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VOLVO TRUCKS : PENETRATING THE US MARKET
1. VOLVO TRUCKS :
PENETRATING THE US
MARKET
TEAM MEMBERS:
Aamir Ansari
SMBA13074
Himanshu Saigal
SMBA13021
Krishna Priya
SMBA13027
2. Case Contents
Volvo introduction.
Mission / Goals.
Trucking industry.
US / European market.
Major Players
Environmental factors.
Volvo Truck Group
Vertical/Horizontal growth
Volvo Business Approaches.
Volvo Market Growth/Decline
Case Questions
Recommendation.
3. Volvo Introduction
Global truck manufacturer based in Gothenburg,
Sweden.
World’s second largest heavy duty brand.
Volvo manufactured its first automobiles in 1927.
Volvo Group Trucks company include Renault
Trucks, Mack Trucks and UD Trucks (Nissan Diesel
Trucks).
Its main parts distribution centre is located in
Ghent, Belgium.
Among some smaller facilities Volvo has assembly
plants in Sweden (Gothenburg - also the Head
Office), Belgium, USA, Brazil, South Africa,
Australia, China, India and Russia, making it a truly
global producer.
4.
5. Mission
Leader in World's heavy
truck industry.
Producing high reliability.
Safety trucks for business
users, individuals and
households.
Establishing higher
throughout the value chain.
Goals
To break 12% market share
barrier on the way towards
20%.
To raise profitability.
6. World truck industry
Heavy weight
GVW class 8
or over 15 tons
Medium truck
GVW class 5-7
Light weight truck
GVW 1-4
8. PEST Factors
Economic environment:
like cyclical industry.
Increasing cost of other factors.
Increasing crude oil price.
Social environment:
US market dominated by conventional trucks.
US have independent companies with small chains
selling different brands
9. Continued…
Political and Legal environment.
Restriction on truck length.
Restriction on weight.
10. US Europe
Freightliner (Daimler Benz)
Paccar (kenworth and
peterbilt)
Navistar (International
brand)
Mack (RVI)
Daimler Benz
Renault (RVI)
Scania
MAN
Iveco
DAF
Major Players
11. Porters Five Forces Model
Threat of new entrants.
Bargaining power of suppliers.
Bargaining power of buyers.
Threat of substitute products.
Rivalry among existing firms(competitors).
12. Volvo Truck Group
US Market
• Entered market in 1975 with medium segment
Trucks.
• Channel: Existing Dealer Network for
distribution of Volvo passenger cars.
• 1978-Teamed up with Freightliner for US
distribution and service of Volvo trucks.
• 1979- Freightliner goes up for sale due to
Market decline
13. Vertical Growth
Backward integration:
Developed and produced major components including
engines.
Established Assemblies in different parts of US.
Forward Integration:
No Exclusive Distributors
Mainly sold through dealers.
14. Horizontal growth
ACQUISITIONS
White Motor Corporation
1981- Acquired white motor corporation for $70million.
Strategic Decisions
1. Improve Dealer and Customer relations.
2. White’s New Family program:
1981-VolvoWhite Introduced the Integral sleeper.
1983-Introduced Volvo “slash” on front of the truck,
maintaining theWhite/Auto car nameplates.
Closed Whites ‘ Utah Assembly Plant and moved to
Virginia.
15. Horizontal growth
ACQUISITIONS
GM heavy Truck Corporation
In 1988, Volvo acquired GM’s heavy Truck Business.
Volvo Headquarters in North Carolina.
Strategic Decisions:
New Brand:WHITEGMC
Consolidated Dealer network by dropping dealers in
areas of GM and Volvo White.
Closed Michigan Plant and shifted to VWTC Facilities.
New Assembly plant in Ohio.
16. External Fit
Choice of customers:
Trucking Companies
Construction Companies Distribution Companies
Specialized Builders
Major Brigadier customers
Choice of products:
American Conventional Trucks(VN and 770 series)
Medium Distance Delivery Trucks
White GMC
Integral Sleeper(VolvoWhite)
17. External Fit
Distribution
Independent Companies and Small Chains
Existing Distributors of Volvo andWhite Motor Corp.
Manufacturing/Assemblies
Cab Trucks Manufacturing in Ohio
VolvoWhite Assembly Plant in Virginia
18. Volvo Business
Approaches
Actions to upgrade, build or acquire competitively
important resources and capabilities
o Started producing major drive-train components,
including engines and transmissions
o Product Quality and manufacturing process were at par
with industry Standards
o Safety and Environmental Performance.
o Upgraded White Production plant of Cab in Ohio and
moved Utah Assembly Plant to Virginia.
o Acquired GM’s Heavy Truck business with
manufacturing plant.
19. Volvo Business
Approaches
Managing R&D , Production, Sales and marketing,
finance etc. :
o Established Volvo truck Finance North America in 1995
o Invested $500 million in Production, marketing &
Operational Changes to launch new VN series
o Improved Communication to convey changed ownership
and better quality.
o Reconsolidation of Dealer Network into three regions
with 240 Dealerships.
o Increased Production Capacity in 1995 to support sales
of over 30000 units per year.
20. Volvo Business Approaches
Actions to Gain sales and Market Share with lower
prices on lower cost.
o Increased Proportion of Volvo Engines results in:
Higher profit on Engines
After sales Service and Spare parts Revenue be
increased
Economies of scale to reduce cost in Engines
o Modular Concept reduced the costs of warehousing,
purchasing and shipping.
o Resulted in meeting with customer demands easily.
21. Volvo FSA’s: International Strategy
Technology: Efficient Engines and Driven components
Research and Development
Brand name-Volvo
22. Volvo Sales & Production
Even though major production was in the Europe, the
Revenues from Sales came from US.
29. 1.DIFFERENCE BETWEEN US AND EUROPE TRUCK
INDUSTRY?HOW DID VOLVO HANDLE THEM ?
US EUROPE
CONVENTIONAL TYPE WAS PREFERRED
(VN,770 SERIES)
CAB OVER WAS PREFERRED
BETTER VISIBILITY
SHORTER TURNING RADIUS & OVERALL
LENGTH
(FH & FL SERIES :CAB OVER
NH : CONVENTIONAL)
GASOLINE ENGINES CONVENTIONAL ENGINES
NON EXCLUSIVE DISTRIBUTOR EXCLUSIVE DISTRIBUTOR
MORE OF ASSEMBLERS – PLATFORM
CONCEPT
DRIVE TRAIN COMPONENTS
ACQUISITION WITH WHITE MOTOR CORP
& HEAVY TRUCK DIVISION OF
GM(GENERAL MOTORS)
REMAINED AS VOLVO
DEREGULATION : NO PRICING CONTROLS
, INCREASED COMPETITION
REGULATED RULES: REGULATIONS
DIFFER IN TERMS OF TOTAL LENGTH OF
THE TRUCK AND THE ACCEPTABLE
WEIGHT OF THE TRUCK
30. HOW DID VOLVO HANDLE THEM?
Volvo was one of the leading truck manufacturers in
Europe .
They made multiple attempts to enter the US market in
1975 but failed .
Later they entered through acquisition of White motor
corporation & GM(Heavy truck division)
Volvo had only 12 % market share and profitability was
near breakeven .
Due to Deregulation they faced increased competition
from other players in the market .
31. Continued…
They made use of the:
1. Brown field Strategy & wherein Volvo tried to target
host market (US) by taking the advantage of existing
brand name & networks( through distributors).
2. Vertical FDI (extending existing business value
chain):involves high trade costs, plants enjoy
economies of scale & specialised plants.
3. Faced Challenges in terms of Insiderisation & Psychic
distance.
33. Conglomerate to Concentrate
Initially Volvo was into diversified businesses apart
from cars & truck industry , like sea foods etc .
In few years they reversed from conglomerate &
focused into their core business.
Later they adopted Concentrate strategy and expanded
their existing business across boundaries .
34. 2. Market Penetration Strategy in
US
Maintain dealership, acquisition, integration &
producing premium products.
Customer focus Strategy by improving customer &
dealer relations.
Integral sleeper vehicles( driver & sleeper
compartments).
Maintained White/Auto cars Name plate to portray US
brand.
Communication strategy to convey VWMC’s
ownership & changed quality.
35. 3. Overall Fit In Global Strategy
Acquiring GM truck business to push sales in 1988.
Introduction of Volvo financial services in 1995
focusing on flexible finance & lease options for
dealers & customers.
Invested in production , marketing for the launch of
new VN series.
Increased proportion of Volvo engines in the
market.
36. Why truck industry is slow in
globalising
1. The major player in this industry skipped large
emerging markets .
2. Large number of players outweighs market
growth-detrimental effect for pricing
3. Limitation to which the truck can be shipped
4. Commercial viability of standardised truck
across the region
5. Necessity of industrial tie ups
6. Standardised models not suitable for all
regions.
7. Manufacturers failed to contrasts market
growth vs new entrants.
37. Recommendations
Enter further into global markets such
as Asia and Africa
Collaboration with new local business
partners : local manufacturing, sales
and distribution
Provide full-service leases, finance
leases, contract maintenance
agreements and rentals.
38. References
http://www.slideshare.net/pooja5611/volvo-
15955051
http://www.irs.gov/Businesses/Trucking-Industry-
Overview---History-of-Trucking
http://www.econlib.org/library/Enc1/TruckingDeregu
lation.html
http://www.youtube.com/watch?v=dMiKvLbYP
PE - THIS VIDEO COVERS ALL THE
FEATURES OF THE VOLVO TRUCKS