PESTEL Analysis of Volvo
The Volvo Group Organization operates successfully in North America having 23% of sales are in the country. The capacity of the company is evident as it employs 16,000 people. The organization provides many activities such as truck operations, equipment construction, buses and automobiles production. However, despite success and profits, it is necessary to explore the external environment of the Volvo Group Organization in order to predict the possible failures and reinforce new future deals and strategies of the firm. To define the organizational business objectives, one should conduct PESTEL analysis that stands for political, economical, social, technological, environmental and legal factors. PESTEL analysis is a way for identifying the key scenarios for the Volvo Group Organization.
Political factors of Volvo deal with desire to avoid high taxes. Political changes can also influence business of Volvo and that is why the company is interested in political stability. Economic factors that define success of the company are connected with buying power of consumers as it can cause decrease in profits, selling and demand on the products of the firm. Sociocultural issues of Volvo are connected with consumers’ concerns about ecology. Technological issues deal with rapid changes in technology and becoming cars obsolete. Legal factors are connected with paying taxes and paying for services that do not violate the law. Finally, the environmental issues deal with pollution of the environment by manufacturing of Volvo products (Amato 2004).
Political factors of the Volvo Group Organization concern the governmental restitutions, regulations, security measures and laws. Volvo automobile industry is completely dependent on governmental requirements. First of all, the Volvo Group Organization deals with the environmental norms that should be fulfilled. It means that Volvo should take care of the environmental problems in the process of car manufacturing and lessen the level of pollution. Secondly, for Volvo Group, government foreign policies and taxes are also critical as they restrict organizational opportunities. The Volvo Group Organization operates at the global market and as a result it should adapt to foreign policies.
It is evident that political factors intend to protect the environment against the negative manufacturing process of the Volvo Organization. As a result, Volvo’s environmental strategy should coincide with the governmental one. Interaction with local communities, environmental interest groups, stakeholders, investors, employees and customers will help define the main political dimensions and the ways of their following. According to the Code of Conduct, the Volvo Group Organization is responsible for social issues, human rights, business ethics and environmental care. Violation of corporate social responsibility can lead to the negative issues with the government of the North America. It is necessary to mention that if Volvo Group is not profitable, it will be difficult for the company to invest in environmentally clean technologies and address social issues and human rights. An increased regulation on the automotive industry leads to a huge taxation (Bingham 2005).
In the future, the Volvo Group Organization will face such political challenges as not fulfilling environmental laws and regulations and violation of human rights and business ethics. For this reason, it is important for the company to take into consideration all influential political factors.
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Economic factors of the Volvo Group Organization concern the business setting, economic growth and the exchange rates. Economic success means increasing of revenue for manufacturing new cars and becoming more competitive in the market. The connection of production with consumption is the main aspect of Volvo transport industry. As a result, the Gross Domestic Product (GDP) is a crucial factor for the organization. There is no doubt that an increase of GDP leads to higher profits and new opportunities and the decrease in the exchange rate can hamper Volvo car market. Economic downturn can also define the state of affairs of the Volvo Group Organization as car industry is very sensitive to any economic change.
Moreover, economic factors of Volvo deal with unemployment and economic crisis that lead to the reduction of customers’ number. However, there is a positive effect of economic crisis as an increase of prices on expensive cars will provoke people to buy cheaper Volvo cars. The main strength of economic factors is connected with employment and high profits. The opportunity is finding the ways of increasing revenues and operating in the economically developed countries like the UK and the USA. The Volvo Group Organization should adapt to economic changes and be ready to crisis (About Volvo 2014).
Another economic issue concerns rise in the fuel prices. This economic factor can reduce the performance of Volvo and greatly influence the automotive industry. The rise in the prices reduces the demand for luxury cars and for this reason Volvo should be ready to offer something more economic and cheaper.
To improve its performance, Volvo should obtain information about national per capita income, economic growth rate and the inflation rate of the country, in which the company wants to operate. Economic conditions are different from country to country. Moreover, global economic unsteadiness influences Volvo business. Volvo is completely dependent on high demand and technology. Varying needs of consumers make Volvo innovate and develop. In the future, the Volvo Group Organization may face such economic challenges as unemployment, low profits due to the economic crisis and that is why it is important for the company to take into consideration all influential economic factors (Ferrel 2010).
Social factors of the Volvo Group Organization include the contradictions between demographical issues and the changes in cultures. Demographic situation influences the profits of the company, capacity of the consumer and buying patterns. It is evident that social factors have an impact on the car industry. Customers of the Volvo Group Organization are conscious about the necessity of low emission cars and fuel efficiency and, as a result, the company should take this into consideration. One recommends Volvo Organization to manufacture different cars according to the market segmentation. Environmental issues also belong to social factors that define company’s reputation in the market. The Volvo Group Organization should be aware of the harmful emissions.
Technological factors are connected with innovations in car industry and development of a strong supply chain in management system. Such system forms a strong side of the Volvo Group Organization and, as a result, it works excellently and efficiently. Besides, Volvo develops its information technologies in order to attract more customers. The strength of technological factors is that they give a possibility to implement innovative technologies, while the weakness concerns spending additional costs. The importance of technological factors lies in the fact that it makes the company innovative and up-to-date. However, Volvo can face a threat of impossibility to stay constantly innovative. Volvo should develop its human resources and make them knowledgeable in innovative technologies (Day 1994).
Increase of technologies development for Volvo is a way to gaining a competitive advantage. For example, at the present time Volvo uses a sophisticated and new design for reinforcing its peculiarities. Innovation is a must for Volvo, and its strength is in giving the possibility to implement new products. The weakness of innovation is that it demands additional costs and human resources that can implement innovative changes. Innovation gives the opportunity to make the company differ from other companies. However, innovation can provoke the threat of negative attitude of customers to the company. Volvo should develop its cars making them ecologically healthy and diverse (About Volvo 2014).
In the future, the Volvo Group Organization may face such technological challenges as obsolete cars and old-fashioned technologies.
Environmental factors concern creating an ecologically friendly image of the Volvo Group Organization that currently does not correspond to the ecological standards. Car manufacturing causes greenhouse effect, global warming and environmental pollution. Another environmental issue concerns consumers’ preferences and tastes. At the present time, customers tend to use fuel cell cars, hybrid cars and eco-friendly cars.
In the future, the Volvo Group Organization may face with such environmental challenges as restrictions on the cars production that emit carbon dioxide. It means that Volvo should implement innovative policy in order to manufacture new safe cars.
The Volvo Group Organization deals also with legal factors. For example, new environmental laws and regulations restrict Volvo’s opportunities. It is evident that the company is obliged to follow all legal requirements. They include Clean Air Act and Environmental Protection Acts that make the Volvo Group Organization take into consideration legislation and manufacture eco-friendly cars. The government puts heavy taxes on the large cars in order to incite automotive companies like Volvo to manufacture more fuel-efficient, eco-friendly and reliable vehicles. Volvo cars emit great amount of carbon dioxide in the atmosphere and only legal regulations can lessen this negative impact. The advantage of the Volvo Group Organization is that they already introduced flexi-fuel cars. However, this innovation is environment friendly but unprofitable to the company.
In the future, the Volvo Group Organization will have to deal with laws and regulations that may negatively influence the profits of the company and create serious legal challenges. As a result, the company should find the ways to promote eco-friendly cars.
Strategic Advice to the Volvo Group Organization
In order to be successful, the Volvo Group Organization should cooperate with other companies, create new products, decrease prices and increase quality. The Volvo Group Organization should cooperate with other companies in introduction new cars and their further distribution. Creating ecologically-friendly cars will benefit the company and attract more customers. Volvo should reduce the prices on its cars as high prices discourage customers. The company should work on improving the quality of its cars, as high quality services allow the company to remain competitive.
Taking into consideration political factors, it is recommended for Volvo to pay more attention to the environmental issues in the process of cars manufacturing and lessen the level of pollution. Moreover, as the Volvo Group Organization operates in the global market it should adapt to foreign policies. Violation of foreign regulations can negatively influence the reputation of the company. Political factors will be beneficial only if Volvo’s environmental strategy coincides with the governmental strategy. In order to avoid social challenges, the Code of Conduct should be followed (Gertner 2001).
The Volvo Group Organization requires improvement of products, distribution, promotional and prising strategies. Volvo should develop its variety of products and adapt them to the international market. They should continue offering the innovations of technologies. Integration in the global market is a new way to development. The promotional strategy is aimed at satisfying different customers’ needs and at attracting different consumers from the different countries. Such activities prove the phenomenon marketing globalization and help in finding customers from all over the world. Political and governmental factors should be beneficial to Volvo because they are basic for the development of international business. In today’s world one cannot analyze the company without considering economic factors as they define whether the business is rich or poor, developed or undeveloped. As a result, Volvo should study the economic peculiarities of North America.
Employees’ performance is a tool used to develop any company and that is why high wages can make Volvo’s productivity better and profits higher. Employees are important assets of the company and, as a result, Volvo should try to improve their conditions of work in order to keep the most talented and skillful employees who can leave due to low wages and poor working conditions. The Volvo Group Organization should avoid such human resource issues by arranging and carrying out training, recruiting employees and preventing discrimination. Productivity of the company can be low due to the incompetence of employees or high competitiveness in the market. Anyway, arranging and carrying out training require additional costs and time. Besides, sometimes it is ineffective due to employees’ negligent attitude. However, organization’s management should always treat their employees equally (Subhash 1996).
The Volvo Group Organization should work towards diversifying its markets involving changes and innovations. The management of the organization should widen the circle of consumers and satisfy customers’ needs. They should take into consideration the geographic diversity, as well. Company’s marketing strategy focuses on peculiarities of climate, space and topography that influence the demand of its services. Volvo should find new markets for increasing its profits and use globalization for defense and support. As it can be seen, the necessary internal tasks of marketing department are to create, innovate, improve and attract new customers.
The North American market has unstable climate conditions and that is why it can negatively influence Volvo Organization. Volvo should change its marketing strategy to target consumers directly as it will be more beneficial for the company. Direct targeting of customers will give a possibility to create an individual approach to every client and increase the level of customer satisfaction. Volvo should pursue mass-merchandising accounts as they will cause the development of new products of different categories.
The main component of a successful strategy of Volvo is the ability of the advertisement managers to find the most reliable ways of attracting customers and working with mass media. Volvo should study customers’ tastes, manufacture cars according to the legal and environmental demands and promote ecologically friendly automobiles. The car industry is highly successful and competitive business. Four main components of the company’s success include reputation, monopoly, architecture and technology. The beneficial economic situation in North America allows customers to choose what they want to drive despite high prices. However, it is recommended to manufacture cheaper cars for the average customers who cannot afford expensive models. Volvo should be available for customers of different levels of income (Jeannet 2001).
Without a doubt, the Volvo Group Organization has a strong brand name, and it is a socially beneficial factor. The objectives of the advertisement managers of Volvo are to establish cooperation with other brand companies, strengthen the power of the brand on a global level, develop business in all parts of the world, and design coordinated and global brand strategy.
Employees of Volvo should be ethical and tolerant with their customers. Rudeness and abuse of power can lead to loss of clients. Employees of Volvo should respect their clients as their complaints and lawsuits can be harmful for the company’s reputation. The feeling of respect between employees and customers can be seen in caring about customers and offering qualitative products and services.
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Volvo’s development depends on the external factors that can become driving forces and potential barriers at the same time. The potential barriers to Volvo are connected with organizational and operational functions, ethical issues and macro environmental issues. Marketing of the company should have a promotional character and all employees should be aware of. Still, the main barrier may be caused by the difficulties for new employees to understand and implement all points in their work. In order to overcome the barriers the company should constantly interchange old approaches to marketing and management for new ones. Macro analysis has showed that Volvo should be more flexible for customers’ desires and propositions. Volvo has a great opportunity to increase the number of clients with the help of affordable prices, friendly dealings, standard service and quality product (Barney 2012).
The Reasons of Success of the Brand
Brand awareness is realized by introducing it to the potential customers. The number of customers increases awareness of the company, its services, products and brand names. Brand extension is a way to a higher level of awareness. Advertisement generates a higher level of awareness when it has larger target market. For example, Mont-Blanc is famous for pens, watches, cufflinks, sunglasses and pocket knives. Evian is famous for water and high-end spas. Starbucks is famous for coffee, film production & promotion. Trump is famous for hotels, casinos, vodka and mortgage services. Xerox manufacturers photocopy and plasma TV. Harley-Davidson stands for motorcycles and automobiles. Red Bull is famous for energy drinks and beverage. Tommy Hilfiger stands for clothes and shoes. Apple is famous for its gadgets and innovative devices. The extendibility of such brands can be explained by their desire to remain competitive and gain more profits. In the market, competition makes the weak companies bankrupt and establishes the fair struggle between the strong players. Competition creates equal conditions for struggle between brands and stimulates the improvement of services and products of any brand. Today, however, the level of competition is too high and difficult for reaching. Though, the extendibility of brand leads to saving time, brand competitiveness, success and product popularity.