1) Outline and discuss the macro and micro environmental factors that are influencing Volvo's strategy?
The micro environment is which explains the internal environment of the company and which tells the position of the business in all the terms of the business and hence this gives an idea of the current position of the company.
The Volvo name is 90 years old and has become a Swedish international icon. In the year 1999, Volvo a Sweden based company comes to Ford motor company, but Volvo maintained independency but benefited from the shared research and development and also the buying power. Volvo employs 27, 500 employees. Volvo has its company in 120 countries. And has wide network and distribution of its product ranges to different parts on earth. Volvo sells its products through 2400 dealers worldwide. Volvo's main mission is safety, and also invests huge profit Research and development in Safety. Safety in driving has a significant role to play in automotive, as majority of the customer's priority is safety. Volvo sold 14 million cars in its life time, the figure shows success of the Volvo cars and also how Volvo has retained its position on the market in long haul. Volvo is the strongest brand of FORD motors. Volvo is the major contribution to the success of Ford Motors. Volvo has asset oriented advertising. The primary asset of Volvo is Safety, and therefore its marketing campaign is also predicated on its core competence or asset "safety". Volvo being a subsidiary of FORD enjoys a shared Research and development programs. This is very beneficial and cost effective for Volvo, as being a area of the giant automotive group, Volvo can share the price involved with Research and Development program. Hence this can be one of the main element advantages for Volvo to be affordable. Volvo is also popular because of its innovations in the car industry which developed and produced different ranges of cars and hence Volvo has made large profits to FORD motors. The core positioning strategy of Volvo is the Safety and longevity. In order to compete with the luxury brands of Toyota and Lexus, Volvo produced the premier cars which are symbol of luxury. Volvo brand was primary key aspects are Big estate cars, and Safety. Hence Volvo is the symbol of safety and innovations which helped the FORD financially.
The macro environment provides clear picture of the changes in the external environment and exactly how these changes in the external environment impact the performance of the business. The macro environmental factors include Political, Economic, social, technological, environmental, legal factors, that happen to be lose but external to the society.
- Political factors:
There has been an increased regulation on the automobile industry and also automotive industry is facing an enormous taxation on trade.
- Economic factors
There is rise in the fuel costs, and this economical factor has hit the automotive industry fiercely and causes decrease the performance of the company. Due to this rise in the prices of the oil, the majority of the customers have started choosing fuel-efficient cars, which includes reduced the demand for luxury cars on the market.
- Social factors:
The major problems Volvo is facing is shift in the consumers preferences from an extravagance, large engine cars with huge carbon emission to a fuel-efficient, and small cars, due to many reasons like rise in the costs of oil, and also governments are providing tax incentive to the people who buy fuel-efficient and eco-friendly cars and other incentives include free parking and road tolls. This shift in the consumer's preferences which is a Social factor has downturn the performance of the business. There is also Volvo much focus on family sector but in Europe there exists decline in the amount of families. Hence Volvo market segmentation is wrong and might not exactly be useful for sales growth.
- Technological factors:
Toyota has occupied a significant share in the market, with the adaptation and implementation of new and advanced technology into its product strategy, and hence has met the needs with their changing environment with fuel-efficient cars with low carbon emissions into the atmosphere. This technological change of the external environment of including many advanced functions into the product had not been adapted by Volvo. Volvo has advanced only in safety but didn't understand the need for the other top features of the product that have become the center of attraction on the market, and those advanced features are fuel efficient, eco-friendly, etc.
- Environmental factors:
Due to the emission of large carbon from the big size cars increased the pollution and hence have caused many problems like polluting air, etc.
- Legal factors:
New laws on the protection of the surroundings have started rallying and this has hit the complete automotive industries. Because of these environmental protection acts and Clean air Act, which was passed by the legislation, caused a changes in the preferences and shift the needs and therefore as discussed above choosing for eco-friendly cars.
Volvo asset was and is also also is merely Safety, but the external challenges are seeking to get more reliable, eco-friendly, fuel-efficient cars as the federal government is putting heavy taxes on the large cars, who emit large carbon into the atmosphere, and moreover the governments are proving more tax incentives for individuals who choose fuel efficient cars, like free road tolls and parking etc. Volvo has introduced flexi-fuel cars but they did not show a good sign on the gains of the business.
- Safety of both the environment and driving is the primary strength of the Volvo cars, and therefore the Governments policies on safety in driving will not have much influence on the performance of Volvo.
- Volvo has a reputation for big estate cars and last for long periods of time.
- Goteberg safety center which really is a world renowned, and hence after the acquisition, Volvo has introduced ten new models because of its customers, and hence earned more profits for FORD.
- Volvo has 2400 dealers worldwide and has its existence in 120 countries of the world.
- Huge investments safely research and development programs.
- Volvo is a wholly owned subsidiary of ford motor company which is a celebrated company which helps the Volvo can draw synergies of technical innovations and improvements for its parent company. And also the buying power.
- 90 many years of brand heritage, where Volvo has gained much expertise in manufacturing a car which is very safe in driving which is the core-competence which includes played a vital role which has brought glorious years to Volvo's brand.
- No change management programs in its product strategy. There has been no innovations and improvements in the merchandise, improvements like fuel-efficient, best performance, etc, which is quite very important to Volvo to meet up with the powerful competition.
- There is a decline in the sales of the Volvo's bi-fuel cars.
- Cannot meet the customer requirement of fuel-efficient cars.
- Even though the possible customers of Volvo are shifting their interests from the top engine cars to fuel-efficient cars, Volvo still stress only on the safety in their mission statement, where its core positioning technique to face the present changed perceptions of the consumers and external environments demands should be fuel-efficient and reliable cars.
- Moreover the mission statement aims at providing safest and even more exciting car experience for modern families, the brand concentrating on the family sector. But in Europe there is decline in the number of families and many couple is opting to be childless, hence this mission of Volvo would badly hit its performance in future.
- Most of the market for Volvo is at US and Sweden and consequently it is open to irregular financial and political circumstances of these markets.
- Volvos almost all of the production is from the Belgium and therefore, the cars produced in Sweden is very costly for the united states consumers. That is because of the less facilities of production of Volvo cars in US.
- Volvos flexi-fuel cars only using geographic markets.
- There is a expect further growth for the business enterprise due to new business in china and India, with a forecast of sales in china of 10, 000 a year.
- The penetration into new markets has an opportunity for improvement in the performance of the company.
- Has the Volvo only specializes in the Safety in its product design, and ignoring on the other aspects like eco-friendly and fuel efficient cars (Toyota Lexus), performance, styling, reliability, handling and affordability, which are all vitally important.
- Low restriction on imports and trade will increase the competition from the Japanese companies in the Asia pacific regions.
- Volvo's safety may well not have any importance as safety is integrated by virtually all the automobile manufacturers. Hence safety which is the primary asset for Volvo does not have any role to learn for the improved performance of the business.
3) Outline the strategic options available to Volvo cars, recommending what you believe to be your best option available, give known reasons for your answer?
The problem Volvo cars is facing is the external pressures and changing perceptions and requirements of its customers. Volvo who strategy of "Safety" was very popular during 1990's but with the changing needs of its customers and external environmental factors, the strategy of Volvo did not change hence Volvo has faced such a downturn in its sales during the period of 2004 to 2006. The external challenges are demanding for a far more reliable, fuel-efficient and eco-friendly cars, which Toyota have understood the need of its customers and therefore have concentrated heavily on fuel-efficient and eco-friendly cars, and for that reason have become the earth largest & most successful car manufacturer. Moreover, the majority of the automobile manufactures have integrated safety into their product design and therefore "safety", key component or the core positioning strategy can no more help Volvo to retain its position in this fierce competition.
To outline the approaches for the Volvo cars Ansoff product/ market grid (Ansoff, 1957). This model would help the business identify the strategy that gives business the best way to grow their business. The four strategies proposed by the Ansoff why don't we find which would help the Volvo cars to improve their business. This model really helps to identify what have to be marketed with what time and risk involved with marketing the products.
The alternatives available to the Volvo cars are:
- Price strategy, as the cars of Volvo is unaffordable for the normal man and hence has to introduce such a style of car for the middle class people. This is the market penetration strategy where with the same product and same market the company has to reduce the cost and therefore subsequently can reduce the price of its products compared to its competitors.
- Market development strategy, where the same product comes in several markets.
- Product development strategy, in which a new product is developed and is sold in the current and existing markets, extensions in the merchandise features which make it not the same as its competitors and this may also be called as product differentiation.
- Diversification strategy is one where in fact the new product comes in new markets, but this is more risky then the market penetration.
Let us find which will be best strategy for Volvo cars from the available alternatives from the Ansoff matrix.
- Market penetration strategy, this plan of selling its same products in the same market, for lower price by reducing the expenses might not exactly be ideal for Volvo cars, this is because challenges Volvo is facing is the purchase price rises of complimentary goods and environmental protections laws, which have changed the preferences of its customers from large engine luxury cars to the fuel-efficient cars because of government taxation policies, etc. hence, reducing the price of the cars will never be the best solution to face the challenge.
- Market development strategy, If Volvo adopts this plan might not succeed as almost all of the current markets of Volvo is the developed countries and hence the consumers are in position of afford to buy reduced car. But, if Volvo searches for a market in developing and under developed countries, there is a lot risk factors involved for the growth of the industry.
- Diversified strategy won't have a positive influence on the growth of the business enterprise as this is risky, and Volvo which is facing a huge performance crisis shouldn't be risk taker but should be risk averter.
- Product development strategy, this might be the best technique for Volvo, such as this strategy you can find product development according to the changing trends and requirements and therefore this might help the Volvo for growth, if it produces cars not only safety and reliability its cars, but integrating safety, fuel-efficient, styling, performance and this causes differentiation on the list of players in the industry. If the company integrates all certain requirements of the demands of its customers, would automatically increase sales and can like a rapid growth for the business enterprise. Volvo being the wholly owned subsidiary of Ford motors enjoys shared research and development. Therefore an investment for further product development is not hard and therefore it can meet the requirements of the clients. You will discover Volvo's flexi-fuel cars which distributes only to certain geographical areas, and therefore Volvo should even have to execute certain product development programs and innovations in these flexi-fuel cars and there should make improvements in distribution networks for these cars in order that they are available to all or any the 120 countries, where Volvo has its network.
The reasons for choosing the product development strategy as the best alternative for Volvo cars is, because product development is really the only alternative which meets the target customer's (especially Volvo's target segment of last 15 years) needs and this is really the only possible solution to withstand with the challenges Volvo is facing, and Volvo also needs to consider the some of the aspects like the rivals of Volvo has already met the needs of the clients who would like fuel-efficient cars, and therefore Volvo have to integrate all the aspects like safety, performance, reliability, fuel-efficient, with low carbon emissions and comfort to contend with their competitors, as Volvo is already reputed for safety and reliability, Volvo must some other elects in list of product design to give a best alternative because of its customers. Volvo's introduction of Flexi-fuel cars to reduce the sales shrink as the customers are moving to fuel-efficient cars shows an optimistic sign in its performance in the future. Future Product development programs also helps Volvo to attain its programs like Volvo 2020, where it is trying to differentiate itself on two factors safety of both environment and driving. Volvo should conduct a budgetary process on the available resources as product development process requires a surplus investments into many aspects like research and developments and raw materials and promotional initiatives.
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