Nissan's Business Strategy: A PESTLE and Porter's Five Forces Analysis

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BUSINESS STRATEGY
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Table of Contents
LIST OF FIGURES.............................................................................................................................3
EXECUTIVE SUMMARY...................................................................................................................4
MAIN BODY....................................................................................................................................5
1. ANALYSIS OF PESTLE FRAMEWORK IN CONTEXT WITH NISSAN MOTOR CO. LTD...............5
2. ANALYSIS OF PORTER'S FIVE FORCES MODEL IN CONTEXT WITH NISSAN AUTOMOTIVE
COMPANY.................................................................................................................................. 8
3. RECOMMENDATIONS TO BE PROVIDED TO NISSAN............................................................12
(a) Potential Scenarios of Nissan..........................................................................................12
(b) Generic Strategy Recommendations for Nissan.............................................................12
CONCLUSION............................................................................................................................... 17
REFERENCES.................................................................................................................................18
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LIST OF FIGURES
Figure 1 PESTLE Analysis of Nissan Company................................................................................5
Figure 2 Porter's Five Force Model................................................................................................9
Figure 3 Porter's Generic Strategies............................................................................................ 13
Figure 4 Bowman's Clock Strategy...............................................................................................14
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EXECUTIVE SUMMARY
This report has emphasized the strategic analysis of Nissan Automotive Company, the car
manufacturer and vehicles used in business transport such as trucks, located in Japan which
were founded in 1933. It has also been leading company in the Europe market and has been
ranked at the 6th position across the world. The most recent vehicle introduced by Nissan is
Nissan Terra in the year 2018 (Nissan, 2019). The report has also focused on the insights of the
company’s strategic objectives which are affected due to the internal and external factors. For
this, the analysis of PESTEL frameworks, Porter’s Five Forces Model is done in the context with
Nissan and on the basis of that recommendation are provided for taking strategic decisions
(Nissan, 2019).
This report discusses the strategic analysis of Nissan. This work will examine the company's
environment and key strength and weakness that influence Nissan's strategic design, conduct a
corporate strategy and business strategic analysis of Nissan, and also provide some
recommendations for the future improvement.
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MAIN BODY
1. ANALYSIS OF PESTLE FRAMEWORK IN CONTEXT WITH NISSAN MOTOR
CO. LTD
With the help of PESTLE analysis, every external environmental factor that impacts the internal
performance of the Nissan can be evaluated. Through this framework, the management of Nissan
can devise the strategy which will help the company to gain competitive advantage and will
increase the profit level in the future sustainable market. The analysis of the external environment
influences every company of the automobile industry (Pratap, 2016).
Following is the described classification of PESTLE framework that belongs to the UK and European
market and impacts the automobile industry:
Figure 1 PESTLE Analysis of Nissan Company
(Source: Pratap, 2016)
Political factors:
Apart from only operating in the Japanese market, Nissan has the huge market in other countries
also such as UK, South America, Europe, Asia, etc. thus there are various rules introduced by the
government which the automotive industries have to follow and should contribute in the GDP level
of the economy. The political factors influence the strategic decisions of the companies and
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necessary changes are to be made as per the requirement. But some of the political changes of
both developing and under-developing nations have directly affected the business operations of
Nissan. Due to several impacts of political norms, the risk of investment in the company gets
increased (Pratap, 2016). Such intellectual property rights protect the rights of the company and if
any country does not have such policies for protecting such rights, entrepreneurs consider the most
unfavourable investment to be made in Nissan. There are some barriers in the countries where
Nissan operates the business this prevents the exports as well as disinvestment of the company.
Companies like Nissan and other automotive companies are unable to enhance their profitability
due to the increase in taxation rates (Moutinho and Phillips, 2018).
Economic factors:
Nissan has to consider various economic factors to sustain the profits such as interest rates,
inflation rates, tax rates (direct and indirect both), increase in population and their purchasing
capacity, etc. the most important factor is the GDP which is required to be increased by increasing
the revenue of the automotive industry. The changes in the inflation rates directly influence the
revenue of Nissan, because the purchasing power of customers is highly impacted due to an
increase in the price of luxurious products (Moutinho and Phillips, 2018). Apart from this, higher the
interest rates result in higher the investments this positively contribute to the growth in the Nissan.
Another is the exchange rates which affects the export-import policy of Nissan. As Nissan operates
the business across the world, the financial instabilities due to currency issues influence the
decisions of investors to invest in the company. The labour costs of Nissan would decrease if the
ratio of unemployment is more and due to this, people can work at the lesser wages also (Pratap,
2016).
Social factors:
The perception of customers towards the cars of Nissan positivity impacts the company and also
due to an increase in urbanization, the profit level of Nissan gets improved. There are several other
factors like the willingness of customers to buy the product but due to the unaffordable prices, they
avoid to purchase the same. So Nissan should focus on the budgeting criteria of the targeted
customers (Moutinho and Phillips, 2018). During the recession in the UK economy, the consumers
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omitted to purchase the luxurious vehicles and this had a huge impact on the revenue of Nissan.
The companies in the automotive industry should have knowledge of the customers' requirements
because customers nowadays prefer to be eco-friendly. Thus this has highly impacted the business
operations of the automobile industry and so almost all the companies including Nissan has
introduced the electric vehicles which have become a huge demand in the European market
(Moutinho and Phillips, 2018).
Technological factors:
It is very important for Nissan to manufacture cars and business vehicles used for transportation by
applying new technologies. To carry out production activities efficiently and the targeted customers
are served effectively. As there is an increase in competitors in the automobile industry, Nissan has
to use the latest technology in the manufacturing process (Moutinho and Phillips, 2018). There has
been a huge investment made in the research and development and market survey by the
automotive industry. Some of the competitors of Nissan like Toyota have planned to introduce the
driverless vehicles in the near future. The technological advancement had become a differentiation
source for the automobile manufacturer. This has increased the sale of electric cars in the industry.
Thus the technological comes with innovation and this impacts the decision-making process of the
companies. Thus along with the strategic decisions, technological factors affect the profit levels and
sustainability of the automobile sector (Moutinho and Phillips, 2018).
Legal factors:
There has been an implementation of the law which states the passengers’ safety after the several
accidents occurred due to the faulty airbags produced by mistake and so Nissan, as well as other
companies in the same industry, are required to take into consideration during production. There
has been also the law introduced for reducing pollution (Moutinho and Phillips, 2018). The designs
of Nissan should be intellectually protected so as to gain a competitive advantage. To make the
investment in any country so as to avoid the trade barriers, the legislative rules of a domestic
country, as well as other countries, should be properly followed. Apart from this, there is various
other law related to the environment, and so on which the vehicle manufacturing companies have
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to consider while operating in the global market (Moutinho and Phillips, 2018).
Environmental factors:
The environmental factors have various policies and rules that are to be focused by the automotive
industry. Due to this, Nissan has to put more emphasis on the vehicles that produce energy and are
free from leaking issues (Pratap, 2016). Nowadays, in the 21st century, everyone is much conscious
towards the environment and this made Nissan be more focused towards becoming eco-friendly.
The government provides subsidies to the company who produce low emission vehicles and also
those who consumes lesser fuel. There are the pollution control tests introduced by the
government of Europe and UK and only after clearing such tests by the vehicles of a respective
company, they are allowed to operate the production ahead (Moutinho and Phillips, 2018).
Thus from the above description, it is concluded that in the 21st century, environmental, economic
and legal factors have highly influenced the strategic decisions of the automobile industry especially
in the Nissan and made the companies to produce zero carbon and low fuel consumed vehicles. To
sustain in the market every company of this industry is focusing on the research and development
and technological investment to gain the market share (Teh, and Corbitt, 2015).
2. ANALYSIS OF PORTER’S FIVE FORCES MODEL IN CONTEXT WITH NISSAN
AUTOMOTIVE COMPANY
With the help of Porter's five forces model, the analysis of the competitive environment in the
automobile industry can be done. The evaluation of the company is made to know the position in
the market. To analyze the industrial structure this model is utilized which works as a tool of
business strategy. The present, as well as the future position, can be evaluated by analyzing the five
factors of the company (Martin, 2018).
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Figure 2 Porter's Five Force Model
(Source: Martin, 2018)
Rivalry among the industry:
The rivalries are generally dependent on the capabilities of the competitors and the increase in the
number of competitors in the current market situation. In the automobile industry, each company is
focusing to develop strong business decisions to maintain the top position in the competitive
market. In the automotive industry, Nissan has many competitors such as Toyota, Honda and so on.
These companies are giving tough competition to Nissan (Martin, 2018). Due to an increase in the
growth of the automobile industry, there are less switching options available to customers. as there
is a large number of companies, and having fewer options of exiting from the market, all the
companies including Nissan are sustaining in the market and competing in the automobile industry.
Due to this, there has been an increase in wars related to prices, differentiation in the products and
advertisement.
One of the strategic decisions of Nissan proved to be the best for the company which was to form
an alliance with Renault, the French automotive company. Thus Nissan has emphasized on
increasing the share and enhance the profit levels among the competitors such as Toyota (Martin,
2018).
Threat of New Entrants:
The new entrants in the industries can easily enter and exit the market. But in the case of the
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automobile industry in which Nissan operates its business, it is difficult for the newcomers to easily
enter and exit the market as it becomes very tough for the companies to diversify their business
after the huge investment. Nissan can take the advantages in cost and also the economies of scale
in the automobile industry as the level of production is higher as compared to the new entrants. For
the new competitor of Nissan to enter in the market there are some barriers while entering in the
market such as it requires huge capital investment during start-up, also faces the difficulties in the
channel of distribution, faces the product differentiation problem and difficulties in building trust
from the customers (Martin, 2018). Even some of the policies implemented by the government like
compulsion on acquiring the license and other legal formalities before starting the business. To
avoid the threat of new competitors, Nissan can focus on innovation and product differentiation
and build strong brand name should focus on proper tools of marketing which will also retain the
existing customers (Martin, 2018).
Threats of Substitutes:
It explains the threat the company faces of losing the customers and switching to the customers.
There is an average level of threat of substitute to Nissan and the company also continues building
the brand image in the market which has developed many loyal customers towards the vehicles of
Nissan. The substitutes which Nissan finds them to be a threat are the vehicles of Hyundai, Toyota,
Honda and apart from this utilization of different mode of transportation is also the threat for the
company (Martin, 2018). The products the same as Nissan are easily available at a similar or lower
price but contains distinct qualities, technology and brand name. This shows that the substitute
threat for the Nissan Company is neither high nor low. Nissan has started producing better quality
products at an affordable price as compared to the competitors’ product that is high in quality but is
also costlier. Thus Nissan focuses on providing unique products through product differentiation and
understands the requirements of the customers by doing a market survey (Martin, 2018).
Bargaining Power of Supplier:
This shows the position of the company in the market and according to that, there is a change in
the cost of supply. The bargaining power of Nissan is very limited. The products that are supplied by
the suppliers are sometimes not up to the requirement (Martin, 2018). As Nissan has the option to
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switch the suppliers so as to be cost-effective, the suppliers sometimes negotiate for the prices.
Nissan can also have more than one supplier in the supply chain for operating in different locations
and this would also improve the efficiency of the channel of supply. The automobile industry always
tends to be an important customer to the suppliers. Thus Nissan can focus on developing the
harmonious relationships to get the cost benefits from the suppliers (Martin, 2018).
Bargaining Power of buyers:
The number of companies as compared to the number of suppliers is less in the automobile
industry and therefore the customers or the buyers have the limited option to select the company
and also does not have the price control. Due to this, the buyers' bargaining power becomes weak
in the automobile industry. As the product differentiation is very much high, it becomes impossible
for the customers to buy the same product again and again (Martin, 2018). As the buying capacity
of the buyers in the automotive industry is low and being price insensitive it becomes difficult to
find the products in this industry at low prices. The buyers, who prefer the best quality products,
are found to be the frequent purchaser and are always tend to pay the high price for the best
vehicles. As the bargaining power of buyer is almost weak, Nissan should focus on building the
string base of customers by taking the advantage of economies of scale and these will provide the
cost advantage to the customers of Nissan (Martin, 2018).
Thus by using the Five Forces of Porter in Nissan, it would become easy for the decision maker of
Nissan to know the market position in the economy as per the profitability which got affected by
the above mentioned five factors. This is how strategic planning is made for the company as it
identifies the external factors affecting the Nissan which will help in gaining the profits and firms
the position among the competitors. Thus Nissan has strategized the plan to introduce high power
vehicles by using product differentiation strategy and to compete with the competitors in the UK
and European market (Teh, and Corbitt, 2015).
3. RECOMMENDATIONS TO BE PROVIDED TO NISSAN
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(a) Potential Scenarios of Nissan
One of the most important decisions taken by United Nation Framework Convention is to reduce
the consumption of fuel by more than 90% up to 2050 which will be compared with the level of fuel
consumed in the year 2000. To achieve this plan, there is the requirement to improve the
productivity of fuel in the short term and to manufacture the electric vehicles by using the
renewable source of energy for generating the power in the long term. Thus the emphasis is
specifically laid upon the zero emission and zero carbon by working on the short term and long
term goals (Nissan, 2019).
There will be an increase in demand for vehicles and to sustain in the long term, there is a
requirement to improve the efficiency of fuel consumption (Nissan, 2019). For overcoming the
situation, Nissan has introduced three fuel-efficient technologies which will be used in the vehicles
of Nissan such as Xtronic transmission system, lithium-ion battery and intelligent dual clutch control
hybrid system. In the present era, Nissan has manufactured the automotive vehicles and has laid
continuous effort in the research and development of electric vehicles, fuel-efficient vehicles,
natural gas vehicles and hybrid electric vehicles (Nissan, 2019).
(b) Generic Strategy Recommendations for Nissan
1. Porter’s Generic Strategies:
In the Michael Porter generic strategy, there are three factors such as cost leadership, product
differentiation and focus strategy (Arshed and McFarlane, 2016).
Cost Leadership Strategy: In this strategy, it determines the low-cost advantages to the automobile
industry that results in effective innovations, economies of scale, and various designs for products.
This strategy works effectively in the automobile industry as the companies can differentiate the
products from the competitors by utilizing the quality raw materials at low cost (Prasad and
Warrier, 2016).
Product Differentiation: The customers’ requirement of buying unique products is catered by
providing different products by charging a premium price for acquiring the highest share in the
automobile industry. This strategy can be effectively be implemented if the companies in the
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