Brilliance Auto Essay

1190 Words Nov 15th, 2015 5 Pages
Brilliance Auto, China
Auto manufacturing industry is not a very profitable industry, with its profit margin averaging at 4.9%; it is 9 times less profitable than the top of the list at 38.30%. Interestingly there is one company in this industry that is reaching 58.81% net profit margin: Brilliance Auto, China. (Exhibit 1) (Exhibit 2)
Auto manufacturing industry has a high entry barrier. The capital requirement is huge for setting up plants, R&D and marketing. Although economies of scale do exist, it is very hard to achieve because it requires more capital compares to other manufacturing industries due to the size and price of the machinery. Government restrictions about environmental are also strict. The power of suppliers is
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In 2003 they invested 500 million dollars with a joint program to produce and sell BMW cars in China. BMW output technologies and engineers, Brilliance provided land, factory, distribution channel and low cost labor. This move was combining the Value Drivers of BMW and the Cost Leadership of Brilliance Auto to create a perfect integrator company. BMW had unique philosophy about car design which is their main value driver: they focus on sports and luxury more than other brands, BMW only produce rear-drive car and enable driver to enjoy maximum raw driving experience, at the same time, the passengers can enjoy the comfortable ride and the luxury interior. BMW invests a lot of money on racing to help develop this iconic value driver. Brilliance was producing and selling low cost licensed Toyota vans, known for its affordable price and reliability, they are cost leader, also they had the land, capital, distribution channel and the government side clear. I think being an alliance is a key to the successfully becoming integrator, BMW side deal with value driver, Brilliance deal with cost leaders. A normal integrator may run into internal conflict, this alliance will not. This alliance is working so well, as BMW announced last year, the alliance will continue till 2028. (Exhibit 3) (Exhibit 4)
Brilliance is using the technologies they learnt from BMW to start their own brand, this strategy is currently working well in China,

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