Business Models - Volvo Group Case Study

This article explores the business model of Volvo Group, a manufacturing firm that produces buses, trucks, and construction equipment. It discusses their resources, value, SWOT, and the significance of their business model. The article also highlights the opportunities and threats that have emerged in the Volvo Group business model due to the advancement in smart-connected products.

Running head: BUSINESS MODELS 1
BUSINESS MODELS
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A business model is a method that the company uses in order to generate more income
and also yield profits so as to achieve its goals and objectives (Zott, Amit, & Massa, 2011). The
business model provides guidance to the management of any firm on the techniques to employ so
as to earn more income and also for the continued success of the firm (Osterwalder & Pigneur,
2010). Once the best products to use are set, then the business plan is completed hence leading to
the creation of a business model. In this task, we are going to look at the business model of the
Volvo Group located in Sweden which is involved in manufacture and service of trucks and also
constructs equipment. We will review the business model of the firm, the resources, its
significance, value, and SWOT.
The Volvo Group is a manufacturing firm which produces buses, trucks, and construction
equipment. It also manufactures and supplies financial services, marine, and industrial drive
systems. It was created in 1927, serves worldwide and has over 90000 employees and the
products are sold in over 190 markets globally. The aim of the company is to be the best and
successful transport company in the whole world. How they interact with their customers and the
community as a whole is what drives them to achieve their desired goals and objectives. The
Volvo Group company has valued which guide them to day to day activities. They value
customer success, trust, passion, change and performance (Palo & Tahtinen, 2011). The business
model of Volvo Group is the best as compared to all the other manufacturing companies in the
world. This has led to its success in the market because they are able to fit the target customers
and also the market needs. The company ensures that they understand what the customer needs
and try to come up with techniques to meet their needs and this leads to the creation of more
profits. By using the business models, the company is able to identify the value proposition, the
target market and choosing the best technology in their daily operations. The business models in

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this firm are important because it provides the management of the firm with the right
justifications so as to ensure the client needs are met. According to Osterwalder &Pigneur, the
success of Volvo Group in the market is enhanced by the good marketing strategies (Osterwalder
& Pigneur, 2010). To ensure that the business model of this company succeeds, they apply the
contingency theory. The company has also employed fashionable management strategies for its
success and survival in the markets which are most times competitive. In this case, the Volvo
Group has allowed more partnerships, innovations and supply chains to be used in its operations
(Gebauer & Kowalkowski, 2012).
Due to the advancement in smart-connected products, opportunities and threats have
emerged in the Volvo Group business model (Kaplan,S., 2012).The opportunities includes that
the company aims at growing global road freight sector. Further, the company has an outlook for
a global trucks market by manufacturing new trucks, cars, buses and construction equipment.
The company also aims at improving global construction industry. There is also need for
partnerships, collaborations and alliances with other companies something which is an
opportunity for growth and expansion of the company. Additionally, there is an opportunity to
use advanced technology in the service motor industry.
On the other hand, there are threats related to Volvo’s business models. There is high
competition in the market by other firms which manufacture the similar product. Also, there are
problems and fluctuations in exchange rates which affect the businesses economic attempts to
advance its business operations in the global markets. Environmental regulations and policies in
various countries in which it operates also threaten the success of its business operations for they
are adverse. Finally, the manufacture of more improved vehicle features that are produced by
their competitors threatens Volvo’s competitiveness in the automobile sector.

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In the recent years, there has been the growth of global road freight sector both in volume
and value. The company expects the freight sector to increase in the next five years by over 6%.
In the world, Volvo Group has been the best leader in the manufacture of trucks and is able to
take the advantage of the growth. The growth of the trucks market is expected to increase and the
company will be able to benefit from any high demands. The company aims at improving the
global construction industry in the recent past (Ulaga & Reinartz, 2011). Expenditure on
infrastructure is expected to rise hence the company is going to benefit. The advancement in
technology has given the company the opportunity to manufacture new products that suit the
customer demands. There are sufficient resources which the company provides to the workers in
different departments. This has led to the creation of new products. The company has increased
its market share through collaborating with other companies.
However, the company is faced with a very stiff competition from other companies which
produce similar products which have affected its performance. They compete with companies
like CNH, Caterpillar, Hitachi, and Cummins. This has led to increased pressure on prices hence
affecting their bargaining power. There has been a change in regulations from country to the
country, especially in the construction industry, industrial engines and diesel vehicles (Frow,
Ngo, & Payne, 2014). This has led to rise in compliance costs. Volvo Group operations are done
globally and this has led to fluctuations in the currency especially the US Dollars. Their
competitors have manufactured new products hence this has affected their operations.
In the recent past, the business model concept has become important in abstraction
whereby models are necessary for a scientific approach. This is because it contains unique
elements hence making it difficult to define. According to Osterwalder & Pigneur, the business
model is a plan which contains operations of a business to ensure its success (Osterwalder &

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Pigneur, 2010). The Volvo Group mostly apply the business model canvas framework in its
operations which illustrates the building blocks of a business model. Being an automobile
company, the Volvo Group addresses its business model by using service business and product
service systems (Neonen & Storbacka, 2010). Competition is not involved here because they use
the business models to explain their services to the customers and coming up with a business
plan and this is because the strategies are set. This makes the principle of Osterwalder & Pigneur
applicable in Volvo Group. This is because according to them, competition is not necessary for
the business model when setting its strategic plans.
The following business model perspectives are addressed in the Volvo Group business
model: value proposition, set of capabilities and resources, the system of processes and profit
formula. However, two business models will be discussed.
The Volvo Group business model takes into account profit formula which is used to
ensure that profit-making and productivity are increased. For those customers who want to
purchase the products on a loan based scheme, the company has shown the capability of
providing solutions to them. The company has the best computer systems of the process which
help them in planning series of actions. These series of actions help in improving the company’s
profits. The profit formula used is the Gross Profit Margin (GP) which helps the company in
understanding the net sales and profits made in a given period of time. Manufacturing capacity is
increased by employing the right business models.
There are set of capabilities and resources business model used by Volvo Company. The
Volvo Group company has employed over 90000 people so that they can be able to meet the
customers' needs by manufacturing products that are demanded by the customers in the market

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(Gebauer, Edvardsson, & Bjurko, 2010). The company has created value to the most targeted
market especially in the automobile industry. The company ensures that the resources required
are available so as to manufacture more automobile products, marine, trucks, and buses. The
business model used by the Volvo Group is essential to the future success of the company
(Kindstrom, 2010). The company is able to advance their innovations which makes them
compete with the other companies that manufacture similar products. The business model also
helps the company to collaborate with other companies in the world and this increases their
productivity (Chesbrough, 2010). The business models contain important elements which the
company uses to solve any issues and this has led to the generation of more profits. With the
business model, the company can come up with different distribution channels and sale channels.
To ensure their success in the market, the company has employed the right human resources and
equipped them with the right resources required to improve productivity.
In conclusion, the right business models should be used by the companies to ensure
success in their day to day operations. The managers are able to interpret the concepts used in
their industry and also the key elements by using the right business models. With the business
model, the company is able to grow rapidly and to meet their customer needs (Palo & Tahtinen,
2011). Finally, we have viewed that the Volvo Group business model contain; value
propositions, set of capabilities, resources, systems of processes and profit formula. This
company acts as a leader in the global automobile companies and they should learn from them
the idea of applying the business models in their operations.by doing this, they will be able to
increase their revenue, earn more profits and increase productivity (Kowalkowski, 2010).

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References
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Frow, P., Ngo, L.V, & Payne, A. (2014). Diagnosing the supplementary services model:
Empirical validation, advancement, and implementation. Journal of marketing
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Gebauer, H., & Kowalkowski, C. (2012). Customer-focused and service-focused orientation in
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Gebauer, H., Edvardsson, B., & Bjurko, M. (2010). The impact of service orientation in
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Kaplan, S. (2012). The Business Model Innovation Factory: How to Stay Relevant when the
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Kindstrom, D. (2010). Towards a service-based business model- key aspects of future
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Kowalkowski, C. (2010). What does a service-dominant logic really mean for manufacturing
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