Volvo Business Analysis
Essay Preview: Volvo Business Analysis
Report this essay
Volvo Business Analysis
The Scandinavian automobile manufacturer founded in 1927 in Gothenburg, Sweden,
Volvo, got its name from the conjugated form of the Latin verb, “volvere” which means “I
roll”. The vision of the company was to produce cars that could withstand the cold weather
and rough roads in Sweden. Taking thins challenges in consideration, Volvo decided to
create the safest car in the world, this becoming their trademark ever since.
The car manufacturer became renowned for creating stodgy cars lacking in design
also called “boxes on wheels”. By conducting a PEST Analysis and taking in consideration
Porters Five Forces the company could identify and overpass the external challenges that
they could face in future.
Kotler claims in 1998 that PEST Analysis is a strategic tool used for understanding of
the market growth or decline. The PEST Analysis studies the political, economical, social and
technological factors including competitors and the standpoint of the company. This
business analysis used in addition to Porters Five Forces models can be applied to Volvo to
review its market position and create the new marketing planning.” “Porters five forces”
have shaped a generation of academic research and business practice. With prodding and
assistance from Harvard Business School Professor Jan Rivkin and longtime colleague Joan
Magretta, Porter here reaffirms, updates, and extends the classic work. He also addresses
common misunderstandings, provides practical guidance for users of the framework, and
offers a deeper view of its implications for strategy today.”(Michael E. Porter, The Five
Competitive Forces That Shape Strategy, The Magazine, January 2008)
Political
Like all other automotive companies, Volvo is facing the same new higher taxation
on trades and the constant increasing regulations on the car industry but also the higher
and higher pollution taxation. Another political factor that influences Volvo is the impact of
globalization which brings the regulations to the same level in every country which makes
the car manufacturer lose its small advantages in some countries. Globalization means that
the biggest multinational car manufacturers, like Toyota who is becoming the worlds
largest and successful automotive manufacturer, or the well renowned Mercedes-Benz are
going to dominate the market. As the governments around the world are starting to give
new laws on the protection of the environment and environmental protection acts such as
Clean Air Act, the whole automotive industry has been affected, this implying Volvo as well
having a stronger effect over the Swedish car manufacturer because of its big sized cars and
not so fuel-efficient engines.
Economical
The major economical problem that Volvo, but not only, is facing now is the big and
continuous rise in the fuel prices. Because of the high oil prices, all car manufacturers have
something to lose because people are going towards cars that are consuming fuel as little as
it could possibly be, but Volvo is lowering its performance more than the others again
because of the less fuel-efficient engines and big cars. Another economical factor is the
economic crisis which affects the car manufacturer by collapsing its sales, and the best
example is USA, where is the Volvos biggest market with sales equating to 19.5% of total
sales. The economic crisis reduced the sales in USA by 31% because the market is focusing
on eco-friendly alternatives rather than large SUVs like Volvos XC-90. In all the developed
markets the growth is flat or it is more of a decline than a growth but in emerging markets
such as Asia, Volvo has good prospects.
Social
Taking in consideration the big shift in the consumers preferences from a luxury,
large engine cars to fuel-efficient cars, Volvo lowered its sales. The car manufacturer is also
losing on the European market because the typical owner of a Volvo was a middle-aged,
part of a family with a 2.5 kids and nowadays, in Europe, there is a decline in the number of
families. The attitude that the customers have towards Volvo has been changing due to the awareness of the car industry business. Volvo current market segmentation is not leading to sales growth.
Technological
As Stewart Brand was saying “Once a new technology rolls over you, if youre not part of the steamroller, youre part of the road.” Volvo is part of the steamroller just in safety matters, becoming the best, as their trademark states, but not far away, being followed by Renault. Looking at the Swedish car manufacturers technological breakthroughs as a whole, they became “the road” because of not understanding the need for the other features of the product, like fuel-efficiency, eco-friendly, advanced features which