#60 Transnational Takeover Alert: Zhejiang Geely acquires Volvo
Chinese carmaker Zhejiang Geely will acquire Swedish Volvo from American Ford Motor. Geely has come a long (and fast) way from its modest beginnings as a motorcycle parts manufacturer to what is now China’s 12th largest automotive manufacturer. Being the 12th may not mean a lot in other markets, but consider two things: First, China is a huge market. Second, Geely has impressed at many car shows with high-powered concept cars and seems to be determined to grow further and gain market share. For Ford, selling Volvo is not only part of its recent strategy to sell off non-core brands (it earlier sold Jaguar and Land Rover to Tata of India), but it’s also quite an infusion of liquidity – out of the reported selling price of 1.8 billion US$, 1.6 billion will be in cash. For now, Geely has promised to leave Volvo alone, but it has also not failed to mention that it has already recruited a new team of executives to ‘oversee’ things at Volvo…!
January 16, 2011 @ 1:21 pm
The problem of this move from Ford to Geely is that most of the Volvo customers never think about who is behind the name Volvo-cars. Most people actually do not know that a Volvo car is not a product of the Volvo Company because Volvo cars were sold to Ford many years ago. On the other hand most of the customers think Volvo cars are on the same quality level today as they were when they were built by Volvo. Another aspect is the image of Volvo. Most people know the “old” Volvo image of the safest cars and vehicles but actually this image works only with the trucks, the busses, the construction equipment and all other products produced by Volvo. Regarding Mr. Hofstedes cultural dimensions it would be interesting to know if Volvo cars would be more successful than they are today if everybody knew that there is no link to the quality of Volvo products.
Especially the dimension of uncertainty avoidance is interesting to look at. My point of view is that if everybody knows that Volvo cars are a Ford or Chinese product, Volvo cars will lose market share in all countries with high uncertainty avoidance because people in these countries will lose their confidence in the products. Many people buy Volvo cars because of the image of Volvo but in fact this has nothing to do with the cars. For the cars, only the name and the emblem of Volvo is used, but that is all.
January 16, 2011 @ 10:04 pm
Taking over such an established brand like Volvo is a huge step for the Chinese carmaker Zhejiang Geely. The acquisition is connected on the one hand with many international and intercultural chances and the other hand it contains threats – both has to be considered.
In my opinion the different management styles will be a huge challenge, because the Swedish and Chinese management styles differ sharply and it will not easy to integrate two different corporate cultures. There are huge differences between Sweden and China in each cultural dimension of Geert Hofstede – power distance, individualism, masculinity, uncertainty avoidance and the long-term orientation. Additionally, the differences in working styles and difficulties in communication are important factors too.
I think that an international take over is a continuous cultural learning process with a wide range of perspectives and a good possibility to realize synergies.
March 12, 2017 @ 3:46 pm
May I add something very crucial to what my predecessors have already explained. I think it is important to actually point out what a great job the Chinese actually did. From the perspective of Zhejiang Geely they used the entry mode of brownfield FDI, foreign acquisition – acquiring Volvo.
All the concerns about culture and potential risks regarding that have already been mentioned in posting #31.
What we can conclude today is, that Volvo may is more Swedish than ever before. The new Chinese owners told the Swedish actually to become more Swedish than adapting in terms of design to established preferences on foreign markets. The new XC90 released in 2015 is stuffed with details of swedishness. The “Thor’s Hammer” LED running lights and the crystal-like gear lever sets the car apart from almost anything out there.
Zhejiang Geely perfectly understood that Volvo already was on the right track and built great cars and Geely was able to see the potential of the brand and the products. Rather than imposing a Chinese approach on Volvo they encouraged them to consequently follow their path.
Furthermore they enabled Volvo by financial support to develop two new platforms and today Volvo has the technological ability to keep up with the Germans. Moreover, production in China was established.
Geely recognized the degree of readiness of Volvos products. As a consequence of need of adaption, all newly developed platforms (called SPA, scalable product architecture) today are ready for long wheelbase models, crucial for Geely’s home market, creating economies of scale and allow the needed degree of localization. Adaption was not limited to size but also design and technology has been adapted to reach a high degree of readiness for foreign markets.
To me, Geely made Volvo better than it was for a long time before and even more successful on difficult markets like the German luxury car market.
Best,
Lukas
April 2, 2019 @ 12:13 am
With the fifth year of sales records in a row, Volvo celebrated an all-time-high-record in sales with up to 642,253 sold units in 2018. The first time in the company’s history, that sales outstrip 600,000 units a year. Volvo was always a well-established upper class automotive brand. Nonetheless, its global reputation for being the iconic of automotive security wasn’t enough, to keep the consistent in Swedish car-tradition designed and making head against all design changes on the market. During the (last) years as part of Ford, Volvo more and more got named dowdy.
The small Chinese company Geely at the time, when buying Volvo, smaller than its catch, obviously had a good notion of the market and of what Volvo needs to become successful again. Geely on one hand gave Volvo a modern design for being able to compete with its competitors but nevertheless kept most of the Volvo attributes. This was accomplished by giving Volvo far-reaching independency in doing its business. Geely didn’t make Volvo Chinese, it just changed those aspects of Volvo, which led to its downfall, against some Chinese viewpoints. Of course, also a technological downsizing i.e. due to a reduction and simplifying of engine offerings was made too, but though, the new approach of building and designing a Volvo plus keeping its Swedish attributes attracted the branch again and led to above mentioned new success.
Now, as Volvo is on its way to a serious player on the market again, Polestar, half owned by Geely, half by Volvo, is now the next market entry, creating a new upper class brand for purely electrical cars. In the year 2018, Geely advanced to Chinas third-largest carmaker. Today, Geely itself is a highly successful automotive company with several automotive brand, developing and building Daimlers next generation “eSmart” in a Joint-Venture in China and holding an almost 10% amount in shares of Daimler – which makes Geely the largest shareholder in the maker of Mercedes-Benz.