https://doi.org/10.20965/jaciii.2014.

p0429

Fuzzy VRIO and SWOT Analysis of Chery Automobile

Paper:

Fuzzy VRIO and SWOT Analysis of Chery Automobile

Faen Chen∗ and Yukio Kodono∗∗
∗ Graduate School of Management and Information Science, Osaka International University
3-50-1 Sugi, Hirakata, Osaka 573-0192, Japan
E-mail: [email protected]
∗∗
Faculty of Business Administration, Osaka International University
3-50-1 Sugi, Hirakata, Osaka 573-0192, Japan
E-mail: [email protected]
[Received October 15, 2013; accepted March 14, 2014]

The Chinese market is indispensable for international capabilities, in particular, for the core segments such as
automobile enterprises and they are expanding their engines. However, Chery does not enjoy this luxury. The
investment in this market accordingly. To escalate company has a short history, and therefore, it has been
their market share in China, automobile manufactur- considerably difficult to research and develop new tech-
ers and independent automotive enterprises have im- nology.
plemented a series of management strategies. Con- Therefore, Chery elected to develop car engines not
sequently, competition in China is becoming increas- only on its own but also with commissioned foreign com-
ingly intense. Conversely, Chinese automobile enter- panies. Consequently, Chery acquired public recognition
prises have no international brand recognition. In this by consumers for engine development and design.
paper, an independent automobile enterprise, Chery Chery primarily markets low-end vehicles. Therefore,
Automobile Co. Ltd., is selected as a case study and ex- the consumer opinion is that the company can only pro-
amined using the SWOT (Strengths, Weaknesses, Op- duce low-end cars. To overcome this reputation and im-
portunities and Threats) method. Moreover, we ana- prove brand competitiveness, in 2009, Chery announced
lyzed the strengths and weaknesses of the company’s four new brands: Karry, Chery, Riich, and Rely.
internal environment using a fuzzy VRIO (Value, Rar- As a case study of automotive enterprises in China, in
ity, Immutability and Organization) method. Apply- this paper, Chery is analyzed using SWOT (Strengths,
ing the fuzzy theory to an analysis of the management Weaknesses, Opportunities and Threats) analysis and
environment can facilitate more effective strategy for- Porter’s five forces analysis methods [1, 2]. The anal-
mulations. It is expected that the application of fuzzy ysis also indicates the applicability of fuzzy theory [3].
theory to management methods will contribute to the Moreover, for the analysis, fuzzy analysis is introduced
future development of the Chinese automobile indus- to the proposed SWOT with a fuzzy concept [4]. To bet-
try. The competitive advantages to Chery are illus- ter understand the strengths and weaknesses of the enter-
trated by the fuzzy VRIO analysis. prise and their strategic management, the SWOT analysis
method is used to analyze the external (opportunities and
threats) and internal environments (strengths and weak-
Keywords: independent automobile enterprises, SWOT
nesses). The SWOT factors are evaluated and a qualita-
analysis, fuzzy reasoning, fuzzy rules, fuzzy VRIO anal-
tive analysis of the factors is introduced into the fuzzy
ysis
concept.
Both external and internal environments are consid-
1. Introduction ered when performing SWOT analysis. The Porter’s five
forces analysis [5] is effective when conducting exter-
Chery Automobile Co. was established in 1997 and nal environment analysis. Barney’s VRIO (Value, Rar-
commenced the sale of automobiles in 2001. The com- ity, Immutability and Organization) analysis [6] is valu-
pany sold 28,000 vehicles in 2001. They achieved a level able when conducting internal environment analysis. The
643,000 sales in 2011. Among independent Chinese au- Porter’s five forces analysis of Chery automobile is re-
tomobile enterprises, Chery has ranked first in the num- ported in [2]. The PEST (Politics, Economy, Society and
ber of sales for eleven consecutive years and in the export Technology) analysis is reported in [3].
volume for nine consecutive years. Chery is the represen- Using the analysis of the internal environment, this pa-
tative of automotive enterprises in China. Compared to per will focus on utilizing the VRIO-framework for prac-
the major international automobile companies, it is small; ticing firms by employing the resource-based view of Bar-
however, it is growing at a fast rate. Characteristically, au- ney [6]. Fuzzy VRIO analysis was proposed in refer-
tomobile enterprises have a history of many decades, and ence [7].
they have accumulated independent product development Furthermore, through the fuzzy VRIO analysis of the

Vol.18 No.3, 2014 Journal of Advanced Computational Intelligence 429

and Intelligent Informatics
© Fuji Technology Press Ltd. Creative Commons CC BY-ND: This is an Open Access article distributed under the terms of
the Creative Commons Attribution-NoDerivatives 4.0 International License (http://creativecommons.org/licenses/by-nd/4.0/).
Chen, F. and Kodono, Y.

PEST
Table 1. Table and
1. PEST 3Canalysis
and 3C analyses
of Chery of Chery. 2. VRIO
Table Table framework.
2. VRIO framework

Feasibility of competitive advantages

PLUS MINUS Value Rarity Immutability Organization

P㸸Politics Deregulationˈestablishment is easy. Many risks happen because of deregulation. No ̿ ̿ No Competitive Disadvantage
E㸸Economy Sales numbers were No.1 from 2010 to Chinese economy slowed down in 2013. Yes No ̿ Competitive Parity
2013 in the world. Yes Yes No Temporary Competitive Advantage
S㸸Society According to Chinese economic reforms, The condition of the automobile industry in Yes Yes Yes Yes Sustainable Competitive Advantage
the automobile industry in China has China has become uncertain since China
Barney, Jay. B, 2002 [6]
changed to a market economy. joined WTO.

T㸸Technology Export was changed from Lack of technologies and experience.

manufacturing to capital and technology. Table 3.3. Fuzzy

Table rules.
Fuzzy rules
Many companies started to expand

factories overseas.
Input Output
3C㸸Customer Automobiles became main stream in Automobile market became fierce since
Feasibilityofcompetitive
personal consumption, and necessary for Foreign-funded automobile companies Value Rarity Immutability Organization
advantages
families. entered the market.

3C㸸Competitor Technology and brand identity improved Quality of cars may be affected because of No ̿ ̿ No CompetitiveDisadvantage
by M&A with foreign automobile price competition.
SomewhatCompetitive
companies.
No ̿ ̿ Yes
3C㸸Company Less constraint and speedy Brand identity is still low. Disadvantage

decision-making, comparing with joint Still inadequate after service system.

Yes No ̿ No CompetitiveParity
venture companies.

Yes No ̿ Yes SomewhatCompetitiveParity

SomewhatTemporary
Yes Yes No No
CompetitiveAdvantage
management state of Chery, the competitive advantages of
TemporaryCompetitive
Chery in the automobile market in China are illustrated. Yes Yes No Yes
Advantage

SomewhatSustainable
Yes Yes Yes No
CompetitiveAdvantage
2. Chery Automobile Company SustainableCompetitive
Yes Yes Yes Yes
Advantage
We have summarized the basic state of the Chery Au-
tomobile Co. Ltd. There are three factors that Chery
shares with the other independent Chinese car companies:
a short history, fast growth in China, and an increase in tages of a company.
market share. However, there remains a range of prob- These four parts (VRIO) consist of four questions re-
lems. As many international automobile enterprises have lated to the activities of the company [6].
entered the Chinese market, the competition has become 1. Question of Value
more intense. To maintain and increase the present market
Will the managerial resources and capabilities of the
share, Chery must develop and adopt a variety of strate-
company adapt to the opportunities and threats in the
gies.
external environment?
Chery’s PEST analysis was reported in [3]. We added
a 3C (Customer, Competitor and Company) analysis and 2. Question of Rarity
the results are summarized in Table 1. PEST and 3C anal- Are these the kinds of managerial resources pos-
yses address the external environment. sessed by the competition?
3. Question of Immutability
3. Fuzzy VRIO Analysis Will the companies without these managerial re-
sources have difficulties with cost during the acqui-
According to the VRIO framework, fuzzy theory is sition and developing of resources?
considered an effective option. Fuzzy theory was pro- 4. Question of Organization
posed by L. A. Zadeh of the University of California, Is it necessary for the organization to integrate busi-
Berkeley in 1965. Fuzzy theory was first introduced in ness policy and procedures to exploit the rarity man-
science and technology to analyze human behaviors. It agement resources with high value and cost?
subsequently became widely used in research fields such
as the natural, social, and cultural sciences [8]. Through the analysis of the Yes and No answers to these
Utilizing the VRIO analysis method with fuzzy theory four questions, the level of managerial resources the com-
for Chery can facilitate establishing effective strategies pany possesses can be determined. However, it is difficult
and achieving competitive supremacy in the market. to definitely answer Yes or No to each of these questions.
Table 2 shows the VRIO framework. The framework The answer could be almost Yes (or Yes with 0.8) or ap-
in a VRIO analysis is divided into four parts: Value, Rar- proximately No (or No with 0.9).
ity, Immutability, and Organization. These can be used to In Table 3, the four questions are set as the input values.
analyze the managerial resources and competitive advan- The competitive advantage is the output value. Member-

430 Journal of Advanced Computational Intelligence Vol.18 No.3, 2014

and Intelligent Informatics
 Fuzzy VRIO and SWOT Analysis of Chery Automobile

Table 4. Membership functions of the antecedent in fuzzy rules.

Table 4. Membership functions of the antecedent in the fuzzy rules

Feasibility of
Rule Value Rarity Immutability Organization competitive
advantages
No ̿ ̿ No
Competitive
ձ
No No Disadvantage

No ̿ ̿ Yes
Somewhat
ղ Competitive
No Yes
Disadvantage

Yes No ̿ No
Competitive
ճ
Yes No No
Parity

Yes No ̿ Yes
Somewhat
մ Competitive
Yes No Yes
Parity
Fig.Figure 2. Fuzzy input values for the question of four
2. Fuzzy input values for the four factors.
Yes Yes No No Somewhat
Temporary
յ
Competitive
Yes Yes No No
Advantage
Yes Yes No Yes
4. Fuzzy VRIO Analysis of Chery
Temporary
ն Competitive
Yes Yes No Yes
Advantage The analysis is conducted utilizing a fuzzy VRIO anal-
Yes Yes Yes No Somewhat ysis [7] based on the VRIO framework. Chery produces
շ
Sustainable cars that meet customer requirements – inexpensive with
Yes Yes Yes No Competitive
Advantage
quality guaranteed. Based on this principle, four input
Yes Yes Yes Yes Sustainable values in the fuzzy VRIO analysis can be concluded as
ո
Yes Yes Yes Yes
Competitive follows.
Advantage
For the Value input, in the current Chinese market, there
are a number of automobile companies, especially joint
ventures and foreign companies that have begun to de-
velop high and mid-level cars in addition to low-end cars,
1 thus expanding their share of the market. This is a great
threat to Chery who focuses on low-end car production.
Therefore, it is concluded that there is slight feasibility
0.5
for Value.
To evaluate the Rarity, Chery differs from the foreign
0 automobile enterprises in that all of the intellectual prop-
erty rights of technology and products can be controlled
Competitive Disadvantage

Sustainable Competitive

without problems related to brand loyalty. Unlike the

Temporary Competitive
Competitive Advantage

Competitive Advantage
Somewhat Competitive

Somewhat Competitive

Somewhat Sustainable
Somewhat Temporary
Competitive Parity

foreign companies or joint ventures, profit distribution is

Disadvantage

Advantage

Advantage
Parity

only to domestic investors. Automobile parts are pro-

duced domestically to reduce cost and compete using a
low price strategy. Therefore, Chery has Rarity advan-
tages, to some extent.
In the area of Immutability, Chery is a company with a
Figure 1. Membership functions of the consequent in the fuzzy rule
Fig. 1. Membership functions of the consequent in fuzzy rule.
short history focusing on low-end car production. This is
difficult for other companies to duplicate.
In 2009, four new brands, Karry, Chery, Riich, and
Rely were launched. However, recently, it was announced
in the news that production of these four brands would
ship functions of the output value in Table 4 are shown in end and there would be personnel changes. This is the
Fig. 1. In addition, Yes or No as alternative answers cor- explanation for the appropriate organizational structure.
respond to the four questions, Value, Rarity, Immutability In light of the above, the membership functions are
and Organization. shown in Fig. 2.
The graphics presented in Table 4 are described as an- No and Yes in the horizontal axis were chosen, with
tecedent conditions of the fuzzy rule and the graphics in values from [−3, 3]. A range from [−1, 1] is also valid.
Fig. 1 as the membership functions of the consequent part. For example, if the response was Yes, the number 3
Figure 1 describes the membership function of Ta- was input. If the response was No, the number −3 was
ble 4. The horizontal axis represents the data from com- input. However, for somewhat Yes or somewhat No, the
petitive disadvantage to sustaining competitive advantage numbers 2 or −2 were input (they were fuzzy). The apex
that fit the triangle membership function. of the fuzzy number range of ±0.5 was expressed by the

Vol.18 No.3, 2014 Journal of Advanced Computational Intelligence 431

and Intelligent Informatics
Chen, F. and Kodono, Y.

Feasibility of competitive
Rule Value Rarity Immutability Organization
advantages

No No
ձ
0.5 0.3 0.3

No Yes
ղ
0.5 0.8 0.5

Yes No No
ճ 0.6
0.7 0.45 0.3 0.3

Yes No Yes
Figure3.
Fig. Fuzzy output
3. Fuzzy output value
value. մ 0.6 0.45
0.45 0.8

Yes Yes No No

No Yes յ 0.6 0.65 0.65 0.3 0.3

1
Yes Yes No Yes
Yes “0.6”
ն
0.6 0.65 0.65 0.8 0.6

No “0.5” Yes Yes Yes No

շ
0.6 0.65 0.45 0.3 0.3
0

Yes Yes Yes Yes

Fig. 4. Grades of value are Yes and No. ո
Figure 4. Grades of “Value is Yes” and “Value is No” 0.6 0.65 0.45 0.8 0.45

5. Inputs
Fig.Figure and
5. Inputs and outputs.
outputs

membership function. A value such as 2±0.6 or 2.5±0.8,

Figure 3. Fuzzy output value
which could be suitable, was not considered in this study.
The internal environment conditions were evaluated using
approximate numbers. Based on the SWOT analysis of Chery (Fig. 6), the
In Fig. 3, the input numbers of each fuzzy rule are intro- strengths, weaknesses, opportunities, and threats are sum-
duced using the Min-Max gravity method. The Product- marized as follows.
Sum gravity and other methods could be considered. (1) Strengths:
In Fig. 3, −4 can be considered a competitive disadvan-
Chery is different compared to foreign enterprises. Its
tage, −3 as a somewhat (slight) competitive disadvantage
products and technology can be controlled completely in-
up to 5 representing sustained competitive advantage. In
dependently, without concern for infringement of trade-
other words, the number and the word are respectively
marks. Chery is not a Sino-foreign joint venture. There-
corresponding.
fore the profit goes to domestic investors. Furthermore,
These numbers denote ratings and are not meaningful.
car parts are assembled primarily domestically, therefore,
Numbers from zero to nine could also be used. Expres-
costs can be controlled and the company can compete
sions corresponding to the numbers would be shown as
with other companies with low prices.
the output result.
Figure 4 (calculation of other questions as well) and (2) Weaknesses:
Fig. 5 illustrate the process of calculation of these. Chery has a short history, and therefore, it is relatively
According to the results of the fuzzy inference, the tem- unknown. Consequently, we can infer that Chery is in-
porary competitive advantage in the feasibility of compet- ferior to joint-venture automobile companies on quality
itive advantages item is high (Fig. 3). This implies that and after service. To address this weakness, Chery has
Chery’s management structure and strategy planning at extended the warranty period. For example, the warranty
the present stage are appropriate. However, these strate- of Toyota Motors is 50,000 km for two years. Chery pro-
gies are temporary and should be modified in the near fu- vides a warranty of 120,000 km and four years. This is
ture. more than twice that of Toyota. Chery has confidence
The temporary competitive advantage was introduced in their products. To determine if they can achieve this
using a conventional VRIO analysis. In Table 2, Value is recognition from consumers may require some time.
Yes, Rarity is Yes, Immutability is No, and Organization is Until now, the main activity of Chery is the manufac-
Yes. Therefore, additional information should be analyzed ture and sale of low-cost cars with a small profit margin.
using a fuzzy VRIO analysis. Compared with the foreign automobile companies, Chery
has low profit margins and only a small amount of money
has been invested in product research and development.
5. SWOT Analysis of Chery
(3) Opportunities:
SWOT is the preferred method to analyze Chery’s posi- Mergers and acquisitions with foreign automobile com-
tion in the Chinese market and the future strategy. Please panies are viable opportunities for Chery. For example,
see [2] for a description of SWOT analysis. the acquisition of the Volvo brand by the Geely Com-

432 Journal of Advanced Computational Intelligence Vol.18 No.3, 2014

and Intelligent Informatics
 Fuzzy VRIO and SWOT Analysis of Chery Automobile

࠙Strengthsࠚ   ࠙Weaknessesࠚ
࣭Chery does not cooperate with any foreign enterprises, so it can ࣭Chery enterprise has a short history, so it is not famous.

control its product and technology independently, without any ࣭Chery’s technology is not as advanced as foreign companies.

infringement of trademark problems. ࣭Chery enterprise is worse than joint automobile company on

࣭Chery enterprise is not a Sino-foreign joint venture enterprise; quality and after service.

therefore profits are allocated to domestic investors. ࣭ The amount of money invested in product research and

࣭Car parts are mostly assembled domestically, so cost can be development is small.

thoroughly controlled, and Chery can compete with other ࣭Chery makes and sells low-end cars.

companies using a low price strategy.

࠙ Opportunitiesࠚ   ࠙ Threats ࠚ
࣭Governmentsupport. ࣭Foreign joint venture automobile enterprises sell their original

࣭Due to the recent appearance of electric cars, the technological models, but make new models for new joint companies.

gap between China and abroad is small. ࣭ Joint ventures and foreign car companies mainly produce

࣭M&A with foreign automobile companies is a good opportunity high-level cars for the moment, but are gradually moving into

for Chery. the low-end market.

Fig. 6. SWOT analysis of Chery Automobile.

Figure 6. SWOT analysis - Chery Automobile -

pany, with a history of automobile production of approx- dition, new Chinese domestic automobile enterprises have
imately ten years, was widely reported and the company entered the market, significantly increasing competition.
acquired both good publicity and new technology. More- In this paper, Chery was selected for a case study and
over, a government policy is that, in future, cars used by analyzed using fuzzy VRIO and SWOT analysis methods.
the government must be produced by independent domes- This paper emphasized the VRIO analysis, which is the
tic automotive companies. In recent years, because of practical framework of a resource-based view, as an in-
global warming caused by automobile exhaust gas and ternal environment analysis. Fuzzy concept was then in-
continuing increases in gasoline prices, electric cars have troduced into the VRIO analysis to provide a new analy-
begun to gain popularity. Owing to the recent appear- sis method called fuzzy VRIO analysis. To conduct the
ance of electric cars, the technology gap between China VRIO analysis, it was necessary to answer Yes and No
and abroad is decreasing. From the viewpoint of both questions. However, it was difficult to answer clearly Yes
conventional-engines and electric cars, Chinese auto en- or No to each of the four principal questions. Therefore
terprises are optimistic for the future. the answers almost Yes (or Yes with 0.8) and roughly No
(or No with 0.9) were accepted. Thus, the answer was
(4) Threats:
a fuzzy conclusion. Employing fuzzy VRIO analysis,
China today has many automobile enterprises. Joint financial status, business direction, and business policy
ventures and foreign car companies produce primarily were considered. Consequently, it is shown that the state
higherend cars. They are, however, gradually moving into of the automobile market in China was one of maintaining
the low-end market. This is a major threat for Chery. Fur- temporary competitive advantages.
thermore, many foreign joint-venture automobile enter- Based on the outcome, the strengths, weaknesses,
prises sell their existing models and make new models for threats, and opportunities of Chery became evident using
the new joint companies. the SWOT analysis method.
Furthermore, because of differences in history, environ-
ment, and management between Chinese automobile en-
6. Conclusion terprises, the optimal business strategy for companies will
be different. Therefore, in the future, utilization of fuzzy
Economic development in China has been remarkable, theory to qualitatively analyze the business environment
especially in the auto industry. Sales figures from 2009 to of other independent automobile enterprises will be ef-
2012 rank first in the world, overtaking the US. The Chi- fective in establishing management strategies. Based on
nese government has pursued policies to develop the auto- the analysis above, this research provides the experience
mobile industry since the year 2000. Foreign automobile to aid the future development of independent Chinese au-
enterprises have expanded into the Chinese market. In ad- tomobile enterprises.

Vol.18 No.3, 2014 Journal of Advanced Computational Intelligence 433

and Intelligent Informatics
 Chen, F. and Kodono, Y.

References:
[1] F. Chen and Y. Kodono, “Competitive Strategy Analysis of the Name:
Chery Automobile Corporation Limited,” OIU J. of Int. Studies,
Vol.26, No.1, pp. 61-76, 2012. Yukio Kodono
[2] F. Chen and Y. Kodono, “SWOT Analysis and Five Competitive
Forces of Chery Automobile Company,” Proc. of the 6th SCIS & Affiliation:
the 13th ISIS, pp. 1959-1962, 2012. Graduate School of Management and Informa-
[3] F. Chen and Y. Kodono, “Analyzing Competitive Strategy of the tion Science, Osaka International University
Chery Automobile,” Proc. of the 23th Soft Science Workshop,
pp. 18-21, 2013.
[4] S. Ghazinoory, A. E. Zadeh, and A. Memariani, “Fuzzy SWOT
analysis,” J. of Intelligent & Fuzzy Systems, Vol.18, pp. 99-108,
2007.
[5] M. E. Porter, “Competitive Strategy,” Free Press, New York, 1980. Address:
[6] J. B. Barney, “Gaining And Sustaining Competitive Advantage, 3-50-1 Sugi, Hirakata, Osaka 573-0192, Japan
Second Edition,” Addison-Wesley, 2002. Brief Biographical History:
[7] F. Chen and Y. Kodono, “Fuzzy VRIO Analysis of BYD Auto,” 1995- Lecturer, Department of Management Information, Fukuyama
Proc. of the 29th Fuzzy System Symposium, pp. 373-378, 2013. University
[8] T. Takizawa, “Introduction to Fuzzy Theory and Its Application,” 2001- Osaka International University
Kyoritsu Shuppan, 2010. 2005- Professor, Graduate School of Management and Information
Science, Osaka International University
2007-2014 Dean, Graduate School of Management and Information
Science, Osaka International University
Main Works:
• “Fuzzy Reasoning Demand Forecasting Models by Type of Season,” J.
Name: of Japan Society for Fuzzy Theory and Intelligent Informatics, Vol.20,
Faen Chen No.2, pp. 211-217, 2008.
• “A Case Study of Fuzzy Exponential AHP and its Applications,” J. of
Biomedical Fuzzy System Association, Vol.10, No.1, pp. 11-18, 2008.
Affiliation:
Graduate School of Management and Informa- Membership in Academic Societies:
tion Science, Osaka International University • The Japan Society for Fuzzy Theory and Intelligent Informatics (SOFT)
• The Operations Research Society of Japan (ORSJ)
• Japan Industrial Management Association (JIMA)

Address:
3-50-1 Sugi, Hirakata, Osaka 573-0192, Japan
Brief Biographical History:
2010 Received Bachelor of Management and Information Science,
Department of Management and Information Science, Osaka International
University
2012 Received Master of Management and Information Science,
Graduate School of Management and Information Science, Osaka
International University
2012- Doctor Candidate, Graduate School of Management and
Information Science, Osaka International University
Main Works:
• “Fuzzy VRIO Analysis of BYD Auto,” OIU J. of Int. Studies, Vol.27,
No.3, pp. 11-29, 2014.
Membership in Academic Societies:
• The Japan Society for Fuzzy Theory and Intelligent Informatics (SOFT)

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