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

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