VOLVO TRUCKS :

PENETRATING THE US

MARKET

TEAM MEMBERS:

Aamir Ansari

SMBA13074

Himanshu Saigal

SMBA13021

Krishna Priya

SMBA13027

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.

Case Contents

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.

Volvo Introduction

Leader in World's heavy

truck industry.

Producing high reliability.

Safety trucks for business

users, individuals and

households.

Establishing higher

throughout the value chain.

Mission

To break 12% market share

barrier on the way towards

20%.

To raise profitability.

Goals

World truck industry

Heavy weight

GVW class 8

or over 15 tons

Medium truck

GVW class 5-7

Light weight truck

GVW 1-4

Europe

Cab – over

trucks

US

Conventional

Trucks

Trucking Industry In Europe/US

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

PEST Factors

Political and Legal environment.

Restriction on truck length.

Restriction on weight.

Continued…

Freightliner (Daimler Benz)

Paccar (kenworth and

peterbilt)

Navistar (International

brand)

Mack (RVI)

Daimler Benz

Renault (RVI)

Scania

MAN

Iveco

DAF

US Europe

Major Players

Threat of new entrants.

Bargaining power of suppliers.

Bargaining power of buyers.

Threat of substitute products.

Rivalry among existing firms(competitors).

Porters Five Forces Model

Volvo Truck GroupUS Market

• Entered market in 1975 with medium segmentTrucks.

• Channel: Existing Dealer Network fordistribution of Volvo passenger cars.

• 1978-Teamed up with Freightliner for USdistribution and service of Volvo trucks.

• 1979- Freightliner goes up for sale due toMarket decline

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.

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-Volvo White Introduced the Integral sleeper.

1983-Introduced Volvo “slash” on front of the truck,maintaining the White/Auto car nameplates.

Closed Whites ‘ Utah Assembly Plant and moved toVirginia.

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.

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(Volvo White)

External Fit

Distribution

Independent Companies and Small Chains

Existing Distributors of Volvo and White Motor Corp.

Manufacturing/Assemblies

Cab Trucks Manufacturing in Ohio

Volvo White Assembly Plant in Virginia

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.

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.

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.

Volvo FSA’s: International Strategy

Technology: Efficient Engines and Driven components

Research and Development

Brand name-Volvo

Volvo Sales & Production

Even though major production was in the Europe, the

Revenues from Sales came from US.

Market Growth

Volvo in U.S

PERIODS Market Share

(%)

Market

Growth (%)

1996 9 - 18

1998 12 39

2000 11 - 13

•Very volatile market

•5th rank in U.S ( Dominated by competitors )

Market share

Market share

Market share

ANSWERS TO CASE

QUESTIONS ??

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

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 .

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.

Volvo( only 12%

market share)

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 .

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.

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.

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.

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.

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/TruckingDeregulation.html

http://www.youtube.com/watch?v=dMiKvLbYP

PE - THIS VIDEO COVERS ALL THE

FEATURES OF THE VOLVO TRUCKS

THANK YOU