Executive Summary
This report provides an analysis of Great Wall Motors Company Limited. The purpose of this report is to investigate the competitiveness of Great Wall Motors Company Limited in the automobile industry. This report explores the position of Great Wall Motors Company Limited by studying the external environment and internal environment of the organization.
This report will briefly introduce the company’s background and organization. The background information will mainly concentrate on information that is relevant to the company’s economic competitiveness. The report will then give a detailed coverage of the company’s main products and markets. The analysis will include strategies which the company has devised in order to stay technologically relevant.
Besides, the report will indicate in detail Great Wall Motors’ strengths and weaknesses by using SWOT analysis. Apart from that, this report will discuss the competiveness of Great Wall Motors by using PESTEL analysing. PESTEL analysis will focus of parameters such us social cultural environment, framework, technology, and political economy.
Obviously, Great Wall Motors Company Limited is competing in a tough automobile market with hundreds of competitors. The company has devised sound marketing strategies, which have contributed to its success. Thus, Great Wall Motors Company Limited possesses positive competitive position. This report will try to explain how Great Wall Motors has achieved its economic prowess.
Furthermore, this report will discuss the strategic capabilities of Great Wall Motors Company Limited using the capabilities foundations, resources and competences.
Few significant resources and capabilities that shape the competitive position of Great Wall Motors Company Limited have been identified. Particularly, Great Wall Motors Company Limited has gained an advantage over its main rivals by attaining EU approval, establishing technical centres, providing after sale services, establishing of R&D centres, opening new operational centres, and establishing knock down centres overseas.
Great Wall Motors has embraced the technique of knock down factories. This paper will discuss how this approach has increased the company’s global outlook. Furthermore, this report will discuss in detail how a Great Wall motors has embraced the strategy of after sale services.
The report will provide an in depth analysis of how this technique has positively impacted on Great Wall Motors’ profit. The report will sum up its discussion by providing a conclusion that highlights all the major points.
Introduction
Formed in 1976, Great Walls Motors is one of the largest Chinese automobile manufacturers. The company’s name has a cultural meaning because it is a representative of China’s Great Wall (Toshkov, 2012). Statistics indicate that Great Wall Motors is the tenth largest automobile manufacturer in China when the number of units produced is taken into account.
In fact, Great Wall Motors topped in the number of sport utility vehicles (SUV) produced in 2010 (Toshkov, 2012). On top of that, no other automobile manufacturer in China matches Great Wall Motors’ pick ups production.
The company entered the European market in 2006 and has since opened a factory in Bulgaria that assembles trucks (Toshkov, 2012). Bulgaria’s assemblage centre is the eighths overseas operational centre. As a result, Great Wall Motors has become the largest Chinese automobile manufacturer. This paper discusses the competitiveness of Great Wall Motors.
Brief Description of the Company
Since its inception in 1976, Great Wall motors Company Limited has risen to become a giant in the manufacturing of automobiles not only in China, but also in Europe. Initially, Great Wall Motors was involved in the manufacture of trucks only. In fact, in 2010 the company led in the manufacture of pick ups by producing approximately seventy thousand pick ups.
The company had been denied a certificate required to manufacture saloon cars by the Chinese government (Ford, & Crowther, 1922). However, this changed in 2008 when the company was granted permission to manufacture saloon cars. The company’s success saw it become the first automobile manufacturer in China to be listed as a public company.
After acquiring a certificate from the Chinese government to manufacture saloon cars, Great Wall Motors has become one of the largest manufacturers of automobiles in this category. In 2011, the company led in the production of 486,000 units of saloon cars (Vladov, 2004).
Initially, Great Wall Motors sold its products in Asia. However, this changed when the company entered the European Market in 2006. This has significantly increased the company’s sales. Great Wall Motors is among the few automobile companies listed on the Hong Kong Stock Exchange. In fact, Great Wall Motors is expected to join the Shanghai Stock Exchange in the near future.
Great Wall Motors exports its products to sixty countries in Europe. In 2011, Great Wall Motors opened a factory in Bulgaria that assembles trucks. The company boasts of its SUV Haval racing model, which has been used by rally drivers in three consecutive editions of the Dakar Rally. The company was ranked position seven in this year’s Dakar Rally edition.
Great Wall Motors headquarters are located in Baoding, Hebei province (Lind, 1975). The company is in the process of establishing new operation centres and facilities. Tianjin has been identified as a potential site. Upon its completion in 2015, Tianjin operational site is expected to produce 500000 units (Vladov, 2004).
Currently, Tianjin centre produces 250, 000 units. In addition, another site is expected to be constructed in Baoding by 2013 (Vladov, 2004). The company aims at using the new site in Baoding to manufacture engines.
The company has a total of eight overseas production centres located in Europe, African, and Asia. Asian overseas operational sites are located in Vietnam, Iran, and Indonesia. In Africa, the company’s operational sites are located in Ethiopia, Nigerian, Senegal, and Egypt.
On the other hand, the company’s operational sites in Europe are located in Bulgaria, Ukraine and Russia. Other operational sites are expected to be opened in Brazil, Malaysia, Venezuela, South Africa, and Philippines.
Great Wall is not responsible for the running of the overseas operational sites. However, it uses a knock down factories. Such factories are run by either an affiliate company or the host government but they manufacture Great Wall Motors products by using knock down kits. Currently, the Bulgarian operational centre produces 2000 tracks. However, the production is expected to rise to 50000 (Sperling & Gordon, 2009).
The company plans not only manufacture trucks but also other models of its range of products so as to meet the expected target. Great Wall Motors established and Research and Development (R&D) centre in 1998 (Chang, 2009). In addition the company is building a technical centre at its chief operational centre in Baoding. Furthermore, Great Wall Motors has invested heavily in the production of electric vehicles.
External Environment: Significant Resources and Capabilities
Knock Down Factory Technique
Great Wall Motors’ success in the external market is as a result of the knock down factory technique (Johnson, Whittington, & Scholes, 2011). This strategy ensures that the factory in question produces Great Wall motors’ products from knock down kits. A knock down kit is often made up of all the parts required to manufacture a given product.
In this case, these parts are manufactured in China by Great Walls Motors, and exported to different countries for assemblage. Generally, a knock down kit consists of all the necessary parts required to make a given product. This technique is also used to export parts that are used to manufacture a given product in the host country. This technique has a number of advantages.
First, the use of knock down kits assists a company to minimize import taxes and thus maximize profits. Secondly, this technique often provides jobs to citizens of the importing county. Most governments provide tax waivers to the exporting company in return. Thirdly, knock down factories are less demanding. They are also easy to establish and maintain.
In addition, work force is usually inexpensive. Furthermore, they do not require modern robotic equipment. Moreover, the use of knock down kits enables the company in question to reach out to many markets that would otherwise be unreachable without the use of such kits. Great Wall Motors has extensively used this technique in a number of countries.
These countries include Australia Bulgaria, Ukraine and Russia (Nenov, 2012). Others include Nigeria, Senegal, Ethiopia and Egypt in Africa. Vietnam, Iran, Indonesia are the main knock down centres in Asia.
Opening of New Operational Sites
Great Wall Motors has invested heavily in the expansion of its production capacity. This has been achieved by the company’s decision to construct additional operational centres. In China, the company is head quartered in Baoding. Other operational centres are also under construction in China. The company is in the process of establishing new operation centres and facilities.
Tianjin for example, has been identified as a potential site. In fact, upon its completion in 2015, Tianjin centre is expected to produce 500000 units. At the moment, Tianjin centre produces 250, 000 units (Bursa, 2011). Furthermore, another site is expected to be constructed in Baoding by 2013.
The company aims at using the new site in Baoding to manufacture engines (Boryana, 2012). In the overseas, the company has opened knock down centres, which are used to assemble the company’s models.
The company has established its presence in Europe by opening knock down centres in Russia, Bulgaria and Ukraine. In Africa, the company has established its presence in Senegal, Nigeria, Egypt and Ethiopia. It is planning to open another site in South Africa. Furthermore, the Great Wall Motors has set other centres in Indonesia, Iran, and Vietnam. In future, the company is set to open other centres in Malaysia and Philippines.
In addition, other another centre is expected to be ready in Brazil by 2015. By opening more operational centres overseas, Great Wall Motors is cementing its presence in the global market. Therefore, it will be difficult for Great Wall Motors’ rivals to match the company’s global outfit.
Establishment of Research and Development Centres
The development of research and development centre started in 1998. However, the actual construction of a technical centre commenced in 2010 in the company’s main operation centre, Baoding. A research and development me centre is key asset fro any given company. Such a centre brings together experts and policy makers who together generate viable ideas that are required to enhance the company.
Great Wall Motors has taken a tremendous by constructing a technical centre. This strategy ensures that the company does not run short ideas. In addition, experts in the technical centre are charged with the responsibility of identifying weak points and providing solutions.
Great wall Motors is expected to construct another technical centre in overseas. Apart from identifying set backs and offering solutions, a technical centre provides an opportunity for experts to test their ideas. Thus, Great Wall Motors has taken a monumental step in ensuring that it stays ahead of its competitors.
Post Sale Services
Great Wall Motors Company Limited has a unique feature called after sale services. The company offers technical advice to employees of stockists who distribute the company’s products in overseas operational sites. Offering after sale services improves customer’s loyalty. Great Wall Motors has embraced the use of after sale services fully.
As such, employees of overseas distributors are trained on the use, functionality, and maintenance of Great wall Motors’ products and spare parts. This reduces cost for distributors. In addition, employees gain an in depth understanding of the company’s products thus equipping them with the necessary information to sale Great Wall Motors’ products.
Employees of Great Wall Motors distributors gain exceptional training owing to this service. This feature enables such employees to market Great Wall Motors products with passion.
European Union (EU) Approval
The European capital market is under strict regulation from the European Union. As such, the EU has set various regulations, which any product has to meet in order to gain entry into the European market. The automobile industry is not an exception. Great Wall Motors products marketed in Europe have been approved by the EU.
These products include pick ups and trucks, passenger vehicles, and the new models of Hover and Deer. Plans are underway to ensure that the company’s latest model, Haval H6, receives accreditation from the EU as soon as possible. The achievement of accreditation from the EU is a remarkable strategy.
This has given Great Wall motors a competitive advantage over its rivals. As the rivals struggle to get accreditation from EU, Great Wall Motors is busy marketing its models. Besides, consumers readily embrace products which have been approved by the EU.
PESTEL framework analysis of Internal Factors
Macro-Environment Analysis
PESTEL framework comprises of various parameters such as political, economic, social, technological, environmental, and legal. It provides a comprehensive list on the possible success or failure of strategies in existence.
Political
The latest data shows that Great Wall Motors is currently dominating in international and domestic markets, and has maintained its place in the Chinese automobile market for many years. In 2009, its four main models received accreditation from the European Union. This has enabled the company export its models to more than 100 countries. Great Wall Motors boasts of over 800 sales networks in Europe, Asia, and Africa.
Economic
Statistics indicate that the GDP of China has been rising constantly in the past 10 years. Due to the stability of both internal and external economies, Great Wall Motors business turnover reached 30.141 billiion Yuan in 2011.This was a 31.13% growth. The operating profit increased to 4.079 billion Yuan.
Global Times reported in 2010 that Great Wall Motors success in Europe is as a result of EU accreditation. Other than exporting to the European market, Great Wall Motors is also considering establishing other markets such as Brazil, Malaysia and the Philippines. Great wall motors significantly benefits from the local market in China owing to the country’s stable economy.
Social and cultural
The Great Wall Motors is situated in a technologically competent society. China is the world’s fastest emerging technological and economic hub. Chinese social and cultural environment is known to be technologically advanced. As such, Great Wall Motors is located in a suitable environment.
China has invested heavily in science and technology. As a result, many young people are venturing into this field. This is a positive phenomenon because it provides knowledgeable labour force to Great Wall Motors Company Limited.
Technological
The Great Wall Motors Technology Centre has invested a significant amount of money in the development soft and hardware facilities. The company plans to establish a world class R&D centre in its headquarters so as to stay ahead of the rest. R&D centre will serve as an invention centre. Experts in various fields will mingle in a bid to solve challenges and nurture new ideas.
Legal
As mentioned above, Great Wall Motors is the only Chinese carmaker accredited by the European Union to sell its products in the European market. Great Wall Motors has a sound legal frame work which enabled it meet the EU’s legal requirements.
Based on the Bloomberg Business week posted in February 2012, Great Wall Motors legal framework has played a significant role in establishing a knock down factory in Bulgaria and receiving accreditation from the EU.
This has made Great Wall Motors the first Chinese company to gain such a mileage in the European market. The company’s legal framework has played a significant role in establishing knock down factories in various countries.
The Five Forces Framework
Potential Entrants
Great Wall Motors is likely to face stiff competition in untapped markets.
Buyers
Great Wall Motors has a significant bargaining power in Asia and Europe.
Suppliers
Great Wall Motors has established numerous sales networks across the globe. This strategy has given it an advantage over its competitors.
Substitutes
In Asia and Europe, Great Wall Motors is unlikely to encounter substitutes. However, in other markets such as Africa and South America, Great Wall Motors might be forced to deal with the issue of substitutes.
Competitive Rivalry
At the moment, Great wall Motors has a competitive advantage over its main competitors in Asia and Europe. The decision to establish knock down factories across the globe has boosted Great Wall Motors’ dominance.
SWOT
Strengths
The company has implemented sound strategies that have seen it conquer both the internal and external markets.
Opportunities
Great Wall Motors has the opportunity to open additional knock down factories in other countries. This will assist the company cement its presence in as many countries as possible.
Weakness
The company has not explored other potential markets like the US.
Threat
The company is likely to face stiff competition from its rivals in untapped markets.
Conclusion
The company has embraced sound strategies which have assisted it realize a tremendous growth. These strategies include attaining EU approval, establishing technical centres, providing after sale services, establishment of R&D centres, opening new operational centres, and establishing knock down centres overseas.
The company has not explored other potential markets like the U.S. Its marketing strategy is selective. In order to realize more profits, the company should improve its marketing techniques and widen market prospects. The company is likely to face stiff competition in unexplored markets. Thus, it should move with speed to tap potential markets.
References
Boryana, Dzhambazova. (2012). Made in China, but Assembled in Bulgaria. Bromsgrove, pp. 1-10.
Bursa, M. (2011). Emerging Markets Analysis: Chinese exports finally start to gain traction. Bromsgrove, pp. 1-10.
Chang, C. (2009). Developmental Strategies in a Global Economy: The Unexpected Emergence of China’s Independent Auto Industry. Web.
Ford, H., & Crowther, S. (1922). My life and Work. Garden City, New York: Garden City Publishing Company.
Johnson, G., Whittington, R., and Scholes, K. (2011). Exploring Strategy: Text & Cases (9th Ed). London: FT Prentice Hall.
Lind, T. (1975). Partnerships – a solution. Web.
Nenov, S. (2012). Thousands of China-made cars recalled in Australia. Web.
Sperling, D., & Gordon, D. (2009). Two billion cars: driving toward sustainability. London: Oxford University Press.
Toshkov, V. (2012). Chinese carmaker opens plant in Bulgaria. Bloomberg Businessweek, pp. 1-10.
Vladov, Andrey. (2004). Chinese carmakers eye European markets. Web.