Renault's Business Expansion in Sweden: A PESTLE and Five Forces Analysis

This report provides a comprehensive analysis of the Swedish business environment for Renault, a leading automotive manufacturer. It examines the company's background, financial performance, and market position. The report utilizes PESTLE analysis to assess the political, economic, social, technological, environmental, and legal factors influencing the Swedish automotive industry. Additionally, Porter's Five Forces framework is applied to evaluate the competitive landscape, including the threat of new entrants, bargaining power of suppliers and buyers, threat of substitutes, and competitive rivalry. The report concludes with recommendations for Renault's strategic expansion in Sweden, considering the identified opportunities and challenges.

BUSINESS ORGANISATIONS AND ENVIRONMENT REPORT
Contents
1

Introduction......................................................................................................................................3
Company Background (Renault).....................................................................................................4
Financial Analysis of Renault......................................................................................................5
Economy of Sweden........................................................................................................................6
Economic Growth of Sweden......................................................................................................6
Sweden Unemployment Rate......................................................................................................7
Renault in Sweden.......................................................................................................................8
PESTLE analysis of Sweden...........................................................................................................9
Five Forces Analysis of the Automobile industry of Sweden.......................................................11
Conclusion.....................................................................................................................................14
References......................................................................................................................................15
2

Introduction
In the management report provided below, the author has briefly presented the analysis of the
industrial environment of Sweden. In order to complete this report, the company that has been
chosen by the author is Renault. The main purpose of this report is to undertake a critical
analysis of the environment of Sweden and identify if this environment is found fit for Renaults
business expansion. The report presented below is inclusive of the background analysis of the
company. In order to undertake the analysis of the industry, the researcher has briefly taken into
account the tools such as PESTLE analysis and Porters Five Forces analysis.
3

Company Background (Renault)
Group Renault is one of the leading car manufacturers and the largest French multinational
automobile manufacturer which was established in 1899. The company produces a large and
diversified range of vans and cars and in the past the company was also active in the production
of buses, coaches, trucks, rail vehicles etc. According to the report of Organisation Internationale
des Constructeurs d'Automobiles, it was found that the company stood at the 9th position in the
terms of volume of production of automobiles in the year 2016. It should be noted that the
organisation has also formed an alliance with the Nissan and Mitsubishi Motors which makes the
group the fourth largest automobile manufacturer (Barmeyer & Mayrhofer, 2016).
The company is headquartered in Bolougne-Billancourt and the group is made up of the Renault
marquee and subsidiaries. The subsidiaries of the company are Alpine, Automiobile Dacia of
Romania, AvtoVAZ of Russia and Renault Samsung Motors of South Korea. It should also be
noted that the company has 43.4% of the total controlling stakes in the Nissan which is
headquartered in Japan and also enjoys 1.55% stakes in Daimler AG which is headquartered in
Germany. Renault is the engine manufacturer of Daimlers A Class and B Class Mercedes cars
(GroupRenault.com, 2018).
In the current scenario, it has been found that the main competitors of the company in the global
market are General Motors, PEUGEOT SA and Volkswagen AG. The company has a global
presence in almost every part of the world and it operated in around 40 manufacturing facilities
in more than 15 countries. The selling activities of the company are experienced in around 120
nations. It should also be noted that the company is today known for its presence in the formula 1
racing and e-racing. The racing tagline is one of the key appeals of the organisation. Provided
below is the financial analysis of the organisation.
4

Financial Analysis of Renault
Image: Profits of Renault
Image source: Hoover.com (2018)
From the figure presented above, it can be stated that the current position of the company is in a
strong position and the total revenue of the organization stood at $ 70,398.44 Million. This states
that the strategy of the company has been effectively utilised in order to maintain profitable
returns as well (Hoover.com, 2018).
5

Economy of Sweden
Situated in Europe, Sweden is one of the most developed and strong economies in the world.
According to the financial data and analysis it has been found that in the second quarter of 2018,
the economy still remains in good hands. This is major because of the rise in the PMI and
business-related activities. The manufacturing PMI has also maintained its firm position as well.
with the development of the economy, it has been found that the economic activities have helped
in generation of employment in an effective manner. There is a significant decrease in the
unemployment rate in the economy of Sweden. It should also be noted that though the GDP of
the economy has sustained a good position in the 1st Quarter, it has been found that the growth is
likely to decline in the 4th quarter which is in line with the EU (Lawrence & Spybey, 2018). This
strong position of the economy of the country not only makes it an attractive option to invest in,
but this also helps in attracting other industries as well.
Economic Growth of Sweden
For an economy to be attractive, it is required that the growth should be robust in nature and
should also be going forward. In order to ensure this, it is required that there should be fixed
investments and strong exports. In the case of Sweden, there is a tight labour market and a more
expansionary fiscal stance which further adds to the growth of the economy. It has been found
that in Sweden there are soft properties which are continuously hampering the housing
investments and this elevated household debt poses a downside risk to the economy of the
country (Arthur, 2018). The development in the GDP of the country has been witnessed to be
around 2.6% in the year 2018 and according to the last month’s forecast, at this rate, the
development rate would be at 2.1% for the year 2019. The economic data of Sweden has been
stated below as follows:
6

Image: Sweden Economy Data
Image Source: Focus Economics (2018)
Sweden Unemployment Rate
The unemployment rate in Sweden is low that is one of the most attractive factors of the
economy. It should be noted that the drop in the unemployment rate in the economy in the year
2018 stood at around 2.6%. The number of the unemployed person has dropped down by 35
thousand from the last year figure of 359 thousand. The employment in the industry has
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increased by the number of 118 thousand which has increased the employment rate to 68.5%
(TradingEconomics.com, 2018).
Image: Unemployment rate in Sweden
Image Source: TradingEconomics.com (2018)
Renault in Sweden
The performance of company in the industrial environment of Sweden has found to be
impressive due to which the company is planning many developments in the economy of the
country. The recent developments in this context are inclusive of the opening of first EV
showroom in Sweden. This has been done such that the company might be able to set up its
electronic cars market in the European arena. This EV showroom is planned to be opened in
Taby which is close to Stockholm. This Electric Vehicle Experience would be run in the
partnership with the Bilia (Whyman, 2018). This states that the company enjoys a good
reputation in the Sweden which further states that the prospects of growth in the industry are not
only high but promising as well.
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PESTLE analysis of Sweden
Political Factors: It has been identified that the political factors and regulation have a strong
impact on the automotive companies such as Renault. The public authorities in Sweden have
granted specially made cars clunkers and bonus for the low emission and electric cars which can
help the company to Foster their sales in an effective manner. Apart from this, it has also been
identified that the Government of Sweden is also supportive in this manner and they have
granted various loans to such companies such that they might be able to set up their plants and
production units in these countries as well (Bertozzi et. al., 2016). The political stability of the
country is also one of the most attractive factors which can help the organisation in establishing
and expanding in the business industry of Sweden.
Economic Factors: The economic environment of Renault is oligopolistic and competitive in
nature. It has been found that the business climate of Sweden and economic situation of the
country is unfavourable in nature due to a sudden decline in the purchasing power of the
households and low rate of the market growth. Apart from it, it has also been analysed that the
general public at times finds to difficult to afford the premium quality and high prices cars
offered by the company which is a negative factor. This at times might lead to a decline in the
sales that are made by the company (Bertozzi et. al., 2016). It has also been found that the
automotive market of Sweden also suffers from the overcapacity of the competitors in the
industry. In the economic terms, the country is emerging in nature which creates an opportunity
for the company to invest in.
Sociological Factors: In the business industry of Sweden, it has been identified that the
attributes and preferences of the customers towards the automobiles have been effectively
changed. It has been identified that the European people are more inclining towards buying
inexpensive and low-cost cars. This might create an issue for the company and they would have
to launch their low-cost segment into the market of Europe as well. The sector is though
popularised, it is also required to evaluate the expectations of the consumers as well. One of the
major rising expectations of the customers is the security and reliability of the car model
(Silinevicha et. al., 2017). The trend is now shifting towards budget cars which offer the value of
money to the consumers as well.
9

Technological Environment: The technological environment of Sweden is changing at a
constant pace and there are many technological developments seen in the industry as well. The
main progression in the technology has been experienced in the engines that are currently being
offered by cars. Now there is a transition in the industry towards electric cars due to which the
company is now planning to open its first ever Electronic Car Showroom in the automobile
industry of Sweden. it should be noted that earlier these activities were required to be conducted
in collaboration but now the company is opening its own electric cars production unit and will
sell these cars under its own brand name.
Environmental Factors: There are certain environmental factors which are required to be
considered as these threats pose a great threat to the environment in the industry. One of the
gravest issues that have been identified by many ecologists is the environmental degradation due
to pollution and crude oil scarcity. These are the issues which are directly linked to the
production of automobiles. The increment in the greenhouse gases is another issue that the
automobile industry is required to confront or these issues might lead to deterioration of the
industry and also impact the sales of the company in the new market (Silinevicha et. al., 2017).
Legal factors: In the automobile industry of Sweden it has been found that the legal constraints
that might have an impact on the industry are the standards, safety and pollution considerations.
Apart from this, the employment law is also one of the considerations that the industry and the
companies operating in it are required to comply with (Lindegaard et. al., 2016). It should be
noted that these considerations are different in different regions.
10

Five Forces Analysis of the Automobile industry of Sweden
Image: Porters Five Forces
Image Source: MindTools.com (2018)
It has been analysed that there is a great recession in the global automobile industry which has
not only impacted the revenues of the industry but also the most known brands came close to
extinction. Without the intervention of the government, the market forces would have badly
disrupted the working of these brands and they would have been wiped out of the industry. Not
that this period has gone, the industry has started getting back on track. Apart from the usage of
technology and appealing design, now the users in Sweden are looking for environmental
friendliness and safety that is now being provided by vehicles. This is the phase of the rise of
new era of automobiles. Apart from the market forces, there are several other factors as well
which have the potential to affect the industry in a pretty bad manner (Rothaermel, 2015).
Provided below is the five forces analysis of the automobile industry of Sweden.
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Threat of new entrants: Weak
It should be noted that the automobile industry in manufacturing industry and in order for
companies to compete with a global brand like Renault, it would require huge financial backing.
In the initial stages, it is important for the company to set up manufacturing units which would
require huge costs. Apart from this, the major barrier of entry is the high level of competition
which is implied by existing brands in the industry. It should be noted that unless a new brand
enters the industry with innovative and differentiated product in the market, the industry is close
to impregnable (Ehsani, 2018). There are no laws that might pose a threat to the entry of new
companies, but the image and reputation possessed by the big players in the industry have the
chances of reducing the entry of new players in the market.
Bargaining Power of Suppliers: Weak
The bargaining power of the suppliers in the industry is weak as most of the suppliers are small
players, only a few suppliers have good financial backing and are of significant size. It should
also be noted that the threat that is possessed by the forward integration is minimum for the
suppliers that is because of the string image of big players in the market. It should be noted that
these suppliers are required to play by the rules that have been set by the big brands in the
industry.
Bargaining power of buyers: Moderately Strong
The large parts of the buyers in the industry are the small individual buyers that purchase single
vehicles. However, it should be noted that there are many government agencies that purchase the
fleets of vehicles. These are the buyers that have a strong hold over the bargaining power in the
industry (Harwit, 2016). Irrespective of the size of company, the buyers in the industry have a
strong position to switch in accordance with their ease.
Threat of substitutes: Weak
There are various substitutes that can be used by the user but the convenience that is provided by
privately owned vehicles is something that the users wish for. The accessibility and the
convenience that is provided by the private automobile is not only a prevailing trend in Sweden,
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but also in other parts of the world. This factor reduces the threat of substitute up to significant
levels in the industry.
Competitive rivalry in the industry: Very Strong
It should be noted that the recognised and influential brands in the industry are quite low with a
high amount of exit barriers. This is the factor which significantly increases the rivalry in the
industry. With the high amount of customer loyalty, the industry has matured up to significant
levels (Noble, 2017). This further intensified the competition in the market which further
increases the competitive rivalry among the brands in the market.
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Conclusion
Thus from the management report provided above it can be concluded that though the company
has gained its customer loyalty and strong brand image in the market, there are vast opportunities
for Renault SA to expand in other markets as well. The image of company has been developed
through the racing DNA, but it is notably one of the few companies that have its operations in
almost every vehicle segment which help the company to build a complete image. Considering
the environment of Sweden, it has been recommended by the company to launch their cheap
vehicles as well that offers the value of money to the consumers. This would help the company
to effectively increase their consumer base and would also help in exploring other potential
opportunities as well. the cooperation of the company with other big manufacturers also gives
the company an advantage of getting hands on the new and updated technology which can be
further utilised to attract the consumers on a large basis.
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