Volvo model and strategic approach were reviewed to fit the US market. Model change through Mergers and acquisitions with leading US truck manufacturers, product differentiation (adding microwave oven and other features), massive investments ($500 million),consolidation of cab production and truck assembly near to OHIO facility, consolidation of dealers’ network, major cost reduction and job cuts; have not had the expected results in terms of market share increase and profitability. The expected increase in truck demand in 1998 was a therefore a missed opportunity for Volvo.
Issues & recommendations:
1. Network of dealers and After sale approach Although Volvo is vertically integrated (ie developing and producing all major drive-train components), the company failed to design an horizontal integration business strategy. Network of dealers mainly drawn ...view middle of the document...
In addition, Customers in the US will assess their total cost and seek lowest cost of ownership along with high quality of the engine.
2. Business strategy differentiation: adopt business strategy to specific products can help Volvo better respond to the market needs. The US market deregulation of trucks’ business has led to industry consolidation in large companies who achieved increased margin, through adopting a specific and separate spare parts business strategy and quality after sales services built on their own distributors. Volvo should draw the case from other large trucks companies like Daimler Benz leader in EU, Scania in Sweden that concentrate on one product (heavy trucks) and brand differentiation by its advanced technology and image/communication approach.
3. Suppliers network enhanced approach & strategic alliances Volvo failed to build strategic alliances with big players and to build on market consolidation. Economies of scale can be generated and leveraged through creating a joint purchasing company with other manufacturers in the US which will give bargaining power with the suppliers and negotiate joint businesses with the major ones (like Mack Had and RVI did).
4. Law and regulation in the US: Recommendations: environmental issues are more and more important and will continue to impact on the regulatory framework. These changes will in turn impact on the engine technology which would require additional investments for Volvo. Volvo has to anticipate and direct R&D to innovate in cleaner and environmental friendly truck’s technical design, ensuring efficient response at the time a new regulation is introduced. In that regard, Volvo has to build strategic alliances and establish supply agreement to quickly react and address new laws and regulations. Finally, Volvo should take the opportunity of US-Canada pac agreements to extend to the Canadian market.
Production and integrated approach