VOLVO Buses India A Case Study

Presented by:
Simran Ahluwalia (A-04) Nikita Khanna (A-10) Nikita Khurana (A-23) Nitish Singhal (A-32) Neeraj Naman (A-37)

Source:- Article:- What lessons can be drawn from Volvo’s success? Business Today, July 8, 2012 issue & www.volvobuses.com

Introduction
The company changed the way Indians travel
• Volvo entered into the Indian market in 2001, selling around 20 buses
• By 2011, 5000 of them were running on Indian roads

Volvo did not tone down its buses to suit the Indian market or cut the prices as most companies do

• It developed the heavy vehicles market and waited for it to mature • The case study discusses various strategic tools like PEST Analysis, SWOT analysis, PLC, Porter’s 5 forces model, BCG Matrix etc.

framework of macro-environmental factors used in the environmental scanning component of strategic management

PEST Analysis

Political Factors • Boosting the infrastructure sector and restarting stalled infrastructure projectsThis will have an effect on development of transport facilities as well • JNNURM (Jawaharlal Nehru national urban renewal mission). Development of transport facilities in India with a sanction of purchase of 14695 buses by the government • Increased spending on rural and urban transport. • Disinvestment policy of government likely to attract FDI.Investment of $20 billion dollars over seven years.Help in negating the affect of increasing interest rates due to inflation.introduced subsidies on environmental friendly transport. .

People from the lower income group likely to switch to public transport like buses which would indirectly increase the sales of the company. • Unemployment. • Easy Funding.Economic Factors • Slow Growth.The economy of India is showing low growth which might help in increasing the sales of the company as people are likely to switch to public transport.Increased participation in commercial vehicles funding by public-sector banks has increased ease in finance availability Helping new entrants to come into the industry. .

• Due to rising population and increasing age group of people. more expectations (comfort etc.) {Current Red Coaches} .Social Factors • There is large demand for environmental friendly and low fuel consuming means of public transport because of rising environmental awareness and rising fuel prices. preference is now given to buses with air condition and air cushioned seats. High disposable income.

These buses would be launched on long routes to make the long journeys more comfortable for the passengers. • Usage of Alternative Fuel.Technological Advancements & Innovations • Comfort. • More Room. .5-m multi-axle city bus which is being pitched as a solution for urban traffic congestion.Volvo launched the CNG versions of its 8400 city buses to garner better share of the city bus segment in the country.With increasing competition from companies like Tata motors and Ashok Leyland.New Volvo buses to be launched by state transport departments whose seats can be reclined to 130 degrees which is higher than the current 110 degrees. the company also brought a 14.

These engines would be protected for euro 5 compliance and would be stronger and reliable by design and have better fuel efficiency.7 litres to 8 litres with euro 3 and euro 4 compliances are being developed. Such technological innovations have and will further make Volvo more competitive which is evident from its 76% market share in luxury buses market and 46% overall market share .New BS3 and BS4 engines having modular capacity of 4.Contd… • Volvo is also expected to launch buses that run on hybrid technology platform. The platform involves a blend of electric and diesel technology. • Stronger & Environment friendly. which could ensure 40 per cent cost efficiency but would cost 50 per cent more.

After doing PEST analysis for the company we can come to a conclusion that the sales of the company are expected to increase and the company would be able to grow in tandem with the industry despite of economic slowdown prevailing in the country. .

BCG Matrix .

BCG Box .

• Volvo entered in India in 2001 with a world-class air-conditioned intercity coach based on a true bus chassis and rear engine and within a year of demonstrating the inter-city coach .When Volvo buses India was a QUESTION MARK • Volvo in its initial stages can be categorized in 1st quadrant that is in QUESTION MARK as it was having low market share and high scope for market growth.Volvo sold 20 of them in Indian market. .

It was to have a clear differentiation over the existing players.• Volvo did not enter the city bus market which is the huge market because of the following reasons: a) The entry barrier created by established players b) Volume constraints c) The purchases for city buses are done by state transport corporations. Hence the company opted to focus on niches rather than go in for mass markets . • But Volvo had a clear strategy when it entered the truck/bus market in India. The market is not fully privatized.

to sell its buses .from operators to passengers to drivers . NOT JUST THE PRODUCT • Volvo engaged with all stakeholders .100 .When Volvo gradually shifted to STAR • Further in 2006 it gradually started moving from question mark to star that is market share started increasing and the figure reached to 1. • In 2008 it finally reached star quadrant and Volvo focused on following things: CHANGE STRATEGY • Volvo brought in its inter-city bus when it saw the market was not ready for a city bus SELL THE CONCEPT.This was the growth stage which Volvo auto India faced.

USED MACRO CHANGES FOR THEIR ADVANTAGE • When Volvo saw that increasing congestion and growing environmental awareness were making public transport attractive. it brought back the city bus CHANGE THE GAME • When the competition started to close on Volvo. it introduced products that would increase the number of passengers .

• So now Volvo enjoys high market growth and high market share and now “Volvo India focus on achieving a billion dollars and 100.000 of them were running on Indian roads.000 units out in India by 2015" . The company changed the way Indians travel.When Volvo became a STAR • By December 2011. Volvo now has 76 per cent of the Indian luxury bus market. 5.

Product Life Cycle .

So there was a big concern about the profitability of the project. But there were reasons for this. . • Secondly. the luxury bus concept in India was completely new & there were unanswered questions like “would Indian roads & travelers be able to accept rear engine coaches”.Why Luxury Bus??? • In the year 2000. • Firstly. luxury bus segment was completely an untapped segment in India. Volvo buses cost about 8-10 times than domestic buses.

The mainstream idea was to bring in air conditioned intercity travel in the country. • Selling to state run companies was becoming difficult so Volvo changed the strategy & brought in intercity buses. it sought driver and passenger feedback.Introduction Stage Strategies followed by Volvo: • Volvo showcased its products in the 1998 Auto expo which drew much interest in the whole country. . • Before launching the B7R in 2001. There was hardly any reason why an AC coach would not be accepted in a tropical country like India.

Operators were concerned whether Volvo would be able to provide maintenance centers every 25 kms. .Target market • Now the primary target for Volvo was tour operators. centers would be provided every 400 kms. • Volvo convinced them that they don’t need any & as the B7R coaches are low maintenance buses. • The Volvo sales team drew up a lifetime cost plan to convince the operators.

tour operators spruced up service with hot towels & entertainment.• The B7R coaches reduced maintenance hassles & offered more distance coverage in less time. With Volvo they were able to cater to three cities (Ahmadabad. This was a great opportunity as operators could raise prices by as much as Rs 100 on some routes. • This was a new opportunity for the operators as they could rope in more passengers on different timings. Mumbai & Pune) in just 24 hrs. • As Volvo offered a luxury bus. For example Mumbai based neeta tours & travels which had 20 Volvos in 2004. . which was a completely new product idea for the Indian travelers. was able to expand & serve destinations.

20 Till 2004 had a country wide presence In 2006 – 1100 By 2011 – 5000 • Volvo expanded gradually. • After successfully launching the product. . starting with South and West India. there was a great scope of growth as the competition was negligible & with increase in India’s population the market offered an exponential growth rate.Growth stage SALES : In 2001(within a year of demonstrating).

in terms of providing after market support to the customers. but also to other stakeholders. • Volvo reached out to not only operators. • Volvo now focused more on distribution & service. • After a successful phase of intercity coaches. . It extensively covered almost all areas across the length and breadth of India. more awareness about luxury.Strategies implemented • The Volvo phenomenon coincided with higher per capita income. Volvo in 2006 planned to reach out to city bus travelers. It ran commercials in film theatres. The Volvo team realized it wouldn't sell much if it sold merely the product. Under the Jawaharlal Nehru National Urban Renewal Mission. Volvos now ply in 13 cities. It had to sell the concept of luxury bus travel. and increasing migration to cities from Tier-II and Tier-III towns.

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. But things may get a little tougher with Mercedes-Benz & Tata Motors entering into the segment. • The Swedish company has changed the way India travels.Maturity Stage • The luxury bus builder now governs 76% of the luxury bus market.

• Volvo started manufacturing buses near Bangalore. which is the longest in India.5-m inter-city bus. It makes 1. Sutlej. the company is looking to change the market. • It brought 14.Plan of action • With increasing competition. . and hopes to raise production to 2. This provides room for more passengers & hence an opportunity to retain the market share.100 buses a year. • The fact that Volvo manufactures its own buses works to its advantage as Mercedes still depends on its body maker.500 by 2013/14.

Increasing Indian population needs big air-conditioned buses so as to cater to the urban population. • It also brought in the Volvo 9. This would be an entry in a new segment which has great potential.100 medium-haul bus (for distances of 300 to 400 km).5-m multi-axle city bus – a solution for urban traffic congestion.• It also brought a 14. Volvo very recently started trial of Volvo 8400 low floor CNG city bus in Mumbai. • Also. as traffic is set to grow in this segment. & hopes to make second-tier city connections viable. .

SWOT Analysis .

e. operators could focus on routes. and increasing migration to cities from tier-ii and tier-iii towns • Volvos could run farther than buses used till then • Volvo manufactures its own buses • Volvo buses meet its customers' exact demands in terms of passenger comfort. • Offers service support for the entire bus. it's available round the clock . • More awareness about luxury. driving safety and total economy. high comfort level • With maintenance hassles reduced.STRENGTHS • Volvo known for luxury buses i. • Volvo provides with a 24-hour vehicle repair support. and not just individual parts.

. • Luxury bus-maker Volvo buses India has only one manufacturing plant currently in India. • The company operates only in the top-end bus segment.WEAKNESSES • The company lacks an aggressive marketing as there is a lack of awareness of the brand. • Volvo city buses cost up to 10 times more than those used by state transport corporations.

activities pertaining to managing customers' fleet and help create a more efficient system • Volvo should develop its business in Indian infrastructure. • Volvo expects to roll out CNG buses by third quarter in Mumbai and Delhi. operators.OPPORTUNITIES • It could form a consortium of planners. . and IT service providers and offer comprehensive solutions supported by local or state governments • Volvo should provide consultancy services. • Volvo planning its entry into the city bus segment.

BMW.segment buses include Tata Motors and Ashok Leyland. Audi. • Its main competition is with Tata Motors which consists of 62% market share in bus market. Toyota. • Other competitors are Mercedes.THREATS • At present. the other firms which operate in the medium. . • Price is also a threat as Volvo is known for luxury and expensive services and the customers are price sensitive. and Hyundai • Trains can also be a threat as the price of one seat in a train with similar comfort level is less as compared to Volvo bus seats.

Porter’s 5 Forces Model .

State Transport Corporation Royal Cruisers.• Business to Business Marketing • PPP Model.Public Private Participation • Sharing money in State Transport Corporation • Buyers .Public Private Corporation • Sellers – Tata’s Volvo Ashok Leyland .

Strategy to enter Indian Market Current mode of Operations: • • Wholly Owned Subsidiaries and Joint Ventures Alliances and Partnership •Market Segmentation – Large Commercial Vehicles •Emerging Economy – India and China •Companies expanding sales activities in emerging markets need access to deeper knowledge of local customers. support networks. distribution and advertising. .

.•Volvo formed a joint venture with Eicher Motors. a local commercial vehicle manufacturer in India to sell heavy vehicles and leverage its network of over 200 service centers across the country. Volvo plans to gain a 15% market share of heavy commercial vehicle. •Volvo plans to use Eicher’s sale and service infrastructure and manufacturing prowess to increase its sales from 5000 vehicles to 100000 by 2015.

.•As they build complete product lines and develop new products. companies require a significant level of control over strategic business activities. owns a subsidiary in India that builds trucks to sell in India. Volvo India has also establishes a product development center in Bangalore. Indonesia. •For example. Myanmar. Vietnam and China. the world’s second largest truck manufacturer. Sweden’s Volvo group.

Volvo’s Strategy • Niche market of Inter-City Travel • Clear differentiation over existing players • Volvo trucks were differentiated on the basis of: – Productivity – Transport Economy – Customer Education .

Porter’s Five Forces for Volvo .

BARGAINING POWER OF CUSTOMERS LOW • High comfort level • Luxury segment is brand conscious and willing to pay a premium for great experience. service quality and safety .

.BARGAIANING POWER OF SUPPLIERS HIGH • JNNURM • Jawaharlal Nehru National Urban Renewal Mission is a massive city-modernisation scheme launched by the Government of India. equitable and responsive cities. • It aims at creating economically productive. efficient.

Hyundai etc. • Economies of scale • Distribution Network • Equity of established players like Tata being market leader in Indian bus market.THREAT OF NEW ENTRANTS MODERATE • Toyota. .

• Uncertainty of regional airlines (incubation stage by Capt. Gopinath) .THREAT OF SUBSTITUTE PRODUCTS LOW • Volvo is a substitute to Shatabdi trains.

COMPETITIVE RIVALRY WITHIN AN INDUSTRY HIGH • Tata’s. • Ashok Leyland. • Mercedes Benz .

Factors of Success Volvo’s slow and steady growth in India has been due to a combination of factors • A clear strategy that was meticulously executed. This has favored these fuel efficient products in offering greater opportunities in improving the transport economy. • Since the time Volvo entered India. • The Indian government’s focus on highways development can help make prospects even better. a range of top of the line HCVs that aim at offering customers greater productivity levels and transport economy. focus on customer training and education. . the fuel costs have escalated steeply. • This has been backed up by a service and parts strategy that has grown in tandem with its sales growth and coverage.Conclusion.

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