International Expansion Opportunities for BYD Auto | Country-Based Project |
THE UNIVERSITY OF AUCKLAND
BUSINESS SCHOOL
Master of International Business
Course: Global Business Operations
Course Code: Intbus 721
By Liwen Ji (1401148),
August, 2010
Contents
1. Executive Summary 1
2. Introduction 1
3. Internal Analysis: Strategy and Structure 1 3.1 Company Background 1 3.2. Value Chain Analysis 2 3.3. Porter’s Generic Strategy 3 3.4. Product Lifecycle & BCG Matrix 4
4. External Analysis 5 4.1. Initial Country Screening 5 4.2. The Economist Model of Country Analysis 5 4.3. Porter’s Five Forces 7
5. Market Entry Strategy 8 5.1. Timing of Entry and Market Entry Mode 8 5.2. International Strategy 8
6. Recommendation/ Summary 9
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The corporation not only provides accommodation, super markets, entertainment facilities and dining hall in the countryside plant, even free education and child care are offered, which to a large extent attract young elites and render them concentrating on work.
3.3. Porter’s Generic Strategy
The company pursues what Porter (1980) calls a differentiation strategy (See Exhibit 4) since the technological core competency distinguishes BYD’s electric automobiles from other brands. The energy cost of electric automobiles could be only 1/8 of that of the traditional fuel automobiles, for which it has attracted extensive public attention. Moreover, adapting Fe Battery permits E6 to be capable of be driven 300 km as a nominal range, and can be charged in household power supply. Beyond that, the environmentally friendly has gained the governmental support in the form of subsidy, which decreased the price of F3DM by almost 50% (From 16980, 000 Yuan to 898,000 Yuan).
However, as mentioned above, BYD Auto reduces its cost to a large extent by supplying itself the car components. Apart from its electric automobiles, the traditional cars are set at a very low price. Therefore, although being focused on differentiation as its primary strategy, BYD Auto also employs a cost leadership strategy
We have the desire to create a new form of technology and get away from gasoline cars. Electric cars are the future in transportation and will pave the way for the auto industry in years to come. Even though we have not seen the results we need in production, costs, and technology, people are positive they will soon catch on. In this paper I will discuss the cultural considerations of the electric car. I will compare the United States use of technology with other nations around the world such as China. When comparing them, I will cover the main sources of the technology for present electric cars and also the production. I will review America’s innovation and motivation in pursuing the electric car. Based on that I will name some leading car brands
Ever since their invention, cars have been powered by gasoline. Over the years as gas prices fluctuated and supplies continue to dwindle, motorists have started looking for a more reliable and cost effective alternative. As a result car companies have begun producing a new type of car to meet the demands of consumers; the electric car. In recent years the electric car has been a source of great controversy, some seeing it as the future of personal transportation, while others see it as the inefficient and unreliable dream of environmentalists. Currently, the United States has been supporting this growth and development of electric cars. The U.S is showing this support by providing tax benefits to consumers who purchase electric vehicles, along with providing government subsidies to companies such as Tesla who are fueling the growth of these electric cars. The United States should continue to promote the use and development of electric cars because they are beneficial to consumers, the economy, and the environment. The promotion of these electric cars will also lead to the continuing developments of technology. These improvements to technology will only further benefit society in the United States.
With a wide variety of vehicles and manufacturers due to low switching costs, the bargaining power of customers is very high in the automobile industry. Also foreign brands are selling vehicles in the Indian markets, adding to the bargaining power of customers in this industry. Thus the value created by the firm lies in adding differentiating features by innovating and increasing the customer’s willingness to pay while reducing the supplier’s opportunity cost.
As for cost structures for this industry, the fixed costs are going to consist of machinery and equipment in order to produce the automobiles. These fixed costs also serve as a barrier of entry into the industry; small firms will not be able to afford the fixed costs. For the variable costs, labor, materials, and advertising are going to be the main costs (Investopedia, 2009). These costs also change according to the output produced; whether the companies cut back on production or increase in production. These costs don’t serve so much as a barrier of entry into the industry, but in order to compete in this industry, an entering firm must come up with them on an extremely large scale.
After this the purchasing decision is derived from Vehicle price, concern’s about travel range, and the size of the car, specifically relating to trunk space. These are all product factors that can only be changed over time as perception of the electric car product is shaped in the consumers mind through a multitude of marketing tactics, something that a small scale dealer like Sanger will never truly have a major influence on. These factors can only go two ways, one is the negative perception of the electric plug-in remains constant as consumers fail to see the benefits of the new product type and the market continues to rely on gas powered vehicles, or consumers view the perceived value of the electric cars as being more beneficial both economically and environmentally. The ladder
At the 27th of May, 2010, BYD auto, together with Daimler AG, a noted Germany-based car manufacturer, formed Shenzhen BYD Daimler New Technology Co. which was committed to develop pure electric automobiles for the Chinese market. The first pure electric auto of the new company is planned to be put into production in 2013.
The United States of America is one of the biggest automobile markets in the world. This trend has also created awareness for environmentalist to bring attention to rising level of pollution and emission within the cities and metropolis. As response, the U.S. Government is encouraging the automobile manufacturers to produce clean and renewable alternative vehicles that will drastically reduce pollution and emission. Subsequently, the automobile industry has witnessed a gradual introduction of environmental friendly vehicles that use clean and renewable energy to encourage less pollution and safer environment. The manufactures of these vehicles have introduced into the market three categories of electric passenger car
After the success of electric cars in the West, manufacturers from around the globe are entering into this business. With more players in the market, the competition is expected to be intense.
In contemporary world, the gasoline’s price has increased so much that there are less people to buy gasoline cars. Therefore, a newly developed car which use the electricity as power comes into people’s sight. There are some comparisons and similarities between the electric cars and gas cars.
Similarly government regulations in the United States and Europe are tightening up, consequently requiring cars to be cleaner and more fuel efficient. As a result, the collaboration with BMW is paramount to getting the most fuel efficient vehicles to the market in a timely manner so that GM can harvest a substantial profit. (3) In addition General Motors is working on the next generation of fuel efficient and gasoline free vehicles to help reduce the impact of the vehicle on the environment, while preserving personal mobility, which further indicates its commitment to innovation. (6)
| * Losing an opportunity to place itself at the forefront of marketing a luxury plug-in electric vehicle * Lose the opportunity to add reputation * Losing the increasing market of hybrid plug-in electric vehicleSee Exhibit 1
Ford planned to introduce the new electric car and it tried to compete against Tesla and GM, which is the two dominated company in the electric car industry. The car which made by Ford satisfied consumer’s needs (see “Fords plans electric vehicle to compete with Tesla Model 3, Chevy Bolt “, Chicago Tribune). Ford also planed that it would try to add 13 electric cars and hybrids to its lineup in
One of the main political factors facing Tesla in the US are the incentives offered by different states and cities to Tesla owners. They must co-ordinate with these policy makers and inform the consumer. In China, the key political factor is that “the Chinese government wants to put around 5 million electric or plug-in hybrid vehicles on its roads by 2020, but to date reports have confirmed that there are a mere 70,000 electric vehicles plying on China’s roads. In order to promote EV sales, the government has set a target that 30% of government vehicles purchased by 2016 should be EVs. To reach the target set for 2020, the Chinese government is ready to fund nearly $16 billion to build electric charging stations. To further promote EVs among Chinese car buyers, the government is looking to impose a new tax on gasoline engines and has renewed the private-buyer subsidies for electric-powered vehicles for another three years.” (GuruFocus. 2014.
They are quiet, accelerate fast and are marketed as producing “zero emission”. Since the beginning of the decade the electric cars became more and more affordable and therefore are starting to be more common on Quebec’s road as well as in the rest of the world. To a lot of people it is like a dream coming true in which they finally free themself from the dreaded price fluctuation of petrol that has been giving them nightmares while robbing so much of their hard earned money for so long. As the technology develops a growing number of people are ready to bet that the electric car is the car of the future that will make us save both save money and resources while being environmentally friendly. Although the electric vehicle is a great
Corresponding Author: Kasperk, Garnet Center of International Automobile Management, RWTH Aachen University Templergraben 64, 52062 Aachen, Germany, gk@im.rwth-aachen.de Phone +49 241 80 93348, Fax +49 241 80 93248 Wilhelm, Jan Chair of Organization, RWTH Aachen University, Templergraben 64, 52062 Aachen, Germany, jw@im.rwth-aachen.de Wagner, Wolfgang Volkswagen Corporate University, China Cuipingbeilixiqu, 16Haolou-1Danyuan, 2311; 101121 Beijing, Tongzhou District, China. wagnerclean@gmail.com