The Investigation of Volkswagen's Entry Strategy in China's Car Market

MA MANAGEMENT DISSERTATION
XIAOFENG WEN
Finally, since it is slow to establish a Greenfield venture, there is the possibility of
being preempted by aggressive competitors who enter the same market via
acquisition.
2). Acquisition
Advantages
Acquisitions are quick to execute. Unlike Greenfield venture, acquisitions save the
time of building the subsidiary; therefore a firm can quickly build its presence in the
target market. For example, Daimler-Benz rapidly showed its presence in the US
market by acquiring and merging a few big US automobile companies (Wild 2006).
Second, it is easy to preempt the competitors because it is quick; many firms make
acquisitions for this purpose. This is particularly effective in the industries that are
rapidly globalizing, such as the telecommunication market. It is possible that
acquisitions are less risky than Greenfield ventures, as firms buy assets that are
already making profits, so less uncertainty, and also, except for the tangible assets,
firms also buy intangible assets such as local brand name and experienced managers,
these all reduce the risk.
Disadvantages
Firstly, acquired firms are often overpaid, especially when more than one firm is
interested in it, and top managers tend to overestimate their ability to create value
from an acquisition.
Secondly, culture clash is another important reason for the fails of acquisitions.
Culture difference between the established firm and acquired subsidiary cause high
management turnover, which harms the performance of the acquired firm, especially
when the managers have valuable local knowledge. For example, in the first year
after Daimler acquired Chrysler, many senior managers left because of culture clash
(Hill, 2005).
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