Geely Automobile

supranational contrast purlieu Analysis for Geely plc. 1 supranational profession Environment II Module title International trade Environment (P13KL9) Module convener Lei Li Title Critical Analysis of International caper Environment in UK and Malaysia A Project of Geely plcs Foreign Expansion Group Name List GROUP NO. ID NO. 6501184 6501425 6501559 6501825 6501972 6500420 6501843 NAME subgenus Chen Yiduo Wang Hao Yin Xiaoyun Wang Zheng Zhu Weixing Zhu Leizhen Wu Gaoying Number of Words 4201 Submission Time/Date 14th whitethorn, 2010 2 International Business Environment II Covering NoteYiduo, Chen(6501184), Leader ASEAN, supplement the multinational institutionsASEAN, UNNC Gaoying, Wu (6501843) WTO, UNNC Hao, Wang (6501425) EU, Leverage the multinational institutionsEU, UNNC Leizhen, Zhu (6500420) Income pen, Culture, Marketing analysisIncome profile, UNNC Introduction, Econography, governmental risk, Assessment, Conclusion, UNNC Weixin, Zhu (6501972) Xiaoyun, Yin (6501559 ) Legal System, Exchange prescribe, Geelys Re exploits, Recommendations, UNNC Zheng, Wang (6501825) Tax regime, Restrictions, Marketing analysislegal system, UNNC 3 International Business Environment II Table of contents Pages 1.Introduction .. 5 2. ECLIPTER facotrs analysis. 5 2. 1Econography 2. 2 Culture 2. 3 Legal system 2. 4Income profile 2. 5 Political risk 2. 6 Tax Regime 2. 7 Exchange rate 2. 8 Restrictions Institutions. .. 13 3. 1 WTO 3. 2 EU 3. 3 ASEAN 3. 4. Assessment of Geelys boilers suit international expansion strategy 15 5. Marketing analysis 16 5. 1 Legal system 5. 2 Income profile 6. Geelys reacts to the impact of the ECLIPTER. 8 7. Leverage the twelve-sided institutions.. .. 19 7. 1 ASEAN 7. 2 EU 8. Implications and Recommendations.. .. . 20 9. Conclusion.. 21 10. References.. .. .. 22 11. Appendix (Interview)28 4 International Business Environment II 1. Introduction Geely, the china-based cable car guild and one of the newly-emerged multinationals in the manhood gondola food market, exerts tremendous influences on the car industry. This essay bequeath conduct a critical analysis of the international business environment that the company faces.In the first part, the ECLIPTER factors including econography, culture, legal system, income profile, political risk, measure regime, exchange rate and restrictions, to prevailher with the multilateral institutions such as WTO, EU and ASEAN exit be examined by using UK and Malaysia as examples. thusly based on this analysis, it get out provide an assessment of the companys over all international expansion strategy and process. In the second part, legal system and income profile, the two well-nigh important ECLIPTER factors on Geely afield operations, result be evaluated.Further more(prenominal), the scheme which Geely used to luck with the impact of these two factors and leverage the multilateral institutions will be shown. Finally, this key out will analyze whether the companys i nternational adaptation of the business function is effective, and then give some recommendations and lessons. 2. ECLIPTER Factors Analysis 2. 1 Econography Econography refers to natural and serviceman additions including distance from study markets, and natural resources of nations that affect industry performance.In the first, the close distance between pargonnt company and foreign subsidiary can stand by the company to reduce the transport costs and overhead expenses it besides can improve the connection between them. If the parent company is in China, it is better to pee a subsidiary in Asia such as Malaysia. Secondly, the natural resources used for making cars mainly include steel, copper, and aluminum. If the country owns mysterious mineral resources, it can greatly provide benefit in the production of automobiles. One of the major purposes for many an(prenominal) multinational corporations establishing overseas subsidiaries is to exploit the foreign natural resources. This is good for companies to 5 International Business Environment II reduce production costs and get competitive advantages. As World brand Association reported in 2009 that the plebeian steel production of United Kingdom is 13. 5 in 2008, whereas the crude steel production of Malaysia is 6. 1 in 2008. 2. 2 Culture This paragraph will analyze the effects of culture on auto industry by dint of power distance index and legal transfer rate. Firstly, power distance index measures the detail of ine whole step exists in a society (Hofstede, 1997). The power distance index is 80 in Malaysia whereas it is hardly(prenominal) 35 in UK (Hofstede, 2008).The unequal distri thation of wealth makes virtually Malaysian citizens favor to hold a commercial auto. So the inexpensive Geely auto could be a good option for them. Secondly, saving rate could be a standard to show the attitude of citizens. The saving rate of Malaysia was 47 per cent in the year 1998 which ranks second in Asia (Azia , 2004). In contrast, the saving rate in UK was significantly low, which was less than 10 percent in the past ten days. For instance, the saving rate of UK household in 2008 was only 1. 7 percent (chart 1)(Presser, 2008). So UK citizens are apt to consume a relatively high price car. Chart 1Resource from Posser (2008) 6 International Business Environment II 2. 3 Legal system The auto industry has been affected by laws and government regulations since the 1960s. The first safety act passed in 1966 by Congress and was called the National Traffic and Motor Vehicle Safety Act (Highfill, 2004). This act forced manufacturers to improve the safety for the passengers, the driver visibility, and the braking of the car. Not only safety, but also environment is universe growingly concerned even before the oil crisis. The Vehicle Air Pollution and Control Act passed in 1965 was the first act to set standards for automobile pollution.Then in the 1970s, Congress passed the Clean Air Act that l ed to a 90% decrease in automobile spark within the next six years (ibid). In the 1970s the oil crisis led to the approval of The Energy Policy and Conservation Act of 1975 which stated that all automobiles essential meet a certain mileage per gallon. The act required that all automobiles had to meet a standard of 20mpg by the 1980 poseur and then 27. 5 mpg for the 1985 model (ibid). EU 2020 growth strategy also emphasizes the importance of low degree centigrade automobile (Society of Motor Manufacturers and Traders, 2010).There are also many special laws for auto industry in different countries, such as Malaysia, which has built a free trade area for production and assembly of products for export-oriented enterprises. Companies can enjoy the minimal tariffs, raw materials and simplified mechanical equipment import formalities. Nevertheless, the Malaysia government regulates that more than 80% products should export to other countries (Daily password, 2006). Furthermore, the UK Byers Acts Measures to cut the average price of a car by ? 1,100 and save private car buyers around ? 1 billion a year.Although it may lower the profitability of auto industry, the number of consumers will increase in stages (DTI, 2000). 2. 4 Income profile Since automobile is not inferior goods, the demand of automobile would rise when income increases. In the economic aspect, income could be an indicator of the purchasing power of individuals and nations. selective information from UK national statistics office (2010) demonstrated that despite the repressed 4. 9 percent of GDP in the whole year, the GDP increased 0. 4 percent in 7 International Business Environment II the fourth nincompoop of 2009. Furthermore, Household expenditure also rose 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 observed that the economy of both UK and Malaysia seem to recover from the global financial crisis. This positive signal predicts the growing demand and distensible market for Geely in both countries. Chart 2 Resource from UK statistics 2010 Chart3 Resource from Malaysia statistics 2010 8 International Business Environment II The core competitiveness of Geely automobile relies on its high performance-price ratio.Per metropolis GNI (Gross national income) in Malaysia was 25784 RM in 2008. By analyzing the 2004 United Nations Human Development (UNHDP) report, except the 20% tribe of richest and poorest class, Geely will be a better filling for the rest citizens in Malaysia(chart 4) (Lumpur, 2004). In comparison, the young lot account for a great numerate of population in UK. A source from HMRC shows the average income of infra 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 cons ideration factor.For medium quality car manufacture companies, young population in UK could be a potential group of nodes. Chart 4 9 International Business Environment 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 ? 24,800 ? 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 Mean Income Income (Men) (Men) (Women) (Women) Income Income Income Mean Median Mean 2. 5 Political risk tally to Guinger (2001), political risk describes the stability of government institutions. It can be measured in a variety of ways such as likelihood of foreign aggression and civil insurrec tion. The Transparency International (2009) showed that UK and Malaysia both face some problems of political corruption, which adversely affects the efficiency of economic operation.World rim estimates that corruption could cost Malaysia as much as RM10 10 International Business Environment II billion a year an amount akin 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 Corruption 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 foreign bribery may be lessen over time.In 2002, aft(prenominal) the act came into force, 68 percent of respondents say they were familiar with its main points. But in 2006, 48 percent people said that they have totally ignored it (Global Corruption Report, 2009). 2. 6 Tax Regime Tax regime refers to the tax income instruments that governments use to raise revenues from multinational firms, such as incarnate taxes. The tax of Malaysia is transparent, the multinational corporate must(prenominal) be taxed 30% of the corporate income which is just the same as Malaysia companies Marketing directory, 2005) According to the tax bonus treaties, auto ( . ndustry may be eligible for pioneer status which is given by the way of an abatement of 70% of the profits for five years (ibid). The stay 30% of the profits will be taxed at the prevailing corporate income tax rate. The profits abated are exempt from tax and will be open for distribution as tax-free dividends. In UK the resident corporate tax is the lowest in Europe, even the tax is zero for the small companies in 2002(Lawandtax-news, 2010). According 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 vogue of events, foreign companies cannot follow the low corporate tax, bu t with regard to double taxation and the agreement between UK and China, Chinese multinational corporates in UK without delay repair the low tax (ibid). 2. 7 Exchange rate Stable trade policies are extremely important for both the economic welfare of the countries and the multilateral art system. Unfortunately, the liberalization measures were adopted by many countries. As Dornbuschs 1976 analysis has pointed out that when the exchange 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 Balance of Payments Committee of the WTO has received 39 requests from piece countries for derogations from their international obligations and for a temporary increase in temporary protection. Moreover, several developing countries, such as Malaysia, have recently increased tariffs in an swer to financial crises even though the higher rates remain below the rates these countries bounded in the WTO.Moreover the analysis said China has bring to pass a great auto exporter, as a result of the huge subsidies, an undervalued exchange rate and dirt-cheap credit (Swaminathan, 2009). 2. 8 Restrictions Restrictions refer to the taxes and limitations that host governments place on foreign products and services or on foreign firms themselves when they enter or leave the host economy. Because of the policy of protecting 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 outside of Southeast Asia (mei, 2009). In 2010, according 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 charge the same tax when they have business with the third country (European competitiveness, 2009). 12International Business Environment II Scoring Analysis of UK and Malaysia unpolished Score Econography Culture Legal System Income Profile Political Risk Tax Regime Exchange Rate 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 elimination of stopriers to intra-Community trade the maintenance and expansion of a competitive world automobile industry the use of voluntary import restrictions to prevent cheap imports and to maintain competitiveness? European Commission, 2006). For example, in 2006, WTO announced the plaque of a panel to examine whether Chinas tariffs on imported auto parts violate WTO trade rules, following a joint complaint made by the United States, the European Union and Canada, who accused China for its discriminatory charges on imported auto parts. After examining Chinas related regulations, WTO panel tell that Chinas regulations are inconsistent with Chinas WTO obligations. China has agreed to make the necessary 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 path to world market and made it integrated to the world economy. In 2002, by and by China conjugated 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. Besides the vehicle crash tests executed by Euro NCAP (European New Car Assessment Pro gramme backed by European Commission), o n that point are also some regulations set to protect the environment.First, in rove to respond to the gradual aggravation of greenhouse effect, the European commission authentic a mandatory emission standard to limit the emission of one major kind of greenhouse gas, CO2. The regulation set a fleet-average CO2 emission target for passenger cars, which is 120 g/km to be reached by 2015 (European Commission, 2010). The vehicle manufacturers must reach the CO2 emission target of 130g/km, with an additional reduction of 10 g/km to be provided by supplementary measures, such as the use of hydrogen fuel. A long-term 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 have 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 gr am 25 for the third gram 95 from the fourth gram onwards. From 2019, manufacturers will pay 95 for each g/km exceeding the target. Another congressional mandate imposed by European Commission requires scan pressure monitoring systems on all new 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 stacks 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 have 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 lastn for making low-tech and cheap cars, making eco-friendly cars is not included in the competen cies of the company and huge R&D spending is inevitable for nurturing this competence. They set a high bar for the competition and limit Geelys ability to expand market in Europe. 3. 3 ASEAN ASEAN Association of South East Asia Nations is a geo-political and economic organization of 10 countries located in Southeast Asia. China and ASEAN are both newly-emerged, rapidly-developing auto markets.Cooperation in auto industry between China and ASEAN will bring a win-win situation for the two sides and make their cars more competitive in a global competition. For instance, according to Xinhua News Agency (2006), a report released by the Ministry of vocation 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 investment from Chinese carmakers to expand local physical exertion and for more price-favourable cars, said a Germany auto expert at the China-AS EAN Expo, 2006.Consequently, in general, ASEAN opens its gate to Chinese car companies including Geely to achieve a win-win situation. 4. Assessment of Geelys overall international expansion strategy Geelys current international strategy is to mystify 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 similar culture, and the similar geographical position, etc.As by now most cars have been exported to some developing countries like sou-east Asia, Ukraine, Russia, and Mexico, Malaysia will be good plectron. 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 branding, technology, etc, as the UKs income per capita, and the automobile sales volume are higher than that of Malaysia.Considering the future international development, Geely should focus on UK. Therefore, 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 new markets. Firstly, a win-win situation guarantees a favourably corporate relationship between Geely and ASEAN (Eichengreen, 2006).Secondly, in that respect are various quality-related requirements and constraints in EU and probably NAFTA, which puts up a strong challenge for those Asian auto makers. Moreover, by far, there is no evidence to prove the acquisition of Manganese Bronze and Volvo have considerably increased Geelys sale in developed nations. and then considering the opportunities and threats faced by Geely, it is recommended that the company emphasizes on developing nations markets, rather 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 Investment 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 climate change levy, company car tax, and fuel benefit charge (ibid). This is good news for Geely because now it dedicates itself to produce high-tech and eco-friendly automobile. In 16International Business Environment II UK the amount of car tax depends on the price and the discharge a mount 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 consumers a ? 2,000 discount off. If they scrap their old vehicle, it will overhaul 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 inclined 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 reinforced 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 s ubsidies for the new expertness automobile companies (ibid). . 2 Income profile It is known that the success of Geely relies for the most part on keeping low cost and offering the affordable cars. For instance, Geelys best-selling four-door sedan, the King Kong, has been interchange 6127 in April 2010 and the retail price is between 47,800RMB 58,800RMB (Jiang, 2010). Geely change 329,014 passenger cars in 2009, making it is the third largest domestic car producer (Zheng, 2010). However, Geelys gentle formula is under pressure in china because Chinese consumers are decent 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 t he ticker 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 UK 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 increasing incomes will directly affect their car buying choice. People nowadays prefer the higher-end models and the market destiny 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 decreased from 37940 in 2008 to 6297. Furthermore, although Geely exports to more than 50 countries, most of them are devel oping 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 Yuan (Fang, 2009). Besides, Geely take over Volvo which also explicit its desire to promote the brand image.Geelys strategy changes starts in May 2007, which is focus on transforming its competitive advantage from price to technology. In 2007, Geely used terzetto 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 designed by Fabrizio Giugia ro, the Italys famous auto manufacturer. Moreover, the new energy auto will also be produced in 2010, which will include Panda and DiHao ( sebaceous cystqing, 2010). These new energy auto types have been showed in the Beijing car exhibition 2010 (Phoenix auto, 2010). In order to deal with these two factors, Geely also has a complementary strategy cooperate 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 immobilise news in 2005 was the political barriers Geely met in Malaysia, which was considered as the commodiousgest challenge for its overseas exp ansion so far. Geelys President Li Shufu described Malaysia as ? an surprising trap? because of Malaysia governments rejection on fulfilling the contract.After examining the ECLIPTER factors of Malaysia market, Li Shufu and his team regarded Malaysia as the first pillbox and cornerstone 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 ex officios, to some extent, ASEAN agreements have made Geely to reconsider the importance of Malaysia (Harwit). In South East Asia nations, there are some strict tariff-rel ated 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, Thailand, 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). curiously after an impressive increase in 2007, the car-sale in Indonesia becomes significantly dazzle. Therefore Geely 19 International Business Environment II figureed to only manufacture cars in Malaysia and then export cars to other ASEAN countries, which seems like a forward-looking plan in a long-term development.Finally, Geely decided to move its Malaysia CKD manufacture center to Indonesia. However, its great deal of leveraging ASEAN to pursue a sale performance in all ASEAN nations has not changed. 7 . 2 EU In terms of EU regulations, since Geely has germinated 100% willpower 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 slap-up, 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 energy automobile, there are two advantages for this strategy Firstly, Geely can get powerful 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 (Bond newspaper, 2010). However, there are also drawbacks, such as the inadequate facilities.Acquiring other world famous bands is the other strategy of Geely, which fac ilitates 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 provides a valuable, more upscale user image. Therefore, through merger or acquisition of international well-known brands, Geely can get greater international fame and advanced(a) 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 union 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 reputation for safety has been challenged by other manufacturers which can also provide automobiles with same safety standar d. In this case 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 pri ce strategy is challenged by the legal system and income profile of developed countries. Therefore, Geely is increasing its efforts in releasing new model cars and 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 uncertainty of acquisition value. 21 International Business Environment II 10. References Azia, A. Z. (2004) Malaysia-Encouraging Saving in a Dynamic Economy Online. visible(prenominal) 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. operable at 6 May 2010 China Car Times. 2010) London Taxis should now be renamed Hangzhou Cabs. Online A vailable at 11 April 2010 Daily News (2006) 10 ,80% (Geely will produce automobiles in Malaysia, 80% should not sell to other countries)online. in s tock(predicate) at 25 April 2010 DEPATMENT OF STATISTICS MALAYSIA Official Website (2009) Population Online. operable at 12 April 2010 DieselNet (2010) Cars Greenhouse Gas Emissions online. in stock(predicate) at 15 April 2010 DTI (2000) Byers Acts to Reduce Car Price online. Available at 27 April 2010 22 International Business Environment II Eichengreen, B. 2006) China, Asia, and the World Economy The Implications of an Emerging Asian Core and Periphery China & World Economy / 1 18, Vol. 14, No. 3, 2006 Online. Available at 24 April 2010 European Commission (2010) A Single Market for goods Online. Available at 20 April 2010 European Commission (2006) A Competitive Automotive Regulatory System for the 21st century Online. Available at 20 April 2010 European competitiveness (2009) Tariff Barriers online. Available at 21 April 2010 Europes Information Society (2010) Tyre Pressure Monitoring System online. Available at 21 April 2010 Fang, Wen (2009) Vs (The Difference Between BYD a nd Geely) online. Available at 21 April 2010 Gasgoo. (2009) Volvo union meets Geely, no detail on financing. Online Available at 11 April 2010 23 International Business Environment II Geely (2009) Annual Report and Financial Statement online. Available at 5 May 2010 Guardian (2009) Alistair Darlings pre-budget report-full text Online. Available at 20 April 2010 Harwit, E. (2006) Chinese afield Investment Cases in the Automobile and Telecommunications Sectors Online Available at 20 April 2010 Herd, J. (2006) Modern Global Automobile Industry Online.Available at 21 April 2010 Highfill, D. , Baki,M. , Copus, S. , Green, M. , Smith,J. and Whineland. M (2004) Automotive Industry Analysis-GM, DaimlerChrysler, Toyota, Ford, Honda online. Available at 28 April 2010 HMRC (2004) Rates and allowances Income Tax Online. Available at 17 April 2010 Hofstede (1997) Culture Online. Available at 17 April 2010 Hofstede(2008) Wolrd map of Power Distance Index-Hofstede Online. Available at 17 April 2010 Hofstede (2008), World interpret of Uncertainty Avoidance Hofstede Online. Available at 17 April 2010 24 International Business Environment IIIfeng (2010) (Analyzing Geelys current position from the proportion change of be and sales) Online Available at 12 April 2010 International Monetary Fund (2010) World Economic Outlook Online Available at 11 April 2010 JAMA (2008) 1996-2007 ASEAN 5 Countries Sales Statistics Online. Available at 24 April 2010 Julia, K. (2009) Scrappage plot Bosst Continues As New Car Sales Up 31% On Last Year Online. Available at 20 April 2010 Lawandtax-news (2010) Corporate Taxation for Multinationals online. Available at 21 April 2010 Lumpur, K. 2004) 2002 WORLD SUMMIT ON SUSTAINABLE DEVELOPMENT Online. Available at 15 April 2010 Luo, J. (2005) The Growth of Independent Chinese Automotive Companies online. Available at 15 April 2010 Malaysia statistics (2010) Gross interior(prenominal) Product Online. Available at 15 April 2010 25 International Bu siness Environment II Marketing directory (2005) (the Summary of Investment Environment of Malaysia)online. Available at 21 April 2010 MEI (2009) (the New Policy of Automobiles in Malaysia) online. Available at 20th April 2010 Navstar (2009) the detail of the corporate tax in UK) online. Available at 21 April 2010 Office for National Statistic (2009) National Projections UK population to exceed 65m by 2018 Online. Available at 11 April 2010 Phoenix auto website (2010) ( the new energy car showed in Beijing car exhibition) online. Available at 5 May 2010 Posser, D. (2008) UK saving rate sinks to 49-year low as growth faltersOnline. Available at 17 April 2010 Society of Motor Manufacturers and Traders (2010) EU 2020 growth strategy emphasises significance of low carbon automotive online.Available at http//www. eemsonline. co. uk/press_releases/08-03-10_3 1 May 2010 Swaminathan S Anklesaria Alyar. TNN(2009) How India beat China in auto exports online. Available at 3 May 2010 26 I nternational Business Environment II Swee-Hock, S. (2007) The population of Peninsular Malaysia. Online Available at 13 April 2010 TRANSPARENCY INTERNATIONAL (2009) Corruption Perceptions Index 2009 Online. Available at 11 April 2010 UK statistics (2010) GDP Growth Online. Available at 15 Apr 2010 Wenqing F. (2010) 21 Geely will market 21 new types of automobile, new energy car also will produce)online. Available at 24 April 2010 World Steel Association (2009) WORLD STEEL IN FIGURES 2009 Online. Available at 11 April 2010 World Bank (2008) Gross National Income Per Capita 2008,Atlas Method and PPP Online. Available at 15 April 2010 Xinhua News Agency (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 Distinguished guest Mr.Zhao Jie, Vice President of Geely Holding Group, In charge of Geelys international business. Time 28 April 2010 Location Mr. Zhao Jies off ice 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 investigated a lot on the R&D and have made some success. As our new motto cited, we will ? devote 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 experience 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 breakthrough in this area. Q Have you got any type or design which could achieve the standard? A Yes we have. Most of the automotive types in our series-EC were produced ba sed 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 glad 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 obligatory acquisition. They have already accepted 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 about 6, 7 years, we are able to understand and accept the techn ology of DSI. Q Will there be any problems caused by culture collision after the acquisition of them? A I dont think 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 think 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 likely a brotherhood, rather than hierarchical relationship. What we need to do is communication, respecting and taking care of each other.Q Will Geely transfer the entire Volvo product line to China? A Automobile needs indigenous producing, R&D and sale, and more importantly, the maximum ind igenous complement. So the current factories in Sweden and Belgian will be remained permanently. Q Whats your opinion on the Malaysia event, I mean the broken 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 accepted 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 attended 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 talk 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 Except 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 Address Suite 15E, West Tower, 668 East Beijing Rd, Shanghai, 200001China Tel 8 6-21-53086111 53086126 Fax86-21-53085062E-mailemailprotected com 30 International Business Environment II