Volvo Business Model: Analysis of Value Proposition and Resources
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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.
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VOLVO: BUSINESS MODEL 1
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Introduction Volvo is a Swedish multinationalmanufacturing 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 thefinancingandservicesolutions.ItisOperatingthroughthesixsegments;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,andEicher.Theconstructionequipmentisdeveloped,manufacturedandmarket 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. 2
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 conceptlaysemphasisupondeliveringcustomervaluethroughtheirconnectedcars.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). 3
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 (VolvoPenta, UDtrucks, MackTrucks, Volvo construction equipment,VE commercial vehicles, Volvo buses,Renault Trucks,Volvo Trucks) 2.Distribution network 3.Suppliers 4.Components andparts manufacturers 5.EPC companies 6.Machinery Manufacturers 7.Collaborators (Research Activities 1.Marketing 2.Post sales 3.Engineeringand design 4.Financial services 5.Supportand 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 todrive prosperi tyby means of transpor t solutions Customers 1.Automation 2.Trust 3.Brand Awareness 4.Change 5.Customer services 6.Postsale services 7.transformation 8.Innovation 9.relationships basedon performance Resources 1.Volvo production facilitatesin eighteennations and products are used to be sold in more than 190 markets. Segments 1.Carmakers 2.Buildingsand plants 3.Municipalities andconstruction companies 4
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institutesand suppliers, universities) 8.Automotive companies 9.Machinery manufacturers 4.EPC companies 5.Equipment manufacturers 2.Network 3.Open innovation 4.Innovativeand creative thinking 5.R&D facilities 6.Openminded andcurious 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 tobespentonresearchand 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) 5
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 modelfor 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 6
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. 7
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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. 8
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