The Great Wall Motors Business Essay
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Published: Mon, 5 Dec 2016
This narrative focus on the competitive position of great wall motors which is one of the top privately owned enterprise in China was specified on both A share market in china mainland and H share market on Honkong. The Great wall motors established in 1976 and it is named after the Great Wall of China (wiki).The company started with manufacturing of Great wall light vans and great wall deer pickups. The great wall deer pickups create a breakthrough in the production line of the company. By the end of 1998 great wall pickups ranked No. 1 in domestic pickup market. Nowadays Great wall motors reach the top level by producing 3 main categories of Haval SUV, Great Wall PC and Wingle Pickup with more than 30 supplementary branches with 45000 employees. Today Haval SUV sustained the top rank in sales and export volume in China for 9 years and Wingle Pickup ranked first in units of market share, export volume and sales in China. It has achieved a fairly good brand name by producing a monthly sales of above 10,000 units illustrates its excellent capacity when compared to Joint-Venture brands.
Great wall motors brand philosophy stick on specialization, dedication and focus. This philosophy helps to illustrate its strategic vision and specialising spirit from dedicated focus philosophy to effective operational management and conclusively to worldwide leading brand. Moreover its brand strategy focuses on creating a category of leading brands. The brand development strategy of Great wall motors helps them to be keeping pace with the world tide.
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The Environment is a framework that provides means of survival for the organisation. It can bring threat as well as opportunities to the organisation(Johnson, et al., 2010). This part analyses the external environment of great wall motors using Pestle analysis.
Organisational environment includes all the elements outside the boundary of organisation that can create potential impact to the organisation positively and negatively(Samson & Daft, 2012). Pestle analysis is a tool used for analysing the macro-environment in which the organisation operates. It is a tool that exclusively scans the political, economical, social, technological, legal and environmental factors that influences the organisation and it can also be used to evaluate the market growth and decline. Pestle lists of 6 external environmental factors are explain later in appendix 1. However, This part examins in detail about the 6 pestle factors that affects the great wall’s environment .
(Downey, J. (2007). Strategic analysis tools. London: The Chartered Institute of Management Accountants)
Technological factors covers different methods adopted by organisation to deliver better efficient and quality products with in minimum time slots(Njanja, Martin, & Rene’, 2012). It includes the way company establish its work methods and patterns, knowledge, materials, tools and methods followed for achieving expected outcome and finally how the information structures used. In this modern world of technology, It act as one of the answer for many problems that restrict the growth of business(Njanja, et al., 2012).For Chinese automobile companies it’s not adequate to clutch production capacity so they need to implement more innovative techniques. So Great wall motors significantly encourages technical advancements and innovations and assert on independent R & D within the organisation (CHINA: Great Wall Motors first science-and-technology festival inaugurated, 2011).During last 5 years, Great wall motors has invested more than 3 billion RMB for the development and software for R &D. So that it has been accredited as High-Tech Corporation, Postdoctoral Science research Institute, National Recognized corporation Technique centre, National innovative corporation, Provincial automobile engineering technique centre. Great wall motors would utilise the exclusive pool of development and innovations for China’s automobile brands. As a result of these great-leap-forward developments Great wall motors succeeded to achieve international quality standards in performance of vehicles for their existing and future models like Germany vehicles standard in controlling stability and bodywork rigidity, NCAP five stars standards in safety, Japanese vehicle standard in NVH, reassuring wear, exquisite project and North American, European and other high-end target market requirements in emission(CHINA: Great Wall Motors first science-and-technology festival inaugurated, 2011).Great wall motors planning to invest a 5 more billions to R &D development in the coming years so as to build first class well maintained international R&D with better experiment facilities, to set up a well qualified and efficient international R&D, to beat world level first class technical innovations, to satisfy technical demands or aspirations of customers so as to rocket their additional value and improve their competitive ability of products .
In china, customers are not much interested in hybrid and electric technology, so there are not many firms producing hybrid cars and electric cars. It offers better opportunity for great wall motors in this field as they have only limited competitors. For a short run, they can have a great market share in this field. But in a long run, more competitions will occur, when more and more firms came to use this technology.
Today customers are looking for better performing and mileage cars. Hybrid cars of great wall motors have better mileage and performance when compare with other hybrid cars. But it is not up to the level of petrol cars performance, so still customers prefer to use petrol cars because of their standard performance. So it is very much mandatory to improve their technology in hybrid cars to make its performance better than petrol cars.
As a result of severe price hike of oil the demand for hybrid and electric cars are continually rising. Great wall motors is one of the leading automobile company in china conducting its research and development in hybrid as well as electric cars. Because of price hike in oil the demand for petrol cars are falling down. On one hand, they can impose or introduce their hybrid and electric car technologies as the demand for this are increasing. But on the other hand, as there are hybrid or electric cars, customers were less interested in buying their petrol cars. As they have hybrid and electric cars, their revenue will not break down even if there is fall in demand of petrol cars. In a long run, they can improve their sales and productions by concentrating more on hybrid and electric cars.
Chinese automobile market shows a severe growth of 1/3 recently. This means still there exist more opportunities for great wall motors to grow and expand their activities. They can expand their sales and revenue more if the market is bigger.
d. political: role of government
Chinese government is going to invest billions of dollars in hybrid technology. Great wall motors is one of the automobile company well known for its research and development in hybrid technology. If they successfully proved that their technology is worth for investment, they can get billions of dollars for their research & development in this technology.
Now Chinese government is planning to buy a large number of hybrid cars for use in china within 2 years. As great wall motors are already producing hybrid cars, the plan of Chinese government may put them forth to increase their production to fulfil the wishes of their government.
Recently, the official vehicle options adopted by ministry of industry and information technology were announced. Including Haval H6 and H5, 25 vehicles of GWM were listed. As a result Haval become most prominent brand in the inventory.SUV because of its versatility it becomes a model with fast growth among customers and market. Due to this new policy of official vehicles, it become popular not only among common customers but broadly requested by officers also. Now a day’s Haval SUV becomes one of the top brands in the Chinese office cars market for bulk purchase by government departments of fire fighting, roads and expressway governance.
However in china, there are some restriction on car ownership in some part of cities, as part of reducing traffic congestion and accidents. To some extent, the legal restrictions and tax increase affects the sales and revenue of great wall motors.
e.environmental(green): green issues,pollution,waste
Environmental factors have greater role in automobile industry as they cause severe hazards to living creatures by air pollution. To eliminate these harmful hazards and achieving fuel efficiency in their vehicles, Great wall motors introduced technological innovations in diesel engines like turbo charging and emissions technologies. So that they succeeded to achieve narrow emission with attractive fuel economy and better power output(Anonymous, 2011).
They are also trying to implement green diesel technology in their vehicles. With this technology in vehicles, great wall motors are demanding an eco-friendly environment with energy saving performance. By this technology, the chairman of the company believes that, they created a breakthrough in high-efficiency vehicles with energy saving power(CHINA: Bosch cooperates with Great Wall Motors for green diesel technology exhibition, 2012).
f. legal: health& safety regulations
Great wall motors give more importance for health & safety of their customers. For that they introduced advanced all wheel driving technology in their vehicles(Anonymous, 2011).
2.Porters five force analysis
Porters five force theory was developed by Michael E. Porter in 1979 for evaluating and identifying the current strengths and market positions of different business firms.The Pictorial representation of porters five force is shown in appendix 2 and the porters five forces analysis of great wall motors is explained as follows:
(Downey, J. (2007). Strategic analysis tools. London: The Chartered Institute of Management Accountants)
a.threat of new entrants
This is one of the severe threats faced by great wall motors. There are several reasons for this threat. As china is one of the growing economies, the market demand for cars is continually increasing. As a result of this, many new automobile companies are trying to walk carefully to the early stage of automobile life cycle. Then only they can withstand in this industry in future developed stages. Moreover the faint intellectual property laws enable new companies to copying the design as well as other properties of others. So that they can develop new innovations in efficient and effective manner than researching and development procedures.
b. Bargaining power of buyers or customers
This power is also moderately high for great wall motors as there are so many automobile manufacturers both in china and international markets other than great wall motors. So that it’s too difficult to withstand in this market without implementing any striking innovations.
c. Threat of substitutes
In China, Mass- transit could affect the car sales badly. But today in this growing economy there exist a vogue in china that, people considered car as their status symbol. So if any one comes to be financially stable then he ends up with buying a car rather than depending on cheapest modes like mass- transit or bicycles. So the impact of substitutes doesn’t effects great wall largely.
3. Strategic capabilities
a) Three high strategies
To enhance the products quality, Great wall motors made “three highs” strategies namely high performance, high technology and high quality. So that they are encouraged to use high tech innovations and better performing designs to their products for getting excellent and effective quality products. While competing with other international leading brands, the “three high” strategies made them fit to keep a highly accelerated momentum in their sales. In the aspect of “3 high” strategies they recently signed the strategic cooperation agreement with many international companies like TRW, Valeo, Bosch, BorgWarner, Ricado, Mahle, Autoliv, and Brose in product manufacturing. The relationship of great wall motors with these international giants compelled them to upgrade their product quality by conducting thorough research and development of technologies.
b) Established branding based on category
Great wall motors is the china’s 1st automobile company that established their brands with the category. According to their view point, real brand would be the representative of distinguishing model in customer’s mind. As a result of this category branding, they are enjoying solid advantages including: For many years, their Haval SUV and wingle Pickup have been recorded as No: 1 in sales market. In the coming years also GWM decided to focus on 3 main categories PC, SUV and Pickup and they wants to become top most in the market with each of 3 brands in paramount positions with Haval- as china’s best selling SUV brand, great wall PC as china’s leading PC brand and wingle -as china’s best pick up brand. With this 3 leading brand positions, the brand name of Great wall motors strongly supported.
GWM continue to maintain a steady sustainable growth in the auto market, because of its steady operation and focusing strategy. They also followed a routine of valuing R&D within the company so that they succeed in keeping up the quality of their products by updating technologies (News). Recent data published by NPCA (National passenger’s cars association) shows that that GWM holds a prominent position in top 10 sales list during the first half of year 2012.When NPCA narrowed the list, GWM is the only independent brand which hold such a fabulous position.
Recently, the seminar conducted by GWM’s technology centre announced that comprehensive proving ground will be finished by end of 2013. GWM is really proud to have first absolute proving ground among Chinese independent automobile companies. From their beginning onwards GWM gives more priority for product quality. They constantly assured their product quality by product quality maintaining systems. As they give more value for product development and quality test, proving ground was one the major project of GWM’s research & development centre. The effort of GWM on development of proving ground illustrates the strategic thinking of management and professional operation of GWM.
In 2011, Chinese automobile market faced a recession because of different factors. When compare with the sales record of 2010, it shows a 30 % fall in overall sales volume. Moreover Chinese independent brands are more brittle and their share got skid sharply. Even in such a dim market, GWM maintained an excellent growth within their industry. According to the chairman of GWM, a strong brand might be a leader in their locality and may act as representative of its product kind in customer’s mind.GWM is the first automobile industry which introduced brands in their products types. To a large extent, branding their products helps GWM to improve their overall performance and to remain competitive in global market. Recently GWM’s president shared their secret behind success that focusing on high-quality products rather than making low quality and low priced products. Moreover in this year, they are planning to focus on the improvement of sales outlet and terminal services. So they will concentrate on solving customer’s problems.
4. Internal environment
The value chain system is accomplished to recognise the line of activities committed by the organisation for creating a product or service. The primary activities are the activities that the firm engages for creation and delivery of a product within the organization through various logistics and external activities include production and sales. The supporting activities are activities that the organisation employs for polishing the efficiency and effectiveness of primary activities. This analysis helps managers to understand the operational level at which the product undergoes for developing value and this understanding is more superior in the success of all the firms (Porter, 2012). This paper centred on various primary and secondary activities undertaken by great wall motors.
Value chain activities
Inbound logistics involves activities that concerned with receiving, storing, and distribution of inputs needed for manufacturing products. Great wall motors maintained to receiving goods from suppliers all around the world in order to maximise their availability of goods. Great wall motors follows a just in time approach for handling their goods. Just in time is an approach of reducing in-process inventory and associated costs for improving the investment return on business. Operation stage is the most difficult phase as it involves the activity of converting the raw materials received into a final product. Great wall motors are famous for their reliability because of their efficient operations. Here in this phase great wall assembles all the materials needed for Individual operations including systematization of parts for a car and final tuning of car engine. In Outbound stage, great wall distribute their finally polished vehicles to wholesalers, retailers, or to consumers. Great wall managed to maintain their showrooms in different countries for making their products easily accessible to customers.
The marketing strategy that great wall adopted was their primary lead for securing a dominant position in the automobile industry. They maintained a customer oriented pattern in their business operations and also they managed to meet their customers demand. Great wall focused more on marketing communication and promotion mix in this area. Great wall had given more priority for their customers. So in the area of services they focussed more on final checking, complaint handling, after-sales services and so on.
Strong distribution network in china
Succeeded in identifying local market demand
Lower operating budget depend on economy scale, low cost of land and labor, cheap plant cost, and own production of spare parts for its vehicles
Better payment collection procedure encourages it with little debt.
It is very much weak in its research & developments settings. It depends on talented professionals from other designer companies to develop designs for their models. According to their record, their R&D expense accounts only a small percentage of its total sales.
Expansion of SUV sales leads to an outstanding growth for global vehicle market. China witnessed steady sales in SUV market during 2008-2011.Greatwall’s low production cost floor and its paramount position in SUV market enable them to achieve a robust growth in global auto market.
Its cost structure encourages the demand of great wall’s vehicles in global market. China’s VAT rebate policy allows great wall to enjoy the higher margin in exporting their products to overseas market.
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