Zongshen Case Study Management Report Case Study

Excerpt from Case Study :

Zongshen R+d

Innovations in strategic planning

Organizational analysis of Chinese industrial firm, Zhongqing Zongshen Automobile Industry Manufacturing Co., Ltd., offers much in terms of understanding the global powerhouse as an industrial economy of scale. If China's macro-economic position is one of increased export growth, then micro-analyses enable us to uncover the ingenuity and strategies behind the giant. Zongshen Motorcycle brand is one of the core subsidiaries of Zongshen Industrial Group, with consumer recognition in the capital market. The mission of the company is to improve the quality of life of human beings through innovation of clean, convenient and safe transportation tools (Zongshen, 2010).

In 2008, expansion of the two-wheeled motorcycle concern in its multi-scale strategic plan encouraged growth through: domestic sales, import and export agreements, and key & important component distribution. The integrated strategy resulted in substantial returns, with export sales at $100 million alone. The Company reports cumulative assets of RMB 1.1 billion, with some 2,500 employees, and annual output of four million motorcycles, and more than seven million key & important components (Zongshen, 2010). This supports the motorcycle manufacturer's vision of world class enterprise, and its leadership in the global motorcycle industry as a value statement.


Zhonsen Motorcycle's competitive stance may be analysed according to the organizational business environment and the industry survival potential of the entity to compete long-term. In this case a Value Chain Analysis (VCA) using Porter's 5 Forces as a theoretical framework to emphasize price factors where external pressures impact Zongshen's competitive edge are illustration in Table 1.

Table 1

1. The Bargaining Power of Your Customers

2. The Threat of New Entrants into your Industry

3. The Bargaining Power of Suppliers

4. Threat of Substitute Products or Services

5. Rivalry Amongst Existing Firms

Table. Porter's Five Forces

As China advances in the global market, 1) Chinese consumers are also seeing an increase in spending power. Zongshen Motorcycle is responsive to this, and recognizes customer equity as a top priority to the brand. With increased capacity to spend, comes the 2) threat of new entrants to the market. In 2003 announcement by United States-based motorcycle competitor, Harley Davidson to enter the Chinese market was met with an offer of partnership by Zongshen. While certainly a competitive 'threat,' the Chinese company was agile in response; with a mutually beneficial business agreement that would advance Harley Davidson's position through existing channels of distribution and sales in mind.

The 3) bargaining power of suppliers in China's economy of scale is fostered through exceptional industrial production capacity. Even where materials used in the manufacture of Zongshen's motorcycle products are at a premium, the sheer magnitude of alternative suppliers will likely be extensive. Zongshen does not face risks in inadequate or low supplies, nor protracted time to accessibility. In turn, full cost pricing inputs will be kept at a minimum as those materials are employed in the Brand's product line.

In cases where product cycle is restricted due to innovation or competitive 4) threat of substitutes, R+D expertise is likely to come up with new proto-types as an alternative. Zongshen is in an strong position in relation to 5) rivalry by existing motorcycle corporations and is set to expand into the global market if the Company can provide international standards organization (ISO) and environmental certification to its products in accordance with national and regional regulatory compliance rules in those external markets.


An industry leader in China Zongshen Motorcycle is in control of more than 10,000 sales outlets in 31 provinces, municipalities and autonomous regions. With consistent performance as best in its class since 2001, Zongshen Motorcycle's international reach is established in global presence through the Zongshen brand's trademark Zip Star, in over 160 countries. Factories in Thailand and Brazil promote cost savings and presence through local supplier relationships, as part of the Company's strategic activities in the Southeast Asia and South American markets. Marketing of the product elsewhere is conducted by way of its international sales network in more than eighty countries.


Zongshen Motorcycle's strategic growth model adheres to an R+D prospectus, that promotes innovation and diversification in power machinery above all else. Zongshen Motorcycle's strategic prospectus is supported by an eight (8) point plan of growth in Table 2.

Table 2

1. Company Philosophy

Centralization, outstanding, pragmatic and innovation

2. Centralization

Being centralized in the development of the company's major trade and the thermo-motive; mobilizing and uniting all the stuff in the work and integrating their interests; serving the company heart and soul

3. Outstanding

Being outstanding in precision work and profession and manufacturing fine quality products

4. Pragmatic

Being honest, pragmatic and careful in work and behaving in a down-to-earth way

5. Innovation

Pursuing for and making innovations, accepting new ideas, creating new culture and establishing new goals

6. Enterprise Aim

Pursuing for the world technology leadership and realizing lean production of Zongshen

7. Strategic Prospect (becoming world's leading power system service supplier)

Leading the motorcycle industry throughout the world and aiming at making Zongshen a world brand

8. Enterprise Mission

Providing a clean, convenient and safe transportation tools for human being and improve their life quality

Table 2. 8 point plan (Zongshen, 2010)

A principled approach to doing business, the potential for exceptional sales China's highly competitive consumer market will ultimately be reliant upon the motorcycle manufacturer's ability to stay ahead of top tier competitors through excellence in manufacturing, international cooperation and optimization of product performance through cutting-edge technologies.

Technology will also play a major role in Zongshen's capacity as an organisation, through close attention to IT network integration of operational and management forces through internal and external connectivity. Monitoring and tracking product from point of manufacture to order and distribution will enable the Chinese company to analyze its own performance through data analysis of its processes.

Quality assurance is a core competency, and reflects the subsidiary's oversight by executive management involved in certification processes, and the front end R&D planning of the Zongshen Industry Group Technical Center which is recognized is certified under China's National Good Standardization Enterprise system. Logistical support from the manufacturer's key & important component intelligent and JIT production systems allow for 100% control over brand divisions assembly in the subsidiary of the Zongshen, Zongshen Piaggio, and Zipstar product lines.

The first enterprise to obtain the China Compulsory Certification (3C) for Complete Vehicles, Zongshen strives to retain position as the quality leader in the industry with the most certifications on individual products in the national motorcycle industry. International trade expansion strategy includes adherence and certification of products and processes according to the ISO9001 (Quality Management System), ISO14001 (Environmental Management System) and OHSAS18001 (Occupational Health and Safety Management System) integrated management system for compliance with World Trade Organization (WTO) trade guidelines and entrance into the international market.

The Logistic Department of Chongqing Zongshen Group Import & Export Corp. coordinates international forwarding of the Company's products through contract with CMA, EVERGREEN, MAERSK, MSC, PIL, and YML and continues in cooperation with local Chongqing shipping companies, COSCO and Chongqing Pacific Ocean Shipping, Minsheng, and Sinotrans (Zongshen, 2010). The logistics division promotes a philosophy of Service Creates Value, which aims to reduce operating costs by way of safe and rapid logistics management.

Marketing of the products with the Zongshen Motorcycle Racing Team, formed over the last decade, has been given increased attention. Sponsorship of the team at the MotoGP World Championship, and Asian Nations Cup promotes the company's identity as a national brand.


As the global economy transitions from that of a purely industrial force to a market in innovation, Zongshen Industry Group will succeed through two factors: 1) attention to external competitive forces within the international industry; and in 2) product research and design capabilities. The Zongshen Industry Group Technical Center which was established four years post start up of the industrial interest, in 1999, is located in Chongqing, in the municipal jurisdiction of the Central Government.

An incubator for developments in technical guarantee of the Company's thermal power-related diversity development and new energy development strategies, the Center is invested in advancing technologies for input and R+D on motorcycle power sources in the software and hardware sector. As part of the Center's Cyclone Project, the scope of innovation research contributes to Zongshen's adjusted product portfolio of motorcycle, engine and related thermal power machinery, through incorporation of internal and external resources, and outward cooperation (Zongshen, 2010). The idea is to optimize the R&D process as a mechanism for change management strategies. A solution to technical troubles within planning, the Cyclone Project is in effect a 'total' enterprise sustainability approach to product development.

Foreign state-of-art technologies are incorporated into the R+D of Zongshen's product lines, and new product innovation seeks high synergy with user demands. Product line creation is conceptualized as a series with differentiated components to build interlocking functions, depth and value into the brand.

Through the efforts of the National Innovation Project, National Torch Program Project, Zongshen's product line includes: 150CC, 200CC and 250CC…

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