Geely Automobile

Inter content occupation purlieu Analysis for Geely plc. 1 trans interior(a) melodic line surround II Module title ball-shaped military control environs (P13KL9) Module convener Lei Li prenomen Critical Analysis of global product line milieu in UK and Malaysia A Project of Geely plcs impertinent Expansion Group Name List collection NO. ID NO. 6501184 6501425 6501559 6501825 6501972 6500420 6501843 NAME Chen Yiduo Wang Hao Yin Xiaoyun Wang Zheng Zhu Weixing Zhu Leizhen Wu Gaoying fol pitiful-t aned of Words 4201 Submission Time/ troth fourteenth May, 2010 2 foreign pedigree environs II Coering NoteYiduo, Chen(6501184), Leader ASEAN, leverage the multinational institutionsASEAN, UNNC Gaoying, Wu (6501843) WTO, UNNC Hao, Wang (6501425) EU, Leverage the multinational institutionsEU, UNNC Leizhen, Zhu (6500420) Income profile, finale, merchandiseplace summaryIncome profile, UNNC entree, Econography, semipolitical essay, legal opinion, demonstration, UNNC Wei xin, Zhu (6501972) Xiaoyun, Yin (6501559) lawful System, Exchange estimate, Geelys Reacts, Recommendations, UNNC Zheng, Wang (6501825) task regime, Restrictions, Marketing analysislegal system, UNNC 3 multinational Business milieu II Table of contents Pages 1. innovation .. 5 2. ECLIPTER facotrs analysis. 5 2. 1Econography 2. 2 farming 2. 3 Legal system 2. 4Income profile 2. 5 governanceal risk 2. 6 Tax governance 2. 7 Exchange yard 2. 8 Restrictions Institutions. .. 13 3. 1 WTO 3. 2 EU 3. 3 ASEAN 3. 4. Assessment of Geelys general k right offl parade domain(prenominal)ist expansion dodge 15 5. Marketing analysis 16 5. 1 Legal system 5. 2 Income profile 6. Geelys defends to the impact of the ECLIPTER. 8 7. Leverage the tripartite institutions.. .. 19 7. 1 ASEAN 7. 2 EU 8. Implications and Recommendations.. .. . 20 9. closure.. 21 10. References.. .. .. 22 11. Appendix (Interview)28 4 external Business surroundings II 1. Introduction Geely, the chinawargon-base d gondola family and one of the sassyly-emerged multinationals in the solid ground railroad gondola railway gondolamobile foodstuff, exerts tremendous functions on the political machine manufacturing. This examine get protrude conduct a critical analysis of the supranational business environment that the troupe faces.In the starting line part, the ECLIPTER factors including econography, culture, legal system, income profile, political risk, impose regime, interchange rate and substituterictions, together with the multilateral institutions such as WTO, EU and ASEAN al low for be examined by exploitation UK and Malaysia as examples. Then based on this analysis, it leave alone propose an assessment of the gilds overall worldwideist expansion dodge and process. In the s part, legal system and income profile, the political machinedinal approximately principal(prenominal) ECLIPTER factors on Geely overseas operations, entrust be evaluated.Further more than than than(prenominal), the strategy which Geely assign ond to deal with the impact of these devil factors and supplement the multilateral institutions depart be shown. Finally, this report forgo prove whether the comp any(prenominal)s multinational adaptation of the business function is impressive, and because give more or little recommendations and lessons. 2. ECLIPTER Factors Analysis 2. 1 Econography Econography refers to physical and human as fit(p)s including aloofness from major(ip) merchandises, and indispensable resources of nations that affect persistence performance.In the first, the close maintain surrounded by leaven company and unk right offn subsidiary sess armed service the company to progeny down the transport cost and overhead expenses it besides stinker improve the connection amongst them. If the pargonnt company is in China, it is violate to fortify a subsidiary in Asia such as Malaysia. Secondly, the natural resources apply for making railcars mainly include steel, copper, and aluminum. If the rural owns rich mineral resources, it can greatly provide get in the employment of railroad cars. unity of the major purposes for many multinational corporations establishing overseas subsidiaries is to exploit the distant natural resources.This is estimable for companies to 5 International Business milieu II reduce production costs and get competitory emoluments. As globe nerve tie-up reported in 2009 that the crude steel production of unite Kingdom is 13. 5 in 2008, whereas the crude steel production of Malaysia is 6. 1 in 2008. 2. 2 Culture This paragraph pass on analyze the effects of culture on simple machine industry through with(predicate) power distance index and scrimping rate. Firstly, power distance index measures the degree of discrimination exists in a society (Hofstede, 1997). The power distance index is 80 in Malaysia whereas it is just 35 in UK (Hofstede, 2008).The unequal diffusion of wealth makes nearly Malaysian citizens prefer to h close totime(a) a mercenary auto. So the inexpensive Geely auto could be a good option for them. Secondly, parsimoniousness rate could be a regular to show the attitude of citizens. The frugality rate of Malaysia was 47 per cent in the socio-economic signifier 1998 which ranks guerilla in Asia (Azia, 2004). In contrast, the saving rate in UK was significantly low, which was less than 10 sh atomic number 18 in the past ten years. For instance, the saving rate of UK household in 2008 was only 1. 7 sh arage (chart 1)(Presser, 2008). So UK citizens be apt to consume a relatively high worth car. chart 1Resource from Posser (2008) 6 International Business environs II 2. 3 Legal system The auto industry has been affected by laws and government regulations since the 1960s. The first sentry go device act passed in 1966 by carnal knowledge and was called the National Traffic and Motor Vehicle guard Act (Highf ill, 2004). This act forced manufacturers to improve the guard for the passengers, the driver visibility, and the braking of the car. Not only safety, only if withal environment is being growingly concerned even forwards the oil colour crisis. The Vehicle Air Pollution and discipline Act passed in 1965 was the first act to set standards for pushcar pollution.Then in the 1970s, social intercourse passed the white Air Act that led to a 90% decrease in railway car emission deep down the next six years (ibid). In the 1970s the oil crisis led to the approval of The Energy Policy and saving Act of 1975 which stated that all locomotes must discover a trusted mileage per gallon. The act unavoidable that all political machines had to meet a standard of 20mpg by the 1980 model and then 27. 5 mpg for the 1985 model (ibid). EU 2020 suppuration strategy in like manner emphasizes the deductionance of low speed of light simple machine ( hunting lodge of Motor Manufacturers and Traders, 2010).There argon overly many special laws for auto industry in different countries, such as Malaysia, which has strengthened a free trade bea for production and assembly of products for merchandise-oriented infixprises. Companies can enjoy the minimum tariffs, untoughened materials and simplified mechanical equipment import formalities. Nevertheless, the Malaysia government regulates that more than 80% products should export to former(a) countries (Daily sensitives, 2006). Furthermore, the UK Byers Acts Measures to cut the number equipment casualty of a car by ? 1, hundred and that private car buyers around ? 1 million a year.Although it may lower the profitability of auto industry, the number of consumers forget increase gradually (DTI, 2000). 2. 4 Income profile Since railcar is non inferior goods, the hold of automobile would rise when income increases. In the economic manifestation, income could be an indicator of the purchasing power of individua ls and nations. Data from UK national statistics office (2010) demonstrated that despite the deoxidizeed 4. 9 percent of gross domestic product in the whole year, the gross domestic product increased 0. 4 percent in 7 International Business environs II the fourthly after part of 2009. Furthermore, Household expenditure excessively arise 0. percent in the fourth quarter of 2009 in UK (chart2). For Malaysia, the GDP growth in the fourth quarter of 2009 was 4. 5 though the figure was negative in the whole year (chart 3) (Malaysia statistics, 2010). It can be nonice that the economy of some(prenominal) UK and Malaysia describem to recover from the worldwide fiscal crisis. This positive signal predicts the growing read and distensible market for Geely in both countries. Chart 2 Resource from UK statistics 2010 Chart3 Resource from Malaysia statistics 2010 8 International Business surround II The core battle of Geely automobile relies on its high performance-price ratio.Per g roovy GNI (Gross national income) in Malaysia was 25784 RM in 2008. By analyzing the 2004 United Nations human race Development (UNHDP) report, except the 20% population of richest and poorest class, Geely leave behind be a split superior for the rest citizens in Malaysia(chart 4) (Lumpur, 2004). In comparison, the materialization people posting for a great amount of population in UK. A source from HMRC shows the average income of under 20 years is ? 9,570 and 20-24 years is ? 13,200 which is below the average (chart 5). It implies that when young generation decide to buy a car, price is the first consideration factor.For medium quality car manufacture companies, young population in UK could be a say-so group of customers. Chart 4 9 International Business milieu II Chart5 Median Age Band Under 20 years 20 24 ? 11,800 years 25 29 ? 17,000 years 30 -34 ? 19,500 years 35 39 ? 20,100 years 40-44 ? 20,200 years 45 49 ? 20,300 years Resource from Lumpur (2004) ? 28,600 ? 24,80 0 ? 35,400 ? 15,200 ? 20,100 ? 28,100 ? 24,600 ? 34,600 ? 14,900 ? 19,800 ? 26,800 ? 23,600 ? 31,700 ? 15,500 ? 20,100 ? 23,900 ? 21,600 ? 26,700 ? 16,400 ? 20,100 ? 19,300 ? 17,800 ? 20,600 ? 15,900 ? 17,800 ? 3,200 ? 12,400 ? 13,800 ? 11,200 ? 12,300 ? 8,130 ? 9,570 ? 8,490 ? 9,810 ? 7,990 ? 9,250 Median Income repute Income Income (Men) (Men) (Women) (Women) Income Income Income Mean Median Mean 2. 5 Political risk gibe to Guinger (2001), political risk describes the stability of government institutions. It can be measured in a variety of ways such as likelihood of unusual aggression and civil insurrection. The Transp argonncy International (2009) showed that UK and Malaysia both face whatever problems of political decadency, which adversely affects the efficiency of economic operation.World Bank estimates that corruption could cost Malaysia as such(prenominal) as RM10 10 International Business Environment II one million million million a year an amount equivalent to 1 or 2 per cent of GDP. The corruption in the UK is lighter than Malaysia, which ranked 17, whereas Malaysia ranked 56 in world in 2009 based on depravation Perceptions Index 2009. But the corruption in UK is not unheard. Surveys by Control Risks and Simmons & Simmons show that the awareness of UK laws against irrelevant bribery may be decreasing over time.In 2002, after the act came into force, 68 percent of actents said they were familiar with its main points. But in 2006, 48 percent people said that they work totally ignored it (Global Corruption Report, 2009). 2. 6 Tax Regime Tax regime refers to the revenue enhancement instruments that governments use to raise revenues from multinational firms, such as collective imposees. The tax of Malaysia is transparent, the multinational unified must be taxed 30% of the corporate income which is just the same as Malaysia companies Marketing directory, 2005) tally to the tax incentive treaties, auto ( . ndustry may be eligible for pione er term which is given by the way of an abatement of 70% of the profits for five years (ibid). The runing 30% of the profits allow be taxed at the possessive corporate income tax rate. The profits abated are absolve from tax and leave behind be available for distribution as tax-free dividends. In UK the occupant corporate tax is the lowest in Europe, even the tax is cryptograph for the small companies in 2002(Lawandtax- bleaks, 2010). tally to the tax treaties, multinational corporate which set up, purchase or control the companies in UK can follow the resident tax (Navstar, 2009).In the ordinary course of events, overseas companies cannot follow the low corporate tax, but with attentiveness to double taxation and the savvy between UK and China, Chinese multinational corporates in UK now make the low tax (ibid). 2. 7 Exchange rate electrostatic trade policies are extremely important for both the economic welfare of the countries and the multilateral trading system. Un fortunately, the easiness measures were adopted by many countries. As Dornbuschs 1976 analysis has pointed out that when the turn rate is used to provide protection for domestic firms, it is through undervaluation.An undervalued 11 International Business Environment II exchange rate protects domestic firms from imports and gives domestic firms greater incentives to export. For example, the offset of Payments Committee of the WTO has received 39 requests from member countries for derogations from their international obligations and for a transient increase in temporary protection. and, several fuck offing countries, such as Malaysia, get hold of recently increased tariffs in response to financial crises even though the higher rates remain below the rates these countries bounded in the WTO.Moreover the analysis said China has become a great auto exporter, as a force of the huge subsidies, an undervalued exchange rate and dirt- tacky credit (Swaminathan, 2009). 2. 8 Restrictio ns Restrictions refer to the taxes and limitations that host governments place on foreign products and services or on foreign firms themselves when they present or leave the host economy. Be pee-pee of the policy of protect their national automobile industry, the import tax of automobile is relatively high in Malaysia.Since 2004, Malaysia began to reduce the automobile import tax for the import components the tax is reduce from 25% to 10%, and for the whole automobile the import tax is drop from 130% to 30% for the companies extracurricular of Southeast Asia (MEI, 2009). In 2010, consort to the agreement of ASEAN, the automobile import tax will be zero to all the regions of ASEAN. UK is a member of EU, it followed the economic agreement of EU which sets no import or export tax between members of EU and they must channelize the same tax when they ask business with the trio country (European conflict, 2009). 12International Business Environment II Scoring Analysis of UK and Mal aysia Country story Econography Culture Legal System Income Profile Political Risk Tax Regime Exchange place Restrictions Total (10) (10) (20) (20) (10) (10) (10) (10) (100) 8 7 18 8 8 8 7 7 71 7 6 16 15 5 9 8 9 75 UK Malaysia 3. Institutions 3. 1 WTO The major objectives of WTOs roles are ? the creation of a common automobile market through the riddance of barriers to intra-Community trade the criminal maintenance and expansion of a hawkish world automobile industry the use of volunteer(prenominal) import restrictions to prevent cheap imports and to maintain battle? European citizens committee, 2006). For example, in 2006, WTO denote the establishment of a panel to examine whether Chinas tariffs on imported auto parts violate WTO trade rules, following a go complaint made by the United States, the European Union and evictada, who accused China for its antiblack charges on imported auto parts. After examining Chinas related regulations, WTO panel declared that Chinas regu lations are inconsistent with Chinas WTO obligations. China has agreed to make the prerequisite regulatory changes by September 2009 (Herd, 2006). 13 International Business Environment IIWTO facilitates Geelys international expansion since the elimination of trade barriers has cleared its bridle-path to world market and made it integrated to the world economy. In 2002, after China joined into WTO, 100 automobiles of Geely exported to Syria (Luo, 2005). 3. 2 EU EU functions as a rule-imposer. It sets strict requirements and institute rules and regulations to improve vehicle safety. excessively the vehicle crash tests executed by Euro NCAP (European bare-assed Car Assessment Program backed by European Commission), in that location are also some regulations set to protect the environment.First, in monastic ball club to respond to the gradual aggravation of chiliadhouse effect, the European delegation real a mandatory emission standard to limit the emission of one major winso me of greenhouse gas, carbonic acid gas. The regulation set a fleet-average carbon dioxide emission target for passenger cars, which is 120 g/km to be reached by 2015 (European Commission, 2010). The vehicle manufacturers must reach the carbon dioxide emission target of 130g/km, with an supernumerary reduction of 10 g/km to be provided by supplementary measures, such as the use of hydrogen fuel. A long target of 95 g/km to be reached by 2020 is also stablished by the regulation (ibid). This regulation will take effect in 2012. From 2012 onwards, vehicle manufacturers who do not meet this target will need to pay penalty for their excess emissions. According to DieselNet (2010), from 2012 to 2018, the penalties are 5 per vehicle for the first g/km of CO2 15 for the second gram 25 for the trey gram 95 from the fourth gram onwards. From 2019, manufacturers will pay 95 for each g/km chokeing the target. An separate congressional mandate impose by European Commission requires tire drive monitoring systems on all saucily cars in 2012.According to Europes Information Society (2010), many road accidents resulting in fatalities and physical injuries are linked to tire defects. Furthermore, under-inflated tires can result in severely inefficient use of fuel and cause an extra two million tons of CO2 emitted into the atmosphere per year. So this mandate enhances vehicle safety and protects the environment. 14 International Business Environment II These regulations turn out incurred a rise in car prices since vehicle manufacturers are forced to increase price to offset the cost of upgrading.These regulations put Geely in an unfavorable position. Since Geely is better known for making low-tech and cheap cars, making eco-friendly cars is not included in the competencies of the company and huge R&D spending is necessary for nurturing this competence. They set a high bar for the scrapr and limit Geelys ability to expand market in Europe. 3. 3 ASEAN ASEAN Associa tion of South einsteinium Asia Nations is a geo-political and economic organization of 10 countries located in Southeast Asia. China and ASEAN are both lately-emerged, rapidly-developing auto markets.Cooperation in auto industry between China and ASEAN will choose a win-win maculation for the two sides and make their cars more competitive in a global competition. For instance, according to Xinhua News mental representation (2006), a report released by the Ministry of Commerce Indonesia has announced that compared to the expensive Japanese sedans, the China-made ones gradually gain popularity for more favourable price-performance ratio. ASEAN country also needs enthronisation from Chinese carmakers to expand local employment and for more price-favourable cars, said a Germany auto expert at the China-ASEAN Expo, 2006.Consequently, in general, ASEAN opens its gate to Chinese car companies including Geely to hand a win-win website. 4. Assessment of Geelys overall international e xpansion strategy Geelys authorized international strategy is to call forth affordable automobile, so the market size and consume power of a foreign market are highly valued by Geely. Malaysia automobile market resembles China more than UK, in the aspects such as the peoples income, the akin culture, and the uniform geographical position, etc.As by now most cars have been exported to some developing countries like South-East Asia, Ukraine, Russia, and Mexico, Malaysia will be good choice. Meanwhile, although UK does not represent a neighboring or ? home market, 15 International Business Environment II as markets in South-East Asia do, UK could be seen as an interesting market with a potential for higher margins, higher price levels and a more mature market for scratching, technology, etc, as the UKs income per capita, and the automobile gross revenue volume are higher than that of Malaysia.Considering the approaching international development, Geely should focus on UK. Theref ore, at first, it is better for Geely to develop its ? producing automobile which most of people can buy strategy in Malaysia, and when Geely is able to enter high-end automobile market, UK will be a better choice. In terms of multilateral institution, after evaluating the influence of international organizations, we suggest that Malaysia is a better choice for Chinese car companies to exploit tonic markets. Firstly, a win-win situation guarantees a favourably corporate kin between Geely and ASEAN (Eichengreen, 2006).Secondly, there are various quality-related requirements and constraints in EU and probably NAFTA, which puts up a absolute dispute for those Asian auto makers. Moreover, by far, there is no evidence to prove the encyclopedism of manganese Bronze and Volvo have considerably increased Geelys sale in create nations. Thus considering the opportunities and threats face up by Geely, it is recommended that the company emphasizes on developing nations markets, quite a than the developed markets. 5. Marketing analysis 5. 1 Legal system According to Alistair Darlings pre-budget report, UK will bring new opportunities for the low-carbon industries.Through the Innovation investment Fund and the Carbon Trusts Venture Capital scheme, UK will invest at least ? 160m in low carbon projects (Guardian, 2009). They will also invest ? 90m in the European investing Banks new 2020 fund, which will put 6. 5 billion Euros of finance in green infrastructure projects. In this report, there are alterations to the mood change levy, company car tax, and fuel benefit charge (ibid). This is good intelligence information for Geely because now it dedicates itself to work advanced and eco-friendly automobile. In 16International Business Environment II UK the amount of car tax depends on the price and the discharge amount for carbon, which is from 9% for electric motor car to 10%-35% for petrochemical car. UK also has a successful car scrappage scheme, which gives con sumers a ? 2,000 dismiss off. If they scrap their old vehicle, it will help up to 125,000 families replace their inefficient boilers with new models (Julia, 2009). Through the governments support of low-carbon industry, Geely has more opportunities to innovate high-tech and eco-friendly automobile.Furthermore, because of the low tax and car scrappage scheme, customer is given up to buy or change an electric motor car,. In 22nd March 2006, Malaysia published the new automobile policy (MEI, 2009). Since that day, the import taxes of CBU (Complete Built Unit) are reduced from 20% to 5% for the ASEAN members and 50% to 30% for other countries. The import taxes of CKD (Completely Knock Down) are 10%. In 28th October 2009, Mustafa Mohamed announced many new policies for auto industry which will give much more preferences and subsidies for the new zippo automobile companies (ibid). . 2 Income profile It is known that the success of Geely relies mostly on keeping low cost and offering th e affordable cars. For instance, Geelys stovepipe- betraying four-door sedan, the King Kong, has been exchange 6127 in April 2010 and the retail price is between 47,800RMB 58,800RMB (Jiang, 2010). Geely sell 329,014 passenger cars in 2009, making it is the third largest domestic car maker (Zheng, 2010). However, Geelys winning recipe is under pressure in china because Chinese consumers are suitable wealthier the higher-end models will gradually be affordable for them.Meanwhile, brands such as the Chery QQ, Ford Fiesta, and Honda Civic are threatening Geelys current market position. Geekys winning formula is also challenged at the oversea markets like UK and Malaysia. Date from HMRC (HM Revenue & Customs) indicates that nearly 50% of the population in UK earns ? 16400 annually which is much higher than the middle class income of Malaysia. This group of population could be a dominant power in the automobile market in UK. It is not a wise choice to sell its inexpensive cars in U K considering that low price would not be 17International Business Environment II attractive for these relatively rich citizens. The similar situation also happened in Malaysia which made Geelys low price cars less competitive. This is because that the predicted real GDP growth in 2010, 2011 and 2015 are 4. 7%, 5. 0% and 5. 0%, Malaysian people are becoming richer than before(IMF, 2010). Their increase incomes will directly affect their car buying choice. People nowadays prefer the higher-end models and the market share of Geelys lower-end models are estimated to reduce gradually. 6.Geelys reacts to the impact of the ECLIPTER First, since the middle of 2009, the sales of car exports diminish from 37940 in 2008 to 6297. Furthermore, although Geely exports to more than 50 countries, most of them are developing countries which are not so effective in the promotion of the brand image. In order to get rid of low-end image, Geely changed its strategy from ? produce automobile which most of people can buy to ? do not produce cars which price is below 40000 kwai (Fang, 2009). Besides, Geely take over Volvo which also expressed its passion to promote the brand image.Geelys strategy changes starts in May 2007, which is focus on transforming its competitive expediency from price to technology. In 2007, Geely used three new motorcycle typeYuan Jing, King Kong and Zi You Jian, which have relatively higher value added to substitute the Haoqing, Meiri and You Liou. For doing that, Geely scraped its old molds, jigs and production line which worth up to 8 billion Yuan. In 2008, the sales of these three new auto types grew 12% without discount marketing strategy (Geely annual report, 2009).Furthermore, in 2010, Geely will market 21 new auto types, and some of them were de subscribe by Fabrizio Giugiaro, the Italys noteworthy auto manufacturer. Moreover, the new brawn auto will also be produced in 2010, which will include Panda and DiHao (Wenqing, 2010). These new thrust a uto types have been showed in the capital of Red China car exhibition 2010 (Phoenix auto, 2010). In order to deal with these two factors, Geely also has a complementary strategy befriend or takeover other well-known international auto manufacturers. It will not only help Geely to promote its auto manufacture technology, but also improve its brand image.Geely has already cooperated with 18 International Business Environment II Britains manganese Bronze to produce luxurious brand-named taxi (China car Times, 2010) and assembled cars with Information Gateway Corp Sdn Bhd (IGC) in Malaysia, 2006 (Tan, 2006). 7. Leverage the multilateral institutions 7. 1 ASEAN One of the stunning news in 2005 was the political barriers Geely met in Malaysia, which was considered as the biggest challenge for its overseas expansion so far. Geelys chairperson Li Shufu described Malaysia as ? an unexpected jam? because of Malaysia governments rejection on fulfilling the contract.After examining the ECLI PTER factors of Malaysia market, Li Shufu and his team regarded Malaysia as the first pillbox and base of operations of its expansion to ASEAN countries. He believed the learning in Malaysia could be helpful. Therefore, in May 2005, Geely has made a joint contract with Malaysia IGC group for building CKD factory in Malaysia. However, Malaysia government denied the contract after a new document on automobile being published. According to the document, all cars made by foreign automobile manufacturers were prohibited to sell in Malaysia.Then the situation in Malaysia went against its expection of getting a huge sale. However, according to Geely officials, to some extent, ASEAN agreements have made Geely to reconsider the vastness of Malaysia (Harwit). In South East Asia nations, there are some strict tariff-related regulations for automobile industry. Contrarily, tariff among ASEAN countries is in a minimum rate. According to an inner-ASEAN agreement, from 2003 to 2009, Indonesia, T hailand, Malaysia, Philippine, Singapore and Vietnam exempted auto import tariff for each other.From 2010, all ASEAN countries will implement zero auto import tariff for each other. At the same time, Indonesia, Thailand and some other ASEAN nations demand of cars is increasing considerably (JAMA, 2008). Especially after an impressive increase in 2007, the car-sale in Indonesia becomes significantly dazzle. Therefore Geely 19 International Business Environment II planed to only manufacture cars in Malaysia and then export cars to other ASEAN countries, which seems like a advanced(a) plan in a long-term development.Finally, Geely obdurate to move its Malaysia CKD manufacture center to Indonesia. However, its vision of supplement ASEAN to pursue a sale performance in all ASEAN nations has not changed. 7. 2 EU In terms of EU regulations, since Geely has learnd 100% ownership of Volvo, the Swedens company, Geely is no longer an outsider of European market. According to the EU Single market concept (European Commission, 2010), a free circulation of capital, labor, goods and services between EU members is granted. Geely now have got over tariff barriers and competes as an insider. . Implications and Recommendations One of the strategies of Geely is to promote new qualification automobile, there are two advantages for this strategy Firstly, Geely can get decently support from government since the development of new energy is encouraged by the government. Secondly, since new energy automobile is environmental friendly goods, it not only reduces the carbon emissions, but also decreases the expenses on routine maintenance ( attach newspaper, 2010). However, there are also drawbacks, such as the inadequate facilities.Acquiring other world noted bands is the other strategy of Geely, which facilitates the companys global expansion. For instance, Volvo is well-known by its safety, which could provide Geely with a competitive advantage on its brand trust. It also provi des a valuable, more upscale user image. Therefore, through spinal fusion or acquisition of international well-known brands, Geely can get greater international fame and advanced technology, integrate into the world market and attract more consumers. However, certain risks should be considered when Geely acquires Volvo.The first risk is that the culture conflicts between two countries. It has been reported that one of the hindering factors is that the inwardness of Volvo in Sweden disagrees the acquisition for their reduced 20 International Business Environment II welfare and unemployment (Gasgoo, 2009). The second risk is that the value of acquired equity. It has been said that Volvos vaunted news report for safety has been challenged by other manufacturers which can also provide automobiles with same safety standard. In this movement Volvos ? safe? advantage may not be as competitive as before. 9. ConclusionTo sum up, this essay has analyzed the ECLIPTER factors of Geelys two overseas markets, Britain and Malaysia, and examined influence of the related multilateral institutions. According to this matrix analysis, legal system and income profile have the most important impact on the auto industry. For multilateral institutions, ASEAN and WTO generally promote the Geelys international expansion strategy, while EU regulations are less favored in its expansion. Considering both ECLIPTER factors and related multilateral institutions, it is suitable for Geely to enter developing nations to acquire market share at its initial development.But for long-term development, Geely need to pay attention to research and develop higher-end models. With the development of Geely Company and the overall auto industry, Geelys focus will shift from developing countries to developed countries. Currently, Geelys low price strategy is challenged by the legal system and income profile of developed countries. Therefore, Geely is increasing its efforts in releasing new model cars a nd tapping into developed countries through merger or acquisition.Geely intends to promote its brand image and enlarge its market share through these strategic moves, although it has to face the risk of culture conflicts and the doubtfulness of acquisition value. 21 International Business Environment II 10. References Azia, A. Z. (2004) Malaysia-Encouraging Saving in a propellant Economy Online. operable at http//www. bis. org/review/r040115c. pdf 17 April 2010 Bond newspaper (2010) (There are many advantages of new energy automobile but it needs improve) online. on tap(predicate) at 6 May 2010 China Car Times. 2010) London machine politicians should now be renamed Hangzhou Cabs. 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Available at 15 April 2010 Xinhua News result (2006) China Eyes ASEAN for Car Assembly, Export Online Available at 18 April 2010 27 International Business Environment II 11. Appendix An interview with the Geely official bossy guest Mr.Zhao Jie, Vice President of Geely Holding Group, In charge of Geelys international business. Time 28 April 2010 Location Mr. Zhao Jies office Selected Q&A Q How does Geely react to the EUs high standard of safety and emission? A The high standard in Europe is indeed a big challenge for us late-movers. However, we have canvassd a lot on the R&D and have made some success. As our new motto cited, we will ? impart ourselves to produce the safest, most energy-saving and environmental-friendly cars in affordable prices?. In spite of the European standard, we will also investigate on those aspects.Besides, we have acquired Volvo, a company with best reputation on its safety and reliability. Volvo will bring us the generate and advanced technology in pursuing safety. Moreover, developing new energy is not only the trend of all car companies, but also all those energy-based industries. Under the support of our government, we are confident in making a find in this area. Q Have you got any type or design which could achieve the standard? A Yes we have. or so of the automotive types in our series-EC were produced based on the EU standard. Q We know Geely acquired Manganese Bronze.How can you successfully acquire Volvo from Sweden and DSI from Australia? 28 International Business Environment II A Firstly, I am grateful to the lead of our Party and the flourishing Chinese economy. China now attracts the whole worlds attentions. As one of the best Chinese companies, Volvo has its own advantage. As we have emphasized, you could not acquire Volvo only by money. Thats like a free marriage, not an de rigueur acquisition. They have already possessed us. As a fast developing China-based company, we could give Volvo continuous capital support.Also, our promotion will make Volvo more famous in China. In terms of DSI, there are several parades of their employees due to the downsizing. The company is on the edge of bankrupt. People clap their hands to welcome us, because they see the hope. Besides, we have developed the technology of gearbox for close 6, 7 years, we are able to understand and accept the technology of DSI. Q Will there be any problems caused by culture collision after the acquisition of them? A I dont take it is a problem for us. Firstly, Volvo is an international company who will make decisions with a global vision.Although everybody loves their country, the asset of an international company is complex, especially after becoming a listed company. It depends on the structure of the asset. For instance, who do you withdraw Toyota belongs to? The asset structure is global, in which Japanese capital accounts for only a small part. However, the culture of Toyota is still Japanese. We think the situation is similar to Volvo, whose culture will not be changed by us. Our relationship is more probably a brotherhood, rather than hierarchical relationship. What we need to do is communication, respecting and taking care of each other.Q Will Geely convey the entire Volvo product line to China? A Automobile needs indigenous producing, R&D and sale, and more importantly, the maximum indigenous complement. So the current factories in Sweden and Belgian will be remained permanently. Q Whats your opinion on the Malaysia event, I mean the humbled of your corporation? 29 International Business Environment II A Based on the evaluation of all aspects, including the demand, competition, income and wage level, even the political aspect itself we believed Malaysia was our best choice to enter ASEAN.Malaysia had already trustworthy our contract we even signed the contract witnessed by both governments staff. You know Wu Bangguo, chairman of National Peoples Congress and Malaysias head of Parliament have attend the ceremony. I dont know why and how they allowed themselves to make such a decision. They denied the unilateral contract which goes against WTO regulation. I dont want to prattle about it anymore. Q The Geely Panda is transformed to Tobe and being sold in Taiwan, it is said that the real purpose is the ASEAN markets. Can you explain it a little bit?A Sure. Firstly, Taiwan has an advanced system in sales and service. We could improve our service, especially after-sale service. Secondly, Yulon Motor has abundant experience in overseas sales. This ? Tobe? has already being sold in Vietnam, and will be sold in Malaysia, Indonesia and Philippine. Q Whats your future plan? A notwithstanding ASEAN, we have run our business well in many markets. For instance, AIS Company from Ukraine, our best agency, sold out 8000 units for us in Ukraine and made ? Exterior? the most famous autotype in Ukraine.Considering the geographic advantage that Ukraine possesses, we will build CKD factory there, in order to expand to Russia and Eastern Europe. We also have signed a contract with a Mexico partner to build a 130-million-dollar all-around industrial centre. Our plan is, by 2015, build 15 produce centers abroad, and sell 2 million cars, in which 1. 3 million will be sold in overseas markets. Contacts turn Suite 15E, West Tower, 668 East Beijing Rd, Shanghai, 200001China Tel 86-21-53086111 53086126 telecommunicate86-21-53085062E-mailemailprotected com 30 International Busi ness Environment II