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Title: Case Study Assignment on Role of Effective Communication in Volvo, UK
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Table of Contents
Introduction ................................................................................................................................. 5
PESTLE analysis of Volvo UK .......................................................................................................... 5
Determining Volvo UK position in the market ................................................................................. 8
The current position of Volvo Company in UK............................................................................... 10
Marketing mix of Volvo Cars UK................................................................................................... 10
Competitive advantage of Volvo Cars UK...................................................................................... 12
Future in the UK market.............................................................................................................. 13
References ................................................................................................................................. 15
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Introduction
The purpose of the paper is to examine the international operation of multinational
corporation giant Volvo. The study will primarily focus on its automobile industry in Europe.
The main objective of the study is to analyse the Volvo automobile industry in UK. As per
European Report (2003), the credit for stimulating growth in Europe market globally goes to
strong development and the automotive adjustment in the automotive industry. The Volvo
has high competition in European market with 40 different manufacturers offering products
(Economic Report 2003). In the given context, the PESTLE analysis of Volvo will focus
upon areas such as the country environment, socio-economic culture, competitive condition
and analysis of technology. The PESTLE analysis will be helpful in identifying the future
challenges for VOVO UK. The analysis of the automotive industry in UK will help the
company to build suitable strategies. The automotive industry is volatile and has huge
potential for growth. The declining status of global climate has an effect upon international
operation in Volvo. The paper also proposes recommendation for Volvo UK to meet the
challenges in the market. The strategic advice on Product, Price, Place and Promotion will
help the company to create a competitive advantage in UK.
PESTLE analysis of Volvo UK
According to Bensoussan and his associates, it is important for Volvo to do PESTEL
analysis of UK environment. The macro environmental analysis will guide the company in
uncertain and dynamic environment. The macro environment provides the clear image of the
changes in the external environment of the country and its effects on the operations of the
company. The environmental analysis should be linked conceptually and practically with
current planning operations. The success of the company depends on how accurate ly the
decisions maker’s analyses and response to it. The six-macro environmental factors are
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Political, Economical, Social factors, Technological, Environmental and Legal factors
(Besoussan and Fleisher 2012 pp. 187-189).
Political factors- According to Cavusgil et al. (2012) the political system is set of
political institutions that constitute government. The political system establishes stability,
rules and protection from threats. UK has a unique political system, which is embedded
within a historical, cultural and ecological context. The political system of the country is
dynamic and continually changing. The changing rules and regulation of government
influence the international strategy and provides challenges and opportunities for companies
(Cavusgil, Knight and Riesenberger 2012 pp.125-129).
As per McNeil (2005), UK is politically stable and safe country. The laws are
comprehensive and fully implemented in the country. The government in UK has imposed
high regulation on the automotive industry. The industry is facing huge taxation on trade.
The increasing concerns over the environment around the globe have pressured the
government to introduce stringent regulations for the automotive industry. The government
has imposed strict regulation on carbon emission. The rise in insurance prices and new safety
regulation has affected the Volvo main markets in Europe. The government has also
increased taxes for cars with higher carbon dioxide emissions. The state has adopted extreme
tax policy to protect local automobiles. The subsidies provided by government are in the form
of tax incentive, low insurance prices. It is a challenge for Volvo to produce low carbon
emission cars (McNeil 2005).
Economical factors- The rise in the fuel prices has affected the automobile industry
and has declined the performance of the car company. The rise in price of oil has changed the
consumer behaviour. The demand for fuel-efficient cars has increased.
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Social factors- As per Kotler et al. (2008) the social factors affecting environment are
religion, custom, values and social organisation (Kotler, Armstrong, Wong and Saunders
2008 pp. 145-150). The major problem faced by automobile industry is changing consumer
preferences from demand for luxury cars to fuel-efficient small compact cars. The reason for
the shift in consumer behaviour is rise in fuel prices. The government is also providing
subsidies and incentives to the consumer who buys eco-friendly cars in the form of free
parking and road tolls.
Technological – Technological factors affecting automotive industry are rate of
technology diffusion, new innovation and replacement of technology. Recently, government
has taken initiative in UK for promoting new technology in renewable energy and creating
electric vehicles (Success and failure in the UK car manufacturing industry 2007). Volvo had
the competitive advantage in producing safety vehicles but failed to adapt with technological
advanced features changes in the external environment. Toyota, the rival company of Volvo,
has successfully adapted and implemented advanced features into product strategy. Toyota
has capture the major market share by meeting the need of changing environment with
producing fuel efficient, low carbon emission cars.
Environmental factors- In UK, the big size cars increase the pollution by emitting
carbon. Therefore, it has caused environmental problems such as polluting air. The
government has taken serious steps to promote hybrid vehicles (SMMT 2013).
Legal factors- The new laws pass by legislation on environmental protection have
affected the automotive industries. The Clean Air Act passed by state has brought changes in
the consumer preferences (Legislation 2013). Volvo focus is only on safety whereas the
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external challenges require reliable, eco-friendly and fuel efficient cars. The Flexi- fuel cars
introduce by Volvo has not shown a good sign on the profits of the company.
Determining Volvo UK position in the market
The SWOT analysis will be helpful in determining how well Volvo fits in the UK
market. The main strength of Volvo cars is on safety of environment and occupant. Hence,
government policies on safety do not have much influence on the company. Zoan (2014)
states Volvo UK has a strong focus on research and development. Volvo strength is in
building on a talent for excellence. Volvo is globally recognised brand. The company has
strong engineering capabilities. Volvo has large dealer network. The company is weak in its
product innovation strategy. As compared to its rivals, Volvo has done very less
improvement and innovation in its products. In recent years, sales have declined. The
company is unable to meet the requirements of customer for fuel-efficient cars. Volvo has
immense opportunity to improve the performance of the company by penetrating into new
markets. It is important for Volvo to understand the importance of performance, styling, eco-
friendly cars other than safety aspects. The competition in the automobile industry in UK is
intense. Volvo has to face the challenge from its competitors: Toyota, Lexus (Zoan 2014).
However, Volvo is strategically fit for UK market and undoubtedly improving its
market shares in the country. In 2014, the company had registered a 20 percent increase in
sales. The company has worked on the design; technology and luxury attributes of the car to
meet the customer demand (Latest Volvo news 2014)
Market segmentation strategy of Volvo UK
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Kotler et al (2008) explains that it is important for the company to understand the
changing consumer behaviour. Consumer behaviour has influence on production, financial
outcome and shareholder return. If company fails to understand the consumer behaviour, the
sales of product decline (Kotler et al. 2008 pp. 150).
Mooij (2010) argues that the Volvo has appropriately segmented the product as per
the buying behaviour of consumer. In UK, the consumer buying decision is influenced by
many factors such as safety, design, joy to drive, car interior, environment friendly and
engine performance. The other factors to choose the car are price and technology. The buying
motives of the consumer are recognised in the design of Volvo cars. In UK safety, functional
aspects of the car are given importance than technology or design. Volvo car brand in UK is
recognised and well known for the safety attribute (Mooij 2010 pp. 170).
Volvo has segment the market considering the demographic, psychographic and
behavioural differences of buyer. Volvo develops cars for the target market for whom safety
of the automobile is a major concern while purchasing the product. Hence, Volvo has
position its car as a safety product (Target markets and Segmentation 2014).
Assael (2005) argues that Volvo has reinvented itself through a strategy of market
segmentation in UK. In the past, Volvo market segment strategy was focused only on the
safety aspect. The company changed its market segment strategy as the sales of Volvo car
shrink in UK. In the early 1990, to increase the sales the company reposition its marketing
segmentation strategy suiting the needs of consumers. The company is repositioning itself as
a comfort, sporty, fun mage without eroding its traditional message on safety so as to
maintain a link with its core customers. As the punch line of Volvo car describes it is a safe
and a family car who appeal to middle-class suburban families of UK (Assael 2005 pp. 535).
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The current position of Volvo Company in UK
In 2014 Volvo car sales in March has seen a tremendous increase. The company has
developed new and exciting models for almost every market segment. The bestsellers in
Volvo car are XC90 known for its style, design, technology and luxury. The new V40 Cross
Country is eye-catching package that cater to both rural and urban needs. The XC 90 is best
among the Genre X customers. Meanwhile, XC60 has beaten all its rivals in UK. The initial
months of 2014 have displayed a strong performance of Volvo UK. The company has an
ambitious target of 20 percent increase in sale by the end of 2015. Volvo S60 and V60 has
been awarded as Best Premium Car of the year by Fleet news. The company has made low
emission Drive-E engine that is available across all its model range, to maintain customer
loyalty (Volvo builds on a talent for excellence 2014).
Volvo is focusing on developing fuel-efficient and innovative electric cars to achieve
its sustainable mobility mission without compromising on the luxury attribute of the car.
Presently, the goal of Volvo cars is to sell cars to the luxury segment profitably. Volvo has
deeply embedded the environmental care in the entire car lifecycle. Volvo C30 is the first
electric motor car that is driven by batteries and offers zero carbon emission. The company is
successful in developing lighter and efficient D4 engine that promise zero carbon emissions
(About Volvo 2014).
In 2014, Volvo launched world first safety technology XC90 SUV. It is the latest
launch from Volvo to realise the ‘Company Vision 2020’. The ‘Vision 2020’ aims that new
Volvo will have zero injury and death of an occupant (Volvo announces 2014XC90 world
first safety tech 2013).
Marketing mix of Volvo Cars UK
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In order to understand the position of Volvo Cars Group in UK market, marketing
mix extends significant help for understanding the current stra tegy of the company in the
market.
Product: The Company offers a number of products in the car segment of UK. They include
models S60, S80, V60, V70, V40, V40 cross-country, XC90, XC70, and XC60. The
company launches its products by keeping in mind size and weight of the cars. The cars are
big in size with high safety standards. The recent D4 engine is available now across all the
Volvo range in UK. Apart from new cars, the company also deals in used cars (About Volvo
2014). Under Volvo Selekt, a customer can buy a used Volvo with an extensive warranty.
The used car comes with a package where it is made even better and advanced through
application of latest software updates (Volvo Selekt 2014). Top-selling Volvo models in UK
are V40, XC60 and V60. The major focus of Volvo for UK market is appeal to customers. It
keeps on adding unique and new features to the already set and popular series models to
capture the market share. For example, V40 model comes in three variations- V40, R-Design
and Cross Country (Latest Volvo News 2013).
Young and Pagoso (2008) state that the product is the tangible element of the overall
marketing mix. It comprises of three levels- the core benefit, the actual benefit and
augmented benefit (Young and Pagoso 2008 pp.129-130). Volvo cars present the core benefit
of driving with safety. The actual benefit is the quality features of the product, such as D4
engine, a premium hatchback, mileage, and accessories. The augmented benefit is the
extended warranty the company gives to its UK customers for its used car service i.e. Volvo
Selekt. Volvo Car Insurance and Volvo Car Financial Services are augmented features of the
product the company delivers in the UK market (Business Sales 2014).
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Price: Harris (2007) states that Volvo UK aims at diversified buyers by offering a fabulous
range of vehicles. It targets mid-luxury customers by offering luxurious cars with innovative
features. The market penetration strategy will not be suitable for the company, as it will
imply selling the same product in the same market at a lower price. It would increase the
challenges Volvo is facing in terms of price rise of complementary goods and strict
environment protection laws in UK. As the preference of UK customers has been changing
from large engine luxury cars to fuel-efficient cars, reduction of price of cars will not help the
company to raise its sales in the market (Harris 2007 pp.100-101, 116).
Place: The Company has large dealership networks in UK. It sells its products through local
dealers located in various parts of the country. Retailers for the company deal in various
services, such as Volvo dealer, Volvo Selekt, Volvo new car sales, Volvo business centre,
service and maintenance, and Volvo insurance under the same roof (Find a Dealer 2014).
Promotion: Moutinho and Chien (2007) argue that Volvo Car UK sees marketing and
promotion as more than a mere technical function. The whole company with managers at all
levels are involved in the function. Two programmes of the company- Corporate Account
Relationship Experience (CARE) and One Customer One Relationship (Oncore) are aimed at
satisfying both business needs of the corporate customer and the human needs of the end-
user/driver (Moutinho and Chien 2007 pp.138-139). It uses online advertorials and ambitious
mobile promotions to promote its products (Volvo promotes C70 in online advertorials
2002). For instance, it launched an augmented reality driving game for Android and iOS
platforms to promote the S60 sports sedan in 2012 (Volvo's driving game promotes S60
2012).
Competitive advantage of Volvo Cars UK
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The competitive advantage of Volvo Cars UK lies in its environment- friendly and
safe car offerings. Total sales of cars rose up to 22% in September 2013 in comparison to the
previous year. The overall sales went up to 2.6 percent in 2013. It is a mid- luxury brand but is
not as expensive as BMW, Audi, and Mercedes-Benz. It provides its customers strong
benefits through strong BIK (Benefit in Kind) figures, with a V40 D2 price at 43 pounds for
20% taxpayers and 85 pounds for 40% tax payers. These figures beat the figures of BMW
and Audi (Latest Volvo News 2013).
The demand in the UK market is driven by quality and performance features of cars.
High demand of premium S40 in UK is an example of how technology and performance
features are driving the car segment in UK. Parry and Graves (2008) mention the strategy of
‘Built to Order (BTO)’ used by Volvo to control its inventory costs and link the mass
production facility to demands from the customers. Quality, high safety standards and
environment friendly features of Volvo cars have made the company create its niche in the
car market segment (Parry and Graves 2008 pp.33).
Future in the UK market
Volvo Car UK Ltd. has been able to survive in the UK market due to its competitive
advantage of safety and environment-friendly cars. However, customer preferences are
changing with more focus on fuel efficiency, small cars with eco-friendly features and
government incentives for small and eco-friendly cars. Due to direct competition with mid-
luxury offerings from every large automobile player in UK, and direct competition from low-
end models from BMW, Audi and Mercedes-Benz, the company has to focus more on
product development strategy. By following the strategy, the company can adapt itself to
changing consumer preferences that will help in the growth of the company (New Car CO2
Report 2014).
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At present, Volvo is focused on producing cars with core elements of safety and
environment-friendliness. With the production of cars that integrate not only safety, but also
style and performance will lead to differentiation of company’s products from competitors’
products. Volvo 2020 vision is based on differentiation of both performance and safety of the
environment. Introduction of hybrid fuel cars in the UK market is a positive step in terms of
performance-oriented features of its products (About Volvo 2014). Recent addition of
innovative features for S40 model in UK and its increased sale is a signal for the company to
focus more on product development strategy (Latest Volvo News 2013).
Anderson (2012) presents the fact that the company adopted a strategy of merger with
Geely Inc. to get the local experience in China (Anderson 2012 p.146). However, UK is the
European market in which the company has a strong presence. Therefore, the company can
use its strengths of strong customer orientation and optimize cost-efficiency and productivity
to address challenges related to changing consumer preferences and becoming more
technology and performance-oriented in the UK market.
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