Question

Did You Know? Volvo Now Owned by a Chinese Automobile Maker

This activity is important because, as a manager, you must be able to understand how the actions managers take influence how well their company will compete as an international business. Managers need to understand the different strategies that can be used to compete, their pros and cons, and the factors that influence the choice of strategy.

The goal of this activity is to demonstrate your understanding of the international strategy; global expansion, profitability, and profit growth; and the choice of strategy.

Geely produces its Volvo brand in three locations: Sweden, the United States, and China. This approach to production

Multiple Choice

a capitalizes on the conflicting demands a transnational strategy entails.
b allows the company to avoid the duplication of functions that might otherwise occur.
c enables Volvo to capitalize on location economies in production in each geographic location.
d limits cost pressures for local responsiveness.
e fosters a multidirectional flow of skills between subsidiaries.

Answer 1

The correct answer is option c. Volvo's international strategy, influenced by owner Geely, locates production in multiple countries to capitalize on location economies, enhancing its competitiveness and leveraging global economies of scale.

Step-by-step explanation:

The global expansion of the automobile industry illustrates the importance of economies of scale in international trade. Companies like Volvo, now owned by China's Geely, have strategically located their production facilities in Sweden, the United States, and China. This approach to production enables Volvo to capitalize on location economies in each geographic location, optimizing production costs and market responsiveness. These decisions are central to forming an effective international business strategy, allowing for competitive pressure which fosters innovation and better product offerings, as seen with the historical competition in the U.S. auto market. The competition from global manufacturers like Toyota, Honda, and Volkswagen has pushed U.S. automakers to improve vehicle quality, demonstrating dynamic comparative advantage and the positive impacts of global market competition.

The correct option for the given question is (c) "enables Volvo to capitalize on location economies in production in each geographic location", as this reflects Volvo's international strategy which targets not only cost efficiency but also improves the company's competitive positioning in the global market.

Answer 2

Volvo's strategy of producing vehicles in Sweden, the United States, and China enables the company to capitalize on location economies, demonstrating an understanding of managing production in an international context to boost competitiveness and address global market challenges.

Step-by-step explanation:

The question relates to the field of international business strategy, specifically how Volvo, under the ownership of Geely, a Chinese automobile maker, manages its production in three different locations to compete in the global market. The approach that enables Volvo to capitalize on location economies in production in each geographic location, according to the multiple-choice options provided, is c) enables Volvo to capitalize on location economies in production in each geographic location.

Volvo's production strategy illustrates the benefits of economies of scale in international trade, allowing large producers to supply cars at a lower average production cost while maintaining competition and variety for consumers. Increased global competition leads to higher quality and innovation, as illustrated by the improved performance of American car producers due to competitive pressure from rivals, especially from East Asian and European carmakers. This dynamic shapes the global automobile industry, making it essential for managers to understand the strategies for competing internationally.