SAIC MOTOR LIMITED: WHAT’S NEW STRATEGY ADOPT?

STRATEGIC MANAGEMENT AUDIT INTERNAL AND EXTERNAL

STUDENT: 311132 TEACHER: Mr. JACOPIN TANGUY

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SUMURY INTRODUCTION ................................................................................................................................... 3

ABOUT SAIC MOTOR .......................................................................................................................... 4

SECTOR ANALYSIS ............................................................................................................................. 5

I. CHINA AUTOMOBILE INDUSTRY ............................................................................................ 5

II. CHINA AUTOMOTIVE INDUSTRY PEST ................................................................................. 5

1. POLITICAL ENVIRONMENT .................................................................................................. 5

3. SOCIAL-CULTURAL ENVIRONMENT .................................................................................. 6

4. TECHNOLOGICAL ENVIRONMENT ..................................................................................... 6

5. ENVIRONMENTAL AND LEGAL FACTORS ........................................................................ 7

III. PORTER’S 5 STRENGTHS ....................................................................................................... 7

1. NEW COMERS: AVERAGE ..................................................................................................... 7

2. CUSTOMER BARGAIN POWER: HIGH ................................................................................. 7

3. SUBSTITUTE PRODUCTS: HIGH ........................................................................................... 7

4. COMPETITION HIGH ............................................................................................................... 8

5. SUPPLIER BARGAIN POWER: HIGH .................................................................................... 8

IV. COMPETITORS FRAMEWORK .............................................................................................. 9

1. SAIC MOTOR COMPETITORS ANALYSIS ........................................................................... 9

V. CORPORATIVE STRATEGY ..................................................................................................... 10

1. COMPANY CURRENT STRATEGY...................................................................................... 10

2. COMPANY CORE COMPETITIVENESS .............................................................................. 10

3. COMPAGNY MARKET SHARE ............................................................................................ 10

4. SAIC MOTOR BUSINESS PLAN ........................................................................................... 11

5. SAIC MOTOR BUSINESS MODEL ....................................................................................... 12

VI. SWOT ANALYSIS ................................................................................................................... 13

1. STRENGTHS ........................................................................................................................ 13

2. WEAKNESSES..................................................................................................................... 13

3. THREATS ............................................................................................................................. 13

4. OPPORTUNITIES ................................................................................................................ 13

VII. PROBLEMS AND SOLUTION ........................................................................................... 14

1. PROBLEMS .......................................................................................................................... 14

2. SOLUTION ........................................................................................................................... 14

REFERENCE AND APPENDIX .......................................................................................................... 17

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INTRODUCTION

The economy of china has widely grown in the last 20 years. This growth created the

emerging companies in many sectors and international companies are more and more

interested to extend their business in Chinese Market because of the wide population and

consumers.

In fact, Chinese government encouraged the internationalization of Chinese domestic firms. It

helps them to build global recognized brand.

Among the sectors that increased in CHINA, we will be more focus on Automobile sector.

This sector is very important in Chinese Economy and the government wanted to maintain

and rise its worldwide ranging of automobile manufacturer. To reach this goal, the

government took many incentives, it has more than 13 state-owned companies that operates in

this sector and in which it invests money.

Among these companies, we will focus on SAIC MOTOR LIMITED that’s the leader of

domestic market in PV1 and CV2 manufacturing, selling and developing.

We will understand what’s wrong in company strategy to make some recommendations to

improve it.

1 PV : Passenger Vehicles 2 CV : Commercial vehicles

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ABOUT SAIC MOTOR

SAIC3 MOTOR corporation was founded in 1955, it is China’s largest vehicle manufacturer

in terms of unit sales and a state-owned company. The corporation is composed of 16

subsidiaries. The company manufactures and sells commercial vehicles and passenger cars,

the production the company entire products happen in its own industry and has its own brands

MG 4and ROEWE5 and MAXUS6. It also operates on truck assembly business, engines and

electronic components. The company operates in Joint-venture with the big international

automakers like Volkswagen and General Motors.

SAIC produces different kinds of car:

- Automotive: the group is leading sales on the Chinese market thanks to its joint

ventures with General Motors and Volkswagen but also through strategy of

competitors buying ROEWE and MG.

- Industrial vehicles and heavy trucks: SAIC also ranked first in the domestic market

thanks to the joint venture with Fiat and Iveco, SAIC Iveco is Commercial Vehicle

distributed under the Hongyan brand.

- The components: company supplies automotive components through its joint venture

with Magneti Marelli7.

3 Shanghai Automotive industry corporation 4 sport cars 5 Sedan cars 6 Van cars

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SECTOR ANALYSIS

I. CHINA AUTOMOBILE INDUSTRY

This is the first 10th companies in China automotive industry, as we can see SM is the leader

of with a market share of 21,4%.

II. CHINA AUTOMOTIVE INDUSTRY PEST

1. POLITICAL ENVIRONMENT

China government facilitate the development in local auto industry. it makes a lot of

investment to support R and D project and encourage automakers to innovate. The

government prioritize more hybrid and electric autos sector to reduce emission of pollution.

Government doesn’t allow to foreign automakers to operate alone in Chinese market it force

them to collaborate with local automakers companies, this strategy create competence sharing

and technology transfer.

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2. ECONOMIQUE ENVIRONMENT

China economy situation (speedy growth) plays main role in automobile industry. Chinese

government promote Chinese lifestyle by increasing people income and middle class

increasing last 10 years, so People wage and turnover rise, they can seek to buy a personal

car. Then Chinese car consumers becoming more demanding because the car is not only a

transport mean but a symbol of success that is why brands like Ferrari, Lexus had big success

in China.

3. SOCIAL-CULTURAL ENVIRONMENT

Social and cultural factors play an important role because the demography constantly growth

and change. more than 90% of population are literate that’s means that government

emphasizes on education. About automobile industry foreign automakers need to be more

deep in Chinese culture to succeed, the best way for them it’s to join “guanxi” Chinese

concept of relationship to learnt more about culture.

4. TECHNOLOGICAL ENVIRONMENT

China Government invest in research and development and innovation in automobile industry

that means that local automakers can easily produce cars with more functions as safety and

product design. Then to face problem of emission control government keeps auto industry

innovation upgrading to produce hybrid cars.

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5. ENVIRONMENTAL AND LEGAL FACTORS

Environment protection is a part of government strategy its why to reduce carbon emission

government promote friendly cars using and hybrid cars production.

However, there are others factors related to china growing auto industry like the high

consumption of petroleum, traffic noise increasing in the big cities, and lack of parking. Many

regulations exist to assure the industry success; however, the government had been accused to

baize curtains regulations, that’s can discourage the potentials investors.

III. PORTER’S 5 STRENGTHS

1. NEW COMERS: AVERAGE

Companies can entry only by joint-venture with domestic company It’s a government policy,

this incentive reduce comers Company freedom to 80% or 50%. However, brand awareness

And loyalty is important because CHINA automobile industry is wide and have more than

170 automakers.

2. CUSTOMER BARGAIN POWER: HIGH

The automakers in CHINA increased, products and services are available, domestic brands

compete with global brand to satisfy customer needs and in the same time increase they

market share. government has also rise Chinese lifestyle by wage and turnover increasing now

customer have the power to decide which brand he prefer.

3. SUBSTITUTE PRODUCTS: HIGH

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Chinese substitute cars by bicycle, Taxi, Rail transport, and motorcycle because this means of

transport are cheap then because of the wide population and lack of space the are many

problem to park.

4. COMPETITION HIGH

The competition is high between state-own, foreign financed and private-owned manufacturer

companies. This competition causes decreasing of car prices.

5. SUPPLIER BARGAIN POWER: HIGH

Suppliers have a strong bargaining power because of the number of automakers.

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IV. COMPETITORS FRAMEWORK

1. SAIC MOTOR COMPETITORS ANALYSIS

COMPAGNY BUSINESS

REVENUE

Competitive

advantage

STRENGTHS

WEAKNESSES

CHINESE COMPETITORS

SAIC

MOTOR

Manufactures

Sales

Develops PV and CV

Revenue 2015: 106.68 B $

Market share 2015: 24%

-R and D

-Big players

experience

-Leader of china

market

-Good reputation

-Government

support

-joint venture with

big player

automakers

-Weak global

presence

- unexperienced to

match global

portfolio

- have 3 own brands

GEELY Develops

Manufactures

Sales of PV

Revenue 2015: 30.14B

Market share 2015: 2,03%

Export in 24

countries

Entire strategy

focus on 1 brand

-Volvo acquisition

-Sales network

-Less advanced

technology

-Image of low-end

brand

CHERY Manufactures

Sales

Develops

Design innovation

Export in 80

countries

Strategy focus on

1 brand

-Experienced

business units

-Reduced labour

costs

-Future market size

JAC MOTOR Manufactures

Develops

Sales CV

Offer best price

Strategy focus on

1 Brand

-Distribution and

and -sales network

-Skilled workforce

-Small business

units

SAID MOTOR is the leader in CHINESE domestic market thanks to the government support

and its numerous joint-venture with the big automakers companies, however its competitors

evolve with they own resources and 1 brand. We thing that SAIC MOTOR needs to be

concentrated on its own brands, it needs to build its own brands reputation like its competitors.

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V. CORPORATIVE STRATEGY

1. COMPANY CURRENT STRATEGY

Saic motor strategy is to follow the development trend and market evolution by improving its

technology and industry to play in global market and lead future automobile industry. They

improve skills in Research in development to increase its own brands that are ROEWE,

MAXUS, MG.

Then the company want to develop key technologies in new ENERGY VEHICULE (NEV)

that will be technologically innovative with its joint-venture partners. The project NEV was

already launch since 2010 just with three of its partners there are General Motor, Volvo buses

and Volkswagen, NEV is also developed in SM8 own brands. This NEV project was

encouraged by the government that is more focused on carbon emission problem.

2. COMPANY CORE COMPETITIVENESS

SAIC Core competitiveness plays a strong role on company success and based on SM9

competitive advantage that is the fact that SM10 is the owner of its industries so company can

perfectly use economy of scale and the creation of synergy effect in production.

Then company have a leader advantage in china domestic market by government support

firstly then its numerous joint-venture with the big global company and variety of product

categories that’s allow it to react quickly to customers need. Finally, the company is mainly

focused on innovation capabilities by improving its R and D capability.

3. COMPAGNY MARKET SHARE

This table show that Saic Motors is the leader of China industry market by selling 586 million

new cars in 2015. According to Nikkei Asia review Saic motors has 23,8% of the auto market

share in China based on china annual sales estimated at 24.59 million of new cars.

8 SAIC MOTOR 9 SM : SAIC MOTOR 10

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Source: Autor

This graphic demonstrates the evolution of sales and market share of company in China, we

note that even if the sales volume increase company market share decrease of 6% between

2012 and 2015. It due to the fast increasing of market sales, then the good point is that SAIC

MOTOR sales didn’t stagnate.

4. SAIC MOTOR BUSINESS PLAN

SAIC MOTOR is focused on promoting development through the improving of its products

and industry quality, seizing market opportunities to control properly the balance between

production and sale, company tries to combine internal resources and innovation to reach

2 0 1 5 2 0 1 4 2 0 1 3 2 0 1 2

5863500 5620000 5100000 4490211

24590000

1992850518084169

15523658

24%

28%28%

30%

S.M MARKET SHARE

SAIC MOTOR SALES MARKET SALES S M MARKET SHARE

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more target. The company is also focusing on business internationalization; it will accelerate

and complete its internationalization process.

5. SAIC MOTOR BUSINESS MODEL

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VI. SWOT ANALYSIS

1. STRENGTHS

Support of the Chinese and SHANGAI government

Lead the domestic market

Innovative and R and D improving process

2. WEAKNESSES

SAIC R AND d still not world class

Need more skills to match international portfolio

Weak global presence

3. THREATS

Foreign companies going solo in the domestic market with the easing of rule

Oil price increase leading to cost for fuel efficient cars

Competition in the foreign market

4. OPPORTUNITIES

Market like Europe and US still untapped

Possibilities to promoting its own brand models and making them world class

New products and services

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VII. PROBLEMS AND SOLUTION

1. PROBLEMS

SAIC MOTOR OWN BRAND ARE NOT SUCCESSFUL

Problem of brand

Problem of design

Problem on KBV (Knowledge base view)

Lack of experience

Despite government support SAIC MOTOR can’t succeed with its own brands, it leads

domestic market thanks to Volkswagen and General Motors car models manufactured in the

joint-venture industry. Then company started to lose money in they own brand its why they

increase each year Research and Development expenses to improve their performance.

2. SOLUTION

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Said Motor sales volume

Source: saicgroup.com

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STRATEGY (build a big one brand = Focus on one BRAND)

This table demonstrates the sale of SAIC MOTOR and we notice that between its own brands

the most successful one is MG, so:

- Instead of finding solution to improve its 3-own brands in the same time;

- SM11 needs to be focus one the successful one that’s MG;

- It will allow SM to be focus its resources, capabilities and RD to improve one brand in

term of design, innovation, technology;

- Brand awareness will be created and company will to compete in international market

will can be more possible.

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REFERENCE AND APPENDIX

http://www.saicmotor.com/english/company_profile/about_us/index.shtml

http://www.saicmotor.com/english/images/investor_relations/annual_report/2016/6/7/1C117E

345F254379966260F97C5D9353.pdf

http://www.ccilc.pt/sites/default/files/eu_sme_centre_sector_report_-

_the_automotive_market_in_china_update_-_may_2015.pdf

http://www.wsj.com/articles/heard-on-the-street-saic-motor-gets-ready-for-wider-audience-

1408006936

http://www.zawya.com/story/Accelerating_its_strategy_of_internationalization_SAIC_MOT

OR_makes_its_Middle_East_debut_at_the_Dubai_International_Motor_Show_2015-

ZAWYA20151111104034/

http://pratclif.com/economy/china/automobile/

http://www.swotanalysis24.com/swot-s/93720-swot-analysis-saic-motor-corporation-

limited.html

http://www.saicgroup.com/english/investor_relations/sales_volume/index.shtml

http://mixsa.weebly.com/master.html

http://www.slideshare.net/aravindmenonm/auto-industry-country-risk-analysis

http://www.saicmotor.com/english/index.shtml

https://fr.wikipedia.org/wiki/Shanghai_Automotive_Industry_Corporation

www.google.fr

www.wikipedia.fr

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