Analysis of Electric Car Production and Marketing for Volvo Cars

This report provides an environmental analysis of the electric vehicle market, with a specific focus on Volvo Cars. It begins with an introduction to environmental analysis as a strategic tool, highlighting its importance in assessing threats and opportunities in the competitive business landscape. The main body of the report delves into the forces shaping the car manufacturing industry, particularly the shift towards electric vehicles. It uses PESTLE analysis to examine the political, economic, social, technological, legal, and environmental factors influencing Volvo's business. The report also identifies new and emerging business opportunities in the production and marketing of electric cars, using Porter's Five Forces model to assess the competitive dynamics and potential for entrepreneurs and business executives. The analysis covers the threat of new entrants, the bargaining power of suppliers and buyers, and the intensity of competition. The report concludes by summarizing the key findings and implications of the analysis, emphasizing the strategic importance of adapting to the changing environment and capitalizing on emerging opportunities in the electric vehicle market.

Environmental
Analysis of an industry

Contents
INTRODUCTION...........................................................................................................................1
MAIN BODY...................................................................................................................................1
a) Forces shaping the business environment of the car manufacturing industry....................1
b) Identify new and emerging business opportunities that the production and marketing of
electric cars may present to entrepreneurs and business executives......................................4
CONCLUSION................................................................................................................................7
REFFERENCES..............................................................................................................................8

INTRODUCTION
Environmental analysis is a strategic tool and is an effective process used to identify all
the external and the internal elements which has an influence on the performance of the
organisation. This analysis about the environment helps in assessing the level of threat or the
opportunity that the company may face while prevailing in the competitive business
environment. This project is based on Volvo cars which is a Swedish Multinational
manufacturing company, headquartered in Sweden (Bartlett, Doz and Hedlund, 2013). Its core
activity includes sale, production and distribution of sales of cars, buses and other transportation
vehicles. This project is based on the trend of electric vehicles in Europe and making a radical
change in the auto mobile industry. This project will highlight about the major forces that is
shaping the business of the auto mobile industry and identify new and emerging business
opportunities within the respective business.
MAIN BODY
a) Forces shaping the business environment of the car manufacturing industry.
As with the increasing trend of the auto mobile industry it has made the Volvo car maker,
a premium car manufacturing industry to switch towards electric motors and place electrification
at the core of its future business. This led Volvo Cars to introduce XC90 T8, S90 T8 and there
are many other Volvo electrified range. In addition to this there are various forces which are
shaping the electrification of the car manufacturing industry described as follows-
PESTLE Analysis
It is an effective framework or a model which is used to analyse and monitor the macro
environmental factors that has a impact on the organisations performance. It is discussed as
follows-
 Political Factors- It is concerned with the governmental rules and regulations, related
to import, export as well as other taxes and the tariff policies which has a impact on the
profitability and the performance of the auto mobile industry. As government all around
the world is rising favourism for low emission vehicles, moreover taxes on the luxury
vehicles are growing higher. In context to this markets like UK and EU are also
providing government subsidy on low emission vehicles. This is the radical change
which forces the Volvo automotive industry to manufacture electrified cars and attains
1

higher revenues for their vehicles brands (Wetherly, 2014). This has caused a change in
respective car manufacturing industry as the reduction in the governmental tax and
tariffs it has persuaded Volvo to introduce electrified cars rather than the high priced
fuelled cars. This has led the industry to change. Therefore, reason for adopting this
change in Volvo cars is to gain competitive advantage and effectively enhances their
brand image in the global market (Gupta, 2013).
 Economic Factors- This factors are considered with the economic condition of the
country. It determines that when the economic conditions within country are not
favourable it will lead to lesser demands as well leads to increase in taxes in high priced
fuel vehicles. This forces the Volvo to switch towards electrified cars which will cost
effective for the buyers within Europe and leads to continuous sales even at the time of
economic crisis (Jun, 2012). As earlier Volvo focused on producing high priced cars so
as to target only the upper segment of the customers and therefore attains maximum
profitability but due to changes in the economic conditions of Europe and UK, it has
forced Volvo to introduce change in its business and therefore has lead towards adopting
the change of introducing hybrid cars in the market, which will be low priced and will be
affordable for all the customers and thereby would aid competitive advantage to the firm.
 Social factors- This factors is concerned to changing demand and requirement of the
consumers in the auto mobile industry which is concerned to increase environmental
concerns, attitudes and emphasis of the customers to buy electrified cars. Therefore, this
persuades Volvo car manufacturing industry to provide electric cars and the eliminates
the use of fuel as required in traditional vehicle. This electric cards will be cheaper than
the traditional cars and will attract lager number of customer and will lead company to
rise profitability and will be able to sustain in this competitive market place. When the
products are manufactured and provided to the customers as per their requirement, it will
enhance brand image of the company and will attract larger customers towards the
electric car manufacturing company (Kim, Rasouli and Timmermans, 2014).
 Technological Factors- With the rapid increase in the technology, it had created fierce
competition for Volvo to adopt to the latest technological trends so as to satisfy the needs
of the target market. With this company has announced to focus on the electrification at
the core of its future business and will lead towards the invention of internal combustion
2

engine so as to meet the increasing demand of the electrified cars. This will benefit the
company to gain competitive advantage and maintain its sustainability for the long run.
Adopting this change is necessary for Volvo so as to compete effectively with other
electric car manufacturing companies and would maintain its sustainability in the
dynamic environment for the long time period.
 Legal Factors- It is considered with the legal issues and the legislations which makes
difficulty for the auto mobile industry to provide cars in different international market.
As with the increased rules of exporting the vehicles oversees, Volvo has to face stricter
rules related to emission controls, apart from these there are various environmental laws
which Volvo has to oblige while manufacturing and providing cars in the oversees
market. Therefore, this creates an opportunity with the company to switch towards
electrical automation and produces hybrid vehicles in the market, this will allow the
respective company to attain higher sales and profitability and therefore effectively able
to sustain in the global market (Lewis and et.al., 2017).
 Environmental Factors- This factor focusses on the environment concern of the
customers towards buying auto mobiles. This has forces car manufacturing industry to
reduce carbon emissions in vehicles and provide eco-friendly cars. Therefore, vehicles
which emit low carbon emissions receives higher tax subsidies by the government and
therefore attracts larger number of customers oversees and can enhance their profit
margins at the larger extent. This is the major factor of change which is forcing the
Volvo car manufacturing industry to switch towards the electrified vehicles and thus
meets the increasing demand of the customer and therefore able to survive effectively for
the long term in the global business environment (Parhizgar, 2013).
These are the major reasons for the change within the specific auto mobile industry as
with the increase in the demand of electric cars and growing concern of the people towards eco-
friendly cars is forcing Volvo car manufacturing company to provide electric cards to the
customers and gain competitive advantage over the rival companies. Moreover, these are the
recent trends which are forcing the Volvo car manufacturing company to adopt to the change of
introducing electric motors in cars and gains competitive benefits. Moro over with the increasing
demand of electrified vehicles there will be radical change in the auto mobile organisations in the
future time period is that large car manufacturing company will manufacture all the vehicles
3

which are hybrid in nature so as to reduce the pollution in the environment as well as will allow
the company to maximise its sales and profit margins as compared to traditionally producing
high priced fuelled cars which only attracts upper segment of the customers.
b) Identify new and emerging business opportunities that the production and marketing of
electric cars may present to entrepreneurs and business executives
In order to survive and sustain in this competitive business environment it is necessary
for the business organisations to determine the emerging opportunities that can be adopted by the
company so as to succeed in the competitive market place in a better manner (Shenkar, Luo and
Chi, 2014). Therefore, in order to determine the available opportunities, it is necessary for the
management at Volvo to analyse the industry's environment and take proper actions and
decisions so as to avail the global opportunities. For this Porters five forces model should be
determined which is described as follows-
Porters Five Forces Model-
It is a tool for analysing the level of competition of the business and also helps in
determining the competitive intensity and attractiveness of the industry in terms of its
profitability. It analyses five competitive forces that shapes every industry according to the
recent trends in the global business environment. This model will also help in determining the
available opportunities from the industry and helps the respective company towards attaining the
competitive advantage.
As the auto mobile industry is the largest and the biggest industry, but there is some
uncertainty related to how electric vehicles will affect the performance or will provide an
opportunity to the entrepreneurs or the business executives to manage and develop the business
in a proper manner. It is discussed beneath-
 Threat of new entrants- This factor is considered with determining the threat to the
Volvo car manufacturing industry by the entry of the new firms. As with the increase in
the demand of the customers towards hybrid cars, as well as growing concern for them
towards protecting the environment and uses environmental friendly products. This
forces the auto mobiles industry to introduce and adopt the change by using electric
motors in their cars and meets the demands of the customer in an appropriate manner.
Therefore, this provides an opportunity to the entrepreneurs to start up the new business
or the company of providing electric cars to the customers and therefore enhance its
4

profitability level at the larger extent. Moreover, setting up of this new business also
requires much of investment by the entrepreneurs. Moreover, it can be said that there is
moderate threat of new entrants within the specific industry and hence provides
opportunities to the various entrepreneurs towards setting up the business (Simic and
Dimitrijevic, 2012).
 Bargaining Power of suppliers- This factors determines that when there are large
number of suppliers regarding the availability of the raw materials that the firm’s needs,
then there will be low bargaining power of suppliers. As the specific industry which
consist of various companies is introducing electric cars, hence requires electric motor as
the major component so as to successfully manufacture its products, but in context to this
there are limited number of suppliers for this electric motors. This led towards the
increase of the bargaining power of suppliers. Therefore, it can also be analysed that this
also provides opportunity to the entrepreneurs to start a business of providing electric
motors to the large companies at an effective price, this will allow the entrepreneurs to
manage and develop their business in a proper manner.
 Bargaining power of Buyers- When there are large number of suppliers of the electric
cars there will high bargaining power of the buyers, I.e. they can easily switch from one
seller to another. Price sensitivity is the major factor which influences high bargaining
power of the customer. Even though there are various companies which are providing
electric vehicles to the customer such as Tesla Model, Jaguar’s I-Pace and many other
companies which are providing range of electric vehicles and this causes the buyers their
switching cost. Therefore, bargaining power of the buyers within the industry is
significant and provides opportunities to the entrepreneurs to provide advanced range of
electric vehicles and easily attracts the customers towards the purpose of increasing
profitability (Tregear, 2015).
 Intensity of competition- It is considered with the intensity of the competition within the
auto mobile industry. Though there are many companies which have announced their
strategy to increase their focus towards the mass development of electric vehicles, such as
companies like GM, BMW, Jaguar, Nissan and many other brand. This causes stiff
competition among the existing companies within the auto mobile industry. With this it
5

faces difficulty for the entrepreneurs to enter into this business where is already existing
stiff competition among the companies.
 Threat of substitute products- This force determines that if there are any substitute
products of electric cars available in the market. Substitute products of the auto mobile
industry generally includes public transportation facilities which is easily affordable for
all the customers. Therefore, this substitute product is not used by all the customers,
therefore there is less risk of substitute products towards the electric vehicles in the auto
mobile industry (Weiss and et.al., 2012).
From the above industry analysis, it has been analysed that there is high level of
competition within the electric car manufacturing company and thus provides lesser
opportunities with the entrepreneurs to develop and manage their business in the effective
manner. Moreover, there are lesser suppliers of electric motors in the company which provides
various opportunities for the entrepreneurs to start and develop the business in the effective
manner. In addition to this there is a stiff competition between the companies, but in order to
gain the competitive advantage new entrants can come up with new innovative technologies so
as to effectively sustain in the global business environment.
There are various opportunities available for an entrepreneur and other people who are
connected to the production and marketing of electric cars. These opportunities drives business
organisations in manufacturing more electric cards instead of traditional cards. In this context,
one opportunity is providing Public EV chargers as increasing availability of EV chargers
increases electric mobility due to which more electric cars and vehicles will be more in
demanded by the customers. In this context, installation of global EV charging stations
encourage people to purchase more electric cars so that they can manufacture in abundant in
future time period. Another opportunity that Volvo have is making partnership of EV charging
stations with restaurants and cafes. The reason behind this is that it takes approx. 30 minutes a
charger a vehicle electrically thus requires support from cafes and restaurants at the time of
discharge of vehicle during stay of drivers at such places for their own purposes. This will be
grabbing the attention of customers which in results increasing sales of an organisation. Apart
from this, Other than this, entrepreneurs with the purpose of marketing more electric cars have
opportunity linked with battery disposal services. After utilising lithium batteries, it is crucial to
6

dispose them in a proper manner. Special service linked with battery disposing is another
business opportunity linked to electric cars.
Critical evaluation of businesses linked with worldwide automotive industry that is not profitable
in long run investment
At present, there are few businesses which are connected with global automotive industry
but their business can be failed in future if auto-mobile sector moves towards manufacturing
electric cards instead of fuel based cars. One of the business that goes downturn is petrol stations
which are established with a main purpose of refilling tanks of traditional vehicles. Apart from
this, businesses connected with mining and extraction may also faces losses in future time period
due to declining in demand of fossil fuels. This will negatively impact the extraction, refining
and mining businesses. In the present scenario, the businesses are generating huge profits due to
high demand of minerals and fuels to filling vehicles. If electric cars enter into the market, then
the people do not require petrol or diesel for travelling purpose. Because of this, investing
amount in Auto-mobile sector will not be profitable in upcoming next years.
CONCLUSION
From the above report it has been analysed that in order to expand its business or enter
towards manufacturing a new product, it becomes essential for the company to analyse the
demands and requirement of the customer in a proper manner. This will allow business
organisations to maintain its sustainability at the global level and therefore it improves their
profitability at the global level. PESTLE analysis is the effective model adopted by the
organisations so as to analyse the forces which are shaping the business environment of the
respective industry and with the help of Porters five forces model it help in determining the
available opportunities which can be adopted by the entrepreneurs, which would help them
towards managing and developing the business in a systematic way.
7

REFFERENCES
Books and Journals
Bartlett, C.A., Doz, Y. and Hedlund, G., 2013. Managing the Global Firm (RLE International
Business). Routledge.
Gupta, A., 2013. Environment & PEST analysis: an approach to the external business
environment. International Journal of Modern Social Sciences. 2(1). pp.34-43.
Jun, S.P., 2012. A comparative study of hype cycles among actors within the socio-technical
system: With a focus on the case study of hybrid cars. Technological Forecasting and
Social Change. 79(8). pp.1413-1430.
Kim, J., Rasouli, S. and Timmermans, H., 2014. Expanding scope of hybrid choice models
allowing for mixture of social influences and latent attitudes: Application to intended
purchase of electric cars. Transportation research part A: policy and practice. 69.
pp.71-85.
Lewis and et.al., 2017. Design+ environment: a global guide to designing greener goods.
Routledge.
8

Parhizgar, K.D., 2013. Multicultural behavior and global business environments. Routledge.
Shenkar, O., Luo, Y. and Chi, T., 2014. International business. Routledge.
Simic, V. and Dimitrijevic, B., 2012. Production planning for vehicle recycling factories in the
EU legislative and global business environments. Resources, Conservation and
Recycling. 60. pp.78-88.
Tregear, R., 2015. Business process standardization. In Handbook on Business Process
Management 2 (pp. 421-441). Springer, Berlin, Heidelberg.
Weiss and et.al., 2012. On the electrification of road transport-Learning rates and price forecasts
for hybrid-electric and battery-electric vehicles. Energy Policy. 48. pp.374-393.
Wetherly, P., 2014. The business environment: themes and issues in a globalizing world. Oxford
University Press.
9