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MGMT3001 Global Business Strategy Individual Essay

   

Added on  2020-10-07

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Student: Georgia O’Brien 45176302 Tutor: Amrita GautamMGMT3001 Global Business StrategyIndividual Essay:Geely’s acquisition of Volvo:Can Geely compete on the global car market? 1

Student: Georgia O’Brien 45176302 Tutor: Amrita GautamGeelyAuto Group is an automobile manufacturer based in Hangzhou, China and wasfounded in 1997 as a subsidiary of ZhejiangGeelyHolding Group (History, 2020). From theearly stages of development, Geely realised they needed to orchestrate the horizontalacquisition of Volvo into their business strategy, in order to maintain a low-cost businessmodel, whilst adopting Volvo’s established trademark, to fit global market demands (Laouiti,Bieske and Sodar, 2018 p.131.). This momentous deal placed Geely on the forefront of future development, as the acquisition gives the company favourable opportunities forexpansion within the global market. Thereby, through theories includingPorters 5 forces,RVB, BCG matrix and the VRIN model, thisessay will analyse Geely’s successes andchallenges in the company’s acquisition of Volvo, giving insight into Geely’s degree of competitive advantage amongst other automotive manufacturers.Horizontal acquisition involves a takeover of a company within the same industry and sameproduction stage, enabling the acquiring company to diversify their business throughgaining access to new market sectors and open innovations (Liu, 2012, p. 554). Prior to acquiring Volvo, Geely automotive was a small Chinese manufacturer known for its moderate pricing and low quality. Contrastingly, Volvo is one of the worlds most advancedand opulent car manufacturers, renound for its enhanced technology and safety features(Chandera and Widjojo, 2012, p.129). As Volvo has an established market presence andcustomer base in different demographics, the horizontal acquisition can further expandGeely’s distribution coverage, giving access to new market sectors. Furthermore, theacquisition of Volvo was one of the biggest outbound acquisitions made by China (History,2020), attracting a strong, global media interest at the time. This resulted in Geely becoming2

Student: Georgia O’Brien 45176302 Tutor: Amrita Gautamglobally recognized, without having a direct product line in any western country. Ultimately,this reinforces the capabilities for building immediate international presence in new marketsectors, by acquiring a well-renound brand.In order to understand Geely’s strategic positioning within the global car markets, it is important to apply the Resource Based View (RBV) framework. This enables Geely to identify the key competences which have contributed to the company in gaining a competitive advantage. The RBV framework is a heterogeneous model which breaks downan organisation into resources and capabilities, analysing how well the company infiltratesthese two elements to achieve internal functionality (Miller, 2020). Geely’s most valuableintangible resource is its brand equity. Before acquisition, Geely lacked capital and could notinvest in Research and development, as Chinese Indigenous brands had weak customerloyalty. Because Volvo is based in Scandinavia, it gives added competitive advantage, as consumers resonate the brand with European elegance and ingenuity. This non-substitutable resource cannot be mimicked, as brand recognition has been built throughyears of quality deliverance, posing a strong advantage when it comes to rival competitors(Ambler, 2020). Geely’s strongest capabilities lies in the innovative technology acquired bybuying Volvo. This allows Geely to target the widest possible demographic, as Geely’smodels are designed with price affordability, yet innovative ingenuity, meeting all requirements for the VRIN model (Ambler, 2020). Both of these resources and capabilitiesdiscussed create competitive advantage by striving to increase consumer loyalty. Bymaintaining brand recognition and technological advancements, it will ensure Geely remains3

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