Volvo Business Model: Analysis of Value Proposition and Resources

This essay analyzes the business model of Volvo, including its value proposition and resources. The significance of these elements for future growth is also discussed.

VOLVO: BUSINESS MODEL
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Introduction
Volvo is a Swedish multinational manufacturing company whose Headquarters are located in
Gothenburg. The company was founded in the year 1937 and at present the company is serving
worldwide. It is a parent company of the Volvo Group. This company is a manufacturer of
trucks, buses, construction equipment, and Marine and industrial engines. The company was
world's largest manufacturer of heavy-duty trucks in the year 2016. The company also provides
the financing and service solutions. It is Operating through the six segments; Trucks,
Construction, Equipment, Buses, Volvo Penta, Governmental sales and Customer Finance. The
company is selling as well as marketing the trucks under the brands Volvo, Ud, Renault Trucks,
Mack, and Eicher. The construction equipment is developed, manufactured and market
equipment for construction and other related industries under the brand such as Volvo, SDLG
and Terex Trucks. The buses have a product range in which buses are included and the buses are
chasing the city, intercity and coach traffic. Engines and drive engines are manufactured by
Volvo Penta it is both for leisure boats and commercial craft. Industrial engines are also supplied
by Volvo Penta; it is ranging from 75 kilowatts to 655 kilowatts for an industrial application
range such as container handling, minimum equipment, and power generation.
This essay discusses the business model of Volvo. The main element of Volvo`s business model
canvas has been analysed as well. The significance of value proposition and resources in future
are also anticipated.
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The business model is demonstration of business articulating how value is created, remunerated
and shared. Because of this reason business has to become a convention which is a collective
conception influenced by the stakeholder's expectations (specifically the entrepreneur, inventors
and customers). The conventional theory of business model states that- the Business model is a
social relic which explains organizational drive for resources can be acquired if a reunion takes
place between the partners (Verstraete and Jouison-Laffitte, 2011).
A business model elucidates the generation of revenue by a venture, cost incur for generating
revenues and how to manage timings and risks in relation to the costs and revenues so that
sustainable reward could be provided to the entrepreneur along with investors. This theory is
Entrepreneurial Value Creation theory. The theory determines that a mechanism is provided by
the business model which facilitates in creating and sustaining in the cash flow of venture and to
manage the risks and timing of the different cash flow avenues.
A business model is a planned approach which involves different steps of actions that intends to
operate the business in a profitable environment in a particular marketplace. Different business
nature has a different business model. An appropriate business model involves a source of
funding or financing, competition, strategy for marketing, projections of expenses and revenues,
the customer base for the business and projected start-up costs.
The concept of the smartly connected product is quite effective. SCPs examine the environment
and can facilitate remote control, automation as well as optimization. It empowers the Volvo
manufacturers to consider regarding their business in an innovative manner. Volvo`s SCP
concept lays emphasis upon delivering customer value through their connected cars. In
automotive industry connected cars has become a standard. The census connects with Volvo cars
support in getting outside information and entertainment services for instance navigation, web
browsing, music streaming, and Wi-Fi hotspot in the car and parking solutions as well.
The opportunities of the smartly connected product of Volvo in regards to its business model are
extensive. As by delivering value to the customer business growth could be realized, In addition
to this, the smartly connected product provides several facilities to the customers which intend
supports the sale of the product. Enhancement in product sale at last leads to increment in
revenue which is a profitable opportunity for Volvo (Tajeddini, 2013).
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On the other hand, the smartly connected product also has some threat for the business as to
provide smart connected products to each and every customer increases the cost of the product
which is a threat (Lee, 2013). Another threat is from the resistance of customer towards the
smartly connected product. As there could be some case in which customer may not prefer such
product.
The Osterwalder & Pigneur Business Model of Volvo is given below:
Partners
1. Subsidiaries
(Volvo Penta,
UD trucks,
Mack Trucks,
Volvo
construction
equipment, VE
commercial
vehicles, Volvo
buses, Renault
Trucks, Volvo
Trucks)
2. Distribution
network
3. Suppliers
4. Components
and parts
manufacturers
5. EPC companies
6. Machinery
Manufacturers
7. Collaborators
(Research
Activities
1. Marketing
2. Post sales
3. Engineering and
design
4. Financial
services
5. Support and
service
6. Production
7. Manufacturing
8. R&D
innovations
9. Financial
services
10. Distribution
Value
Proposition
1. Self-
driving
vehicle
2. Contract
manufac
turing
3. The
mission
of Volvo
Group is
to drive
prosperi
ty by
means of
transpor
t
solutions
Customers
1. Automation
2. Trust
3. Brand
Awareness
4. Change
5. Customer
services
6. Post sale
services
7. transformation
8. Innovation
9. relationships
based on
performance
Resources
1. Volvo
production
facilitates in
eighteen nations
and products are
used to be sold
in more than 190
markets.
Segments
1. Carmakers
2. Buildings and
plants
3. Municipalities
and construction
companies
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institutes and
suppliers,
universities)
8. Automotive
companies
9. Machinery
manufacturers
4. EPC companies
5. Equipment
manufacturers
2. Network
3. Open innovation
4. Innovative and
creative thinking
5. R&D facilities
6. Open minded
and curious
teams
7. Brand
8. intellectual
property
9. Production
technology
Channels
1. Website
2. Volvo Museum
3. Service Centres
4. Dealers
5. Social media
6. Authorized Distributors
Cost Structure
1. Raw materials
2. Components
3. Facilities
4. Taxes
5. Technology
6. Distribution
7. Production
8. Assembling and manufacturing
9. Parts
10. Fabrics
11. Software
12. Employees
13. Billions of UD dollar are used
to be spent on research and
development
Revenue Streams
1. Financing and insurance
2. Spare parts
3. Technical services
4. Components
5. Licensing
6. Rental
7. Product sales (Construction Equipment, Buses,
trucks and Cars)
(Yayici, 2015)
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The term business model can be defined as the organization using the set of plans for generating
the revenue and earning the profits. The organization gets helps by these describing factors in
order to earn profits and areas are focused on the management. A business model for Volvo
Company is as follows-
Value Proposition of the company facilitates in separate itself from its competitors. Customers
get attracted due to these factors for using the goods and services of a particular organization.
Volvo Company emphasizes to maintain its value proposition by making prosperity through
transport solutions (Lee, 2013). The company believes in providing customer value which is an
innovative idea that could be realized through providing transport solutions to the customers.
One of the other aspects of gaining value proposition is contract manufacturing through which
business could be operated efficiently.
Volvo`s resources include- enriched production faculties, open innovation, intellectual property,
brand, R&D facilities, network, production technology etc. The products are used to be sold in
several markets. One of the great resources of Volvo is its open-minded and creative teams
which focus on research for innovative products as well as services. The R&D department of
Volvo research and develop the processes and systems for carrying out the business activities
smoothly. Volvo is a huge brand which is famous all over the world. The buses of Volvo are
renowned and in demand as well.
Below is a discussion of the significance of the above elements of Business Model Canvas of
Volvo which could be realized into future-
The significance of value proposition-The value proposition element of the business model
includes the self-driving vehicles of Volvo. This could be the great significance for the business
in future. As such aspect will support in fulfilling the requisites of customers or their problem
related to driving the vehicle by owner could be solved (Kumar, 2010). Significance will be
derived from the mission of Volvo i.e. providing transport solutions. This factor will facilitate in
bringing prosperity in business.
The significance of Volvo resource- In future the resources will facilitate in offering and
delivering the value proposition of Volvo. Innovative and creative thinking of Volvo will deliver
a number of benefits to the business. Creative thinking leads to innovation which is the demand
of the market. Customers like unique products and services. Creative thinking will lead to getting
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innovations and gaining competitive advantage through such aspects. One of the other signs will
be derived from the research and development facilities. The R&D of Volvo continuously
involved in researchers for making the product as per the customer`s demand and preferences. In
addition to this, R& D will also facilitate in getting profitability through researching innovative
products.
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Conclusion
Each and every business organization has their own business model which has nine crucial
elements. However, the aspects of each element can be different for the businesses. A business
model demonstrates the environment and activities of business under a table. Through an
effective business model growth could be achieved by the businesses.
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