Examine the relationship between structure of value chain and competitiveness - the case of BYD

Publication Type:

Conference Paper

Source:

Gerpisa colloquium, Bordeaux (2024)

Keywords:

BYD, Engagement ecosystem, Engagement Platform, Transaction cost, value chain, Value co-creation (VCC), Vertical integration

Abstract:

Purpose: BYD has emerged as one of the global leaders in new energy vehicle (NEV) segment. In 2023, BYD surpassed sales of over 3 million NEVs, solidifying its position as the global champion in this sector since 2022. This paper aims to examine the sources of the company’s competitive edge through a comprehensive value chain analysis, with a particular emphasis on its degree of vertical integration.

This research delves into the historical trajectory of BYD’s NEV value chain structure across various vehicle models featuring different platforms. In light of the evolution towards the framework of CASE (Connected, Autonomous, Shared, Electric) for NEVs, this study further scrutinizes BYD’s shift from a conventional vertical structure towards an engagement platform, as conceptualized by Gawer and Cusumano (2014). Consequently, we investigate how this evolutionary process influences BYD’s competitiveness in terms of research and development, cost efficiency, productivity, market share, and brand image.

Methodology/approach: This research employs an embedded single-case study approach (Yin, 2009), supplemented by secondary data from public sources.

Findings: Commencing with imitation, BYD expanded its business footprint from consumer electronics to automobiles through imovation—a blend of innovation and imitation (Scuotto et al., 2022). Within the automotive sector, particularly in the new energy vehicles (NEVs) segment, BYD has transitioned from reverse engineering to forward engineering, establishing its proprietary modular platform with high level of vertical integration. BYD appears to take an active role within the engagement platform as NEVs undergo a paradigm shift towards CASE, fostering collaborations with partners within the emerging ecosystem.

The foundation of BYD's high degree of vertical integration traces back to its inception in 1995, and can be identified as BYD's corporate DNA. This value chain architecture affords BYD a substantial competitive edge in the NEVs market. Nevertheless, it remains pertinent to monitor the dynamic evolution of BYD's value chain structure in the forthcoming decades, particularly in the era of CASE

Research implications: Firm level decision on the structure of value chain, often referred to as the "make or buy" decision, has long been a focal point of theoretical inquiry across various academic disciplines. This paper offers a dynamic perspective, initially grounded in transaction costs theory (Williamson, 2010), which we further extend to encompass the concept of engagement platforms (Ramaswamy & Ozcan, 2014, 2018). This expansion is particularly relevant as the industry itself undergoes a transition towards a more intricate ecosystem involving new stakeholders.

Practical implications: Limited attention has been given to in-depth analyses of BYD concerning its value chain structure and competitive sources. This paper delivers actionable insights for competitors within the NEV segment, guiding strategic decisions regarding the configuration of their value chains to secure competitive advantages in future battles. At the industry level, value chain configuration emerges as a collective decision. Therefore, further exploration of this critical topic, both at the firm and industry levels, along with regional comparisons, holds significant promise for future research endeavors.

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