Longxi Case Analysis

China Market

China is a huge market for small diesels, where sales of diesel-powered agricultural machinery and vehicles had grown by more than 10% annually since 1985, and this growth rate is forecasted to continue until at least the year 2000. 85% equipment use single-cylinder diesel engines, while the rest of 15% use multi-cylinder diesel engines. Due to intense demand for single- cylinder diesel engines, the competition is less intense in the market of multi-cylinder diesel. However, due to customer demand for more power, formation of large co-operative farms, greater need for small agricultural transportation vehicles and need for versatile engines with broad applications, the future prospects for multi-cylinder diesel engines are much more promising. As competitors in the market, there are 15 medium and small sized firms that compete on the basis of low cost production. Therefore, due to strong competition, a price war is imminent in the market.

Quality in the market

In the early years, the concept of quality of diesel engines was not regarded as an important factor that can be used as a competitive advantage by diesel engine producing companies. However, due to lost production time by consumers due to underperforming products caused by engine breakdowns, the manufacturers of the diesel engines were incurring high repair or replacement costs. Therefore, quality has become one of the major factors for the success of the businesses.


Longxi is an SOE that was founded in 1957. Primarily, the company is enjoying continuous growth in the production of single and multi- cylinder diesel engines for domestic and international markets; however, Longxi has a particular competitive advantage in the market of multi-cylinder diesel engines. The most popular model is SL2100. Longxi shares a part of 55% of market share.

Changchai- Major Competitor

The major competitor of Longxi is Chnagchai, which is the largest producer of single-cylinder...