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In: Operations Management

1- What might be the underlying motivations of Geely's acquisition of foreign auto brand? 2- How...

1- What might be the underlying motivations of Geely's acquisition of foreign auto brand?
2- How does cooperation in international business offer competitiveness?
3- What role can the government play in promoting internationalisation?

China Globalises London's Black Cabs lobalisation refers to international transactions, co- company for last 70 years. Coventry city is the birth place of operation, and competition among firms. China has British motor industry and has long tradition of manufacturing become one of the most active trading nations in an iconic automobile brands like Jaguar, Rover, Triumph, and increasingly globalised world. China's pursuit in transforming Armstrong Siddeley. The FX4 model taxis rolled out in 1959 itself into an industrial economy gave birth to a thriving auto from Coventry plant set the quintessential shape for the black mobile industry and Geely Automobile Holdings Limited was cabs. They formed partnership with Geely in 2006 which fi- founded in 1986. Geely is a subsidiary of Li Shufu's Zhejiang nally acquired the taxi maker in 2012 for £11.4 million after it Geely Group. They began with motorcycle production and went into administration. London Taxi Company's current annual eventually started manufacturing cars in 1997. Geely's moto production is approximately 2000 taxis. Geely has been con- of 'Happy Life, Geely Drive' encompasses its customers, sup- stantly investing to increase capacity and competitiveness since pliers and human resource to manufacture safe, environmental acquisition. The company has recently announced a £250 friendly and god value automobiles. Relentless pursuit of bet million investment to build a new factory with a production ter technology, foreign brands and oversees market resulted capacity of approximately 36000 cars annually. This new in- in Geely's European acquisition of Volvo cars in 2010 and vestment is celebrated locally and nationally due to 1000 new London Taxi Company (LTC) in 2012. jobs creation and boost to the local economy. Geely's ambition London Taxi Company is the manufacturer of the iconic to put iconic London taxis in all major cities in the world require London Black Cabs. Coventry has been the home of the lots of innovation in emission technology and globalising the London taxi experience. The current technology is not suitable The Chinese state extended its support to fund Geely's for bigger cities due to high emission, less fuel efficiency and oversees ambitions. China EXIM bank is offering a 20 billion bulky weight. The company has pledged to invest a further £80 yuan credit line to Geely. This is exciting news for privately million in research and development of TX5 model with hybrid owned enterprises in China as favourable credit lines were engines. Hybrid and electric taxis are expected to roll out from mostly available for the state owned enterprises (SOEs) until the new factory in 2018. recently. This is an expected move from new Chinese leader- Western manufacturers are also developing strong manu- ship team under chronic overcapacity and mounting losses of facturing bases in China to tap the opportunities presented the State Owned Enterprises. by the increasing purchasing powers of Chinese people. Geely's ownership of London Taxi Company is an ex- Competition from foreign manufacturer, cost pressures due ample of multinational corporations (MNCs) from emerging to stringent regulatory requirements at home and volatility in economies acquisition in the industrial hearts of developed some export markets are some of the current challenges for countries. This is a fairly new phenomenon in international Geely. The management is searching for new opportunities to business which becoming more and more common with grow- overcome these challenges. ing powers of emerging economies.

Solutions

Expert Solution

  1. The underlying motive of Geely to buy the international brand Volvo was to move up-market. Volvo has been making electric and hybrid cars since some time and buying stakes in the brand has given Geely the entire market of Volvo along with the innovations which Volvo has been producing. With this Geely also reunited its ties and started manufacturing in the markets of China, Europe, and the US, which it had not been doing earlier.
  2. It is noticed that if the companies are interdependent i.e. are cooperative with each other, they can offer high competitiveness in the international market. Once two companies join hands, their resources, capital, technology, and employees are shared and they work together to produce the best of products in the national and international market. Together the brands will prove to be far more strong than the rivals and hence there will be very little competition for them in the international space. This can prove that cooperation leads to low international competitiveness for brands.
  3. The Government can play a key role in internationalization. It can help the foreign brands to open production and manufacturing units in their country. The taxes levied on these brands can be less and the import and custom dusty paid can too be discounted. Not only this, but the special economic zones can also be provided to the foreign brands so that they get the advantage of paying less annual taxes. The legal formalities and funding too can be eased down.

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