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 / Second Quarter 1997 / Issue 7(originally published by Booz & Company)


Conceptual Re-engineering at Nissan

Our entertaining brand commercials catch people's attention. The rest will be 30-second, single-purpose commercials designed to attract competitive levels of traffic for our dealerships. There will be a consistent format, and subtle references to our brand advertising.

Change Retailing Environment. This is a multifaceted issue, but one physical change we will encourage is to have fewer dealers and larger retailing areas. We believe that formula builds financial stability through reduced overhead and greater revenue opportunities. It also encourages better customer treatment because the dealer is more dependent upon those living in the assigned market area. Dealers currently spend too much of their resources and "good will" competing not against other manufacturers' brands, but against nearby dealers marketing the same brand to the same universe of customers.


This is the point when a fanfare should sound, signaling me to announce a set of dazzling statistics that prove the brilliance of what we have done. But the fact is that I am writing about a program that remains very much in play.

The changes we have made so far required us to think differently about our product, our market and our company. We have found it is no easier to re-engineer a mental process than it is a car.

We have consolidated functions at all levels, but that isn't code language for wholesale job elimination. What it means is that we have changed the focus of our headquarters operation to support our regional offices, rather than headquarters first servicing itself, or the "parent" company in Japan.

The unwritten chapters of our story will be characterized by our ability to face and deal with the issues that have been raised by our conceptual re-engineering. While those issues are certainly daunting, we will address them, and we have the confidence -- bred from our pattern of success -- that we can accomplish what we focus on.

My tasks will consist of keeping the organization on track with our new direction ("Belief Stream"), and pushing it to meet the operational and process objectives we have and will set.

I would like to come back to you in six months or a year with a short update: within our headquarters, will we remain as energized, and as ready not to strangle ourselves with our own bureaucratic forms? Will our stylish, brilliant advertising put our brands at the top of consumers' minds, and will our other ads bring more people into Nissan and Infiniti showrooms?

More importantly, will those consumers then feel comfortable where they are, and buy or lease a car? Will our corporate changes translate into different behavior all the way up and down the corporate line?

I look forward to being able to report the next installment.


Nissan and other non-American car makers owe their success in the United States to the last time the country's auto industry underestimated the power of consumers.

Detroit opened the door to "outside" competition during the oil crisis of 1973. It had misjudged potential consumer demand for small, fuel-efficient, reliable vehicles -- cars that Honda, Toyota and Datsun (as Nissan was then known) were happy to provide.

Until the mid-1980's, the demand for Japanese cars far exceeded the supply, the result of a voluntary restraint agreement between the United States and

Japan that limited the number of imports. The limit-created shortage made "let's make a deal" marketing (those special prices, rebates and incentives that now permeate the industry) superfluous. Selling Japanese cars back then was like minting money, for everyone wanted one.

Once the oil crisis ended, American drivers moved back into larger cars. But Japanese companies followed suit, providing high quality and extreme levels of reliability in larger cars, thus achieving high loyalty rates. Increased success meant increased competition -- leading to aggressive new marketing programs. For the first time, the Japanese- owned companies needed a sales strategy. It seemed simple enough: consumers wanted good deals, so we competed with each other on price.

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