...A Case Study of the Acquisition of Swedish Volvo by Chinese Geely Author: Lieke Wang Supervisor: Thomas Danborg Master's Thesis in Business Administration, MBA programme February 2011 Abstract The acquisition of the famous Swedish Volvo by the unknown Chinese Geely has attracted a lot of attention in the world-wide medias, particularly in Sweden and China. It is the largest overseas acquisition ever by a Chinese company, which marks a beginning of a new era that the fastest growing China has become a superpower in the world economy. Because this acquisition is such a complex business where two involved companies are so much different, it is of high interest to make a case study of this in the business research area. The thesis begins the study by looking at the basic facts of these two companies: the products, market, finance situation, brand and technology, etc. It was found that these two companies have very little in similarity, but a huge difference in product segment, technology and brand, inter-culture, language, etc. Therefore, there is no immediate cost saving through the integration of two companies and the sharing of the common components, which indicates that the risk of failure of this acquisition is relatively big. However, there do exist some opportunities lying ahead. The most obvious opportunity is the possible rapid expansion in the growing Chinese market as Volvo’s second home market. To be successful in China, Volvo must address several issues: quickly...
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...performance prior to being acquired by Geely. Targeting the lower end of premium auto segment, historically, Volvo has focused on sustaining competitive advantage in safety through constant innovation. Over the last 82 years, the strategy has earned Volvo a strong brand equity and global recognition of its reliance and adherence to high safety standards. However, in 2000s it struggled with profitability due to increasing competition, changing customer preferences, and ineffective cost management and, finally, the recession. Discuss Geely’s strategy and competitive positioning in the auto industry prior to acquiring Volvo. In contrast to Volvo, Geely targeted the low cost-low quality budget segment, pursuing tier 2 and 3 towns in China. With relatively short history and small size, up until recently Geely had been mostly using the imitation strategy in its car design and production, which allowed for growth and increasing profitability. However, to accelerate growth of its modest market share, Geely has shifted its focus on technology in order to differentiate from the steep competition. Its competitive positioning is being in transition from low price advantage to technological advantage, with the objective to rapidly expand domestically and internationally. Why did Geely acquire Volvo? What are some of the merger integration challenges Geely faces, and how should they be addressed? There is very little overlap between Geely and Volvo in nearly all aspects of doing...
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...Fierce Market Competition Geely sees the acquisition as an opportunity to expand its business into high-end market of luxury vehicles through building up Volvo into a successful luxury brand. However, although the market position of Volvo is clear and both Geely and Volvo are full of confidence, the prospective seems very tough. Firstly, long positioned in luxury vehicle market, Volvo has a share in Chinese luxury vehicle market, but compared to other big brands, it is too small and growing very slowly. In 2010, Audi sold 225,580 cars, enjoying an increasing rate of 43.5% comparing to last year; Bens reached sales of 147,670 cars and an amazing growth rate of 115%; the sales of BMW was 169,000 cars which increased by 87%. Volvo, however, only sold 31,000 and increased by 36.2%. These figures are not only inferior to the three competitors, but also disappointing to the target of Volvo, which is to reach 200,000 sedans sales in 2015 with an annual increasing rate of 50%. Besides the low growth rate which is far behind market average, Volvo is also the one with the largest discount rate of selling prices. Although Volvo is quite ambitious to challenge Bens and BMW which Volvo sees as competitors, the image building and brand value of Volvo in Chinese luxury vehicle market are far inferior to the competing brands. Secondly, Volvo’s capacity is not large enough to support such an ambitious target of production. Currently, China market is only the fourth largest market of...
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...When Volvo Car Corporation split off from Ford in 2010, it needed to develop its own stand-alone IT environment in some areas. At the same time, the company wanted to improve its business intelligence (BI) capabilities and operational efficiency. So Volvo decided to prototype a Microsoft data management solution that simplifies its IT environment, provides graphical self-service reporting capabilities, and improves collaboration. Business Needs By the time that Zhejiang Geely Holding Group completed its acquisition of Volvo Car Corporation in 2010, the IT environment at Volvo had become complex, difficult to manage, and expensive. Over the years, a variety of data management and business intelligence products had been deployed. Volvo wanted to reduce the number of these products to make the overall system easier to manage and to reduce licensing and other costs. “All the products out there have been purchased by some department at some time in history, and we’re trying to consolidate and simplify our BI infrastructure,” says a Volvo IT architect. Volvo also wanted to improve its business intelligence capabilities to achieve greater insights into such things as assembly and product development costs and to help employees produce reports more quickly and easily. “With the old systems, users had to sample their own data from various sources, integrate the data, and produce the reports—and that cost a lot of time,” says a senior business analyst for business demand and strategy...
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... INDUSTRY | AUTOMOTIVE INDUSTRY | TIME OF CASE | 2010 | ISSUE ON HAND | ACQUISITION OF “VOLVO” BY “GEELY” | KEY PLAYERS | “VOLVO” AND “GEELY” | COMPANY COUNTRY | CHINA | FOUNDER OF THE COMPANY | LI SHUFU | PRODUCT | LUXURY CARS | 2. SITUATIONAL ANALYSIS Li Shufu was born in China in 1963, the son of a small business owner. He started the business from making photographs of tourists, then he shifted to making refrigerators and refrigerator parts, and from there he diversified again to motorcycle production business. At the age of 35, in 1998, he started the business of producing cars. The name “Geely” came to him in a dream. Geely was a privately owned firm, which was involved in producing non-luxury cars for its local market of China. For the acquisition of Volvo, Li obtained financing from state-owned banks and governments in China and this acquisition made Geely able to enter in the new market of luxury cars by following a “related diversification” strategy. Now Geely is heading towards lowering the costs and making Volvo more profitable in the industry and following a growth strategy in its business 3. DEEP LIST ANALYSIS Demographics Volvo was a Swedish company; Geely was planning to produce luxury cars at Volvo plants and offering these cars to local Chinese, who desire to drive these luxury cars. This strategy enabled the Geely to target a new market segment in the country. | Ecological Producing and providing good quality luxury...
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...Assignment -Case Study of Li Shufu, chairman of Geely 2014.1.14 Managing Operational Behaviour Assignment -Case Study of Li Shufu, chairman of Geely 2014.1.14 Content 1 Introduction 3 2 Background Information 3 3 Gaining Support and Trust 3 4 Use networking to sustain the powerful station 9 5 Conclusion 12 1 Introduction Managing organizational behaviour (MOB) comprises a wide variety of topics, such as motivation, leadership and organizational design, which relate to different aspects of behaviour in organizations (Knights et al., 2007). Specialists within different function of business are inevitably working with others. Likewise, generalist managers are involved in coordinating their activities with different specialist functions. Crucially, these are not only simply impersonal activities requiring technical skills, but also organizing capabilities that are identified as leadership, communication and motivation. This paper will provide a case study of Li Shufu, chairman of Geely Automobile Holdings. The first part will focus on how Li gained trust and support at Volvo Car Corporation after acquisition, and then the seconded will look at how Li derived and sustained power from the networking. 2 Background Information Established in 1927, Volvo Car Corporation has been one of the best-known luxury automobile manufacturers in the world. And in 2010, Volvo Car Corporation was acquired by Zhejiang Geely Holding Group, which is the Chinese automobile...
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...Summary “Volvo’s Heart will remain in Sweden” * Volvo is a brand of premium cars and well known as a safe and trusted cars in United States and Europe. * This Swedish brand is rarely been compared by its predator – at least until now. * Volvo’s new owner is Li Shufu, the chairman of Geely (Chinese Car). * Li Shufu thinks of Volvo as a tiger penned in the zoo and it needs to be loose and liberated in the broader world. * Li Shufu bought Volvo from the previous owner Ford Motor, making Volvo a China’s first purchanse of a premium western car marque. * Mr. Li told the reporter that the Volvo tiger’s ‘heart’ would remain in Sweden, where it has two plants, and in Belgium, where it has one. * Volvo’s manufacturing footprint will be kept in Europe. * Volvo sits in the ‘near-luxury’ or ‘only-just-upscale’ part of the car market, alongside with the rival Swedish brand Saab and Fiat’s loss making Alfa Rome. * Volvo is a subsection of the premium market under attack from luxury leaders BMW, Mercedez-Benz, and Audi since the car industry’s crisis began in 2008. * The German brands’ superior sales and higher prices have allowed them to outspend Volvo on research and development, and ride out the crisis in fitter shape. * Volvo’s signature contribution to car industry history is the three-point seatbelt which it claims has saved more than 1 million lives, make other cars to follow suit. * Even at their 50th year, their have a solid reputation...
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...Introduction The Automobile Industry registered a 30% increase over the past ten years. This industry plays a significant role in every major market around the globe. In 2012 63,069,541 cars were produced globally, close to 9 million workers were involved nonstop in the manufacturing process of these vehicles and their respective parts; 25% of these cars were built in China alone, in other words 1 in 4 vehicles are manufactured there. This is equivalent to 5% of the globe’s manufacturing sector. For every direct job in this industry at least 4 indirect jobs in the vicinity are created; this is equivalent to more than 40 million jobs worldwide. Jobs in industries such as steel, iron, aluminum, glass, plastics, glass, carpeting, textiles, computer chips, and rubber are some examples of jobs created indirectly by the Automobile Industry. Environmental Scanning of Current Conditions China assembled 25% of the world’s cars in 2012, keep in mind that this is 7 million more cars than Japan (second largest car manufacturer in the world). Its industry growth has been mainly motivated by business friendly policies created by the government, increase in domestic demand, and an emerging middle class. Although this industry has grown lately, it continues to remain dreadfully divided. Furthermore, government officials believe that surplus volume must come to a halt and worry about local government departments impairing the economy due to unrestrained expansions. Therefore, they are aiming...
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...Geely's purchase of Volvo (chinadaily.com.cn) Updated: 2010-03-29 17:09 Comments(0) PrintMail | | Large Medium Small | | Editor's Note: Zhejiang Geely Holding Group, China's No 10 automaker, sealed a deal on March 28 to buy ailing Swedish luxury car brand Volvo from US giant Ford for $1.8 billion. The deal is China's biggest overseas auto purchase, said analysts. Ford has been trying to sell Volvo since late 2008 to focus its resources on managing its core Ford, Lincoln and Mercury brands. The sale deal is expected to free up cash for the No 2 US automaker. Geely, an independent automaker that has struggled to raise its profile in overseas markets, has long coveted a stronger foothold in Europe. [Full Story] Upside for Geely | Chairman of Zhejiang Geely Holding Group Li Shufu hugs Ford's Chief Financial Officer Lewis Booth after signing the agreement on Sunday. [Xinhua] | Geely to get technology, brand recognition The acquisition will offer Geely, a producer with lower-end image, access to a high-end brand and technology it needs to compete with much bigger rivals in China. [Full Story] Volvo deal to help Geely's going-global ambition At a time when the world auto industry was experiencing huge difficulties caused by the global downturn, Geely's aim, as it said on the company website -- "let Geely cars go to the whole world", seemed very ambition. [Full Story] Li consummates his love of Volvo Firstly, buying Volvo will give China-made cars an access...
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...Development of Enterprise Culture After Geely-Volvo M&A BIT IMBA 2011 Oct. 2011 Abstract： This article is focusing on the cultural fusion after the M&A between Gelly and Volvo. Culture fusion is not so difficult as people think, as long as we can be truly understand and be good to respect people from different party. Not only the culture differences, but also the differences in humanity behavior, would be well treated and accepted by each party. The human understanding, respect, dare and be good from Geely and Volvo both sides, make all the negative factors to be transformed into a positive force. Workers union in Western countries, is useful in helping the enterprises to improve competitiveness and maintain the vitality of the enterprises. Benevolent invincible is the highest integration way. Keywords： Cultural diversity，Fusion，core values, benevolent, invincible 1. Skepticism On Geely's Volvo Ambitions Before the merge, some reporters and market analyst said that China's Geely Automobile may well find that its resources cannot accommodate such a takeover. It is just a despite of the Chinese automaker's ambitions. Geely, an only 11 years old company, which is the youngest and the most aggressive of China's carmakers, is undertaking a feasibility study on acquiring Volvo. Management has yet to submit a proposal to the relevant authorities. Geely, which is owned by the city of Wuhu...
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...Tata is an Indian based automotive company and Geely is a China automotive based company. Geely bought Volvo for 1.8 billion dollars, and Tata bought Land Rover and Jaguar. These brands all are European brands. Because of these purchases the automotive production has shifted to more overseas jobs and as a result people working in American and Europe are now used to having an Indian or Chinese boss. Doing business in other cultures is not as easy as it seems. There are many different ways that people do things all around the world. What may be accepted in one area may seem offensive to someone in another area. In order for Tata and Geely to integrate their acquisitions in other global organizations they will have to find a way to train their employees and their managers in a way that they can deal with the culture change that they face. For example the book says that Haier set up in the small town of Camden, South Carolina and it had a series of challenges due to the not fully understanding American and Southern pride and sensitivity to culture. They put Chinese managers in charge of the plant and that was a mistake that was quickly fixed. It didn’t work because it is a slap in the face when someone living in America all their life and being in that plant working hard see’s someone who didn’t grow up here or have any history in America, takes management over the plant the locals won’t be very pleased. Most Multinational corporations have a strategic predisposition when it comes...
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...“Volvo” by “Geely” (a Chinese firm) * Geely is an automotive company in China, which was engaged in producing non-luxury cars for its local market in the country since 1998. * Li Shufu was the founder of the company, who was basically a poet and has a philosophical attitude towards life. * The time of the case is year 2010. 2. Situational Analysis Li Shufu was born in China in 1963, the son of a small business owner. He started the business from making photographs of tourists, then he shifted to making refrigerators and refrigerator parts, and from there he diversified again to motorcycle production business. At the age of 35, in 1998, he started the business of producing cars. The name “Geely” came to him in a dream. Geely was a privately owned firm, which was involved in producing non-luxury cars for its local market of China. For the acquisition of Volvo, Li obtained financing from state-owned banks and governments in China and this acquisition made Geely able to enter in the new market of luxury cars by following a “related diversification” strategy. Now Geely is heading towards lowering the costs and making Volvo more profitable in the industry and following a growth strategy in its business 3. DEEP LIST Analysis i. Demographics Volvo was a Swedish company; Geely was planning to produce luxury cars at Volvo plants and offering these cars to local Chinese, who desire to drive these luxury cars. This strategy enabled the Geely to target a...
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...by Chinese Geely motor company. This is about global and Chinese automotive industry that discuss the international market entry barriers and strategies to over come. Situational analysis Geely is a car manufacturing company. It mainly deals in automotive industry. Automotive industry is emerging in China these days. With capital growth in China the social attributes are changing and different automotive companies are holding foots in China. Geely took start in 1998 when Li Shufu diversified from motorcycle manufacturing to car manufacturing company. This company was financed by a state owned bank. Geely is full filling the need gaps of economy class cars. No doubt it is modern company but with low-tech. Strategies Geely’s Corporate strategy Geely is going to purchase Volvo with the support of Government of China who wants to develop cutting edge technology infrastructure in the country to meet the needs of near future. For this they decides to get FDIs and mergers with well known and reputed companies of the world. Ford motor took a move in 1999 and took over Volvo in US$ 6.45b. But with passage of time they could not get hold on it and company went into loss. Volvo is the best brand in the Europ with BMW and Mecedes. Now Gelly is there to get Volvo in US$ 1.8b. Geely’s Strategy Geely is focusing China and its production in 2009 was 330000 vehicles. Small and low cost vehicle are the main products of the company. Now with the emerging times Geely wants to...
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...Nour Shaker Supervisor: PhD. Jose Ferraz-Nunes Examiner: PhD. Bengt Kjellen Master’s thesis in International Business 15 ECTS Department of Economics and Informatics University West Spring term 2010 ABSTRACT Over the past two decades, the open-door of the market supply in China has had a massive impact on the automotive market. This development contributes to the globalization of the automobile industry that involved the integration of the Chinese domestic market into the international markets. Among many reasons, motivation to gain access to industrialized markets and to gain access to superior technology, management resources and knowledge are the most driving factors of the Chinese automotive industry for the internationalization and going abroad strategy of China´s automotive industry. This study investigated whether different external globalization drivers and internal organization factors have differential effects on various dimensions of China´s automakers firms’ global strategy. Most of the studies written about global strategies have implemented only either of the internal or the external drivers of the internationalization of the firms. The contribution of the paper introduces a more comprehensive model on the global expansion of a firm. This paper concludes that China´s automotive industry has some competitive advantages such as low cost, while, facing a number of challenges that hinder the internationalization of Chinese automobile companies. It also...
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...INFORME DE VARIAVILIDAD DEL MERCADO AUTOMOTOR. Integrantes: * Tania Álvarez. * Alexis Muñoz. * Andrés Barrera. * Francisco Bocaz. Profesor: * Claudio Arana. Sección: * 002 V. Índice Introducción 1. Realizar análisis estadístico de crecimiento y variabilidad de mercado automotor en los últimos 5 años. Determinar que empresas automotrices han tenido tendencia al alza en el último periodo MARCAS | 2009 | 2010 | 2011 | 2012 | 2013 | 2014 | CHEVROLET | 29.745 UNI.18.3% | 49.483 UNI.17.1% | 56.640 UNI.17.0% | 57.238 UNI.16.9% | 56.596 UNI.15% | 47.054 UNI.13.9% | NISSAN | 16.426 UNI.10.1% | 35.494 UNI.12.3% | 34.597 UNI.10.4% | 34.124 UNI.10.1% | 30.002 UNI.7,9% | 20.699 UNI.6.1% | HYUNDAI | 25.945 UNI.16% | 34.122 UNI.11.8% | 35.063 UNI.10.5% | 35.123 UNI.10.4% | 34.967 UNI.9.2% | 32.757 UNI.9.7% | KIA | 17.184 UNI.10.6% | 25.098 UNI.8.7% | 27.871 UNI.8.3% | 28.916 UNI.8.5% | 31.899 UNI.8,4% | 31.477 UNI.9.3% | SUZUKI | 11.071 UNI.6.8% | 18.659 UNI.6.5% | 21.554 UNI.6.5% | 1.422 UNI.4.4% | 21.943 UNI.5.8% | 21.723 UNI.6.4% | TOYOTA | 12.130 UNI.7.5% | 24.908 UNI.8.6% | 23.151 UNI.6.9% | 26.562 UNI.7.8% | 28.072 UNI.7.4% | 23.183 UNI.6.9% | En relación a los últimos 5 años, Chevrolet se posiciona líder en venta de vehículos livianos debido a su trayectoria en el mercado automotriz y por los precios llamativos que tienes para sus clientes, en comparación de sus competidores tales como: Hyundai, Nissan, Kia...
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