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“Volvo’s Heart Will ‘Remain in Sweden’”

Strategic marketing (Universiti Teknologi MARA)

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QUESTION 1: HOW HAS VOLVO ACHIEVED DIFFERENTIATION OVER THE

YEARS?

Different approaches has been pursued by Volvo to ensure that they can
compete with their rivals in the automotive industry. In order to achieve competitive
advantage against the competitors, an organization must carry out the strategy to
distinguish themselves from the competitors in various aspects such as product,
service, image and so forth. The focus of differentiation is that you must be creative in
the product and service, which is also considered to be unique and special by the
industry and customers. There are so many elements to be considered in order to
implement differentiation strategy in an organization, this includes customer needs,
competitors, products and service levels.

In the case of Volvo, product differentiation is among the elements that Volvo is
focusing on. Product differentiation is expected to increase the value of the product or
service offered to the customer. Volvo has created world changing innovations since
1927, which most of the features has been created by Volvo to ensure their customer
benefited from their research and development which revolved on the safety aspect of
the vehicles. These includes the modern seatbelt, the side impact protection system
and the pedestrian detection system. As a matter of fact, this has been an ongoing
process since the car industry’s crisis in 2008. From that day onwards, Volvo’s technical
team has been constantly exploring security technologies and practices. The three point
seat belt which was first introduced as a standard item through its 1959 Volvo PV 544,
has been used as a standard safety feature which has been used and adopted by most
of the automotive companies for their respective products. Instead of monetizing from
the design patent of the three point seat belt, they made the design patent open in the
interest of safety and available for all car manufacturers. Although this creation seems
simple, it has saved countless lives. All these ideas lead to one thing, which is to be the
leader in terms of security and safety technology and to stand at the forefront of the
market. Now, Volvo has achieved many of the world's first technological achievements
and aside from that, Volvo is now focusing on design. For instance, changes have

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occurred in Volvo's new models. With higher configurations and more sophisticated
interiors, Volvo's design is now younger. This may be the result of lowering its cost of
manufacturing or new positioning, thus allowing position of Volvo to be precise and
clearer. Moreover, Volvo are currently moving away from making boxy, square cars into
more edgily fashioned, smaller, alternative fuel model and now with their corporation
with Geely, Volvo has also started developing electric cars. By implementing these
differentiation strategies, Volvo’s brand loyalty will successfully be embedded into
customers’ heart.

QUESTION 2: WHY DID GEELY ACQUIRE VOLVO?

As mentioned in the article, Geely acquisition of Volvo may be due to some

possible reasons. It was first stated that this Swedish brand has been rarely compared
with a predator of the forest which means they are very much in need of improvement in
term of product innovation, financial position or even management performance. When
Mr Li Shu Fu associated Volvo to “a tiger penned in a zoo that needed to be loose to run
free in the broader world”, it could have meant that Volvo need to expand its potential in
regards to broadening its market geographically and demographically as well. Another
factor of the acquisition is that Volvo sales was declining under Ford Motors and they
were not be able to compete with the other car manufacturers such as Audi, Mercedes-
Benz and BMW ever since the car industry crisis. This could be because of customer’s
changing of preference and also the 2008 global economic crisis.

The acquisition of the famous Swedish Volvo by the Chinese Geely has attracted
a lot of attention in the world wide media, particularly in Sweden and China. It is the
largest overseas acquisition ever by a Chinese company, which marks the beginning of
a new era that the fastest growing China has obtain a superpower in the world
economy. First of all, we look into when Volvo was owned by Ford Motors, it was said
that the company had been facing financial crisis as well as due to the failure of some of
their experiment such as car allowance rebate system. With Ford Motor at the brink of
ruin, CEO Alan Mulally began divesting assets including Jaguar, Land Rover, Aston
Martin, Volvo and reduced its stake in Japan's Mazda, and eventually Volvo Cars was
sold for $1.8 billion to the highest bidder billionaire, Li Shufu. Li Shufu, Chairman of
Geely Holding, said it was a historic moments for them, and he promised that Volvo
which is based in Sweden will be expanding its market around the world while retaining
their original principle such as emphasizing on safety, which defined Volvo’s principle.

Since Geely is Volvo's new owner, there is a potential of new market expansion
in the Asian region especially in China. Volvo will benefit from local market knowledge
and established production facilities as well as dealership network in Asia when it is
acquired by Geely. In reverse, Geely too will have the opportunity to expand their
products and brand outside from China as the acquisition has given them a gateway to
the most profitable market especially in United States of America and Europe, hence
will be able to establish and expand their networks in the US as they are the biggest
markets of Volvo.

Through this acquisition, Geely brand will have the better advantage and
customers’ awareness will increase towards the brand as well, especially in countries
outside of China. Nonetheless, it is a win-win situation for both parties as Volvo will now
have more opportunity and market in Asia especially in China. On the other hand, Volvo
is also known for their advanced technology as well as well-known established brand in
Europe, therefore with Volvo now under Geely holdings , Geely will benefit from Volvo’s
brand equity and image as customer perception towards Geely products will start to
change.

Lastly, the technological expertise that Volvo has is the best thing that Geely can
leverage in order to improve their product and eventually will uplift their image and
brand, not only in China, but in other region as well. In fact, Geely could benefit from the
safety technology that Volvo possesses. Volvo is known for their best features and car
configuration especially in terms of safety while Geely, based on sources, believed to
have a very poor protection and safety features. Having negative perceptions and
reviews from consumers will badly affect the company’s image. If Geely can improve
this critical aspects of safety, they will have bigger opportunity in the West as most of
western people are very particular and put much emphasize in terms of safety when it
comes to vehicle that they purchased. It is also mentioned in the article that Geely is
currently developing its first plan for energy efficient vehicle or electric cars. If Geely can
utilize the expertise combining talent from Volvo, it will definitely be able to improve their
car design and image. The cars that they manufactured will be renowned for both their
quality, safety and the technological advances.

QUESTION 3: SUGGEST STRATEGIES FOR VOLVO TO BUILD UPON ITS UNIQUE

STRENGTHS.

A strategy means a plan of action which is designed to achieve a particular goal,

in this case, efforts must be spent mostly to develop the unique strengths of Volvo.
There are so many ways that Volvo can improve in order to build upon their unique
strengths. Volvo has used a conservative marketing strategy for a long time. This was
its greatest misdoing, but results could be seen with the new strategies focused on
Volvo needs.

Keeping the premium value of the Volvo brand is a very challenging task after
Volvo was bought over by Geely. The reason is that the Geely brand is very weak, and
almost foreign to most people in automobile industry. They are also a low-cost car
manufacturer in China targeted to China masses and its technology is less
sophisticated compared to Volvo. While Volvo is regarded as a safe and premium
quality car everywhere in the world, and is recognized as a ‘near-luxury’ car in certain
parts of the world. The name of Volvo is often associated with its elegance and style, for
the cars are designed and produced in Sweden. The safety record is also an important
feature for Volvo, which is often recognized as the safest car in the world. Therefore, the
brand of Volvo is very valuable. This is how the existing customers value Volvo and
enables Volvo to compete within the premium segment. Therefore customer loyalty can
be kept only through the preservation of the brand value.

When we talk about brand, it is always about the uniqueness of the product or in
other words, product differentiation that is especially valued often. We know that Volvo
is often known as highly prestigious car brand with a high reputation of technology
advanced in safety. However, most of automobile companies nowadays have been
advancing through similar features and customer preferences is also changing over the
years, Some of them are most likely to purchase car with sophisticated design,
remarkable engine powers, comfortability, and so forth. There is a crucial need for Volvo
to start making research regarding their new market segmentation and strategies
especially when they have been acquired by Geely and the new market expanded from
West to Asia where the two different continents have so much differences in terms of
demographic.

With that being said, Volvo need to consider upon their channel of distribution. In
order to maintain the unique features as well as the strength of Volvo Automobile, they
have to be distributed separately from Geely Brand. It should not be displayed in the
same room or showroom as Geely Car. This would prevent customer from having
negative perception towards Volvo brand or image as well as the price consciousness.
Volvo need to be careful when it comes to segmenting their customer as the brand need
to identify their customer base and set their pricing correctly so that it will not give
negative impact to its sales because of customer’s perception.

Lastly, through mutual learning from both organization, it can help Volvo build
upon the unique strength. Geely and Volvo both need to be very flexible in order to
adjust to both corporate cultures which is entirely different from each other. The
acquired company, Volvo, has critical problems that need to be addressed and it is a
challenge for the both parties to fine tune this process and it will surely take some time.
Customers may have aware that Geely is not on the same level as Volvo hence it is
possible that they regarded these two brands as different in class. However, most
importantly through this acquisition, Geely may be able to learn so much from Volvo in
terms of technology advances, and similarly, Volvo can learn from Geely about
entrepreneurial leadership skills, marketing strategy, cost strategy and so forth. As the
owner of Geely, Li Shufu is a very well-known entrepreneur in the world. Thus, Volvo
can utilized this corporation between Geely to learn as much knowledge from them.