question:

1. Based on the case facts, briefly describe the current BYDs global strategies. Do you agree that there is a consistent match between environment and strategy? Why or why not?

2. The design of organization structure is crucial to support the implementation of the global strategy. Discuss the relevant issues that BYD should consider before designing the appropriate organization structure to support its future global strategies.

3. In view of the challenges and the company corporate objectives, what recommendations would you provide to BYD to make better entry decisions to the new oversea markets?

The Next Move of BYD

The senior management of BYD Co. Ltd. has witnessed a dramatic demand surge in Mainland China as the Group has introduced multiple new models in 2022. As shown by Diagram I & II in the Appendix, it tripled the sales of electric vehicles (EV) from nearly 600,000 units in 2021 to more than 1.8 million units in 2022. In view of such brilliant performance, the gross profit of BYD increased sharply by 156.69% to the record high of RMB72,245 million last year.

However, BYD only sold about 20,000 passenger vehicles excluding commercial vehicles to oversea markets, and the proportion of oversea businesses further reduced to 21.57% despite the prevailing trend of electrification in the global automotive industry.

	China	Overseas
2021	70.43%	29.57%
2022	78.43%	21.57%

Source: BYD annual report 2022

The Company Background

BYD (Build Your Dream) was founded in 1995 with initial capital of RMB2.5 million by Wang Chuan Fu who was a chemical engineer and researcher working in Beijing Non-Ferrous Research Institute after graduated from Central South University in China. BYD was primarily engaged in developing and manufacturing of batteries for mobile phones, and it was selected to be the lithium-ion battery supplier of Motorola and Nokia in 2000 and 2002 respectively. BYD began producing vehicles in 2003 after acquiring Xian Tsinchuan Auto Co., since then the auto division became the core business contributing to the continued growth of the company.

To enhance the financial support for future expansion, BYD was listed on Hong Kong Stock Exchange in 2002 and Shenzhen Stock Exchange in 2011. The famous value investor Warren Buffet also bought 225,000,000 of BYDs H-shares through his flagship holding company Berkshire Hathaway Inc. in 2008. It was also the year that BYD introduced the worlds first plug-in hybrid electric vehicle (PHEV) in Mainland China.

At present, there are five major business units in BYD including passenger vehicles, commercial vehicles, rail transit, batteries and electronics. The automobiles and related products accounted for nearly 77% of total revenues in 2022, increased from about 60% in 2021. In 2015, BYD officially announced the new corporate directive which called 7+4 Full Market EV Strategy The 7 represents seven traditional transportation vehicles including buses, taxis, coaches, logistics, construction and sanitation; and 4 represents four specialized industries including warehouse, mining, airport and port. Such comprehensive strategy covers almost all form of vehicles responding to the needs of both consumers and business organizations.

BYD achieved a very remarkable performance in 2022. Not only surpassing Tesla to rank No.1 EV manufacturer in both home and global markets, but the Group also reached the benchmarks of exceeding 1 million units of annual sales and the three millionth unit of EV rolled out in last November. To cope with the electrification trend and to further commit itself in new energy vehicle industry, BYD decided to terminate the production of traditional internal combustion engine (ICE) vehicles as from March 2022.

The success of BYD partly attributed to the favorable policies enacted by China government. Like most of the countries in the world, China government also established objectives of the peak carbon dioxide emissions in 2030 and carbon neutrality in 2060. Various subsidies and allowances are providing to both individuals and companies with the aim to support the development of new energy industries and to reduce the harmful emissions by encouraging replacement of ICE vehicles with new energy vehicles.

Compared to major domestic and global competitors, BYD possesses certain important resources and capabilities to facilitate its growth in the auto industry. With its strong background in battery technology, BYD invented Blade Battery based on the cell-to-pack battery technology in 2020. Such innovative technology can ensure longer travelling distance on a single charge and better battery life as well. The EV production also relies on the high vertical integrated supply chain. Some of the major raw materials of battery are partly from BYDs own mines in China; the key components including semiconductors and power-management chips are also supplied by its own divisions. The strategic position selected by BYD to provide more affordable vehicles is also crucial to its success. BYD also enriches its product variety by introducing Dynasty and Ocean series to provide better customization to different market segments. The joint venture formed with Mercedes-Benz Group also launched the premium brand Denza to domestic market. The Group centralizes the production of passenger vehicles in China to serve both domestic and overseas market and the factories are located in Guangdong and Shaanxi Provinces.

The organization structure (refer to the Diagram IV in Appendix) of the Group keeps evolving to reflect the growth of the businesses and the significance of coordinating activities done by various subunits. Basically, the headquarter of BYD is responsible for setting up long term corporate objectives and strategies to provide clear direction for subunits. It also decides how to allocate the financial resources for different business units. Research works are also coordinated by headquarter to maintain the technological leadership. Subsidiaries are established in some countries to be responsible for regional marketing activities and after sale services.