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Volvo Trucks (A)
Transcript of Volvo Trucks (A)
Analysis Recommendations Why didn't Volvo Succeed In US Market Entry Volvo Trucks (A):
Penetrating the U.S. Market
Case Analysis High speed rail is a type of passenger rail system significantly faster than traditional rail systems.
•They are used all over Europe, and places like China
•They are being developed so that some trains reach speeds of over 300km/h
•Very safe because of a predictable course, and it lowers the possibility of collisions
•Less weather related delays than airplanes
•Produce less noise
•Shortens trip time
•Reduce dependence on oil
•High speed rail is environmentally friendly and will cut down carbon emissions What alternative forms of transportation would you recommend? (think about social, environmental, economical issues) High Speed Rail System Teleconferencing
Teleconferencing is a live exchange of information between several people
•It would be a positive alternative for flying for business people
•With technology being developed it is getting easier to communicate and share data
•Meetings could be held between two parties without having to leave the city Reasons: Volvo Trucks did not apply the right market entry strategy to penetrate the U.S. market.
Volvo Trucks was not keen in choosing its partners as it basically targeted the weak trucking companies in the United States.
Volvo went forward and acquired the White Motor Corporation, a bankrupt truck manufacturer in the United States. It also acquired General Motor’s heavy truck division, which apparently was also performing poorly (3 percent of the total market share).
Despite the fact that forming alliances and acquisitions is one of the major strategies that could be used to penetrate into newer markets, its success is only dependent on the correct choice of partners and companies to acquire
This can be measured in terms of performance and reputation. It was difficult for Volvo to rise up and control a significant proportion of this market considering the fact that the companies it acquired held only a small proportion of the overall market share.
Volvo Trucks is an established global company which has all the capacity to successfully penetrate into the US market.
It has made successful entries into other markets and thus it just need an appropriate Market Entry Strategy Other Considerations Coordination
Common Brand Name and Product Development
Dispersed for adaptation of local failure, regionalization of processing and assembling activities
Developing more fuel efficient vehicles
Provide full-service leases, finance leases , contract maintenance agreements and rentals
Developing Customer Care Centers The Industry Organization Model The Resource Based Model Listen up Folks! Integration
Horizontal Volvo US Penetration Volvo Porters Porters Five
Forces Potential Entrants Rivalry Among Competitors Substitutes Bargaining Power of Buyers Bargaining Power Of Suppliers Political Economic Sociocultural CORE VALUES:
“Quality, safety and environmental care are the core values of Volvo Trucks, each reflected in how we develop our products, how we act in society, and how we approach our customers and employees” Today, the Volvo Group is one of the world’s leading manufacturers of trucks, buses, construction equipment and marine and industrial engines. The company headquartered in Gothenburg, Sweden.
While the Volvo Group built its first truck in Sweden in 1928, Volvo first entered the North American truck market in 1959.
The Volvo Group, which employs about 115,000 people, has production facilities in 19 countries and sells its products in more than 190 markets.
In 2012, the Volvo Group’s sales amounted to $45 billion. Company Overview Volvo in 2000s The economics of scale and experience effects, product and brand identification, capital requirements and switching costs, proprietary knowledge are high.
The control of distributions and control of access to raw materials are medium to high.
The prominence of existing brands in the United States.
American drivers are loyal to a few well-established domestic brands.
Volvo’s brand in the United States is primarily related to cars, they have little if any reputation concerning the large truck market. Indirect: other means of transport
Direct: competitors trucks
fuel- efficient, innovation
high technology and performance, macho image
durability reputation, more innovative
one of the most trusted, very international JIT delivery of components
Most manufacturers assembler on their own buying components from outside suppliers
Some companies even produced their engines, like Mack
Less technical sophisticated components come from outside the company On one hand, buyer concentration is high, they purchase in big volume and infrequently with good information, these mean that buyers have high bargaining power.
On the other hand, buyer switching costs are high, theirs ability to integrate backwards is low and the close-substitute products are unavailable since the differentiation of suppliers’ product is high, this lowers their bargaining power. Dominant Business Other Investments Cyclical Industry
Increases in Oil prices
Engine development costs for higher fuel economy U.S. market was dominated by conventional trucks whereas Europe favored the cab-over design
in Us independent/diversified distributors while in Europe exclusive distributors Technological Mergers/Acquisitions Medium/Low Medium/Low Moderate High Questions? Truck Length Restrictions in US
Truck Weight Limits
Industry Deregulation Major Issues to address Recommendations Different design preferences
Different restriction and regulation
Different economic status quo
Different logistic Share knowledge Increase Market Power &
Bargaining Power with Suppliers Bargaining Power with Supplier (Vertical Movement on Supply Chain) Collaboration with local business partners
Sales and Distribution
Decentralize Irakli Chlachidze
David Berdzenishvili Revenue: Geography Revenue: End Markets Organizational Structure Increase in Engine development costs
American trucks have unsynchronized gearboxes while Europeans prefer fully synchronized US Europe Threat of Substitute Product or Service
Less tendency to change
method Higher tendency to change because of more comprehensive train system Low US Europe Bargaining Power of Supplier Powerful producers
for truck components Most core parts manufactured in-house. US US Europe Bargaining Power of Buyers Deregulation of trucking market
and Consolidation Fluctuation of sales
of the new trucks The industry is in its maturity stage and the industry growth rate is low
High high fixed costs, exit barriers and strategic stakes
The heavy truck industry also has high asset specialization and high barriers to the exiting business Europe US Asia Acquisition
WHITE MOTOR (1981)
GM heavy truck division (1988)
North America Finance (1995) Maturity Maintain presence