Company Highlights
In just five years, NIO has emerged as a significant competitor in the electric vehicles industry. NIO is a Chinese electric car manufacturer with its headquarters in Shanghai. It was founded in 2014 by William Li. After their first launch, numerous organizations started to invest in NIO, such as TPG, Tencent, Temasek, Baidu, Sequoia, and Lenovo. They design, jointly manufacture, and sell smart and connected premium electric cars. They drive innovation in the future generation due to creativity, autonomous driving, and machine learning (Serrat, 2017). The company redefines user experience, offers the user broad, comprehensive, and innovative battery charging techniques.
NIO is most innovative in two fundamental areas: battery technologies and self-driving software, which drive the company's stock significantly. NIO makes modular batteries quickly removed out in seconds, decreasing rage anxiety while offering batteries as a service. The total revenues of NIO at the end of 2020 were $700 million, an increase of 150% from the end of 2018 (NIO, 2020). According to Trefis Team (2021), the gross profit in the last quarter of 2020 was $90 million and an increase of more than $30 million in the last quarter of 2019.
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Performance Challenges and Strategic Problems
At a glance, it may seem that NIO electric car company is going strong, and it does not have to worry about the company's failure. In most countries, cars have become the most fundamental component of retail sales. NIO contributes to more than 5% of China's GDP (Gross Domestic Product) and hires about 10,000 employees (Reuters, 2021). NIO is facing severe challenges under the surface that may play a significant part in the next ten years. It is a fact that the company is skyrocketing, but there are few challenges. According to Moss (2020), the company is facing a severe shortage of cash, and it began the year with approximately 10,000 workers worldwide. It is planning to cut off 2,500 employees to save on cost and reduce its operating experiences from $400 million to $300 million.
The company's major strategic problem is the environmental pressures because there is no sufficient cash balance to provide the working capital and liquidity needed to drive operations in the next ten years. The continuation of the organization relies on its ability to get sufficient external equity and debt financing.
Additionally, the company is continuously losing shares because it is not demonstrating potentially significant volatility. As a result, NIO's stock is undervalued due to long-term debt that has risen to approximately $1 billion while only having cash at hand equivalent to $250 million (Moss, 2020). The main reason that has affected NIO's stock is the COVID-19. It made the company stop making the cars because the cases of coronavirus were rampant in the region. The company registered limited sales, forcing it to seek external financing.
Current Mission and Vision of the CEO
NIO is a Chinese name that means "Blue Sky Coming." It originates from the company's vision full of blue skies. Its vision statement is "leading to a more sustainable future for the planet." A mission statement is “leading the way to a smart, electric, and autonomous car.” The company's values include sustainability, openness, and innovation (Maughan, 2019). The overall organizational culture is driven by engaging in research, development, efficient production, maximum performance, and premium election cars that offer AI engines an interactive human interface (Xu et al., 2019). The CEO inspires employees to be hardworking and self-driven, intending to satisfy their clients with a car that offers verbal and visual connections.
Stakeholder Analysis
Regarding suppliers, NIO has over 180 suppliers but has not been identified some of them. However, it has seven fundamental suppliers: Novelis, Bosch, CATL, Mobileye B.V, ADAS, and Brembo. These organizations contribute to NIO's AI system, brakes, air suspension systems, and many more. The Environmental, Social, and Corporate Governance shows that the company is above average. NIO states in its annual reports that its criteria for selecting suppliers are always based on time management, quality, and costs (Greimel, 2019). However, the company has not mentioned anything about sustainability when it comes to sourcing material or parts. The company has also not commented on ethical issues because it seeks financial profits for a growing organization.
The consumers are also essential stakeholders as they control the demand and directly impact the number of electric cars NIO produces. NIO is much vulnerable to its customers, dedicating its services to premium quality and user experience. They ensure that clients are happy at all (Kumar et al., 2020). NIO has an application where the community can share their suggestions or concerns, making it feel like the company takes care of community demands.
Investors are also the most significant part of the company's existence. Because of the CEO's talent and personality, he has attracted huge investors and interests. The primary investor is the Chinese government. China has been in the center when it comes to issues of pollutions and protests. Investing in a sustainable company like NIO is essential. NIO has already developed immense support, both monetary and inner network within China and globally. Currently, it is received by private people, private organizations, and many more. They need to maintain and increase the shares so at to attract more investors.
Also, resellers are essential stakeholders of the company. Electric cars came to market lately and now a significant development in the industry. Each company selling the second-hand car are being affected by rising development of electric car organizations like NIO (Luvioni, 2020). Resellers will start losing money, and financial institutions will not give them loans.
PESTEL Analysis
The macro-environment of electric vehicle manufacturers is analyzed through the PESTEL model. Notably, the companies continue to revolutionize the vehicles with a variety of options. The PESTEL model consists of political, economic, social, technological, legal factors influencing the macro business environment. The political environment provides tax holidays and credits to electric vehicles' customers, a move by governments to progress electric and hybrid vehicles' growth. There has been an increase in economic growth, causing an elevation in electric car purchases. As such, the manufacturers can produce more cost-effective cars for their clients.
Electric vehicles have been viewed as a perfect option for eco-friendly customers. Families tend to like the notion of electric vehicles (Ferreira et al., 2020). Environmentalists find these cars to be friendly as they eliminate the need for fuel consumption. The technological merit of electric vehicles is that there has been the facilitation of ease of entry into the automation and Artificial Intelligence technology that enables the companies to gain a competitive advantage over their competitors. Electric vehicles are suitable for future usability, are fuel-efficient, and adapt quickly to modern technologies (Ferreira et al.,2020). The urge to keep up with patent rights assists electric car manufacturers to exist legally in international business operations. This helps the expansion of their markets and customer base. Additionally, electric cars are eco-friendly and promote the notion of energy efficiency, ensuring they abide by international regulations.
Key Variables
Electric car manufactures such as NIO use various vital variables as success factors. The use of the technology acceptance strategy helps them in retaining its customers. The manufacturers strive to assess and interpret information technology users (Zhang & Zhang, 2020). External variables to influence the internal variables of belief, behavioral intention, and attitude help to keep the organizations profitable. The manufacturers ensure they listen to the consumer demands and produce suitable, appropriate, and precise vehicles to the customers. The model used by the electric car companies’ advocates for the supposed usefulness and perceived ease of usage that affect the client’s attitude towards the technology, influencing certain behaviors.
Other key variables include the changing infrastructure that advocates for electric car usage. The availability of government financial incentives to the car manufacturers enable the companies to increase their productivity. Also, the personal environmental awareness of its clients aids the company is having a ready market. The perceived social influence of electric cars is that they are not cheap products, thus making customers take full consideration before purchase. The critical success factors of electric car manufacture also apply in their marketing and distribution, where most companies manufacture a vehicle once its demand increases (NIO, 2020). They ensure that their level of supply matches the demand for electric vehicles.
VRIO Analysis
| Resource/Capability | Valuable | Rare | Imitable | Organized to Exploit | Impact on Competitive Advantage |
| Strong financial resources | Yes | Yes | No | No | Disadvantage |
| Employees | Yes | Yes | No | No | Temporary Advantage |
| Strong distribution network | Yes | Yes | No | No | Disadvantage |
| Leadership Strategy | Yes | Yes | No | No | Sustained Disadvantage |
| Patents | Yes | Yes | No | No | Parity |
| Ethical decision-making | Yes | Yes | No | Sustained Advantage | |
| Research and Development | No | Yes | Yes | No | Disadvantage |
Valuable
Financial resources are valuable assets because the company has to invest in external opportunities when it arises. Employees are also highly valuable because more than half of the workforce is highly trained, leading to maximum productivity. Patents are highly valuable as it allows the firm to sell its goods without competitive interferences. The distribution network is a valuable resource to the company because it helps reach out to more clients. It increases revenue and ensures that advertising translates to leads (Choudhury, 2021). Research and development are not a valuable resource because they cost more than the benefits they offer in innovation. Ethical decision-making is highly valuable because it enhances the image of the company. Leadership strategy is a highly valuable resource as it gives the company strategic directions and ensures that the goals and objectives are met.
Rare
The financial resources are rare because few organizations in the region only own them, and employees are a rare resource because it requires highly skilled and trained workforce. Patents are rare resources because they cannot be accessed easily by competitors (Trivedi, 2020). The distribution networks are also a rare resource because the competitors need more investment to develop an excellent distribution network.
Imitable
The financial resources of the company are expensive to imitate. The organization has acquired these financial resources over an extended period. The new entrants will require the same profits to accumulate sufficient financial resources. The employees are also not costly to imitate because they need to train staff to improve their skills. Patents are hard to imitate because it is legally allowed to adopt a patented good. The distribution network is also expensive for competitors because they would have to invest a considerable amount in adopting the same distribution system.
Organized to Exploit
The financial resources are organized to invest in the correct place, utilize opportunities, and combat threats. Patents are not well organized because the firm is not using them to their maximum potential. The distribution network is organized because it can reach a large audience.
Porter’s Five Forces
Electric car manufacturers apply Porter's five forces to keep up with their competitors. Organizations maintain their profits via strategic measures addressing the competitive challenges outlined by Porter's model. The external factors such as the supply power are analyzed to ensure that suppliers do not increase the electric vehicle's price. The buyer power is also assessed to ensure buyers do not drive the prices down. The buyer power of customers purchasing electric cars helps in dictating terms in the industry.
Competitive rivalry is considered where the main drivers are the ability and the number of competitors in the industry. Various opponents, offering undifferentiated products and services, will decrease market appeal. The use of strategy tools such as total quality management, cost leadership, and growth via acquisitions helps maintain its operations and profitability. The threats of substitute products are also a force that might make competitors switch their tastes and preferences. Threats of new companies entering the market tend to erode profit levels (Bradsher, 2017). Electrical car Companies such as NIO should have strong patents, economies of scale, and robust competitive strategies.
By assessing Porter's diamond model's power in the scope of NIO, one can appreciate the value of a protectionism strategy towards a free trade market. Being NIO's country's origin, China has joined international trade agreements that have seen an increase in electric vehicle companies' competitiveness. Porter's national competitiveness model has enabled a substantially different model to assess an organization's market's competitive advantage. Productivity is the crucial aspect for international competitiveness, and that the standard of living of a nation's inhabitants can be enhanced as a direct outcome of growth in that factor (Ma et al., 2019). It relies on elevating staff skills, progressing technologies, producing efficient products, and reducing costs. An increase in productivity facilitates advanced technology, boosting products and services' profits and sales.
SWOT Analysis
The strength, weaknesses, opportunities, and threats analysis of electric car companies is essential in determining its strategic and competitive advantages. The strengths in the electric car company productions include ethical decision-making, lower costs of running, eco-friendliness, the low cost of ownership, energy-saving mode from the regenerative braking system, and simpler mechanisms than fuel cars. The weaknesses might be expensive batteries, lack of recharging infrastructure, and time consumption during recharge. The opportunities exist in terms of government incentives, reduction of taxes, an increase in fossil fuel prices, and the lack of congestion charge (Wang et al., 2017). The threats arise in terms of the rise in the cost of electricity and completion from hybrid, alternative, and hydrogen driven vehicles. Electric vehicles compete ethically compared to other cars, which strive to increase electric cars' sales.
Corporate strategies are essential in electric car production to increase their competitiveness, productivity, and profits. However, globalization trends continue to challenge the corporate strategies of the electric car industry. The use of strategic management tools will help to make production operations more effective and efficient.
Total quality management guidelines and tools are essential in increasing the quality of NIO. The guidelines will help elevate the attention on the production and ensure that the buyers are satisfied with the firm's product. Customers are always in demand of electric cars due to the policies they follow before being produced. Electric car companies can maintain the cars' quality and sell them at friendly prices to their clients. Subsequently, NIO can seek to acquire competitor companies to eradicate competition. Due to globalization dynamics, such companies' acquisition will increase the market base and make the cars more accessible to potential clients in developing countries. Additionally, the use of a cost leadership strategy will facilitate NIO in dictating operations and the vehicles' price. An audit of the external opportunities threats is also essential to provide insights that will help adopt long-term approaches.
Strategic Business Unit (SBU) Analysis
SBU depicts a full and functional unit of an enterprise to have its vision and direction. NIO operates under a strategic business unit with a central command center. NIO ostensibly functions under an evidence-based strategy that utilizes technology - b ased theories and techniques. The Just in Time strategy aids the firm deal with the forced problem by paying attention to inventory reduction (Juárez et al., 2017). It tends to respect consumer demand and prove effective staff engagement to meet its goals and objectives.
The investment opportunities relevant to NIO are that of increasing its creativity and innovation practices. Advocates of environmentally friendly cars invest in various amalgamations of fuel cell vehicles and biomass fuels as ways of decreasing dependency on fuels or accomplishing the increasing demands for greener radiations (Sanderson, 2018). Actions range from involvement in technical inquiry, primarily associated with battery storage, for instance, the Department of Energy Freedom CAR and Fuel Partnership, to progress the smart meter technologies, which have submissions outside of electric cars.
Using corporate business strategies will enable NIO to apply Porter's five models in its business practices. Differentiation focus strategy is the most suitable strategy NIO Vague to ensure success in electric car production. This strategy is an approach to competitive advantage, whereas a firm endeavors to outclass its challengers by providing a product recognized by customers to be greater than that of challengers even though its value is higher. To adopt a differentiation focus strategy, the firm should focus on narrow market analysis, looking only to attracting a lesser, specialized fragment.
Conclusion
NIO has the potential to compete favorably at the global level. Therefore, NIO should use the generic defender strategy to safeguard their market from new challengers. Narrowing the focus on protecting its customer base will help make significant adjustments in its structure, culture, and operation mode. The firm will be able to devote its attention to progressing the efficiency of its current operations. The effective application of the defender strategy is critical in ensuring an organization controls its macro and microenvironment. Electric car manufacturers should adhere to ethical decision-making tactics that will enable them to achieve their set goals and objectives.
References
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