Deal Between Renault Nissan and Samsung Motors

Renault Nissan

            The Renault Nissan coalition is an automobile company with partnership between France and Japanese. The Renault automobiles are based in Paris and France whereas the Nissan are based in Japan (Loska, 2013). It is vital to note that these two companies have been strategic partners since the year 1999. The coalition has approximately 460,000 employees and has over eight major brands all over the country. Statistics state that the company sold over 8.5 million auto mobiles all around the world in the year 2013 (Loska, 2013). It is evident that as at the end of the year 2015 the coalition was the world’s leading manufacturer of electric vehicles. Statistics state that they had sold over 300,000 electric vehicles (Loska, 2013).

            It is vital to note that the coalition between Renault and Nissan cannot be termed as a merger or an acquisition. This is because the two organizations came together as a result of a cross sharing concord and union (Peng, 2009). This formation and make up was exclusive especially in the automobile industry in the early 1990s combination tendency and with time served as a replica for the general motors and Peugeot, Mitsubishi and Peugeot, and Volkswagen and Suzuki. The coalition has tremendously grown to a point where it has made additional associations with other companies in the auto mobile industry (Loska, 2013).

            As discussed above, the coalition is a tactical and planned partnership and due to the significant shareholding speculations; each company has a financial interest on the other (Smith, 2010). Despite that, it is clear that each company has been maintaining individual products and brand name and independent business cultures. Economists state that Renault has 44.3% stake in Nissan Company, while the Nissan Company has a 15% stake in Renault (Smith, 2010). It is evident that many companies in the United States have taken the same terms of coalition, however, many reporters state that if only the two companies made a merge then that would be a bold move in the automotive industry (Smith, 2010).

Samsung automotive

            The Samsung Company is renowned to have been developing camera type of cars since the year 2006 ad has exported its products to countries from all around the globe since the year 2013 (Gruppe, 2010). The company has made it sure that it has the technological capabilities to grow from the development of camera components for cars such as lenses and sensors to the mass production of these elements. It is vital to note that the company is more specified into manufacturing electronic components for the autonomous vehicles (Gruppe, 2010). It is evident that the company is the only one that possesses the latest technology for the manufacture of such elements as they have become much sophisticated as days go by.

            It is vital to note that the automotive industry is now getting into the era of vehicles that are defined from software. This is to mean that the automotive software and the hardware competences will in time become one of the most urbane and complicated platforms (Gruppe, 2010). This is to mean that with time the automotives will not only have complex software but will also have the ability to communicate with one another and also with other forms of infrastructure (Gruppe, 2010). This is one of the major visions of the Samsung automotive company. It is evident that the company had very high sales in terms of smart phones and the venture into automotive modules is an aspect of growth and development (Gruppe, 2010).

 

 

Renault Samsung automotive company

            The French manufacture of automotives is the first organization to venture into the South Korean market and buy Samsung Company (Peng, 2009). This acquisition happened in April 2000 immediately after the Asian financial crisis. The Samsung Company first became a subsidiary of the Renault Company and also bore its name. However, Samsung has a minority ownership (Peng, 2009). The Renault Samsung motors has various products including different models of cars, electric vehicles and other crossovers. The negations between Samsung and Renault began by the end of 1998 and by September 2000, Renault had bought 70% stake of the Samsung Company (Peng, 2009). One of the major reasons as to why, Renault bought Samsung was because Samsung had prior financial assistance from Nissan and by the time the Asian crisis took place, Renault were the major stake holders of Nissan (Peng, 2009).

            After the acquisition the results of the company began to improve in terms of sales and revenue. The company later became an export manufacturing company (Stahl & Mendenhall, 2005). Some of their markets were in Europe, Russia, Mexico, and Ukraine among other countries. In the year2005, the Renault Company increased its stake by 10% and in 2009 the two companies agreed to use the brand name Samsung until the year 2020 (Gruppe, 2010).

            It is vital to note that there was a lot of pressure from competitors in the South Korean market; Hyundai and Kia as they were the dominant automotive companies (Stahl & Mendenhall, 2005). Reduction of sales was highly experienced in the year 2010 pushing the Renault Samsung motors sales down by 2.9%. The declining trend was experienced also in the following years by a percentage of 43% and this also affected the employees and caused a reduction by 65% (Stahl & Mendenhall, 2005). In order for the company to increase their sales, they invested $160 million in exporting some of its products like the Nissan Rogue and also to better the production levels. By the year 2015 the total sales in the South Korean market increased up to 1.5 million items and since then the company has been modifying some of its products in order to fetch markets in the world market. It is vital to note that the company manufactures over 300,000 cars annually in different models.

            Statistics state that the demand for the Renault Samsung motors has greatly increased especially in the unite states. This can be seen from the fact in which the company was asked to increase the production of the Rogue sport by approximately 300,000 units to be sold in the states (Aras & Crowther, 2009). As a result of this, the company’s plant that handles this model of car is expected to increase the production output by 12% (Aras & Crowther, 2009). This has enabled the company to be among the leading companies in terms of revenue. It also has a positive effect o the economy of the country. The company has helped the country to have a high gross domestic product even due to its exports to other countries (Aras & Crowther, 2009). This has caused the government to favor the company and help to ensure that is the dominant automotive manufacturer company.

            It is vital to note that the deal between the Renault and Samsung companies have increased job security for the employees due to the increased production rates (Stahl & Mendenhall, 2005). It also boosted the local companies that provided spare parts by enabling then to expand their facilities and their human resources (Stahl & Mendenhall, 2005). The increase in production has also helped to increase the rate of employment as many individuals are securing job opportunities in the different plants.

            It is evident that Renault Samsung motors is a company that owns approximately 70% of its networks and are owned by the employees (Loska, 2013). This is done in order to ensure that the company is a going concern and also to enhance growth and development. It is vital to note that the acquisition of Samsung motors helped the company to improve on their design and automotive development. The Renault Samsung motors is aimed at attaining 15% of the market share and also to ensure a noteworthy and a lasting presence in the South Korean market (Loska, 2013). It is also vital to note that the company is aimed at providing customer satisfaction and also ensure that they are leading in the competitive market from all around the globe. The company has been able to attract numerous customers by the fact that the provide quality service and network (Loska, 2013). Most of their products especially the SP5 is very prestigious in terms of styling and therefore attractive and appealing to the south Korean customers. The interior of the automotive is also made of quality products; it is irreprehensible and perfect with the unique handling and comfort. This is one of the models that have enabled the company to stay ahead in terms of competition (Smith, 2010). The products help to create a good corporate image of the company to other countries when their products are exported. The company looks forward to being the Renault’s focal point in Asia and also to improve their products thus allowing the growth and development across Asia (Smith, 2010).

            There various reasons as to why Renault came together with Samsung motors. One of the key issues is the fact that Samsung motor company was facing closure after the Asian financial crisis (Fitsell et al, 2007). This is to mean that they needed financial assistance. As state above, the company had sought assistance from Nissan in order to cater for its expenses in growth and development. With time, Nissan and Renault came together with Renault having the bigger percent of stakes to mean that they were the major owners of Nissan (Fitsell et al, 2007). As a result of this, the Samsung Company was purchased by Renault on behalf of Nissan. It is also evident that Samsung is a leading manufacturer of automotive components and therefore Renault took advantage of this. This ensured that Renault Samsung motors was able to manufacture automotives while Samsung manufactured the software and hardware required. This helped to ensure that the cost of production had gone down (Fitsell et al, 2007). As a result of this, the merger enabled the companies to make increased profits and also increased the market share.

            It is evident that Samsung is renowned for manufacture of electric and electrical appliances and this brought about a good corporate image (Aras & Crowther, 2009). This was advantageous to Renault as it would help to build its own corporate image. This can be seen by the fact that the mergers agreed that the brands of the companies would bear the brand name of Samsung until the year 2020. It is also critical to note that the two companies merged as contenders (Aras & Crowther, 2009). This is to mean that they were competitors in the market and therefore this ensured that they both have competitive advantage over other companies in the same industry. The two companies built up each other; this can be seen by the fact that the companies were from different geographical locations and the merging created market for them. For instance Renault is a French company that sought its market share in South Korea (Aras & Crowther, 2009).  Samsung Company also had preference for Renault and not other companies due to its image to customers. This therefore meant that the coalition would be of benefit to both the two companies. The acquisition of Samsung was also an advantage to the automotive industry that was crumbling down (Aras & Crowther, 2009). This was because the Samsung Company did not have the ability to run on its own and therefore the merger created a future for the automotive industry in South Korea. Some of the major weaknesses that Samsung was facing before the acquisition were lack of profit orientation, minimized number of customers, weak cross functional lines, lack of a sense of urgency and lack of long term plans (Aras & Crowther, 2009). Some of the strengths that the company brought along to Renault Samsung were global reach, advanced products in technology, leading manufacturing systems and increased market share.

            It is clear that the main aim of the acquisition was increased profits and revenue, growth and development in automotive design, and being the lead in the automotive industry (Yu & Lee, 2002). From the information provided, it is clear that the acquisition led to increase in productivity. Sales and marketing was also improved due to the fact that Renault had very strong dealers while Samsung had the opposite (Yu & Lee, 2002). The acquisition brought a balance in the sales thus maximizing profit.

The association between Renault and Samsung can be termed as a limited Liability corporation. It is vital to note that this type of corporation has a blend between the partnership and corporate structures of governance (Yu & Lee, 2002). This can be seen by the fact that Renault has bought a larger percent of Samsung; however, Samsung experiences minority ownership. In the United States this form of corporation is the form of partnership for many companies (Yu & Lee, 2002). This form of partnership is more advantageous than any other type of corporation because it is well suited with companies with majority and minority ownership.

            This limited liability company has both characteristics of a corporation and sole proprietorship because there are several owners. However, the extent to which the owner owns the company is what determines the level of involvement in processes such as decision making. It is also evident that associations in the limited liability company follow written down agreements as for the case of the Renault and Samsung companies (Yu & Lee, 2002). It is clear that the two companies wrote an agreement that the two companies would use the brand name for Samsung for a particular period of time.  It is also clear that this form of association is mostly for companies that have mutual benefit from one another. His can be seen from the mutual relationship between these two companies (Yu & Lee, 2002). It is evident that Samsung has been providing software components for the company whereas Renault has been financing Samsung since the Asian crisis.

            It is also evident that such associations allow taxation on the partnership and therefore the members included share the taxes all together. This allows for effective distribution of profits and losses in relation to the percentage of ownership (Fitsell et al, 2007). There are various risks associated with this form of association including liquidity risks and credit risks. However, the two companies have been able to correlate very well and major on the maximization of profit (Fitsell et al, 2007).

            It is vital to note that when powerful companies merge or form a coalition, they are faced with the challenge of ensuring that they are committed to ensuring that the venture is successful (Fitsell et al, 2007). The corporate culture that is built between Renault and Samsung is the reason behind their success. This is because of all ten cars that are sold all around the globe two of them belong to the alliance (Fitsell et al, 2007). It is also evident that the association has increased the financial stability of the two companies. The culture of each company is protected by both because the success of one company depends on the other. In this case the coalition requires performance on both companies (Fitsell et al, 2007).

            According to experts, joint business ventures are undertaken depending on the facts that brought the alliance together. This is to mean that they are no analytical discussions concerning the blending of the corporate cultures of the different companies (Gruppe, 2010). This is because the objectives tend to be blending the cultures easily. It is also critical to note that the information between these two companies is shared effectively in order to reduce competition from other companies in the same industry. This is because there is limited competition between Samsung and Renault and therefore they work as one (Gruppe, 2010).

            This alliance has enabled and ensured the successful marketing of their products all over the world due to the brand names. The strong corporate culture between the companies also ensures that there is long term certainty of the coalition (Gruppe, 2010). The alliance between the two companies invested $176 million in production of products that would be sold in the American market. This was done in order to take advantage of the favorable exchange rates in Korea and also the agreement (Smith, 2010). In the year 2014, it is evident that the company experienced a decline in the amounts of revenue to the decreased rate of the Euro. As a result of this the sales reduced by 5.1% as a result of the exchange rates. This brings into the play aspect of the movement in the exchange rates. It can be said that this movement was both of advantage to the companies because where the exchange rates were higher the sales were higher and vice versa (Smith, 2010). This movement also allowed to the exportation of the products.

Conclusion

            The alliance between Samsung and Renault was for the good of the automotive market. This clearly shows that they created a large market for the automotive industry especially in South Korea. It is also evident that these two companies ensured that they have competitive advantage over other manufacturers in the same industry.

References

 

Aras, G., & Crowther, D. (2009). Global perspectives on corporate governance and CSR.            Farnham: Gower.

Fitsell, T., Williams, R., & Hongkong and Shanghai Banking Corporation. (2007). HSBC's guide             to cash and treasury management in Asia Pacific 2008. Hong Kong: PPP Co. Ltd.

Gruppe, B. (2010). Samsung: Samsung group, Samsung S5, Samsung Sm3, Bada, Renault           Samsung motors, Liste Der Samsung – mobitelefone, Omnia. General books.

Loska, T. (2013). Strategic alliances: The renault & nissan alliance- celebrating 10 years of        synergies. Place of publication not identified: Grin Verlag.

Peng, M. W. (2009). Global strategy. Mason, Ohio: South-Western/Cengage Learning.

Smith, R. (2010). Alpine & Renault: The sports prototypes 1973-1978. Dorchester, Dorset,           England: Veloce Pub.

Stahl, G. K., & Mendenhall, M. E. (2005). Mergers and acquisitions: Managing culture and        human resources. Stanford, Calif: Stanford Business Books.

Yu, C., & Lee, K.-W. (2002). Introduction to international studies. Seoul, Korea: Ewha Womans             University Press.