Volvo Business Analysis

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

Porter's 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 Porter's Five Forces models can be applied to Volvo to

review its market position and create the new marketing planning." "Porter's 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 world's

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 Volvo's 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 Volvo's 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 you're not part of the steamroller, you're 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