Strategy for BYD LTD

What are the typical steps in developing an export strategy for services? (Why do you need an export strategy anyway?) Compare the market strategies between China and US(similarity – knowledge –distance – involvement)……..

Contents page                                                                                   

3. 1.0 Introduction

3. 2.0 Feasibility/situational analysis

4. 3.0 typical steps in developing export strategy 

7. 4. 0 Significance of export strategy

8. 5.0 Swot analysis of BYD Co.

11.5.0 Conclusion

12. 7.0 References

1.0         Introduction

The purpose of this paper is to develop export strategy to be employed by BYD co. ltd in their efforts to introduce electric car into the USA market. The product has experienced significant market growth in China hence high chances of succeeding in the US market. Different export strategies and steps have been assessed and suggestions and conclusion provided which addressed the main issues of this research.

 

2.0 Feasibility/situational analysis  

China market has been economically stable and growing despite recent financial crisis that hit the world, (Wayne, 2011). However, US market has been negatively affected by financial crisis which led the economy into recession leading to high level of unemployment; this reduced the purchasing power of its people which might affect product performances.

Political stability is very stable in the US, with strong and effective political institutions which offers favorable conditions for foreign business to prosper in the country, (Comstock & Liguori 2010). This has attracted numerous foreign investments in the nation hence leading to high competition in all business areas, including automobile industry. The company should therefore be prepared to face strong competition within the US market.

However, China is characterized by public protests and massive corruption in governments and law enforcing institutions. The country is not stable politically. Legal institutions are not effective hence limiting transparency and fair playing fields in business operations. Cultural conditions of the two nations vary a great deal, with US having diverse cultures that pursue western lifestyle. In China, traditional cultural values have been maintained.

 

 3.0 Typical steps in developing export strategy  

i)             Make a commitment to export

The company is engaged in production of automobiles, phones and batteries. It has however made a commitment to export one of its flagship products, electric vehicles into the US market. This has been arrived after realizing high market potential for this type of product in the US market and is aimed at increasing product sales, offer markets and opportunities for product growth, build brand name and diversify product market. However, this commitment will take efforts and substantial resources and is bound to face challenges.

 

ii)            Export plan

Planning is necessary for the success of export trade for it gives direction of the journey the company takes into foreign market.  The plan will assist BYD Company to act and respond to the challenges and risks likely found in the export trade hence help the implementation of export strategy. The plan if carefully designed will also help the company get financial aids, investors and other relevant partners, (Köksal & Özgül, 2007).

Components of export plan will include company and product description, product’s existing and targeted markets, business objectives in the new market, analysis of US market, assessment of competition level in motor products in the US, international marketing strategies for the company, financial and other resources required for export business of company products.

iii)           Conduct market research

Market research of US is undertaken to assess the market potential for the product. This will be aided by relevant trade statistics found in libraries and internet which will provide preliminary indication of the market for the electric car in the new territory. Market research will highlight similarities and differences in market condition for electric vehicles in both countries. Thorough market research will help in developing suitable marketing strategies by giving a clear view of economic, political and social cultural condition of the US market which will help reduce business risks besides saving time and resources.

iv)          Devise export marketing strategies

This will be taken after careful analysis of various factors by company departments such as finance, marketing and other relevant departments. Export marketing strategies for the US market will vary from those used in China because of differences in tastes, customs and needs between the two nations. These strategies are subject to constant revision from time to time to suit marketing needs of target export market. The basic 4 P’s will form the basis of export marketing strategies, (Borden, 1964).

v)            Enter the market

After being armed with sound marketing strategies, the firm will now introduce electric vehicles into the US market.  Direct export market entry strategy has been found to be appropriate strategy to enter the US market because the market can easily be accessible. Other entry strategies such indirect export is not suitable for the target market, because it has very minimal entry restrictions,( Proctor, 2000).

However, strategic alliances may be used where an established company producing complementary products such as oil distribution in the US with adequate skills and capabilities will be selected. This will provide necessary insights, contacts, effective market access and expertise necessary to kick start export business and fill the export readiness gap; this will result into more sales revenues in the initial period.

vi)          Getting product and services to market

The shipping of electric vehicles to the US market will be done after complying with set rules and regulations of the market. Laws and regulations regarding safety, health, security, packaging and labeling of motor vehicles in the US are slightly different from those in China; this may require modifications of products to suit the new market. The company intends to develop a contractual relationship with freight forwarding companies and customs brocker to assist in getting the products into US with easiness. They will assist the company in finding efficient and least risky options for shipping the products.

vii)         Explore financing options

The company will use revenues generated from domestic sales to finance export of electric vehicles to US. A three year financial plan for the export trade will be developed by financial experts, detailing financial costs to be incurred during the initial three years of export to US. A cost benefit analysis will be taken to determine project costs and benefits to the company and society in general, (Shankar. V, 2008).

viii)        Analysis of legal and regulatory issues

Export trade is subject to minimal regulatory restrictions in the US market. Analysis of international laws, especially in regard to environment and green house emissions, national and laws on product design and development and municipal rules will be assessed and complied with. Laws regarding dispute resolution with company partners, distributors, creditors, clients and intellectual properties will also be analyzed to inform the management of possible repercussions that may result from failure to comply.

ix)          Implementation

These involve actual practicing of export trade after putting in place all the requirements. The company will now take up the challenges and start selling in the US market. The management at this point must be convinced and confident hence it is high time to undertake the export of electric vehicle into the new market, (The extended market strategies, n. d).

4.0 Significance of export strategy

Export strategy informs management about required resources to undertake the export trade. This helps in mobilizing the needed finance and human capital for the project. In the case of Byd co, initial capital will come from retained earnings of domestic sales of company products in China.

Strategies are used to address all the risks of export trade hence reducing company exposure. Analysis identifies risk differences in the two countries’ market and industry and develops necessary strategies to address them. Export strategy helps in selecting the appropriate partner for the company in the new market. The company intends to use a well established oil distribution company which will help increases company sales even during the initial period of entry.

5.0 Swot analysis of BYD Co. ltd (electric vehicle)

Company and product strengths

Strengths

BYD co. ltd is engaged in production of automobiles and other electronic accessories. It has a variety of products which in automobiles ranging from cars, buses, car batteries, mobile phones among other products. It therefore has a variety of products which reduces company risks and builds public confidence.

The company has a strong financial base derived from retained earnings of its products over the years, (BYD business performances, and n.d). However, the half year financial performance for 2012 declined mainly due to its restructuring, increased interest expenses and reduced sales, resulting into low profit for the company. However, introduction of electric vehicles are expected to boost company sales and improve its performances.

The company is also known for its innovativeness. It is the first company to produce electric car which uses Fe to power vehicles. The company has made numerous inventions and development of green essay/impact-technological-competency/">technology, involving use of pure electric energy, solar power and Fe batteries in most its products as a means of reducing greenhouse emissions, (about BYD, n.d).

The company has a team of experienced staff and uses state of the art essay/impact-technological-competency/">technology in production and marketing of its products in China and abroad. It has a well established market base in China and has a strong brand name.

Weakneses: Company products face strong completion from Toyota automobiles among other automobile companies. Another probable weakness is bureaucratic nature of decision making process.

 

Opportunities

Increased demand for electric vehicles in the global market including the US market which has high purchasing power. This offers ready market for the products. Stable political environment in the US will provide favorable conditions for the export business to thrive. The country has well developed institutions to provide which provides smooth political transition and addresses all political conflicts amicably. The use of social media network will help in marketing company products in the US. This will be supported by technological advancement.

Threats: The likely threats include cultural differences between two nations which may require modifications of the products. Import regulations may not favor the company and product performances in the new market. Another threat emanates from the power of buyers which is relatively high because of availability of substitute products in the US market from competing companies. Differences in transaction currencies may lead to foreign currency risks which need to be addressed using different foreign currency risks management techniques, (Wang & Chen, 2010). Another probable threat is the low switching costs involved, this exposes the product and company to sales risks due to fluctuations in sales of company products in the US market.

Table 1. Swot analysis

Strengths

>Well diversified and differentiated range of products

>Adequate finance generated from company sales over the years

>A well established market base in China and other parts of the world

>Qualified, dedicated, and experienced staff in the motor industry.

> Highly innovative, the first company to develop electric vehicle in the world

 

weaknesses

>Competition from established motor companies like Toyota Japan.

>Electric vehicle faces competition from gas and fossil fuel driven Vehicles.

> Company bureaucracy which may delay implementation of export strategies.

 

opportunities

>Expanding and evolving global market will provide market for the company products and services

>Favourable political environment and rule of law in the new market which provide a smooth environment for business to thrive.

>Technological advancement in the US which may be integrated and further improves the product quality.

>advent of social media network such as twitter and facebook, a strong marketing tool for the product.

> Copyright and patents laws in the US will benefit the new product and related innovations.

>Generally high purchasing power in the US is likely to boost sales.

Threats

>Cultural differences between the two nations which influences the design of motor vehicles.

>Government import control measures may affect product entry and performances in the market.

> buyers power are relatively high, may easily influence product sales

>Weak global economic outlook as a result of global recession that hit US economy may reduce purchasing power of potential consumers

> Differences in transaction currencies between China and the US may result in exchange rate risks

> Relatively low switching costs; customers can move to other forms of vehicles with easiness.

>High costs of labour in the US may reduce returns on the product.

 

6.0 Conclusion

The success of export trade is not guaranteed and most times may be complex and challenging hence the need for proper analysis and planning. The company however stands a chance of benefiting a lot from this new venture if the marketing strategies are followed to the later. The export strategies are relevant and appropriate for the new market. This is not only a unique product but environmentally friendly and is likely to attract high market demand and support from environmental activists and foreign bodies.

7.0 References

About BYD co. (n.d) [online] Available at  http://www.byd.com (accessed on 30th april, 2012).

BYD business performances. (n.d). [online]. Available at http://www.sinoendless.com (Accessed on 30/04/2012).

Comstock. B, Gulati R and Liguori S. (2010): Unleashing the power of marketing. Harvard Business Review October 2010, HBR.ORG.

Köksal, M. H, Özgül E. (2007): The relationship between marketing strategies and performance in an economic crisis. Type: Research paper. Source: Marketing Intelligence & Planning Volume: 25 Issue: 4 2007 Iss: 4, pp.326 – 342

Neil H. Borden, (1964): The Concept of the Marketing Mix. Published his 1964 article, Business Source Complete, EBSCOhost, viewed  30th April, 2012.

Proctor, T 2000, ‘chapter twelve: growth strategies: product-market expansion’, Strategic Marketing, pp. 238-263, Business Source Complete, EBSCOhost, viewed  30th April, 2012

Shankar. V, 2008, “Strategic Allocation of Marketing Resources: Methods and Managerial Insights,” Marketing Science Institute Report 08-207.

The extended market strategies. (n.d). [Online] www.Learnmarketing.net. (Accessed on 30/04/2012).

Wang.  A. T, Li. M, Chen. T, (2010). ‘Price transmission, foreign exchange rate risks and global diversification of ADRs’. Applied Economics, May2010, Vol. 42 Issue 14, p1811-1823, 13p, 5 Charts;

Wayne M. M, (2011): China’s Economic Conditions. Specialist in Asian Trade and Finance. June 24, 2011

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