Case Study: Merger Between the Renault and Volvo

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Added on 2019-12-28

Case Study: Merger Between the Renault and Volvo

Added on 2019-12-28

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Case Study

TABLE OF CONTENTSINTRODUCTION...........................................................................................................................1TASK 1 KEY DRIVERS THAT LED RENAULT AND VOLVO TO CONSIDER A MERGER..........................................................................................................................................................1TASK 2 FACTORS THAT LED TO THE BREAKDOWN OF THE RELATIONSHIPBETWEEN THE TWO COMPANIES...........................................................................................4TASK 3 MERGER ALWAYS SEEM A GOOD IDEA AT THE TIME, BUT RARELYRESULT IN GREATER PROFITS.................................................................................................6CONCLUSION................................................................................................................................9REFERENCES..............................................................................................................................10

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ILLUSTRATION INDEXIllustration 1: World's leading car group.........................................................................................2Illustration 2: Strategic alliance.......................................................................................................5Illustration 3: Volvo and Renault merger........................................................................................7

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INTRODUCTIONIn the current era of globalization, businesses which are facing consequences are trying toundertake strategic alliance or merge with other similar manufacturing firm to overcome thechallenges. However, it is essential for businesses that are operating in a global market toundertake a better choice such as enter into a new market and enhance both its market share andglobal competitive advantage. In the present case, international merger has been implementedwhich states the prevailing conditions of two businesses from different countries and theirmergers in order to carry out effective functioning (Eliasson, 2013). Such situation arises due tocertain consequences such as huge cost on research and development, increasing economies ofscale etc. that assists business to integrate with each other in order to create better competency inglobal market. Here, the case study has been analyzed which states the merger between theRenault and Volvo which seemed to be failed in the year 1993. For instance, Volvo was a strongmanufacturer in the large car market while Renault consistently failed to make an impact as itproduces small cars with diesel technology. However, both the companies possess their diversemarket share but probably too small to survive in the global competitive car market (Björnerstedtand Verboven, 2014). TASK 1 KEY DRIVERS THAT LED RENAULT AND VOLVO TOCONSIDER A MERGER From the case, it can be analyzed that both Renault and Volvo possess strengths in theirrespective care segment areas. Such as Renault produces small cars while Volvo manufacturers’large cars. However, both the companies were too small in order to survive in a globalcompetitive market and thus face issues from different car manufacturing companies of Japan.They merely produce unique and innovative technology products as compared to both thesecompanies and this leads to decline of market share of Renault and Volvo. Therefore, both thecompanies undertook a mutual decision to adopt strategic fit and adopt a merger. Volvoorganization was stronger in Northern Europe and especially in North America while Renaulthad a larger market share in Southern Europe and South America (Warter and Warter, 2015).There are varied key drivers that led Renault and Volvo to consider merger situation such as ithelps firm to reduce their cost of operations, enhanced economies of scale and the opportunity toshare increasingly expensive research and development costs. However, all these factors assists1

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Case Study: Merger Between the Renault and Volvo