Five Forces

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The impact of the government policy
on the Chinese electric vehicle
industry and business strategy
management: Case of FAW

Zhe Li & Lu Sun

Abstract
Title: The impact of the government policy on the Chinese electric vehicle industry and business strategy management: Case of FAW
Author: Zhe Li, Lu Sun
Supervisor: Åsa Kä
fling
Background: The electric vehicle industry is an emerging industry worldwide. In China the development of the electric vehicle industry is rapid. The government policy is of great influence on the economy in the Chinese context. The Chinese electric vehicle company has to design the right business strategy to maintain and enhance its competitive advantages in order to respond to challenges.

Aim: This study analyzes the five competitive forces of the Chinese electric vehicle industry and the effect of the government policies on the Chinese electric vehicle industry. The research uses Porter‘s Five Forces model and Porter's Generic Strategies theory to give the strategic guidance to the company.

Definition: In this thesis, the term ―Electric Vehicle‖ referred to the electric drive vehicle used for transporting passengers, which is designed to typically have four wheels, and to have seating for one or more people.

Method: The authors use FAW Electric Vehicle Company as the case company in order to achieve the purpose of this research. The qualitative method is used in this study. The authors collect primary data through three interviews with the company managers. Results: This research reveals how the government policies affect the profitability of the industry and the company through changing the five competitive forces. FAW Electric Vehicle Company should maintain and enhance its relationship with the government. It should also maintain and enhance its competitive advantages through implementing cost leadership and differentiation strategies in different stages. Five appropriate search terms: Electric Vehicle Industry; China; Government Policy; Porter‘s Five Forces model; Porter's Generic Strategies

Acknowledgements
The two-year Master program at Linkö
pings Universitet has been one of the most
challenging and rewarding learning experiences in my life. I would never have completed this thesis and Master program without the considerable support from teachers, family, colleagues, and friends.

Foremost, I would like to express my deep appreciation to our supervisor Åsa Kä fling
for supporting, inspiring, and encouraging me in our research. Her patience and valuable advice, guidance, and personal assistance helped us to finish this thesis in the limited time. I also acknowledge Marie Bengtsson, and Jö

rgen Ljung for all the
generous help and advice.

I would like to acknowledge the help from the thesis group members: Julia Seidel, Alexander Penev, Catalin Ivan, Gloria Adero, Jun Liu, Ethan Emmanuel, and Anton Chaika. My deep gratitude is also extended to Yuanyuan Wu and Chuankai Song. Their help and support means a lot to me.

Last, but most important, I would like to thank my parents and grandparents. They have never stopped believing in me. Their love, understanding, continuous encouragement, and vigorous support have given me tremendous strength and faith to overcome the difficulties. They introduced me a spiritual world. They always warm my heart.

Linkö
ping, 30th May, 2011
Zhe Li

Acknowledgements
During the process of this master thesis, many people have assisted us, both through school and in fieldwork. I would like to give my thanks to all of them in general and to some of them in particular.

The first gratitude goes to our supervisor, Åsa Kä
fling. Thank her inspiring responsible
and patient guidance through the whole process of writing.

I would like to express our deep gratitude to our interviewees. They are Mr. Chen, the general manager of FAW Electric Vehicle Company; Mr. Leng, the marketing manager of FAW Electric Vehicle Company; and Mr. Xu, the...
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