Byd Case Analysis

BYD CASE ANALYSIS

A. According to Porter's value chain theory, I infer that the core competencies of BDY are low-cost manufacturing, human resource management, and technology development.

Primary Activities:

Operations: BYD spent two-thirds of its annual R&D budget that focus on improving manufacturing processes. P5 The improvement of designing new methods of battery production significantly reduced the cost and gained advantage for BYD. P1

Supportive Activities:

1. Human resource management: BYD took care of employees in many ways.P7 These actions resulted in BYD that the turnover in its manufacturing workforce was 10-20%.P6 Besides, BYD had discipline training for their workers that greatly affected the quality improvement of products.P6

2. Technology development: Jigs and non-humidity sensitive chemical were also achievements of BYD on technology development.

These core competencies, low-cost manufacturing, human resource management, and technology development, are transferable to the automotive business. The low-cost manufacturing can help to decrease the cost of production process for automotive factory. Discipline training of human resource management can improve their efficiency of productivity.P11 Finally, BYD was working in battery industry which is a part of automobile. Thus their technology development in battery can apply to reduce the cost of automobile production or even expand to new electric vehicles.P11

B. The competitive advantage of BYD is low-cost and high-quality production process. Compared with Japanese firms, the production process of BYD was similar but most of it was not so automated. Instead, BYD used labor and jigs to do the process and the final assembly. P2 Furthermore, BYD's dry-room is specially designed that could save a lot of space. The risk of using labor and jigs to replace robotic arms is the defect rate. To reduce (quality) variability, the production process at BYD was divided into numerous and easy steps. P5 By doing this, BYD maintained the low cost and low defect rate.

We use VRIO framework to determine whether the factor is sustainable or not:

Value: with annual capital spending 5 to10 times less than competitors', low-cost manufacturing created a great value for BYD.P5

Rare: high quality led to differentiation while most rivals' quality was inconsistent.P2

Imitability: in the battery industry, cost of existing and large competitors were high and quality of new and small entrants were low. P3 These facts indicates that manufacturing and quality control were non-imitable.

Organization: BYD became the world's second largest manufacturer of rechargeable batteries in 2002, whereas