Comments on: The Challengers vs. The Incumbents http://globalinvestmentclub.org/2009/06/the-challengers-vs-the-incumbents/ Fri, 26 Mar 2010 12:42:52 -0700 http://wordpress.org/?v=2.8.6 hourly 1 By: Albert Xu http://globalinvestmentclub.org/2009/06/the-challengers-vs-the-incumbents/comment-page-1/#comment-54 Albert Xu Wed, 24 Jun 2009 03:36:58 +0000 http://globalinvestmentclub.org/?p=386#comment-54 Acquisitions are surely a way for fast expansion of these challenger companies Aaron mentioned here. However, I think there're drawbacks of expanding through acquisitions because the foreign companies such as those from China/India face a completely different market from their local markets. For example, the Lenovo group from China didn't have much time to enjoy their honeymoon with IBM PC division after they acquired the Thinkpad brand as the sale of its products declined year to year. Culture difference, markets positioning all contributed to the difficult situation. Lenovo gave up using the brand of IBM but Lenovo in States only two years after the acquisition, but the brand of Lenovo not only has little influence overseas, but also gives American customers an impression of a food company. The confusion of Ideapad and Thinkpad also limited the growth of Lenovo. Thus, from my point of view, the challengers do need to fully consider the cost of acquisition and research more about the new market they are entering. Aaron is right about the fact that there’re more and more challengers coming up from the RDE. Hummer maybe sold to a Chinese company based in Chengdu, Sichuan. Volvo sale also involved some rumors about Chery, the famous Chinese motor company. If you ask me about some investment opportunities, I may suggest some Chinese state owned companies which has great growth prospect such as Aluminum Corporation of China Limited (NYSE). The Chinalco constantly seeks acquisition opportunities to expand overseas. The most known action it took recently is the deal with Tinto, which unfortunately didn't go through. However, there’s news saying that it is now targeting on Anglo American plc and offer a bid to value this company at about GBP27.7 billion ($45.6 billion). The Chery Inc I mentioned early on may be listed within this year at Shanghai and Hongkong. Similar to BYD Aaron suggested in the article, this seems a good investment for me too. Acquisitions are surely a way for fast expansion of these challenger companies Aaron mentioned here. However, I think there’re drawbacks of expanding through acquisitions because the foreign companies such as those from China/India face a completely different market from their local markets. For example, the Lenovo group from China didn’t have much time to enjoy their honeymoon with IBM PC division after they acquired the Thinkpad brand as the sale of its products declined year to year. Culture difference, markets positioning all contributed to the difficult situation. Lenovo gave up using the brand of IBM but Lenovo in States only two years after the acquisition, but the brand of Lenovo not only has little influence overseas, but also gives American customers an impression of a food company. The confusion of Ideapad and Thinkpad also limited the growth of Lenovo. Thus, from my point of view, the challengers do need to fully consider the cost of acquisition and research more about the new market they are entering.

Aaron is right about the fact that there’re more and more challengers coming up from the RDE. Hummer maybe sold to a Chinese company based in Chengdu, Sichuan. Volvo sale also involved some rumors about Chery, the famous Chinese motor company. If you ask me about some investment opportunities, I may suggest some Chinese state owned companies which has great growth prospect such as Aluminum Corporation of China Limited (NYSE). The Chinalco constantly seeks acquisition opportunities to expand overseas. The most known action it took recently is the deal with Tinto, which unfortunately didn’t go through. However, there’s news saying that it is now targeting on Anglo American plc and offer a bid to value this company at about GBP27.7 billion ($45.6 billion). The Chery Inc I mentioned early on may be listed within this year at Shanghai and Hongkong. Similar to BYD Aaron suggested in the article, this seems a good investment for me too.

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