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Considerations for Auto Maker Acquisitions

Please respond to the questions below and cite your sources

The idea is for Volkswagen to acquire Fiat in Brazil. As representatives of Volkswagen in Brazil, we are looking to increase the company's market share, profitability and diminish competition by acquiring a local automotive company.

Review the strategic rationale of the proposed acquisition through:

- Resource Based View of the firm rationale.
- Political, Economic, Social, Technological Factors (PEST Analysis)

Solution Preview

As the number two automobile manufacturer in Brazil, Volkswagen Brazil has an
opportunity to greatly increase market share in the automobile industry. By acquiring Fiat in
Brazil, Volkswagen will be poised to become the number one automobile company of the region.
Additionally, Volkswagen has the opportunity to gain a foothold in the BRIC (Brazil, Russia,
India, China) group, which is a rapidly growing automobile market (Moore, 2010). It has
already reached nearly one fourth the automobile market share in China, well above Toyota and
Honda. There are many advantages for Volkswagen, in acquiring Fiat in the Brazilian market.

Volkswagen already possesses the technology, facilities and know-how, to manufacture
automobiles in Brazil, with its well- established facilities. Though in the number two position,
Volkswagen is gaining popularity in the Brazilian market, where its new hybrid models and
Flexible fuel vehicles have become very popular with consumers. The Brazilian market is highly
focused on the use of renewable energy sources. By acquiring Fiat, the automobile company can
bring its engineering of such features to Fiat models as well, making them more environmentally
friendly and desirable for a market that is increasingly demanding more options. Volkswagen
is also investing in new products and expanding manufacturing facilities in Brazil (VW Press,
2009), to address the increase in earnings and purchasing power of Brazilians, with a growing

Though Volkswagen has been low in quality ratings for the past several years, a 2008
J.D. Power & Associates quality survey indicates that company has made great strides in
reducing the number of problems per 100 vehicles, from 160 to under 125 (Lorenzo, 2008). If
quality control measures are applied uniformly throughout the company's various manufacturing
locations, it stands to improve its reputation as a quality automobile manufacturer. With
improvements in quality control practices, well established manufacturing facilities in Brazil and
its ability to product consumer friendly vehicles, Volkswagen has the resources to manage ...

Solution Summary

The solution analyzes the various considerations an auto maker may take into account when considering acquisition of another auto company or firm. Specifically, this discussion analyzes the considerations that may be made by Volkswagen acquiring Fiat in Brazil.