Case Study:
Volvo Group Strategic Plan: New Product or Service
Introduction
Volvo Group is a Swedish based company that started in 1927 by Assar Gabrielsson and Gustaf Larson. Since then Volvo has grown into one of the truck and construction equipment manufacturers in the world. In 2015, Volvo Group had an operating income of SEK 17.5 billion which is equivalent to 2.1 billion USD. As of 2015, 39% of Volvo Group's net income came out of Europe, with 33% of the company's business comes from the United States. Also, Volvo has 23.8% of the market share in Europe and 19.6% of the market share in the US. The bulk share of Volvo's net sales is dominated by the Trucking Industry at 68% followed by Volvo Construction Equipment with 16%, which is where the focus of the new product will be. The current CEO of Volvo, Jan Grurander, stated in a 2015 Q1 meeting that it is necessary to focus on the strength of Volvo's technological capabilities, as well as capitalize on the products towards customers (The Volvo Group, 2015). The new product, a mobile customer service application, is intended to increase customer purchases, customer service, and save Volvo dealerships time and money.
New Product
The new product that is being proposed is an application called Volvo Mobile, that can be used on computers and mobile phones, allowing customers to identify, located, and purchase parts and other products. Volvo Trucks currently has a large inventory of products, especially truck parts, in which Volvo dealerships have access to. The idea behind the mobile application is to give the same access of a Volvo dealership to large account holders and businesses that use Volvo Trucks and Volvo Construction Equipment. The application will work well with most trucking companies because a majority of businesses that are targeted will have the employees and staff needed for the application to be beneficial. With a simple training program, support from local dealerships, and an online support team that is already in place; it would be easy to train companies and their employees to use the application. The trucking industry has seen a lot of innovation in terms of manufacturing, but this sort of technological innovation is not currently offered to customers. As Volvo Truck sales continue to grow, and local dealerships become busier, this technology would be beneficial to both customers and Volvo dealerships.
Mission Statement
The mission of Volvo Mobile is to lead the industry in technological advancement, and helping to service customers, by allowing companies access to Volvo's resources; thus limiting down time of Volvo trucks and equipment. Volvo Mobile will indeed help to service customers in this manner. Most trucking companies already have their own inventory as well as designated staff that order parts and products in order to maintain their. The cycle has stayed the same for quite some time now, failing to take advantage of the latest technological advancements. Companies will call their local dealership and the dealership will have to research and order the necessary parts or products. In many instances, communication between customers, dealerships, and vendors are misinterpreted and customers receive the wrong part. This is unacceptable for trucking companies, which rely on their trucks running to make money. Each day a tractor is down, a company loses $800-$1000 of income and the number becomes much larger when you factor in construction equipment (Truck Info, 2015). It is important for Volvo Mobile to help customers avoid this by eliminating the middle man and allowing customers to order on their own.
Vision Statement
The vision for Volvo Mobile is to be the trucking industry's pioneer in mobile technology and help to lead Volvo Group to the forefront of the industry in terms of customer service. With our application, customers will be able to easily identify the parts or products needed, have access to their local dealerships inventory, and be able to order products as well as track shipments, etc. The initial target of Volvo Mobile is the large accounts of Volvo Group. These companies have the capital to pay for our monthly subscription as well as the resources and staff needed for Volvo Mobile to be beneficial. As Volvo Mobile grows with research, development, and through trial and error, it is our long term goal for all Volvo truck owners to use the application. This will alleviate the pressure that dealerships with large customer bases have. It will allow a Volvo dealership to focus on other aspects of their business and not have to spend as much time researching and ordering parts for customers. It also allows customers the access to Volvo's resources and the ability to research and order parts on their own; helping to eliminate the downtime of their trucks.
Business Model
Volvo Mobile is a monthly subscription that companies will pay to use with different prices depending on what the customer wants. For large businesses with many Volvo trucks in their fleet, it would be beneficial to use the premium subscription which will cost roughly $399-$499 a month. While this may seem like a steep price, it comes with invaluable information on Volvo trucks. This includes the ability to order and track parts, access to Volvo Group and local dealership inventory, annual program training, and service bulletins and information to help technicians fix Volvo trucks. Volvo Mobile will also have cheaper options for smaller companies in the future, but currently the larger businesses are the focus.
In today's trucking industry there are an estimated 1.2 million trucking companies in the US alone, with 97% of companies operating 20 or less trucks, 90% operate 6 or fewer, and 3% operate over 20 trucks. Volvo Mobile is targeting larger companies, which we consider to be 10 Volvo trucks or more, and we estimate that to be about 10% of the 1.2 million trucking companies in the United States (Truck Info, 2015). With 120,000 companies targeted, it is our goal to have 50% of these companies using Volvo Mobile in the next 1-2 years and over 80% within 3-5 years. This would generate an estimated $300-365 million by the end of the second year at a rate of $25-30 million a month. Volvo Mobile also gives companies an incentive to buy Volvo products rather than buying from our aftermarket competitors. Not only will it generate another revenue stream, but it will also help to increase sales. With this new income, Volvo Mobile will further invest and develop the application in order to keep customers satisfied with the product as well as use a portion of the income towards employees, dealerships, and social responsibility.
Principles and Values
As stated in both the mission and vision statements, the Volvo Mobile Division is dedicated to customer service. It is the belief of the organization that great customer service starts with employees who love their job. The members of the Volvo Mobile Team will have all of the benefits that other great companies offer; paid vacation, maternity leave, sick leave, 401k, etc. Volvo Mobile will also offer sales incentives for dealerships and commission for the Volvo Mobile sales team. It is the plan of Volvo Mobile to push the company's employees to reach the goals that are set in the business model and to do so by investing in the staff. Volvo Mobile also plans to invest in the future of technology by donating as well as investing in internet technology schools and small business startups. It is the social responsibility of a company with the Volvo name to give back to the community that keeps Volvo moving forward.
Conclusion
As the first quarter of 2016 is coming to a close, Volvo Group is looking to follow up after a record year for the company in 2015. With Volvo Mobile, the company can expect further growth in parts sales, truck sales, and a brand new revenue stream of $25-30 million a month by 2019. As technology continues to grow and connect the world, Volvo Mobile plans to use the mobile phenomena as an advantage and create a connection with customers that is currently not existent in the industry today (Altman, 2016). By allowing customers the access to all of the information as a dealership, it would be beneficial to both customers and Volvo Group. The Volvo Mobile Division is dedicated to customer service and will continue to invest in its products and employees to ensure customer satisfaction and improve the outlook of Volvo Group's reputation.
References
Altman, I. (2016). Top 10 Business Trends That Will Drive Success In 2016. Forbes. Retrieved from
https://www.forbes.com/sites/ianaltman/2015/12/01/top-10-business-trends-that-will-drive-success-in-2016/#10b019205571
The Volvo Group. (2015). Annual and Sustainability Report. Retrieved from
https://www3.volvo.com/investors/finrep/ar15/ar_2015_eng.pdf
Truck Info. (2015). U.S Statistics Retrieved from
https://www.truckinfo.net/trucking/stats.htm#Size