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MartOne of the most competitive sectors in the world today is probably the auto industry with many brands competing fiercely against one another. The last couple of years have seen a dramatic shift of power.

Detroit’s Big Three of GM, Ford and Chrysler are no longer the undisputed kings of the road. Western carmakers are under relentless pressure from Japanese and Korean brands like Toyota, Honda, Hyundai and Nissan over the last three decades. But it will be exciting to watch this battle unfold with yet another Asian entry: Chinese cars.

Geely is one of the leading Chinese automakers that aspire to make it big on the global market. The brand is based in Hangzhou, the capital of East China’s Zhejiang province. Founder and chairman Li Shufu, one of China’s richest men, is behind the wheel.

The brand’s aspirations were apparent when Li some years back said Geely would not be the subject of any world auto giants, and would instead devote itself to producing its cars, which the average Chinese consumer can afford.

Recently Geely bought Sweden’s Volvo from Ford for $1.8 billion in order to add a global brand to its portfolio, learn from it and apply the lessons.

But mergers and acquisitions are difficult. According to McKinsey & Co., only 20 to 30 percent of all global M&As are successful for shareholders.

China has experience buying overseas car brands, with Shanghai Automotive Industry Corp. acquiring Korea’s Ssangyong Motors in 2004. But the company went into receivership in January.

Building global brands and integrating acquired brands are tough journeys that require the right mind-set, skills and adequate resources.

When HSBC launched a global acquisition strategy during the ’90s, the bank was a fairly small entity operating. Today HSBC has become one of the world’s largest top institutions with headquarters in Hong Kong and London. It is one of the most successful cases of how acquisitions can be integrated seamlessly into a global brand.

For Geely to build a strong brand that resonates well, it has to focus relentlessly on quality and keep exploiting its cost advantages from its Chinese manufacturing base. Geely also has to build and sustain a strong brand to take on global competitors — not an easy task. The well-established global car brands have found a balance between brand promise and brand delivery.

If Geely wants to grow into a strong global competitor, the brand has to raise the bar constantly and make sure all customer touch points work in tandem around a strong brand promise. Price is not the only factor as Chinese consumers are very image conscious.

Additionally, Geely is linked to the country-of-origin effect of being made in China. It may work for simpler and cheaper products like mobile phones and TVs, but a car is a different challenge. A car is an important personal statement, and it comes at a much heftier price tag, so the perceived risk is higher.

There are great challenges ahead for Li and his team to strengthen the Geely brand in overseas markets as well as fully benefit from the Volvo acquisition.

Li Shufu is a brilliant example of the increasing number of new generation of Asian business leaders who have become more confident and are willing to run the risks associated with buying a large global brand.


Martin Roll is a global business & brand strategist. His Web site is www.martinroll.com.