NorthVehicleCompanyShandongBranchINTERVIEWDATE:Feb29th,2000INTERVIEWERNAME:AnneWangIntervieweeNameMr.DaiHengmingPositionViceGeneralManagerCompanyandAddressNovecoShandongBranchNo.69BeiyuanRd.,Jinan250100Telephone/Fax(0532)8610186BackgroundKeyProcessesKeyIssuesConclusionsBackgroundFoundedatthebeginningof80's,ChinaNorthVehicleCo.(Norveco)isastate-ownedcompanyandasubsidiaryofChinaNorthIndustriesCorp.(Norinco).Norincoisthebiggestweaponproducers/dealersinChina.Norvecoisrestructuredin1998withatotalcapitalof600MillionRMB.Norvecosold20,000autoslastyear;annualrevenuewasaround1.2BillionRMB.AcomprehensivebusinessnetworkofNorvecohasbeensetupinmajorChineseprovinces,coveringBeijing,Tianjin,Sichuan,Sha'anxi,Yunnan,Guizhou,Hebei,ShandongHubei,AnhuiandJilin.Norveco'sbusinessrangesfromsalesandmaintenanceofautos,sparepartssupply,after-saleservices,carrental,autoinformationservice,etc.NorvecosetupfivebranchesinShandong:Jinan,Zibo,Weifang,Tai'anandHeze.Currently2salesmenareassignedspecificallyforJiefangtrucksinJinan.MostofNorveco'scustomersareendusers.Amongthem,20%ofthesalesgoestobigcompanieswhile80%ofthesalesgoestoprivateowners.However,Norvecoismoreinterestedindevelopinglargecustomersastheyhavestrongfinancialbackground.Besides,largecustomersreplacetrucksevery2years.Privatecustomersaremoreinterestedinlighttrucksandusuallyreplacetrucksevery4years.AccordingtoMr.Dai,FAWtrucksarecompetitiveinbrandimage,priceandproductquality,butSAW'sforwared-headtruckdesignaremorewelcomedbyusers.Mr.Daidon'tthinkFAW'sheavy-dutytruckshavegreatpotentialduetothelimitationofShandong'shighwayconstruction.1KeyprocessesCustomerdevelopmentForlargecustomers,Norvecosendssalesmentovisitregularlyanddeveloplongtermrelationship.Forprivatecustomers,Norvecohasalargetruckdepotforprivatecustomerstovisitandassignonesalesmanstayinginthedepot.Carsandtrucksarewashedeveryotherdaytokeepgoodimage.DeliverytimeIfthereisturnovertrucksavailable,noleadtimeisneededIfturnovertrucksarenotavailable,thenfourdays'lead-timeisrequired.InventoryturnoverInventoryturnoverisaround10daysforbestsellingtrucks.AsNorvecoisexperiencedintruckselling,predictionoftruckmarketdemandhas90%accuracy.SalesexpensespertruckGasolineanddamageintransportation:150RMBTreatment/travelexpense50RMBThetreatmentexpenseisexpectedtoincreaseanother50RMBifNorvecosetsupexclusivestoreforFAWtrucks.KeyIssuesNorvecocurrentlyisnotexclusivedealerofFAW(FAWproductsare60%ofNorveco'stotalsales,however).ThereasonisthatFAWdonotgiveanypolicyfavouringexclusivedealers:sincerebateareissuedsolelybasedonsalesvalue,aslongasadealercansellFAWtruckstoacertainamount,FAWwon'tcareifthedealeralsosellsSAWtrucksinthemeantime.Mr.DaiexpresseddiscontentwithFAWTradingCo.'sunstablepricingin1999.Accordingtohim,FAWTradingCo.raiseditstruckpriceabruptlyinbestsellingseasons.Norvecopurchasedalotoftrucksatthattime.ThenFAWreduceditspriceagainwhenthelowseasoncame.ThusNorvecohadtosellitsinventoryinlowerprice,whichcausedhugelosstoNorveco.Mr.DaihopesFAWtoprovideastablepriceallthroughtheyear.ConclusionsNorvecoisalarge,powerfulautodealerwithmilitarybackground.ItbroughtlargesalestoFAWin1999,butitstillremainstobeseenifNorvecoisanidealpotentialexclusivepartner,foritmightbetoopowerfultobecontrolledbyFAWalone.2