taiga and nissan - leadership and organizational effectivness

1.0 Introduction:

Taiga forest products had sales of $913 million in March 2003 but the net profit after tax was only $7.8

million and the earning was flat for past five years. Taiga is in the deep jungle looking for way out and

just like Taiga, Nissan also need some one to roll the tyres and keep going. The company needs someone

to rescue from its ailing profits. Tong and Ghosn a new CEO’s are operated some what entirely in

different industries, different issues and challenges yet the companys’ bring about one single familiarity

between two companies ‘Change Agents’ in this assignment.

The purpose of this report is to discuss the corporate culture prior to the entry of Tong and Ghosn, CEO’s

personal profiling and their leadership styles theoretically, which bridge the gap between theory and

practice and companies turn around process in the wake of globalization. However, both leaders face

immense challenges and issues to their respective organization. Yet, there is ‘felt needed’ for change in

Taiga and Nissan, not just to survive but to grow and tap its market potential, using the management tools

such as cross cultural management and bottom line objectivity to its critical appreciation in orderly

fashion. However, devising caution in this report is advisable due to word limitation and logical fallacies,

but yet again this report will help researchers for further studies to come.

Leadership and Organizational Effectiveness. 1

2.0 Companys’ Background:

2.1 Taiga Forest Products

Taiga Forest Products is Canada’s largest independent wholesale distributor of lumber, engineered wood

products, preserved wood products, panel products and related building materials such as insulation, Trex

composite lumber, asphalt shingles, wood moldings and nails. With 15 full-service distribution netwrok

centers throughout Canada and one in Northern California, provides the essential link between

manufacturers with large volumes of product to sell, and retailers and industrial customers with smaller,

wide-ranging needs. (Company website, 2006)

2.2 Nissan Corp Inc.

An automobile factory started by Masujiro Hashimoto in Tokyo's Azabu-Hiroo district in 1911.

Hashimoto was a pioneer in Japan's automotive industry. Over the years, Nissan has lived up to its

reputation for excellence in engineering by playing a pioneering role in many fields of advanced

technology. With the aim of improving fuel economy, Nissan has developed a variety of weight-reducing

materials, such as high-tensile steel sheet for body panels, and has also created sophisticated engine

management systems for controlling combustion. In addition, Nissan has also been a fore runner in

developing and using CAD/CAM systems and industrial robots. The company has been pushing ahead

with "NISSAN 180" a new business plan aimed at achieving additional unit sales of one million vehicles

globally in 3 years (Nissan Brief History, 2006).


3.0 Corporate Culture of Nissan and Taiga:

3.1 Taiga’s Culture:

Author, argues that sales maximization does not always lead to profitability. The theoretical relationship

of the integration between a firm's strategic and financial objectives is examined. It is shown that the

strategic objective of sales growth is interdependent with the firm's capital structure. Thus, the common

goal of sales maximization should be replaced by the objective of the management of sales growth in

terms of the firm's capital structure otherwise the company can face serious problems in financial planning

when it is unwilling or unable to raise new equity. (Spienza, 1995), and also from case study because

share holders was earning dividends from revenues after tax was less transparent because of US

countervailing and antidumping duties, and other rivalries of Taiga didn’t include the duties in their

financial transaction. Shows clear unethical means of business.

Furthermore, before the entry of Tong and without any foresightedness company was paying millions of

dollar to outsource management consultants, for their correction measure, the company fail to recognize

home country size and their high distribution cost, thus operating netwrok distribution is very costly and

this hasn’t been changes for a very long times, Tong says. Furthermore, Taiga staff members were lacking

the key initiatives for change, such as no reward system, less transparency and lack of shared vision and

accountability. In addition, Taiga tone was to increase volume with no control cost strategy, subsequently,

profit margin become very low. Taiga, top executives lavish life styles maintaining costly four resorts

including one in Hawaii incurred Taiga un-necessary cost of hard earned dollar operating in a highly

competitive market. This also indicates that relationship with staff members and managers comes to the

point of near collapse. Resulting, Taiga hard to attain bottom line objectivity.

3.2 Tong’s Entry.

‘Organization activities are on the journey that never ends, and the day leaders think they got it all

workout, that’s the day leaders have to better start worrying about going out of the business’ (Bateman

and Snell, 2004). Dr. Tong is known in South East Asian business community as fast paced business

learner and recognized as future analytical entrepreneur, he took the challenge acquiring 20% stake and

later become CEO. Tong conveys a strong vision and act as transformational leader, he shows the future to

shareholders to where they will be in the future, penetrating market, centralize distribution network and

containing of the cost. As a leader, Tong further, introduces reward based performance system given

significant ownership to the employees.


He also, emphasize that relationship is the most important factor of Taiga’s corporate culture. Further,

Tong focuses on open communication between all levels of employees and employee need to understand

their roles and the consequences their roles contributed to the company. Furthermore, Author says that,

Leadership is influencing people by providing purpose, direction, and motivation while operating to

accomplish the mission and improving the organization. (Slater, 2003). In Taiga’s case, Tong, formulate

the mission strategy to goal setting theory, orbiting around three fundamental concepts for mission

attainment, such as reducing inventory risks, increasing gross margins and to concentrate of sales growth

Tong plan to proceed with succession planning. Tong, identify, promote and empower the next generation

of senior managers. The new corporate equity structure will enable Taiga to make these potential

candidates “partners”, aligning their interests with those of shareholders. Taiga, will begin making

contributions towards the company’s overall strategy and future direction (Tong, 2006).

3.3 Nissan Culture:

Employees sensed that there was indeed a problem within the company, they nearly always believed that

their respective departments were operating optimally. The consensus was that other departments and

other employees were creating the company’s problems. Ghosn also learned that many of the employees

of the company did not have a sense of crisis about the possibility of bankruptcy at Nissan because of the

Japanese business tradition, which implied that large troubled employers would always be bailed out by

the government of Japan. This view was based on the long standing partnership between the government

and the major businesses to ensure employment and expand exports to world markets. The businesses for

their part were committed to the consensus was that other departments and other employees were creating

the company’s problems (Susan and Smith, 2005).

At Nissan there were procedural norms both formal and informal, which were holding the company back.

First, once decisions were made at Nissan, the follow-up during implementation was often not effective.

This was not usually the case in other Japanese companies. Second, top management had developed tunnel

vision regarding its strategic focus on regaining market share, as opposed to restoring margin per unit

sold. This was in part due to a focus on what was best for maintaining the company’s size and its

employees, i.e. more units to produce, rather than what was best for customers. Additionally, in an

unusual break from Japanese business culture, there were communication problems between the layers of

the organization.


Staffs seemed relatively uninformed of key corporate business decisions, while top management seemed

out of touch with what policy execution issues were present at the middle and lower management levels.

Nissan culture before Ghosn can break down into 5 main components of holding backing there bottom

line objectives.

Lack of a clear profit orientation Insufficient focus on customers and too much focus on competitors Lacking sense of urgency No shared vision or common long term plan Lack of cross-functionality leadership

Source: (Sulejewicz, 2003)

3.4 Carlos Ghosn Entry:

Ghosn, the man who would become known in Japan as "the destroyer" was bringing out the big guns.

(Milliken and Fu, 2005). His first target, keiretsu system, the traditional relationships of fixed pricing and

co-ownership between Japan's major manufacturers and their chief suppliers, a system that Ghosn blamed

in large part for bringing Nissan to the brink of bankruptcy. Ghosn embraced the cultural differences

between the Japanese and himself, believing fervently that cultural conflict, if paced and channeled

correctly, could provide opportunity for rapid innovation. He felt that by accepting and building on

strengths of the different cultures, all employees, including Ghosn himself, would be given a chance to

grow personally through the consideration of different perspectives (Manz and Henry, 1990).

The key, he reiterated in (Cole, 2004), was that no one leader should try to impose his/her culture on

another person who was not ready to try the culture with an open mind and heart. Carlos Ghosn came to

Japan knowing that if he were to start imposing reforms by using the authority of his company position,

rather than work through the Japanese culture, then the turnaround he sought would likely backfire. Nissan

company culture can be break down into three categorize as followed

Transparency: An organization can only be effective if followers believe that what the leaders think.

Execution is 95% of the job. Strategy is only 5% organizational prosperity is tied directly to measurably improving quality, costs, and customer satisfaction. Communication of company direction and priorities this is the only way to get truly unified effort and buy-in. It works even when the company is facing layoffs.

Source: (Sulejewicz, 2003)


http://financial.washingtonpost.com/custom/wpost/html-qcn.asp?dispnav=business&mwpage=qcn&symb=NSANY&nav=el

Ghosn also put focus on performance by introducing a performance based incentive system. These

incentives included cash incentives and stock options for achievements that could be linked directly to

successful operating profits and revenue. This was a large departure from the traditional Japanese

compensation system, in which managers usually received no stock options or bonuses. Under Ghosn’s

compensation system, the highest achievers got the highest rewards. And promotions were no longer

limited to age, length of service, or educational level.


4.0 Leadership Styles:

4.1 Tong Entrepreneurial ship style and Credibility:

Tong leadership style is entrepreneurial and transformational. Author argues that entrepreneurial Leaders

are more important in the knowledge economy characterized by continuously evolving technologies and

change (Brown & Eisenhardt, 1998). Leaders must be able to adapt to rapid changes in order to advance

themselves, their places of employment and the societies in which they live. Globalization and rapid

change are contributing factors leading to increased competition and uncertainly in the 21 st Century (Bettis

& Hitt, 1995). These same factors also increase the importance of studying entrepreneurial behavior

outside of new venture creation (Shepard & Krueger, 2002). Tong was also participative leader allowing

followers to be act as individual entrepreneurs (Fig-1), while introducing pay-for-performance, giving the

staff incentives to be watchful of cost.

Fig-1: Theoretical Framework of the Entrepreneur in the Context of an Academic Setting

Source: (Hild, 2005)

In order to learn and grown, leaders must have self-awareness, which, ironically, requires input from

others (Daft, 2005). Tong also introduces 360 degree feedback programme and particularly ask for own

performances and discover how others perceive him as non westerner CEO, this way he will be in better

position and able to align his intentions with reality and develop a plan for improvement.

Tong’s effective and admirable leadership necessitate the composure. Furhter, challenges, stressors, and

obstacles are inherent in any organization and in any leader’s path how leaders conduct themselves during

the good times and the bad can be indicative of their character, competence, and ultimately, credibility.

While the call for transparency that builds credibility urges leaders to reveal their true opinions and

emotions regarding relevant business issues, it does not allow for leaders to irresponsibly let it all hang


out. Followers expect their leaders to be composed. And they are always watching. Also, a certain level of

predictability builds trust. continue emphasize on overriding transparency (Jamie, 2002)

Tong is also visionary leader, he introduce his new change vision to the company while continues

emphasize on overridden transparency, he match his words into actions, Tong place a high value on their

commitments. Furhter, Tong as a leader directed the company to change from “how bad the deeply

troubled Taiga was” to a vision of “how good Taiga will be”. This vision turn back the company from

$7.8 million profit to staggering 26.3% million net profit almost multi fold profits (Derek, 2005) and

continuous selling a millions more products and increasing the operating profit margin. Tong was setting

measurable goals, to succeed and creating an environment where employees feel a sense of making the

vision come true. This, entrepreneurial understanding, articulating, and sharing the vision that leads Tong

to move to higher level of effectiveness and success.

Taiga has to be prepared for anything. It’s important, to keep future in mind. This presents environmental

concerns because the regulations are only going to get more stringent. It’s not going to get any easier. It’s

going to get more demanding. Tong says you have to have the expertise and the technology to answer and

to satisfy the question Green Peace Foundation asks and threaten the business of Taiga. Furhtermore, 14

distribution centers across the country and has chosen to focus on the distribution business. Taiga sees the

opportunity of a good value added process and product and it dovetails nicely with the building products.

4.2 Carlos Ghosn Leadership style and The Future for the New Age of Nissan:

Successful change on Nissan is hinged on a picture of a desirable future. Vision can provide both a

corporate sense of being and a sense of enduring purpose. Without a sensible vision, change efforts can

dissolve into a list of confusing projects that take the organization in the wrong direction. Therefore for

the future, vision can empower and encourage leaders and followers to implement change (Sullivan &

Harper, 1996). Moreover, Ghosn importantly recognize what are the company’s core competencies and

traditional mode of operating core capabilities, then must transformed it to meet the challenge of today’s

global world. According to (Hamel and Prahalad, 1994), there are three key elements of core

competencies that can be used for Nissan’s core competencies identification, which as customer value,

competitor differentiation and extendibility, seen in Table 1

Core Competencies Identifying Nissan’s Core Competencies


Customer Value-that is, competencies should make a significant contribution to the perceived customer benefits of the end product.

Good and high quality cars

Differentiation-that is, competencies should be difficult for competitors to imitate.

Nissan was very well known well for its advanced, engineering and technology, plant productivity and quality management.

Extendability-that is, competencies provide potential access to a wide variety of markets.

Alliance with Renault, Nissan will add more capabilities on marketing and design flair. Moreover, Nissan can expand market coverage into Latin America, whereas Renault had its high share market, especially Brazil.

Source: (Hamel and Prahalad, 1994)

Company vision is’ Nissan 180’. Functionally, Ghosn decide to mobilize ‘Nissan’s 180’ line managers

through a series of cross functional teams that would identify and lead the radical changes that needed to

be made. His leadership technique is team approached style and he believe this is the best way to get

managers to see beyond the functional and regional boundaries that had previously defined their jobs.

Thus, he created nine management teams and charged them with creating a plan for transformation in all

areas of the business. The teams were organized into areas such as, Business development, Purchasing,

Manufacturing and logistics, Research and Development, Sales and Marketing, general and administration

Finance and Cost, Phase out of products and Parts complexity management. (Thunderbird, 2003).

Within three months, the nine teams had created a detailed blueprint for Nissan’s turnaround and within

three years, implementation of the various aspects of the plan and returned the company to profitability. In

addition, because managers throughout the company were involved in creating the plan, morale,

cooperation and company identify have grown stronger. (Daft, 2005).

End of keiretsu relationships in Nissan slashed by Ghosn and the resulting cost cutting has prompted many

Nissan suppliers to get creative. Two major Nissan keiretsu players, Calsonic Corp. and Kansei Corp.,

merged and diversified their client base in order to withstand the impact. (Ghosn, 2002) in his speech says

some suppliers could not meet the cost-cutting target and bowed out of contracts, but in all cases, the

automaker has found a supplier that could do the job for the right price. Suppliers, he says, also are

encouraged by the fact that Nissan is sharing the pain, making harsh internal cuts whenever possible.

5.0 Lying Issues and Challenges:


5.1 Challenges and Resistance to Change Prior to Cross Cultural Differences:

The situation was so bad that Nissan did the un-thinkable, it started shopping around for a foreign buyer to

save this icon of Japanese industrialism. Foreign firms had invested in other Japanese carmakers, General

Motors had taken effective control of Isuzu by the late 1990s, and Ford was running the show at Mazda.

But these were smaller car companies that had always been secondary players in the Japanese market.

Their surrender to foreign competitors didn’t carry the symbolic punch that a takeover of Nissan would. In

1999, after DaimlerChrysler balked at the huge debt load, French carmaker Renault, seeking an entry into

both the Japanese and North American markets, bought a controlling 37 percent interest in the company

for $5.4 billion. While the company would be saved, at least temporarily, not many people in Japan were

happy about the notion of a foreign takeover of one of the country’s proudest companies. “When

MacArthur came after World War II, the Japanese just surrendered to his leadership,” said a retired Nissan

executive. “A similar thing is happening at Nissan today” (Wehrfritz 1999).

Ghosn face numerous challenges, but the main ones are, seniority base system and life time employment,

which is un-acceptable in west. For example, a female factory worker who had only a high school diploma

was promoted to be a manufacturing manager based on her strong abilities to perform the work, relating

promotion and salary increase to the ability to perform challenging or demanding tasks. The promotion of

some younger leaders over older is routine in the west. However, In Nissan and particularly in Japanese

culture it is totally un-acceptable and in Nissan employees caused some problems and resist to this change

and lack of cooperation. However, Nissan was the first company who appoint female line manger in

factory indicates to sweeping reform in the company. (Thunderbird, 2003).

Slow decision making impeding the company’s profit. Specifically, these cultural norms severely

hampered risk-taking and slowed decision making at all levels. Existing teams of employees routinely

spent much time on concepts and details, without much sense of urgency for taking new action, due in part

to the risks involved with actions that could result in failure (Daft, 2005). This indicated, according to

Grete Hofstede that Nissan culture was feminine in nature and Un-certainty avoidance was high. This

mindset contributed to a certain degree of complacency with market position and internal systems at

Nissan undermining the company’s competitiveness. In a related cultural issue, as employees became

increasingly aware that Nissan was not performing well, the Japanese culture of protecting career

advancement led to finger pointing rather than acceptance of responsibility. Sales managers blamed

product planning. Product planning blamed engineering. Engineering blamed manufacturing and so on.

5.2 Taiga impediments


The main impediments Tong facing was the containment of cost and distribution network capability and

needs to be overhauled because geographically Canada represents very huge country which required

company to some one whos good in logistics like UPS and FedEx, and Wall Mart’s Just in Time

management system, and Taiga to take this mix paradigm and apply in company.

Moreover, Taiga has stakes of new products and brands, especially with in Taiga products. Since 2004,

Taiga launches new 52 regional products. Causes, they can not maintain the sales in the market. Taiga end

retail consumers are implies to less awareness to the consumers’ diverse preferences which hamper the

longtivity of the products, costs company millions of dollar make these products through into dumps.

(Business papers, 2006). There are some natural and significant challenges faced by Tong, such as de-

forestations, continues law suits between forest products vs environmentalist groups and organizations.

Less awareness of Taiga’s image and brand resulting bad image to consumers eye and partners.

The distribution netwrok which hasn’t been change for a long time, this incurs very high cost to company

and Taiga’s processes product to finishing goods cost becomes very high in competitive market because of

mobilization cost. Furthermore, Taiga’s performance was slipping because of Indofood facing fierce

competition from companies, for year ahead, Taiga facing numbers of competitors which most persistent

in the lower-price segments. Industry analyst says that the competition price becomes big challenge for

Tong to make price strategy for next year marketing plan. The company is competing with fearsome

American rivalries and well within Canada. Taiga’s lumber market share was going down because lumber

and flooring products are expansive unit price at 20% higher than other companies. (Business paper, 2006)

One main significant challenges faced by Tong was technological. For example other companies with

amazingly sophisticated technology in hand, they producing products with renewable and recycled

technology making Taiga’s position in difficult place to compete with. This may directly points out

Taiga’s internal issue, that even though the employees are skill and perfectly capable of making use of this

technology but they are well with in their comfort zone, this could be other reason as well, it may be

something to do with non-western leadership, because the employee are in such a personal and biasness

level that they didn’t allow them self to feel the sense of urgency.

Influence is defined as a mechanism through which people use power to change Taiga employee behaviors

or attitudes. Unlike power, influence can produce an effect without the exertion of force, compulsion or


direct command (Luecke 2005). The direct application of power from Tong may have drawbacks and

consequences. The first and most notable may be that the people on the receiving end of power may

respond only half heartedly. It may also hamper mutual agreement and involvement on the part of

followers and employees and may not produce full commitment from employees to follow the goals.

6.0 Change is necessary:


6.1 Nissan Necessity to need for Change:

There was resistance of change initially. Nevertheless, Nissan recognized that a Ghosn renovation might

be the last chance to save the company. “Many of them were receptive to Ghosn idea’, because Nissan

knew this had to be done, said one midlevel manager. “We were getting impatient with the old Nissan

management because they kept talking about changes but wouldn’t make them. So we are happy to

support Ghosn-san now” (Dawson 2002). Even the labor unions backed him. That kind of support might

not happen in other companies, where the case for major overhaul might not be so clear cut. It’s also

unclear whether anyone but a foreigner could deliver such direct talk and call for such drastic actions.

Ending a relationship with a member of a kereitsu would mean cutting off a lifelong colleague, as

typically suppliers and subsidiaries are run by executives from the mother company. Yet there is evidence

of a Ghosn Reformation, if not a Revolution. “Ghosn’s results have raised the bar for companies in Japan

in terms of what can be accomplished and how quickly”. Furhtermore, recent survey of 800 companies

found that less than one fifth of them plan to hold on to their system of lifetime employment for

employees (Dawson 2002). Other companies are introducing merit-based pay and promotion and even

stock options. Blue-chip companies, which for decades had clung to a lifetime employment system, began

implementing rounds of layoffs and moving manufacturing operations offshore.

Nissan is selling off non core businesses. They are starting to face pressure to do this from their banks,

which are heavily indebted and under pressure themselves to reduce debt loads. With an aging population,

a deflationary economy and competition from such emerging markets as China for manufacturing, it’s

clear that Japanese companies do need to engineer a makeover. (Brenner, 1999).

6.2 Taiga’s to facilitate the support for change:

Taiga which would focus on profitable growth. All new goals were to be accomplished if company

contains their cost. The world is witnessing everyday emerging markets, the technology are getting very

complicated whilst sophisticated. If Tong revival plans of cost containment weren’t launched, soon Taiga

find its self out of the door and floor which Taiga use to make for the customers and partners (Business

Paper, 2006).

Taiga two major restructuring plans in the 1990s, but they had little impact powerful trade unions, a

societal taboo against layoffs and institutional inertia stalled any real changes. The company’s global

market share of car sales declined from 6.6 percent in 1991 to 4.9 percent in 1998 (Wehrfritz 1999). With


Nissan on the verge of bankruptcy, the government owned Japan Development Bank issued $731 million

in emergency loans to save the company from collapsing (Brenner 1999).

Taiga’s management didn’t have a coherent marketing message, so the employee didn’t exactly know

what kind of image Taiga was trying to sell. Furthermore, Tong see the change as opportunity of window

in Taiga because Canada forest product market was getting highly competitive, further more WTO

agreements with China out company into ground and never too stand it in Canadian as well as US market.

Change now or never. The road to redemption might have been a bumpy ride in early going, but share

holders and employees have warmed up in a serious way. In addition, continues fluctuation and hike in the

prices of gasoline cost Taiga cost a lot of money, Unit sales cost and gross profit margins were dampen

and weakened the company’s credibility the share market prices was devaluating. This trigger the

company to major reshuffle and change. Tong has converted his employees the people who make this

logistics model work to the big picture. Furhter, hike in the prices of gasoline

There are expected to be further departures from the company, but most are to be concentrated in the

janitorial and resort staff and involve relatively junior staff this will lead it through significant growth. The

Malaysian Tycoon Tong represent change agent and at the moment he is doing the major reshuffle

programme embracing globalization tapping into international source and deliver customize product with

just in time management model and FedEx, UPS logistics model,

There are all kinds of factors and influences. In the case of Taiga, they had to research bird life on their

site to make sure there were no endangered species and do an archeological dig at a cost of $50,000 to

satisfy the public groups that the land involved is no sacred sites. But rather than looking at all this as a

hurdle, the company chose to see it as an opportunity. "We’ve got a chance to do things the right way right

from the start," says Tong. "Both in Langley and at Taiga’s new plant in Edmonton, we were able to build

facilities that satisfied the authorities incorporate the absolute latest in technology and introduce a new

green treated wood product to the market. (MacDonald, 2000).

7.0 Conclusion:


When you get a clear strategy and communicate your priorities, it’s a pleasure working in Japan (Brenner,

1992). The Japanese are so organized and know how to make the best of things. They respect leadership.

Japanese are also pragmatic peoples and they are totally aware of their global challenges and change in

this discontinues world, say Charles Handy describe that change is not what it used to be. Taiga

employees after some while respect and accept the new reality that non western also can be as effective as

their counterparts.

Ghosn and Tong are transformational leaders and they represent change agents like Kurt Lewin describe

and transformation has really just begun. Both companies had reached the goals until some extent that

were seemingly herculean before the entries of both Ghosn and Tong.


taiga and nissan - leadership and organizational effectivness

Documents