LCBB4005 - Environmental Analysis of Car Manufacturing Industry: Volvo

This report provides an environmental analysis of Volvo Cars, focusing on the external factors influencing the company's performance. It begins with an introduction highlighting the importance of environmental analysis for business success, particularly in a dynamic market. The main body utilizes the PESTLE model to assess the political, economic, social, technological, legal, and environmental forces shaping the car manufacturing industry, with a specific focus on the shift towards electric vehicles. The report also includes an overview of the industry using Porter's Five Forces framework to assess the competitive landscape. A critical assessment of the changes taking place and the reasons behind them, such as growing consumer preference for electric vehicles and environmental concerns, is also discussed. The report concludes by summarizing the key findings and emphasizing the need for companies to adapt to evolving environmental factors to maintain a competitive advantage. References are provided at the end to support the analysis.

ENVIRONMENTAL
ANALYSIS OF AN
INDUSTRY

Table of Contents
INTRODUCTION...........................................................................................................................2
MAIN BODY...................................................................................................................................2
Major forces shaping the business environment of car manufacturing industry........................2
Critical assessment of changes taking place and reason behind it..............................................5
CONCLUSION................................................................................................................................5
REFERENCES................................................................................................................................7
1

INTRODUCTION
For the success of the company it is very essential for the company to analyse the
environment in managing the performance of the company (Chen and Jia, 2017). This is because
of the reason that the business exist in the dynamic and frequent changing environment then it is
very essential for the company to analyse the environment and to adapt to the changes for
managing the work in the company. The present report is based over the company Volvo cars
which is a premium carmaker which has announced to make the electric cars in accordance with
the latest changes taking place in the dynamic environment. The present report will outline the
PESTLE analysis of the company and then to identify the changes taking place in the
environment and adapting to these changes in the business.
MAIN BODY
Major forces shaping the business environment of car manufacturing industry
The industry operates in the environment which is very changing and dynamic in the
nature and there are also many frequent changes taking place within the working environment.
But if the company wants to gain success then it is essential for the company to adapt to these
changes taking place in the environment. All these changes taking place in the environment can
be analysed with help of the PESTLE model and this is because this model includes the analysis
of the external environment and then to adapt to these changes. With the analysis of the
environment it was clear that there is need to electrify the model of the cars as the latest trend is
of the electric cars (Tresna, 2017).
Political factors- this is the factor which relates to the changes taking place in the political
or the governmental sector of the country. This is majorly pertaining to the fact that when there
are changes in the government or the political sector then the company is also affected in the
direct or indirect manner. In accordance with the current political state if the company goes for
the electric vehicles in Europe then this will be beneficial for the company. This is because the
tax rates are low for the companies who add in the environment protection and safeguarding of
the nature.
Economic factors- the economic factor relates to the changes taking place within the
economy of the country and it also has a great impact over the company and its profitability
(Yuan, Ren and Chen, 2017). This is majorly because of the reason that when it comes to
company it exists in the economy of the country and any change in the economic factor also
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affects the working of the company. Currently the interest rates on the borrowing by the
company have decreased and this is an opportunity of the company (Rosen, 2018). This is
majorly pertaining to the fact that if now the company will borrow the money from the economy
or the banks then they will have to pay less of the interest and this will save the money of the
company. Thus, this will have a positive impact over the company as the company will now have
to pay less of the interest and this can be used in the company.
Social factor- this includes the attitude, behaviour, values of the consumer and the people
within the society. This need to be studied in effective and efficient manner because if the
behaviour of the consumer will not be studied then it might be possible that consumer will not
like the product and services of company. Thus, it is very essential for the company to first
analyse the attitude and preference of the consumer towards the electric car and then work on the
idea and launch it. This will be a good idea to the business concept because the consumer
increasing the trend for the electric vehicles and this will be successful.
Technological factor- this is also an important factor to be studied at time of analysing
the new idea or the business opportunity. It is so because of the fact that when the company
works in the external environment then there is much advancement and up gradation within the
technological sector which need to be adapted by the company. Thus, it is crucial for the
company that they effectively analyse and study the technological factors. This is due to the fact
that adaption to the latest technology increases the efficiency and effectiveness of the company.
Thus, the new technology of electric vehicle will improve the performance of the company.
Legal factor- this is also very essential for the company to analyse the different rules and
regulations and legislation which are applicable over the working of the company. This is
essential because of the fact that when it comes to company complying by the legal rules makes
and builds the trust of consumer for the company. The legal rules and regulation bind the
company in a contract which they cannot break or violate and this makes sure that the company
is working in ethical and morally correct manner. Thus, this will increase the sales and revenue
of the company to a great extent.
Environmental factor- this is also the most important thing to be analysed because of the
environment will not be taken care of then the consumer will not like this and this might reduce
the popularity and consumer of the company (Mak and Chang, 2019). Thus, the concept or idea
of electric car is beneficial for the company as the consumer will like this fact that with help of
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electric cars the pollution will be decreased and this will increase the goodwill and sales of the
company in the highly competitive market.
Industry overview
Porter’s five forces is the framework which generally used to define the level of competiveness
present in the industry (Wang and Zhao, 2017).
Competition among company: This force is very high as there are many different car
makers who used to operate in industry. This eventually used to create the variety of the issue for
Volvo to build good customer base of the company in the market. As they have to face variety of
the competition from them. Also, different organization used to offer different offering in front
of different consumer in the market. This eventually used to attract the customer of the company
toward different organization. So it can be said that this force is very high in the market.
Threat from new entrant: This force is very low in the market. As it has been find out that
entering into this sort of the industry generally requires and demand good sort of the finance to
be invested by different companies in the market. Also, there is many few investor or bank in the
market who used to provide that sort of the loan to carry out different operation in the market. As
a result this industry used to see very less number of the new entrant entering into the industry.
So for the same reason it can be said that this force is favourable for Volvo.
Threat of Substitute product: There are many different type of substitute product of car in
the market, which is generally used by the different individual for the purpose of transportation
in the market. This eventually used to create the variety of the issue for the Volvo as a whole. At
the same time analysing real substitute product it can be said that there is no real substitute of car
as different feature which are provided by the car are not provided by other substitute in the
market. So it can be said that threat of substitute product is very low in the market.
Bargaining power of customer: This threat is very high in the market, as it has been seen
that there is good sort of bargaining power in the hand of the customer in the market. As it has
been find out that all customer in the market used to have a good sort of the option to buy the
product from the variety of organization operating, this eventually used to give a good sort of
bargaining power in the hand of different consumer (Song, Sun and Jin, 2017). This used to
impact the performance of the business very adversely.
Bargaining power in the hand of supplier: Looking at different supplier in the market it can
be said that there are many different supplier who used to give different raw material and
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unfinished goods to different organization in the market. This eventually used to open good sort
of the option for the Volvo to procure different sort raw material in the market. This eventually
means that this sort of force do not bring that sort of the impact on the performance of the Volvo
(Wang, Wei and Huang, 2018).
Critical assessment of changes taking place and reason behind it
The company operates in the environment which is very dynamic and ever changing and
it is advisable to the company to continuously monitor the changes taking place in the
environment. These changes need to be adapted by the company then this will make the
company more advance and effective. The major change taking place in the environment is the
use of social media marketing in the promotion of the goods and services. This is majorly due to
the fact that when it comes to marketing the competition is very high and to face it, the necessity
of company is to use effective marketing tools and techniques. Thus, the company has to make
use of the social media marketing for the promotion of the electric cars in the highly competitive
market.
Another major change is the change in preference of the consumer trends and
requirement and this is more trending towards the use of the electric and battery driven vehicles
so that it does not harm the environment and does not have any impact over the environment
(Xuan and Yue, 2017). Thus, the major reason of this change is that the consumer has become
more conscious relating to the environment and it is very essential for the company to adapt to
these changes and implement in their product and services. This is because of the fact that if the
company will not adapt to these changes then the consumer will not like this and this will
decrease the sales and income for the company. This reason has forced Volvo cars to make the
and indulge in making of the electric cars so that the company can stand on the requirement of
the consumers.
Also, if the company will make use of these latest trends then the company will enjoy or
gain a competitive advantage in the whole industry. This is due to the fact that when Volvo cars
will cater to the latest need of the consumers then the consumer will like the product and services
being provided by the company and they will prefer the product of Volvo cars over the other
companies (Aithal, 2017). Hence, this will provide the company to enjoy the competitive
advantage as the company will have increased sales and large number of consumer base.
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CONCLUSION
In the end it is concluded that the analysis of the environment is very essential for the
company as the company operates and exist in the environment only. Thus, it is essential for the
companies in gaining success that they timely research for the changes taking place in the
environment in which the company exist. For this there are many different models like PESTLE,
Porter five forces and many other models to outline the changes taking place in the environment.
Thus, with help of these models it was outlined that the major consumer preference is relating to
the use of electric and battery driven vehicles. This is majorly pertaining to the fact that when the
need of the consumer will be fulfilled then the consumer will like this and will purchase the
product of that company only. Hence, the company will enjoy the competitive advantage and this
will give a greater preference by the consumers among the high competition as well.
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REFERENCES
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Mak, A.H. and Chang, R.C., 2019. The driving and restraining forces for environmental strategy
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Rosen, M.A., 2018. Environmental sustainability tools in the biofuel industry. Biofuel Research
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Song, J., Sun, Y. and Jin, L., 2017. PESTEL analysis of the development of the waste-to-energy
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