According to the statistics of Chinese Ministry of Commerce, in 2013, Chinese investors made direct investment overseas in 5,090 enterprises in 156 countries and regions. As of the end of 2013, China’s non-financial direct investment overseas totaled US$ 525.7 billion. The number of international acquisitions by Chinese firms has grown remarkably in recent years.
Traditionally, exploiting economies of scope and scale or taking advantage of market imperfections was deemed by firms a dominant way of achieving competitive advantage . However, due to the forces of globalization which have caused economies to become more integrated, there is a realization among firms that these traditional ways of achieving competitive advantage now have only limited profitability. As a result, mergers and acquisitions have become an increasingly popular strategic choice for organizations (Nahavandi and Malekzadeh, 1988; McEntrie and Bentley, 1996; Zhu and Huang, 2007).
On March 28, 2010, Chinese automotive manufacturing company Zhejiang Geely Holding Group’s acquisition of Volvo Car Corporation for USD 1.8 billion (NYDailyNews, 2010). Geely is known as a low cost car maker and the acquisition of Volvo will allow them access to Volvo’s vast experience, acquire advanced technology and managerial know-how, brand image and distribution network. In fact, through acquisition it will help Geely to compete better with other automaker globally and it will allow Volvo to succeed in China automotive market and start making profit.
Zhejiang Geely Holding Group
Zhejiang Geely Holding Group privately owned by Chinese automotive manufacturing company that was founded in 1986. Geely launched its auto manufacturing business in 1997 and over the past ten years Geely has grown fast as one of China’s top ten auto manufacturers today. Geely said that their rapid growth has been built on careful planning and innovation and Geely’s independent R&D in vehicles, engines, transmissions and hybrid technologies had meant that the firm is the only Chinese car manufacturer to have developed its own range of engines – including eight series of engines between 1 litre and 1.8 litres supporting both manual and automatic transmissions – plus other valuable technologies. (Geely.com, 2011)
In 2005, Geely Automobile Holdings Ltd. was listed on the Hong Kong Stock Exchange and is responsible for the majority of Geely's manufacturing operations. Geely is headquartered in Hangzhou, the capital of Zhejiang province, and operates six car assembly and power-train manufacturing plants in China that are located in Lanzhou, Gansu Province; Linhai, Zhejiang Province; Luqiao, Zhejiang Province; Ningbo, Zhejiang Province; Shanghai and Xiangtan, Hunan Province. These facilities enable a production capacity of approximately 300,000 cars per year.
However, Geely is described by some foreigners as a Chinese upstart and barely known outside China, partly because its range of mainly...