byd company case analysis essay
1 . BYD Company, Ltd. (“BYD”) is a world’s second largest company of normal rechargeable batteries. Exhibit 1 demonstrates that between 99 and 2001, BYD’s total annual sales grew three times – exceeding RMB 1 . several billion in 2001. Depending on the initially four several weeks of 2002, BYD’s annual sales are required exceed RMB 1 . six billion in 2002. Founded in 1995 by Wang Chuan-Fu, chief and leader, BYD has generated its standing by getting the largest Chinese supplier of lithium-ion electric batteries to cell phone manufacturers. Demonstrate 3 shows that by 2002, BYD was among the top four manufactures throughout the world – the largest Chinese manufacturer – in each of the three primary battery technologies (with regarding 9% business in Li-ion technology, 31% market share in NiCd technology, and 8% market share in NiMH technology).
Regardless of the presence of enormous Japanese rivals – including Sanyo, Volvo, and Matsushita – inside the global market and many local China firms, BYD’s aim to enhance the quality of products while keeping the price low started winning it business from foreign companies.
By doing so, BYD has positioned itself like a cost leader in the mixture industry and has shifted towards cost advantage in manufacturing of usana products. BYD highlighted on the technology and application by investment about 2% of the provider’s revenue in product and process R&D. Since the advancement its 1st lithium-ion electric battery in 97, BYD made several advancements that elevated the routine life of its products. BYD moved coming from having no patents since 1999 to holding scores of patents as of the beginning of 2002.
The making process – in terms of pattern of methods – by BYD was similar to that at the competing Japanese firms. However , Japanese firms got most of the processes automated and had more dry-room space. This kind of set up needed greater investment in capital equipment and accounted for a capital costs five to ten occasions more than that in BYD. The largest threat to BYD’s competitive advantage is a tough competition experienced from the beginning of almost 200 Oriental firms inside the rechargeable battery market.
Just like BYD performed, these Chinese language firms also relied upon labor-intense production process. Deficiency of proper regulations in Cina allows the competitors to duplicate BYD processes very easily. On the other hand, BYD faced a shortage of labor in Shenzhen because of the presence of large number of manufacturers situated in that place. At BYD, 95% with the work force around the battery production is young women who attended from more compact villages across China. They might work here for a couple of years ahead of returning to their home villages. Resulting from this immigration pattern, BYD faced a turnover of 10% to 20% in its manufacturing labor force.
2 . The core competencies of BYD are: Battery Technology (by changing the item materials to make them fewer sensitive to humidity), R&D department, Hrm (providing enclosure, food, and health insurance to workers, self-control traning, job rotation to minimize monotony, social activities and promotions), cheap labor and Manufacturing method (labor in addition jigs means automation). In the above mentioned key competencies, power supply technology, R&D department, Human Resource Management, and inexpensive labor are transferrable towards the automotive business. Yet , the manufacturing process – which is not computerized – is usually not transferrable to the automotive business. From the resources perspective BYD should your auto sector because obtaining Qinchuan Auto Company provides BYD unusual resources such as production enables and terrain for its new Auto manufacturer, which are significant barriers pertaining to entry for new competitors, for a reasonable cost. These solutions coupled with the BYD’s transferable resources could result in a successful business.
3. The Chinese car industry is definitely overall eye-catching. There is big growth predicted in the Oriental demand for vehicles – coming from 1 , 000, 000 sedans in 2002 to potentially six million simply by 2010. Given this expected progress in demand intended for automobiles, several Chinese vehicle manufacturers had partnered with foreign suppliers, such as Standard Motors, Toyota, and Vw to sell their particular vehicles. As shown in Exhibit 13, the production capacity of key firms in china a little bit exceeded a couple of million products in 2002, this number is likely to reach 3. 5 , 000, 000 units by simply 2012 – as shown in Exhibit 14. Certainly! The Chinese auto market is attractive to BYD.
Given the predicted growth and demand in the auto industry, combined with Oriental government having stopped providing production permits for new automotive companies, there are very few outstanding opportunities to join to this booming auto sector. Moreover, BYD is getting an excellent bargain since the resources of the state-owned Qinchuan Automobile are being sold by a cheaper price. The state owned automobile manufacturers without foreign lovers accounted for 25% of vehicle sales in China. A lot of the SOE companies did not have even R&D departments. Because the majority of the automobile parts were imported, similar types of cars could prove costly in Cina than in USA.
The existing overseas joint endeavors were advertising the automobiles at prices that offered them margins of 10% to twenty percent. Considering the current situation, there is room to get low-priced traders. Wang constantly dreamt of applying Li-ion battery technology to develop an electric vehicle. Applying newer power supply technology and assembling it cheaply, the automobile could be competitively priced and represent the best way for China and tiawan to step forward in an industry and technology in which completely previously lagged other countries. Wang was also enthusiastic about applying BYD’s deep functions in method engineering – used therefore successfully to develop new strategies of battery development that gave BYD a significant cost advantage over global competitors – to automobile manufacturing.
5. In addition to offering OEMs a “one-stop” solution to get the outsourced manufacturing of their products, BYD should also get Qinchuan Auto Company. As a result of huge potential for the automotive industry in China and tiawan and very handful of available opportunities, this is the right moment to get BYD to the automotive industry. As Qinchuan Auto Firm already provides a name available in the market, with its range topping product Hazard, BYD will need to continue providing Flyer and various other upgraded new models of car. BYD also needs to invest in automating the manufacturing process and R&D division.
It should make sure that most of the parts are inside or regionally manufactured in in an attempt to keep the costs at lowest and margins high. The business should invest heavily in infrastructure necessary to cater to the foreseen demand in the Oriental automotive industry. It should invest greatly in acquiring quality manpower by providing them very good salaries, advantages etc…. If capital is challenging, then BYD could acquire foreign producer and provide them a system to sell many in the Oriental automotive industry. This will give BYD enough time to closely analyze the Oriental automotive industry and take important steps.