Assessment Brand Management

The turnover by strategic business units (in millions Euros).

Source Renault/Nissan Alliance facts and figures 2008

The total turnover presents a decrease of 7% in 2008 mainly due to the financial crisis. Indeed, the automobile sector was heavily impacted by the world economic crisis and on the fourth trimester of 2008, the scale of the crisis provoked a decline of 7.4% in the global automobile marketing activities.

3. Renault’s Models

As seen previously, Renault markets three brands: Renault, Dacia and Renault Samsung.

Renault markets under its brand various models:

Dacia markets under its brand two models:

Renault Samsung Motors markets under its brand four models:

4. World Market

The company is present in 118 countries and possesses numerous production factories in the world markets to reduce the transport costs of export as well as the labor costs.(Appendix 2)

With the objective to appear among the three best car manufacturers, Renault aims at increasing its sales all over the world. In 2008, according of its annual report, Renault resisted to the financial crisis since the world sales of the group dropped 4.1 % when the world market presented a 5 % recession. Regarding the European market, with 8 % recession in 2008, Renault’s sales present a decrease of 7.2 %. Therefore, Renault’s results adjust well to the market’s variations. However, emerging countries (Euromed and Asia) appear to be a very interesting market for the French manufacturer because even in critical situation, Renault increases its sales in these zones particularly due to its low cost car Logan. Thus, since 2003, Renault’s market shares in Europe decreased (11.1 % in 2003 against 8.9 % in 2008) whereas sales out of Europe know a progress (2.6%). (Appendix 3)

Renault’s world sales: Source Renault/Nissan Alliance facts and figures 2008

III – Industry Environmental Analysis

1. External

• PESTLE Analysis

Due to the fact that Renault is present in 118 countries mainly in Europe and Asia, the PESTLE-Analysis will focus on the impacts of the various environmental factors in these countries. From a politic point of view, the governments impose, via regulations, automobile characteristics to manufacturers. Besides, policy instability or protectionism in a country where Renault is implanted, can damage a stable strategy and a financial situation. Regarding the economy factor, Renault’s performances are essentially bound to the economic situation of a country. The current financial crisis has a huge impact on the automobile industry which knows some difficulties. In Europe, the European Union supports the automobile sector which is in maturity phase and encourages the manufacturers to innovate in ecology. Unfortunately in 2008, the European market presents 8 % recession. However, in the central Europe, the production of news models progress contrary to countries as Italy, France, England and Spain. The increase of raw materials can be considered as the most negative factors for the companies. Besides, the drop of the purchasing power urge the household to reduce their expenses, thus the number of cars sold decrease. Concerning the Asian, due to the establishment of free exchange agreement with India and China, the market presents an outstanding growth and in Europe, the Asian’s brands hold 18% of the market share. From a social point of view, the multiplicity of cultures obliges the companies to take in consideration the specific request, own to each continent. For example, the cars in USA and in Europe are not the same that is why, in 1967, Ford created its own subsidiary in Germany. The aim was to answer at the specific European request by manufacturing its own models. Ford thought that the offer created the demand. Nowadays this theory is obsolete since it is the offers which have to adapt at this demand. Indeed, the big American engine’s car would be inappropriate in the European market where the fuel price is higher than in USA. Therefore, the geographical zones with various cultures present a different segmentation. Thus, in Unites States there are more sport cars, berlins and pick-up. In Europe, there are more estate cars and berlins and in Japan, compact cars represent the most part of the market. Regarding the technical factors, first, the computing integrates more and more cars with USB socket or GPS for example. Then, from a mechanic evolution point of view, sport line of each brand, pushed by the performance, allows substantial improvements. Finally, concerning the ecology, pollution remains the most important factors and European governments encourage the manufacturers to innovate in order to reduce the CO2 emission. For example, in 2007, Renault launched its ecological model “Eco”.

• Future Scenarios

According to PricewaterhouseCoopers, the automobile industry would present an average growth of 2.5% per year until 2015. Thus, the 69 millions vehicles made in 2007 would become 84 millions in 2015. Russia would dominate the European market and in the world, 65% of the growth will benefit to BRIMC countries (Brazil, Russia, India, Mexico and China). Indeed, it is appear that the emerging countries with low production cost will see the best increase at the world level. The Pacific Asia and the South America produced 33 % of vehicles in 2000, 44 % in 2007, and will produce 47 % in 2012, particularly light vehicles. Still according to PricewaterhouseCoopers, in 2012 the European Union will represent 25% of the world production instead of 32 % in 2000. From an ecological point of view, Renault envisages to sell 100 000 electric cars before 2012.

2. Internal

• Porter's Five Forces

“Porter’s five forces of competition framework view the profitability of an industry as determined by five sources of competitive pressure.”

The first factor is the competition from substitutes and the question is: by what the automobile could be replaced? For one thing, train represents a way of conveyance with competitive prices and its network become more and more developed. Then, in times of crisis, the public transportations should increase because the households hesitate to invest money in the purchase of a vehicle. Finally, the “green” cars with natural gas and the electric motor cars are going to develop more and more with the aim of protecting the environment. Concerning the threat of entry, the huge investments necessary for the creation of an automobile firm (infrastructures, R&D, distribution) and the strict regulations barriers do not facilitate the entrance of new competitors on the market. However, the Chinese, Korean and the Indians are probably going to lead in the future years. Regarding the supplier power, there are few manufacturers in comparison to the significant number of suppliers and consequently, this power balance is not positive for the industry. Thus, the partnership system obliges the suppliers to satisfy in the best way their customers if they don’t want to be substituted. From a buyer power point of view, diversified choices which is offered on the market puts the customers in a strong position. Indeed, the buyer can choose his car according to the dimensions, the manufacturing country, the price, the style of body… However, it is the manufacturers who created this situation by their desire to present competitive advantages. Furthermore, the current economic circumstance doesn’t encourage the customers to buy a car thus negotiation power of companies become weak. At last, industry rivalry represents the last factor. Number one in the world, General Motors regroup seven brands (Appendix 4) in order to assure its presents on all markets. For example, In Europe, GM exists with two brands, Opel and Vauxhall, but doesn’t represent a huge threat for Renault in this continent. Ford Company, its main American competitor and fourth in the world rank, has know a 20% decrease of its turnover en 2008 against 7% fall for Renault. Concerning Volkswagen, first European group and third in a global market, the company differentiates itself by its excellent technical, its redefining of the brands and its rise rang in particular with its specialist brand Audi. Besides, with the Skoda, Volkswagen is the principal rival to Renault’s Logan in Romania.

Regarding the main Renault French competitor, Peugeot Citroen develops a strategy based on three axes: growth, innovation and profitability. This last one, strongly look like to Renault Plan 2009 Strategy. At last, Toyota proposes reliability cars and possesses leading industrial infrastructures. The company is very successful in term of technical innovation and has good reputation in term of environmental with the first hybrid car, Prius. Japanese’s company appears as being the main competitor of Renault in ecology.

• Future Scenarios

These next ten years will see probably the important development of the Asian car industry. Indeed, it is China which today holds the first place on global market. This development can take advantage to Europe and USA by the implantations of factories. However, the major risk is the massive marketing of Chinese cheap models on our industrial market. Nevertheless, this impact will be minimizing by the fact that the Chinese cars remain technically lower than the European cars even if low cost’s cars attractive the current household.

3. SWOT Analysis

• Strengths :

In 2005, the new Renault’s CEO, Carlos Ghosn, seems to be the right man by bringing his contribution with the Renault Plan 2009. This plan is an ambitious project but it aims to restructuring the strategy with as target, the first place in term of profitability. According to , with 23.2% of market share in 2009, Renault is leader in France in front of Peugeot-Citroen. Regarding the European market, the company remains the first commercial vehicles brand for ten years. Besides, the launching of Logan placed the enterprise as first European manufacturer which propose a low-cost car. In addition, since their alliance, Renault-Nissan develops components in common and set up deck of production which allows them to realize economies of scale and to expend their distribution networks. Also, its competitive strength lies in its association with Samsung Motors, Dacia and AvtoVAZ, which gives it an edge in R&D, production and distribution. In term of innovation, Renault dominates widely with 9 vehicles prize-winners in the Euro test NCPA collecting the maximal score.

• Weaknesses :

With its Logan which cost 5000 Euros, Renault positioned itself on the low-cost segment and inevitably, the aesthetic of this car can be only inferior. Thus, Renault can depreciate its image in particular in the countries where the car is marketed under the Renault’s brand and not Dacia as in Russia or in India. Besides, there is a possibility of cannibalisation since the Logan’s success could touch the volume sales of the others Renault models and damage their image. This risk is more and more present since that the car is marketed in the Western Europe. For example, Kangoo’s model has already suffered from the appearance of the Logan break sold 6000 Euros less expensive.

• Opportunities :

The emerging countries in America Latina, Africa or Middle East present true potential of growth and manufacturers understood it because they turn more and more towards markets.

• Threats :

With the current crisis, the automobile industry presents a huge recession thus Renault decided to reduce 25% of its production in the world market in order to anticipate the decrease of sales. In addition, the increase of raw materials is also a negative factor for companies. Finally, the competition is more and more strong and it is difficult for firms to remain stable a competitive position.

IV – Renault Plan 2009 Strategies

1. Innovation Strategy

Quality is one of the main objective of Renault Plan 2009, in this perspective, the company made numerous innovation’s effort with the aim of better satisfying customers. In order to manage this goal, Renault focused on four axes:

• The reduction of emission: In May 2007, a commitment for the manufacturing of ecological and economical cars has been signed.
• The comfort via air-conditioning and ergonomic.  
• The security.
• The engine performance due to its sport subsidiary.

Thus, Renault created in 2006  “DREAM” namely « Direction de la Recherche, des Etudes Avancées et des Matérieaux ».

In line with the offensive products of the Renault Plan 2009, having launched only 7 models in 15 years, Renault launched several new models since 2006 with in particular the new Twingo and new Laguna which are synonym of quality and reliability. In 2009, according to Renault’s website, 175 patents were deposited for the new Megane.

2. Alliances & Acquisitions Strategy

The partnership strategy allows firms to cooperate and share their knowledges with the intention to increase their growth. The alliance with Nissan organized in 1999, with total respect for the identity of each brand, constitue a competitive advantage for the companies. Indeed, due to this partnership,  Renault was able to penetrate on markets previously controlled by Nissan (emerging country) and to get an opening into the Americain and South Americain market. Renault made also a come back in Australia, Japan and in Indonesia and benefits from the support of its partner. In compensation, Renault helps Nissan’s development on the European market with the objective to have 15 % of market share in 2015. Thus, in 2006, Renault-Nissan became the fourth in the world rank of the biggest automobile groups.

Concerning the acquisition strategy, Renault began by join Dacia in 1999 with the intention to dominate the Romanian market. Due to its low cost car more adapted in these markets and a differentiation strategy, Renault became one of leader in Eastern Europe. In 2006, Renault developed the Logan globalization in Russia, Colombia, Morocco and India.

Regarding the acquisition of Samsung Motors, in 2000 Renault wanted to be present on the South Korean market. Since, with three models, the company covers 15% of the market. At last, in 2008, Renault signed an agreement with the first Russian manufacturers AvtoVAZ in order to reinforce its position on this market. Plus, Renault signed a second agreement with Scandinavian countries and created the subsidiary Renault Nordic.

To conclude, it’s abroad that the group develops its production growth today. Renault’s world dimension was possible thanks to the alliances and acquisition strategies which allow extending its impact by targeting new emerging markets in order to avoid the saturation of developing countries. These strategies correspond at the objective of international growth evoked in Renault Plan 2009.

3. Profitability Strategy

The global aim of profitability is reached thanks to the relocations strategies.

Indeed, of all the Renault production’s activities are located according to their profitability. Thus, the use of the low skilled work will be mainly made in emerging countries where the workforce is less expensive and activities of high value-added will be made in developing countries with a specialized workforce.

Furthermore, Renault-Nissan shares factories and have common suppliers which allow important economies of scale.

V – Resources and Capabilities

This part will display the resources and capabilities of the Renault by using a GAP-Analysis.

This analysis shows that Renault’s lacks are mainly in the segments of technology, (the group need to regain the up-market position), product development (Renault launched only 7 models in 15 years and the company is too dependent of the Megane which represents almost 50% of the profits) and financial (due to a financial crisis). However, the company makes lot of effort in R&D with 9 vehicles prize-winners in the Euro test NCPA which collecting the maximal score. Concerning the segment of manufacturing, Renault produces with profitability by sharing its plants and equipments with its partners. At last, Renault has important government relations in emerging country and possesses a geographically extensive distribution with special strength in emerging markets. Thus, the development of the international sales, and the increase internationalization of the productive device are the main Renault’s strengths.

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Discussion

Being at the end of 2009, a brief balance sheet can be established concerning the "Renault Plan 2009 ". In 2005, nobody could predict this recession for the car industry, even Carlos Ghosn… Unfortunately, current crisis radically changed all its objectives. First, in term of growth, it is impossible for the company to respect the commitment of 800 00 vehicles sold by year before 2010 with a decrease of 4.1% in 2008. Then From a profitability point of view, the company had 212 million euro in 2008 against 1354 millions in 2007. Thus, the economic situation truncated the Renault’s plans and it is difficult to make an objective balance sheet of its successful. However, In spite of the crisis, this strategy allowed Renault to progress. In term of quality, the launching of Laguna III answers well to the aim of a set up a reliable saloon car because the Laguna III is very appreciated by the customers. Furthermore, the improvement of quality in the sale and after-sale permit to increase by 8 points the customers' rate with 72 % in 2005 to 80 % in 2008. Concerning the objective to launch 26 new products, the company has launched “only” 17 new models (contrast to 7 models launched between 1990 to 2005) but they allow widening the Renault’s range. Besides, in 2005, Renault was still too dependent on a single market (France) and on one only car (Megane). Today, the company can count on 3 axes of profitability namely its utilitarian range, its Megane vehicles and its Logan family. Indeed, this plan allowed to the firm to be active abroad since sales out Europe represent 37 % of the Renault’s sales in 2008 against 27 % in 2005. It remains a serious asset which will help the company to live the crisis and probably to reach its main objective. Indeed, become the most profitable and competitive European’s manufacturer remains possible and continues to drive the company.

Source: Carlos Ghosn's speech 17th February, 2009

Recommendations

Renault is the only manufacturer absent in the Chinese market whereas this last one has a strong potential of growth. Indeed, with 1.3 billions of inhabitants, China is the second global manufacturers behind the United States and could reach the first place in 2010 according to . Besides, Nissan is well implanted in China and created a joint venture with the Chinese manufacturer Dongfeng holding the sixth rang of the market. The Logan which knows a huge success in emerging countries isn’t sold in China. Thus, it would be interesting for Renault to make a strategic alliance with a Chinese manufacturer such as Cherry, with the aim of continuing its world expansion. According to , Cherry is the fourth Chinese manufacturers with a market share of almost 8% and is leading in small cars sector (Appendix 10). Hence, Renault partnership with Cherry maybe envisaged especially since Cherry has particular knowledge on Chinese market and Logan will be appropriate to its segmentation and the emerging market. Otherwise, Renault can adopt the same marketing strategy than in Mexico namely the Logan’s sale via its partner Nissan.  Concerning the others emerging market specifically Brazil, Russia and India, Renault should strengthen its position on these markets because they represent "the future". Renault has a competitive advantage with Logan and has to continue to conquer new countries because this differentiation’s strategy allows gaining market shares. However, Renault also must continue to innovate around Logan because of new competitors such as Volkswagen or Toyota gradually arrives on this segment with similar projects. On the other hand, the company should pay attention to not damage its current image with the low-cost segment. For that purpose, it has to invest in news technology in order to keep a position on the up-market mainly for its development in Europe especially in France.

At last, the Renault Plan 2009 having been falsified by the crisis, it would be smart to set up a new plan, based on the same features and applicable as soon as the economy will be better. Indeed, this kind of objectives, even if they are ambitious, gives a strategy’s direction to the company and allows it to be better in the worldwide.

Conclusion

To conclude, automobile industry is the first victim of the current crisis due to the rise of raw materials and fuels’ prices and to the decline of the households’ purchasing power. With these factors, it was difficult for Renault to achieve correctly its Plan. However, Renault managed its international expansion thanks to its strategy of alliance and acquisition. In fact, the repurchase of Dacia allowed the Logan which knows a huge success and represents a growth model for the company in particular in emerging countries. Regrettably, this car is not still present in China although this country has a strong potential of growth. Thus, the strategy elaborated by C. Ghosn drive gradually Renault towards the way of success.

Bibliography

Books :

• Grant, R. (2008), Contemporary Strategic Analysis: The development cost of new automobile models

• Grant, R. (2008), Contemporary Strategic Analysis: International alliances and joint venture
• Sandrine Fernez-Walch ; François Romon-Vuibert (2006), Management de l’innovation : De la stratégie aux projets
• Alfred A. Marcus; Management strategy (2005) : achieving sustained competitive advantage
• Hovers, John;  

Website & News paper:

• « Logan, un programme résolument tourné vers les marchés de croissance de Renault » (Sept 2006) Available :   (Accessed 07 December 09)
• « Document de référence » by Renault (2008) Available :  (Accessed 06 December 09)
• « Rapport annuel 2008 » by Renault (2008) Available :  (Accessed 06 December 09)
• “Alliance facts and figures” by Renault Nissan (2008) Available:   (Accessed  03 December 09)
• “Renault Plan 2009” by Carlos Ghosn (Feb 2008) Available:  (Accessed 08 December 09)
• “Le success de la Logan est-il un piège pour Renault” Available Capital n°198
• « L’Alliance Renault-Nissan et LeasePlan s’engagent pour un futur zéro émission en Europe » April 2009 Available :  (Accessed 06 December 09)
• « Automobile - Revue de presse » by Catherine Lebée (Mars 2008) Available:  (Accessed 04 Decembert 09)
• “Automotive innovation: from concept to car” by Pascal Hénault Available:   (Accessed 04 December 09)
• “Renault Nordic” (Jan 22008) Available:   (Accessed 05 December 09)
• “Comment limiter les emissions de CO2 des voitures?” by Fabienne Keller (May 2008) Available  (Accessed 09 December 09)
• “Competitiveness & cars 21” Available: http://ec.europa.eu/enterprise/sectors/automotive/competitiveness-cars21/ (Accessed 05 December 09)
• “European vehicle makers hard hit by financial and economic turmoil” Available  (Accessed 05 December 09)
• “Le communiqué de presse de 2008” (Jan 08) Available: PricewaterhouseCoopers (Accessed 06 December 09)
• « Les constructeurs mondiaux annonce un véhicule à bas coût » Available :   (Accessed 07 December 09)
• « Ghosn dévoile le plan Renault contrat 2009 » Available :  (Accessed 02 December 09)
• “Low-cost stop ou encore?” by Olivier Page Available   (Accessed 06 December 09)
• “Renault expansion” by Renault group Available http://www.renault.fr/decouvrez-renault/groupe/strategie/ (Accessed 08 December 09)

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Appendix 1

Appendix 2: Locations

Table 1: Renault S.A’s worldwide facilities

Appendix 3: Marketing’ Results in the World

Appendix 4 : GM’s Models

Appendix 5 : Renault/Nissan

Appendix 7: Dacia et Samsung

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Appendix 8 : World’s Sales

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Appendix 9 : Forecasting World Sales

Appendix 10 : China’s Market