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3
Li6.941
Strategic Analysis of BYD
Strategic Analysis of BYD
Anuj Gandhi
Michael Pottratz
Chong Zhang
Di Zhang
Xuemin Hou
Lu Yang
Anuj Gandhi
Michael Pottratz
Chong Zhang
Di Zhang
Xuemin Hou
Lu Yang
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Li6.941
Introduction:
• BYD Automobile was established in 2003
under the leadership of Wang Chuanfu
• In a span of 8 years it is the sixth largest car
manufacturer in china
• The parent company of BYD Automobile is
BYD Co Ltd . • Vision :To be the leading car manufacturer
in 2025
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• Inadequate power lines
• Huge population but less space and hence public transport is of extreme importance
• Economic conditions around the world are weak and car sales have declined in the last one year
• Support from Chinese government
• The holding company has to be a Chinese company
Political Economic
TechnologicalSociological
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Core Competence :lithium ion technology,
System integration, Project management
Distinctive Competence :
Low cost High quality
Competitive Advantage:
Low cost labor, lithium ion scale of
production
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Key Resources and Value-Added Functions
Very High High Modest Low
Non-global distribution
Lithium ion battery Lithium
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Financial Performance:
2007 2008 2009 2010 Automobile Industry
Norm
00.20.40.60.8
11.21.4
Liquidity Ratios
Current Ratio Liquid Ratio
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Financial Performance
2007
2008
2009
2010
Auto
mob
ile In
dust
ry N
orm
0.00%10.00%20.00%30.00%
Profitability Ratios
Net Profit Margin Return on Total Assets Return on Equity
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Strength (Internal)
Distinctive competence and competitive advantage : lithium-ion technology and manufacturing
Human Resources: Low cost Labor
Weakness (Internal)Financial: limited working capitalCore competency: automotive engineering Outbound logistics: no global distribution network
Opportunity (external)
Political: Government policy support.
Socio-Cultural: Increase population tax oil supply
Buyers: Commercial ZEV
Entry: Scale of economy
Threat (external)
Economic: Artificially low Yuan
Technology: Current electric grids cannot satisfy ZEV demand
Supply: Lithium supply
Substitute: consumer ZEV
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The BCG Growth-Share MatrixHigh
100%
$80M 70 60 50 40 3020 10 0
Reward(ECV)
0%Circle Size=Resources(annual) Low
Pro
babili
ty o
f Te
chnolo
gy S
ucc
ess
eBus
FutureB2B battery
pack
B2B battery pack
B2C consum
er electric
cars
eBUS
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Key Points :
• Current electric grids cannot satisfy
consumer ZEV demands
• Lack of global distribution network
• Lithium is a key component for BYD
which Is the differentiator
• Declining financial performance
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Sale of BYD Consumer
Automobile(B2C)
Reorganization
Global Strategy
Joint Partnership
Phase 1Corporate Strategy
Increase in cash
Lean organization
Win-Win situation
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Phase 2Competitive
Strategy
Focus on Electric Busses
production
Sell electric busses to the
Chinese government
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Phase 2Low Cost Strategy
Increase in Cash
from sale of BYD
Automobile
Acquire lithium from Afghanistan
New production
facilities and equipment's
Large volume and low
cost lithium ion battery is produced
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Differentiator
Low Price for making the electric Busses
Volume Production of Lithium Ion Battery
Quality of Products
Arenas Low cost Lithium Ion Battery
Worldwide Electric Busses for public
transportation in China
Staging
Buy low cost lithium Agreement with Chinese
government for selling electric busses
Increase in the production facilities of Lithium Ion
Battery
Vehicles
Sell BYD Automobiles
Joint Venture with Afghanistan
Government to obtain Lithium Internal Development Economics
Lower cost for production of Lithium
ion battery (Higher margin)
Subsidies provided by Chinese government for electric busses