Volvo’s Transformation under Geely: No Smooth Ride in the US?




Case Details Case Introduction 1 Case Introduction 2 Case Excerpts

ABSTRACT

The case discusses the transformation of Swedish-run luxury car brand, Volvo Car Corporation (Volvo), under its owner, Chinese multinational automotive company, Zhejiang Geely Holding Group (Geely). Ever since Geely acquired Volvo from the American automaker, Ford Motor Company (Ford) in 2010 for US$ 1.8 billion, the company had been tackling the challenge of reviving Volvo. The Swedish company had recorded pre tax losses of US$ 934 million for the year 2009, attributable to the global economic downturn. To revive Volvo’s fortunes, Li Shufu (Li), chairman of Geely, devised a turnaround plan under which he proposed to make Volvo profitable by expanding its sales in China to nearly 1 million vehicles a year, set up a low-cost manufacturing plant in China with an annual capacity of 300,000 vehicles banking on China’s inexpensive labor and market potential, and produce more cars out of Volvo’s European factories. In addition to this, Geely’s Hong Kong listed unit, Geely Automobile Holdings Ltd., planned to add two or more luxurious car brands in a bid to boost Volvo’s global sales. Industry analysts expressed skepticism over Geely’s ability to turn around the loss making Volvo as the ailing brand had a very niche market. Moreover, they felt that Geely had no experience in selling luxury car brands and was known for manufacturing cheap cars with a short history and questionable quality and poor safety while Volvo had a long history of being recognized as a luxury car brand and was known for its quality and safety standards. Some critics also pointed out that several Chinese companies had a relatively poor record in integrating their foreign acquisitions and Geely could also face issues related to cross-cultural management.... ...

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Issues

The case is structured to achieve the following teaching objectives:

  • Analyze the effectiveness of Geely’s efforts to revive Volvo in the US auto market.
  • Formulate strategies for Volvo to successfully compete in the US auto market and sell 800,000 vehicles globally by 2020.
Contents
INTRODUCTION
LI SHUFU AND GEELY
ABOUT VOLVO
ACQUIRING VOLVO
REVIVING VOLVO
THE RESULTS
TAPPING CHINA’S LUXURY CAR MARKET
LOOKING AHEAD
EXHIBITS

Keywords

Geely, Volvo, Li Shufu, Acquisition, Turnaround, Chinese automobile industry, Luxury car segment, American consumer behavior

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