A case study of the acquisition of Swedish Volvo by Chinese Geely

University essay from Blekinge Tekniska Högskola/Sektionen för management

Author: Lieke Wang; [2011]

Keywords: case study; acquistion; Volvo; Geely; China; Sweden;

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 establish its local production in China, develop its own supply chain in China to reduce its cost, get into the list of the government procurement in China, etc. In all these aspects, Geely has good experience and competence, and should give Volvo a lift there. These are the real opportunities for Volvo in the new chapter of its history. To realize Volvo’s opportunities and reduce its risk of failure, right strategies must be developed and effectively implemented. The suggested strategies include: running two separate companies to defend Volvo’s brand, a new organization and strategy in China to facilitate the expansion, local market positioning for more custom base, etc. In addition, it is necessary for Volvo and Geely quickly establish mutual trust and respect between two companies’ employees. Finally, the thesis also looked at the strategies Volvo and Geely have adopted so far, and it indicated that they are implementing a similar strategy except in two areas: how to position Volvo in China and how quickly Volvo should establish its production in China. It is believed that the road to a successful acquisition of Volvo by Geely is not smooth, rather it is a bumpy road where there are a lot of challenges ahead. In summary, the acquisition of Volvo by Geely does not sound very rational from the conventional wisdom, due to the huge big difference in brand, product specification, custom base, inter-culture and company culture, language, etc. However, the aspect of China does give a lot of hopes for the success of the acquisition. To realize these opportunities, it is important for the management team to develop a right strategy and effectively implement it.

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