Case Study of Saic Acquiring Ssangyong Motor Company

Topics: Automotive industry, Shanghai Automotive Industry Corporation, SsangYong Motor Company Pages: 12 (4436 words) Published: June 10, 2013
Case Study of SAIC Acquiring Ssangyong Motor Company
By Cheryl, Linda, Vianne, Ivy, Danna and Bob
Class 1, English Trade, SCNU
2011/12/01

Content

1. Introduction2

1.1 Scale of Entry and Strategic Commitments2
1.2 Establishing mode2

2. External macro environment analysis3

2.1 Political3
2.1.1 Country’s situation3
2.1.2 Shanghai’s situation3
2.2 Economic4
2.2.1 Cost of production4
2.2.2 Currency exchange rates4
2.2.3 Cost of capital5
2.3 Social5
2.3.1 Ssangyong Motor Company’s own situation in 20045 2.3.2 Powerful Labor Union of Korea and the stuff of Ssangyong5 2.4 Technological6

3. Industry environment analysis6

3.1 Rivalry6
3.2 Power of buyers7
3.3 Threat of new entrants7
3.4 Threat of substitutes7
3.5 The life cycle of car industry8

4. Analysis of internal environment in SAIC Group8

5. SWOT analysis9

6. Conclusion & Possible Solution10

References11

1. Introduction
With the robust and sustainable growth of the economic in China, more and more Chinese enterprises turn their eyes to the targeted market in foreign countries for the sake of achieving the economic of scale enterprise as well as improving their international competitiveness, which makes the volume of the cross –border acquisitions grow at a rapid rate for two decades. However, acquisitions often produce disappointing result. According to a research done in 2001, nearly 70% of mergers and acquisitions failed to achieve expected revenue synergies. SAIC’s acquisition over Korea Ssongyong is with no exception. SAIC-- Shanghai automobile industry corporation is one of the third largest carmakers in China at the turn of the century, whose main businesses are the manufacture, development and investment of the passenger cars and commercial vehicles and relatively financial services. To enlarge the market share and with the desire for independent brands and R&D capabilities, SAIC had made up its’ decision to acquire South Korea, Ssangyong Motor Co. Built in 1954, Ssangyong was Korea’s fourth-largest automaker and dominated the high-end market for sport-utility vehicles at that time, which also had a strong R&D team and extensive, global sales channels that fit SAIC’s ambitions to produce an independent car and branch out into international markets. However, hard hit by the Asian Financial Crisis in 1997, there was a depression time for the car industry in Korea. Most of the well-known cars,such as Hyundai and DAWOO were acquired by foreign countries. With the heavy burden of debt, Ssong had changed hands for several times but failed, which provided a golden opportunity to SAIC. With a long period of bargaining, SAIC paid 4.1 billion yuan for the 49 percent stake in 2004 and increased the share by more than 51 percent in the following 2 years, indicating the largest shareholder in Ssangyong. 1.1 Scale of Entry and Strategic Commitments

Compared with the large- scale entry, SAIC applied to the small –scale by purchasing nearly 50 percent stake, which is a way to gather information about a foreign market before deciding whether to enter with a significant scale and how best to enter. Besides, it can reduce the risks especially with the less experience in oversea country. 1.2 Establishing mode

As it can be easily seen that SAIC establish a wholly own subsidiary in South Korea by acquiring the Ssongyong. Compared with the green field, acquisition is more suitable for the SAIC. First, acquiring the Ssongyong made the SAIC quick to execute and build its presence in the Korea market, while the green field has to take years to come. Second, the acquisition can preempt competitors by enlarging the market share. Third, lack of the international management, acquisition makes more sense than the green field, as it has...

References: He Zhiyi, Ke yinbin, 2011, 10 cases on the transnational M&A of Chinese Enterprises, 94-122
Hill.C.W.L, 2008, Global Business Today, 394
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