Byd Company Limited

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BYD Company Limited

A Case Write-Up

Group - 8        6/17/16        Operations Strategy

Recommendation: The dilemma that lied in front of Wang Chuan-Fu, chairman and president of BYD Company Ltd. was regarding the next stage of BYD’s growth. He had to take a decision on buying a regional Automotive Company, Qinchuan Auto. Having done an analysis of the Pros and Cons of this decision and taking into account BYD’s operational capabilities, we recommend against the decision.[pic 3]

BYD’s strategy was built around its core-competencies of low-cost manufacturing, human resource management, and technology development. Its value proposition as well as competitive advantage was High Quality at a low price, which prompted it in making investments in Process Improvement which gave it high Process based Capabilities. While it spent two-thirds of its annual R&D budget on improving manufacturing processes, the improvement of designing new methods of battery production significantly reduced the cost and gave advantage to BYD over its competitors. In other words, it was based on the strategy of low unit cost and Product innovation which was well supported by its human resources. Three Important characteristics of its low cost and high quality strategy were:

1. Use of labour instead of automation while still maintaining nearly equal defect rate as of the competitors
2. Technological developments in the form of Jigs and use of non-humidity sensitive chemicals which brought the expense that would have incurred in the form of dry rooms significantly down
3. The production process was divided into numerous steps, each requiring only a narrow space of activity in order to reduce variability

The strategy of BYD has been put into a VRIO framework to determine if it has a strategic advantage and hence if it can ensure sustainability among competitors

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It could hence justify entering into the industry despite such a strong set of competitors from Japan since its strategy gave it a sustained competitive advantage. It’s also thus quite evident that BYD’s decisions have been very consistent among the various decision categories. Wang has always focused on reducing cost through investment in Process and Production R&D rather than solely focusing on sales efforts. He is also consistent in improving quality through technological innovations. This can