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    Haima Automobiles: Acquisition in Mexico

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    Chinese automobile company "Haima Automobiles" is looking into a foreign direct investment in Mexico as a joint venture with Mazda:

    Please help me analyze the benefits of the acquisition using the following models:

    •Internal resources: Competitive advantage rationale / Value chain rationale / Resource Based View of the firm rationale
    •Shared resources: Vertical integration rationale / Horizontal integration rationale
    •Financial rationale: Risk management / RAROC

    Please use credible references and use in text citations. List the references at the end of the response.

    Note: Attached is an assessment concerning Haima Automobile's decision to make its investment in Mexico to provide you with some background information.

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    Solution Preview

    In accordance with BrainMass standard, this is not a completion of assignment but is only background help.

    Step 1
    Internal resource model:
    In 2008 the construction of a new assembly plant at Hinan with a capacity of 100,000 units a year was commences. Haima has plans of building two more plants, likely to be located at Hakou. each with capacities of 150,000 vehicles annually. According to the internal resource model Haima must develop a reputation as an acquirer. It must be capable of compensating the current shareholders/owners of the acquired, company, provide reasonable security of employment to the current employees, and assure that the acquired company will grow. Further, Haima must confirm its strategic vision of entering Mexico, and successfully manage synergy targets. From the Internal resource model point of view Haima will grow in Mexico by acquiring a competitor (a). Haima will get access to the marketing and distribution network of the acquired company and will be able to increase its sales in Mexico relatively quickly. Further, acquiring an auto company in Mexico will ensure that synergies are achieved. The competitors of Haima will be caught off guard, there will be instant market penetration for Haima, and elimination of an important potential competitor from the Mexican market. For Haima to commence and increase sales in Mexico it is essential for it gain trust and customer loyalty quickly. This competitive advantage will available to Haima if it makes an acquisition in Mexico. From the internal resource perspective if Haima wants to enter Mexico, then acquisition is a lower risk option (b). Currently, Haima is aware of the potential acquisition targets in Mexico, selecting the right target will ensure ease of integration with the acquired company. From the internal resource point of view financing is easier to get for acquisition. Haima can use shares, raise share capital, or borrow for financing an acquisition for entry into Mexico.

    Step 2
    Shared Resource:
    The entry by acquisition into Mexico will be vertical integration. Haima will acquire an auto company or an auto ...

    Solution Summary

    This solution discusses the foreign direct investment strategy of Haima Automobiles into Mexico. The sources used are also included in the solution.