My evaluation of NIO’s current strategy is that it is considerably insightful and competitive, but it requires certain adjustments to achieve coherence between business and corporate strategic objectives. Considering that the company is in its first decade of business, NIO’s operating and generic strategies are reasonably futuristic and poised to benefit from the globally growing demand for electric vehicles (EVs). In particular, the decision to lay off some workers will help achieve low overheads and align with the corporate goal of organizational efficiency (Rong, 2017). Also, NIO’s environmental analysis exhaustively maps out the critical factors directly impacting market competitiveness and sustainability if well implemented.
Of particular interest is the vertical integration strategy it employs, which seeks to place the consumer in direct sight of the company. That has proven to improve sales and brand name (Allain, 2020; Pollack, 2010). This operating strategy is quite in line with the overall corporate strategy – of building a consumer-aware culture. That is seen from NIO’s attempt to create consumer communities and forums. From the SWOT analysis in the firm’s strategic recommendation, the suggestion of acquiring competitors to stem local competition is a thoughtful consideration. While the strategy is fronted as a corporate strategy to manage local and global competition dynamics, it replicates quite well at the business level strategy. One observation is that particular SBUs will experience (positive) ripple effects. For instance, the human resource department will have an easier time synchronizing labour across multiple tasks and projects, and R & D will have a wider pool of human resources.
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However, the business strategy fails to identify some approaches that would help NIO proactively outsmart its competitors. I will offer suggestions both at the business and corporate-level strategy.
Generic business strategy
NIO should strive to make early deliveries
The suggestion is motivated by the observation that the market leaders in EV, especially Tesla, often run into delivery delays, and this could uniquely establish NIO besides its competitors (Kolodny, 2020). That calls for synergy among the business units and more importantly, with elements and parties to the supply chain. Notably, this goal is possible for NIO, given that it is an OEM. This way, NIO will have a “red ocean” corporate strategy that is well-poised to take on its global competitors.
Focused differentiation
Finding a small market niche would also help make NIO’s business strategy more robust and rugged against competitors. Considering that top market players like Tesla have already ventured into and flooded the sedan and SUV EV market, NIO could narrow down to hatchbacks and crossovers. Alternatively, it could diversify into bipeds and mopeds, considering that such markets are relatively untouched in China and Asia at large.
Corporate level strategy
I would recommend a growth strategy through conglomerate growth. While the NIO’s strategy proposal admits that NIO’s operating experiences have recently become unnecessarily high necessitating a layoff, it fails to cite the corrective mechanisms to compensate for the loss in skill, which could impact its quest for innovation. I would suggest conglomerate growth as a long-term solution to labour and productivity overhead. Essentially, the EV business’s nature makes it possible for NIO to expand into loosely linked business units, each having a small set of production factors to manage. While there is less synergy across such a model, it creates a strong brand. The individual units can then independently handle battery systems, mechanics, and auxiliary parts. That would remedy the dilemma of whether a separate entity should handle battery systems. Muthee (2019) identifies conglomerate growth as the primary success factor behind the Virgin group of companies, which is at the pinnacle of global success in financial and aviation services. More so, conglomeration enhances the efficiency of SBUs.
The two suggestions are aligned with NIO’s mission to “redefine premium service” in car ownership and driving experience. More so, the company’s PESTLE analysis reveals a strong backing by the government. That means the firm’s expansion would be in line with the government’s desire for global influence. Besides, focused differentiation into a more discrete market would be supported by the company’s funders, given that it would increase the volume of output and hence higher purchase volumes.
References
Allain, M. L., Chambolle, C., Rey, P., & d'Economie, C. (2020). Vertical Integration, Innovation and Foreclosure.
Kolodny, L. (2020, November 12). “Tesla Reports 499,550 Vehicle Deliveries for 2020, Slightly Missing Target.” CNBC . https://www.cnbc.com/2021/01/02/tesla-tsla-q4-2020-vehicle-delivery-and-production-numbers.html
Muthee, D. (2019). Keiretsu Business Structure in Virgin Group: A Literature Review of Advantages and Disadvantages of Keiretsu.
Pollack, T. A. (2010). Strategic information systems planning. ASCUE Proceedings, 47-58.
Rong, K., Shi, Y., Shang, T., Chen, Y., & Hao, H. (2017). Organizing Business Ecosystems in Emerging Electric Vehicle Industry: Structure, Mechanism, And Integrated Configuration. Energy Policy, 107, 234-247.
