Introduction
Steve Jobs changed the way people acquire and appreciate electronic gadgets. Steve Jobs’ Apple brand is the gold standard when it comes to consumer electronics. A secret ingredient to Jobs’ success is vertical integration, which is a business model based on integrating every major component of the business into one platform (Sellers 1). Jia Yueting, a Chinese billionaire, openly admits his fascination and admiration of the Apple brand. Jia Yueting attempts to emulate the same formula, however, his foray into the “electric vehicle” industry raises a lot of eyebrows, because it seems like it is pushing the idea of vertical integration into the breaking point.
Steve Jobs’ business model for his tech company was dependent on vertical integration. For example, Apple computer’s laptops are compatible with other related gadgets such as the iPhone, iPads, and iPods. In addition, customers will never have a hard time acquiring content, because they can purchase music and computer applications via the Apple store. However, this example is merely scratching the surface when it comes to the concept of vertical integration. Steve Jobs’ idea of vertical integration includes the components of the gadgets sold under the Apple’s banner, and this means developing not only innovative products but also the operating system that works flawlessly with the said electronic gadgets.
Vertical Integration
Jia Yueting is a disciple of the said business approach. However, Yueting took a different route but arriving at the same business model. Yueting is a Chinese national. He was born in the year 1973, in Xiangfen County, in a little known province in China called Shanxi. Yueting’s humble beginnings are not as intriguing as that of Steve Jobs who decided to drop out of a famous American university and started a company using his parents’ garage as his business address. Yueting, on the other hand, was able to earn a postgraduate degree in business administration. His first job was to manage the internal network of a government office in his home province. He did not stay for long, and he decided to establish his own tech company.
As a tech entrepreneur, Yueting’s success story was not as dramatic and as controversial as Steve Jobs when the public saw how the founder of Apple was booted out from his own company. In the case of Yueting, the young Chinese businessman favored the gradual ascent to the top. His breakthrough year came in 2004 when he established a company called Leshi Internet Information & Technology. (Baer 1). In the Chinese Language, the word “leshi” is loosely translated as “happy TV” and it is China’s answer to Netflix (Baer 1).
The outcome for this investment was nowhere near the overnight success enjoyed by Apple. Nevertheless, the foundational framework for the “vertical integration” business model was already visible a few years later when the company expanded with a film division called Le Vision Pictures (Makinen 1). It is difficult to appreciate this business strategy for the same reason that it is hard to imagine a company like Yahoo or Google expanding its business model to include producing Hollywood films. For example, it is not prudent to encourage Netflix to produce its own media content. Be that as it may, it is prudent to maintain an open mind because Le Vision is in partnership with world-famous Chinese director Zhang Yimou (Makinen 1). it is also important to point out that Le Vision was able to earn money investing in Hollywood films, such as The Expendables 2.
Yueting’s decision to expand the capabilities of his companies and adopt the “vertical integration” model came a few years after the establishment of the Leshi Internet Information & Technology company when he unveiled the plan to implement a “vertical integration” business through investing in facilities creating Smart TV and smartphones for the Chinese market (Baer 1).
In the year 2010, Yueting’s main company went public, and with his 44% stake on the said enterprise, the company’s founder became a multibillionaire. Yueting is currently listed as a member of the top 20 richest billionaires in his homeland (Makinen 1). His current net worth was estimated to surpass the seven billion-dollar mark. Access to billions of dollars in earnings perhaps explains Yueting’s penchant for expanding his business empire and to push the envelope when it comes to “vertical integration” of the products and services that his multiple companies provide the general public. Nevertheless, one can argue that his latest venture is redefining the way business leaders understand the concept of integration. Yueting seemed obsessed with the idea that it is more cost-efficient and more attractive to develop products and services that are linked together not only for the purpose of streamlining the business process but also for the sake of experiencing a seamless experience with the said devices.
Electric Vehicles
Yueting’s decision to delve into the electric vehicle market confounds business experts. For example, Fang Xingdong, a business consultant specializing in Internet-based ventures gave a positive outlook for the company assuming it will attempt to emulate Netflix’s business model, but at the same time offered grim prospects if Yueting continues to invest in the creation of a China-made electric car to rival Tesla’s S class model (Yuan 1).
Corporate leaders are trying to justify this move by pointing at the “vertical integration” of the electric car and the computer applications, software requirements, and other needs that the consumers can acquire through the company’s online store (Harris 1). If Yueting is indeed the disciple of Steve Jobs, he will quickly realize that the evolution of the Apple company from a personal computer manufacturer to a business that creates and sells iPhones follows a development pathway that is easy to grasp. It is easy to understand the connection between a phone and a computer, but it is difficult for an ordinary person to wrap his mind around the idea of a video streaming company building an electric car in order to increase the demand for the company’s primary business. It does not make sense.
Conclusion
The strategy to build electric cars in order to demonstrate the power of “vertical integration” is full of holes. First of all, Yueting has zero experience in building and selling electric cars. Secondly, electric vehicles are unproven profit streams, and the company will be forced to shell out millions of dollars before a prototype is made available to the general public. It makes more sense if Yueting focuses on his primary business venture, which was the attempt to develop an enterprise built on the idea that streaming content will be in demand for years to come.
Works Cited
Baer, Drake. “Meet The “Chinese Elon Musk” – A Billionaire Who’s About to Launch His Own Electric Car. The Insider. 2015.
Harris, Mark. “Inside Faraday Future.” The Guardian. 2016.
Makinen, Julie. “Who is Jia Yueting, the Chinese Billionaire Linked to Faraday.” Los Angeles Times. 2015.
Sellers, Dennis. “Jobs: Vertical Integration Part of Apple’s Success.” Macworld. 2013.
Yuan, Li. “A Steve Jobs’ Disciple Dreams Big.” The Wall Street Journal. 2015.