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The Strategic Group Analysis of BYD New Energy Vehicles from the Perspective of Value Chain Tong An* Advances in Social Science, Education and Humanities Research, volume 517 Proceedings of the 6th Annual International Conference on Social Science and Contemporary Humanity Development (SSCHD 2020) The Strategic Group Analysis of BYD New Energy Vehicles From the Perspective of Value Chain Tong An* School of Economics and Management, Beijing Jiaotong University, Beijing, China *Corresponding author. Email: [email protected] ABSTRACT A new energy vehicle is an irresistable trend, which is the guidance and goal of the automobile industry’s future development. BYD as a pioneer and strong performer among domestic new energy vehicles, has received extensive attention of the society from all walks of life. This paper takes BYD as the core developing a strategic group analysis on the new energy automotive industry. First of all, this paper based on the perspective of value chain of new energy vehicles line divides the strategic groups and to clarify BYD’s position and competitive environment in the industry. And then through an analysis of the internal and external competition strategy group at the same time to find out the advantages and disadvantages of BYD in the competition, and put forward development prospects. Keywords: BYD, Strategic groups, Value chain, New energy vehicle. 1. INTRODUCTION revenue is only slightly lower, this performance is very good [3]. However, the new energy automotive industry With the continuous enhancement of people's is still an emerging industry, before the industry awareness of environmental protection, the new energy matures, the barriers to entry are low, which makes the automobile industry has been widely concerned [1]. At existing enterprise face more variables, threat and the same time, the emergence and development of new challenge. If enterprises want to extend or keep their energy vehicles has made the traditional automobile advantage position, they need to make constant industry glow with new vitality and become a new adjustments and efforts for the market and competitive breakthrough point for the automobile industry. Up to environment. The strategic group analysis in this paper now, there is still a big gap between China and can clarify BYD's position in the current competitive developed countries in traditional automobile industry. environment more clearly, which can draw the current The emergence of new energy vehicles drives a new development advantages and disadvantages of BYD and round of global competition, providing a new look forward to the future development of BYD. competitive platform and a chance to seize the high point for China's automobile industry [2]. 2. REVIEW OF RELEVANT THEORIES BYD is one of the well-known domestic independent automobile brands. As the pioneer and 2.1. Strategic Groups leader of China's new energy vehicles, it has received national policy support and wide attention from all Strategic groups were put forward by Michael Porter sectors of society, which is in an important place in the in 1980. He believed that strategic groups could be new energy automobile industry. At present, BYD has divided by considering a certain combination of fully mastered the technology of new-energy vehicles. characteristics, and environmental opportunities and According to the 2019 annual report released by BYD, threats could be determined according to different the company's annual revenue in 2019 was about strategic groups. Enterprises belonging to the same 127.739 billion yuan, down 1.78% year-on-year, while strategic group have more competition, while those not the R&D investment increased 12.83%. belonging to the same strategic group or those far apart from each other in the figure have less competition. In consideration of the epidemic, the withdrawal of new energy vehicle subsidies and other factors, BYD's Copyright © 2021 The Authors. Published by Atlantis Press SARL. This is an open access article distributed under the CC BY-NC 4.0 license -http://creativecommons.org/licenses/by-nc/4.0/. 735 Advances in Social Science, Education and Humanities Research, volume 517 In addition to the attention of competitors within the 3. STRATEGIC GROUP DIVISION same strategic group, the possibility of migration of the enterprises in other strategic groups should also be 3.1. Dimensions Selection considered. However, there are barriers to strategic migration [4]. The barriers to migration are factors that At present, one major trend of China's new energy limit the transfer of enterprises between different groups automobile industry is that new energy automobiles will within an industry. If the transfer barrier is low, the extend up and down the value chain of the automobile entry threat is high; If the migration barrier is high, the industry, and the industrial profit structure is changing entry threat is low [5]. accordingly [7]. The upstream power battery and intelligent technology, as well as the downstream end- 2.2. Value Chain market user service will become the important profit pool [8]. The theory of value chain was first put forward by Michael Porter in his book Competitive Advantage in According to the China's new energy automobile 1985. Value chain is the general term of a series of development report: 2020, we can get the sales of new economic activities conducted by enterprises to create energy automobile enterprise, respectively BYD is 19%, value for customers, shareholders, employees and other Tesla China 14.8%, SAIC 6.7%, GAC6.5%, BAIC interest groups, and the difference of value chain among 5.6%, BMW Brilliance5%, Chery3.5%, Great Wall different enterprises forms the source of enterprises' Automobile3%, Geely Automobile2.4%, NIO 4.5%, X competitive advantage [6]. Motors 1.3%, WM Motor 2.5%. In the past, scholars mainly used the "diamond Enterprises with similar nature basically have model" to study the competitiveness of new energy similar scale in the new energy vehicle market. This vehicles, analyze the advantages and disadvantages paper divided 12 companies according to market share from the six elements of the model, and put forward and the enterprise features into several groups. The first countermeasures from the macro and micro perspectives. group is industry leader including BYD and Tesla. The The application of value chain in the new energy second group is China's well-known joint venture automobile industry mainly focuses on the discussion of including SAIC, GAC, BAIC and BMW Brilliance. The business model and energy supply model, and few third group is China's traditional independent brand literatures are used to study the competitiveness of a including Chery, Great Wall Automobile, Geely single enterprise. This paper taking BYD as the core, Automobile. The forth group is the new forces including stands on the strategic groups to analyze BYD's position NIO, X Motors, WM Motor. Next, we consider the and competition in the industry. And then this paper positions of the groups in the strategic group map in creatively takes value chain extension direction as one terms of group position units. strategic group division dimension, which is a good way According to the China New Energy Vehicles to identify different strategic groups. Development Report: 2020, we can get the sales volume Based on the characteristics of the energy of auto companies in the first quarter of 2020. Due to automobile industry, this paper divides the activities of the diversity of automobile market segments, car the value chain into four links: technology and vehicle companies with different sizes or market share have less R&D, production and manufacturing, sales and after- competitiveness. For new-energy vehicles, market share sales service. These links are respectively reflected in is a more appropriate dimension to divide strategic several aspects, as shown in the figure1 below. groups. According to the current situation and development trends of new energy automobile industry, it can be found that the dimension of extending to the upper reaches of the value chain and extending to the value chain can better distinguish the strategic groups using different strategies. Besides, the complexity of New energy vehicle industry is high. It’s reasonable to take enterprise value chain extension direction to divide, Figure 1 Value chain of new energy automobile which can also be clearly showed a strong competitive industry relationship of enterprises and weak competition and potential competition of enterprises. Therefore, this paper takes the current enterprise in the value chain extension direction and market share of as two dimensions of strategic group analysis. 736 Advances in Social Science, Education and Humanities Research, volume 517 3.2. Strategic Group Location Analysis companies. On the other hand, cost compression is difficult. BYD can get cost leadership in technology 3.2.1. The Upstream of the Value Chain with [11]. In the whole vehicle design and production, R&D and Production as the Core depending on a higher level of aesthetic design and maturity of the production line, this kind of enterprise As a traditional independent brand, BYD is also a will have certain advantages. On the whole, compared pioneer of new energy vehicles. It has great advantages with BYD, the joint venture has a smaller advantage in in the upstream of the value chain, especially in the the upstream of the value chain and has a smaller degree R&D links. BYD's most brilliant advantage is in the of expansion up the value chain. battery field. BYD has 100% independent R&D, design For Chinese traditional independent brands such as and production capacity. With more than 20 years of Geely, Great Wall Automobile and Chery, some continuous innovation, products have covered consumer attempts have been made in the field of new energy. 3C batteries, power batteries, solar cells, as well as However, except for BYD, most of the main engine energy storage batteries and other fields, and formed a factories of independent brands in China do not have complete battery industry chain.
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