Environment analysis of an Industry Assignment

Environment analysis of an
Industry

Table of Contents
INTRODUCTION...........................................................................................................................1
1. Major forces shaping the business environment of car manufacturing industry....................1
2. New and emerging business opportunities that production and marketing of electric cars
may present to Entrepreneurs and Business executives..............................................................4
CONCLUSION................................................................................................................................6
REFERENCES................................................................................................................................8

INTRODUCTION
Change is the only constant. The statement holds true for itself because every business operates
in a dynamic environment where it faces competition. In order to overcome its competition, it
needs to upgrade. An up gradation can be in any way. It can be up gradation of technology,
business policies, strategies etc. Till today, many businesses feel reluctant to change. This is
because they have become so used to the old methods of production that they resist change. A
better and enhanced technology not only improves the productivity but also minimizes the cost
incurred. Volvo is a Swedish multinational automotive company, it was founded in 1927 by
Assar Gabrielsson and Gustav Larson but as of today its owned by Geely Holding group of
China. The company is headquartered in Gothenburg, Sweden and is famous all around the globe
for manufacturing Trucks, Buses and Cars. As of 2017, it had around 38000 employees and the
total production output was around 5,70,000 vehicles. The company went public in the year 1935
and was listed in Stockholm stock exchange. It is one of the largest and the most valuable
companies in Sweden. The current assignment will focus on Volvo company's business
environment, changing technology and its business strategies.
1. Major forces shaping the business environment of car manufacturing industry.
The car manufacturing industry has gone through major changes and evolution in the past 3
years. The industry witnessed changes in technology. Exterior, engine and features. The cars
have become more responsive, smart and internet friendly. A person can lock and unlock his car
with the help of his smartphone. The engines have become more powerful with automatic
transmission but the major evolution that changed the automotive industry forever was the
introduction of electric cars. Electric cars are the need of the moment and there is no doubt about
that. The increasing emission and pollution from diesel\ petrol cars has impacted the
environment in drastic manner. Therefore, many automotive companies like Tesla and Volvo are
switching towards manufacturing of electric cars. Volvo company, in order to meet its customer
needs and wants, will start manufacturing electrical combustion engine instead of internal
combustion engine. The CEO and President, Hakan Samuelsson stated that the company has
always given priority to their customers needs and wants and now they wish to have electrical
cars then they want to design electrical cars for them. The CEO also stated that it will be the
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most risky and challenging move by the automotive company over these years and they are
hopeful that it will be worthwhile for them. (Kumar and Maqbool, 2018).
Major external forces affecting auto mobile industry are political factors, economic factors,
social factors, legal factors and environmental factors. All these factors equally affect the
company and the importance of any factor cannot be ignored.
 Political factors: Political factors are those factors that are controlled by the government
authority and it can have a huge impact on the working of any industry. For Volvo and
electrical cars, the government has promised to offer subsidy and tax exemption for both
manufacturers and customers. It is a win-win situation for everyone and the icing on the
cake is the fact that it will preserve and protect the environment.
 Economic factors: Economic factors are the main factors affecting the manufacturing and
sales of cars. With the subsidy and tax exemptions, the cost of electric vehicles have
reduced and this boosted the sales of theses cars. Also, the fact that people will no longer
have to spend any money on petrol is another major benefit. This factor will also play a
major role in the growth of Volvo company and its sale. Even in developed countries like
United Kingdom where people already own a car, it is predicted that they will sell or
dispose off their old cars and switch to electric cars.
 Social factors: The auto mobile industry has transformed the whole society. It is not a
luxury any more, it has become a necessity. Be it an upper class or a middle class family,
everyone needs a car and with the increasing population it is quiet obvious that the
demand for cars will increase and since the middle class cannot afford the surging diesel
prices, it is forecasted that they will switch to electric cars, sooner or later.
 Technological factors: Technological factor has been the single most influencing factor
for the production of electric vehicles. Auto mobile industry has gone through a lot of
changes since the time it was first invented. Volvo company analysed its competitor's
market and identified the customer needs and wants. This induced them to manufacture
electric vehicles and introduce electrical combustion engine. The company has also
introduced an upgraded facelift version which is basically a better looking model that has
a lot of smart gestures and controls. (Jiang and Lu, 2018).
 Environmental factors: Environmental preservation and protection has also been a major
inspiration behind introduction of electrical vehicles. The devastating effects of petrol
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cars on the environment cannot be ignored. Therefore, electric cars are the current need
of the moment because they are nature friendly. These cars will ultimately benefit the
people as humans will be able to breathe fresh air instead of polluted air.
 Legal factors: The law makers have grounded various rules, regulations and quality
standards for automotive industry and manufacturers. It is the fundamental duty of Volvo
company to abide by these rules in order to smoothly and freely operate in the
environment. The auto mobile industry has always been a matter of concern for law
makers all around the world because the company needs to follow a lot of things like
safety measures, use of updated technology, quality of steel etc. Any kind of negligence
can have adverse effects on the operations of the company. [PESTLE analysis of Volvo
company, 2019].
Other trends driving changed in the auto mobile industry
 Accelerating innovation: Innovation is everywhere and there is no doubt about it. But the
automotive sector is the only sector that has been hugely affected by the innovation and
changes in technology. This has led to auto makers collaborating at various levels so that
it becomes easy for everyone to survive in the industry. (Jiang and Lu, 2018).
 Competition: The automotive industry is the most competitive and profitable industry in
the whole wide world. The profit part attracts a lot of new players but if they don't
innovate then they lag behind and they have to ultimately leave the market. Therefore,
companies like Volvo and Tesla, spent huge chunks of money on Research and
development in order to overcome the competition. They continuously innovate and
create new technologies that help them to survive and grow in that market.
 Unpredictability: It is not an easy job to manufacture a car. The automotive industry
suffers through a lot of unpredictability. It may be due to social tensions, foreign
exchange, tariffs or fluctuating prices of raw materials. The safety tests can also hamper a
lot of problems for the auto mobile manufacturers. The Brexit can also affect the Swedish
brand Volvo's UK market. There can be a rise in tariff charges, prices etc. and this may
reduce its share of UK market. Therefore, unpredictability is the major problem that
affects car manufacturers.
 Consumer behaviour: The consumer behaviour is changing rapidly. Many people have
shifted from traditional diesel cars to battery operated ones. But there is still a huge
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population of old people that shows distrust towards battery cars. The reason being that
these people are of the old mentality and they do not wish to change. Therefore, it has
deeply affected the manufacturers as they have to manufacture both diesel and electric
cars. Moreover, old people fail to realize the smart and advanced features of these cars.
 Safety: Safety still plays a number one role when it comes to choosing cars. Volvo
company is famous for its comfort and safety levels. The company has been successfully
passing all the safety tests initiated by the government over the years. It affects the
buying decisions of people of all ages because obviously everybody loves themselves.
2. New and emerging business opportunities that production and marketing of electric cars may
present to Entrepreneurs and Business executives.
The automotive sector is full of opportunities. It is the duty of companies to tap those
opportunities and convert them into successful business model. Volvo company predicted the
future opportunities and also identified consumers needs and wants. This is the core reason for
their success and growth. The company also believed in innovation and creativity which allowed
them to build a separate base of loyal consumers for themselves. The business opportunities
associated with electric cars are very diverse and it has also helped them and companies like
Tesla to attain a lot of funding from external sources. (Becker, 2017).
These emerging business opportunities are
 Increasing demand: There is a huge demand for electric cars and is expected to grow
more in the near future. Their safety level, servicing costs, charging expenses are all
cheaper than compared to traditional petrol operated car. These cars may be on the higher
end but they are worth it because the petrol and other overhead expenses are close to
none. The increasing demand is the major factor that can attract the entrepreneurs and
business investors to invest their money in these valuable projects.
 Image building: Innovations are admired by everyone. This helps in image building of the
company in the eyes of the customers. Image building not only increases the sales of the
company but also enhances their brand value. Volvo has enhanced its image from being a
luxury company to an innovative company that fulfils customer needs and demands. This
factor can make Volvo a market leader in the United Kingdom and the entire Europe.
 Government support: The support from government is the most crucial thing that anyone
could ask for. Government has been supporting production and selling of electric cars by
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offering subsidies, tax exemptions, reduction in tariffs and other facilities. This is
important because the air pollution caused by diesel and petrol cars is massive. In order to
protect the environment, government is offering various schemes on electric vehicles.
 Corporate social responsibility: Every Multinational company has the fundamental duty
to fulfil their corporate social responsibility towards the society. This is important
because the company borrows society's resources and later on it becomes its liability to
repay the society. Companies like Volvo are fulfilling their social needs as well as
customer demands by manufacturing electric vehicles. This will help the company in
achieving profits as well as they are also contributing towards the preservation and
protection of environment.
 Disruptive Innovation: Disruptive innovation will be the major factor for success of
Volvo's electric cars because the company's cars will create a separate market for them
eventually. Electric cars are the future and they will change the transportation system
forever. These cars will have an unmatchable speed combined with next level safety
measures and all that at a price of traditional car, even If they are expensive, they are
going to be worth it. The company has proved the myth of disruptive innovation wrong
that it can be done only by the star ups and entrepreneurs and not by market leading
companies (Helmers and Marx, 2017).
Analysing business opportunities using Porter's Five force analysis
Porter's five force analysis model is important because it helps in complete break down of the
reasons that are responsible for the profitability of the company. Volvo is not just a name, it's a
brand. This model was invented by Michael Porter and the same was mentioned in his book as
well. In a dynamic industry like auto mobile, it is important to identify attractiveness, level of
competition and profitability of these companies.
 Competition in the industry: As of now, the competition is not a concern for Volvo in the
electrical auto mobile sector because till today not many companies deal in electric
vehicles. The major company giants like Toyota, Hyundai and Maruti Suzuki are yet to
invest in manufacturing of electric vehicles. Moreover, Volvo enjoys a brand name that
will help them in achieving competitive advantage.
 Potential of new entrants in the market: The potential of new entrants entering the market
is very high because every company knows that battery cars are the future and sooner or
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later they will have to switch on to manufacturing them or else they will lag behind.
Therefore, Volvo has the perfect opportunity of being a new entrant and to capture
majority of market share. (Mathooko and Ogutu, 2015).
 Power of Suppliers: This force addresses how suppliers can affect the entire market.
Maintaining good relationship with suppliers can lead to some discount on receiving raw
materials and timely receiving of these materials. Also, it is the duty of every company to
look for other suppliers that offer same quality materials at cheap price. It is important
because it can help these companies in achieving cost advantages.
 Power of customers: The importance of customers cannot be denied after all they are the
king of the market. Also, they have the power to accept or reject a product. Volvo
company identified the customers needs and wants by doing market research and this
helped the company in manufacturing electric vehicles. The company sold around
6,50,000 cars in 2018 which is their all time highest record. The Volvo company is
confident that their new venture of electric vehicles will be as successful as their earlier
ones.
 Threat of substitutes: The biggest threat Volvo has it's from its competitor Tesla because
these two are the most reliable and trusted companies when it comes to manufacturing of
electric vehicles. Volvo is a perfect combination of luxury and safety. The prices of both
the cars are almost the same but both companies are successful in their respective
countries. While Tesla is quite popular in the North America, the Volvo leads the race
when it comes to European market. (Vaughan, 2017)
CONCLUSION
From the current report it can be concluded that Volvo is all set to become the market leaders
electronic automotive industry because the company operates in more than 100 countries which
means that its market share cannot be compared with. Also, Volvo's strong business plan had
helped the company in attracting investors, suppliers and even increased their consumer base.
The major reason for the success of company's electronic vehicles will be that the company
analysed its consumers needs and wants successfully and they have always given priority to their
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demand and market research. The use of electrification combustion engine would also have
positive impact on the environment and through this way the company could fulfil its corporate
social responsibility as well. Thus, Volvo has all the potential to become a market leader in
electric car segment, the company just need to tap on the opportunities and convert them into
successful business ideas on time. These practices will help Volvo to become successful and
their profit will grow by leaps and bounds.
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REFERENCES
Books and Journals
Becker, E.P., 2017. Electric cars gain traction. Tribology & Lubrication Technology. 73(10).
p.96.
Böckin, D. and Tillman, A.M., 2019. Environmental assessment of additive manufacturing in the
automotive industry. Journal of Cleaner Production. 226. pp.977-987.
Helmers, E. and Marx, P., 2017.
Helmers, E. and Marx, P., 2017. Chpater 9. Electric Cars: Technical Characteristics and
Environmental Impacts. In Transportation and the Environment(pp. 229-264). Apple
Academic Press.
Isaksson, J., Langguth, J. and Schnee, S., 2018. Volvo & The Pole star Series: Integration or
Separation?. LBMG Corporate Brand Management and Reputation-Masters Case Series.
Jiang, H. and Lu, F., 2018. To be friends, not competitors: A story different from Tesla driving
the Chinese auto mobile industry. Management and Organization Review. 14 (3). pp.491-
499.
Kumar, G. and Maqbool, J., 2018. Financial technology in the auto mobile industry.
Mathooko, F.M. and Ogutu, M., 2015. Porter’s five competitive forces framework and other
factors that influence the choice of response strategies adopted by public universities in
Kenya. International Journal of Educational Management. 29(3). pp.334-354.
Vaughan, A., 2017. All Volvo cars to be electric or hybrid from 2019. The Guardian. 5.
Online
PESTLE analysis of Volvo company, 2019. [ONLINE] Available through
:<https://www.swotandpestle.com/volvo/>
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