Nissan Motor Co., Ltd. (A): The Hakone Pilot

Published 01 Oct 2006
Reference 5364
Topic Marketing
Region Asia
Summary

Nissan Motors Ltd. went through a spectacular turnaround led by Carlos Ghosn. Nevertheless, in spite of strong growth in new car sales, "After Sales" of automobile parts in Japan did not keep up, hurting dealer profitability. Since dealer profitability is a key success factor in the auto industry, Nissan decided to lead its Japanese dealers to (1) improve their cost structure, (2) improve their management methods, and (3) stimulate "customer traffic" via better marketing strategies. The After Sales department identified a Toyota dealership that actually managed to increase its profitability by working on these three factors, and its president agreed to let Nissan benchmark with his operation. The department decided to replicate this Toyota dealer's management methods, costs and strategy. The latter includes significant price reductions on fees for road worthiness tests, which dealers are authorized to perform on behalf of the Japanese government. Many Nissan dealers raised objections to this pricing approach and, in order to convince them, the company executes the strategy on a "pilot" basis, in Hakone, testing the approach and, hopefully, creating a showcase. While initial results were encouraging, the growth in market share seems to flatten, possibly vindicating the doubting dealers' arguments. The case, generates considerable controversy in both MBA and executive classes, includes discussion on market segmentation, pricing strategy, channel design and dealer network management issues. The case includes a detailed discussion of the dealers' "business model", allowing the class to inspect the financial impact of various strategic scenarios for both Nissan and its dealers.

Teaching objectives

(1) The difference between Strategic and Trivial market segmentation (2) Examination of Channel Conflict as a major obstacle to implementing a marketing strategy that is based on a new segmentation (3) Examination of the challenge of aligning the business models of the manufacturer and the distributor (4) Showing that not overcoming channel resistance to a new strategic segmentation may require an expensive redesigning of channel structure (5) Familiarity with the distribution challenges of the automobile industry in Japan.

Keywords
  • RD0906
  • AR0607
  • AR2006
  • Distribution
  • Channels
  • Channel conflict
  • Automobile distribution
  • Automobile dealers
  • Pricing strategy
  • Market segmentation
  • Aftersales