Nissan Corporation is one of the world’s leading manufacturers of motor vehicles in the world. The Japan- based company, is the sixth largest motor producer after Toyota, General Motors, Ford, Motor Group, Volkswagen Group, and Hyundai. In China, Mexico, and Russia, Nissan is the most common brand of automobile used. Nissan’s sales and market share have been on the rise, until recently when they started to decline. This has been a major concern to many people including the Nissan Company itself. The harsh economic times that are being experienced worldwide have affected many sectors, including the Nissan Corporation. Therefore, I conducted this research to find the reasons why the economic conditions are affecting the performance of the Company.
Background of the Study/ Defining the Problem
The difficult economic conditions that have been experienced worldwide have led to a decline in sales and profits of many companies. In this case, the Nissan’s sales have been declining in the recent years making it a huge concern. The market share of the company is slowly getting replaced by its competitors who include the Toyota Corporation. This research wants to analyze how the corporation can still make profits and improve its sales despite the harsh economic conditions. The market share of the company was slowly declining, and the profits had decreased despite many efforts being put in place to improve the performance of the organization.
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Since the last fiscal year, the Nissan Corporation has received a decline in their profits and sales in some of their markets. The affected markets are Japan, Africa, Russia and the Latin Market. The rise of the value of the Japanese yen has been a major cause of the decline in the profits. The Japan market has been affected by the scandal which involved their rival company the Mitsubishi where they were accused of producing faulty cars. Therefore, this has made the Japanese consumers lack trust in the Corporation.
Objective of the Study
To investigate the reason why the sales, profits and market share of Nissan Corporation have decreased due to the economic conditions.
The research also wanted to find out why the sales of their competitors are improving despite the economic conditions unlike of those of the Nissan Corporation.
The study also wanted to find out the measures that can be incorporated into the company to save the situation.
The research also wanted to find alternative sources of capital so that they may make profits despite the challenges facing the economy worldwide.
The study also wanted to find out from their existing market whether any improvements should be made in future.
The last objective of the study is to find out the policies and steps their competitors are using to gain a competitive advantage despite the tough economic conditions.
Research Design
I used secondary data sources to conduct my research because I could not get first- hand information. These sources included websites, the Automotive News article to conduct this research. I found that the sales and profits of Nissan Corporation had fallen in some markets. The sources of data revealed that the economic challenges being experienced globally had caused this problem. The Nissan Corporation still made efforts to improve the sales and profits, but they still went down. The Corporation blamed the strengthening of the Japanese yen as the major cause of the problem. The loss of the Japan market also contributed to the decline in the sales and profit. The unfavorable exchange market led to losses in the overseas market.
After analyzing the data collected, I found that some markets still managed to make profits despite the economic changes. In the United States, the Nissan Corporation still managed to increase their sales because they introduced discounts to their consumers. The data collected from the Nissan’s website was for the Fiscal Year 2015and the data from the Automotive News article being for the first and second quarter of the year 2016, this being the most current data of the corporation. From my research, it was expected that the Corporation would still experience losses due to the economic conditions. The markets in Russia, Japan, Africa and Latin were the most affected.
Results collected from the Automotive News article
In the latest quarter of the Fiscal year that ended June 30, 2016, the Company reported a decline in the global operating profits by 9.2% to $1.71 billion (Greimel, 2016). Foreign exchange losses were said to be the cause of this decline. In the period between April and June 2016, the net income of Nissan fell by 11% to $136.37 billion (Greimel, 2016). The Corporation blamed the decline to unfavorable exchange rates and the fall in sales in Japan. The global revenue fell by 8.4% to $25.84 billion in the period between April and June 2016 (Greimel, 2016). The Company reported the decrease of global sales by 0.6% to 1.29 million vehicles. In North America alone, the operating profit declined to $774.1 million the first quarter of 2016 and in Europe sales fell by 2.9% to 183,000 vehicles (Greimel, 2016).
Data from Nissan’s Website
Despite the Corporation reporting profits in some part of its market, several countries had a decline in their sales, profits and market share due to the economic conditions. Japan reported a decrease the sales fell to 4.94 million vehicles representing 6.8% decline (Nissan Motor Co., 2016). Japan’s market share fell to 11.6% and the sales fell by 573,000 vehicles which were 8.1% decline (Nissan Motor Co., 2016). The decrease in the performance of Japan was blamed for the customer’s lack of confidence in Japan’s motor vehicles. Russia too was affected by the economic conditions reporting a decline in sales by 32.6% to 116,000 vehicles (Nissan Motor Co., 2016). Despite the decline in sales, Russia’s market share remained constant at 7.6%. Nissan’s other markets were also hit hard by the economic conditions. The sales in these markets fell to 835,000 vehicles which were a decline of 5.9%. The Asian market reported a fall in sales to 357,000 units (Nissan Motor Co., 2016). Sales in the Middle East declined by 12.4% to 208,000 vehicles, in Latin America, they fell by 6.7% to 171,000 vehicles while in Africa they fell by 4.1% to 99,000 vehicles (Nissan Motor Co., 2016).
Bloomberg Market Website
Profits in the second quarter of 2016 were reported to decline by 16% (Jie & Horie, 2016). In US and China, the demand was predicted to go down. The Nissan Corporation reported that its net profit went down to $1.4 billion in the second quarter of 2016 (Jie & Horie, 2016).
Analysis of the Data
All the sources of data show the decline in the sales, profits and market share of Nissan Corporation due to economic changes. According to the Automotive News Article, the global operating profit went down by 9.2% which represented $1.71 billion. This decline in the operating profits was caused by losses that were experienced in the foreign exchange market. Loss of the foreign exchange earnings is one of the economic conditions that have led to the current situation in Nissan Corporation. Between April and June 2016, unfavorable exchange rates and the falling sales in Japan led to fall of the total income to $1.33 billion which was a fall by 11%. Nissan’s global revenue of Nissan Corporation fell to $25.84 billion, and the sales went down by 0.6% to $1.29 units (Greimel, 2016). The harsh economic conditions stripped the Corporation $889.1 million from its operating profit (Greimel, 2016).
Sales in Japan had been suspended due to consumers’ lack of trust in its products. This has also contributed majorly to the decline in profits, sales and market share of Nissan Corporation. The profits of the Corporation in Mexico and Canada markets were affected by the appreciation of the value of the yen compared to the dollar. The sales in these two markets fell by 8.9% to 529,000 vehicles, and the operating profits fell to $774.1 million which represented a decrease of 17% (Greimel, 2016). The European market reported a decline in sales by 2.9% to 183,000 units (Greimel, 2016). The operating profits are expected to fall to $6.92 billion in the fiscal year ending 31st March 2017. The revenue of Nissan Corporation is expected to fall to $115.04 billion by the end of the current fiscal year (Greimel, 2016).
Analysis of Data from Nissan’s Website
This data was for the fiscal year of 2015 that was used to table the financial performance of that year. Sales in Japan were reported to drop by 6.8% to 4.94 million vehicles (Nissan Motor Co., 2016). The market of Japan has reported very poor sales leading to a decline in the markets. Nissan’s market share fell to 11.6%. The sales in the African market fell by 4.1% to 99,000 vehicles (Nissan Motor Co., 2016). The sales in the Latin market declined to 6.7% to 171,000 units (Nissan Motor Co., 2016). The sales in the Asian market dropped to 357,000 vehicles. These markets were majorly affected by the fluctuation of the currencies which decreased the sales and market share. The sales in Russia were affected by the weakened Russian currency which made the sales fall by 32.6% to 116,000 vehicles although they managed to maintain their market share (Nissan Motor Co., 2016).
Analysis of data from Bloomberg Markets article
In the second quarter of the year 2016, Nissan Corporation a decline of its profits. In the same period, the net profits declined to $1.4 billion dollars due to the discounts offered in the US market. The Nissan Corporation offered $4, 000 discounts in the American market so as to increase the sales but this affected the profits (Jie & Horie, 2016). The deliveries of Nissan’s motor vehicles fell by 20% due to the economic conditions (Jie & Horie, 2016).
Report of the Study
After collecting the data from the secondary report, I found out that the economic conditions that are currently being experienced have affected Nissan’s sales and profits. The economic conditions which are affecting the sales and profits of Nissan Corporation include; foreign exchange losses, unfavorable exchange rates of currencies, and the appreciation of the Japanese yen. In Japan, Nissan Corporation has had to suspend its sales in that market due to its poor performance which has been contributed by the economic conditions. From the data collected, the sales and profits of Japan were very low compared to the other markets. The market of Japan was affected by consumer’s lack of confidence in its products.
If it were not for the economic challenges that have hit the market, the sales and profits of Nissan Corporation could have been rising in all its markets. There have been efforts by the Company to increase sales in the market of the United States by offering discounts to their consumers. The United States is the largest market of Nissan’s automobile followed by China. The sales were reported to have increased, but the profits declined due to the discounts. Nissan Corporation is still determined to make profits and increases its sales despite the economic conditions affecting them. Despite the sales in the Japan market being suspended, the Corporation has managed to compensate this loss with other markets.
The market of Nissan faces several economic uncertainties. For example, the Brexit is expected to affect the sales and profits of the Corporation because Nissan has a major production plant in the Britain which serves the European market. If Britain exits the European Union, then the Corporation will lose its market in Europe. Britain has assured the Nissan Corporation that its market will still remain despite their exit from the European market. The Corporation also expects the sales and to fall in the financial year ending 31st March 2017. The rise of the Japanese yen and the unfavorable exchange rates are expected to affect the sales and profit. This research found that the rise of the Japanese yen was the major problem that affected the sales and profits of the Corporation. The strong Japanese yen has made the Nissan’s vehicles less competitive in the overseas markets. This has affected the market because almost 80% of Japan’s market is in the overseas countries. The corporation has to find ways in which they will manage the effects the appreciation of the yen. The weak Japan market has also led to the decline in the Nissan sales and profits. The Japanese market after it was involved in a scandal of producing vehicles with small engines which were faulty.
Assumptions of the study
This report assumed that the data derived was accurate which reflected the true state of affairs in the Nissan’s Corporation
It was assumed that the economic conditions were the only factors that affected the decline in sales and profits of Nissan Motor Corporation.
Limitations of the study
One of the challenges that I encountered was using secondary data sources. This is because it is not possible to establish whether the data was correct or not. The other limitation that I experienced while conducting the research was that there were limited sources of information that I could use to table this report.
Recommendations
The current economic conditions being faced worldwide have affected the performance of Nissan Corporation. The rise of the Japanese yen has made the price of their vehicles to go up in their overseas markets. Therefore, I would recommend that the Corporation sets up a measure to deal with this issue. They should find a way to deal with the challenge of the appreciation of the Japanese yen. The second recommendation is that the corporation should try and revive the market that was lost in Japan. They should regain the trust of the Japan market by producing quality vehicles. The Nissan Corporation should offer discounts to all its markets and not offering the discounts in the US only. This step will increase the sales of the Corporation by a large margin. I would also recommend that they look for new markets in where they had not previously explored. This will help them increase their sales in the new markets. The Corporation should find new market opportunities and explore which will not be affected by the economic conditions.
Conclusion
Nissan Motor Corporation has been making great sales and profits until recently when the sales and profits have started to decline due to the economic conditions. The conditions that have led to this trend include the appreciation of the Japanese yen against other foreign currencies, the loss of the Japan market due to a scandal where it was claimed to produce faulty vehicles and the losses that have hit the foreign exchange markets. Despite experiencing these harsh economic conditions, the Corporation has still managed to increase its sales in some of its markets. The market in Japan has had to be suspended because its consumers have lost trust in the Corporation. The exit of Britain from the European Union has led to doubts whether it will affect the European market because Britain harbors one of Nissan’s production plants. The Corporation is still finding ways in which it can manage to make profits and sales with these economic conditions.
The handout
The Nissan Corporation has experienced a decline in its sales and profits over the recent years due to the economic conditions. The Corporation has been affected by the Weak Japan market, the appreciation of the Japanese yen which has made it lose its competitive advantage in the markets abroad and the poor foreign exchange trade has contributed to this problem. From the data collected from the secondary sources, the Japan- based Corporation has continuously been experiencing fall in profits and sales. The sales in various markets have been on the rise especially during the first and second quarter of 2016. The markets that have been most affected include Russia, Latin, Japan and Africa.
The Nissan Corporation also forecasts a further decline of sales in the Fiscal year ending 31st March 2017. This is because there have been no changes in the economic conditions affecting the sales. The exit of Britain in the European Union also is expected to worsen the situation because Britain is home to one of Nissan’s production plant. Although Britain assures Nissan that their exit will not affect their sales and profit, this still remains to be a worry. The sales in the United States were reported to have increased because the consumers were offered discounts of $4,000. This step was taken to increase the sales in the US, but it led to the decline in profits.
It was assumed that the information that was used was accurate because it was taken from secondary sources. It was also assumed that economic conditions were the only factor that led to the decline of sales in Nissan Corporation. The limitation of the report is that it was not possible to get first- hand information, therefore second- hand information sources were used. These sources include the Nissan Motors website and two other articles. The recommendation that the study would give to the Corporation is to find ways to improve the sales and profits despite the economic conditions.
References
Greimel, H. (2016). Nissan profit declines 9% as stronger yen hits earnings. Retrieved from http://www.autonews.com/article/20160727/COPY01/307279959/nissan-profit-declines-9-as-stronger-yen-hits-earnings
Jie, M. & Horie, M. (2016). Nissan Profit Falls 16% on Stronger Yen, Higher Incentives. Bloomberg Market . Retrieved from http://www.standard.net/Business/2016/11/07/Nissan-profit-falls-16-percent-on-stronger-yen-higher-incentives
Nissan Motor Co., L. (2016). Nissan | FY15 Financial Results . Nissan-global.com . Retrieved from http://www.nissanglobal.com/EN/DOCUMENT/HTML/FINANCIAL/SPEECH/2015/2015results_speech_648_e.html
