SECTION A – Provide a brief background and history of Geely Auto

Geely Auto is a group that is located in the city of Hangzhou, in south-east China. Geely was
established on 1987 and was providing refrigerator parts at that time. Li Shufu diversified its
assets and then entered automobile industry in 1997. When Geely established its new
business, its mission was to produce cars and provide to middle, working class. Geely became
the first ever, privately-owned, automobile manufacturer in China in 2001. In 2003, it was then
they first exported cars overseas which made them a global company.

SECTION B. – BUSINESSES IN GENERAL

1. Critically Analyse key factors of cost, market, environment, competition, communication and
transport that drive global commerce and trade.

1.a. COST
- What are the possible cost that ANY business will have to incur in going global especially when
exploring the Philippines
When going globally one of the major cost that companies should consider is the capital
expenditure. The company will have to decide whether or not to have a showroom or a local
manufacturing plant. Another factor that drives capital expenditures is capital investment for
construction materials. Raw materials are not always readily available and takes time to process
bulk orders. Prices of these materials differ from locally-developed vs. internationally-developed
which should be canvassed and compared carefully.

Utility rates - when considering investing in the philippines, they should consider the operational
expenses. Electricity price in Hangzhou is .12 USD per kwh vs. .20 USD here in the philippines.
Electricity is a bit steeper here compared to china’s rates in electricity, as well as, water rates.
Water rate here in the Philippines is about .82 USD per cubic meter vs. China’s rate .70 USD
per cubic meter. Gas is another form of utility and should be considered as well because giant
 corporation relies on it. Gas is what makes the corporation runs smoothly. Diesel in the
philippines is cheaper here. It is about .79 USD compared to China’s .90 USD per liter.’

There’s a notion that labour in China is cheaper. However, minimum daily wage per day in
Hangzhou, China is 21.91 USD vs. 6.10 USD here in the Philippines. As you can see
Philippines is 72 percent cheaper. This information could help Geely with their operational
expenses if they decide to put a manufacturing plant in the philippines.

There are different tax tiers when importing a car. On an average there is a 40 percent importation
tax for cars. If they will manufacture cars here in the Philippines they are subjected to 30
percent corporate tax when selling their products. In China, corporates are subjected to 25
percent tax. There are also special economic zones in the philippines that let companies enjoy
tax holidays such as zero percent tax for several years/
- Are these costs factors challenging? Why?

Capital expenditures includes all cost in constructing a manufacturing plant (machines included)
or showroom, which requires heavy investments, and as per utilities, they will face higher
overhead expenses. These overhead expenses are operational costs which is important to
monitor to make sure that the company hit the target margins. They may be able to source out,
but the prices will be something that they are not accustomed to.
- Are these costs factors necessary or beneficial? Why?

Labour or wages is a cost factor that is both necessary and beneficial if used properly to one’s
advantage. This applies to tax as well. Especially when the thriving relationship of China and
Philippines is now. Labour here in the philippines is about 72 percent cheaper compared to the
labour in China.

Corporate tax here in the Philippines are a bit friendlier compared to China’s corporate tax. Here
in the Philippines, business owners in Philippines Economic Zone Authority (PEZA), could enjoy
several years of not paying taxes.

1.b. MARKET

- Introduce Hofstede’s 4 Dimensions of Culture

Hofstede’s 4 Dimensions of Culture is a model for culture based on Dr Geert Hofstede’s decade
research. This model has 6 factors that consider within a community. The following are the
factors:
1. Power Distance Index (high versus low).
2. Individualism Versus Collectivism.
3. Masculinity Versus Femininity.
4. Uncertainty Avoidance Index (high versus low).
5. Long- Versus Short-Term Orientation.
6. Indulgence Versus Restraint.

Power distance index (PDI) indicates the distribution of power. If the power index is high, that
means people of the society understands the hierarchy of power. If the the power index is low,
that means power is shared and distributed evenly.
Individualism Versus Collectivism (IDV) refers to the type of relationship between people within
a society.

Masculinity Versus Femininity (MAS) refers to distribution of power and responsibilities between
men and women.
Uncertainty Avoidance Index (UAI) refers to how well a person can cope with their anxieties.
Having a high score in UAI means that a society is highly-energetic and has a firm structure.
If a society gets a low score, that means the society is more likely to be open-minded. Would
probably misinterpret emotion, hand gestures and anger.

Long Term Versus Short Term refers to the indication of long-term oriented people and short-
term oriented people in a society. Those people that are long-term oriented are more likely to be
modest, thrifty and avoids to talk about themselves. Short-term oriented people are more on
values and rights. They focus on principles and have strong conviction especially when it comes
to truth.

Indulgence Versus Restraint (IVR) refers to the description of how well a society takes life.
Having a high score in IVR are the members of the society who are more optimistic towards life.
They don’t take life seriously but still prioritize feedbacks, coaching and mentoring. These
people focus of their own personal happiness. Getting a love score in IVr mean that people are
more pessimistic toward life. Their more controlled with themselves and mostly only express
negativity about what they see in the world.

Definition of Filipino Culture by Hofstede’s model

In Philippine culture, people tend to lean towards to high PDI. People are well aware of
leadership status and their own scope of responsibility in a society. For example, one of the
reasons why there are political dynasties in the Philippines is that people tend to put these
leaders in high regard. Once given a role to do, they tend to participate and sometimes even
refuse to do other job that is not included in their scope

Individualism vs Collectivism
In a recent study, Filipinos are one of the most active Facebook users globally. Given this
scenario, locals are more prone to giving their opinion in public. Also, there is a crab mentality
that is plaguing the Filipino culture. However, this is not true for all. Though this is negative, we
can surmise that people acknowledge individual accomplishments and therefore the crab
mentality persist among us. Another example, milestones of a Filipino kid is highly celebrated
like achievements schools, medals which are plastered in the living room of most Filipino
families, and debuts of Filipinas just to name a few. The Filipino culture falls under the High IDV
category

Masculinity vs Femininity
Filipino culture embraces patriarchy. Although, it is slowly changing. The idea that men should
be the breadwinner of the family is slowly becoming a thing of the past. Now more and more
women are available in the Philippines. The Philippines is in the top 8 globally when it comes to
gender pay equality. However, in society, traditionally women are still expected to perform
based on the stereotypical roles. Women are expected to rear the children even while working.
When there are guests, women are still expected to be the kitchen expert. Manual labors like
fixing the house, washing the cars are still expected of men. Most politicians are still men
 because there is a country-wide expectation that men were born to lead. Although Philippines
have already had and the only female president. The Philippines still leans towards masculinity.

Uncertainty Avoidance Index

In the Filipino society, people tend to be conservative and have unspoken rules that are
expected from each other. The sample of societal conventions in the Philippines are, children
asking for blessing in older people, calling people of authority using Ma’am or Sir, and offering
food to other people when eating as a sign of courtesy, just to name a few. The Philippines has
a High UAI index

Long Term Versus Short Term

This category can be tricky in the Philippine culture, as both may be true generally for Filipino.
Although the idea of being modest is ideal for Filipinos, sometimes, when necessary, they
oversell themselves to be taken seriously. However, culturally, Filipinos are more willing to
accept compromise. One of the saying of many Filipino parents is that the only thing they can
give to their children if they die is good education. Education is highly regarded in the
Philippines. Being thrifty is also seen as positive in society but maybe different in the ones living
in the cities. In this regard, Filipinos are leaning towards Long term orientation

Indulgence vs Restraint

Especially with the rise of social media, freedom of speech has never been invoked by Filipinos
as much as this generation. The educated workforce are trying to look for a work-life balance.
Even if the minimum wage do not look for work-life balance, they would still like coaching,
mentoring, and get or give feedback. Despite the conditions of many Filipinos whether in the
middle class or lower, the Filipinos still have an optimistic outlook in life. Only in the Philippine
news you’ll see residents in a calamity-stricken area would still smile and push each other just
to be in the frame shot of news reporters. The Philippine society is categorized closer to high
indulgence.

- Describe the culture of the Philippines using Hofstede’s model

- Differentiate the culture of the Chinese and the Filipinos? What the possible business
challenges that ANY company will experience due to varying cultures

Citizens of the Republic of China, view their own products as something of high quality. Meaning to
say, they are proud of their own made products. On the other hand, “Made in China” is well-
known to all Filipinos to be as “acceptable.” You can see “Made in China” on your clothes,
shoes, tumblers, etc. Filipinos view these “Made in China” as something cheap and breaks
easily. This conflict in two cultures may pose a big threat in the near future if that kind mind set
is not settled right away.

- Is it beneficial to know the culture of another country? Explain

Though it is important as well to understand the culture of another country. Understanding the
culture of one’s target market, it can be used as an advantage to a business. From culture, you
will be able to identify your target demographic.

- Why is it challenging to deal with another culture? Explain

Expanding business to location that has a different business environment could be a bit tricky
to manage. Because of too many factors to consider when considering expansion, and might fail
if not studied well. Any organization that expands without studying the target market is making a
gamble.

1.c. COMPETITION

- Why is knowing the competition integral when going global? Explain.

When going global, the organization must be aware of its competitors. One way of making sure that
your product has always this one edge to make your consumers buy the product. Competitors
will also help push the organization for more room for innovation, thus leading into a better
product. Knowing your competitors is also knowing what the market wants. This kind of
information is valuable because you can refine it and polish a better version of what the market
wants.

- Who will be the the top competitors of Geely in the Philippines?

If ever Geely wish to expand their business here in the Philippines, their top competitors would be
Toyota and Hyundai. Toyota was established on the year of 1937, and ten years after, one of of
its competitors was established as well--Hyundai. Toyota is a Japan made and known for their
durable cars. Hyundai, on the other hand, is a Korean made and it is known for its elegant
design on cars. These two brands are popular live up to their vision and considered to be
superior in their own countries. Toyota Wigo’s price range is about 547,000 - 686,000 PHP.
Toyota Wigo is one of most popular hatchback, compact car because of its fuel efficiency.
Another comparison is Hyundai Eon. It has a price range of 508,000 - 526,000 PHP. Hyundai
i10 has similar mileage with Toyota Wigo. i10 is a heavy competitor with being the top, would
still be relatively cheap compared to Wigo’s top variant.

- How can competitors help ANY business that wants to go global?

Competitors will only be of any help when the organization understands the standard that the
market wants. With competition, any organization will be forced to innovate on their product, and
maintain the edge that gives it the selling power. Competition helps maintain the quality of
standard that the consumers wants. This information can be used as a guid to know which path
to take the product.
On the other hand, competition poses a threat, because it splits the the target market. Splitting the
target market would result into less sales. Any organization wouldn’t want this. In fact, every
business would want to monopolize the business as much as possible. But nowadays, there are
new laws being implemented to prevent monopolizing the market.
- How can competitors pose challenges to ANY business that wants to go global?
 1.d. INTERNAL BUSINESS ENVIRONMENT

- Why is ANY company’s culture/values important in going global?

Establishing Company’s culture is important. Every organization must integrate their organization’s
values to their employees. Without these core values, simple problems could shake down an
employee, especially to those who are working on total different working environment. The
organization must train their employees to smarter and work efficiently even though there are
some cultural gaps with the customers.

- How can values and a company’s culture be a source of challenge when it comes to going
global?

Each employee is representing the company who, he is working for. And not all employees are
comfortable working on a different business locations especially to those who are working
overseas, and sometimes job will take employees to location they’ve never been to. It is a job. It
is required. That is why it is important that the employee shares the same vision as the
company does.
- What possible values should a company have if it wants to go global

For me, one of the core values that all employee must have is dependability. If an employee is
really representing the company, then that employee should take care of the business as if it is
its own. Not only the employee will do its job, but also the necessary actions fill the gaps that the
organization needs.

1.e. COMMUNICATION

- What communication advancements have various industries experience.

Modern technology has helped every human being. With modern technology, technological
advancements are pushing new boundaries for new generation of technology. One of the most
evident one is communication. Before, it would take months just to send a message through
mail. Now, messages can be read instantly. This kind of advancement in technology, has cut
down time and given everyone the privilege of efficiency. Presently, every car being produced
now has a feature that lets you connect to your phone and have a seamless conversation while
inside your car. Wireless connectivity and communication has been a feature that customers
have been looking for.

Geely can use this information to step up their game and live up to the international standard. They
should install or make it an absolute part for their car to impress their customers. Maybe even
better, they could enhance their communication feature and make their very first, own video-
call-feature.

- What benefits have these advancements provided to companies

- How can Geely and/or the Automotive Industry take advantage of these communication
advancements

SECTION C – GEELY CHALLENGES

1. Critically analyse strategic challenges in context of risk and diversification strategies and the
supply chain flow

Cost of expansion, marketing, competition, and communication have their own scope of challenges,
and if one fails, the whole company fails. Take communication for example. Yes, it is a privilege
for us to have this kind of technology, but like most privileges, not all use it to its full potential.
Evidently, there are always some sort of lack of communication within the organization.
Employees sometimes miss messages which causes gap in communication. Communication
through technology is not enough. Managers should also be able to convey a clear goal to their
workmates. This will fill in the gap of communications and connect fellow workers for efficient
work flow. Communication will help the new branch to ask support from the central base.

Competition could be used as an advantage. One, if there is competition, then that means that
there is an existing customers. Geely just needs to find a way to tap into that network. Second,
competition can generate motivation to improve on the quality and innovation of their project.

Marketing demands heavy when it comes to funds. Most budget when expanding is poured into
marketing management. It depends to marketing management when it comes to putting a face
to the public. They have to make sure to portrait their product and its edge the best and exciting
way possible.

Cost of expansion should cover all the budget and study the allocation of the budget. Finance is
what makes an organization run and should be carefully planned out.

1.a. Describe the challenges that Geely have to face in going global (opening in the
Philippines) using Porter’s Diamond Model
- Describe the model first

Porter’s Diamond Model is a framework that focuses on explaining why certain industries
within a particular nation are competitive internationally, whereas others might not be.
This framework is based on interrelated set of location advantages that certain industries in
different nations posses, namely: Firm Strategy, Structure and Rivalry; Factor Conditions;
Demand Conditions; and Related and Supporting Industries.

- Describe the challenges specific to the automobile industry in the Philippines

a. Firms Strategy and Structure and Rivalry
 *** 1. Is the automobile industry in the PH very competitive? (describe,
support with data) If the automobile in the PH is very competitive, this means that
members of the industry are very innovative to separate themselves from the
competition, Geely Motors ready for this intense and innovative market?

According to autodeal.com,there are 52 official brands currently operating

in the philippines. Having 52 brands to pick on when buying a car, makes other
car brands really competitive when it comes to design, price and efficiency

One of Geely Motors’ edge is cutting the price down into half.
Spending half the price of an average car is a great innovation, and might
just be what Filipinos are looking for.

b. Factors of Production
 Define factors of productions
 What are the factors of productions that Geely will need as it opens its branches in the
Philippines
 Does the Philippines have enough factors of production to help Geely become
successful.

Factors for production:

 Location
 Human Resource
 Logistics
 Capital

If Geely wish to be successful expanding its branches overseas, they need a strategic location
in which all options have been evaluated properly. One specific location that could help Geely
bloom is the Special Economic Zone by PEZA. these special economic zones utilize tax holiday.
A tax redemption program to help new business to grow, like Geely. As for human resource for
Geely, PEZA zones are filled with skilled workers. From there, Geely can have the assurance of
having skilled workers as partner for the new branch. On the other note, logistics might be a
hindrance to the growth of Geely. In order to establish a new manufacturing branch, outsourcing
raw materials for the construction of this plant will be necessary. All ordered raw materials are
not needed right away, that is why when logistics order, they should consider the following:
storage, port congestion, and truck ban traffic. Another challenge that Geely will be facing is the
increasing rates of interest. Due to inflation, conversion of peso to dollar is weak. Capital is
important, and should always be monitored if there is enough.

The factors for Geely Motors to be successful here in Philippines are a strategic location, human
resource, logistics and capital. It needs to secure these 4 factors before they start for
production.

Geely Motors need a strategic market and should be at the center of its targeted market, for
consumers to reach Geely easily. Human resource is important
yes.

c. Related and Supporting Industries

 Mining industry
 Digital tech industry
 Automobile part
 Marketing agency
 Dealer and rental agency
 Petroleum industry
 Tire industry

Competition in philippines are highly competitive

d. Demand Conditions
With 171,353 units being sold per year, there is a high demand, according to TopGear
Philippines. The demands are mostly coming from minimum to average wage workers.
.
e. Government
Anti competition - Republic Act No. Act 10667 is also known as Philippine Competition Act
Color coding - could be used as an advantage/leverage to sell cars
Ownership policy - could be used as an advantage to sell cars
Train law
ASEAN - advantage
APEC - advantage
f. Chance
- For every factor, clearly indicate why it can be challenging for Geely Motors
Typhoon - disadvantage
Flood - disadvantage
Solar cars innovation - both

2.b. Describe how the supply chain of Geely would look like in the Philippines using the 4
elements of the Supply chain (look at supply chain of honda and toyota

Supply chain:
Raw materials (imported) - challenge delivery lead time and cost of shipping
Production (nueva vizcaya, phil) - challenge recommend peza zones laguna
Logistics (air freight) - opportunities port congestion, typhoons may delay deliveries
Retail - online & physical store must be near to your target market
sales/marketing - hire influencer. Target - challenge highly skilled and must understand the
target market and must be able to higlight the advantages of Geely
Service - 5 years warranty opportunities and skilled labor force must be present

- Describe the 4 elements of supply chain

- Describe how the Supply Chain of Geely will be in the Philippines
- What the challenges and opportunities in the determined supply chain?

Government - could be a deterrent or could be a catalyst

Chance - natural disaster (sol - insurance)
Supporting industries (petroleum industry) could be a challenge
 Political climate between china and philippines could be an opportunity or a
challengec(sol-corporate social
Train law could be a deterrent (sol - longer and lower rate to pay)

Purchasing power for raw material (sol - let suppliers bid to you)
Production need to have a location for the manufacturing plant to work.
SECTION D – SUMMARY
- Based on the challenges identified in SECTION B, how can Geely Motors overcome them?
- What opportunities can Geely take advantage of from items written on SECTION C.
- Any other suggested strategies for Geely

Put up a manufacuring plant in a PEZA zone in Laguna, most car manufacturers are located
there, also you enjoy priority customs clearance for your imported goods, enjoy tax holidays
Properly forecast supply delivery lead time vs when you will need it to avoid delays
Provide in-house financing meaning istead of buyers getting loans from the bank, they will loan
directly to Geely
Get partnership with TESDA for skilled workers

Based on the study, if Geely are able to achieve the recommendations, the Philippine market
can be a viable source of new revenue streams for the company. B