Micro-Environmental Factors That Are Influencing Volvos Business and Strategy - Case Study Example

Outline and discuss the macro and micro-environmental factors that are influencing Volvo’s business and strategy The micro-environment of a company includes those elements in its environment that are in control of the company and directly influence its business. Whereas, the macro environmental factors are those that are in the external environment of the company and are not a part of the company’s day-to-day operations. Micro environmental factors Following are the key micro environmental factors that influence Volvo’s business and strategy: Product – Most importantly, it depends on the type of cars that Volvo manufactures that will determine its strategy. Volvo has a brand name for big estate cars that focus on safety and are offered at a premium price. Customers – The main target market for Volvo had been middle aged men with a family. However, Volvo had recently included smaller cars in its product offering to cater to the young, independent individuals Competitors – Competition for Volvo includes Toyota, Lexus, Audi, Saab, Mercedes-Benz, and BMW. These companies have shown certain trends in their strategy adoption over the years. They have increased their product offerings and introduced hybrid cars in their product lines. Macro environmental factors Following are the key macro environmental factors that influence Volvos business: Political and Legal – There has been a drastic increase in the government regulations in terms of safety and environmental concerns over the years. Because of global warming, government has introduced tax structures on automotive trade that penalizes gas guzzlers and provides incentives to purchases of hybrid cars. Economic – Global economy is experiencing one of the worst recessions in history. Sales for Volvo are decreasing rapidly. Also, because of reduced disposable income for people and increasing fuel prices, there is an overall reduction in automotive sales, and people are either switching to more fuel efficient cars. Socio-cultural – The demographics of automotive customers are changing. The target market of Volvo is decreasing because lesser are people are getting married, or choosing to have children. Also, people’s habits are changing. Customers are adopting more sensible options with better fuel consumption and reliability as the main focus. Technological – Car manufacturers are constantly using technology to attain fuel efficiency and reduce CO2 emission to more fuel efficient engines. Conduct a SWOT Analysis on Volvo Cars Strengths Volvo is owned by Ford Motor Company, which gives it access to immense resources in terms of research and development and operational capacity. These can be used by Volvo to provide technologically advanced cars to its customers in every aspect. The much broader clientele of Ford can be used to increase sales. Volvo has a strong brand name. It has operations in major parts of the world Weaknesses Decrease in demand and sales It’s brand image of big estate cars will not be successful in today’s environment Opportunities A developing Asian economy can be a good target to increase revenue for the company Many of Volvo’s competitors have experienced a great decrease in sales, and some have filed for bankruptcy as well. Volvo should see this as an opportunity to increase its market share and revenue Increasing safety concerns should be used by Volvo to highlight its history of safety in the minds of the customers. Threats The increasing product offerings from Volvos main competition in Europe, such as BMW, Audi, Mercedes Benz, would impact Volvo’s sales in Europe in the future. Free Trade policies in different regions of the world will impact Volvo’s sales and cheaper, more reliable Japanese cars would penetrate into Volvo’s customer base. Most Volvo cars for the United States market are manufactured in Europe, and exported to United States. This makes prices of the cars very vulnerable to currency exchange rates. Government regulations against cars with high CO2 emissions. Based on your previous analysis, outline the different strategic options available to Volvo Auto Division and discuss their advantages and disadvantages. Volvo should focus on its strengths, and devise strategies to make use of the opportunities present to it in today’s environment. Following are the available strategic options available to Volvo: Volvo should establish manufacturing facilities in United States instead of importing the vehicles from Europe. They should use Ford’s operational capacity to set up manufacturing facilities of their own, so that competitive prices could be set up against the Japanese brands. Volvo should use its well established brand name in today’s conditions to show the customers how Volvo is the right choice for them. This would help Volvo increase its market share as other companies strive to maintain their own. It should learn from its competition. One of the main reasons for Toyota’s success in these tough economic conditions is its Just in Time inventory approach. Volvo should look into similar strategies so that it can use its resources in the most efficient manner. What do you believe to be the best option available? Provide a course of action and provide reasons for your answer. The first thing that Volvo must do is align its vision with its mission statement. A “premium car brand” is different from an “exciting car for modern families”. Mercedes Benz, for example, focuses on luxury as its core value. Similarly, Volvo must narrow down its positioning goal. Because of globalization, coupled with a state of economic turmoil, Volvo must focus on its brand image and core values of “Safety”, instead of trying out everything, and use it to distinguish itself from the fierce competition. Moreover charge a premium price, Volvo must also incorporate “Luxury” into its positioning goal. Therefore, overall, the company should focus all its resources on positioning the brand as a safe, luxury car brand. This means that experiments, such as the S30, should be discontinued because it dilutes the brand values of the company. The company’s initiative of establishing a museum and that of DRIVe are great steps towards achieving the proposed objectives. The former will aid in injecting the brand value of the company in the minds of the customers. In today’s tough environment, this is extremely important to keep the customers engaged with the brand. DRIVe, on the other hand, focuses on the safety/environment part of the goal. All these steps must be promoted heavily amongst the target market so as to snatch as much market share from the competition as possible, so when the global economy starts to boom, the company can reap the benefits of this strategy to the maximum. Works Cited Caroll, C. (2010). Vulnerable Volvo - Can the Volvo Brand Succeed in the New Competitive Landscape. Retrieved from University of Limerick. Read More