BYD COMPANY, LTD. CASE ANALYSIS
1. BYD Company, Ltd. (“BYD”) is the world’s second largest manufacturer of rechargeable batteries. Exhibit 1 shows that between 1999 and 2001, BYD’s annual sales grew three times - exceeding RMB 1.3 billion in 2001. Based on the first four months of 2002, BYD’s annual sales are expected exceed RMB 1.6 billion in 2002. Founded in 1995 by Wang Chuan-Fu, chairman and president, BYD has built its reputation by becoming the largest Chinese supplier of lithium-ion batteries to cell phone manufacturers. Exhibit 3 shows that by 2002, BYD was among the top four manufactures worldwide - and was the largest Chinese manufacturer – in each of the three main battery technologies (with about 9% market share in Li-ion technology, 31% market share in NiCd technology, and 8% market share in NiMH technology). Despite the presence of large Japanese competitors – including Sanyo, Sony, and Matsushita – in the global market and a large number of local Chinese firms, BYD’s aim to improve the quality of products while keeping the price low started winning it business from foreign companies. By doing so, BYD has positioned itself as a cost leader in the batter industry and has moved towards cost advantage in manufacturing of its products. BYD emphasized on the technology and product development by investing about 2% of the company’s revenue in product and process R&D. Since the development of its first lithium-ion battery in 1997, BYD has made several improvements that increased the cycle life of its products. BYD moved from having no patents as of 1999 to holding scores of patents as of the beginning of 2002.The manufacturing process - in terms of sequence of steps - at BYD was similar to that at the competing Japanese firms. However, Japanese firms had most of the processes automated and had more dry-room space. This kind of set up needed greater investment in capital equipment and accounted for an annual capital expenditure five to ten times...
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