Case Study Of Vulnerable Volvo | International Business Management

Added on -2020-02-14

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MANAGING INTERNATIONAL
BUSINESS
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TABLE OF CONTENTS
INTRODUCTION................................................................................................................................3
Critical analysis of macro-environmental factors that can influence the Volvo's international
marketing activities with their implications.....................................................................................3
Market entry methods.......................................................................................................................6
Entering and managing foreign markets such as Russia and India, critically 4 IHRM approaches.7
CONCLUSION....................................................................................................................................9
References..........................................................................................................................................10
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INTRODUCTION
International business refers as the commercial transactions which occurred across the
borders of the nations. Commercial transactions include private and governmental sales,
investments, logistics and transportation. Generally private firms uses this kind of transactions for
earning more profit whereas governmental companies undertake such transactions either for profit
or political reasons (Pandey, 2012). Along with the various global opportunities, there are some
problems also which need to managed properly for taking benefits of all the opportunities. The
present file is based on the given case study of the Vulnerable Volvo. The report includes macro
environmental factors, foreign market entry criteria, market entry methods and international human
resource management approaches for managing foreign markets of Russia and India.
Critical analysis of macro-environmental factors that can influence the Volvo's international
marketing activities with their implications
Volvo is a Swedish multinational manufacturing firm which manufactures and market the
sport utility vehicle, station wagons, sedans, compact executive sedans and coupes. According to
the given case study, Volvo is facing some issues while doing business at international level. In
2013, its sales decreased by 18.3% which was continued in 2014. Company possess less than 1% of
the global market share.
PESTLE Analysis:
According to the Cui, Jiang and Stening, 2011, “PESTLE analysis is a kind of framework
which is used by the companies for analysis of their external environment. The letters of this
analysis stands for Political, Economic, Socio-cultural, Technological, Legal and Environmental
factors” (Cui, Jiang and Stening, 2011). Pestle is used for the macro-environmental analysis of the
Volvo's international marketing activities. It is as follows:
Political Factor:
As per the view of Marx, 2011, “Government plays important role in the political factor of
the companies. The policies, practices, laws, spendings, tax rates, etc affects the working of an
organisation in both negative and positive manner” (Marx, 2011). With respect to the automotive
industry Pandey, 2012 has said that “It is belief of governments that automotive and related
industries are beneficial for the development of nation and its people” (Pandey, 2012). On the other
hand Welch and et.al., 2011, have argued that “Automotive industry is facing issues regarding the
huge taxation on trade and increased regulations. These affects the working and profitability of the
car industry” (Welch and et.al., 2011). With respect to these statements, Volvo is suffering from
decrease in sales due to high tax rates on the trade. In contrast, Aguilar and et.al. 2011, have
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identified that “Government of some countries are providing incentives to the automotive industry
for supporting the sales of cares. Various policies are also being implemented by the nations for
making the mergers and acquisition activity simple and effective” (Aguilar and et.al. 2011). As per
this, Volvo is getting benefits in China due to the incentives which include cut in sales tax and
Geely's international acquisition is evident of the simple merger and acquisition policies.
Economic Factor:
Forsgren and Johanson, 2014, have said that “Economic factors include the various
determinants which directly or indirectly affects the performance and growth of the organisation”
(Forsgren and Johanson, 2014). With respect to the Volvo Filali-Adib and et.al., 2013, have found
that “Present economic situation is appropriate, strong and stable for those nations which consider
the Volvo operations. This can help the industry in improving its economic performance and level”
(Filali-Adib and et.al., 2013). On the other hand Kontinen and Ojala, 2011, have asserted that
“Economic factors involves interest rates, taxation changes, exchange rates, inflation and economic
growth which impact positively and negatively on profitability of the firm and purchasing power of
its customers” (Kontinen and Ojala, 2011). As per this, exchange rate fluctuation results to influence
the international trade of Volvo cars. Along with this, economic slowdown in different nations at the
time of financial crisis also affects the performance of the Volvo and resulted to decline of
customers and sales.
Socio-cultural Factor:
Nielsen and Nielsen, 2011, have suggested that “Social factor of the PESTLE analysis
includes lifestyle, trends, culture, social life, buying access and many more which affects the
demand of customers along with size of potential market” (Nielsen and Nielsen, 2011). Along with
this Welch and et.al, 2011, have found that “For the organisations which are working at global level
it is essential to conduct research for understanding the socio-cultural factor of that particular
country. This helps in implementing right strategies for the growth and success of business” (Welch
and et.al, 2011). As per this, the major problem faced by the Volvo is shift in consumer preferences
from luxury, premium, and large engine cars to small, fuel efficient and eco-friendly cars. This shift
of the users is one of the major factors behind the decreased performance and market position of the
company. On the other hand Pandey, 2012, has said that “It is important for have proper market
segmentations for increasing the sales and number of consumers” (Pandey, 2012). According to this,
focus of Volvo is on the family sector and nowadays number of families is decreasing in the
countries like Europe. This represents that market segmentation of the firm is wrong and due to this
it is unable to rise the sales. Due to changes in the need and requirement of target market business
has to face large number of issues where products have to be modified accordingly. Apart from this
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