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Managing strategic risk in China’s unpredictable automotive market


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Risk Management

  • China’s rapidly-growing automotive market offers tremendous opportunities to domestic and foreign automakers, but because of its rapid evolution it also presents difficult challenges
  • This paper examines the application of the message behind the book The Strategy Paradox to the promising yet perilous Chinese automotive market. (A book written by Michael Raynor of Deloitte Consulting LLP )
  • The paper illustrates how the book’s principles apply in the context of the Chinese automotive market. It focuses on an invented company called Tian River Motors (TRM)
  • The findings discuss:
    • TRM’s plight: stuck in the middle of the pack
    • Safe and sane won’t propel TRM into the lead
    • A new and daring plan with a big upside
    • TRM’s board points out the downside
    • Reacting to risk: unsatisfactory methods
    • Using scenarios to bracket the array of possibilities i.e. smooth acceleration (the basis for operation overtake), or team sport, or rough road and lastly the option of high performance
    • Adjustments that TRM would have to make under these circumstances
    • TRM and its operation overtake, discussed in this paper illustrates the application of the principles presented in The Strategy Paradox
    • Some of the highlights presented in the book are: winning big requires committing to an extreme strategy, but commitment exposes a company to unpredictable changes, and adaptation has limited applicability, commitment vs uncertainty creates the strategy paradox, the middle-of-the-road solution sacrifices upside exposure and what is needed is a means to manage strategic uncertainty
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