Chinese automaker Geely is in negotiations with Ford Motor Co. about acquiring Swedish automaker Volvo.
According to University of Gothenburg School of Business, Economics and Law researcher Eva Ossianson, the proposed Geely-Volvo tie-up could present enormous problems for the Swedish automaker in the marketplace.
Volvo already experienced a merger where differences in company cultures were the main reason why its merger with French manufacturer Renault in the 1990s failed. Now Volvo would merge into a Chinese company. It can be assumed that the cultural differences in this case will be even greater, which might have a negative impact on the Volvo brand.
Building a Volvo requires high quality work, involvement, and commitment on part of the workers as well as good relations and trust between the company and its employees. Individual contributions are important to Volvo, and thus the company places emphasis on taking good care of its staff. It is part of Volvo’s company culture.
In Geely, individual contributions seem to be of less importance. Li Shufu, chairman of the Geely board, compares Geely’s company culture with that of a military organization on the company Web site. There are clear rewards for competence and equally clear “punishment” if directives aren’t followed. Geely even employed Chinese army sergeants to improve discipline among employees.
In China, all employees are members of the same union, which in turn is under the Chinese Communist Party’s control. Employees have rights, according to the laws of China, but people with dissenting views always risk punishment—even imprisonment—regardless of what the law says.
In this regard, Volvo and Geely differ a lot, and Volvo is in danger of losing its identity. All employees at Volvo’s main factory in Sweden can, regardless of their position, expect a different set of rules from the ones they have now, if the purchase becomes a reality.
Geely has a relatively short history of making cars. The company started in 1986, manufacturing parts for refrigerators. In 1994, it started building motorcycles and then in 1997 it entered the car industry.
For many years, Geely was known for making the cheapest cars in China, but in 2006 it started building more expensive cars for the Chinese market, but are still considered budget cars by Western standards. During the 2008 Detroit Auto Show, Geely’s marketing director spoke of its Haoqing model, which was meant for the U.S. market, “We have very competitive prices; this model will be available for less than $10,000.”
A cheaper Volvo must naturally be manufactured in China, but will this spell the end for the perceived quality of Volvo, or does Geely have something else up its sleeves?
When the decision was made to start selling more expensive cars, Geely was unwilling to wait on development of its own models. It chose, instead, to copy the designs of other models, such as the Mercedes-Benz C Class and the Rolls Royce Phantom.
Allegations of copying and illegal use of other companies’ intellectual property led to court cases against Geely. One such case arose when Toyota found a Geely model with a logotype similar to one of its models. Geely won that case, however.
With its history of allegedly borrowing other designs, it is an “extremely dangerous situation” for the Volvo brand, Ossiansson wrote in her analysis. “The Volvo brand is a valuable asset that has taken many years to build, yet it can be ruined almost overnight if it is linked to the Geely copying strategy.”
“We believe that our analysis has shown that a brand marriage between Volvo and Geely involves too great a risk,” she said. Ossianssion is an expert in commercial branding at the University of Gothenburg, School of Business, Economics and Law. She conducted the study “Volvo vs. Geely: A study of Brand Marriage Issues.”
According to University of Gothenburg School of Business, Economics and Law researcher Eva Ossianson, the proposed Geely-Volvo tie-up could present enormous problems for the Swedish automaker in the marketplace.
Volvo already experienced a merger where differences in company cultures were the main reason why its merger with French manufacturer Renault in the 1990s failed. Now Volvo would merge into a Chinese company. It can be assumed that the cultural differences in this case will be even greater, which might have a negative impact on the Volvo brand.
Building a Volvo requires high quality work, involvement, and commitment on part of the workers as well as good relations and trust between the company and its employees. Individual contributions are important to Volvo, and thus the company places emphasis on taking good care of its staff. It is part of Volvo’s company culture.
In Geely, individual contributions seem to be of less importance. Li Shufu, chairman of the Geely board, compares Geely’s company culture with that of a military organization on the company Web site. There are clear rewards for competence and equally clear “punishment” if directives aren’t followed. Geely even employed Chinese army sergeants to improve discipline among employees.
In China, all employees are members of the same union, which in turn is under the Chinese Communist Party’s control. Employees have rights, according to the laws of China, but people with dissenting views always risk punishment—even imprisonment—regardless of what the law says.
In this regard, Volvo and Geely differ a lot, and Volvo is in danger of losing its identity. All employees at Volvo’s main factory in Sweden can, regardless of their position, expect a different set of rules from the ones they have now, if the purchase becomes a reality.
Geely has a relatively short history of making cars. The company started in 1986, manufacturing parts for refrigerators. In 1994, it started building motorcycles and then in 1997 it entered the car industry.
For many years, Geely was known for making the cheapest cars in China, but in 2006 it started building more expensive cars for the Chinese market, but are still considered budget cars by Western standards. During the 2008 Detroit Auto Show, Geely’s marketing director spoke of its Haoqing model, which was meant for the U.S. market, “We have very competitive prices; this model will be available for less than $10,000.”
A cheaper Volvo must naturally be manufactured in China, but will this spell the end for the perceived quality of Volvo, or does Geely have something else up its sleeves?
When the decision was made to start selling more expensive cars, Geely was unwilling to wait on development of its own models. It chose, instead, to copy the designs of other models, such as the Mercedes-Benz C Class and the Rolls Royce Phantom.
Allegations of copying and illegal use of other companies’ intellectual property led to court cases against Geely. One such case arose when Toyota found a Geely model with a logotype similar to one of its models. Geely won that case, however.
With its history of allegedly borrowing other designs, it is an “extremely dangerous situation” for the Volvo brand, Ossiansson wrote in her analysis. “The Volvo brand is a valuable asset that has taken many years to build, yet it can be ruined almost overnight if it is linked to the Geely copying strategy.”
“We believe that our analysis has shown that a brand marriage between Volvo and Geely involves too great a risk,” she said. Ossianssion is an expert in commercial branding at the University of Gothenburg, School of Business, Economics and Law. She conducted the study “Volvo vs. Geely: A study of Brand Marriage Issues.”
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