- 16th Apr 2023
- 06:03 am
Introduction: Nissan Motor Company Ltd. is a multinational automobile manufacturer headquartered in Yokohama, Japan. Founded in 1933, it is the world's largest electric vehicle (EV) manufacturer, and has a global presence, with operations in Asia, Europe, North America, and South America. The company is well known for its popular brands like Nissan, Datsun, and Infiniti. Over the years, the company has faced several challenges related to production, product quality, and corporate governance. In 2018, Nissan was hit by a major scandal involving its former chairman, Carlos Ghosn, who was accused of financial misconduct. The scandal led to a major overhaul of the company's corporate governance structure and a renewed focus on building operational resiliency. This case study will examine the steps taken by Nissan to build operational resiliency in the wake of the Carlos Ghosn scandal.
Background: In November 2018, Carlos Ghosn, then the chairman of Nissan Motor Company Ltd., was arrested by Japanese authorities on charges of financial misconduct. The charges included underreporting his salary to the Japanese government and using company assets for personal use. Ghosn denied the charges, but he was subsequently fired from his position at Nissan. The scandal sent shockwaves through the global automotive industry and raised questions about the corporate governance practices at Nissan. The company's reputation was damaged, and its share price fell significantly.
Building Operational Resiliency: The Carlos Ghosn scandal exposed several weaknesses in Nissan's operations, including its corporate governance practices, its internal controls, and its risk management processes. In response to the scandal, Nissan's senior management team launched a program to build operational resiliency. The goal of the program was to identify and mitigate risks in the company's operations and to strengthen its corporate governance practices.
The program had four main components:
1. Strengthening Corporate Governance: Nissan's senior management team recognized the need to improve the company's corporate governance practices in the wake of the Carlos Ghosn scandal. The company's board of directors was overhauled, with several new independent directors appointed to the board. The board's responsibilities were expanded, and it was given greater oversight of the company's operations. The company also implemented new policies and procedures to improve transparency, accountability, and risk management.
2. Improving Internal Controls: Nissan's senior management team recognized that the company's internal controls were not strong enough to prevent financial misconduct. The company implemented new policies and procedures to improve its internal controls, including the establishment of new control functions and the deployment of new technology systems. The company also conducted a comprehensive review of its financial reporting processes to identify areas of weakness.
3. Strengthening Risk Management: Nissan's senior management team recognized that the company's risk management processes were not effective enough to identify and mitigate risks. The company implemented new risk management policies and procedures, including the establishment of a risk management committee and the deployment of new risk management tools. The company also conducted a comprehensive review of its business operations to identify areas of risk.
4. Enhancing Operational Efficiency: Nissan's senior management team recognized that the company's operations were not as efficient as they could be. The company implemented new operational efficiency measures, including the consolidation of production facilities and the optimization of its supply chain. The company also invested in new technology systems to improve its manufacturing processes.
Results Nissan's program to build operational resiliency has had several positive results. The company has strengthened its corporate governance practices, improved its internal controls, and enhanced its risk management processes. The company has also improved its operational efficiency, and has implemented measures to improve its financial performance. In
Conclusion: Nissan's journey to building operational resiliency is a case study on how a company can recover from a crisis and build a sustainable business model for the future. The company's transformation under the Nissan Next plan shows the importance of effective leadership, a clear strategy, and a commitment to change. By implementing a new business model, optimizing production and supply chain management, and investing in new technologies and electric vehicles, Nissan is positioning itself for long-term success.
However, the road to recovery was not without challenges. Nissan had to make difficult decisions, such as closing factories and laying off employees, to reduce costs and become more competitive. The company also had to navigate cultural differences between the Japanese and non-Japanese executives and implement changes across the global organization.
Despite these challenges, Nissan has shown that it is possible to build operational resiliency and emerge stronger from a crisis. The company's transformation provides valuable lessons for other businesses facing similar challenges, such as the need to adapt to changing market conditions and embrace new technologies.
Overall, Nissan's case study demonstrates the importance of a proactive approach to building operational resiliency. By anticipating risks, implementing effective risk management strategies, and investing in the right technologies and talent, companies can weather crises and thrive in the long run.