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Volvo and Geely

In: Business and Management

Submitted By agentXYZ
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Assess Volvo’s strategy and performance prior to being acquired by Geely.

Targeting the lower end of premium auto segment, historically, Volvo has focused on sustaining competitive advantage in safety through constant innovation. Over the last 82 years, the strategy has earned Volvo a strong brand equity and global recognition of its reliance and adherence to high safety standards. However, in 2000s it struggled with profitability due to increasing competition, changing customer preferences, and ineffective cost management and, finally, the recession.

Discuss Geely’s strategy and competitive positioning in the auto industry prior to acquiring Volvo.

In contrast to Volvo, Geely targeted the low cost-low quality budget segment, pursuing tier 2 and 3 towns in China. With relatively short history and small size, up until recently Geely had been mostly using the imitation strategy in its car design and production, which allowed for growth and increasing profitability. However, to accelerate growth of its modest market share, Geely has shifted its focus on technology in order to differentiate from the steep competition. Its competitive positioning is being in transition from low price advantage to technological advantage, with the objective to rapidly expand domestically and internationally.

Why did Geely acquire Volvo? What are some of the merger integration challenges Geely faces, and how should they be addressed?

There is very little overlap between Geely and Volvo in nearly all aspects of doing business – target market segment, brand positioning, corporate culture, cost structure, technology use and others. In light of common M&A failures due to cultural misfit and failed integration effort, the Volvo-Geely integration sounds particularly challenging. From first glance, the acquisition doesn’t reveal an obvious synergy potential. However, there is…...

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