Environmental Analysis of Volvo's Business in Automobile Sector

This report provides a comprehensive environmental analysis of Volvo within the automobile sector. It begins with an introduction to the business environment, encompassing internal and external factors impacting the company. The main body of the report delves into the major elements shaping the business environment, utilizing PESTLE analysis to examine political, economic, social, technological, environmental, and legal factors influencing Volvo. Furthermore, the report critically assesses organizational changes and future trends, including the adoption of electric vehicles, and employs Porter's Five Forces model to evaluate industry competition. The analysis highlights Volvo's strategic adaptations, such as the introduction of the XC40 Recharge, and discusses the reasons behind organizational changes, emphasizing the importance of innovation and responsiveness to market demands. The conclusion underscores the significance of technological advancements and strategic planning for sustained business success.

Environmental
Analysis of an industry

Contents
INTRODUCTION...........................................................................................................................3
MAIN BODY...................................................................................................................................3
Explain the major elements shaping business environment...................................................3
Critical assess organisational as well as other changes which takes place in near future and the
reasons for such changes........................................................................................................5
Organization Changes............................................................................................................8
Reason or purpose for organizational change........................................................................8
CONCLUSION................................................................................................................................8
REFERENCES................................................................................................................................9
Books and Journals.................................................................................................................9

INTRODUCTION
Business environment includes many factors that are both internal and external. Employees,
customers the demand and supply the suppliers all are combined and called businesses
environment. There are many facts that impact the environment such as political, social, and
legal and have impact on business. It is important to analyse these factors and then take decisions
that are required by the business. This report is considering Volvo for analysing the business
environment in relation to the automobile sector. Volvo cars are is a Swedish luxury business
entity was founded in 1927 (Brkljač, and Sudarević, 2018). Headquarters of the company is
situated at Gothenburg, Swedenas well as at current state company offer their products in around
12 countries across the world The company has its operations in around 12 countries and it
manufactures SUV cars that are good for safety. The automobile sector needs regular innovation
and keeps on updating their product and services to compete in the market. The report discusses
the various elements that are helping business environment to shape. Also the research about the
changes that are taking place and that are needed to be changed for competing in this marketed.
The organisational changes and the reason for those changes are mentioned in this report. The
models are used explain further like porter five forces model to know about the competition in
the industry and PESTLE analysis that helps to know the factors that have impact on the business
environment.
MAIN BODY
Explain the major elements shaping business environment
The various factors that have impact on the business are important to be analysed. PESTLE
analysis is used by the business to check the external factors and how they influence the
company. The world has turned competitive and this is impacting the business adversely. The

performance of the business varies due to the impact of the factors on the organisation. The
PESTLE Analysis in respect to Vivo cars is discussed below:
 Political Factors– Different countries have various political factors that impact the
business organisations in a different ways. The policies of that place that are made by the
government, import and export, taxes the trade policies (Aithal, 2017). The business that
follows these political factors would help them to be successful. The various political
reasons have created problem for Volvo in Europe. The variants in tax rates impact the
business in automobile sector like Volvo. Also it is important for the organisations to
assure safety of the employees and then they are able to run smoothly. The new norms
that are by government are also influencing the business and they need to adopt them.
 Economic Factor – Another factor that impacts the business is economic factors and it
includes the inflation rate, demand supply, GDP, interest rate etc. are considered as
economic factors. The economic condition of the place of operation of business has
impact on the business organisation. In relation to Volvo there are conditions that have
impact on the electric vehicles that is formed by them in Europe. The inflation rate is
high in Europe and this is problematic for the organisation as well as business, as the
power of consumers reduces when there is inflation and the prices are high and this
directly impacts the profitability of the business (Dvorsky, Sopkova and Janoskova, 2017).
The main reason of profitability and contributing to economic growth of company is their
profitability.
 Social Factors – The society in which the business operates directly impacts the business
as the age of people, population, cultural factors all change the thinking level of people
and also impacts the buying decisions. The lifestyles they are living change the mind set
and their decision to buy. Also the needs and wants of customers are changing in context
of Volvo the thing is faced by them as challenge as the customers always demand new
product and innovation in the old once. That requires proper research and development.
 Technological Factors – To be successful in business the need is to get updated and
make right use of technology. The development of technology and regular updates will
lead to satisfy the customers and the needs and wants of them. The Organisations that use
digital means and the advancement of technology are gaining more customer base. In
relation to Volvo the company analyses and makes proper research about the current

trends in the market that help to innovate. The management team is also facing some
challenges as there are competitors also that are innovate their products and services and
this requires a lot of efforts to innovate.
 Environmental Factors- All the resources that are required by the business are –
provided by the environment to them, so it is utmost responsibility of business to use
them optimally and be environment friendly (Eddleston, Banalieva and Verbeke, 2020).
The pollution is the main harm that automobile industry causes, so Volvo should focus on
this factor and manufacture the cars that emit less pollution and are Eco friendly that
increases the goodwill of the business in them market and also attract more and more
customers.
 Legal Factor – It is desirable that the companies should follow the rules and regulations
of the place where they operate. The laws and regulation helps the business to operate
efficiently and get support of government (Ramirez-Montes, 2019).
 The Volvo Company always follow all such rules and the managers keep on helping the
society by satisfying them with their needs and wants and serving them at fair prices. The
laws related to employees need to be fulfilled as that keeps the workers motivated and
they work more productive and boost the sales of the organisation (Sobehart, 2016).
These are the external factors that have impact on the business environment but a right
study and following them makes the organisation successful and gain huge profits while building
loyal customer base.
Critical assess organisational as well as other changes which takes place in near future and the
reasons for such changes.
It is a frame work that is used by business organisations for determining competition in the
industry. Framework helps to identify potential profitability of the industry. Five elements of
porter’s five forces model help analysing the strengths and weakness of the sector. To achieve
success in this environment it is important to understand the market. There is need to update the
products and services as innovation are the key to success. The competition in automatic sector is
so high that they introduce new innovative features in their products. To beat the competition
level, higher authorities of Volvo will launch XC40 recharge which is fully electric car, so this
model is discussed below:

Threat of new entrants: Threat of new entrant is low in automobile sector. In competitive
market it’s not easy to perform operations as it has huge amount of funds. The businesses enter
the business that is making more business, and they try to enter in that business. To gain
opportunities to create positive image in market this is the biggest advantage for Volvo. Also it is
difficult for business in automobile industry to gain. It becomes difficult for new entrants to
operate their functions because of high government policies. That is why Volvo focuses on
innovation to gain competitive advantage (McAllen and DeSouza, 2018).The Volvo has established
its name in the market and does not have fear for the new entrant as these new players cannot
compete with them.
Bargaining power of suppliers: In automobile industry company have large number of
suppliers which says bargaining power of supplier is weak. The more the suppliers in the
industry it is good for the host company as they can switch among them. The managers of Volvo
Company have option to switch from one supplier to another as the cost of switching is low.
Profitability of company is based on cost by suppliers to provide raw material. They have built
good relations with suppliers that help them to purchase the raw material at time and low cost as
it helps to increase the success position of the company.
Bargaining power of buyers: In this sector buyers have low bargaining power as the number of
players are less that provide cars to their customers, means the electric cars that are offered by
Volvo are not supplied and there is less competition in the market. The customers do not have
more options and are not able to switch easily. That’s why manger of Volvo introduces new
changes and innovation and provide high quality product with reasonable price. As result large
number of costumer grab attention towards increase in overall sale and the profit of the company
also increases (Trad, IBISTM, and Kalpić, 2017).

Threat of substitutes: the available substitute is less in the industry and customers do not have
more options that are why threat of substitutes for organisation is low. These organisations offer
same products at low price that’s why Volvo has to maintain the quality of the products. As
others are not dealing in same type of product that can satisfy the customers. This helps them to
attract more customers towards their products and increases the brand image of the company in
respect to its competitors.
Rivalry among existing organizations: Volvo deal with various rivalries among automobile
sector. As there are many competitors present in the industry famous companies like Ford, Tesla
spend more funds to attract individuals and gain them. Volvo has to introduce new and unique
feature to retain their costumers and fulfil their requirements. The better the company will
provide services to its customers more will be the loyal customer base of the company and that
will help to be more profitable as compared to rivalry in the industry (Bavato, and Xiao, 2018).
For a company to be successful it is vital to check the requirements of the customers and
to know about the competitors that are in the industry. The competition in the industry is always
present and the company needs to make the strategies that would help to gain loyal customers
that help the company in making huge profits.

Organization Changes
The world is dynamic and it is important for business to make changes as and when
desired. The organisation has to adopt themselves according to the conditions that are prevailing
in the market. The external factors such as technology have impact on business and the laws and
procedures need to be followed as they help them to function effectively. Volvo has also
understood and introduced the concept of electric cars that is good decision and the change has
helped the company to achieve their goals and objectives effectively while contributing to
success of the company.
Reason or purpose for organizational change
It is essential to adopt the changes, the reason for growth and success of the organisation is
the way it tackles with the changes as the world is changing and so are the needs and wants of
the customer group. To retain the customers and take care of their satisfaction it is necessary to
make desired changes as per their demands. It is the time when there is need of proper research
to study the current trends and future needs and the innovation in the product as helps the
organisation to grow (Kensbock, 2018). Volvo switched to electric cars as they are Eco friendly
and save fuel as well as reduce the pollution in the economy that has increased the position of the
company and attracted more customers towards the organisation.
CONCLUSION
It can be concluded that innovation and proper and timely use of technology is required by
business to be successful. The organisations should know about the strengths and weakness
and should focus on the opportunities that arise in the course of business. The PESTLE
analysis tells about the external factors and their impact on the organisation. The reason why
the organisations change on regular basis is the smooth operations in the market. The five
forces of Porter help the organisation to know about the competitors and the strategies that
can be used to attract more and more customers.

REFERENCES
Aithal, P. S., 2017. A critical study on Various Frameworks used to analyse International Business and its
Environment. International Journal of Applied Engineering and Management Letters
(IJAEML), 1(2), pp.78-97.
Bavato, D. and Xiao, J., 2018. From Catalysts to Synthesists: A Qualitative Study of Transformational
Brokerage in Volatile Business Environments. Academy of Management Global Proceedings,
(2018), p.285.
Books and Journals
Brkljač, M. and Sudarević, T., 2018. SHARING ECONOMY AND „INDUSTRY 4.0 “AS THE BUSINESS
ENVIRONMENT OF MILLENNIAL GENERATION A MARKETING PERSPECTIVE. Annals of
DAAAM & Proceedings, 29.
Dvorsky, J., Sopkova, G. and Janoskova, M., 2017. Evaluation of the social environment and access to
financial resources for business: case study of the Czech and Slovak Republic. Ekonomicko-
manazerske spektrum, 11(1), pp.62-73.
Eddleston, K. A., Banalieva, E. R. and Verbeke, A., 2020. The bribery paradox in transition economies
and the enactment of ‘new normal’business environments. Journal of Management
Studies, 57(3), pp.597-625. Eddleston, K.A., Banalieva, E.R. and Verbeke, A., 2020. The
bribery paradox in transition economies and the enactment of ‘new normal’business
environments. Journal of Management Studies, 57(3), pp.597-625.
Haddud, A., McAllen, D. K. and DeSouza, A .R., 2018. Managing Technological Innovation in Digital
Business Environments. In Marktorientiertes Produkt-und Produktionsmanagement in digitalen
Umwelten (pp. 47-60). Springer Gabler, Wiesbaden.
Kensbock, J., 2018. Building Bridges over Troubled Waters—How Individuals, New Ventures, and
Established Organizations are Facing Challenges in Dynamic Contemporary Business
Environments: An Approach Linking Entrepreneurship, Psychology, and Organizational
Behavior.
Ramirez-Montes, C .J., 2019. Trade marking the look and feel of business environments in
Europe. Colum. J. Eur. L., 25, p.75.
Sobehart, J.R., 2016. The FinTech revolution: Quantifying earnings uncertainty and credit risk in
competitive business environments with disruptive technologies. Journal of Risk Management in
Financial Institutions, 9(2), pp.163-174.
Trad, A., IBISTM, F. and Kalpić, D., 2017. The Business Transformation Framework and Enterprise
Architecture Framework for Managers in Business Innovation The role of legacy processes in
automated business environments. The Proceedings of E-LEADER 2017 Berlin, p.1.