Zongshen free essay sample

All of buly integrating them into the production. This change led Zongshen to improve its capabilities and to become a parts manufacturer. Manufacturing parts and using parts that it produced to assemble engines were a new objective of Zongshen. In order to improving quality and reliability of parts that it produced as well as to reduce production costs, Zongshen started applying advanced technology tools such as computer aided design and computer aided manufacturing to its product development. Besides, Zongshen also sought manufacturing consultant from former Honda employees and visited its competitors and prospective partners like Harley-Davidson in the United State. As a result, Zongshen was stood out in the common manufacturers throughout the country. Despite of the ability of producing parts in house; Zongshen still needed to purchase materials for its manufacturing. Zou understood that it would be a problem if Zongshen relied heavily on a small number of suppliers. Therefore, Zongshen worked with multiple suppliers for each part so that it could get competitive pricing. We will write a custom essay sample on Zongshen or any similar topic specifically for you Do Not WasteYour Time HIRE WRITER Only 13.90 / page Consequently, it led to significantly reduce influences of suppliers. * Identify and analyze the factors that now make Zongshen’s value chain is now a source of innovation. There are few factors that lead Zongshen’s value chain to become a source of innovation. First, the technique that Zongshen used to raise its financial capital is very artful. Instead of following the tradition method which is through an initial public offering (IPO), Zongshen use another technique called â€Å"Reverse Merger† or â€Å"Backdoor Merger†. The technique can be described in detail that Zongshen had a target list of companies which had an existing list but lack of assets or liabilities. Once Zongshen could attain one from the list, it would merge its assets into. This technique is very critical to success of Zongshen. In fact, when it became the largest shareholder of a Chengdu company, it divested the assets of the original company and inserted its own assets from the engine company. As the result, it turned into the largest engine manufacturer in the Chinese motorcycle industry. Second, Zongshen was very excellent in catching up the trend of market. As they explained, they predicted a very fast growing opportunity in the China market for gasoline and electric motorcycles. In fact, there would be an increase in numbers of consumers who were willing to pay a premium to purchase for superior products. Besides, the Chinese policies would be stricter on safety and emission. These two conditions would be significant factors that reduced numbers of motorcycle companies, especially when the companies could not satisfy these perspectives. Consequently, Zongshen had invested in new technology and manufacturing facilities, as well as merged the gas and electronic motorcycle businesses of ZPP and ZIG in order to improve its operational collaborations. Third, Zongshen was always looking for advanced technologies and applying these technologies to optimization for its productions. Achieving in producing proton exchange membranes (PEM) which is a key element to produce hydrogen fuel cells is an example. The technology was applied in producing e-bikes and helped increase its sale volume dramatically. In fact, the sale volume of its premium e-bikes quickly escalated from 50,000 units in 2007 to over 220,000 units in 2008. Fourth, Zongshen was always seeking opportunities in corporation and development. They would invite a potential partner to visit its subsidiaries and to see if the company’s objectives complied with the development strategy of Zongshen. Besides, they established a network of technical advisors to give them recommendations on acquisition of technologies. For instance, in case they needed to know about lithium battery, they would hire consultants from the International Lithium Battery Association. Use Teece’s Model to explore the firm’s transformation. In the beginning, the firm could find it very difficult to become a successor if the Chinese regulations were strict on violations of intellectual properties. With a small initial investment about CNY 500,000, the firm could not be able to operate a Ramp;D center. Even if they could create a new product, it could not compete with Japanese engines, which were considered as dominant designs in the industry. Fortunately, the government ignored the fact that designs of Japanese engines were being duplicated. It created a chance for Zongshen as well as others assemblers to assemble motorcycles that were similar to Japanese products but had very competitive prices. When becoming mature, Zongshen strived to control complementary assets, and it can be noticed in several stages of its development. First, acquiring a Chengdu company in 2003 which was a steel producer led Zongshen to become the largest engine manufacturer in the Chinese motorcycle industry. Second, buying PEM Technologies through Norstar Venture in Canada led Zongshen to be able to control the technology manufacturing proton exchange membranes, a key element in producing hydrogen fuel cell. Having this technology, Zongshen became very successful in manufacturing and selling e-bikes. In fact, its two subsidiaries could produce 350,000 units of e-bike a year. Its sale volume increased dramatically from 50,000 units in 2007 to 220,000 units in 2008. Moreover, Zongshen enhanced its effectiveness by collaborating with other established firms. Piaggio, for instance, became its partner in exploring rural markets. The corporation set up a new company and planned to manufacture 100,000 scooters a year. As a part of the new joint venture agreement, Zongshen would supply the company with a significant amount of parts. In fact, by 2005, Zongshen provided 35% of accessories and components of the scooter. It was expectedly increased by 50% in 2006. * From a strategic perspective: what resources, capabilities, and core competencies did the firm possess that facilitated its transition from copying knowledge to creating it? The resources, capabilities, and core competencies that Zongshen possessed create a tremendous foundation for it to become an innovator. It can be explained as several different factors. First, its human resources are among key factors leading to innovation. Zongshen was an established firm and had more than 10 years of experience in the Chinese motorcycle industry. Certainly, its employees obtained a lot of experience and knowledge in designing, developing, and manufacturing motorcycles as well as small gasoline engines such as lawn mowers, snow blowers, and related products. Besides, its top managers understood very well and applied successfully financial tactics to acquisitions during its development. These experience and knowledge are extremely valued to the transformation, and they require the involvement in practicing and working with the processes for a long period of time to be able to achieve. As the result, experience and knowledge that Zongshen’s employees and employers possessed are among crucial resources of its innovation. Second, being able to access to resources that lead to transform into innovation is another key capabilities that Zongshen possessed. This capability is established through its development and can be pointed out in several elements. The first element is about owning a Chengdu company, a steel manufacturer. This led Zongshen to be the largest engine producers in the Chinese motorcycle industry. The second element is about being the largest shareholder of PEM Technologies firm. Having the leading position, it generated Zongshen a treasured opportunity to approach PEM technology, which producing key elements of hydrogen fuel cells. The capabilities of controlling and applying PEM technology to its product development, Zongshen’s products became differentiated and accepted in the market. Sale volume of E-bikes, for instance, was increased dramatically to 200,000 units in 2008. The third factor is from a combination of technology and corporation. First, Zongshen’s management board recognized the benefits from use of technology to its product developments. In early years of its history, advanced software applications such as computer aided design, computer aided manufacturing, and computer numerical control were adopted to refine part designs and improve its production capability. Later on, Zongshen had established several Ramp;D centers serving its development strategies. Some of those were Zongshen PEM Chongquing Hydrogen Energy Ltd, researching a hydrogen fuel cell and another one in Erlang, developing its first innovation – Cyclone. Second, Zongshen established corporations that lead it to innovation. Some of the examples consist of that * It hired former employees of Honda to learn their work approaches and application of tools to help develop its product quality and upgrade its technology. worked with Swiss scientists in Canada in order to achieve PEM technology, * contracted a Taiwan industrial design firm to generate the finest design of Cyclone, and * cooperated with Piaggio to explore the rural market. * From a management perspective, what is a key problem that has emerged due to the firm’s transition from an imitator to an innovator? From a management perspective, the key problem that has emerged due to the firm’s transition fro m an imitator to and innovator is the challenge of looking for talented people who can lead it to result in intellectual property theft. Third, Zongshen may give up their advantage at innovation when involved in corporate venturing. In general, a corporate venture’s operation need to be independent of the parent firm’s supervisory in order to be successful. Therefore, the firm has to forgo the benefit of scale economies when engaging in corporate venturing. Plus, in case intellectual properties exist in the existing as well as new operations, the firm may find it more difficult to make use of this kind of asset. That is because the asset has to be assigned to the parent firm or the corporate venture.