Geely's Acquisition of Volvo: Benefits, Costs, and Risks

This article discusses Geely's acquisition of Volvo, including the benefits of accessing funds and valuable assets, brand enhancement, and profitability. It also explores the reasons for direct investment in the US market and the drivers of international business growth. Additionally, it examines the economic and political arguments for regional economic integration and the reasons why there is not more integration in the world economy.

International Business
and Communication

INTRODUCTION
Section A
Why did Geely acquire Volvo? What are the benefits of acquisition? What are the potential
costs and risks?
Geely is automobile player who loved to invest in the low quality and low price car in
China. Volvo is well known brand of car producer located in the Sweden. His Chairman, Li
Shufu, who was investing in these industries from last 5 years Unfortunately, Ford refuses to sell
the brand to Geely (SENTISHCHEVA, 2021). According to the analyses made, the intention and
benefits of this acquisition are defined thereunder:
 Accessing Funds or valuable asset for new development: Volvo has one of the biggest
advanced technologies industry of auto-mobiles. It provide safety design and world wide
customer management service is they key to success for the Volvo. This will help the
Geely to increase the funds from investing in Volvo.
 Brand enhancement of Geely: The acquisition of Volvo, helps the Geely to enhance the
brand value in both China and other countries.
 High Possibility of a profitability: Volvo is succeed in growing their business in China
Geely believe that it is profitable in investing companies like Volvo.
Due to various economic reforms, the supply chain has been improving in various industries and
government has taken the strategic tool to enhance the auto-mobile industry to the world.
Without the government approval, Geely could not think about such acquisition. Therefore, the
Chinese government plays active role in supporting him for this acquisition.
The Volve acquisition allowed Geely to grow the sales in China. Why might an acquisition
have been preferred to simply licensing the brand and know-how from Volvo (assuming
that was an option)?
Geely was the one who wants to represent its product to develop the share market of Volvo in
China . In order to expand the sale, he needs to develop technology for international merge of the
brand to diversify the business overseas. The strategies needs to adopt long term impact of this
acquisition to increase brand , sales and technologies. Geely is the fourth largest independent
private automobile manufacture in the China and known for its self developed several original
products for the automobile industries. To be success in China, Volvo must address the following

factors such as local production, increase in supply chain etc. Simple licensing is necessary to
ease the medium of doing business. It provides simple procedures for legal compliances to
procure the products. The main challenge before Geely is financial Management to exchange the
currency rates to expand the business in global market. It requires them to analyse the capital
budgeting of the business after its acquisition (Luo, 2021). Also, Volvo faced loss in financial
performance which requires Geely to raise funds to make investment in this industry. Due to
Chinese culture , Geely founds difficulty in understanding the individual quality and preference
in the automobile industry.
After acquisition made by Geely, he actively plays important role in technological development
of the Volvo, Therefore he needs to expand the sale by simplifying the purpose includes :
 Products: The Geely can increase the sale price to make the product relatively high. The
Volvo price list operates in the different premium segment of automobiles.
 Market: It covers biggest market in both the U.S and the EU. It is small player in the
global market and have best growth in the global market. Finance Situation: Volvo has faced the financial loss many times and has taken many
steps to reduce the cost.
Following the Volve acquisition, Geely built a new wholly owned factory to produce Volve cars
in the United States. Why was a direct investment strategy preferred to other ways of
growing the US market, such as through exporting or licensing the Volvo brand and
designs to another producer?
Geely, a Chinese manufacturer of low product quality of auto mobiles. Chinese people usually
like to afford the luxury products and has classified culture. Volvo must change the local market
market demand in future. One main problem is the safety and quality of products may affect the
brand management. As Volvo is a big companies to they focus to share new technology and
develop cost effective method to make profit .But due to Volvo continues loss requires Geely to
make direct investment strategy to attract the investors to run in the competitive market. The
main issue before the Geely is to manage the currency exchange rate and taken global decission
to profit the company. They are trying to attract local customers to increase the market position
of the Volvo.
Volvo needs to operate separately to increase profit and reduce cost. Volvo should needs to
improve the working process of its operation and and negotiate with the government to ease the

policies of the local government so that it becomes easy for the investors to invest in such
companies. Reinvesting profits helps the investors to expand the business in the oversease4
market.
Benefits of Direct Investment :
 Market diversification: It helps to increase the market share and expand the business.
 Tax incentive: It helps to reduce the tax burden on the investors and promote investing
into the big companies.
 Lower Labour Cost: Investment helps to reduce the labour cost and promote capital
intensive techniques for effective production.
 Subsidies: It provide subsidy on investment of funds in the company and increase the
economy and growth of the country. Development of Human capital:Humans are the asset of the company and it can be
promote by building the strong relation with the employees by reducing the high
employment turnover which is the main reason for decrease in the cdmpany's
productivity.
What are the benefits of Geely’s investment in South Carolina to the US economy? What are
the potential costs? Do you think it was in the interests of the United States to let this
investment proceed?
Geely expansion of business in other countries helps them to establish new assembly plants and
international expansion of the auto mobiles (Qin and et. al., 2021). Investment in South Carolina
helps to increase the profitability of the U.S. Investment in the other countries helps the Volvo to
increase the investors and ensure the management of finance in the overseas market. Geely is
the key player of the automobile and well known international market where business can be
diversify to meet the international demand. Geely helps to strengthen the funds necessary to
attract the customer to create brand value. The customer are the potential buyer and their need
can be satisfy only after ascertaining their taste and preferences to build auotmobiles, a
successful brand. Investment by the International investors helps Volvo to meet finance
management of funds to generate high income foreign market. The Volvo provide production of
new engines to create image in market. The Unites State is known for its technology and
innovation and mass market can be covered by adapting the fluctuating market to meet the
consumer needs. The U.S is a great source of diversifying the business if money is invest at right

place on a right thing. The industrial relation with other countries will be affected by the future
acquisition. The collaboration of Geely with South Carolina is a remarkable change and attract
multinational investors in the International market. In the initial stage of development in the
domestic market, reverse engineering require for the production of nre technology car and
development of less cost prices product. Geely asset seeking technique help him to extend the
scope of the Volvo in the overseas market and promote multinational growth.
Section B
With globalization in mind, examine at least four drivers that have led to the increased growth
in international business in recent decades? Which do you think has been most
important and why?
Globalization is mainly the process with which all the interaction and the general
compliance and integration is taken in the people, government and the companies are being
taken. This manages all the global interaction through which they maintain all the growth
through international trade with the diversify and the exchange of belief, ideas and the
accumulated culture (Sheraz and et. al., 2021). This helps in enhancing the economic process and
also to evaluate and gain the cultural and social aspects. And this implies some of the main
drivers of globalization which are like: Political drivers- This involve all such trading areas and the rules with the deregulated
market that provides all such trading rules and also help in the foreign direct investment.
For instance, Eastern Europe have some latest developments. Technological drivers- This helps in maintaining the modern globalization with which all
the abrupt foundations are been underlined. As innovation in so many transportations
helps in managing the revolutions areas in the industry. As through technological areas
and the innovation will provide jet aircraft with all the eventual containerization. This has
all the telecommunication and the microprocessor with all such effective computing with
all emergent cost level. Market drivers- In order to manage the growth all such domestic areas and the saturated
markets will be taken. All such growth with the global expanding in all such integrated
areas and the overcome situation. Common customers imply to have channels of the
global marketing and transfer areas and the marketing nature.

 Cost drivers- All such efficiency in the cost through which the country manages global
firms and also to undertake the advantages of the general a fact. This driver provides the
global scale economy with high product in development.
There is been seen that Technology driver seems to be important as this r5eflects and manages
the modern globalization and there is underlined all the innovation in the transportation and also
inn maintaining the commination and delivery of the import export business practices within
time. It will also manage the global e-business activities.
a) Using BREXIT as an example, what are the economic and political arguments for regional
economic integration?
In order to maintain the political and the economic argument which are being laid through
general agreements their involved all the tariff and the non-tariff barriers with which all the
free flow in the effective areas and the factors with effective production is undertaken. As
when in general areas there is addressed that all the economic arguments with which they
manage the regional nature and the services. As in the case of Brexit there is been seen that
the European convention outrage and maintain the asserted areas and the management and
them involves the major issues in relation to the economic integration and the effective
practises (Rafindadi and Usman, 2021). All such management and the ways through
which the political and the porched stabilised arguments underwent to create the general
adherence, the taxes, GDP and all the Europeans issues will be undertaken in it.
b) Given these arguments, why don’t we see more integration in the world economy?
They main reason due to which there is no effective integration in the world economy is due
to the dependence on all the developed countries in regard to functioning of all the smooth
business practises. There is analysed that all such transactions and the ways with which the
countries manage the absolute power will undermine to declare the consequences and the
abrupt nature and safety. Other than this it is also seen that developing countries are not that
strongly compatible in managing the effective nature of working and also in attaining the
growth and practises through which it is been laid out that the companies true to manage the
working and the global transitions through developed nation. T5bheir is silos seen that due
to all such emergent and effective requirements and demands the countries led to face the
issue in relation rot integration and on world economy. The main portion the custom quality,

various barriers in relation to investment bad also in trading all such development gaps and
functions along with it the nascent regional areas bad rhea economic governance will led to
maintain the major issues in their working and the problems that are being led out in general
areas and the regions (Gupta and et. al., 2022). All such trade barriers and the ways through
which the development gap is outlined will be consciously managed and also to rely on the
emerging nature and the functions with which the growth and the import export will; be up
divested through which the global nature and the function is taken.
REFERENCES
SENTISHCHEVA, E.A., 2021. Globalization in the modern world. In Молодежь и XXI век-
2021 (pp. 11-13).
Luo, Y., 2021. New OLI advantages in digital globalization. International Business
Review, 30(2), p.101797.
Qin, L., and et. al., 2021. Does financial inclusion limit carbon dioxide emissions? Analyzing the
role of globalization and renewable electricity output. Sustainable Development, 29(6),
pp.1138-1154.
Tahir, T., and et. al., 2021. The impact of financial development and globalization on
environmental quality: evidence from South Asian economies. Environmental Science
and Pollution Research, 28(7), pp.8088-8101.
Xu, X., and et. al., 2021. Impact of globalization and governance determinants on economic
growth: An empirical analysis of Asian economies. Growth and Change, 52(2),
pp.1137-1154.
Sheraz, and et. al., 2021. Moderating the effect of globalization on financial development, energy
consumption, human capital, and carbon emissions: evidence from G20
countries. Environmental Science and Pollution Research, 28(26), pp.35126-35144.
Rafindadi, A.A. and Usman, O., 2021. Toward sustainable electricity consumption in Brazil: the
role of economic growth, globalization and ecological footprint using a nonlinear
ARDL approach. Journal of Environmental Planning and Management, 64(5), pp.905-
929.
Gupta, V., and et. al., 2022. Library social networking sites for fostering startup business
globalization through strategic partnerships. The Journal of Academic Librarianship,
p.102504.
(SENTISHCHEVA, 2021) (Luo, 2021)(Qin, and et. al., 2021)(Tahir, and et. al., 2021)(Xu, and
et. al., 2021)( Sheraz, and et. al., 2021)(Rafindadi, and Usman, 2021)(Gupta, and et. al., 2022)

REFERENCES
Books and Journals