You are on page 1of 27

KCB ID : 15737

1. Introduction The format of this study will be as follows: The study consist of two sections. In the first sections, success or failure of three companies in the automobile industry and their strategic Merger and acquisition (M&A) decisions and strategic alliances will be evaluated by using six different companies and the main strategic reasons of these moves are tried to analyse by investigating the overall strategy and achievements. The second section will be the evaluation of the key competitive threats of HewlettPackard and what types of threats the company will face in 2012 and onwards. 1.1 Automobile Industry 1.2 The Acquisitions of Swedish Volvo By Chinese Gelly The Swedish car manufacturer Volvo which was owned by Ford, has been bought by an unknown Chinese carmaker Gelly which is a cost effective car manufacturer in the industry. As adapted from the Dolan and Matthew (2010), the definitive agreement has been signed on March 28, 2010 which sale figure was approximately $1.8 billion. This was one of the biggest acquisition ever by a company in China.

1.2.1 The Reasons Behind This Acquisition 1.2.1.1 The Intention of The Buyer (GELLY) For a company which has an unrecognised brand image in terms of quality and price, it is very attractive to have a brand image of a company like Volvo. This is because; Volvo is a very well known luxury carmaker in terms of product segmentation, brand image, use of technology and company culture. It might make a very good synergy in this acquisition from the perspective of Gelly company. According to the intention of Gelly`s chairman, Li Shufu, (1-2) the reasons are as follows: Getting the access of advanced technology via Volvo; The fact that Volvo is the advanced technology user in the industry in terms of safety designing and environmental technology. In addition to this, Volvo is known as the

1

KCB ID : 15737

safest carmaker by many authority in the world. With this acquisition, Gelly might be able to have an advanced product development process for the new car technologies. To enhance the brand image of Gelly; For instance Gelly will be able to gain prestige and also it will get a lot of attention from social media with this acquisition. In this way, potential consumer in western countries will already know the Gelly car brand even they have not used it. This action will precisely help to expand in abroad in the future. To demand high rate of profit with this acquisitions; Every single organisation wants to increase their profit margin and so, the chairmen of the Gelly was expecting windows of opportunity from Volvo for high profit margin although Volvo was still losing money when the acquisition was made. This is because; Li Shufu believed that with the variety of models in Volvo, they can succeed and increase their market share in the industry. Ultimately, as adapted from the Volvo sales increase,Volvo group has done very well by returning to profit after the acquisition. High enhancement of growing possibility in the Chinese market with Volvo; From the Gelly`s chairman view, they can make a significant and faster growth in Chinese market with Volvo and they can help Volvo to understand the market deeper and better with this acquisition. And also they might promote the Gelly brand internationally with the Volvo acquisition. Development in the automobile industry in China; Chinese automobile industry does not consider only domestically, it also eyes on overseas expansion. For this reason, the government supports Gelly to acquire Volvo in order to open overseas expansion and this acquisition will significantly enhance the value of nation`s car brand. Therefore the Chinese government has supported this acquisition actively. Lastly, top of all these reasons the chairmen of Gelly , Li Shufu, dares to take a risk in business world as an Chinese entrepreneurial leader.

2

1. Although the acquisition of Volvo is relevant with this phenomena. Gelly is roughly the tenth biggest company in China. According to 2009`s sales figure is 326719 units and the total number of employees are 12000.2 The symbol of Gelly ( cited from www.com) 3 . In 2009. living style and products are distributed and emerging markets are occurred. The word of globalisation gains meaning in terms of providing scope for buying and selling of products.gelly. For instance The road of silk used to provide this connection between Asia and Europe. through globalisation the worldwide export of western culture. According to Chinese perspective. when Chinese industry has expanded. Figure 1. In 2000s. exporting in China has surpassed Germany by becoming world`s biggest exporter. According to many observers. management styles and cost reallocation. most of the industrial nations went into the recession. 1.2. this acquisition has a significant impact on cultural and political systems and economical developments in the world. it affects important phenomena in the industry according to the past. Gelly will face many challenges such as differences of culture. China`s GDP will surpass the America in ten years time and it will become the biggest economy of the world.2. On the other hand. In this century. this acquisition will act like a test case.2 The Global Perceptions About This Acquisition Although this acquisition is not a world shaking case in terms of scale for the worldwide business.KCB ID : 15737 1.2. this acquisition will impact the increase power of Chinese economy.2 Gelly Company Gelly is one of the four biggest independent car makers company in China. According to some authors.

2.com) 4 .gelly.3 Gelly`s Production Locations in China ( cited from www.KCB ID : 15737 Figure 1.

2.gelly.KCB ID : 15737 Figure 1.4 The Recommended Prices of Products (cited from www.com) 5 .

2.5 The Annual Sale Volume of Gelly between 1998 to 2009 (citted from www.5.2.KCB ID : 15737 Figure 1. 6 . the sales volume was constantly rising and the company had the biggest increase between 2008 and 2009 .geely. Ultimately.com) As can be seen from the figure 1. it might be a good time to take risk to acquire Volvo.

For this reason. Gelly`s main market is the domestic market according to figure 1. As a result.6 Top Ten Automobile Manufacturers in China in terms of Market Share in 2009 ( citted from www.2. 2010 and worth $1. Therefore. Geely gained access for rapid technological development in a near future.geely.2.3 The Process of Acquisition The definitive agreement was signed on March 28.2.6. Gelly wanted to acquire Volvo to be able to reach their global target.com) In terms of market share of top ten players in China automotive industry.8 billion. 1. Geely`s brand image has got many positive coverage from international and domestic social media. 7 . While this acquisition was occurring.KCB ID : 15737 Figure 1. they might have goals for international growth in the market.

1 Some www. As can be known by many.4 The Company of Volvo Volvo has a large variety of product in car industry.KCB ID : 15737 1.com) of the Volvo`s models(citted from 8 . Figure 1.4.volvocars. The sales price of Volvo cars is comparably high according to other carmakers such as Geely.2.2.

4.KCB ID : 15737 Figure 1.2.5% in total. 9 .com) As can be seen from the sales volume of Volvo.2 Volvo Sales between 2008 and 2009(citted from www.6% and 1. they have a respective market share proportion which is 0. This figure has been very stable over the years.volvocars.

81%.2.4. in terms of having a broad scope of market such as China and also the fastest growth of automobile industry in China are encouraging aspects of this acquisition.2. Tata group is the largest automobile and commercial vehicles manufacturer company in India and its world market share in the industry is 0.3 illustrates the volume of Volvo annual sales in total between 2000 and 2009 (adapted from Volvo annual report 2009) The financial situation of Volvo has been negatively changed over the past years in figure 1.3.3 The Acquisition of British Jaguar by Indian Tata 1. 1. and it is located in Mumbai. this integration does not look very rational from the point of accustomed wisdom because of different good specification. Tata motor is also the 19th biggest automobile manufacturer in the world according to its sales figure in 2007. Volvo and Gelly should achieve the appropriate strategy in order to have a good synergy of these two companies. company culture and language.2. target audiences.3 1. On the other hand.1 The Company Profile of Tata Motor Tata Motor used to be known as an engineering and locomotive company which was called TELCO.5 Conclusion As a consequence of this acquisition. Apart from all these opportunities and threats. India. 10 . As reported by OICA data in 2007.4.KCB ID : 15737 Figure 1.

On the other hand. According to the intention of Tata Motor.2 The Reasons Behind The Acquisition of Jaguar Figure 1. “ We are very pleased at the prospect of Jaguar in order to be an important part of automotive industry”. Ratan Tata. this acquisition will help the company to have a global impression in the premier automobile market segment which this segment consist of luxury brands such as Porsche and Mercedes.KCB ID : 15737 1. said. 11 .2. As adapted from Tata Group chairman.3.1 shows some of the acquisitions made by Indian Companies.3. their action will be keeping the identity of two brands intact in supporting their growth and competition by benefiting from their expertise and experience. Figure 1.2.3. Furthermore.1 Some Acquisitions Made By Indian Companies According to Tata motor’s long term strategy. they tend to stabilise their position in the domestic market and whereas they want to expand their business through international markets by having acquisitions and strategic collaborations. Tata motor has made the cheapest car of the world which is called Tata Nano valued at $2500.

eventually it might take a long time for a company to be a world class iconic brand name like Jaguar in the automobile industry. This is because. 1.3. As it refers to Morgan Stanley report. 2008. As a British colony in the past India. it was acquired by Ford in 1989 valued at $2. Ultimately.5 billion.3 The Company Profile of Jaguar Jaguar is known as an iconic car brand of British nation in the automotive industry.KCB ID : 15737 Tata Motor is able to get the access for advance technology of car industry by entering this acquisition with Jaguar. Tata can improve the core techniques of production processes. this deal will positively decrease the dependence of Tata in domestic market. Firstly. 12 .3 billion. After that Jaguar has been bought by Tata motor from Ford in 2008 worth $2. England. It can be a good reputation for their brand image in the domestic market. Designing and engineering processes are carried out in Coventry. They have a reputation of luxury car manufacturer in the market. 1. it seems to be negative for the Tata group in terms of increase the earning volatility.3. Jaguar.4 The Process of Acquisition The deal of acquisition has completed on June 2. which is an identified brand name for British nation. This deal of acquisition can provide a rapid enhancement for the recognition and credibility of Tata motor products. from the Indian government`s point of view. From the perspective of Tata group. it seems to be an attractive choice to acquire a brand.

1 Total sales of Jaguar and Tata Motors Price Source:http://auto.indiamart. Therefore.KCB ID : 15737 Figure 1.3. The sales of Jaguar is up at 26 921 units which is over the same month in last year. as can be seen from Figure 1.3. It is early to say that two company will cooperate in a perfect way and complete their adaptation to each other very well in terms of company culture. it seems to be successful acquisition in terms of companies` sales figures and market shares. 2012 .3.4. 1. 101605 units which is over figure according to same period last year.4. sharing the latest technology and management style etc.5 Conclusion Consequently. 13 . it could be said that the probability of having synergy with this acquisition is positively high in terms of sales figures and market share.html However.com/autoblog/tata-motors-increased-global-sales-21-in-july2012.2 that the global sales rised with 21% on July.

Besides. the company was durable in terms of financial statement and performance data. 1. BMW etc.1 Fiat Company Profile Fiat company is an Italian manufacturer in automobile industry and is located in Turin. Fiat was also engaged in the manufacture of locomotive engines. Lastly.4.KCB ID : 15737 In order to have stableness in the market. Therefore it might be a good time to take risk by having deal of alliances with some others in order to expand the business. Fiat was less affected by the economic crisis.China and Middle East countries against US and European markets for Tata and Jaguar. According to OICA data in 2009. In 2009. This is because. it is difficult to sustain the brand image of Jaguar against other premium pricing models such as Mercedes. carriages and aircraft. Italy. 14 . Tata motors needs to focus on alternative markets such as Russia. Tata motors needs to spend effort on keeping up with competition rather than pushing the volume of sales. the Fiat group was the ninth largest car manufacturer of the world and the biggest in Italy. The company was established in 1899.4 The Strategic Alliance of Fiat and Chrysler 1.

4. sales of cars was 2.4. The company was in the statement of financial and economic crisis after 2009 and it was going to bankruptcy after the acquisition failure of Daimler-Benz. 15 .Since 2009.2.2 Fiat Company SWOT Analysis LOCATION OF FACTOR TYPE OF FACTOR FAVORABLE INTERNAL STRENGTHS UNFAVORABLE WEAKNESSES ● Deficiency of scale ● Diversification in according to pers business ● Diluted performance ● Strategic M&A in dividing the activities business ● Products innovation ● Having less impression in majority of markets EXTERNAL OPPORTUNITIES ● Capability of growth in track markets ● High demand of agricultural machinery and equipment ● Growth in construction industry THREATS ● Recession in 2009 ● Decline of global automotive industry ● Pressure of high competition 1. Fiat.2 Chrysler Company Profile Chrysler is an American company and was established in 1925 in United States. Chrysler has a strategic alliance with Italian carmaker. According to Chrysler group annual sales reports.6 million in 1999 and in the year of 2008 sales figure has declined to 1.4 million.4.1. which Fiat is the owner of stake majority in Chrysler group. It can be clearly seen from the figure 1.KCB ID : 15737 1.1 that the company is not doing well so far with the acquisition of Daimler-Benz.

2.4.1 Sales figures of Chrysler in the past years (source: www.com) 16 .KCB ID : 15737 Figure 1.autointell.

it does not mean that this plan will entirely save the company.3 The Reasons Behind This Strategic Alliance The meaning of this agreement for Fiat is to gain an opportunity for entering into the U. However.4. for Chrysler.S. In exchange for this.3. Chrysler will be able to use Fiat`s advanced technology for its manufacturing process. the US government also has effects on this alliance. as can be illustrated from figure 1. Otherwise. they would not make returns for debts and so they had to go bankrupt.4. market. Figure 1. This is because.1. 17 . Fiat also wanted to have manufacturing plants in North America in order to use resources in there.4. The reason behind of building up plants in North America is to satisfy the demand of small car in the near future.3.1 Modification of the strategic alliance between two companies (Source: Integrative Agreements in Multilateral Negotiations: The Case of Fiat and Chrysler) The condition of finding a partner is specifically only way for Chrysler to use government funds.KCB ID : 15737 1.

Chrysler.KCB ID : 15737 On the other hand. Fiat will get a chance to set up plants for its small car industry in North America. Chrysler can use the distribution channel of Fiat in the European market and it will support Chrysler supply chain system. it can be a good opportunity for Fiat to reenter the U. There might be some weaknesses of this alliance as well. Figure 1.and so. In addition to this. In the near future.3. Chrysler will be able to survive in the market and to save itself from going bankrupt.S market. this is because. Fiat has specialised in small car industry and their engines as well as the premier car segment.2 that Fiat has a rising trend for international markets.4 Evaluation of Strengths and Weaknesses of Chrysler and Fiat With The Alliance After this strategic alliance. the competition of automotive industry is intensifying day by day . Chrysler does not have plenty of choice apart from this agreement.3. some problems in integration of corporate cultures of the companies and in the share of technology may occur.4.2 Sales trend of Fiat the last years (Source: Fiat Annual report 2008) 1. It might be encouraging reason for the Fiat company to have this type of agreement to expand the business. Fiat can enhance its existence of the U.S market with an American brand name.4. they need technical and financial support in order to keep up with competition. Therefore. It can be seen from the figure 1. The discrepancy of company portfolios may pose problems and 18 .4.

This is because. ownership and management problems can be some of the weaknesses of two companies.1 Number www.4.net) According to the number of sold units. 1.5. the market share in 2012 also has a rising trend at 11.5 Conclusion Figure 1.net) of sold units between 2007 and 2012 (Source: Figure 1. these figures should gradually increase 19 .KCB ID : 15737 also distribution.carsitaly. the strategic alliance positively affected Chrysler group. However.4.5.6 % according to figures in the past.4.2 The change of Chrysler`s market share between 2007 and 2012 (Source: www.carsitaly.

KCB ID : 15737 instead of being fluctuational. researchers and businessmen.3 Chrysler`s Market share change between 2007 and 2012 (Source: Graphing By Bloomberg Business Week.S. Hewlett-Packard (HP) is the world's 11th most valuable brand. However.1 Executive Summary As per the recent announcement of world`s authority.4. Key Competitive Threat of Hewlett-Packard 2.5. revenues has increased but profits went down.2 Hewlett-Packard Computers and Its SWOT Analysis In years of 90s. which targeted mostly audiences from university students. These activities helped HP to lead the PCs market in the U. 2. Figure 1. 2. edmunds. this is because. the year of 2012 should be the recovering process for profit returns. HP achieved a high product variety target. It has also supported its success through acquisitions such as made with Apollo Computer in 1989 and Convex Computer in 20 . the company had worthless mergers by making overpaid figures. That is why.com) Fiat company needs to consider all these aspects and it needs to take risks wisdomly for generating the synergy for this alliance. This means that this agreement still needs time to be beneficial for both company. over the last couple of years. The HP brand name is applying to more than 150 countries by ensuring quality to its consumers.

the focus area will be the division of Personal Systems Group (PSG) which covers PCs and accessories for businesses and consumers. Furthermore..3 Competitive Analysis of HP The application of Porter's five forces can be found difficult in large corporations such as HP./Likens2012/reports/HP.2 SWOT analysis of HP (Source: economicsfiles. This is because. The PSG is presenting big challenge by declining its revenues and margins.com” Figure 2. Out of these six units.KCB ID : 15737 1995.edu/jlikens/. HP has switched to online selling with an independent subsidiary company which is called “hpshopping.pdf) 2.. HP has six different business units. 21 .pomona.

HP has challenged to operate this market.3. these reasons caused decrease of revenues and margins and so.) there are a lot of requirements and massive resources. this is because.1 Threat of New Entrants ( Reasonable): The market of PSG is the one of the most competitive markets in the electronic industry. Ultimately.KCB ID : 15737 The application of Porter's five forces for HP's PSG can be illustrated from the figure below. the threat of new entrants is not high.3 Porter`s five forces for HP Personals Systems Group 2. The profit margin is very little because of high volume and the nature of products (massmanufacturing). 22 . the market is not attractive in terms of the amount of revenues and high margins. On the other hand. APPLE etc. Moreover. Figure 2. for becoming a member of this market as a competitor( HP.

electronic industry. And also.KCB ID : 15737 2. majority of HP suppliers are small and this causes to 23 .3.3. a PC or a laptop consists of many parts and each part may require different company to produce for HP. the bargaining power of buyers is reasonable. Some of the parts can be provided by large suppliers and some others can be done by small companies. Figure 2.2 Bargaining Power of Buyers ( Reasonable): Buyers have reasonable bargaining power for a couple of reason. For the overall picture. Strategically.3.2 that buyers can distinguish which product is better than another. The second reason is that HP's PSG buyers (such as businesses and universities) are scale buying and they can negotiate with HP by using their size and threaten its profit. As can be seen from the figure 2. having large suppliers are more advantageous for efficiency and cost negotiations. computer products are more comparable and recognizable in terms of their commoditization aspects. this is because. However.3. The first one is that number of buyers are many and they do not have enough power for synergistic effect on HP`s margin.3 The Bargaining Power of Suppliers ( High): According to the nature of business. For instance. brand loyalty is very low. the level of suppliers`s bargaining power is high in HP's PSG division. HP or other competitors are able to meet customer`s demand for their customisations such as functionality. features etc. 2. As a result of this.2 Customer satisfaction between Mac vs PC (Source: American customer satisfaction index) The users of PCs have more bargaining power.

3.4 below.4 Sales of PCs and Mobile Devices (Source: www.3. personal computers have been losing their market share in electronic industry.bwinparty. they can be complete substitute for PCs. the strategy of having small number of suppliers will be favorable for the company. smartphones and tablets are growing very rapidly while the growth of PCs and laptops are increasing very slowly. especially in the electronic market. 2. According to sales growth.KCB ID : 15737 have less competitive advantage for manufacturing their technologies and so. Since. it cannot be said that they will not lose their popularity for the market share. Figure 2.4 Substitutes ( Reasonable): PC is the one of the most important consumer goods for last 20 years. However.3. This impact also can be seen from the figure 2. the market share of PCs presumably will not stay around if the strategy of mobile devices proceeds in this way. smart phones.com) According to these sales figures. mobile devices and tablets are penetrated into market. 24 . because of mobile devices` functions and usefulness. Furthermore.

Apple is differentiating itself by using different operation system and hardware and softwares and so specifically Apple can ask for higher prices.3. Six of the seven major personal computer manufacturers are using Windows operating system and similar capability of hardwares.5 Computers prices from 1997-2011 (Source: Bureau of Labor Statistics) For the last two decades. Therefore.3. recently HP has taken measures by developing Touchpad and acquiring the smartphone maker. For the short and long term planning. HP and its competitors have no option apart from competing with each other. 2. valued at $1.5 Internal Competition (High): As a consequence of having high power of supplier.8 billion. reasonable threat of substitutes and reasonable threat of new entrance. their prices are very close to each other. Figure 2. However. Palm. 25 . these measures could not help Hp to compete against Apple and Android-based products. the rivalry will be strong. moderate power of buyer. HP needs to form itself in order to be different from its competitors as Apple has done. the prices of PCs has a dramatical decrease in overall image.KCB ID : 15737 Against this strategy.

volvocars.foxnews.com OICA (2012) "World motor vehicle production by manufacturer: World ranking of manufacturers.com.jpg?9d 7bd4 http://theeword. "Volvo Deal Sparks Leadership Shake-Up .com OICA (2012) "World Ranking of Manufacturers 2009 by production".KCB ID : 15737 3.com/2009/03/31/brand-loyalty-by-mobile-pc-brand/ http://theeword.economagic.uk/seomanchester/pc_sales_decrease_as_tablets_rise_in_po pularity.com/wpcontent/uploads/2011/07/Smartphone_Tablets. 1999 -2008 International Journal of Business and Social Science Issue – June 2012] http://www. Retrieved 2009-06-19 http://auto.exe/form economics-files.edu/jlikens/..co. Matthew (2010).pomona.indiamart. 3 No. 2012 http://www.shopping./Likens2012/reports/HP.com/scitech/2011/08/18/hp-kills-tablet-smartphone-pcdivisions/ http://www.com" www.html http://thegadgetfan. Jaguar Cars Ltd. Shareholder..com/notebooks http://technologyuser.html www.REFERENCES                     Dolan.com Vol..com/en/best-global-brands/best-global-brands-2008/bestglobal-brands-2011. Year 2011".com/em-cgi/daychart. "The Years 1989 to 1986". 12 [Special 26 . Chrysler Group LLC Annual Sales Reports.com/autoblog/tata-motors-increased-global-sales-21-in-july2012.aspx "Hewlett Packard Co : Form 10-K".WSJ.hp.pdf www.uk/seomanchester/pc_sales_decrease_as_tablets_rise_in_po pularity http://www.gelly.bwinparty.interbrand.co.

http://www.com/watch?v=y3We1rpAQhg OliverCJoseph 2012. Carlos Ghosn of Nissan/Renault: Look Ahead. Sergio Marchionne Resurrecting Chrysler. accessed 28 November 2012.Mr Li Shufu. Dont Stand Still. http://www.com/watch?v=h3ppoyWNN7s> (1:30-2:48) 27 .youtube.youtube. accessed 17 November 2012.com/watch?v=yChtop17sd8 ( 13:01-14)   Pentastar 2010. http://www.youtube.com/watch?v=BcStBzQWzGY Stanfordbusiness 2010.youtube. <http://www.KCB ID : 15737   Paintandpanel 2010 . Volvo . Chrysler Under the Pentastar 5-1-09. accessed 28 November 2012. online video.