How was the future of Volvo's Chinese market?

Sweden’s Volvo AB has struggling nearly $1 billion in order to acquire a 45% stake in a new venture with China's Dongfeng Motor Group Co. for 5.6 billion yuan ($900 million). This was claimed by 26^th January 2013, which stand for the 7-year-negotiation finally ended with success.

 

This M&A would bring both advantages for Volvo and DongFeng Motor Group Co.  Volvo has entry to Chinese market several years ago, however, no good commercial vehicle development.

Universal acknowledge that maximazine shareholders wealth and increase market price are main reason that organisation choose to merger and acquistion. After claim of this news, the share price increase from $95.5 to $100.5 per share, at the beginning of the comming Monday.

Another important reason that companies combine is to improve their competitive market position. This negotiation would not only bring acquisition but also share core technology and create new R&D Centre in order to occupy Chinese big truck market. Merging with a competitor is an excellent way to improve a company's position in the marketplace. It reduces competition, and allows the combined firm to use its resources more effectively.According to wall street journal, "Volvo's Mr. Persson said the alliance signaled a long-term commitment to China's growth that would outlast year-to-year market moves. 'We will see markets going up and going down for years to come,' he said. He also cited Volvo's know-how in reducing vehicle emissions."

 

In order to open new market and being more competitive within industry, there are a long way that Volvo need to considering. On the one hand, the incresing of market price after acquisition is commen, which donnot stand for strength confidence of shareholders. On the other hand, subsequent expenditures might influence the purpose of the organisation.