Business the second largest manufacturer of heavy-duty trucks

Business Structure of
the Volvo Company

The Volvo group is a
Sweden based company with branches all over the world. Its main
headquarters are In Gothenburg. The company specializes in the
distribution of buses trucks and the construction equipment. However,
it extends its services to include supplying clients with marine and
industrial drive systems. They also offer financial services. The
mode of operation and their scale made them be rated as the second
largest manufacturer of heavy-duty trucks worldwide. The manufacturer
of the luxury cars, Volvo Cars, can be easily be mistaken for the
Volvo group. However, they are different in spite of both having the
same location for headquarters, sharing the same name and having the
same logo (Munck-Ulfsfält et al. 2003). The company is the best case
scenario because it started as a small company that defied all odds
to become a multinational company worth billions of shillings. It
enters the Stockholm Stock Exchange in 1935, making it a suitable
enterprise to analyze its market trends, its competitors and the
changes they have done for them to be a viable business to attract
investors.There only difference is that the Volvo cars are owned
by a Chinese multinational company called Geely Holding Group. They
jointly run a Volvo museum.

We Will Write a Custom Essay Specifically
For You For Only $13.90/page!


order now

History of the Volvo
Company

The Volvo was formed in
1915 as a branch of the SKF enterprises, a company that specialized
in manufacturing ball bearing. Volvo is a Swedish name meaning “I
roll”, an inspiration from the ball bearing specialty. The Volvo
group and the Volvo Cars came to be officially recognized as
independent in 1927 when the first car was produced (Nordblom, 2006).
That was after testing with ten prototypes. It was the Volvo OV 4
series and was designed in a factory in Hesingen, Gothenburg. The
manufacture of the car was pioneered by Assar Gabrielsson, an SKF
sales manager by then and Gustav Larson. Gustav was an engineer at
KTH Royal Institute of Technology. Their agenda was to make cars with
a capacity to use the rough roads and bear with
the low temperatures experienced in Sweden. The AB Volvo built two
hundred and eighty cars that year.The first truck was produced in
1928, and that attracted investors from around the country. By 1930,
the AB Volvo company was selling more than five hundred cars
annually, and some trucks were exported other countries in the
European continent. When the company started trading on the stock
exchange, SKF sold all its shares.

In
1977, Volvo tried to merge with Saab-Scania, but they rejected. Hat
saw them partnering with Renault, a French-based manufacturer. They
collaborated in buying, carrying out research and development, and
quality control analysis. Renault assisted Volvo with the entry
level, and in return, it would help its partner technological
know-know in the upper segments. However, the alliance did
disagreement that arose as a result of a deal the two companies were
to sign (Munck-Ulfsfält et al. 2003). The merger was dissolved in
1994.

Financial performance
of Volvo

Volvo has one of the
largest production of trucks, buses and construction tools. Using its
assembly unit in North America, it makes huge rigs. It has also
invested in Mack tracks of North America. Back in Europe, it has
shares in the Renault trucks (Viaene, 2008). The ab Volvo has
production facilities in about twenty countries.

Porter’s five
forces analysisCompetition:
The Volvo Company face few competition from other companies that make
the heavy duty trucks. Apart from that, some countries give the local
companies an incentive that will enable them to compete with the
international companies.

Potential
of new entrants into the industry: there is a low chance of other
industries entering into the automotive industry because of the high
competition it will face from the existing companies and the
economies of scale they already enjoy.

Power
of suppliers: the suppliers usually enter into a contract with the
suppliers and sometimes buy the suppliers. Also, the Volvo group does
not depend on one supplier and that reduces the chance of one
supplier having a strong grip on the companies performance.

Power
of customers: the market for Volvo is concentrated in Europe, North
America and now they are venturing into Asia. These areas have people
whose standards of living are good. Therefore, they have a good
purchasing power.

Threat of substitute products: the Volvo produces engines that are
exclusively designed for their cars. Therefore engines made by other
companies do not pose a threat.

STRATEGYThe
stays ahead in their field of expertise, beating other global
companies by understanding the customers’ challenges and
preferences. Having understood that, they make products that would
fit them. They are also concerned about the value the product is
going to give to the customers or how the product of going to help
them regarding expense reduction. That framework forms the foundation
of their strategy. The company aims at making Volvo a global
heavy-duty truck brand. Of late the sales of the Renault trucks and
Mack and UD have gone a notch lower. Since the Volvo Group has shares
in it, it aims at resuscitating them.The company faces intense
competition from other companies in the Asian continent. The Volvo
Group has embarked on forming an assembly unit in India and China.
These two plants will help reach the continent better because they
will be able to identify the challenges in those regions hence, come
up with customized types of equipment.Another way the
multinational is using to stay ahead of the game is developing
brand-specific sales operations (Viaene, 2008). Through this
strategy, they want to improve their customer service and their
retail activities and also make sure that they make quick decisions
and are closer to their prospective customers. Each brand under the
company’s name has the responsibility to customize their services
and are solely accountable for the profits they make.The company
uses a highly advanced technology called Volvo Production System
which helps in the purchasing and manufacturing activities, examine
the quality and lead of R operations. The system was designed
to ensure continuous improvement in product development, production
administration and sales. The leverage group assets the company has
in non-truck businesses help in creating more revenue, partnerships
and the company stay updated on technology. Products produced by the
company are usually designed commonly, and the technology is mostly
similar. That is because they are made using a modulated concept, and
the interfaces are standard. At the core of this strategy, the
group’s resources such as the electronics and transmissions are
used.The company aims at revitalizing the five pillars that
characterize their culture: Customer Success, Trust, Passion, Change
and Performance. A solid culture helps in deepening the interactions
among workers and with the clients.

Product development

For the company to still
make profits, a lot of funds are set aside for research which in the
long run add value to a product. Experts with information about the
products and services and their demand in the market are hired to
create value (Thompson & Wallace, 1996). The clients play the
center role in the process because of their opinions. The experts
customize the products based on their demands. They are invited to
take a look at various parts of a vehicle or machine and then they
are asked to comment. When the changes are made, they are again
invited to test the new products. Since their demands may vary from
to time, it means that there is a continuous search for improving the
services and products and always embracing new technology for new
markets. Several factors are considered during the value addition
process such as financial, quality and reliability.The
developments are mainly concentrated around fuel efficiency,
productivity, safety, the driver environment and up-time because they
boost the profit the customer gets from the vehicle. However, the
future company improvements would be automating and elector-mobility.
This technology is susceptible to cybersecurity. Therefore the Volvo
Group is encouraging progress in data privacy and reliable
communication protocols before they go full swing into automating
their cars.

Production and
logistics

The logistics system is
highly equipped and advanced to meet high-quality standards, lead
times, and deliver on time and ensure the workforce is healthy, and
safe while in the manufacturing plants (Thompson & Wallace,
1996). Some of the industrial facilities for trucks are labor
intensive while others are capital intensive. The component factories
offer services worldwide but for the assembly plants, they are
located near the end-markets for the vehicles to be delivered on
time, and it also allows for customization. For example in Europe,
the Volvo trucks have been restructured until I have gotten the right
balance and size suitable for the European population.

Retail and services

The various brands within
the Volvo Group occasionally organize for workshops and offer
maintenance services as indicated in the contract with the customers.
The network of skilled technicians working for the company keeps the
customer updated on when their car or equipment will be due for
service and also the cost of maintenance and repairs. Whenever the
customers need help in their language, the roadside assistance can be
offered.The sales of spare parts and repair services help to
balance the fluctuations experienced in the sales department. In
2016, the repair services accounted for twenty-two percent of the
Volvo Group’s net sales. The company also keeps the customers
updated on things like marketing, the product and sales details and
that helps them make a well-informed decision about the Volvo
merchandise.The company also encourages sharing of best practices
and provides a platform where people can learn more about their
products through competitions. The Volvo International Service
Training Award (VISTA), is the most significant competition in the
world for service personnel. Through the competition, the
participants get to know and improve their ability to cooperate. In
the long run, those factors improve the services given to the
customer and it ultimately, customer satisfaction. Other competitions
such as the Volvo Construction Equipment Global Masters gather the
best technicians from their plants around the world. It gauges the
technical skills of the mechanics and spare part personnel.

SWOT ANALYSIS

STRENGTH

The Volvo group is a large
multinational with investments in real estate. The amount of profits
they get annually is large enough to allow them to take care of their
creditors and even save some money for future research and disaster
management.Innovation culture of the company makes it a suitable
enterprise for investment. They have highly skilled experts that
analyze the market trends and foretell the future of the automobile
industry. The hardware and software for their information system are
unique and customized to meet their needs.The
size of the company makes it enjoy the economies of scale. It is a
multinationals company with assemblies in more than 19 countries.
Their size helps them get goods and services from their suppliers at
a subsidized rate. That indirectly influences the cost of the
machines and trucks they produce. The
quality of the goods and services they give and the advertisement the
company has invested in, has earned them loyalty from the customers
worldwide. With the customer being the center of attention, they
ensure that their trucks and machines are suitable for a particular
region and that the customer reaps maximum benefit from them.

WEAKNESS

The
Volvo Company can be divided into two: the business units and the
business areas (Ellram & Cooper, 1993)). The business units
generate revenue while the units are the support units. For example,
the Volvo information technology (Volvo IT) supports business unit
for technology. The company’s focus is working with other interest
groups to improve the transport industry. Most of the attention for
improvement is strained on improving the IT infrastructure. However,
there are challenges.
The
major components are the computer hardware and the enterprise
software application. However necessary they are to the information
technology infrastructure, they are highly risky for Volvo to fully
depend on them. This is because they are platforms for storing and
retrieving essential data. In case of a systematic problem occurring,
the effects can be felt in the whole company.Another problem is
the legacy information system. This is systems that are hard to
modify, change or evolve because they require a lot of capital to
replace or redesign. Legacy information systems can also be a product
of a merger or acquisition of a different enterprise. The Volvo group
has acquired a lot of small business in the past. Legal information
systems have the potential of making the company continue using
obsolete hardware. That derails the chances of improving the output
production or adding value to the products. In most cases, old
technologies usually occupy a big space, and therefore, space would
be poorly under-utilized. The chances of other competitors getting an
edge over the company are high.Another problem is that the
software can be expensive to maintain (Viaene, 2008). Old technology
means that the speed and capacity of the software infrastructure are
less than the current one and it may require a lot of power input,
making it expensive to maintain. Some of the legal information
systems do not allow any room for extension. That can hamper the
smooth movement of information or manufacturing processes. That means
that a more extended method would have to be used and as a result, a
lot of time would be wasted. At times the system cannot be integrated
with other systems. That can inhibit the introduction of modern
technology. Most technologies that are obsolete are usually very
slow. That is a challenge mainly when a disaster occupies. The
process of rebooting takes a needlessly long time, and the system can
easily crash when recovering from a failure. That can have very
adverse effects especially when the system is used as a place for
storing data.The automobile industry is consolidated, and the
number of companies is very few. However, the few companies are
highly competitive and strong. They include the Daimler, Volkswagen,
Paccar, Caterpillar, and Komatsu. In as much the Volvo group is
searching for new markets in the Asian continent, countries like
India and China have their local brands which have a grip in that
region.

OPPORTUNITIES

The
Volvo group has grown to become a brand with their products being
used all over the world. They have a great opportunity of using their
resources to invest heavily in automating the whole industry. If they
can do that, it means that the cost of production will immensely
reduce and their profits would drastically raise. Such innovation can
make them be in control of the largest market share of the heavy-duty
trucks and the engines.The world is currently striving to come up
with a solution to curb global warming. Cars and vehicles are deemed
to be the main catalyst for the global warming. There is a high
chance that the company that will be able to invent an affordable
pollution-free engine will end up dominating the industry for a long
time.

THREATS

In
some countries, there are extensive regulations regarding exhaust
fume emission affects the Volvo group. The regulation requires that
the noise and pollution from the factories be reduced and the safety
of worker be improved. Volvo, as a firm that produces heavy-duty
vehicles, has to invest heavily in research, to come up engines that
least pollute the environment.Local protectionism adversely
affects the Volvo group in the foreign countries because the
competitors will be operating at a lower cost and therefore their
products will end up being cheaper. Geopolitical instability is
another factor that affects the sales of the Company. Volvo operates
in more than 190 countries. When there is political instability,
armed conflicts or civil unrest the sales go down. Those countries
usually experience inflation in the economy or their currency is
devalued, and in the process, Volvo makes huge losses because the
rate turn-over is low and the assemblies’ facilities are
underutilized.Volvo as a multinational that faces stiff
competition, it is greatly affected by the lawsuits that are filed
against them by the customers, employees, and other third parties
complaining about the safety, health, a business-related issue or a
failure to comply with a certain regulation. Such disputes can be
settled, but they can malign the reputation of the company. In the
recent past, a lot of attention has been directed to climate change.
There is a potential for Volvo Group facing environmental law suits
in the future is high. The emission standards for vehicles are being
raised.

SOLUTION

The
best way to deal with the legacy systems is to upgrade them and use
technologies that are flexible. When the company enters into a deal
with another one, particular attention has to be paid to allow future
improvement of the machines and software used in the running of
activities in the industry. There is a need for a paradigm shift from
the centralized system of the Volvo IT to a decentralized system.
That inhibits stalling of an entire process when a single hitch
occurs in the system.

Recommendation

The
Volvo IT firm should adopt the cloud computing model and replace the
legacy supply chain systems. The model should be guided by global
policy (Nordblom, 2006). However, before replacing the legacy systems
entirely, a pilot cloud computing solution should be implemented to
serve as a proof of the concept. The Volvo Group is a multinational
firm based in Sweden that specializes in heavy-duty trucks.. The
clients are the primary assets of the company, and therefore, they
are highly valued. As the group continuous improve their services,
there is need to automate them so that the customers can reap big
from their vehicles and machines.