Term Paper on "Renault Is a French Automobile Producer"

Term Paper 8 pages (2170 words) Sources: 0

[EXCERPT] . . . .

Renault is a French automobile producer, one of the biggest and most well-known in the world. It has been developing both cheaper models (usually by purchasing existing producers in developing countries) and luxury limousines. The challenge for Renault is its capacity to adapt to the changes in the external environment, including the higher prices for gas, the continuous request of consumers for new cars, with better technologies and higher comfort, the competition from several other producers on the market, all with similar history and markets. This report will aim to provide a five-year strategy that Renault can use in its future development, taking into consideration several elements.

Decision making structure

There are two separate parts in the decision making structure. First, proposals for a new strategy will be received bottom-top, from the working levels of the organization towards a selection committee that would be formed of decision makers of different departments, such as the Head of the Human Resources Department, the Head of the Financial Department, the Head of Production, as well as senior decision makers (Senior Vice-President for Marketing, Senior Vice-President for Budget and Finance etc.). The idea would be to streamline the selection process, while also ensuring that there are enough proposal from the working levels, from the individuals who are most in contact with the markets, with the consumers and the producers.

Once the management has decided on a set of strategies, these can be proposed and discussed in a referendum-style approach with the company's shareholders. The assumption made is that the strategy proposals that have also considered other relevant shareholders, such as the consumers, the producers, the suppliers etc. And that once they reach the decision making committee, these elements have also been taken into consideration in the set of criteria.

III. Selection criteria

The company will need to consider several internal and external factors in order to build a proper framework based on relevant criteria. First of all, an obvious objective for the company would be to grow its profits and revenues, which would mean that one of the criteria can be the prospected revenues. Costs can also be a criterion, including the cost of implementing the strategy and opportunity costs. Costs are an important criterion because they affect both the capacity of the company to remain competitive on the market and its financial health.

Human resources and the impact of the strategy on human resources, both current and future, should also be a criterion. The reason is simple: the competitiveness of the company will depend, in the long-term, on the capacity of its human resource and on how well they are trained and how they perform. This means that the strategy will need to have a separate, relevant chapter on human resource, on how the management is aiming to integrate it into the new strategy and how it will change/adapt through the future period of time, especially during the implementation phases.

The impact on the market is a fourth criterion. Here, the elements of interest would include the new number of consumers, the market share, the effect on competitors etc. A successful strategy will need to eventually increase market share, as the basis of the company's future development.

The impact of the strategy on the environment should also be one of the criteria. More and more consumers are becoming aware of concepts such as sustainable development and environmental impact. A strategy that has a negative impact could potentially harm the relationship between the company and other stakeholders, as well as the company's image on the market.

IV. Description of the chosen strategy

The company's strategy is based on focusing the company's development and resources into the development of low and medium priced cars, in developing countries, at lower production costs. These cars would ideally sell into the same markets, thus lowering transportation, marketing and sales costs, but would, at the same time, be sold into the markets with consumers with a higher standard of living and greater purchasing power.

This strategy would, first of all, concentrate the resources that Renault has into a particular market segment and area of development. The effect of such a concentration (including resources for research and development etc.) could mean economies of scale, the capacity to produce cars at lower costs, but with better materials and technologies than otherwise etc. Overall, the primary goal of the strategy would be to generate higher profit margins, all while keeping track of all the criteria that have been previously mentioned.

The implementation of this strategy would imply the company giving up on several of the models that are in the upper costs level and that are not producing the necessary profit margins. It would also imply relocating some of the factories from developed countries, with high labor and administrative costs, to some of the new developing countries, including countries from Central and Eastern Europe that have recently joined the European Union.

V. Resource implications

In terms of resource implication, there are two main areas that are likely to require significant resources: relocation and training. Relocation has been partly discussed previously and is related to the fact that moving production units from a country to another implies distinct costs, including moving personnel, equipment, buying land and building factories (or a local producer) etc.

In terms of training, many of the new human resources, either hired or from existing companies that would be purchased in these locations, need to be trained, not necessarily professionally, but in terms of adopting the Renault organizational culture, its rules, regulations and procedures. All these are essential in ensuring that there is a proper communication between management and the production, marketing and sales teams in all these new locations.

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VI. Vision

Our vision is to produce cars that are, at the SAME TIME, better and more affordable. This means that our vision is to offer our customers the possibility of driving better cars without having to pay significantly more for this.

VII. Mission statement

Our company is a multinational company, developing its business in a variety of countries and selling to different markets. We currently cover all income levels, including with luxury cars, as well as different economic sectors (we produce industrial automobiles, vans, trucks etc.). Our mission remains to provide a highly diversified portfolio of auto vehicles to a wide array of consumers, both from the public and private sectors. We aim to provide cars at different levels of price, without a particular focus on any of these categories. We also want to ensure that our

VIII. Objectives

Our objectives should include:

relocating at least 20 production plants from high cost countries to lower cost countries. This is obviously an objective whose implementation would play a significant role in managing to attain some of the other objectives described here. Relocating production plants would imply (1) an initial assessment of what plants need to be closed. One can argue that, give labor productivity, it is cheaper to actually retain some of the plants with higher costs in developed country, but this needs to be done in a thorough analysis company-wide; (2) a decision on what plants will be closed in developed countries and (3) a decision on where these plants will be relocated (including on where all of these would need to be relocated or whether it is enough to relocate only some for similar production levels);

developing 3 new automobile models that fit the current characteristics that the company will be aiming for (quality and technology at lower prices). The automobile industry is a highly competitive industry, which means that Renault needs to remain competitive not only in the cost segment (which it will be, with the development of several new models targeting medium and lower income consumers), but also in terms of developing new models and bringing new products on the market. This will also reassure the markets that relocation does not necessarily mean any change in the quality of the products that the company brings to the market;

increasing revenues across the board with 10% in the first three years and with an annual 15% in the following years after that. Increasing the revenues, along with cutting down costs, will increase profit margins for the company. This will be a fact that all stakeholders will benefit from, especially since management could reinvest some of the profits to benefit employees as well and to ensure a continuous development of the company;

cutting costs with 10% in the first three years and with 15% in the next years after. The reason why the threshold for cost-cutting is lower in the first years is that the relocation costs need to be included in this equation. One needs to agree on the fact relocation will increase costs in the first years, which means that even cutting costs down with 10% is a good performance; opening several new markets. This would ideally mean that the company would set up shop entirely in new locations and in new markets, but, at… READ MORE

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