Geely's Automotive Holdings, Ltd: Targeting Us Market

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QUESTION 1:

Undertake a SWOT analysis of the organization in the case.

Strengths

- An effective cost control system

- Strong governmental support that could be leveraged for overseas expansion.

- Innovative

- Established Research and development
- Establish manufacturing bases in different location

- Established broad distribution network in different locations

- Creating intangible through employees

Weaknesses

- Lack of brand effect
- Lack of innovative designs
- The strategy of low cost strategy’s profit magin is very thin in the long run

- Quality will not be able to compete with other car makers

- Problems meeting U.S. emission requirement for environment protection agency

- Geely’s lack of good distribution channels in US

Opportunities:

- China’s automotive industry profit growth was driven by increases in demand for cars in both the domestic and overseas market which helped China to overtake Germany and become the world’s third largest car maker after Japan and US.

- Trend to increase the profit as an overall by targeting the sporty segment and midlevel portions of the market with models. - Expanding market by open to overseas opportunities
- Geely ventured into the middle to high end market in 2004

Threat:

- Partnering with a foreign firm was a losing proposition in the long run because Chinese partners had little bargaining power over their larger, more established foreign partners

- The alliances often did not bring about the advanced technology that was promised by the foreign partner

- Lack of innovative design and pirating of designs (infringing others’ intellectuall property rights

- Perception of poor quality of china products

- Perception of low price equals low quality

- Economic crisis, government initiative and shortage of oil leads to obstacles for Geely to embark into U.S

- trade friction between china and U.S

- Strong competitors in US

- Probablity of RMB reevaluation could create uncertainties

QUESTION 2:

How did entering the U.S. market contribute to the organization’s competitive advantage?

For us to analyse the company, firstly is to identify the company’s competitive advantage. Having a competitive advantage are the factors that differentiate a company from its competitors resulting in the success of the organisation. Geely’s competitive advantage is having its cars at a lower price than its competitors and the ability to produce smaller cars, which are expected to be in high demand in the near future.

Entering the U.S. market will definitely contribute to the market’s competitive advantage. U.S automobile market is the largest in the world as of 2008. Though having a slow growth rate, it still promises a huge market value if the company entering is able to carve a pie out of them.

The strategy in entering the U.S. market would be stealing market share from existing players since the market growth rate is low. Geely can offers a unique value proposition that customers favour through its low cost system of being able to price its cars more favorably than current competitors.

Due to collapse of the financial system and the predicted long-drawn recession, it is expected that more consumers would be looking for bargains and cheaper products and trading down their current bigger cars with high maintenance costs for low maintenance cars. The sale of small cars that are affordable has been on the rise while the Big three has suffered erosion in market share due to their relatively higher-priced vehicles and also the gradual loss of brand equity. If Geely is able to use its low cost position and sell for the lowest price in the market, it would occupy a unique position that rides on a favourable trend. The trends of the U.S. market bode well for Geely if they are able to occupy a mass market value...
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