Business Plan of Renault Essay Example

agreement with Volvo Group, with the intention of merging. However, the merger was later canceled. In November 1994, as part of its privatization efforts, the State partially conducted an Initial Public Offering (IPO) for Renault, which officially took effect in July 1996. Then, in March 1999, Renault made a significant milestone by signing a historic alliance with Nissan in Tokyo.

The company acquired 51% of the capital of Romanian car manufacturer Dacia in the same year, which increased to 80.1% one year later. In 2000, Renault also acquired South Korean brand Samsung. In 2001, Renault and Volvo merged their forces in the truck industry to become the world's second-largest player.

Renault became the principal shareholder of Volvo Group in 2002, and together with Nissan, they established a common strategic center. The Megane 2 achieved great success as the bestselling car in Europe in 2003. Starting from 2004, the Logan was introduced to the market.

This model achieved significant success both domestically in Romania and in exports due to its outstanding affordability. In 2005, the Group expanded its international presence to various countries including Russia, Colombia, and Morocco. Additionally, Renault F1 Team became the World Champion Constructors and Drivers in the F1 competition. In 2006, a new strategy was implemented to establish the brand as the leading car manufacturer with the highest profitability. This strategy is based on three key principles: quality, profitability, and growth.

A new double reward is given to Renault F1, as in 2007 the Group Renault is introducing new products (such as Twingo) with improved quality and reliability. The Group is also dedicated to environmental sustainability, incorporating the manufacture of less polluting cars in certified factories.

However, in 2008, Renault encounters the financial and economic crisis.

The group attempted to create a course of action to minimize the impact. In 2009, Renault Group, along with the car industry, received assistance from the State to overcome the crisis that was crippling the automotive world. The group's primary activities have been divided into two sectors since 2001: automobile manufacturing and sales financing. Additionally, Renault has involvement with AB Volvo, Nissan, and AvtoVAZ. The organization chart has been simplified. The group has over 30 automobile manufacturing sites and also utilizes partner's industrial facilities.

Additional Information

Renault Group consists of three brands: Renault, Dacia, and Renault Samsung Motors. The group has a global presence in 118 countries. In 2009, the group sold a total of 2,309,188 vehicles worldwide, with 34% of the sales occurring outside Western Europe. Since its launch in 2004, Renault has sold 1,250,000 Logan vehicles globally as of the end of 2009. The group's revenues for 2008 amounted to ˆ31,951 million. As of December 31, 2009, Renault Group employed a workforce of 121,422 individuals. All of Renault's industrial sites are certified with ISO 14001. Furthermore, Renault has been the leading LCV brand in Europe for over 10 years. In 2009 alone, Renault and Nissan together sold a total of 6,085,058 vehicles worldwide.

IV. PORTER 5+(1) Bargaining power of customers: Our customer base includes both individuals and professionals who have the ability to negotiate prices and seek discounts by comparing prices among different manufacturers such as Peugeot and Citroen in France. This competition among manufacturers drives down prices within the Renault Group.

In some countries, individuals lack financial resources and consequently, lack

any significant influence. However, professionals possess more negotiating leverage due to their purchasing power for vehicles. Factors influencing bargaining power include: threat of substitute products, bargaining power of customers, threat of new entrants, bargaining power of suppliers, competitive intensity, and authorities. Regarding the bargaining power of suppliers, there are only a few available, making it costly to switch suppliers and giving them significant leverage. However, the Renault Group is also exposed to risks associated with the quality of their supply chain. Additionally, the economic crisis may impact certain suppliers, which could then affect the Group.

The challenge of new competitors is a barrier in the automotive industry. Entering this market requires substantial financial resources, reliable and competitive vehicles, technological advancements, and a good reputation. However, some manufacturers may shift their focus and become direct competitors to the group's brands. Additionally, the group may face challenges from environmental concerns as people in developed countries prioritize eco-friendly transportation options such as green cars, bikes, and buses.

For over a year, French manufacturers have been receiving substantial assistance from authorities. They have obtained billions of Euros in funding for strategic projects and vehicle development. Foreign manufacturers affected by the crisis have also received aid from their own countries. The market's level of competitiveness varies depending on factors like country, brand, and car type. Nonetheless, there is significant overall pressure.

The main competitors of the group include Peugeot-Citroen, Ford group, BMW group, Daimler, Toyota group, VW group...

Market Overview

Renault is a major car-maker in France and has expanded into various markets such as car sales, rental services, and financial services. In 2010, we will provide a brief description of these market types.

The car

market in France: According to an article published in Les Echos, all car-makers have achieved positive results in February. A favorable environment is one of the key reasons for this success.

After the car crisis, carmakers reduced their prices in order to attract new customers and the "prime a la casse" (i.e. old car for 1000 box) was abolished. Despite the market's growth, strong competition remains in France. The car market in developing countries presents a significant opportunity for car manufacturers to expand their presence.

The customer base in India, Russia, and Brazil is expanding rapidly, with each country welcoming foreign investment to aid the growth of car manufacturers. These countries possess the necessary knowledge and technology to establish their own formidable car companies, as demonstrated by Tata, an Indian-based car-maker.

Rent Market

Hertz, Avis, and Europe Cars dominate the car rental market in France, collectively holding a 60% market share. Alongside these major players, there are currently over 1000 specialized car rental companies operating within the country.

In an effort to combat competition, many companies have chosen to merge or form partnerships in various sectors, including finance services. In particular, the finance services sector has seen a significant number of car manufacturers establish their own Financial Services departments. These departments are crucial in providing loans and project investments to customers who want to purchase cars at attractive interest rates. This not only helps car manufacturers develop closer relationships with their customers but also serves as an advantageous investment approach for the manufacturers' projects.

Renault, ranked 18th in the global car market, is currently trailing behind PSA Peugeot at 15th place. In 2008, Renault's worldwide sales reached 2,382,230 vehicles and generated

a turnover of 37,791 million Euros. The operating margin amounted to 212 million Euros and the net income stood at 571 million Euros. The company employed a workforce of 129,068 individuals.

Furthermore, Renault maintains its position as the leading market player in Western Europe for commercial vehicles for the past 11 years consecutively. By the end of 2008, Renault secured second place ahead of Ford with a market share of 14.4% in Western Europe. Additionally, Renault offers an extensive range of commercial vehicles available in Europe.

Example: Kangoo

In terms of passenger cars sector amidst the challenges posed by the global market crisis, Renault has successfully maintained its position and currently holds a global market share of 3%.

Despite the challenging economic conditions, Renault has managed to withstand and maintain a 6% market share in 2008. The Group experienced a decrease in global sales by 4.1% (with 2,382,230 vehicles sold) amidst a market decline of 5%.

The examples include Twingo, Clio, and Megane.

Vehicle Dacia (Logan) in the new low-cost market

Renault acquired Dacia, the largest Romanian car manufacturer, in 1999. Despite the economic crisis, Dacia's worldwide sales saw a 12.1% increase compared to the previous year, reaching 258,472 vehicles.

Renault Samsung Motor is an exclusive brand sold only in Korea, created through a collaboration between Nissan and Samsung, which Renault acquired in 2000. Despite facing economic crisis and changing market demands, Renault has managed to adapt by introducing products like the Dacia Logan to cater to lower-end customers. The company has demonstrated its flexibility in different markets while also undergoing internal restructuring to cut fixed costs. Moreover, Renault has prioritized the development of fuel-efficient cars

to reduce drivers' consumption expenses. In terms of technology, the automotive industry's research efforts have mainly focused on ecological concerns such as electric transportation, cross compatibility, design improvements, and utilization of recyclable materials.

But there is also an effort to modify manufacturing methods to meet ecological expectations and promote sustainability. On a legal level, a significant portion of automobile standards aim to ensure the safest possible vehicle. Compliance with these standards is necessary for the approval of a vehicle. These standards are established at international (ISO standards), continental (Europe), or national levels (such as Japan). In Europe, these standards become mandatory following a decision by the European Commission through a community directive.

For example:

• Standard for materials' combustibility to regulate the car's speed
• Standard for the use of hazardous materials
• Standard for contractibility, preventing striking objects in the car's passenger compartment

The automobile industry, due to its large production capacity, establishes its own technical standards in certain areas. For instance, manufacturers define the properties of gearings in the gearbox, such as the dimensions of tooth sets.

The manufacturer of movement creates and develops standard elements, known as movements, which cannot be modified. These movements are designed to meet the specific demands of the manufacturers and are produced to measure. Additionally, in 2009, Renault SA witnessed a growth in sales in Europe amounting to 1.4%. This enabled the Group to enhance its market share by 0.6 points, despite the overall decline of the market by 4.5% caused by the global financial and economic crisis

affecting vehicle sales.

The competitive strength of the company is attributed to its partnership with Nissan, Samsung Motors, and Dacia. This partnership provides an advantage in research, production, and distribution. As Renault and Nissan enter their tenth year of collaboration, they establish a dedicated team to enhance cooperation and maximize synergies between the two partners. The production capacity at the Dacia base, combined with Renault's technical expertise, are crucial elements in the company's strategies for renewing its product line. Despite the crisis, the Renault group has managed to increase its market share. Furthermore, seven of Renault's vehicles have been awarded a top five-star rating in Euro NCAP crash tests, highlighting the excellent safety features of their vehicles.

All manufacturing sites within the Renault perimeter were certified ISO 14001 in 2008. The latest sites to obtain this certification were Somaca in Morocco and Avtoframos. However, a weakness of Renault is its heavy dependence on Western Europe for sales, which currently account for 72.8% of total sales. If the company's market share for cars and LCVs were to decline, this would have a significant impact.

The forecast for auto production in Western Europe shows a predicted decline of 0.2% in the CAGR from 2005 to 2007. This emphasizes the need for the company to broaden its customer base geographically. The alliance with Nissan has resulted in the development of geography-based synergies, which present promising opportunities for long-term leverage. Several model launches, including Twingo, Megane, and Logan, are expected to contribute to the company's earnings. Additionally, Renault aims to expand its presence in the United States both industrially and commercially in the long run.

Threats to Renault include the impact of the

global financial and economic crisis on vehicle sales. Additionally, competition from Korean and Japanese automakers like Toyota, Honda, and Mitsubishi is growing in the European markets. Asian manufacturers are strengthening their positions in the North American and European market, which is reducing Renault's market share. Competitors like Nissan aim to achieve a worldwide market share of 15% by the end of 2010, increasing competitive pressure on Renault. Stiff competition can also be expected from Toyota and BMW, who have seen increasing market share in Europe over the past three years in the passenger and LCV segment. Rising raw material prices are anticipated to affect profit margins.

Assumptions 1. The economic crisis has prompted car manufacturers to alter their practices and focus on the emerging trends in the market. Emerging countries such as India, Brazil, and Russia will be the target of Renault's efforts due to declining sales in western countries. India, with its over one billion consumers, presents a significant opportunity.

Renault needs to invest in an emerging country by establishing factories to capitalize on low labor costs and raw material prices. This is in response to a growing demand for low-cost cars that are not as concerned with environmental and safety issues. Renault aims to accomplish this by developing affordable cars like the Logan. Additionally, Renault should strengthen its partnerships with local companies to achieve economies of scale. In contrast, the situation in the Western market is distinct.

Consumer needs and market dynamics have transformed, leading to changes in Renault's approach. Over the past years, Renault concentrated its efforts on the affordable market segment, resulting in a loss of high-end car consumers as a target audience. At

the same time, Audi and Mercedes, positioned in the luxury market segment, were relatively less affected by the economic crisis. Additionally, Renault is confronted with the discontinuation of government policies supporting ecological bonuses. To offset this, Renault should offer consumer advantages that conceal the overall higher price.

Renault must invest in its R&D department to gain a competitive edge in security, design, and energy. In terms of security, design, and energy, Renault needs to stay ahead by investing in its R&D department. Additionally, Renault recognizes that the future of its strategy lies in the environment. As environmental norms continue to evolve in the coming years, Renault acknowledges the importance of developing more ecological cars.

Becoming an environmentally friendly company can enhance Renault's reputation and brand image. A focus on developing electronic cars in developing countries can help achieve this, as people's awareness of environmental issues is increasing.

Objectives

To accomplish this, Renault has established a set of goals that can be categorized into three areas: social goals, operational goals, and societal impact.

1. Social goals: These involve fostering employee commitment, as human resources are crucial for the group's overall performance.

Renault aims to enhance staff commitment by providing various training opportunities and integrating employees into the corporate culture through incentive programs. Renault acknowledges that its employees are also innovators who contribute to the overall performance of the company. In order to keep up with its development, Renault believes in implementing a contemporary recruitment policy and desires to support young talents. Moreover, Renault's staff intends to promote collaboration with Nissan employees to foster unity within the organization. This intercultural exchange involves over 100 employees who aim to develop the diversity dimension

within the group.

Promoting social strategy: Transmitting information is a key goal for Renault. More than 100,000 copies of the internal newspaper will be distributed in both French and English. This form of internal communication serves several purposes for Renault, including explaining group results, providing new information, and motivating employees. As a result, this communication strategy brings together all members of Renault, from employees to their leaders. Additionally, it aims to implement the Health and Working Conditions policy.

Renault, similar to other companies in France, shares concerns about the suicide rates among their employees. This issue greatly unsettles the French group as it indicates that some employees are discontent with their work. In order to address this problem, Renault conducts over 73,000 tests on stress, anxiety, and depression at the Medical Center. Additionally, Renault highly values its social responsibility and strives to contribute to road safety. Hence, the company organizes a growing number of driver training sessions.

2. Environmental goals The automotive manufacturers in Western markets predict that the 22nd century will revolve around ecology. Renault is also dedicated to sustainable development as a significant priority. Their approach is centered around life cycle management, where Renault incorporates sustainable development, environmental protection, economic profitability, and the well-being of society and its workforce at every stage of a vehicle's existence.

Renault aims to become the first carmaker to sell electric cars by 2011 that do not emit CO2, in line with efforts to combat global warming and promote sustainable development. As one of the most accountable industry leaders in the face of global warming, Renault is committed to enhancing sustainable development, with particular focus on the production of cars.

The group's

goal is to reduce CO2 emissions in the atmosphere by 10%. As for the product, the overall objective is to sell 1,000,000 vehicles that emit less than 140g of CO2 per kilometer. To achieve this, Renault is developing biofuel supplies. Additionally, reducing noise pollution, restoring ecological health, and conserving water are also significant environmental objectives for the French group.

In conclusion, sustainable development involves reducing and recycling wastes. Renault focuses on managing the environment throughout its production and sales process. This commitment extends not only to Renault itself, but also to its suppliers. Norms, standards, training, and assessments are used to promote environmental awareness among all stakeholders.

Economic Goals

Due to the challenging economic crisis for car manufacturers in 2010, Renault's primary objective is to achieve a positive net profit by directing its resources towards this priority.

To achieve this, Renault must prioritize three main areas: cost reduction, income optimization, and effective management of working capital requirements. A key strategy for cost reduction involves leveraging synergies with Nissan. By collaborating with Nissan, Renault can minimize equipment investments. For example, instead of independently developing a 1.6l diesel engine, Nissan will utilize Renault's resources. This collaboration significantly saves costs, with Nissan's investment on the project amounting to 50 billion Euros in 2009. Additionally, cost sharing enables Renault to reduce expenses by 20 billion Euros.

As demonstrated in this example, Renault is able to benefit from economies of scale, which allows the group to undertake new projects such as the development of an electric car that does not emit CO2. This particular project cannot be accomplished by either Nissan or Renault alone due to the high cost involved. Furthermore,

the synergy between the two companies enables the formulation of an international expansion strategy. For instance, new cars will be manufactured in Asia, specifically in India and Russia, by the end of 2012. Additionally, implementing measures that contribute to controlling its need for working capital is crucial. Working capital represents the amount of liquid assets that a company possesses and is available for investment in its operations.

The company's debt can result in either a positive or negative number. In order to improve Renault's working capital, the company managed to cut variable costs by 253 billion Euros in 2009. The goal is to reach 400 billion Euros in 2010. Reducing stock is also a top priority for the group. Expanding into new markets is essential for car manufacturers in order to compete with rivals in the international market. The group's strategy has been greatly influenced by the changing dynamics of new car markets.

This part focuses on the development of a low-cost car in a new market. Logan, the low-cost car of Renault, has been successful in the international market and represents the company's leadership in this segment. Renault's leadership in this market has enabled them to increase their revenue in emerging markets, which is vital for Renault's success.

Indeed, car sales in France have been declining for several months. The success of the Logan, which demonstrates Renault's leadership in the affordable car segment, enables the group to pursue other projects with multiple engine and body variations, such as a new, more appealing low-cost vehicle compared to the Logan and other models. Additionally, the group aims to continue increasing sales in emerging markets such as Russia, India, and

Brazil. In Russia, particularly, Renault plans to double the capacity of its factory as it remains a crucial market for the company.

The Russian market, currently with 1 million cars, experienced a low point in 2009 but now has significant potential for growth. This potential is demonstrated by the fact that 60% of the cars are over 10 years old, creating opportunities for renewal. Additionally, the motorization rate in Russia is only 230 vehicles per 1,000 inhabitants, compared to Western Europe's rate of 600 vehicles per 1,000 inhabitants. The factory in Moscow has already invested 230 million Euros since 1985 and will now invest an additional 150 million Euros to increase vehicle production from 80,000 to 160,000 per year. In addition to this, Renault aims to enter the Indian market of one billion people in 2012 with a new low-cost car.

There is a demand for this highly innovative product in the Indian market as well as other emerging markets. Renault partnered with Mahindra ; Mahindra in 2005 to meet this demand. The creation of a joint venture with Bajaj Auto, the establishment of a logistics platform in Pune, and the opening of a new design center in Mumbai all demonstrate Renault's commitment to expanding in India. In Brazil, Renault produces 118,209 cars, which accounts for 4% of the group's global production.

Renault has 4,526 employees, which represents 3.5% of the company. This demonstrates Renault's significant presence in Brazil. Despite fierce competition among car manufacturers, Renault's sales experienced substantial growth from 2007 to 2009, making Renault the fifth largest manufacturer in Brazil.

Renault is creating a design department in Sao Paulo to better understand and adapt their products to

customer needs in order to gain market share. The company recognizes the significance of Brazil's biofuel industry and the importance of having a strong presence in the country. In terms of strategy, Renault aims to be a pioneer in the mass commercialization of electric cars and continuously improve the efficiency of their combustion engines. Additionally, they are focusing on sales development in emerging markets.

In particular, Renault aims to strengthen its positions in countries like Russia, India, and Brazil. It plans to reinforce its leadership in the low-cost segment by leveraging the Logan platform and expand its presence in the international market through ultra low-cost cars. Additionally, Renault seeks to enhance the positioning of its European brands within the group. The company also emphasizes the importance of partnerships as a key strategy to achieve its goals. In 2009, amidst the economic crisis impacting all companies, Renault focused on generating positive free cash flow as its primary priority.

The objective of this action was achieved by implementing an action plan with three main focuses. The first is optimizing income, the second is reducing costs, including investment costs, and the third is efficiently managing working capital. Additionally, the company expanded its product range by introducing six new products. These new products contributed to a growth in the global market share from 0.

1 to 3. The market is declining, but the company has seen an increase in market penetration in 11 of its first 15 markets, accounting for 85% of sales. Fixed costs have been reduced, including physical and intangible investments (2,302 million Euros in 2009). The company is constantly striving for efficiency and synergy with Nissan, resulting in a

26% reduction in research and development spending while maintaining essential programs. Overheads have also been reduced by 8% compared to 2008 and 20% compared to 2009. 9 1.

The Price: Patrick Pelata, Renault's second-in-command, has stated that the future models of the brand will not be more expensive than their predecessors. "For us, it is clear: the prices of the next models will have to not exceed those of the current range under any circumstances." This commitment remains valid despite the new standards of Euro cleanup 5 and 6, which will inevitably lead to higher manufacturing costs. It also remains unaffected by the increasing demands from customers for enhanced security, comfort, and equipment.

Product: Renault's product policy revolves around several core principles: quality and design. At every stage of a car's lifespan, Renault adheres to professionalism, competence, expertise, rigor, and demanding standards. This ensures that customers receive the best possible quality in both products and services.

This emphasis on quality for Renault began well before the launch of Laguna in 2007. The city dweller Modus, Clio, and Twingo were renewed since the end of 2004 and positioned themselves as references in quality and reliability in their segment for more than 3 years. The objective now is to continue these efforts by proposing new vehicles that are always better positioned in quality and reliability than their predecessors. The ultimate goal is for them to be systematically recognized as being in the Top 3 of their segment in reference markets. To achieve this, Renault has embarked on an initiative of continuous progress with the Renault Plan of Excellence (PER), which is built around 6 axes:

• Make corresponding,

Laguna and New Megane are both top-quality products in their respective segments, ranking in the top three in terms of product quality in France and Germany. This trend is consistent throughout the Renault Group worldwide. Due to the global economic crisis, Renault Group had to adjust its marketing strategy and promotional objectives. Nonetheless, the Group aims to maintain its position as the leading advertiser in France. Stephen Norman, the International Marketing Director, has set ambitious marketing goals. The group's promotional strategies include creating brand affinity, driving traffic to showrooms, showcasing new models, valuing customers, and maximizing their budget. Currently, the Group's main focus is on utilizing high-impact media such as TV, sports events, and the internet.

Between 2007 and 2009, Renault doubled its advertising spending on the web, reaching over 600 million Euros in international communication strategy in 2008. Television received 65% of the investment, followed by the internet with 15%, while the remaining 20% was divided among magazines, radio, and publishing. It is important to note that Nissan's advertising expenditures are separate from those of the Renault Group.

Renault Group promotes its investment in advertising, allocating 20% of the budget to radio, 15% to magazine and publishing, and 65% to TV and internet. The group's brands, including Renault, Dacia, Nissan, and others, have a strong presence on television. Every year, numerous TV spots are produced to mark the launch of new models. Currently, there

is a preference for creating humorous commercials that showcase the group's history. Additionally, on January 28, 2010, Renault introduced its own television channel called Renault TV.

This is a groundbreaking development in the automotive industry. On 24th April, the channel launched broadcasts in France and Great Britain, providing a range of content such as magazines, archives, portraits, entertainment, and more. In March 2009, the manufacturer introduced an online version of Renault TV in both French and English. The Group estimated that the potential audience for the channel was approximately 30 million people.

According to Kantar Media, the Budget in 2009 was 421 million Euros. In the same year