Ans1 : Volvo's motives for acquiring Samsung CED in 1998 :
Scale economies and Product alterations: In large scale process, for companies like VOLVO export's reduce costs over more units of output. For such products, especially if they are standardized or undifferentiated from those of competitors, the cost per unit drops significantly as output increases .The more the the product has to be altered to the foreign market, the more likely it is that production will shift abroad.
Vertical Integration: It is a company's control of the different stages of making its product from raw materials through production to its final distribution. One way to help assure this flow is to gain voice in the management of one or more of the foreign operations by investing in it.
Rationalized Production: companies produce different components or different portions of their product line in different parts of the world to take advantage of low labor costs, capital and raw materials. Another advantage of this type of rationalization is smoother earnings when exchange rates fluctuate.
Product-Life Cycle Theory: For market and costs reasons ,production often moves from one country to another as product moves through its life cycle. Volvo found it profitable to produce mature product in emerging economies of like South Korea.
Volvo CE needed to obtain a competitive excavator line, because
?Excavators comprise a very large share (33%) of the global construction equipment market, and Volvo CE was too small in this product line.
?Volvo CE wanted to establish an Asian industrial hub and strengthen its position in Asia
?It was a way to enter in the large excavator market in Korea and to introduce Volvo CE's other products in this market.
Obstacles facing Volvo?
The bu ...