Business Structure of the Volvo Company
The Volvo group is a Sweden based company with branches all over the world. Its main
headquarters are In Gothenburg. The company specializes in the distribution of buses trucks and the
construction equipment. However, it extends its services to include supplying clients with marine
and industrial drive systems. They also offer financial services. The mode of operation and their
scale made them be rated as the second largest manufacturer of heavy-duty trucks worldwide. The
manufacturer of the luxury cars, Volvo Cars, can be easily be mistaken for the Volvo group.
However, they are different in spite of both having the same location for headquarters, sharing the
same name and having the same logo (Munck-Ulfsfa?lt et al. 2003). The company is the best case
scenario because it started as a small company that defied all odds to become a multinational
company worth billions of shillings. It enters the Stockholm Stock Exchange in 1935, making it a
suitable enterprise to analyze its market trends, its competitors and the changes they have done for
them to be a viable business to attract investors.
There only difference is that the Volvo cars are owned by a Chinese multinational company called
Geely Holding Group. They jointly run a Volvo museum.
History of the Volvo Company
The Volvo was formed in 1915 as a branch of the SKF enterprises, a company that specialized in
manufacturing ball bearing. Volvo is a Swedish name meaning “I roll”, an inspiration from the ball
bearing specialty. The Volvo group and the Volvo Cars came to be officially recognized as
independent in 1927 when the first car was produced (Nordblom, 2006). That was after testing with
ten prototypes. It was the Volvo OV 4 series and was designed in a factory in Hesingen,
Gothenburg. The manufacture of the car was pioneered by Assar Gabrielsson, an SKF sales
manager by then and Gustav Larson. Gustav was an engineer at KTH Royal Institute of Technology.
Their agenda was to make cars with a capacity to use the rough roads and bear with the low
temperatures experienced in Sweden. The AB Volvo built two hundred and eighty cars that year.
The first truck was produced in 1928, and that attracted investors from around the country. By 1930,
the AB Volvo company was selling more than five hundred cars annually, and some trucks were
exported other countries in the European continent. When the company started trading on the stock
exchange, SKF sold all its shares.
In 1977, Volvo tried to merge with Saab-Scania, but they rejected. Hat saw them partnering with
Renault, a French-based manufacturer. They collaborated in buying, carrying out research and
development, and quality control analysis. Renault assisted Volvo with the entry level, and in return,
it would help its partner technological know-know in the upper segments. However, the alliance did
disagreement that arose as a result of a deal the two companies were to sign (Munck-Ulfsfa?lt et al.
2003). The merger was dissolved in 1994.
Financial performance of Volvo
Volvo has one of the largest production of trucks, buses and construction tools. Using its assembly
unit in North America, it makes huge rigs. It has also invested in Mack tracks of North America.
Back in Europe, it has shares in the Renault trucks (Viaene, 2008). The ab Volvo has production
facilities in about twenty countries.
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Porter’s five forces analysis
Competition: The Volvo Company face few competition from other companies that make the heavy
duty trucks. Apart from that, some countries give the local companies an incentive that will enable
them to compete with the international companies.
Potential of new entrants into the industry: there is a low chance of other industries entering into the
automotive industry because of the high competition it will face from the existing companies and
the economies of scale they already enjoy.
Power of suppliers: the suppliers usually enter into a contract with the suppliers and sometimes buy
the suppliers. Also, the Volvo group does not depend on one supplier and that reduces the chance of
one supplier having a strong grip on the companies performance.
Power of customers: the market for Volvo is concentrated in Europe, North America and now they
are venturing into Asia. These areas have people whose standards of living are good. Therefore,
they have a good purchasing power.
Threat of substitute products: the Volvo produces engines that are exclusively designed for their
cars. Therefore engines made by other companies do not pose a threat.
The stays ahead in their field of expertise, beating other global companies by understanding the
customers’ challenges and preferences. Having understood that, they make products that would fit
them. They are also concerned about the value the product is going to give to the customers or how
the product of going to help them regarding expense reduction. That framework forms the
foundation of their strategy. The company aims at making Volvo a global heavy-duty truck brand.
Of late the sales of the Renault trucks and Mack and UD have gone a notch lower. Since the Volvo
Group has shares in it, it aims at resuscitating them.
The company faces intense competition from other companies in the Asian continent. The Volvo
Group has embarked on forming an assembly unit in India and China. These two plants will help
reach the continent better because they will be able to identify the challenges in those regions
hence, come up with customized types of equipment.
Another way the multinational is using to stay ahead of the game is developing brand-specific sales
operations (Viaene, 2008). Through this strategy, they want to improve their customer service and
their retail activities and also make sure that they make quick decisions and are closer to their
prospective customers. Each brand under the company’s name has the responsibility to customize
their services and are solely accountable for the profits they make.
The company uses a highly advanced technology called Volvo Production System which helps in
the purchasing and manufacturing activities, examine the quality and lead of R operations. The
system was designed to ensure continuous improvement in product development, production
administration and sales. The leverage group assets the company has in non-truck businesses help in
creating more revenue, partnerships and the company stay updated on technology. Products
produced by the company are usually designed commonly, and the technology is mostly similar.
That is because they are made using a modulated concept, and the interfaces are standard. At the
core of this strategy, the group’s resources such as the electronics and transmissions are used.
The company aims at revitalizing the five pillars that characterize their culture: Customer Success,
Trust, Passion, Change and Performance. A solid culture helps in deepening the interactions among
workers and with the clients.
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For the company to still make profits, a lot of funds are set aside for research which in the long run
add value to a product. Experts with information about the products and services and their demand
in the market are hired to create value (Thompson & Wallace, 1996). The clients play the center role
in the process because of their opinions. The experts customize the products based on their
demands. They are invited to take a look at various parts of a vehicle or machine and then they are
asked to comment. When the changes are made, they are again invited to test the new products.
Since their demands may vary from to time, it means that there is a continuous search for improving
the services and products and always embracing new technology for new markets. Several factors
are considered during the value addition process such as financial, quality and reliability.
The developments are mainly concentrated around fuel efficiency, productivity, safety, the driver
environment and up-time because they boost the profit the customer gets from the vehicle.
However, the future company improvements would be automating and elector-mobility. This
technology is susceptible to cybersecurity. Therefore the Volvo Group is encouraging progress in
data privacy and reliable communication protocols before they go full swing into automating their
Production and logistics
The logistics system is highly equipped and advanced to meet high-quality standards, lead times,
and deliver on time and ensure the workforce is healthy, and safe while in the manufacturing plants
(Thompson & Wallace, 1996). Some of the industrial facilities for trucks are labor intensive while
others are capital intensive. The component factories offer services worldwide but for the assembly
plants, they are located near the end-markets for the vehicles to be delivered on time, and it also
allows for customization. For example in Europe, the Volvo trucks have been restructured until I
have gotten the right balance and size suitable for the European population.
Retail and services
The various brands within the Volvo Group occasionally organize for workshops and offer
maintenance services as indicated in the contract with the customers. The network of skilled
technicians working for the company keeps the customer updated on when their car or equipment
will be due for service and also the cost of maintenance and repairs. Whenever the customers need
help in their language, the roadside assistance can be offered.
The sales of spare parts and repair services help to balance the fluctuations experienced in the sales
department. In 2016, the repair services accounted for twenty-two percent of the Volvo Group’s net
sales. The company also keeps the customers updated on things like marketing, the product and
sales details and that helps them make a well-informed decision about the Volvo merchandise.
The company also encourages sharing of best practices and provides a platform where people can
learn more about their products through competitions. The Volvo International Service Training
Award (VISTA), is the most significant competition in the world for service personnel. Through the
competition, the participants get to know and improve their ability to cooperate. In the long run,
those factors improve the services given to the customer and it ultimately, customer satisfaction.
Other competitions such as the Volvo Construction Equipment Global Masters gather the best
technicians from their plants around the world. It gauges the technical skills of the mechanics and
spare part personnel.