Table of Contents

TASK 1.. 3

Introduction.. 3

Need and Importance of Environment Analyses. 4

TASK 2.. 5

PEST Analysis. 5

Political Factor: 5

Economic Factor: 5

Social Factor: 6

Technological Factor: 6

TASK 3.. 7

Porter’s Five Forces Model 7

Threats to the new entrants: 7

Bargaining power of the buyers: 7

Bargaining power of the suppliers: 8

Threat of substitutes: 8

Competitive Rivalry: 8

Task 4.. 9

SWOT analysis of NIO: 9

Strengths: 9

Weaknesses: 10

Opportunities: 10

Threats: 11

Conclusion: 12

References

NIO: DEVELOPING A BUSINESS MODEL IN CHINA
TASK 1

Introduction of DEVELOPING A BUSINESS MODEL IN CHINA

Every organization is an important piece the business environment in which each of it works. There is not even a single entity that can function in isolation due to a reason that there are number of different factors that surrounds the business closely, that is then called as the business environment. This is further classified in two different forms which are Microenvironment and Macro environment. The first one directly impacts upon the working of the specific business only while the later one is responsible for affecting the function of all business groups that operates in an economy.

Microenvironment causes a straight effect upon different business activities; macro environment is the general environment of business that effects all of the business group’s at big scale. It is very essential to learn about the business environment therefore to know the impact of different forces on the business, chart has been shown below: (Jobber, 2006)

Need and Importance of Environment Analyses

Different parts associated with the microenvironment specifically impact a specific business only but on the other side, macro-environment factors greatly impact all the groups of business.

Factors of the microenvironment can be controlled by the business but this can only be done to some extent while on the other side, macroeconomic variables are the ones that are completely uncontrollable.

Elements associated with the microenvironment can affect regularly as well as directly to the firm and Macro environment can’t affect directly because it works in a complete opposite way.

Study of the microenvironment is being known as the external environment analysis. PESTLE analysis is the study of the Macro environment. Their complete abbreviation has been shown in the table above. (Filip, 2012)

In the end of this, it has been noted that Microenvironment and Macro Environment both of these covers the complete environment of a business. So, both of these are more complementary as compared to contradictory. Complete study of all these environments also helps you to know about the strengths, their weaknesses along with the different opportunities and the threats that are for the business. The external environment factors such as economic, political and legal factors and effect the profitability and sales of the businesses up to lot of extent. Therefore environment factors should be analyzed so that their influence on the business can be analyzed and mitigated. 

TASK 2 External Environment Analysis
PEST Analysis of DEVELOPING A BUSINESS MODEL IN CHINA

China automobile industry is one of the strong most vehicle superpower in the whole planet that has now come to be the backbone among the national economy because of the fast growing in the industry since 2009. There is no doubt in it that the demand of Automobile is increasing day after day and Chine is the one that has the biggest automobile industry and they manufacture number of different automobiles according to the need and demand of a customer or the citizen. There are four different kind of the factors that cause an impact on the Chinese Automobile industry which are described below in detail: (Lao, 2009)

Political Factor of DEVELOPING A BUSINESS MODEL IN CHINA:

The political factors include the rules and regulations created by the government. The political factors affect the business because the rules and regulation which the government makes have to be followed by the business. In the past years, Chinese Government is the one that has tried their best to make regulatory as well as the legal environment for the number of different foreign investors to make it even less complicated. There are different kind of the laws that has been developed by the Chinese Government related to the Automobile industry and they also cause a great effect on it but still among these laws, there are some of them which seems to be still unclear. Things are not clear enough related to them and due to which it has also become a bit difficult to know about all the laws in detail that has been made for the Chinese Automobile industry.

Economic Factor of DEVELOPING A BUSINESS MODEL IN CHINA:

The economic factors include changes in tax rates, inflation rate and foreign exchange rates. The changes in economic factors can increase or decrease the purchasing power of the customers thus have significant impact on business. An open policy has brought the country with rapid as well as the continuous growth towards the economy in today’s era. China is the one that is playing one of the major and important roles towards the global economic environment. Relying upon the china and the current growing economic position, enormous market size along with the prominent market position in the global market economic environment which simply shows that there are many chances for the potential of high profits that have successfully attracted the manufacturers of big international vehicles. 

Social Factor of DEVELOPING A BUSINESS MODEL IN CHINA:

Social factors includes the taste and preferences of the people. Business ethics and the behavior of an organization by the concept of Chinese that is “relationship” which is called as the “guanxi” which is entirely different from the western concept of the relationship. Due to this, there are many companies along with the Chinese automobile industry as well, they can gain the competitive advantage through the development of a network called as guanxi.

Finding out the local partners while beginning of the any kind of business in the China is one of the most sensible way. Therefore, there are number of different multinational automobile industries present that chose up the joint scheme being an entry mode where it can easily ease out the process in two different processes which are administrative and the political one. There are different kind of the cultural differences as well that come up with every organization and all these differences can further become as an obstacle for them and they can’t then be handled out that easily.

Technological Factor of DEVELOPING A BUSINESS MODEL IN CHINA:

As it is clear that technology is the one that keeps on changing with the passage of time. Technology is the factor that causes an impact on the automobile industry, technology keeps on upgrading in the automobile industry. An example can be used here which is that makers of automobiles in china are now designing the cars having some of the environmental consciousness just to keep the environment safe and protected and now they have come up with the new hybrid cars. Furthermore, there are many automobile companies in the china that are successfully using the computer systems in their car to detect the different problems.

TASK 3

Porter’s Five Forces Model

This Michael Porter’s five forces model is one of the detailed concepts for the evaluation of Chinese automobile industry competitive position. Michael Porter gave the complete framework that models out the Chinese automobile industry and the business also gets effected through it. This model is mostly being used in the strategic planning, this is one of the most commonly used strategy of business tool and it has proved to be useful in many situations. This model further includes five different factors and they cause a great impact on the china Automobile industry, let’s have a look at them in detail.  (Yunna, 2014).

Threats to the new entrants:

This part measures out that simple or tough it is for the new entrants to enter in the china automobile industry when they want to. It involves different things like for example;

·         Cost advantages that includes the economies of the scale and economies of the scope as well.

·         Getting access to the production financing along with the inputs as well.

·         Different policies of the Government along with the rules of taxation.

·         Learning curve and the production cycle.

·         Access towards the distribution channels.

Threat of new entrants is moderate.

Bargaining power of the buyers:

Next part is that needs to be considered is that strong the position of buyer is and how do they cause an impact? An example can be taken here that can a customer work together to order out the large volumes to squeeze out the profit of margins? Below are some other points that are important here;

·         Concentration of the buyer and their volume.

·         What kind of information buyers need to have to go to the automobile industry?

·         Sensitivity in price.

·         Cheap price of the Automobiles. Customers only get attracted towards those products which are not that much expensive and stay in their budget.

·         How much loyal the customers are towards the brand because if they are not loyal enough then the reputation of the company may get lost.

·         Threatening of the backward integration.

·         Presence of the substitutes.

It means that bargaining power of buyers is moderate.

Bargaining power of the suppliers:

·         This part relates that what a supplier can do in relationship with the china automobile industry and it further have different points which are;

·         How strong is the position of China Automobile industry?

·         Does the industry have many or just few of the potential suppliers?

·         How much of the profit is being taken up by each of the supplier?

·         Last point is that is there an availability of a single supplier with the same products?

Threat of substitutes:

To see the impact of the threat of substitutes, following things need to be analyzed which are very important and they are:

·         How much the china automobile industry cost the client to divert to the competing services?

·         How much of the chances are available for the customers to get switched?

·         If any of the automobile gets substituted easily then this is the threat to the automobile industry so it can further compete with the price. (Yunna, 2014)

Threat of substitute products is low
Competitive Rivalry:

This is the part which describe the level of competition that exists among the already present players in the Chinese automobile industry:

·         One player should not be leading over the other because it causes difficulties.

·         How fast the Chinese automobile industry is growing in the community?

·         Customers are being identified by the brand of a Chinese automobile industry.

Task 4
SWOT analysis of NIO:
Strengths:

·         Incoming of the E town capital, Chinese Government that is being related to the company funding.

·         Tesla is manufacturing very effective and powerful electric cars which are more reliable, powerful and provides smooth drive.

·         NP2 platform, RMB 10Bil that is mostly for the developmental research along with the requirements of user network.

·         Very first mover advantage for the EV premium at the competitive rates. Within the rates of china passenger market of cars, SUV and the premium segments are being expected for the achieving of highest growth duration of 2017 till 2022. While the 2019 luxury vehicles like Audi and Mercedes are still showing much growth.

·         Tesla has the ability to target particular niche as the luxury electric automobile market. Furthermore, tesla focuses on delivering their electric cars that will be affordable to the people. The affordability Tesla cars is the plus point to attract the audience towards the cars to get highly competitive advantage from the market.

·         Good predictions for the next generation of the vehicles like an example is autonomous driving.

·         Excellent kind of the service.

·         Rapid growth Tesla Company over few years.

·         The United States government support the growth of Tesla. From United States department of energy, Tesla has obtained more that 365 million dollars.

·         Listing down in the market of US that helps in providing the funding avenue along with the more awareness of brands.

·         Less capital requirement at the onset and No factory as well.

Weaknesses: Cash and the ongoing different methods. Different kind of the details on the agreement of framework with the E which is still to be finalized along with the unknown implications as well.

·         Different kind of the marketing is still in need.

·         High success of the R and D.

·         Tesla Company has invested a large amount of its monetary resources to expand the business. The plenty of resources are allocated by Tesla towards the development as well as research.

·         Company has invested a lot of monetary resources around 6.8 billion dollars but the tesla has generated only 312 million dollars.

·         High cost of the different things like the cost of staffs.

·         This is a young company as compared to the other ones which almost sold out only 17k cars by now. Only the existing users are the ones that can vouch for the standards of a service.

·         They are without any kind of the factory and margins still have to go up.

Opportunities: There are number of opportunities for the other companies that are associated with it:

·         EV focused country. Automakers have certain target that starts from 0 percent and ends till 20 percent for the year of 2019. 12 percent for the 2020. Sales of EV in china back in 2018 was almost 1.3 Mil. In 2019, it was expected to grow till 1.6 Mil and for the year of 2020, it is expected to reach 3.6 Mil.

·         Support of the Government, like for example; not any kind of the restriction on the license plates of the EVs. Local govt is not allowed to impose any kind of the restriction on the EVs and the restrictions that have been imposed already are getting abolished.

·         Government is raising up the barrier for the entry of EV which are Electric vehicle makers but more of the competitive players as well. New makers of EV want to tap up the other companies as well. Production Company needs to have R and D investment in the china for at least 4 billion for the last three years. While the global sales of the pure electric passenger vehicles for the last two years are at least 15000 units.

·         Launching of the cars in other countries as well.

·         Tesla has recently completed the first two Gig factory for that development of the batteries and the energy systems for the vehicles as itself.

·         NIO charging facility helps in providing the revenue from the other owners of EV.

·         Combined ventures like GAC, HYCAN in the market of 2020 to target out the lower end of EV market.

Threats: EV is still not the choice of people’s default. Many different competitions from the manufacturers of EV along with the manufacturer of traditional car.

·         Subsidies of the Government phasing out, starting weakness that is being expected from the people’s reaction is considered to be less.

·         Downturn reactions.

·         Trade war that is currently importing from Germany. Bosch wire of copper, permanent motor is the one that needs the flat line rotor of the motor.

·         Above mentioned are some of the threats that are being defined in detail to make sure that they try to make any plans or strategies to avoid them.

·         High competition of Tesla with other company such as Toyota, Ford and Google electrical cars. Due the production of vehicle cars by the other vehicle companies as well as due the new entrants into the market, the sales of the company will be decreased. Furthermore, due to the new entrants in the market, the revenue of Tesla has also decreased and it is difficult for tesla to skim the profit layers from the market to hold the high market share.

Conclusion of DEVELOPING A BUSINESS MODEL IN CHINA

Every company has their own strengths and weakness according to which they work. There are many companies who are only showing their strengths and try their best to hide out their weakness form the market so that the opponents to make sure that they don’t use their weakness. But if the company is only showing their strengths and not weakness that doesn’t mean at all that such companies don’t have any weakness. This is entirely wrong. Each and every company have their own way of telling and describing their weakness and one should not think about them on their own. Same is the case with opportunities and the threats as well. They also vary from company to company.  Furthermore, Tesla has spent almost 6.3 billion dollars to grow as well as expand the business of the company. But the fact of generating the revenue is very interesting that Tesla has only generated 312 million dollars. It is because there some very strong competitors entered in the market that are effectively started to hold the high market share.

 References of DEVELOPING A BUSINESS MODEL IN CHINA

Filip, A. (2012). A global analysis of the educational market environment. Procedia-Social and Behavioral Sciences, 1552-1556.

Grundy, T. (2006). Rethinking and reinventing Michael Porter's five forces model. Strategic Change. 213-229.

Jobber, D. F. (2006). Foundations of marketing.

Lao, G. &. (2009). Risk analysis of third-party online payment based on PEST model. International Conference on Management and Service Science, 1-5.

Yunna, W. &. (2014). The competition situation analysis of shale gas industry in China: Applying Porter’s five forces and scenario model. Renewable and Sustainable Energy Reviews,, 798-805.