9 The growth and

internationalisation
of Geely – the
Chinese car
manufacturer

Cindy Qin, Prem Ramburuth and Yue Wang

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 STRATEGY AND ENTREPRENEURSHIP IN INTERNATIONAL BUSINESS

In March 2010, Chinese car maker Geely (a Chinese word meaning auspicious or
lucky) signed a deal to buy Volvo from the US car giant Ford for US$1.8 billion. The
acquisition is considered to be an example of China’s growing influence in a range of
industries on the international stage. It is fresh evidence of foreign direct investment
(FDI) being made by Chinese car makers in a bid to gain access to European markets
and Western technology. The Volvo deal placed Geely – which was barely known
outside of China – in the spotlight. It also raised questions about just how ready Geely
was to be a major player on the global stage. Did Geely have a clear and robust
strategy for further development of its fledging international strategy? Was the
purchase of an extremely well-established Western auto manufacturer by Geely – an
emerging market automobile manufacturer – an act of egotism or a sound and
strategic long-term investment? This case provides an insight into the global automo-
bile market and China’s growing interest, as well as an indication of Geely’s growth
and expansion, culminating in the takeover of Volvo.

& Background: the automobile industry

worldwide
The automobile industry is a large and critical sector of the global economy. Over the
last few years, there have been dramatic changes affecting the industry. For example,
significant changes are evident in the European Union and the United States, whose
economies have suffered as a result of the global economic slowdown, leading to a
decrease in car sales and a decline in the relative markets. In contrast to these
declining trends in developed countries, emerging economies have become fast-
growing markets for the automobile industry. China became the world’s third largest
car market in 2006, and then the largest in 2009; additionally, India recently posted
its highest ever car sales figure – 195 million cars in 2011 (Gulati & Choudhury 2012).
It is anticipated that the emerging markets will experience continued growth, with
drivers including rising incomes, increasing availability of credit and falling car prices.
These emerging economies are also becoming the main players in car manufactur-
ing. In 2005, a total of 46.86 million cars were produced worldwide. One-third of the
cars were produced in the European Union, and 19.24 per cent were produced in
Japan. In contrast, in 2011, production globally reached 58 million, of which 24 per
cent (14.49 million cars) were produced in China. This made China’s production for
2011 twice as large as Japan’s, which first lost its title of the world’s largest car
manufacturer to China in 2009 (OICA n.d.).
Ongoing investment in new technologies will doubtless help the auto industry
become even more competitive than it currently is. In 2011, five out of the top 20
research and development (R&D) spenders around the world were from the automo-
tive sector. In particular, Toyota spent more on R&D than any other company in the
world, largely to improve fuel efficiency and electronics (Jaruzelski, Loehr & Holman
2012; Economist 2012). Studies have also shown that profitability in the industry
results not only from the amount of R&D spending, but also from how the money is

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 THE GROWTH AND INTERNATIONALISATION OF GEELY

spent, and whether it is utilised effectively – including effectiveness in defining new

concepts and executing strategic plans (Booz Allen Market Services 2003; Booz & Co.
2010). While cars makers from advanced economies invest significantly in new
technology, there seems to be persistent under-investment in R&D in emerging
economies, such as those of India and China.

& China’s automobile industry

Nevertheless, the growth of the Chinese automobile industry – the origins of which
were in the 1950s – is clearly evident. In 1965, the annual combined production
volume of nine key Chinese manufactures (all state-owned) was less than 60 000 cars.
After the initiation of its open door policy in 1978, China started to encourage FDI into
the automobile industry and set up alliances and joint ventures with major foreign
auto manufacturers, such as Volkswagen, General Motors, Toyota and Honda. Only
state-owned enterprises were allowed to engage in automobile manufacturing and
form joint ventures with international automobile manufacturers. Since the 1990s,
with further advancement of the economic reform and open door policy, several new
domestic enterprises have entered the Chinese automobile industry, including some
privately owned companies, such as Geely Automobile. By the end of 1998, China’s
annual vehicle output had reached 1.6 million, making China the tenth largest auto
producer in the world. Eleven years later, in 2009, China’s annual automobile pro-
duction capacity exceeded 10 million. It was at this point that China surpassed Japan
for the first time as the largest automobile maker in the world. Approximately one-
quarter of the cars in the world are now produced in China (see Figure 9.2).
Today, more cars are sold in China than in any other nation, and strong markets
have emerged for cars at different price levels, from inexpensive sedans and vans to Figure 9.1: Car
production statistics
expensive Cadillacs and German luxury cars. While some developed countries, such as
between 2005 and 2011
Data Source: OICA (n.d.).

Number of cars
70,000,000
60,000,000
50,000,000
40,000,000
Total
30,000,000
China
20,000,000
10,000,000
0
2005 2006 2007 2008 2009 2010 2011 Year

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 STRATEGY AND ENTREPRENEURSHIP IN INTERNATIONAL BUSINESS

the United States, have experienced domestic market declines over the last few years,
China has consistently registered high growth rates for its domestic automobile
market.
The sale of automobiles within China has increased from 2.36 million in 2001 to
13.64 million in 2009, resulting in an astounding compound annual growth rate
(CAGR) of 24 per cent. By the end of 2009, China had become the world’s largest
automobile market, and it continues to hold this position. This is a significant
achievement, attained over a relatively short period of time, and it is the first time
that China’s automobile market has surpassed the market in the United States.
In addition to locally manufactured cars, the Chinese market attracts a large num-
ber of imported cars, mainly from Europe, the United States, Japan and Korea.
China’s overall auto usage increased from five cars per 1000 persons and 2.6 cars
per 100 households respectively in 2002 to 22 cars per 1000 persons and 8.3 cars per
100 households in 2009 (National Bureau of Statistics of China 2009). Although the
vehicle penetration level has increased, it is still lower than in developed countries.
As a result of its significant population of 1.3 billion, and its fast economic develop-
ment, China’s market size and growth potential make the country a game-changer
in the international car market (US-China Economic and Security Review
Commission 2006).
It has become evident, too, that the Chinese auto manufacturers now include both
state-owned and privately owned enterprises. Since the 1980s, the majority of the
state-owned enterprises have formed joint ventures with international auto manu-
facturers, with the joint ventures successfully becoming leaders in the automobile
production market. Given that China’s automobile industry was under the protection
of high tariffs during the 1990s, the fast-growing automobile market has provided
domestic auto manufacturers with great opportunities. Local governments have been
supporting local automobile manufactures by providing financial assistance, reducing
the local auto manufacturers’ tax liability, reducing overhead costs – for example,
through free use of industrial land – and so on. Consequently, some local automobile
enterprises, especially locally state-owned car makers, have experienced rapid
growth during this period. Since China entered the World Trade Organization
(WTO) in 2001, central government control over local automobile enterprises has
gradually loosened. The role of local government has also changed from direct
intervention in the local automobile industry (mainly in support of local, state-
owned enterprises) to support for all types of companies, including joint ventures
and privately owned enterprises. Some local privately owned manufacturers quickly
gained market share through the use of imitation and low-price strategies, without
support from international enterprises. In 2010, among the top 10 automobile man-
ufacturers in China, seven were joint ventures and two were privately owned enter-
prises, namely BYD and Geely. In 2011, Geely dropped out and BYD was the only
privately owned automobile manufacturer in the top 10.
The Chinese government continues to play a central role in shaping the automo-
bile industry. For example, Beijing launched a raft of policy measures that included
automobile buying incentives to boost spending on cars; these incentives act to

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 THE GROWTH AND INTERNATIONALISATION OF GEELY

promote the continued growth of the automobile industry, and they resulted in
continued growth during the global economic downturn. In terms of managing FDI,
ownership policies mandate that foreign automobile manufactures enter into 50/50
joint ventures with local auto makers. The central government is strongly encourag-
ing of R&D on alternative sources for power trains, including electric cars and
gasoline–electric hybrids to help cope with energy shortages and rampant pollution.
During the last couple of years, on average, 10 per cent of automobile sales were
allocated to R&D in China’s automobile industry (National Bureau of Statistics of
China 2009). Despite this investment in R&D, Chinese-owned brands are still under-
developed, and face big challenges both domestically and internationally. Chinese
auto makers appear to be heavily reliant on international suppliers for automobile
parts; furthermore, many auto manufacturers in China suffer from a shortage of talent
and a lack of experience in managing across borders.
Automobile manufacturers in China have, however, outpaced global automakers
in developing cars specifically for emerging markets. As a result of China’s automotive
industry developing extensively through FDI in the form of alliances and joint ven-
tures, international automobile manufacturers are unlikely to promote Chinese
exports that compete with their own products in other markets (Tang 2009).
Additionally, some Chinese self-owned brands seeking to enter industrialised coun-
tries are finding it next to impossible, partly because they are struggling to meet the
safety and emission standards for these countries. Other emerging markets are there-
fore the main target of Chinese companies seeking to export cars.

& Geely’s venture into China’s

domestic markets
Geely Automobile Holdings Ltd is the tenth largest automobile manufacturer in China
(Geely n.d.). Headquartered in Hangzhou, Zhejiang Province, Geely has six car-
assembly plants and power train manufacturing plants in China, enabling a produc-
tion capacity of approximately 300 000 cars per year.
Geely was founded in 1986 as a refrigerator maker, then switched to producing
decorating materials. In 1992, Geely started to make motorcycle parts, followed by
the manufacture of the entire motorcycle. By 1994, its motorcycles were being sold in
22 countries worldwide, an indication of its determination to succeed in whatever
product it manufactured. Continuing its entrepreneurial spirit, in 1996 Geely bought
the shareholdings of an automobile manufacturer in Sichuan province, a purchase
that provided the company with an automobile manufacturing licence. In 1997, Geely
officially launched its automobile manufacturing business for RMB 50 million
(US$8 million). A year later, the first Geely car – the Geely Haoqing SRV – rolled off
the production line. Geely’s mission was to produce affordable cars that would
become available to the ordinary citizens of China; consequently, most of the cars it
produced were reasonably priced, around and even below RMB 40 000 (US$6000).
Such prices were bound to attract local share.

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 STRATEGY AND ENTREPRENEURSHIP IN INTERNATIONAL BUSINESS

As one of the first entrepreneurial, privately owned auto manufacturers, Geely

experienced difficulties in attaining sufficient support from the local government of
Zhejiang province, where it was located. This lack of local government support was
clearly evident when Geely’s founder and chairman, Li Shufu, invited local govern-
ment officials to the launching ceremony of Geely’s automobile business – only a few
of them showed up. This lack of support was more than likely due to the fact that
Geely was not yet one of the high-ranking local enterprises in the province at the time.
Geely operated in this ‘awkward’ situation until it was officially listed in China’s
automobile manufacturer index in 2001. This official recognition provided the com-
pany with excellent opportunities to compete against the more than 40 other private
enterprises that reportedly wanted to enter the automobile industry. China’s entry
into the World Trade Organization (WTO) in the same year did not influence Geely
much, given that China’s car manufacturing sector – as a fledgling industry – was
granted five to six years of protection. It was during these years that Geely became one
of the fastest growing companies in the automobile industry in China.
The history and growth of Geely as a company is an interesting example of low-
cost strategy and entrepreneurial leadership. The business venture commenced from
humble beginnings as a family business, with its operating capital coming from Li
Shufu’s family and friends. In 2002, in a strategic move, Li Shufu invited a former
accountant from the Zhejiang Provincial Local Tax Bureau, Xu Gang, to join Geely as
the president. Using his networks, Xu set the framework for Geely to establish contacts
and build relationships with many banks at the provincial level. Before long, Geely
was able to raise a loan of RMB 100 million. In yet another strategic move, in the same
year Geely signed a significant agreement with the China Everbright Bank, one of the
largest banks in China.
Geely also sought to attract capital from overseas. In 2004, Geely purchased a shell
company in Hong Kong, and had its Initial Public Offering (IPO) on the Hong Kong
Stock Exchange in 2005. This brought Geely HK$2 billion by June 2007 – a develop-
ment that was critical to Geely’s growth and development. Being listed on the stock
market in Hong Kong also attracted attention from well-known investment banks,
which prepared Geely for its acquisition of Volvo.
Geely’s transformation from a small family business to a public company listed on
stock exchanges required dramatic and sweeping changes within the organisation.
During the transition, two-thirds of the senior management was replaced, and 90 per
cent of the old employees, including almost all of Li’s family members and relatives,
were forced out (Wu, Cao & Chen 2010). In a country like China, where renqing
(mutual obligation) plays an important role in the culture, these changes could not be
made by Li Shufu himself. Rather, the new senior executives were the implementers of
the organisational transition process, and they managed the changes through pro-
cesses in the human resources department of the company. The intention was to
revitalise the workforce, and Geely has continued with its approach of attracting
skilled automobile executives from established auto manufacturers or suppliers.
Human talent is considered to be the most important resource by Li Shufu. Geely
also has its own schools and colleges to educate and train people to meet the

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company’s needs. In 2008, Geely donated RMB 12.5 million and established the Geely
Future Talent Fund and the Li Shufu Education Fund, to ensure that it is continuously
building its talent pool.

& Geely’s venture into international markets

Having established itself firmly in the local domestic market of China, Geely was ready
to venture into feasible international markets. It began with exporting cars in 2003,
and developed a strategy for a continuing growth in export numbers. In 2008, Geely
sold over 220 000 cars, with 24.5 per cent of its cars being sold to 55 countries –
mainly emerging nations around the world. Geely had tried to enter the developed
markets in Europe and the United States. For example, earlier in 2005 it became the
first Chinese automobile manufacturer to participate in the 61st Frankfurt Auto Show,
held in Germany. A year later, Geely made history at the Detroit Auto Show by
showcasing the first Chinese automobile at the biggest show in North America.
Unfortunately, despite its intentions of asserting its presence and becoming known
in the United States, its lack of international experience led to a rather ordinary, lack-
lustre display, featuring a small silver sedan that attracted criticism rather than
admiration. The low-cost car was unsuccessful and uncompetitive on many fronts,
and failed to meet the developed world’s stringent safety and environmental regu-
lations. It was mercilessly panned at the show.
Geely’s senior management realised that it had to do better, and that focusing on
low-cost cars would neither sustain the company in the long term – especially in the
global automobile market – nor enable it to gain the international profile it desired.
Geely kicked off a major transformation in 2007. A new mission was announced:
‘Produce the safest, most environmentally friendly and most energy saving cars. And
let Geely cars go all over the world.’ (Geely n.d.) The transformation initiatives were
carried out in an effort to get rid of Geely’s image as a ‘cheap’ car manufacturer and to
help the company become a technology-driven auto maker (Chen 2010). In 2007,
Geely added another development to its strategy of innovation and entrepreneurship.
The company entered a joint venture with Manganese Bronze Holdings, the estab-
lished manufacturer of the London taxi. It strategically established Shanghai LTI
Automobile Ltd as an arm of Geely, and commenced producing the iconic London
taxi in China. Furthermore, in 2008 the company halted production of its three best-
selling models, Haoqing, Meiri and Youliou, and planned to replace them gradually
with better and more technologically sophisticated models in the form of the Free
Cruiser, Kingkong and Prospect.
In the same year, at the biggest automobile show in China, Geely presented 23
new models in keeping with its strategy for change and ongoing innovation. All the
new models employed new technologies and fell within the mid-range to high-end
levels of car manufacturing. The shift in price is indicative of the shift in image
building. For example, one of Geely’s new high-end models cost RMB 3.6 million
(US$580 000), which was several hundred times the price of Geely’s old,

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 STRATEGY AND ENTREPRENEURSHIP IN INTERNATIONAL BUSINESS

inexpensive models. At the same time, Geely returned to the next international
Detroit Auto Show in the United State, and presented two strongly competitive
vehicles: the FC sedan featuring Geely’s G-Power four-cylinder engine, and its newly
revised version of the London taxi TX4. Even though Geely was still developing its
overall strategy and schedule for entry into the US market, it was making progress in
reaching US federal crash safety requirements and building a better perception of its
product quality with reviewers.
In 2009, Geely made further strides forward in the international arena and bought
Drivetrain Systems International Pty Ltd (DSI), a global transmission developer head-
quartered in Australia. It then proceeded to build three DSI plants in China to produce
gearboxes. Geely intended to equip all its passenger cars with automatic gearboxes
made by DSI. In the same year, Geely also opened overseas car assembly plants in the
Ukraine, Russia and Indonesia.
On another level, to attract international market share, Geely rolled out a major
initiative to classify all of its new models under three major marketing brands –
Gleagle, Emgrand and Englon – and segmented its advertising and sales channels by
brands instead of the traditional approach of segmentation by models. It strategically
removed the name ‘Geely’ from the nameplate of its three new brands in a move
intended to avoid people connecting the new brands with Geely’s existing reputation
for low prices and poor quality. The revised branding strategy sought to put Geely in a
stronger position to meet new market challenges and attract new customers. While
features of the ‘Gleagle’ brand targeted fashionable young people, the ‘Emgrand’ and
‘Englon’ brands were defined as luxury and classic brands, and targeted buyers from
middle- and upper-income groups. These brand-focused strategies prepared the way
for Geely’s next target – a world-class international brand. Hence it commenced its
acquisition deal with Volvo.

& Geely’s takeover of Volvo

By August 2010, Geely was able to proudly announce that it had formally completed
a deal to buy Sweden’s prestigious Volvo Cars from the US auto giant Ford for
US$1.8 billion. It simultaneously proceeded to raise an additional US$900 million
to keep Volvo operating. The total cost of US$2.7 billion included US$2.1 billion
in loans from the Bank of China, China Construction Bank, Export–Import Bank of
China, Geely Automobile Holdings and the government of Gothenburg, where Volvo
is headquartered. The move was welcomed not only by Geely but also by the Chinese
government, with China’s Minister of Industry and Technology, Li Yizhong, appearing
at the signing ceremony in Gothenburg, sending a strong signal of support from the
Chinese government. The message seemed to be that Geely was buying Volvo, but so
too was China (Economist 2010).
Geely was determined that the Volvo brand and its reputation of prestige and quality
would remain intact. It announced that Volvo would still be operated as a separate
subsidiary, managed by Swedish personnel, and the Volvo China team – including its

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marketing and public relations staff – would operate independently of Geely. This
distinctive approach is captured in the words of Geely’s Chairman, Li Shufu, who
noted that ‘Geely is Geely, Volvo is Volvo’ (ChinaBizGov 2012). On 15 July 2010, Li
Shufu became chairman of the Volvo board; the then CEO, Stephen Odell, left Volvo
and returned to Ford as CEO of Ford Europe. Before he left Volvo, he told the media:
‘Volvo is well positioned for the future with an exciting range of products that remain
true to its core values: safety, quality, environmental responsibility and modern
Scandinavian design.’ (Ford 2010). A few weeks later, Stefan Jacoby – the previous
head of Volkswagen’s operations in the United States – was appointed the new president
and CEO of Volvo Cars and a new board of directors was elected. A Volvo–Geely
Dialogue and Cooperation Committee (DCC) was set up to steer the communications
and joint efforts of both parties (Global Times 2010).
Volvo’s main production sites will continue to be in Sweden and Belgium, but
Geely plans to open two factories and an engine-assembly plant in China. Li Shufu
has claimed that the corporate synergy could help Volvo nearly double its sales to
600 000 vehicles by 2015. Geely-Volvo is considering selling Volvo cars manufac-
tured in China into the US markets, which could help reduce exchange-rate risks for
Volvo, and make it one of the first companies to bring Chinese-made vehicles into
the United States.
However, as in all acquisitions in international business (Datta 1991), bringing
together two very different organisations can be problematic. In this instance, three
months after Geely’s official takeover of Volvo, Li Shufu admitted that there were
severe conflicts between the Geely management team and the Volvo management
team, mainly due to strategic differences. For Li Shufu, selling big and luxurious cars
was the only way the Swedish brand could make up for lost time in the Chinese
market. ‘The fancier the better,’ he said. ‘Few have an eye for Volvo’s Scandinavian
no-frills style, to be honest.’ (Yan & Pollard 2011). Yet Volvo’s management advocated –
at least initially – that Volvo stick to its tradition of focus on core mid-size models, where
safety and fuel-efficiency are important.
Li Shufu responded by saying that Jacoby needed to understand China better.
He told the media that many of China’s new rich ‘behave outrageously, showing
off their wealth’, and are willing to buy upscale car brands. He also inferred that it
was like producing cigarettes, noting that ‘smoking is bad for your health, but
tobacco companies make and sell cigarettes. The same is true with Volvo.’
(Shirouzu 2011)
In May 2011, four months after the establishment of a new Volvo China head-
quarters in Shanghai, Volvo’s new S60 model – targeting the world’s largest vehicle
market – was launched in China. It was considered the blueprint for Volvo’s expansion
into luxury cars (Shirouzu 2011), and also seen as a sign of the smoothing over of the
significant misalignment between the Geely and Volvo management teams (Yan &
Pollard 2011). Whether Geely and Volvo can overcome their differences and steer
Volvo towards success in the long term is still uncertain, but what is clear is that there
are broad implications for China’s global expansion. Chinese companies have poured
tens of billions of dollars into foreign acquisitions in recent years, such as Lenovo’s

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 STRATEGY AND ENTREPRENEURSHIP IN INTERNATIONAL BUSINESS

purchase of IBM’s personal computer business and TCL’s acquisition with Thomson,
but have done so with little success. Although in a different industry, Geely and Volvo
are facing similar challenges to those faced by other Chinese companies and their
partners when involved in international acquisitions. Not only are there differences in
strategy, but there are also cultural conflicts, and differences in management style and
values (Krolicki, Pollard & Yan 2010).
There is one factor that is clear, though. Geely’s takeover of Volvo did not stop it
from the global expansion of its own brands. More recently, in 2011, Geely entered
into the Australia markets with a Geely MK city sedan selling for around A$11 990
(US$12 350), which is believed to be one of Australia’s cheapest cars. Another model,
the Geely Panda, will be launched in Australia very soon – probably at an even lower
price. Interestingly, the company decided to return to using the ‘Geely’ nameplates on
these two models, two years after they were removed from the new brands launched
in 2009. It was thought to be important to market and continuously strengthen the
‘Geely’ brand in the international arena – a sign of a successful auto brand from China!

& Appendix 1: Volvo

Volvo was a Swedish car maker officially founded in 1927, when its first car rolled out
of the factory in Gothenburg. Sweden’s Volvo is the epitome of good middle-class
taste. Volvo’s very safe and practical cars were, in better days, the default choice on
many a suburban driveway in the United States and Europe. Volvo was the first car
manufacturer in the world to equip its cars with three-point safety belts as a standard
fitting (1959). Volvo passed the two million car production mark in the 1970s. In
1976, the US traffic safety administration (NHTSA) purchased a number of Volvo
240s, which were used to set the safety standards against which all new cars on the US
market were tested. Volvo cars became more powerful, faster and safer in the 1980s.
The 1990s marked the biggest technical transition for Volvo. In 2007, the ReCharge
plug-in hybrid concept was unveiled, signalling a new emphasis on environmental
solutions. In 2008, Volvo introduced two mid-size models with extremely economical
and clean diesel engines (Volvo, n.d.a). Table 9.1 presents the sales figures for Volvo
between 2000 and 2011.
Volvo Car Corporation was sold to the Ford Motor Company in 1999 for
US$6.45 billion. Before being taken over by Geely in 2010, the last time that Volvo
had shown an annual profit was in 2005. In 2010, the president and CEO of Volvo Car,
Stefan Jacoby, announced that Volvo had witnessed a turn-around in the car market
and had returned to profitability. Volvo’s retail sales for 2010 increased by 11.6 per
cent to 373 525 units, compared with 334 808 units in 2009. In China, 2010 sales
improved against 2009 sales by 36.2 per cent, and in the Nordic region they grew by
29 per cent. Corresponding European sales grew by 10.4 per cent, and market
share improved by 0.14 per cent to 1.2 per cent. However, during this period of
global growth, Volvo sales volumes in the United States decreased by 12.2 per cent to
53 952 units, compared with 61 246 in 2009 (Volvo, n.d.b).

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Table 9.1: Volvo sales figures, 2000–11

Year No. of cars (thousands)

2011 449
....................................................................................
2010 373
....................................................................................
2009 334
....................................................................................
2008 374
....................................................................................
2007 458
....................................................................................
2006 428
....................................................................................
2005 444
....................................................................................
2004 456
....................................................................................
2003 415
....................................................................................
2002 407*
....................................................................................
2001 412
....................................................................................
2000 409

*
As of 2002, sales are defined as cars delivered to end-customers.
Source: Volvo (n.d.b).

& Appendix 2: Li Shufu vs Stefan Jacoby

‘Mr Jacoby and Mr Li are a study in contrasts.’ (Shirouzu 2011)
Geely’s founder and chairman, Li Shufu, is being heralded as the equivalent of Henry
Ford in China. He was born into a farmer’s family in a poor village in Taizhou,
Zhejiang province. Using the 120 Chinese yuan (US$15) he got from his father, he
started a photography business after finishing high school. He also tried producing
and selling silver and gold using a chemical separation, an ‘innovation’ that came from
his experience while processing photos. The story of Geely Corporation began one day
when Li Shufu saw four shoemakers producing refrigerator parts. He started to make
refrigerator parts at home by himself, and before long set up a factory with his
brothers to manufacture the entire refrigerator. After that, he dabbled in various
business areas, such as producing decoration materials and brokering real estate.
Not all of these attempts were successful. His failure in the real estate business, which
he rarely mentions, made him believe he was not a good player in capital markets. Yet
he was still extremely ambitious in pursuing his automobile manufacturing dream.
His vision was one of China walking down a new Silk Road with Geely leading
the way.
Volvo’s CEO, 53-year-old Stefan Jacoby, is a reserved German with a sports streak:
‘I am an athlete at heart and have always been inspired by the challenge of climbing
Mount Everest.’ (Mbuya 2008) Jacoby earned a MBA degree at the University of

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 STRATEGY AND ENTREPRENEURSHIP IN INTERNATIONAL BUSINESS

Cologne in 1985 before starting a lengthy career at Volkswagen AG, where he was a
Secretary General, Executive Vice President for the Asia-Pacific Region, Executive
Vice President for Marketing and Sales, and finally accepted the position of CEO and
president of the Volkswagen Group of America in 2007. As a VW golden boy in the
United States, he had engineered both the building of a $1 billion plant in
Chattanooga and an ambitious recovery plan for Volvo (Motavalli 2010). Jacoby’s
jumping to Volvo in 2010 was a surprise to both those inside and outside of
Volkswagen.

& Discussion questions

9.1 What is Geely’s business strategy? Do you think Geely’s choice to discontinue the
production of cheap cars in favour of concentrating on the high-end market is
risky?

9.2 What kind of foreign entry mode did Geely use in this case study? What are the
advantages and disadvantages of using this (these) entry mode/modes?

9.3 What factors motivated each company during Geely’s takeover of Volvo? What
benefits can both Geely and Volvo expect to gain?

9.4 What do you think will be the main issues faced by Geely after its purchase of
Volvo? Is Geely ready for further expansion and takeovers?

& References
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