Wanxiang Group Case Analysis

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Wanxiang Group is the largest auto-parts maker in China and on its way to become the giant of global market under the leadership of Lu Guanqiu, the founder and chairman. The past 30 years have witnessed the huge success of Wanxiang Group from a farm tool repair plant to a multinational conglomerate with a core business in auto parts, as well as many other businesses, such as agriculture and electric car development.

Standing on the achievement from the past, Wanxiang Group faces the challenges about the future. There are plenty of directions for it to explore further. What should Wanxiang focus on and what is the next step?[pic 3]

We could try to find the answers from three-dimension analysis. (Refer to Graph 1)  

Value Chain 

During the three decades since 1969, chairman Lu, recognizing the importance of quality and the role of government, have invested a lot in human capital and R&D, as well as maintained a good relationship with Chinese Communist Party (CCP). All these actions have helped Wanxiang gain competitive advantages (Illustrated by Graph 2 and 3). Even though quality has always been the core competence of Wanxiang, the negative response has been received from clients. Therefore, keeping the stability of high-level quality is vital for Wanxiang’s next step, or it will lose the core competence. [pic 4][pic 5]

Geography: Globalization  

One of the benefits obtained from embracing CCP is that Chairman Lu got his son-in-law Ni Pin, who has later played an important role in Wanxiang Group’s globalization. Both Lu and Ni highly think of the significance of Wanxiang’s expansion in global market, especially in U.S. Through acquisitions, Wanxiang got market share in low key and enormous profit for re-investment, which could provide strengths for further globalization. (Refer to Graph 4) [pic 6]

Besides, there is huge potential market share in both OE market and aftermarket. In 2004, 47.6 billion USD OE parts were imported from Canada, Mexico and Japan, while only 2.4 billion USD from China. And for aftermarket, Europe accounted for 39.5% market share but Wanxiang haven’t explored much of this market. Overview, global expansion is a very promising direction for Wanxiang Group. However, with the widening product line and geographic coverage, Wanxiang faces risks of management. As a large corporation, Wanxiang lacks shared-culture to reinforce control and communication. If it wants to build an auto-parts empire, it can refer to GE’s success in corporation building (Graph 5 provides the stable and complete structure for multinational corporation based on General Motors’ practice). [pic 7]

In general, with great opportunities and foundation, Wanxiang’s globalization path should be based on a more integrated corporate culture instead of applying different standards in different subsidiaries.

Other related business: Electric Car Development 

As the largest auto-parts manufacturer, Wanxiang has the bred-in-the-bone advantages to develop electric cars. By analyzing the transfer of value chain and current electric car market, we could tell if it is worthwhile to go further. [pic 8]

According to graph 6, some resources could be transferred from auto-parts business to electric car business, but since they are actually in different industries, Wanxiang still needs to invest a lot in the new business.