Case Study No 1: (geely of China Acquirs Iconic Swedish Carmarker, Volvo):

Case study No 1: (Geely of China acquirs iconic Swedish carmarker,Volvo):

-Why had Volvo lost its way in the years leading up to the takeover?

The acquisition of the Swedish Volvo by the Chinese Geely is a direct result of one of the worst recession trigged by the finance crisis .However; it is in fact the result of the new world economy balance between China & Western industrial countries. Benefited from the globalization, China will be the next superpower in the world economy .it is believed that, this acquisition is just a beginning of the Chinese economy expansion overseas. This acquisition has been called “snake eats elephant”.  

Due to the reduced sales figure, Volvo has run into trouble in its finance performance .As Volvo has been losing money for a continuous period of four years. Volvo has no growth during the last ten years and negative growth during the finance crisis .a negative growth of 10.6% during 2009.

In 2008, Volvo experienced the biggest loss in its history, nearly 1.5 billion USD in a single year. This triggered Ford to sell Volvo.

The boring indesign and image of Volvo which have big effects on its sales per year result in no increase in sales and no profit since 2005.

- What are the risks for Geely in trying to turn around a premium European brand such as Volvo?

Risks rose from the reputation regarding the Chinese manufacturers for coping design and parts rather than building their own. This gives a negative feedback to the customers that this luxury car manufactured in one of the third world country. This may lead to damage the Volvo brand name.

- In your view, was the purchase of Volvo a brilliant strategic decision, or a mistake? Explain

In my view, the decision of acquisition it was a brilliant strategic decision, due to

-Volvo still has a good reputation and loyal customers especially in America with a higher reputation of technology advance in safety, solidity &reliability.

-Chance to build up a new Volvo plant in China dedicated only for Chinese customers which seeking for more premium brands and more safety conscious lead to increase in Volvo sales in China while Volvo’s home market of Sweden is very dynamic, it is actually very small.

-The local manufacturing of Volvo in China for domestic Chinese market will lead to cost reduction by using a lot of locally produced cheap components, cost reduction because of the cheap labor cost ,avoid the high cost of transportation from abroad to China & avoid the import tax of approximately 25% in China.