Strategic management plan - Global Operations Mangement - Essay Example

Following is the PEST analysis of China. Political According to Chen Bin, head of industrial coordination at the National Development and Reform Commission (NDRC), motivated by healthy profits and economic benefits brought by auto parts industry, government of China is making efforts to open new factories and expand capacity (Schmitt, 2010). Chinese government encourages foreign investment however, to protect domestic industry, strict policies have been imposed such as NDRC issued a policy on 15 August 2009, which states that one foreign company cannot set up more than two joint ventures of same nature unless it merges with a domestic manufacturer and with no more than 50 percent shares (Murphy, 2010).

Economics China auto spare market is expected to achieve 35 percent annual growth rate and in 2010, the auto parts exports of China will reach to 40 billion U.S. dollars (Anonym, 2008). China has combated the recent financial crisis very strongly and even Americans are declaring this century as the “Chinese Century” (Associated Press, 2009). Chinese economy is facing a strong economic growth and the current Gross Domestic Product (GDP) of China is $4.985 trillion (World Bank, 2010). Social The huge difference in Chinese business culture as compared to other economies is a major obstacle for foreign companies (Runckel & Associates, 2006).

The spending power of consumers in China is increasing and the average per capita national income in 2008 was $3000 and if it continues to increase at 8 percent, the per capita income will reach to $8500 by 2020 (Economy Watch). Westernization is also increasing in China which shows the changing living patterns of Chinese consumers. Technological The current expansion and investment plans exercised by China auto industry has aim to increase production capacity for 31.24 million units by end of 2015 (Schmitt, 2010).

Competition China auto parts industry is increasing because of a number of foreign companies in China. The strategies of government to protect the domestic companies are further strengthening the position of domestic companies, thereby, further boosting the competition (Yahoo, 2010). The following figure shows the structure of the Chinese auto part industry. It is interesting to note that by 2009 most of the companies are private owned. Moreover, the proportion of sales revenues of foreign companies is the highest which shows the demand of parts from foreign companies.

Figure: Chinese Auto Parts Companies Source: Zhonghong, 2010 Internal Resource Analysis Based on the information given in the scenario, I have identified following strengths and weaknesses of the company. Strengths The company is holding 5 percent of the world market shares which shows a significant visibility of company in the international market The profit margin of the company is equal to the industry average which shows the financial stability of company PPQ Parts has developed significant corporate social responsibility activities which help the companies to establish an image of socially responsible organization Weaknesses The average employee turnover of the company is 28 percent which is greater than the industry average which is 25 percent.

It means that company is facing problems in satisfying its employees and retaining skilled labor. Short-term and long-term