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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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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

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