BYD Case Analysis: Case Study

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BYD CASE ANALYSIS
A. According to Porter’s value chain theory, I infer that the core competencies of BDY are low-cost manufacturing, human resource management, and technology development.
Primary Activities:
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With no doubt, the battery industry is very competitive and dynamic. P3
C. After the vertical integration into wireless handsetsP8, the current corporate strategy of BDY is diversification. BYD is now considering the acquisition of an automotive manufacturer, Qinchuan Auto.
In short term, BYD believed that with the ability they built in battery manufacturing, there is a great opportunity of low-priced market for them to enter.P10 Designing new production model, as one of BYD’s core competencies, can reduce the cost of manufacturing and improve the efficiency of producing Flyer, Qinchuan Auto’s main product. P11In long term, within the green energy trend, BYD intend to develop an electric vehicle powered by their battery. And they currently started to develop applications which are related to electric vehicles.
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Based on those analysis above, although BYD had strong core competencies and competitive advantages so that they intend to imply these advantages to auto industry and create great value within it, we still have to use Porter’s three essential tests to test and verify whether BYD should diversify into auto industry, acquiring Qinchuan Auto or not.
1. Attractiveness test: the passenger autos were expected to rise, but it have not happened until 2002. And the price continued decreased by 10% to 20% per year. Besides, there are three large barriers, Shanghai Automotive Industry Corporation (SAIC), First Automobile Works (FAW), and Tianjin Automotive Industrial Co., Ltd., had market shares 40%, 20%, and 14%, respectively. P9
2. Cost-of-entry test: to get into this industry, BYD would require 2,000 additional, skilled, and talent product and process engineers who did not exist in Xi’an. Not mention the cost of buying the Qinchuan Auto and further investing is approximately over RMB 850 million.P10
3. Better-off test: though the auto manufacturing could gain from BYD’s core competencies, it will still be really risky that this will take at least seven years and many engineer focus on automobile design instead of on battery. Moreover, they are working with unknown expenses, products, and product reception in the market.

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