Dyadic Network Relationship of BMW AG and Brilliance Auto Ltd - Research Paper Example

?Network Maps, boundaries and horizons: 3 Network before 2003: Before 2003, brilliance automotive ltd was incorporated in Bermuda on 9th June, 1992as an exempted company with limited liability. The company’s American Depositary Shares and shares are traded on The New York Stock Exchange Inc. and The stock Exchange of Hong Kong Limited, respectively. Brilliance has had a minibus joint venture with his Japanese company since the early 1990s. While the company also manufactures gasoline engines and other automotive components, automobile manufacture is performed by the subsidiaries Shenyang Brilliance JinBei Automobile Co Ltd and BMW Brilliance Automotive Co Ltd of which Brilliance has 51% and 50% ownership respectively. In August 2002 the Jinbei Automotive Company, a subsidiary of Brilliance China Auto, launched their first car; the ‘Zhonghua’ (China). 3.2 Network after 2003: The dyadic network of BMW and Brilliance in 2003 has made a big impact in the automobile industry. BMW launched its first car in 2003 and has made the 50,000th in 2007 and has now launching the new model in 2010 as the 10,000th car. After 2003, BNW and Brilliance has been mounting amazingly at high momentum, carrying out the highest manufacture within 2 years. It had observed, joined and occupied a part in the progress of Chinese automobile industry. They are prepared to hail a dazzling opportunities by this combined set-up and it has fruitfully included into the Chinese culture and dynamically thinking business shared tasks. This network has found its boundaries and kept an eye on the opponents. These has manufactured the quality products which gave the customer maximum satisfaction. It has set the target to develop into a superior business dweller. They have kept the horizons as learning, civilization, client commitment and business authority in the corporate world. These horizons clearly show the liability of BMW towards the Chinese humanity. These also prove the assurance and obligation to the long-standing improvements in China. There has been lot of risks in this network relationship. There always had a pressure to meet the client demands with the new automobiles over ever more smaller product growth phase and they have to reach the market to the further sectors with the pioneering new products as like Sedan which will decides the upcoming success. Also the risk comprises the capability of dyadic network to get sufficient funding as and when required at competitive rates and profitably expand, produce and trade the innovative products in China. A Concluding Analysis of the Evolution of the Dyadic Network BMW / Brilliance: BMW decided to enter into a joint venture with Shenyang XingYuanDong in the year 2003, XingYuanDong is a 100% subsidiary of Brilliance China Automotive Holdings Ltd. (Bermuda), a publicly listed Chinese car manufacturer founded in 1993. BMW enter into this joint venture to produce and locally service BMW branded cars as well as gaining wider network legitimacy within the Chinese market. “The first BMW Brilliance factory was built in 2004. It is running at full capacity as the luxury market continues to boom” (Tianyang, 2011). BMW is increasing their sales growth in China at more than nine times the pace of the wider industry, defying the nation’s attempts to unclog its roads and discourage “lavish lifestyles”. Brilliance China is one of the leading automotive manufacturers in China through its subsidiaries, associated companies and joint ventures in PRC. The joint venture with BMW which was established in the year 2003 was to produce BMW 3-series and 5 series sedans in China. Brilliance auto has many strategic partners and alliances. They have established strategic and working relationships with global automotive manufacturers. In the production of minibuses their partner is Toyota, and in the case of automotive components their partners are Mitsubishi motors, FEV, TRW automotive, and Johnson Controls. Brilliance has a wide range of 15 subsidiaries in China and announced its intention to form an additional joint venture with another German car maker, Daimler AG, in 2010. Daimler AG is one of the world’s most successful automotive companies. With its division Mercedes-Benz cars, Mercedes-Benz Vans, Daimler trucks, financial services etc. Brilliance auto ltd had an intention to form a joint venture to make a special purchase vehicle, but Daimler officials confirmed that it was just a speculation, rumors reports of a joint venture between Daimler AG and brilliance China Auto ltd. “Brilliance Auto, the Chinese partner of BMW AG, is in talks with Daimler AG to form a special purchase vehicle (SPV) joint venture in China, according to newspaper reports. Brilliance is discussing a manufacturing tie-up with Daimler now and a deal could be reached before the end of the year, Reuters said, citing an unnamed executive from Brilliance Auto” (Daimler denies SPV JV with Brilliance China, 2009). A senior official of Daimler yesterday dismissed as "speculation, rumors" reports of a joint venture between Daimler AG and Brilliance China Automotive Holdings to make special purpose vehicles (SPV) in China, Reuters reported. “I know everything about China in Daimler, so ... from my point of view that's not right," said Ulrich Walker, head of Daimler's Northeast Asia operations” (Daimler denies SPV JV with Brilliance China, 2009). Brilliance China automotive holdings ltd (Bermuda) has 15 subsidiaries and one of its subsidiary Shenyang XingYuanDong automotive component Co. ltd is doing joint venture with the BMW. XingYuanDong is 100% owned to Brilliance Co and they have 50% share in the joint venture with the BMW. The relation between BMW and Brilliance is superior. Brilliance has production facilities that allow BMW to manufacture its vehicles at a cheaper labor rate than in other countries. Brilliance is offering BMW, namely giving legitimacy to its China operations, mainly legitimacy to produce in China, sell in China as well as political legitimacy. Te other actors of Brilliance are JinBei, Granse, Zhonghua, Zunchi, Junjie, Kubao, Junjie FRV etc. The Company (through its 51.0% - owned subsidiary, Shenyang Automotive) manufactures and sells all of its minibuses under the "JinBei" and "Granse" brand name. The company sells all of its sedans under the "Zhonghua" and "Zunchi" brand name in China. The year 2010 signified another year of significant growth in the Chinese auto industry. According to the China Association of Automobile Manufacturers (“CAAM”), China’s vehicle sales increased by 32% in 2010 as government stimulus measures and rising affluence helped the nation to maintain its status as the world-largest auto market for the second consecutive year. After years of close cooperation between the Group and BMW AG, the company believes their BMW joint venture has a sound understanding of the Chinese premium auto market and has established a business model which specifically caters to the demands of the Chinese customers. The launch of their brand new 5-series long version sedan in August 2010 had been a successful one, and sales momentum on this product continues to be strong in 2011. “The joint venture is currently undergoing a major capacity expansion which will bring our production capability up to 300,000 units by 2013” (Chairman's Statement, 2004). All these shows that the relation between BMW and Brilliance is tremendous and they are enjoying the status of the large players in the market Conclusion and recommendations: As China is the most populous country in the world and with the largest consumer world, many of the big business have tried to establish their dealings in China. The dyadic relationships between the Brilliance and BMW AG have given the BMW an immense opportunity to establish their business in China and can come to a top player in the automobile business in the world. The relationship between these two giants has provided BMW to reorganize its situation inside the group configuration of China and global automobile industry. “The German luxury automaker sold nearly 122,000 cars on the Chinese mainland in the first nine months this year, almost doubling the figure in the same period last year. China surpassed the United Kingdom at the end of June to become BMW’s third-largest market. The country is also the largest market worldwide for the BMW 7 Series” (BMW: China certain to be top market, 2010). The most important components in this dyadic network between these two are the dealership of the Brilliance in the Chinese customer market. They have the efficient servicing outlets and the big manufacturing capacities are the other actors which strengthen the dyadic connection. Dyadic relationships enlighten the discrepancies that are present within and between complex attachments of the different organizations and recommends that these attachments are not all similar and not all uniformly calculated. “An emerging firm's external network ties exist on a continuum from market-based exchange to relational exchange, depending on the extent to which the tie is embedded within a social relationship. Ties that enable exchange and influence the firm's economic choices on the basis of the relationship are relationally embedded. Relational embedded ness implies that maintaining the social relationship often becomes the most important concern--superseding even economic concerns” (Evolutionary Processes and Paths of Relationally Embedded Network Ties in Emerging Entrepreneurial Firms, 2011). The building of the dyadic relationship between BMW AG and Brilliance has been evolved after looking on the several criteria. There will be several variations from the point of view of both companies and they have to face an array of choices in structuring their associations. “The nationalities of partners, their motives and goals in entering alliances, and the formal contractual structures used to organize the partnerships, called the governance structure, have all become increasingly varied” (Gulati, 1998). This association brings tight competition in the industry and all the other automobile giants will also try to overcome the growth of the opponent companies. The expansion of one organization will increase its performance, but it can make the opponent to rise up. The other companies will also come up with various offers to attract the Chinese customers and this differentiates the energetic distinctiveness of competition in the market. This dyadic network should make the sense of the roles that brings the firm’s alertness, inspiration and potential to take steps or react to opponent’s actions. “Thus, understanding what factors influences the patterns of competitive action and response between firms that underscore the dynamics of market processes has been a central inquiry in the strategy and management research. In this line of inquiry, past research however has focused primarily on the roles played by firm characteristics and industry characteristics in a firm’s decisions to undertake actions in response to rivals’ actions” (Chuang, et al, 2009) Thus the collaboration with Brilliance provided BMW car manufacturers to bring the new models in Chinese market by building strong link between the customers and the brand. Reference List BMW: China certain to be top market, 2010. [Online] CBN. Available at: http://cnbusinessnews.com/bmw-china-certain-to-be-top-market/ [Accessed 19 May 2011]. Chuang, Y. et al., 2009. The Roles of Alliance Networks in Dyadic Competitive Interaction in the Context of Mergers and Acquisitions. [Online] Druid. Available at: http://www2.druid.dk/conferences/viewpaper.php?id=5303&cf=32 [Accessed 19 May 2011]. Chairman's Statement, 2004. [Online] Brilliance Auto. Available at: http://www.brillianceauto.com/company/chairmans.html [Accessed 19 May 2011]. Daimler denies SPV JV with Brilliance China, 2009. [2009] Global Times. Available at: http://auto.globaltimes.cn/auto-china/industry/2011-03/462145.html [Accessed 19 May 2011]. Evolutionary Processes and Paths of Relationally Embedded Network Ties in Emerging Entrepreneurial Firms, 2011. [Online] questia. Available at: http://www.questia.com/googleScholar.qst?docId=5009287214 [Accessed 19 May 2011]. Gulati, R., 1998. Alliances and networks. [Online] Strategic Management Journal. Available at: http://www.unifr.ch/intman/my_documents/multin_network/Multi%20Net%202011/Gulati%201998%20-%20Alliances%20and%20Networks.pdf [Accessed 19 May 2011]. Tianyang, H., 2011. BMW doubles investment in China. [Online] China Daily. Available at: http://www.chinadaily.com.cn/business/2011-05/16/content_12515618.htm [Accessed 19 May 2011]. Read More