Strategic Analysis of China's Motorcycle Industry - Report Example

Strategic analysis of Chinas Motorcycle Industry Introduction The country of China has countered a huge drive in the sector of Road Transportation. It is observed that the demand for the development of road transportation in the country owes it origin to the rise of economic development of the region. In regards to the stated fact, it is observed that the Republic of China has met the consumer demand through the development of consumer vehicles like cars, bicycles, hybrid vehicles, and motorcycles. However, the country has rendered special focus to the growth of motorcycles in regards to the development of other transportation means. (Shrivastava, 2006) PESTLE Analysis The Chinese Motorcycle Industry is analysed based on the Political, Economic, Social, Technological, and Legal Parameters to understand the factors that triggered the development of the industry. Political Factors In China, the Chinese Chamber of Commerce is considered as the governing members of issues related to the motorcycle industry. They represent the industry in the General Assembly. From January 22 to January 23, 2010, this group met at Beijing to discuss on the development of the industry both technologically and economically. They highlighted on the development of motorcycle exports in the region and also to work on augmenting the quality of the motorcycles produced through proper technological innovations. (Luke, 2002) Economic Factors In regards to the Economic factors, it is found that the Economic development of China was enabled through the development of specific areas like transportation. With the growth of industry in the country, the demand for transportation networks also increased. The development of road transport system in China has a close tie to the development of motor transport in the region. China was better known to the world as the land of cycles. Today it is being increasingly replaced by the development of motorcycles. (Shrivastava, 2006, pp. 54-55). Social Factors The increased use of motorcycle in China can be observed from the estimates given. Estimates show that during the year 2002 the number of motorcycles produced in China rose to 1.3 million. Further, it is found that the development of the motorcycle industry helped in the growth of rural transportation. Moreover, the country in 2002 due to increased social demand for motorcycles ranked the first in motorcycle production. (Sperling, Lin & Hamilton, 2004, pp.106). Technological In regards to technological factors promoting the development of the motorcycle industry it is found that at present a model on Collaborative Design Chain Operations is enabled in regards to the industry. The model helps the motorcycle industry to make effective production and sales planning by conducting interaction between suppliers and consumers. The motorcycle manufacturing industry is also made systematically strong enough through the incorporation of web-based interfaces to its network. (Wu, Yeh & Fang, 2006). Legal In the light of legal factors triggering the growth of motorcycle industry in China it is found that the Chinese Chamber of Commerce is endeavoring to make a bridge between the government and the business enterprises to help in the development of the industry. In that the Chamber of Commerce sought on the eradication of urban restrictive measures and the development of a licensing policy to help further growth of the industry. (Luke, 2002) Porter’s Six Forces The Motorcycle Industry of China is analysed based on Porter’s Six Forces model. In regards to Rivalry between the Existing Firms, it is found that the motorcycle industry of China faces threat from both the domestic and foreign sectors owing to opening up of the market economy. With the increase in consumer demand of motor vehicles in China due to technological, economic and social development the country’s motorcycle industry also faces the Threat of New Entrants. Again, in regards to The Threat of Substitutes it is found that the country is promoting the development of the Hybrid Vehicles. Thus, the consumers would get access to substitute products to diesel and petrol run vehicles. With the increased access to private finance in regards to purchase of vehicles in China the Bargaining Power of Customers has been rendered a further impetus. It is observed, that the customers can get loan up to 80 percent of the price of the vehicle, which one can repay in a span of five years. A large number of suppliers characterizes the Chinese motorcycle industry. The Bargaining Power of Suppliers is found to gain further impetus which can be observed through a statistics given. It is observed that China has 148 motorcycle assembly plants and around 1,558 companies, which produces motorcycle parts for other companies. This big supply network in China in its motorcycle sector gives it a further competitive position. (Min, 2005. pp. 100-103). In addition to the Five Forces Network, the Sixth Force used on the Chinese Motorcycle Industry is the addition of Bike Insurance to the motorbike models. This acts as a Compliment to the motorcycle manufacturing industry. The motorcycle insurance programs are created to make the bikes cheaper for the consumers. (Chinese Bike Insurance, n.d.) Industry Life Cycle The Industry Life Cycle for the Chinese Motorcycle Manufacturing Industry can be given as follows.  The Chinese Motorcycle Industry falls in the growth sector of the Industry Life Cycle Analysis. It is because as observed that in the year 2002, the total number of motorcycles produced in China rose to a figure of 1.3 million. Further, through the government participation in focusing on its technological and export sectors the demand for Chinese Motorcycles would also increase. Finally, the introduction of insurance products with Motorcycle industry helps in financing the demand for such. (Sperling, Lin & Hamilton, 2004. pp. 106;Luke, 2002; Chinese Bike Insurance, n.d). Industry Analysis of China’s Motorcycle Manufacturing Industry The Chinese Motorbike Manufacturing Industry has developed from its previous position in regards to changing its supply network. Previously, the firms which produced the automobile parts dispatched the same to the first tier supplier network. However, in the modern context, the suppliers or the manufactures of the automobile parts goes through a two stage hierarchy. It passes through the second tier of suppliers to reach the network of the first tier suppliers. (Mei, n.d.). Conclusion The industry analysis of the motorcycle market in China shows that there is a huge underlying demand for the vehicle. With the development of social and transportation network, the Motorcycle Industry of China is moving forward towards a new millennium. Moreover, with the development of Hybrid vehicles the motorcycle industry would stand the test of times. References Shrivastava, P. (2006), Sustainable Transportation Strategies: China, Greener Management International, 50, 53-63, Retrieved on November 23, 2010 from: http://web.ebscohost.com/ehost/pdfviewer/pdfviewer?vid=4&hid=106&sid=3960fc2b-c544-4c26-b25d-ee3c7b12accc%40sessionmgr112 Sperling, D., Lin, Z., & P. Hamilton, (2004), Rural vehicles in China: appropriate policy for appropriate technology. Transport Policy. Luke. (2002), China’s Motorcycle Industry, Retrieved on November 10 from: http://industry.frbiz.com/China-Accessories/China_s_motorcycle_industry-6510.html Wu, W., Yeh, S., Fang, L. (2006). The Development of a collaborative design chain reference model for the motorcycle industry. The International Journal of Advanced Manufacturing Technology, Vol. 35, No.3-4, 211-225, Retrieved on November 23, 2010 from: http://web.ebscohost.com/ehost/pdfviewer/pdfviewer?vid=4&hid=106&sid=3960fc2b-c544-4c26-b25d-ee3c7b12accc%40sessionmgr112 Min, Z., (2005), Five Competitive Forces in China’s Automobile Industry. The Journal of American Academy of Business, Vol. 7, no. 1. Retrieved on November 23, 2010 from: http://www.commerce.uct.ac.za/managementstudies/Courses/bus2010s/2007/Nicole%20Frey/Readings/Journal%20Articles/Contemporary/Five%20Competitive%20Forces%20in%20Chinas%20Automobile%20Industry.pdf “Chinese Bike Insurance” (n.d.), chinesebikeinsurance.co.uk. Retrieved on November 23, 2010 from: http://www.chinesebikeinsurance.co.uk/ Mei, L. (n.d.). Local firms learning: Chinese and Vietnam motorcycle industry. 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