five force analysis of china motor industry.ppt

P.1,s,s,Five Competitive Forces in China Automobile Industry:Bus and Coach Sector,Five Competitive Forces in China Automobile Industry:,Bus and Coach Sector,BY,Kwan Yu Him,0401 0256,BBA China Business Studies Option,An Honours Degree Project Submitted to the,School of Business in Partial Fulfillment,of the Graduation Requirement for the Degree ofBachelor of Business Administration(Honours),Hong Kong Baptist University,Hong Kong,April 2007,BUS 3590/06-07/Kwan Yu Him(0401 0256),P.2,s,Five Competitive Forces in China Automobile Industry:Bus and Coach Sector,Acknowledgement,I would like to take this opportunity to thank my supervisor of this Honours,Project,Dr.Jamie Cheung,for her expertise,enthusiasm and patience on this,project.She has provided invaluable advice and opinions for me during the,course of this project.,Moreover,I wish to thank my family and all my friends for their encouragement,and support towards me.,BUS 3590/06-07/Kwan Yu Him(0401 0256),P.3,s,Five Competitive Forces in China Automobile Industry:Bus and Coach Sector,Abstract,This paper provides a picture for a fast-developing sector of the China,automobile industry,i.e.the bus and coach assembling sector.With the aid of,Five Competitive Forces Model,in-depth analysis will be made on the major five,factors that affect the companiesperformance.Hence,better business strategy,can be formed.,In the later part,some points that do not covered by the Five Competitive Forces,Model will also be discussed so as to give a better understanding of the sector as,a whole.,Finally,recommendations are made for the bus and coach assembling industry.,What are the difficulties faced by them?What are their future prospects?,BUS 3590/06-07/Kwan Yu Him(0401 0256),1,2,3,P.4,s,s,s,Five Competitive Forces in China Automobile Industry:Bus and Coach Sector,Five Competitive Forces in China Automobile Industry:Bus and Coach Sector,1.Introduction,China-3rd largest automobile manufacturing country,The automobile industry in China is a large,dynamic and vibrant market.,After the entrance to WTO(World Trade Organization)since the end of 2001,the automobile industry has come to a new decade.In 2006,the production,and sales volume of Chinese automobile industry has reached 7.28 million and,7.22 million respectively1.It makes China become the world third largest,automobile production country,just after the United States and Japan2.,1st commercial vehicle manufacturing country,Among various automobile manufacturing sectors,the commercial vehicle,sector has a production and sales volume of 2.05 million and 2.04 million,respectively in 2006,which ranks the top in the world3.,2006 年汽車工業發展形勢簡析,中國汽車工業協會,2007-01-19,http:/,我國汽車生產躍居世界第三,中國汽車工業協會,2007-12-29,http:/,2006 年商用車產銷穩居世界第一,中國汽車工業協會,2007-2-7,http:/,BUS 3590/06-07/Kwan Yu Him(0401 0256),4,5,P.5,s,s,Five Competitive Forces in China Automobile Industry:Bus and Coach Sector,Within the commercial vehicles sector,the bus and coach sector has been,undergoing tremendous changes in these few years time.These changes not,only confined to design and technology enhancement,but also the market,composition.In the past,the bus and coach produced are mostly for domestic,market with lower-qualities.However,nowadays,more and more bus and,coach are produced for overseas market with a much better quality.According,to the statistical data published by the China Association of Automobile,Manufactures(中 國 汽 車 工 業 協 會),the number of medium-sized and,large-sized bus and coaches has increased by 34.59%from 4,784 to 6,439 in,2004 and 20054.Compared with an annual increase of 20%in automobile,exporting volume within the same period of time5,this sector development,progress is much above the industry average which cannot be neglected.,Introduction to the bus and coach sector,Bus and coach,to be more precise,should be named as commercial,motor-vehicles of passenger transport(營 運 客 車)according to the,definition of Ministry of Communications of the People Republic of China,大中型客車國內與國外市場銷量,中國汽車工業年鑑 2006-P.289 表 11-8中國汽車產品出口量,國家海關總署,中國汽車工業年鑑 2006-P.338 表 12-4,BUS 3590/06-07/Kwan Yu Him(0401 0256),6,P.6,s,Five Competitive Forces in China Automobile Industry:Bus and Coach Sector,(中華人民共和國交通部)6.,Bus and coach assembling sector would be the focus,Basically,bus and coach can be divided into 2 main parts,i.e.the chassis(客,車底盤)and the body(客車車身).The chassis manufacturer(底盤製造商),first install engines,gearboxes,axles,suspensions and other auto parts(汽車,零部件).Afterwards,the body assembler(車身組裝公司)would fabricate the,bus body,air-conditioner and interior body structure(車身內飾)like seatings,and luggage compartment based on the requirements posed by the bus and,coach operator(客車營運商).,In the following paragraphs,I would focus on analyzing the medium-sized,large-sized and extra-large-sized bus and coaches body-assembling,enterprises and corporations(中大型客車車身組裝公司).The chassis,manufacturers and the body parts(車身零件)would be viewed as suppliers,while the coach operator,i.e.the ultimate bus and coach buyers would be,treated as customers.,中華人民共和國交通行業標準(JT/T 325-2006),營運客車類型劃分及等級評定,中華人民共和國交通部,http:/,BUS 3590/06-07/Kwan Yu Him(0401 0256),P.7,s,s,Five Competitive Forces in China Automobile Industry:Bus and Coach Sector,In this context,I would assay the China bus and coach assembling sector,through the five competitive forces model as it not offers insights into the,market environment of the industry,but also influences both the existing,enterprises as well as the potential local and foreign enterprises in their,strategy formation and finding their competitive position.,2.Literature review,Clear Chinese government guidelines and regulations,After years of development,the Chinese government has placed quite mature,regulations and enough guidelines towards the bus and coach manufacturing,sector.Among various guidelines and regulations,the most important guideline,is the“People Republic of China Transport Industry Standards JT/T,325-2006-Type dividing and class rating for commercial motor-vehicles of,passenger transport”(中華人民共和國交通行業標準 JT/T 325-2006 營,運客車類型劃分及等級評定)6 which is revised every couple of years.It,outlines the latest standards,classifications,alternations as well as the,requirements of the bus and coach sector.For instance,after the release of,“Road Vehicles Exterior Dimension,Axles and Quality Limit GB 1589-,BUS 3590/06-07/Kwan Yu Him(0401 0256),7,8,P.8,s,s,s,Five Competitive Forces in China Automobile Industry:Bus and Coach Sector,2004”(道路車輛外廓尺寸、軸荷及品質限值 GB 1589 2004)7,Ministry of,Communications extended the bus and coach width limit to 2.55m.Also,the,department launched a new category called extra-large-sized(特大型客車)for,those bus and coaches having an overall length between 12m and 13.7m.Such,requirements keep pace with the latest European standards which can not only,improve the quality and development of domestic bus and coach industry,but,also stimulate the export of China-made bus and coaches.,Limitation of several journals,I have read numerous journals of the industry.However,although quite a,number of them are concentrated on analyzing China automobile industry,only Zhao Min(2005)8 evaluates the industry from the angle of five,competitive forces.Meanwhile,as his journal focuses on the automobile,industry on the whole,it can only give us an overall understanding of the,Chinese automobile industry.In order to make a more in-depth investigation,I,would like to place my emphasis on the bus and coach sector of the industry,which has been under immense expansion especially for the last decade.,中華人民共和國國家標準(GB 1589-2004),道路車輛外廓尺寸、軸荷及品質限值,中華人民共和國技術監督局,http:/,Zhao Min(2005),Five Competitive Forces in China Automobile Industry,Journal of American,Academy of Business,Cambridge,BUS 3590/06-07/Kwan Yu Him(0401 0256),9,10,11,12,P.9,s,Five Competitive Forces in China Automobile Industry:Bus and Coach Sector,3.Methodology,Gathering information,In my report,secondary data are mostly used.As I want to look deeply into the,development of bus and coach assembling sector,some industry yearbooks like,China Automobile Market Yearbook(中國汽車市場年鑑)2002-20069 and,China Automobile Industry Yearbook(中國汽車工業年鑑)2002 200610,would be used.,Besides,in order to get pace with the latest development of the industry,some,electronic resources like(中國客車網)11 will be cited.These,electronic resources provide me with the latest sector development news,market,situations and government latest regulation towards the sector.,Data Issue,In my report,all the statistics data come from reliable sources like China,Association of Automobile Manufacturers(中國汽車工業協會)12,General,中國汽車市場年鑑 2002 2006,綫裝書局,中國汽車工業年鑑 2002 2006,中國汽車技術研究中心、中國汽車工業協會,中國客車網,http:/,中國汽車工業協會,BUS 3590/06-07/Kwan Yu Him(0401 0256),13,14,15,16,17,P.10,s,s,s,Five Competitive Forces in China Automobile Industry:Bus and Coach Sector,Administration of Customs of the People Republic of China(中華人民共和,國海關總署)13 and National Bureau of Statistics of China(中華人民共和國國,家統計局)14.Moreover,some companies annual report of the bus and coach,enterprises would be used for identifying their latest development as well as the,companiesstrategies.,4.Theoretical Framework,Five Competitive Forces framework,Strategy is the creation of a unique and valuable position,involving a different,set of activities(Porter,1998)15.The success of competitive strategy is a,function of the attractiveness of the industries in which the firm competes and,of the firm relative position in those industries(Porter 1980)16.According to,Porter(1982)17,the competitive game in an industry entails five forces:,http:/,中華人民共和國海關總署,http:/,中華人民共和國國家統計局,http:/,Porter Michael(1998),La concurrence selon Porter,Village mondial,Porter Michael(1980),Competitive strategy,techniques for analyzing industries Competitiors,The,Free Press,Porter Michael(1982),Choix strategiques et concurrence,Economicia,BUS 3590/06-07/Kwan Yu Him(0401 0256),P.11,s,Five Competitive Forces in China Automobile Industry:Bus and Coach Sector,Picture 1:Five Competitive Forces Model,Context of strategy and rivalry of enterprises,Threat of potential entrants,Threat of substitute products,Bargaining power of customers,Bargaining power of suppliers,The bus and coach sector has intense competition nowadays.Especially after,the accession to WTO,the rivalries not only involved domestic competitors,but,also international competitors.In the following context,I will analyze the,environment of the Chinese automobile industry bus and coach assembling,sector with the aid of the Five Competitive Forces model developed by Porter.,BUS 3590/06-07/Kwan Yu Him(0401 0256),P.12,s,s,Five Competitive Forces in China Automobile Industry:Bus and Coach Sector,5.Analysis and Findings,Bus and coaches classifications,Before analyzing the bus and coaches assembling industry,I have to clearly,identify the differences between various bus and coaches.In the following,context,the definition of“People Republic of China Transport Industry,Standards JT/T 325-2006-Type dividing and class rating for commercial,motor-vehicles of passenger transport”(中華人民共和國交通行業標準,JT/T 325-2006 營運客車類型劃分及等級評定)6 would be in use.,Table 1 and Table 2 list out the 5 different grades among middle-sized,large-sized and extra-large sized bus and coaches.Meanwhile,I would also,classify the bus and coaches according to their major use.,BUS 3590/06-07/Kwan Yu Him(0401 0256),18,19,P.13,s,Five Competitive Forces in China Automobile Industry:Bus and Coach Sector,Table 3 Bus and coaches classification 3,Touring coaches(旅遊客車),Coaches that offer touring servicesCity buses(城市客車),Buses that offer daily transportation services within a citySub-urban buses(城邊客車),Buses that offer daily transportation services between a urban and iturban fringe,Inter-city coaches(跨城客車),Coaches that offer daily transportation services between different largecities within a province,Inter-province coaches(省制客車),Coaches that offer daily transportation services between different largecities across provinces,Context of strategy and rivalry of enterprises,Range specialization,High-end market,Different bus and coaches assembling enterprises would specialize in,assembling some particular range of bus and coaches.For instance,Ankai,Setra(安凱客車)18 and Neoplan(利奧普蘭)19 specialize in producing High,II and High III large-sized coaches(高二高三級大型客車)which mostly,catere for the inter-city and inter-province needs.These coaches are mostly of,Ankai Setra(安凱客車)http:/,Neoplan(利奧普蘭),http:/,BUS 3590/06-07/Kwan Yu Him(0401 0256),P.14,s,Five Competitive Forces in China Automobile Industry:Bus and Coach Sector,higher prices(RMB 0.8 million RMB 1.2 million)which are of higher,profitability.These enterprises use foreign assembling technologies which is,rare in China.Not much of the domestic enterprises can enter this high-end,market.It hence reduces the rivalries among enterprises.,Middle-end market,On the other hand,most of the domestic enterprises and corporations focus,on middle and High I(中級高一級客車)buses and coaches as these,products can cater for needs of touring and sub-urban transportation industry.,The market is the largest.Although these buses and coaches are of lower,prices(RMB 0.4 million RMB 0.8 million),the profitability is still,acceptable under large market demand.As the assembling techniques utilized,are mainly local and previous foreign technologies which are relatively lower,lots of enterprises participate in this market and the rivalries among this,market is very intense.,Product diversification,Bus body design,The competition among bus and coach assembling sector is very intense.In,BUS 3590/06-07/Kwan Yu Him(0401 0256),20,P.15,s,Five Competitive Forces in China Automobile Industry:Bus and Coach Sector,order to strive for more market share,the most common competition method,among the firms is through pricing strategies.Besides,the enterprises switch,to compete in other ways.First,bus and coach assemblers would keep their,bus body design(車身外觀設計)fashionable and eye-catching.However,fashion changes from time to time,the product lifecycle would then be,shortened.Normally,domestic enterprises would launch a new series of bus,body design every 2 to 3 years.When compared with foreign assemblers,renew their design every 5 to 6 years,this strategy can keep the young and,keeps changing.However,this frequent renewal will shorten the return,period and raise the cost of competition in long-run.,In the recent 2 3 years,some domestic enterprises tend to employ foreign,design companies in designing the outlook of the bus body and keep the,products last longer in the market.For instance,the Suzhou King Long(蘇州,金龍)Higer S91 series20 innovative outlook was designed by an European,firm.,Suzhou King Long(蘇州金龍)Higer S91 series,http:/www.kinglong-,BUS 3590/06-07/Kwan Yu Him(0401 0256),21,P.16,s,Five Competitive Forces in China Automobile Industry:Bus and Coach Sector,Picture 2:Suzhou King Long Higer S91 series,Although the designing cost would be raised,the average design cost for,each coach would be reduced wh