Company: Brilliance China Automotive Essay Sample

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Automotive industry relies chiefly on an efficient technology innovation system. Brilliance China Automotive, established in 1992, has maintained high-speed growth through continuous optimization of is product mix and constant technological innovation. It has also realized rapid expansion through capital injections and NYSE1. Its main product line is minibuses.

Present day situation in automotive industry is marked by two factor – specification, which is to do with the ‘design quality’ of service, and conformity, which is to do with the ‘process’ quality which is achieved are of particular importance to customers. With the success of its new technologies, stating in the end of 1990s, automotive industry began to rationalize its product lines. In future, Brilliance China Automotive is going to manufacture a family sedam, with the “body design similar to BMW”2. In addition, it had begun to follow a strategy of withdrawing from small markets with limited potential for its core products and to look for markets in countries with a major growth potential for automotive industry.

In his book “Competitive Advantage” Porter identifies Five Forces that drive competition within an industry: the threat of entry by new competitors; the intensity of rivalry among existing competitors; pressure from substitute products; the bargaining power of buyers; the bargaining power of suppliers. 3. If there are few, large competitors in the industry, it is likely that this is due to high entry barriers. Conversely, an industry of many, smaller competitors is likely to be the result of lower entry  barrier. Competitive rivalry on both a price and a non-price basis is not higher in the industry. Only if the product is mature and the industry is subject to ‘shake-out’, then competition will be more intense3.

1 Rarick, Ch.A., Brilliance China Automotive Case 16., p.65.

2 ibid., p.65

3 McDonald M., Christopher M. Marketing: A complete Guide. (Palgrave Macmillan, 2003), p.78.

The main competitors in the industry are First Automotive and Dongfeng Automotive. Brilliance China Automotive does not face great rivalry on the Chinese market, but faces with strong competition on the European market. This year, it was announced  “Brilliance, China’s largest minibus maker, reported a net loss of 359 million yuan ($43.4 million) for the six months to Dec. 31,2004”1. The same tendency marked market performance of the company in 2005. According to the survey: “Shenyang Automotive sold a total of 29,471 minibuses in the first half of 2005, representing a 6.2% decrease from the 31,416 minibuses sold during the same period in 2004. Of these vehicles sold, 25,905 were mid-priced minibuses, representing a 8.6% decrease from 28,335 units sold during the same period in 2004”2. Last year Brilliance China Automotive announced that it would reinforce its commitment to the Chinese goods market in 2005, in order to meet growing demand from increasingly discerning and demanding consumers seeking products that add to the quality of life.

In spite decreases in sales, it is possible to say that Brilliance China Automotive is well-positioned to take on this important global leadership role. Entering into WTO gives new opportunities for European market penetration and development3. It has the global resources and certainly has the technological capability. The main partners of Brilliance China Automotive are Volkswagen and General Motors on China and joint venture partner of German BMW AG 4,5

Clearly, some companies in the same industry are more successful than others,

  1. Leung, A. Lim, W. Brilliance China posts loss on weak auto sales. 2005. http://www.detnews.com/2005/autosinsider/0504/26/1auto-161327.htm
  2. Brilliance China Automotive Holdings Limited Announcement. 2005.
    http://biz.yahoo.com/prnews/050923/lnf002.html?.v=18
  3. Rarick, Ch.A., Brilliance China Automotive Case 16., p.66.
  4. ibid,
  5. Leung, A. Lim, W. Brilliance China posts loss on weak auto sales. 2005. http://www.detnews.com/2005/autosinsider/0504/26/1auto-161327.htm

lending support to the view that competitive advantage is largely internally developed. Equally, however, there is a danger of ignoring the environment, as customers and their needs, competitors, changes in technology, etc., can play an important role in determining competitive success.

For Brilliance China Automotive, the threat of entry to an industry by new competitors depends up the ‘height’ of a number of entry barriers. Manufacturing industry like Brilliance China Automotive is subject to a complex regulate framework. The company increased “its domestic content … which has resulted in lower costs due to saving in tariff expense and unit cost”.1 Still, even if it is possible to predict the needs of customer there are some threats and new opportunities which should be taken into consideration. The relative ease with which new car emerges in a large market like USA, suggests that the threat to existing Brilliance China Automotive is essential because company has not a strong brand image and price differentiation.

There is a high threat to entry for the automotive industry because the big companies have a huge marketing advantage as well as established customer confidence in their product.  It also requires a lot of capital to finance a high-tech product with several complex components.  It is very difficult to enter this highly competitive segment.  For example, if Brilliance China Automotive is able to obtain economies of scale, it will be pos­sible for it to undercut the prices of new entrants because of their cost advantage. In some cases, existing competitors may make price cuts or increase marketing expenditure specifically to deter new entrants. But using high technology and proposes competitive prices to its buyers Brilliance China Automotive can sustain leading position on the European and American market2.

The cost of items bought from suppliers (e.g. raw materials, components) have a

  1. Rarick, Ch.A., Brilliance China Automotive Case 16., p.66.
  2. Porter M.E. Competitive Advantage. (New York, Free Press, 1985), p.23.

significant impact on its profitability. “In December 2003, the Company entered into agreements in relation to the proposed acquisition of an indirect 40.1% interest in Shenyang JinBei Automotive Company Limited, the joint venture partner of Shenyang Automotive and the supplier of certain automotive components for its minibuses and sedans production”1

The bargaining power of buyers is great because there are few dominant buyers and many sellers in the industry. The range of products is standardized, but on the other hand automotive is the key industry in its supplying group which secure it from decrease in sales. The threat of substitution is possible for Brilliance China Automotive. Substitution occurs where a consumer is able to replace your product with a different type of product performing the same service or satisfying similar needs. Brilliance China Automotive is not only threatened by new entrants from cheap labour economies but also by the development of substitute products.

Marketing strategies are the broad approaches Brilliance China Automotive intends to adopt in the longer term to achieve its marketing objectives in accordance with its mar­keting policies. Strategies are developed for the following: The market segments will concen­trate and the marketing position it proposes to adopt in each segment (i.e., minibuses and family sedam). The blend of controllable marketing variables required producing the response wanted in the target market. “The company sponsors the Shenyang Football (soccer) team in order to gain good public visibility and public relations”2. The mix includes new products, prices, promotion, packaging, advertising, field sales and distribu­tion. Maintenance of high standards is a key factor to maximizing clients’ satisfaction. The purpose of maintenance of high standards is to attempt to maximize the performance of service by ensuring that it performs regularly and efficiently.

  • Brilliance China Automotive Holdings Limited Announcement. 2005.
    http://biz.yahoo.com/prnews/050923/lnf002.html?.v=18
  1. Rarick, Ch.A., Brilliance China Automotive Case 16., p.66.

Brilliance China Automotive is seeking to maximize its ‘global reach’, in the belief that those that offer a global service will be in the strongest competitive position. It is evident that strategy includes the determination of the basic long-term goals concerns the conceptualization of coherent and attainable strategic objectives. With these three main strengths, its marketing strategy, growth rate, and technology, Brilliance China Automotive will extend the business vigorously. Using a mar­ket development strategy, Brilliance China Automotive can capture a larger share of an existing market for current products through market saturation.

References

  1. Brilliance China Automotive Holdings Limited Announcement. 2005.
    http://biz.yahoo.com/prnews/050923/lnf002.html?.v=18
  2. Leung, A. Lim, W. Brilliance China posts loss on weak auto sales. 2005. http://www.detnews.com/2005/autosinsider/0504/26/1auto-161327.htm
  3. McDonald M., Christopher M. Marketing: A complete Guide. Palgrave Macmillan, 2003.
  4. Porter M.E. Competitive Advantage. New York, Free Press, 1985.
  5. Rarick, Ch.A., Brilliance China Automotive Case 16., pp.65-66.

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