2. The FDI to US$8.9 billion in 1998 and soon soared to US$15.5 billion, exceeding the total foreign investment over the previous 35 years.
3. The recovery pushed the unemployment rate down to 4.8 percent (1,353,000 workers) in 1999, and it fell to 3.7 percent (about 800,000) in May 2000.
4. Data for the first 4 months of 2000 indicate such investment totalled US$3.7 billion, about 33 percent higher than the same period in 1999.
5.
6. Increased product portfolio for Volvo: Samsung was manufacturing some ten different types of excavators, mostly in the 7-28 ton category. Samsung's broad range of excavators contributed significantly to VCE's existing product program.
7. Increased market share for Volvo: The acquisition gave Volvo access to an industrial structure in Asia and an efficient distribution network in South Korea, a significant market for construction equipment in Asia. The acquisition also strengthened Volvo Construction Equipment's presence in East Asia and provided opportunities to increase market shares in the company's other product areas, such as wheel loaders, graders and articulated haulers.3) Why did government of South Korea permit this acquisition? What was the initial response of CED’s employee s and South Korean citizens to this acquisition?<br />ASEAN Financial crisis:<br />The government of South Korea permitted this acquisition since after the economic crises of 1997, Korea’s long period of economic boom came to an abrupt end which produced a sharp drop in the economic activity in South Korea. The Korean currency slumped across the dollar, requiring the government to seek $58 billion in aid from the International Monetary Fund. As the demand for their products plummeted, dozens of highly leveraged Korean companies found themselves unable to service the debt that they had taken on during the boom years to finance their expansion. Many teetered on the edge of bankruptcy. The South Korean govt responded by making the historic decision to remove many of the restrictions to foreign direct investment, including the regulations which prohibited foreign firms from making hostile takeovers of Korean enterprises.<br />Need for FDI inflow:<br />As demand for their products plummeted; many of the highly influential Korean conglomerates (chaebols) became unable to service their debts and were near to bankruptcy. These companies either wanted to sell off their stakes to boost their liquidity or be acquired over by foreign company, thereby transferring their ownership. It was recognized that allowing free flowing FDI was the only way to achieve this. <br />Also as per the theoretical concept of impact of FDI, the FDI does not only bring capital but also it brings technology, knowledge and due to the spill over effect, development of process remains for the long run. FDI works as the catalyst for the economic growth of a country, especially for the developing countries like South Korea.<br />Volvo was the reputed global company in automobile and industrial sector. Government thought Volvo’s global exposure will help ailing company more efficient with better productivity.<br />Initial response of CED’s employee s and South Korean citizens to this acquisition:<br />Acquisition whether hostile or non hostile always comes with a tag of corporate restructuring which directly results in job cuts .As a result acquisition is always seen as an opposition agent from labour and trade unions and same was witnessed in case of Volvo acquisition in South Korea. <br />Initially many Koreans and CED workers viewed the new wave of foreign investment with deep suspicion. The very next month after the acquisition was announced in January 1998, the workers of CED went on strike. <br />4) What are the learning for MNE’s from this case? Explain the rationale for your answer.<br />Importance of FDI:<br />Case showcases the importance of FDI and liberal trade policies which is needed for overall development of the country. Case also introduces acquisition as one of the host country entry policies (FDI Based) through which MNE along the world can directly tap the local market and infrastructure. Acquisition also helps the host country in improving the industrialization standards and technological know –how.<br />Country Objective: <br />Volvo had evaluated its country objective before it invested in Samsung’s CED. They wanted to export 60-70% of its products produced at the plant. Since South Korea has cheap and abundant labour and also it has a history of workers involved in industries producing heavy machinery, so the learning curve ensures that the labour is also productive. <br /> Volvo had evaluated South Korea also on the invariant and acquired factors. Since Korea has a vast coastline so shipment of products becomes easier. Also Korea had a history of boom where in the country progressed in many sectors. If we look at the acquired factors then people skills were there in place which ensures that the workers are hardworking and productive.<br />Need and Importance of M&A<br />Host company point of view:<br /> Mergers and Acquisitions can prove to be really beneficial to the companies when they are going through turbulent times may be due to financial or operational problems. MNEs not only bring the capital but also bring the latest technology and best business practices which are tested successfully by MNE in other parts of world. <br />MNE point of view:<br />Access to local markets of different countries is possible through international mergers and acquisitions. M&A provides direct access for MNE to the local or regional market and thus increase in market share.<br />M&A helps MNE in gaining cost efficiency through economy of scale.<br />The labour cost is relatively cheaper in developing countries. Thus by setting up manufacturing hub in developing countries, MNEs can lower the cost of production. MNE gets access to infrastructure, resources and distribution channel of company in host country.<br /> <br />References<br />http://en.wikipedia.org/wiki/History_of_South_Korea<br />http://www.samsung.com/hk_en/aboutsamsung/corporateprofile/history01.html<br />http://volvogroup-qa.volvo.com/group/global/en-gb/newsmedia/pressreleases/previous/1998/Pages/newslist.aspx<br />http://www.ifri.org/files/Economie/FDI_Economic_Status_Korea.pdf<br />