Swot Analysis of Geely Automotive- Case Study

Topics: Automobile, Automotive industry, Revenue Pages: 6 (2367 words) Published: March 4, 2013
SWOT Analysis
Strengths
The main strength of the Geely Automotive Holdings, Ltd. is their focused research and development initiatives. They invest roughly “10% of their annual sales revenue (which is significant when compared to Toyota’s 5% investment)” in research and development and focus much of their company’s efforts on their Geely Automobile Research School and the Geely Engine Research School (Dess, Lumpkin, and Eisner, 2010). These schools allow them to make improvements pertaining to gas efficiency (a huge competitive advantage in the U.S. and European markets), the meeting of EPA standards, design innovation, as well as feature innovations. These are all important things to consider for any company in the automotive industry, but due to their founder’s (Shufu Li) visionary belief that “by mastering technology, Geely would be able to maintain its competitive advantage when facing foreign rivals,” Geely has taken the necessary actions to increase their total sales revenue as well as total profits from 1997 (the year they started their research and development for automobiles) to present day (Dess, Lumpkin, and Eisner, 2010). Geely has built upon this strength by showcasing their technological innovations in the heavily marketed and world renowned Detroit Auto Show. They also tied for first prize in the 2009 State Science and Technology Award for its innovation and received an award that has, for the past 5 years, has been received by only 12 out of the more than 5 million candidate companies (Min, 2005). Awards like this as well as Geely’s industry celebrated technology advantages (such as the Blow-Out Monitoring and Brake System, Electronic Equal Balance System, and overall safety improvements that allow Geely to meet the international F1 technical car racing safety standards) are part of what helps will help in generating more customer trust in the quality of their product and will in allow Geely obtain a larger scope of economy (Zhao, 2009). This strength will allow them to diminish their weakness of perceived poor quality as well as bring them closer to achieving their long-term goals of owning a competitive brand (Zhao, 2009). From 2004-2008, Geely was able to sustain strong financial growth in their unit sales and revenues through their cost saving methods and technological innovations. Their first major cost-saving method is their implementation of vertical integration (Dess, Lumpkin, & Eisner, 2010). Since they produce “many of their components in-house,” they are able to avoid the cost of purchasing through a middle-man as well as the cost of paying employees to scout for cheap suppliers (Dess, Lumpkin, & Eisner, 2010). They have also been able to sustain strong financial growth by building specialized manufacturing bases in areas that focus on producing cars that match the incomes of the locals (Dess, Lumpkin, & Eisner, 2010). For example, Geely’s manufacturing plant in Shanghai (a large metropolis in China in which consumers have higher incomes) focuses mainly on mid-ranges automobiles (in the price range of $6,580 to $9,200), while the manufacturing plant in Taizhou (a smaller city in the Zhejiang Province that includes lower income customers) in Zhejiang Province focuses mainly on lower-end (in the price range of around $3,950) automobiles (Dess, Lumpkin, & Eisner, 2010). The implementation of strategic idea has allowed Geely to expand the entire automobile market in China due to the fact that many of their customers who purchase the lowest-end models couldn’t afford a car before the arrival of the Geely plant and are now able to own a car. Technological advances have also kept them growing financially as their overseas consumers are attracted to their energy saving (for their alternative-fuel automobiles) and practical innovations (for example the McCar which is the world’s first small sized sedan designed to accommodate the physically disabled) (Geely, 2012). These advances in...
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