Do you think Geely’s strategy to acquire an extremely well-established Western automobile manufacturer can help the company to gain competitive advantages in the global car market? And why?
On the 28th of March 2010, and after a year long drawn out negotiation process, the Chinese car group Geely bought luxury car brand, Volvo. The Volvo car brand had been bought over by Ford Motor Company in 1999 for $6.45 billion. After the profits targets were not being met by Volvo, Ford decided to sell the Volvo cars brand. The transaction between Ford and Geely cost $1.8 billion holding 100% in the shares and inclusive of all assets. (Zheng & Shi 2013) This overseas transaction was the largest acquisition recorded for a Chinese company. Geely made the step into merging with and into a luxury brand. This became not only a major part in Chinese business, it also became a new part of history for the Chinese automotive industry overall.
This transaction was warmly welcomed by experts with certain degrees of caution. They state that both buyer and seller moved toward better futures and potential for long term approaches in strategical benefits. (Balcet et al. 2012) Through the acquisition, Geely's aim was to make upgrades in its cars to meet the demands of the rapid growth in the Chinese automotive market. While some people agree that this was a good idea, some experts also stated that Geely was greedy and not realistic. Even Li Shufu, automotive businessman and chairman of the Geely Group stated that the deal was like the “poor boy from the countryside” (that being Geely) got to marry the “rich girl from the city” (that being Volvo). (Russo 2010) Despite peoples comments, the acquisition of such a renowned company provides success for the Geely Group. The acquisition also reflects and inspires as a high set standard for many companies to follow and potentially gain skills and experience. Through this example, and with government support, Chinese companies...
References: Accenture (2013) http://www.accenture.com/Microsites/asia-go-global/Documents/pdfs/home-slider/Accenture-Growth-Journeys-Final.pdf Accessed 07/05/2014
Balcet, G., Wang, H., & Richet, X. (2012). Geely: a trajectory of catching up and asset–seeking multinational growth. International Journal of Automotive Technology and Management, 12(4), 360-375.
Chen, H., & Zhou, J. (2013). The positioning strategy of China self-owned car brands in the Chinese market (Doctoral dissertation, Uppsala University. Department of Business Studies).
Ford Motor Company (2009) 2009 Annual Report Accessed 07/05/2014
Gorman, S., & TIBKEN, S. (2011). Security ‘Tokens’ TakeHit. TECHNOLOGY.
Harvard Business Review (2010) Geely 's Volvo Gamble Accessed 08/05/2014
Liu, H., & Roos, L. U. (2006). Managing strategic planning paradigms in China. Marketing Intelligence & Planning,4(5), 432-445.
Russo, B. (2010) Making the Geely and Volvo Marriage A Success Accessed 08/05/2014
Wang, H., & Kimble, C. (2010). Low-cost strategy through product architecture: lessons from China. Journal of Business Strategy, 31(3), 12-20.
Zheng, X., & Shi, Y. (2013). The case of Geely acquiring Volvo Car: A study on low brand equity acquiring high brand equity.
Please join StudyMode to read the full document