International Takeovers by Chinese Companies
International Takeovers by Chinese Companies: The Challeng
31/08/2012
Abstract
While a multitude of multinational companies are entering the Chinese market, there are very few Chinese companies going multinational. Therefore, the Chinese government has formulated the “Go Global” strategy in order to encourage Chinese companies to invest in business abroad. Takeover (Acquisition), which can be defined as one company being purchased by another, is generally believed to be a straightforward and effective method to achieve that goal. However, it is challengeable to make the takeover successful, especially between companies from different countries. This paper will explore the challenges that Chinese companies may encounter while taking over multinational companies. Through the analysis of the case of Volvo acquired by Geely, it is found that the challenges mainly come from cultural differences, corporate finance and brand image. It is necessary for Chinese companies to focus on making appropriate strategies to overcome these difficulties so that benefiting from acquisitions. These strategies include cultural integration, expanding the Chinese market and brand positioning.
Introduction
International takeover (acquisition) is a straightforward method of Outward Foreign Direct Investment (OFDI) which can be defined as the action of investing in business abroad. China, as the second largest economy of attracting foreign investment, has developed its scale of OFDI tremendously. Acquisition plays a significant role in this progress. According to the National Bureau of Statistics of China, the capitals of Chinese OFDI reached as large as 68.8 billion USD. In terms of the patterns of OFDI, it was reported by the Xinhua News Agency which is the official media of China that more than 40% of the investment came from acquisitions.
However, for Chinese companies, international takeovers could be highly risky and challengeable since most of them lack the experience and
31/08/2012
Abstract
While a multitude of multinational companies are entering the Chinese market, there are very few Chinese companies going multinational. Therefore, the Chinese government has formulated the “Go Global” strategy in order to encourage Chinese companies to invest in business abroad. Takeover (Acquisition), which can be defined as one company being purchased by another, is generally believed to be a straightforward and effective method to achieve that goal. However, it is challengeable to make the takeover successful, especially between companies from different countries. This paper will explore the challenges that Chinese companies may encounter while taking over multinational companies. Through the analysis of the case of Volvo acquired by Geely, it is found that the challenges mainly come from cultural differences, corporate finance and brand image. It is necessary for Chinese companies to focus on making appropriate strategies to overcome these difficulties so that benefiting from acquisitions. These strategies include cultural integration, expanding the Chinese market and brand positioning.
Introduction
International takeover (acquisition) is a straightforward method of Outward Foreign Direct Investment (OFDI) which can be defined as the action of investing in business abroad. China, as the second largest economy of attracting foreign investment, has developed its scale of OFDI tremendously. Acquisition plays a significant role in this progress. According to the National Bureau of Statistics of China, the capitals of Chinese OFDI reached as large as 68.8 billion USD. In terms of the patterns of OFDI, it was reported by the Xinhua News Agency which is the official media of China that more than 40% of the investment came from acquisitions.
However, for Chinese companies, international takeovers could be highly risky and challengeable since most of them lack the experience and
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