Volvo Business Plan
Volvo Inter-city Bus Market| | Group-Transporters| 8/24/2011| | Submitted To Prof. Ranagan Mohan Contents Table of Figures2 Introduction3 Volvo in India4 Volvo Buses5 SWOT Analysis6 Strengths6 Weakness6 Opportunities6 Threats7 Marketing Mix7 Products7 Pricing9 Promotions9 Place10 Market Segmentation11 CRM11 Organizational Buying Dimension12 Distribution Channel12 Competitor Analysis12 Market Potential and Sales Forecast14 Sales Promotion17 Special promotion geared to vehicle uptime17 Conclusion17 Sources18 Table of Figures
Figure 1: Image showing the new Volvo 94008 Figure 2: Specifications for Volvo 9400 bus8 Figure 3: Distribution and Servicing centre in India10 Figure 4: Division of bus market14 Figure 5: Changing spectrum of Inter city travel15 Figure 6:Changing spectrum of intra city travel15 Figure 7: Sales forecast for 201416 Introduction AB Volvo is a Swedish builder of commercial vehicles, including trucks, buses and construction equipment and supplies marine & industrial drive systems, aerospace components and financial services.
Volvo was incorporated in 1915 as a subsidiary of AB SKF, a Swedish ball bearing manufacturer. However the auto manufacturer considers itself officially founded on 14 April 1927, when the first car, the Volvo series, affectionately known as “Jakob”, rolled out of the factory in Hisingen, Gothenburg. From the very start, the company’s two owners, Assar Gabrielsson and Gustaf Larson, decided to construct vehicles that were safe and could withstand the harsh conditions posed by Sweden’s cold climate and the poor road conditions of that time.
Since vehicles are driven by people, the founders’ view was that: “Safety is – and must always be – the basic principle in all design work. ” The focus on safety, durability and quality has been part of the company’s development from the beginning. Competitors have come and gone, but the Volvo Group, from its relatively modest beginnings in the 1920s, has developed from a local industrial company to a global Group and one of the world’s largest manufacturers of heavy trucks, buses, construction equipment, marine engines and engine components for the aircraft and aerospace industry.
Volvo Group’s businesses are conducted in several companies—among them these subsidiaries: * Volvo Trucks (midsize-duty trucks for regional transportation and heavy-duty trucks for long distance transportation, as well as heavy-duty trucks for the construction work segment) * Mack Trucks (light-duty trucks for close distribution and heavy-duty trucks for long distance transportation) * Renault Trucks (heavy-duty trucks for regional transportations and heavy-duty trucks for the construction work segment) * UD Trucks (midsize-duty trucks) Volvo Construction Equipment (construction machines) (previously Volvo BM, see also AB Bolinder-Munktell) * Volvo Buses (complete buses and bus chassis for city traffic, line traffic and tourist traffic) * Volvo Penta (marine engine systems for leisure boats and commercial shipping, diesel engines and drive systems for industrial applications) * Volvo Aero (high-tech components for aircraft and rocket engines as well as services for the aircraft industry) * Volvo Financial Services (customer financing, inter-group banking, as real estate administration) Beside this the group consists of several business units: Volvo Parts (Spare parts, maintain services for support to the aftermarket within Volvo Group’s companies) * Volvo Information Technology (IT services, develop new technology and business solutions for Volvo Group’s companies) * Volvo Powertrain (Responsible to Volvo Group’s development of diesel engines, transmissions, and axles) * Volvo 3P (Responsible for product planning, product development, and for purchasing to all Volvo Group’s truck businesses) * Volvo Technology (Centre of research and innovation, drives technology agenda for the future and secures synergies, commonality and operational excellence for Volvo Group companies. * Volvo Logistics (Plans and hands logistic solutions for the metal and air-related industry worldwide) * Volvo Technology Transfer (Develop and support new businesses with relevance for Volvo Group’s companies) * Volvo Business Services (Maintain cost effective and high quality services within financial administration for Volvo Group’s companies) * Volvo Treasury (Manage Volvo’s cash flow) * Volvo Event Management, which coordinates sponsorship activities including the Volvo Ocean Race Volvo in India The Automotive industry in India is one of the largest in the world and one of the fastest growing globally. India manufactures over 17. million vehicles (including 2 wheeled and 4 wheeled) and exports about 2. 33 million every year. It is the world’s second largest manufacturer of motorcycles, with annual sales exceeding 8. 5 million in 2009. The supply chain of this industry in India is very similar to the supply chain of the automotive industry in Europe and America. This may present its own set of opportunities and threats. Interestingly, the level of trade exports in this sector in India has been medium and imports have been low. However, this is rapidly changing and both exports and imports are increasing. The demand determinants of the industry are factors like affordability, product innovation, infrastructure and price of fuel.
Also, the basis of competition in the sector is high and increasing, and its life cycle stage is growth. With a rapidly growing middle class, all the advantages of this sector in India are yet to be leveraged. Volvo has leveraged this opportunity by entering the Indian market with its Luxury buses, trucks and cars. In India Volvo has introduced its FM and FH truck models and its Wagons, Sedans, Coupes and Crossover car models. Volvo entered the bus segment in India with the Volvo 9400 intercity bus and Volvo 8400 low floor city bus. Volvo Buses Of all the segments that Volvo caters to the Volvo bus segment is a very attractive segment in India especially with the booming economy class.
With the increase in income of the economy class preferences for travel has changed in the urban civilization. People would prefer travelling in an A/C bus in cities rather than a normal bus. Same is the case of intercity buses that start and end at Metro cities. This creates a huge opportunity for the Volvo bus segment. Volvo buses has grown in India through a step-by-step and focussed approach, ensuring that the support services are in place before any Volvo bus commences operations on a route. Volvo first introduced the bus in South India, followed by West. Entry into North took place early 2004 and in January 2005, Volvo buses stepped into Eastern Region – thereby covering the country comprehensively.
Volvo buses have set a new benchmark in the luxury air-conditioned bus and coach market in India. Up until the first Volvo bus came along with the true bus chassis, typical buses were all built on a truck chassis. It was only the body-type that determined the league in which one operated in. Competition as a result was more or less only skin-deep. Today, Volvo has successfully created a new segment of bus transport, with high end rear engine buses, built on “true bus chassis”. Volvo has contributed to the overall development of the standards of city and intercity transport in India. Volvo has successfully brought about a paradigm shift in the perception about bus travel in India.
SWOT Analysis Strengths * Volvo Buses India Private Limited being industry leader has almost 80 percent market share in the luxury inter-city air-conditioned coach segment and over 50 percent market share in the air-conditioned diesel low floor city buses – which are present across 13 cities in the country. * Has strong brand image for superior quality, safety and environmental care through fuel efficiency. * Strong Global presence and parent company support. * Manufactures of wide range of products ranging from complete vehicles, chassis, bus bodies, transport system solutions for metropolitan traffic, leasing, financing and service contract maintenance. Volvo Buses India Private Limited is part of the Volvo Group, one of the world’s leading manufacturers of trucks, buses, construction equipment, drive systems for marine, industrial applications, aerospace components and services. The company has a total offering that, in addition to buses, includes a global service network, spare parts handling, service and repair contracts, financial services and traffic information systems. Weakness * Volvo buses are priced 50% to 100% more than rivals. Its intra-city bus range ‘8400’ is priced around Rs 75 lakh while domestic rivals come at a relatively cheaper price. * Poor market penetration in northern India compared to southern India. Opportunities The commercial vehicles segment of the Indian automobile industry is one of the fastest growing markets in the world. Passenger carriers are one of the most prolific variants in the commercial vehicles segment. Due to the increasing urbanization and related need for inter-state transportation, the passenger vehicles segment is expected to grow at a CAGR of around 15% during 2011-12 and 2014-15. * The industry as a whole is receiving ample support from the Indian Government. For instance, in the recently announced budget for FY 2011-12, the government has provided tax rebates and excise duty concessions (Reduced from 16% to 12%), which would benefit the commercial vehicles segment.
Besides, these provisions will allow the development and commercialization of electric/hybrid commercial vehicles to drive the green revolution in the segment. * In recent years, the Government has made substantial efforts to tackle the Transportation sector’s shortcomings and to reform its transport institutions. These include: * Increasing public funding for transportation in its Five Year Plans. In 2010-11 budget Government announced to fund 15,260 modern low floor and semi-low floor buses under JNNURM scheme for improving urban transportation. * Launching the ambitious National Highway Development Program which has seven phases and is expected to be completed by 2012.
It includes improved connectivity between Delhi, Mumbai, Chennai and Kolkata, popularly called the Golden Quadrilateral, in the first phase, North- South and East- West corridors in phase two, four laning of more than 12,000 km in phase three, two laning of 20,000km and six laning of 6,500 km respectively in phase four and five, development of 1,000km of expressway in phase six and other important highway projects in phase seven. Total expected investment is INR 2. 2 trillion. This will increase the number of inter-city travelers. Threats * Increased competition. Domestic players like Tata Motors, Ashok Leyland, Swaraj Mazda, and Eicher are also coming in with luxury variants. Recently, Mercedes has also entered the luxury bus sector in the country with its high class and advanced air conditioned buses. Apart from these, some well known foreign bus companies are thinking of entering the luxury bus segment.
They are Mobitec, Konevekta, Bitzer, and Allison Transmission and Turkish commercial vehicle maker Temsa. * Government has decided to continue to support the use of subsidized diesel for luxury consumption like for SUV’s and Luxury diesel cars. Marketing Mix Products Though the company produces many products but our project caters to only Volvo’s bus business. In this category the company has two products * Volvo 9400 Intercity Bus * Bus Chassis only * Bus Body Building Though there is only basic model available but certain things can be customized as per the need which includes * We can opt between multi axle ( 14. 5 m long body) or single axle chasis ( 12. m long) * Number of seats in the cabin (53 or 43 seats depending upon multi or single axle) * Interiors * Entertainment solution(Common speakers or socket for every seat, Lighting, Radio for every seat) * Bus seats, the angle of recline and with or without calf rest. Volvo as a company believes in giving a complete solution and once a customer of Volvo means the buyer can be assured that company will take care of all i. e. * Financing * Driver Training * Operational Services * Product training – Technical advice – Workshop advice – Technicians development – Training on Aggregates Figure 1: Image showing the new Volvo 9400 Figure 2: Specifications for Volvo 9400 bus Pricing
The Volvo bus are priced on bit higher end and a fully loaded bus will cost around * 75 to 80 lakh for single axle * 1 Crore for multi axle jumbo buses and that is the off road price , on road price ,operating expense and other misc costs might add up few more lakh of rupees and so obviously pricing is not one of our strong hold but never the less the company offers attractive financing schemes. Financing services is something they have started in India looking at the needs of the customer as generally the buses cost around 75 to 80 lakhs that too off road prices , therefore, to buy and operate needs a heavy capital inflow. The company has come up with interesting financing schemes which vary as per the need of the customer epending upon the number of units ordered and finance opted for. That even includes discount if the order is too big. Promotions The company is by and large working on pull factor and we hardly see any promotions for its products at least in bus sector, we don’t see any TVC or banner for its products but one goes to their site they boast about their * In house crash test facility * Various roll over test , break test and other safety test they conduct * Speed pick up test * Noise, cabin vibration standards (so far best in world) * Quality standard and strict emission norms No doubt the product stands for pure quality and comfort at its best.
Recently they have introduced a new promotion under which buyers can take buses on lease from the company so they need not pay the heavy amount up front. Place Figure 3: Distribution and Servicing centre in India The company was initially present only in few South Indian states and in last couple of years has also ventured into North India with major customers being * RSRTC (Rajasthan State Roadways Transport Corporation) * UPSRTC( Uttar Pradesh State Roadways Transportation Corporation) * Punjab Roadways and Haryana Roadways * Gujarat Roadways * Other private players like Apshara ,JBG tours and travels Market Segmentation The transport business in India is thriving and the companies catering the segment need to cater this growing demand by investing heavy in their assets.
The demand for buses in the intercity mode is increasing and with growing life style people no longer think twice before opting a comfortable bus service between cities , which throws open a plethora of opportunities. Various state transport are already in a race of placing orders * Maharashtra state transport has recently asked for a tender of 1000 luxury buses (www. sakaaltimes. com) * Karnataka roadways to bring in 1000 buses in year 2011(http://www. ksrtcblog. com/featured/ksrtc-to-introduce-1000-new-buses-this-year) * The trendis almost the same and with private players like NEETA, VRL etc catering the same segment the opportunity is enormous We need to aim at inter-city private bus operators in both private as well as public sector which become our major target market. We can support the argument by the statement by Mr.
Akash Passey, Managing Director, Volvo Buses India Private Limited where he says that Volvo as a company has created a segment for itself which stands for comfort at highest security standards and played a pioneering role in changing the bus industry in last ten years. The company aims at enhancing its production to 5000 buses in one year compared to 1000 buses as of now which will cater the growing need of inter-city bus service and also turning India as its major hub for South Asian markets CRM At Volvo, relationship with the customer does not end with the delivery of the product. It marks the beginning of a long term partnership for complete transportation solution. The product is just one part of our total offering. The service support, part’s network, customer advisory ; driver training completes the loop.
Volvo as a company believes in giving a complete solution and once a customer of Volvo means the buyer can be assured that company will take care of all i. e. * Financing * Driver Training – with every bus sold, 3 drivers are trained * Refresher Training Course * Operational Services * Product training – Technical advice – Workshop advice – Technicians development – Training on Aggregates Volvo offers the best financial supports possible to its customers to finance the buses through its various finance partners in the country. Drivers are trained in basic and advanced driving skills along with special training for economic and safe driving practices. They have redefined the role of a river and have motivated the operators to acknowledge drivers as key factors in productivity. Drivers who are declared as fit are called as Coach Captains. They also provide warranty for individual parts and components, if they are from an authorised Volvo workshop. Volvo Action Service is a 24/7 helpline backed by mobile workshops and vans attached to the workshops. Volvo Buses are backed by Volvo’s extensive network of Sales offices and Service & Parts centers, ensuring that your vehicle remains at the top of its performance throughout the operating life. (III) Organizational Buying Dimension * The clients of Volvo like the different State Road Transport Corporations, requests for tenders. It would be followed by bidding.
The client with the lowest bid wins the deal. * Private clients would generally approach the sale force (representative) of the company. It could either be taken on rent or on lease. Distribution Channel The company believes that they are everywhere to serve the customers. Volvo has extensively covered almost all areas across the length and breadth of India, in terms of providing support to the customers. Volvo, as a true partner for the customers, is well prepared to provide every support required by the operators to run their operations successfully. Competitor Analysis In Indian market, VOLVO did not have any competitor initially. It is one of the difficult markets to penetrate.
The Indian mind-set that favoured steel bodied buses would not change easily. Also the transporters were reluctant because of high cost. Big cities are served by state-run bus corporations that are determined to keep the cost of travel low; this skews the economics of bus operations. Manufacturers will be put off by the large capital needed for the basic tooling and the lack of enthusiastic customers. But a lot has changed in the past 10 years. The consumer demand swung overwhelmingly towards the buses that provide more comfort, safety and luxury. Now the market is being competitive. More players like Mercedes Benz, Corona, Ashok Leyland are also in the market.
The market has a healthy growth rate of 5-10% in coming years. Corona is a Pune based manufacturer which has tie – up with Global Partners like Cummins, Voith, and Meritor etc. They offer comfortable travel at an economical price. They have adapted new technologies to ensure road shocks are not transmitted to the passenger saloon, offers high impact resistance during collisions and easy maintenance. They are competing for their market share in Maharashtra and Karnataka. Mercedes Benz provides 2 axle and 3 axle buses. They provide EBS braking facility which allows shorter braking and stopping distance when compared to other conventional system, which enhances safety.
They compete by providing more comfort for the passengers by four levels of adjustable footrest and calf support, lumbar support and sturdy, cushioned arm-rests. The disadvantage is the low span of dealer network when compared to Volvo. Ashok Leyland has an advantage of surviving in the Indian market for a long time. It is under the flagship of Hinduja group. They are increasing their focus to North India. They are well placed to deliver best-in-class products to customers backed by an innovative service care package. They are penetrating into market by adopting different strategy. The Company has trained and developed over 16,000 mechanics and nearly 5,400 retailers across the country.
The Company offers the TatkaAL promise of reaching a customer anywhere on the Golden Quadrilateral or on the North-South, East-West corridors within 4 hours, restoration of vehicle in 48 hours with a penalty clause of Rs. 1,000 per day in case of any delay. Company addresses the need of trained drivers by offering comprehensive driver care programmes. They are investing double the money in R & D for last 5 years to overcome the competition. Currently, Volvo buses have a dominant share of 80% within the intercity luxury air conditioned coaches market and presence in 13 cities with its city buses (50% share). Company differentiate it by creating “Drive better quality of life for drivers, customers and passengers”. Company plans to achieve a sales target of 5000 buses a year within 5 year time.
Company offers safety, comfort and luxury to all its customers. They have the plan to make 100% localized buses in the future to reduce the manufacturing cost. Market Potential and Sales Forecast Figure 4: Division of bus market As of 2011 approx. 1, 15,000 buses, serve 65 million passengers a day (Ministry of Road Transport and Highways). These include all the kinds of buses MDV, ICV / LCV. Volvo currently is into Inter-City, Intra City and Institutions Segment. Inter-city and Intra-city segment constitute and institutions are close to 1, 00,000 buses in India. And among these low floored and premium segment are less than 9% i. e. somewhere around 9,000 odd buses.
Figure 5: Changing spectrum of Inter city travel Moreover this segment is growing by 14% CAGR (BUSworld). Hence by 2014 it will bulge up to 1, 71,000 buses in India. Even though if consider the same market share of low floored and premium segment we get around 13,400 buses in India in 2014 Figure 6:Changing spectrum of intra city travel Taking the same market share into account in 2014 VOLVO will still have a sales potential of around 6000 odd buses in 2014. Figure 7: Sales forecast for 2014 Currently, there are about 4,000 Volvo Buses operating in the country. The future of Volvo Buses in India is backed by a strong Indian footprint.
Volvo Buses today has almost 80 percent market share in the luxury inter-city air-conditioned coach segment and over 50 percent market share in the air-conditioned diesel low floor city buses – which are present across twelve cities in the country. The company has doubled investments in the Hosakote plant in Bangalore by investing Rs 200 crore over the next two to three years. This will help ramp up the production capacity to 5,000 buses in the coming years, from its current 1,000 buses per annum. These new investments are aimed at fuelling the growth of the company in years to come. Currently, with a dominant share of 80 percent within the inter-city luxury air-conditioned coaches market and presence in 13 cities with its city buses, Volvo Buses announced a range of plans to drive the bus industry into the future. Sales Promotion Special promotion geared to vehicle uptime There’s a special promotional offer from Volvo for the 2011 coach season designed to ensure your new Volvo vehicles operate at peak performance. * All new Volvo retail coaches ordered from November 1st 2010 and delivered prior to July 2011 will receive a free annual inspection and test for 2 years. * The checks, inspection and test will be completed by skilled Volvo technicians at our authorised Volvo Truck and Bus workshops. * In the event of any non warranty repairs being required, these will be subject to a price agreed with the dealer. | | Conclusion From the above data we can clearly say that market seems to be growing and there has been a considerable paradigm shift in the transportation by buses.
Where a decade ago people were more price conscious but today they are ready to fetch more money for comfort and our product the Volvo 9400 suits particularly well and answers the need of the new consumer trend, We thereby end our report referring that the company should invest more in its capacity expansion and expand aggressively in the market. Sources * http://automotivehorizon. sulekha. com/volvo-buses-india-reveals-ambitious-growth-plans_03_2011_postedby_jayashankar-menon * http://www. rncos. com/Press_Releases/Indian-Commercial-Vehicles-Market-Set-for-Prosperous-Future. htm * http://networkdispatches. wordpress. com/2011/03/02/environmental-issues-well-under-control-in-india-the-finance-minister-says-so/ * http://web. orldbank. org/WBSITE/EXTERNAL/COUNTRIES/SOUTHASIAEXT/EXTSARREGTOPTRANSPORT/0,,contentMDK:20703625~menuPK:868822~pagePK:34004173~piPK:34003707~theSitePK:579598,00. html * http://home. iitk. ac. in/~sanjay/railroad. pdf * http://www. msrtc. gov. in/statistics. html * http://www. volvobuses. com/bus/india/en-in/news_and_events/pressreleases_india/_layouts/CWP. Internet. VolvoCom/NewsItem. aspx? News. ItemId=106209&News. Language=en-gb * http://automotivehorizon. sulekha. com/volvo-buses-india-reveals-ambitious-growth-plans_03_2011_postedby_jayashankar-menon * http://www. financialexpress. com/news/volvo-buses-targets-35-growth-in-india-s