The diagnosis of Nissan in 1999, and its survival plan. how Carlos Ghoson managed to turn the situation and rescued Nissan. with my personal comments and suggests.

1. Organizational Diagnosis of
NISSAN Prepared By: Mustafa
Watar
Force field analysis, Open system theory
Synergy University
Mustafa Watar
Dr. Jaafar Badwan

2. Organizational Diagnosis of NISSAN Prepared By: Mustafa Watar
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Open system theory and the external environment:
he open system theory strongly refers to the concept that the organizations are strongly affected
by their environment, this environment consist the other organizations that perform various
forces including the economic, social nature, political, Quality of education. The organization as
system is described as an entity consist of four components: inputs which imply the resources that the
organization need to perform its process and produce, for instance” raw materials” the second
component process where the organization’s production performed and transform the input into an
outputs which is the final products, services these final results of the system could be the inputs for
another system and finally the feedback about the outputs. However, the open system theory supports
that these four components exist linked to an external environment which provides the organization
with the necessary resources to sustain and affects the organization in a positive or negative way, hence
the environment could be a source of risks or opportunities to the organization and the organization
provides the environment with products, services. In other words the open systems exchange feedbacks
with the external environment and they affect each other. So a healthy open systems they continuously
exchange feedbacks with their environment, analyze the feedback, then adjust internal system as
needed to achieve the system goals, and then transmit necessary information back out to the
environment. (1)
Open system theory and force field analysis:
pen system theory as explained before it describes the organization as connected internal
components which are affected by the external environment. Hence the force field analysis
identifies the forces that strengthen and weaken the organization, these driving forces, such as
environmental factors, push for change within the organization while the restraining forces, such as
organizational factors (e.g., limited resources or poor morale), act as barriers to change. Hence these
forces identified by the force field analysis define the internal and external environments of the
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3. Organizational Diagnosis of NISSAN Prepared By: Mustafa Watar
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organization. As result the force field
analysis helps us to define the factors that create the
environment which effects the organization.(2)
Nissan’s situation introduction:
issan the car maker organization is in a
very bad situation, in other words the
company is heading to a bankruptcy the
company is suffering of the following:
1) The Company’s performance is so bad and
the performance net income is declining
(graph 1) in fact the company was
performing well during the 1988-1991 and
after that the company suffered from
extreme declining during 1992-1995 and
slight improvement in 1996 and again the
company started losing the net income of its
performance 1997- 1999 and still declining.
2) In fact the company does not make profits,
the global production has decreased from
3.08 billion unites his highest point in 1991
TO 2.46 billion unites in 1998 which means
that the company’s global production has
shifted by 615,000 vehicles (graph 2)
actually the domestic factories were
operating at half their capacity.
3) Additionally the company is suffering from
declining in the global market share (graph
3) as the graph 3 shows the global market
share of Nissan has dropped from 6.6% in
1991 to 4.9% in 1998 which means Nissan
lost 1.7% of its global market share. See the
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4. Organizational Diagnosis of NISSAN Prepared By: Mustafa Watar
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table below.
4) The domestic market shares (graph 4) shows the
dramatic decline in the domestic market share
from its highest level (18.5) in 1989 to its lowest
level (13.3) in 1999 which obviously means that
Nissan losing its local market share.
5) Nissan’s debt has reached 2.1 trillion yen which
is more than 20 billion Dollars (graph5),
Actually the company is facing several problems
including management problems, strategic
problems, and lack of coordination.(3)
Desired situation:
he most important thing now is to reverse the
situation and changing the situation
completely from company on the brink of
bankruptcy to a company with promising future, and
that’s by changing to the following situation by:
 Increasing the net income on our performance
and initially reaching a positive situation where
we can reenhace the pefromnce we can see that the net income is
nigative. The grapg on the right clarifying the situation.
 We need to reach a higher level of our production and using the
actuale production capacity espicailly the domestic factories which
were operating in their half capacity hence we need to recove our
producation capacity first to reach the optimum point and then start
increasing our production capacity by 50%.
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5. Organizational Diagnosis of NISSAN Prepared By: Mustafa Watar
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 Increasing the global market share, Nissan has been losing market share since 1991, we should
increase our global sales to start generating profits.
 Enhancing our local market share and reaching market share more than 20%, the company lost 5.2%
since 1989.
 In fact the company is drowned in debt 20 billion Dollars is considered big Burden and strong
obstacles that banning Nissan from growing, so reducing the debt at least by 75% is the very
important. (4)
Force field analysis:
Driving forces:
 Full support from the alliance “Renault”
 Qualified and highly skilled engineers.
 High sales in some countries.
 One of Nissan’s models in the top ten best sellers in Japan.
 Support from Nissan’s union board.
 High support and communication of both the suppliers and customers.
 International presence and global reach.
Restraining forces:
 Decreasing global / domestic market share.
 Company is high indebtedness.
 No profit orientation
 Low retune on production
 No shared strategy, and no clear strategy
 No shared vision and mission
 No customer engagement
 Unsatisfied suppliers
 Unqualified senior managers
 Slow process
 Poor communication.
 Unqualified dealers and sales workforce

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(5)
Open system theory:
Inputs:
hen we mention the inputs we refer here to the suppliers and the cost of the raw materials
and resources that the company needs which are divided by three categories environment,
resources and history in my diagnosis I will focus on the first two:
Environment:
First of all the company is existed in a very rival environment in terms of competition locally and globally
on the local side the company facing Toyota, Honda and others in fact Nissan is operating at half of
Toyota’s.
Restraining forces Driving forces
 Decreasing global /
domestic market share 4 5
 Full support from the alliance
“Renault”
 Company is high
indebtedness.
5 3
 High support and communication of
both the suppliers and customers.
 No profit orientation 3 5  Support from Nissan’s union board.
 Low retune on production
3 2
 One of Nissan’s models in the top
ten best sellers in Japan.
 No shared strategy, and
no clear strategy
4 2
 High sales in some countries.
 Unqualified dealers and
sales workforce
5
 No shared vision and
mission
3 5
 Qualified and highly skilled
engineers.
 No customer engagement
5 5
 International presence and global
reach.
 Unqualified senior
managers
3
 Slow process 2
 Poor communication. 3
 Unsatisfied suppliers 2
Total 42 27 Total
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Secondly, Economic environment: In Japan, the economy was hit by a dramatic downturn in consumer
spending triggered by factors that included an increase in the consumption tax rate and the termination
of special income tax cuts. Uncertainty about the economic outlook was meanwhile heightened by
instability in the financial system, and the economy showed increasing signs of sluggishness.
Thirdly, Demand: This economic situation was reflected in low levels of domestic demand for
automobiles. The slumping economy eroded consumer confidence, causing overall domestic vehicle
registrations to decline by 14.6% below the previous year’s level to 4.75 million units, excluding mini
vehicles. This is the first time in four years that registrations have fallen below five million units.
Resources:
An overall look at the cost of production in total: An approximate ¥50 billion increase in research and
development costs and other expenses, an approximate ¥25 billion increase in costs for sales promotion
in Japan and approximately ¥90 billion in losses for the write-down and re-marketing cost in the carrying
value of vehicles in the U.S. lease portfolio.
In terms of the suppliers Nissan has more than 230 suppliers in JAPAN only and they are not aware of
the vision and Nissan’s strategy or the company’s priorities of the company, additionally Inventories are
stated principally at the lower of cost or market. The cost of finished products, work in process and
purchased parts is determined primarily by the average method, and the cost of raw materials and
supplies is determined primarily by the last - in, first - out method.
In terms of the assets, the company has Total assets increased ¥410.0 billion, or 5.5%, to ¥7,883.8 billion
(US$59.7 billion).Total assets consist of manufacturing and sales operations assets and financial services
assets that include retail and wholesale financing and leased vehicles. Manufacturing and sales
operations assets increased by ¥431.8 billion, or 7.7%, to ¥6,018.6 billion, while financial services assets
decreased by ¥21.8 billion, or 1.2%, to ¥1,865.2 billion (graph 6). The following statement the costs and
expenses that Nissan pays:(6)
Graph 6

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Out-puts:
he total system out-put: the overall production of the company has been dropping since 1991
when the production was in his highest levels (3.08 million vehicles) to its lowest level in
beginning of 1999 (2.46 million vehicles) and the earning performance net income has been
decreasing for the last 2 years 1998-1999 in comparison to 1997 furthermore in 1997 the net income
was 77,743 and in 1998-1999 respectively (14,007), (27,714) minus and the employees’ number in 1999-
1998-1997 respectively (131,260) (137,201) (135,331) which reveals that the employees performance is
dropping down dramatically. Graph 7 shows the number of employees and the income from 1994 to
1999:
Transformational process:
here is a lack of urgency in the process in Nissan which means there is delays in the process flow
for example: the process that should take a week Nissan’s employees do it in a year! Which worth
to be highlighted that Nissan to accelerate the decision-making process by delegating more
power and authority to middle management and the middle management in fact was disjointed
everyone is pulling in a different direction, furthermore the company was divided into territories. The
companies using teams approach but functional teams not cross functional because of the previous
reason (we have territories no teams) and senior managers, middle manager, executive committee, and
Nissan’s Union, Secondly the company’s Nissan’s designs were doing badly and the only 4 models
generating profits.(7)
Change strategy:
issan change plan should be comprehensive and covers the whole company to reach favorable
situation and new equilibrium where Nissan start generating profits as follows:
 Production and design:
o Improving the brand identity
o Develop unique products.
143,310 145,582 139,856 135331 137201 131260
-86,915
-166,054
-88,418
77743
-14007
-27714
-200,000
-150,000
-100,000
-50,000
0
50,000
100,000
150,000
200,000
1994 1995 1996 1997 1998 1999
Series1
Series2
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9. Organizational Diagnosis of NISSAN Prepared By: Mustafa Watar
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o Innovative and creative designs
o Invest more in R&D.
o Restructuring the organization.
 Technology
o Focus on the core technologies
o Building more on Nissan’s engineers.
o Reducing the number of platforms to speed up the process.
o Using the latest technologies to speed up the process.
o Creating an IT department to enhance the communications within the company and
with the organization’s customers.
 Purchasing:
o Reducing the purchasing cost by 20%
o Reducing the suppliers’ number.
 Production:
o More costumer engagement.
o Raising the utilization rate of our factories.
o Reducing the fixed costs
o Moving production as close to the end consumer as possible.
o Reduce time of the assembling process cycle.
 Sales and marketing:
o Improving the e-commerce sales channels.
o Increase efficiency and competitiveness of sales by streamlining the company’s outlets
and increasing the private ownership of dealerships.
o Complete training programs for our dealers and sales workforces.
o Enrich the global awareness of Nissan’s brand by consistent marketing communications
throw new products.
o Launching new products globally
o Reducing our own retails and increasing our sales channels networks.
 Financial:
o Creating an overall financial goal on global base.
o Reducing the company debt
o More profit oriented management.
o Alliance with Renault.
 Human Resources, Structure, management:
o Performance based system.
o Create global vision and share it with all the employees.
o Create a global strategic plan.
o Enrich the strategic awareness among the departments and regional factories.
o Change the structure of Nissan and creating cross functional teams to break the
hieratical barriers.
o Setting higher goals to achieve and connect them to our strategy.
o Creating an encouraging reward system to motivate the employees.

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References:
(1)(2) Katz & Kahn, 1978, 1951Kurt Lewin Beer, M. & Spector, B. (1993). Organizational diagnosis.
Link: https://www.iei.liu.se/fek/frist/723g16/files/1.120328/Orgmodels.pdf
(3) (4) (6)(7) Nissan’s Annual reports (1996-1998-1999) available on: http://www.nissan-
global.com/GCC/Japan/ANNUAL99/an99.pdf
http://www.nissan-global.com/GCC/Japan/ANNUAL98/an98.pdf
http://www.nissan-global.com/GCC/Japan/Annual96/menu.html
(5)(6)(7) Ghosn, C. , Ries, P. (2005) SHIFT Inside Nissan’s Historical Revival.