicles (E.V.s) and the entry of new participants, such as Tesla Inc. In order to respond to the movements of the market, existing companies need to seek opportunities to retain competitive advantage both on national and international levels.

The following paper presents an analysis of Nissan Motor Company aimed at evaluating its ability to remain proactive in a competitive business environment. The analysis is done using the SWOT and PESTLE tools and substantiated with relevant performance indicators such as sales, market share, revenue share, and paying capacity of the audience.

Company Background

Nissan Motor Company is one of the leading manufacturers of cars. The company was founded in Japan at the beginning of the twentieth century and has since expanded to more than 100 countries. Recently, the technological progress and the growing concern with the state of the environment have created the demand for energy-efficient electric vehicles (E.V.s), which was addressed by several companies, including Nissan. Currently, its Leaf model remains one of the most popular options on the E.V. market. The company owns three brands (Nissan, Infiniti, and Datsun), operates in a long-term partnership with Renault, and steadily increases its market share both in developed and developing countries, with an apparent focus on the latter.

PESTLE Analysis

Political Factors

The automotive industry depends heavily on the economies of scale, both in terms of materials and labor. Typically, production processes are outsourced to Asian countries, and the U.S. Thus, the political tensions between major players may lead to restrictions that will compromise the manufacturing process. On the other hand, a partnership aligned with the corporate social responsibility program may provide additional benefits to all stakeholders.

Economic Factors

Cars, especially electric vehicles, are expensive products and are considered a luxury in many developed countries. Thus, it is necessary for Nissan to account for factors such as the paying capacity of the population in order to correctly estimate the profitability of entering new markets. This is especially relevant for developing countries, where the company is actively establishing a market presence.

Social Factors

In addition to the socioeconomic considerations mentioned above, it is equally important to take into account the current perception of the target audience. Due to the growing concern with a negative impact on the environment, the automotive industry gradually loses its appeal. The obvious exception is the electric vehicles, which provide an additional level of comfort while at the same time aligning with the perception of environmental friendliness and cleanliness. The latter is especially relevant for Nissan due to sufficient investments in innovative technology demonstrated in recent years.

Technological Factors

The automotive industry is tightly connected to the technological development, both for manufacturing purposes and for expanding the capabilities of the final product. Therefore, it is reasonable to suggest that the success on the market will depend heavily on the level of technical proficiency of the company and its ability to implement the findings in the design of vehicles. In addition, it is possible to expect further performance improvements provided by the automation and integration of informational technology in vehicle manufacturing.

Legal Factors

The main area of legal concern is with safety requirements maintained by different countries. These requirements can usually be enforced by governments and vary significantly depending on the country. Failure to comply with the requirements may compromise the companys image and lead to product recalls, which is a costly and image-damaging procedure.

Environmental Factors

As was mentioned above, the environmental impact is one of the most pressing issues in the industry. It is also reasonable to suggest that the trend will persist in the long term, creating the demand for highly optimized, low-emission cars. In order to sustain competitive advantage, the company needs to prioritize the development of hybrid vehicles and E.V.s, which are more likely to comply with future regulations and are expected to be more attractive to the customers.

SWOT Analysis

Strengths

The first strength of the Nissan car company is the attention to the management of the R&D department. According to the latest data, the expenditures associated with the R&D segment were estimated at just below USD $4.5 billion (Nissan Motor Corporation 2016). It should be mentioned that the amount of investment has increased by approximately 1% compared to the previous year, which is in line with the overall steady increase in funding for new projects (Nissan Motor Corporation 2016).

It is also necessary to point out that the identified sum is relatively low when compared with other players in the field. However, Nissan distributes the funds within the segment to prioritize the most promising options, including vehicle safety, hybrid vehicles, and E.V. technology. The short-term result of such focus is the introduction of Nissan Leaf, an electric vehicle, to the consumer market. Since its introduction, the model has garnered a positive image in the market and has since remained the most popular option chosen by the consumers, occupying one of the top positions by annual sales in the recent three years, and managing to surpass Tesla in 2017 in terms of sales despite its relative obsolescence (Schmitt 2017).

The second strength is a successful alliance with Renault, established in 1999. Both entities hold a percentage of stakes in the partners enterprise and are managed by a joint company that ensures the alignment of goals and interests of both players (Renault Nissan 2017). The said alliance provides an opportunity for both companies to allocate more funds to R&D activities, negotiate better terms, expand market reach, and invest in long-term high-concept projects.

The third strength is a strong presence on both the developed and the emerging markets on a global scale. According to the recent report, Nissan occupies approximately a third of the automotive market in Russia and France, with significant shares in Japan (11%), China (5%), the U.K. (10%), Germany (7%), and the U.S. (8%) (Nissan Motor Corporation 2016). While such percentage is clearly insufficient for market dominance, it provides growth opportunities and diversification necessary to maintain a competitive advantage by introducing new products to the market. It should also be pointed out that the presence in the U.S. market is responsible for a high revenue share of above 40%, which illustrates the significance of the occupied position.

Weaknesses

The most apparent weakness of the company is the volume and concentration of the recalls in the market. The latest of such recalls occurred in 2016 in the U.S., with more than 3.5 million cars recalled due to safety bag issues (Reuters Staff 2016). In addition, more than 900,000 cars and 700,000 SUVs were recalled for various safety considerations (Shepardson 2016). While the practice of vehicle recall is relatively widespread in the industry segment, Nissan has demonstrated the rates which were particularly damaging to the companys revenues and reputation.

The second weakness is the poor performance of the marketing department. Nissans expenditures on advertising in 2015 surpassed the U.S. $2.5 billion, which remains above the respective number allocated by competitors. Nevertheless, Nissan has failed to build sufficient brand presence as a result of the investment. For instance, the majority of brand rating agencies currently do not list Nissan among the top-rated brands in the world, with the exception of Interbrand, which lists it as 39 (Interbrand 2017). Such discrepancy suggests the need to review the current marketing and advertising approaches utilized by the company.

Opportunities

The most apparent opportunity for Nissan is the growing concern with environmental issues and its impact on the automotive industry. The need to reduce carbon footprint will eventually lead to an increase in production costs for the manufacturers, at which point they will need to either invest in R&D of technology that would comply with the government regulations or cut down or incur additional expenses to retain the price-sensitive consumers. In this situation, Nissan would have a significant advantage since it already has a recognized product in the segment of electric vehicles and a well-developed R&D department with several ongoing long-term projects in development.

The second opportunity is the overall growth of the industry, which is estimated to increase at a compound annual growth rate of 6% in the following years, adding the value of above USD $1.5 trillion by 2030 (McKinsey 2016). Such growth rate provides the opportunity to increase revenues steadily and allows for more consistent modeling of the outcomes. The same can be said of hybrid vehicles and alternative fuel utilization, both of which are expected to increase in demand as the natural supply of oil dwindles. It is also worth mentioning that Nissan has a sufficient presence in all major markets where such demand is anticipated.

The third opportunity is the expected increase in consumer confidence among the U.S. citizens. As was mentioned above, the U.S. market is responsible for a significant revenue share of the company. Thus, the improvement of the regions economy and, by extension, the quality of life of the citizens is expected to result in an increase in sales figures. This assumption is consistent with the metrics of the previous years, where the observed improvement has correlated with a 5% increase in sales of cars in 2015 compared with the year before.

Finally, the strong orientation at the developing markets can be considered an advantage. Currently, Nissan is focusing on establishing its presence in India by setting the goal of a 10% market share. It is also worth mentioning that the Chinese market, where Nissan is in control of 5.5% of the market, is already responsible for the second-largest revenue share after the U.S. Considering the economic growth potential of the largest developing countries, it becomes apparent that emerging market penetration creates growth opportunities on the international scale.

Threats

The first threat to the company is the volatility of the Japanese Yen exchange rates. Nissan is a Japanese company, and its global outreach means that a significant proportion of revenues need to be converted to the national currency. As a result, the profits are highly dependent on the fluctuations that occur in the market at the time of transfer. For instance, the increase of the Yen rate will result in an unexpected decrease in profits of the company.

The second threat is the cost of electric vehicles compared to their gas-powered counterparts. Currently, the former is significantly more costly in terms of purchase, maintenance, and repair. It is generally believed that as technology progresses, E.V.s will become increasingly more affordable. However, the ongoing decrease in gas prices across the world allows the manufacturers to focus on the optimization of existing vehicles, which creates a more attractive option for consumers. As a result, the investment in electric vehicles may not produce the desired returns.

Conclusion

As can be seen from the analysis above, it is evident that the automotive industry is in the process of ongoing disruption caused primarily by the growing concern with the negative environmental impact and the introduction of electric vehicles. Nissan Motors has successfully tapped into the new market segment by introducing an affordable Nissan Leaf model. However, as was indicated in the analysis, the current trends are expected to remain relevant, at least in the short term, with the gradual dwindling of oil reserves determining the long-term changes.

Currently, Nissan is maintaining a competitive advantage by investing heavily in R&D and focusing the efforts of the research on technologies that are expected to be in demand in the future, including effective utilization of hybrid technologies and an increase in the energy efficiency of the vehicles. Another important move is the strong orientation towards increasing market share in the emerging markets, such as those of India and China. The former is expected to minimize expenses once the entire industry starts shifting towards E.V. production, whereas the latter will provide an advantage of early market entry and increase the long-term stability of the companys position in the market.