Volvo : Developing a Service Marketing Assignment Sample

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• Subject Name : Service Marketing

Service Marketing

Contents

1. Background

1.1 Organizational context

1.2 Culture

1.3 Impact of culture on Volvo

2. Effect of culture on service operations mix

3. Strategies adopted to overcome the cultural challenges

3.1 Marketing mix of Volvo

4. Implications of service marketing

5. Conclusion

References

1. Background

1.1 Organizational context

Volvo is a Sweden-based luxury vehicles brand. It is headquartered in Gothenburg, Sweden. It is a multinational car manufacturing company which produces and distributes buses, industrial drive systems, trucks and construction equipment (Svahn, Mathiassen & Lindgren, 2017). The Volvo group officially came into existence in the year 1927. Volvo also markets sport utility vehicles (SUVs), compact executive sedans and station wagons. The car division of the firm was sold to Ford Motor Company for around 6.45 billion in the year 2000. Since 2010, the car share is majorly owned by the Geely Holding Group. The logo between the AB Volvo and the Volvo cars is common. The firm has been accused of missing the Corporate Average Fuel Economy targets in tenure of four years between 2010 and 2015. The total fine that the firm was entitled to a peak of $19.6 million.

It was announced by the group in the year 2017 that it will launch the new models by the next two years i.e. by 2019 which will be hybrid-electric or fully electric (Vahlne & Jonsson, 2017). However, it is currently stressing on the manufacturing of cars that are non-hybrid after these cars receive a facelift and re-designing is done. The group has stated that it will lay prominence only on the manufacturing of the on-electric cars from 2040 onwards. In the year 2019, Volvo made a record for the sixth consecutive time to achieve appreciable sales which mounted up to selling of around 705452. In the year 2018, a total number of cars sold by the firm of the S90 model in China was 38011, that in Europe was 56192 and in the US was 6967. It has numerous series under it which incorporate the ‘S’ series, ‘C’ series, ‘V’ series and many more.

1.2 Culture

Culture poses a significant influence on the performance of the businesses specifically when considered in the marketing mix. The marketing mix is basically a strategy that is intended to promote the product and build a robust market-base (Zafarv & Steinberg, 2017). Volvo group has many branches, but this study specifically considers the cars division. According to the opinions presented by the authors Vieira-dos Santos & Gonçalvesb (2018), a culture is a group of educated responses which results in diverse types of behaviours, ideology and beliefs.

There have been varied interpretations of the meaning of culture in the literature, however; the very first clear picture was brought forwards by Geert Hofstede. Hofstede laid prominence on the five key dimensions that help in allowing the firms to effectively contrast the home country operations and the other international market operations (Yoo & Schatzer, 2018). The five key factors that he stressed on incorporate masculinity, individualism, Long-term orientation, indulgence and power distance (Yoo & Schatzer, 2018). These factors state how culture can be a key factor that determines the assortment of marketing tactics.

It is also proposed by them that culture drives organizational marketing strategies and makes it more focused. Since culture influences the consumers’ lifestyles it is a key factor that the firms must consider while framing their marketing mix elements. Culture is defined by the authors Zafar & Steinberg (2017) as the collective way of living that distinguishes one individual’s life from others or even highlights the similarity. Businesses like Volvo which operate across the international birders must be culturally sensitive in terms of outlining the marketing mix so that the needs of the different consumers are effectually met. It is also imperative to make sure that the diverse values, beliefs and attitudes are captured and stressed on.

1.3 Impact of culture on Volvo

Looking up to a particular culture of a company is cardinal so that the business decisions are made in an effectual manner. Culture appears to be an integral part of the purchasing behaviour of the customers. Adoption of innovation is closely associated with culture and the marketing stratagems. For a manufacturing giant like Volvo, it is vital that the culture is considered and significantly stressed because it operates across the international borders. There are many theories that exist in the literature regarding the impact of culture on a firm, however, authors Terpstra & Sarathy (2000) explicitly bring forward a picture of a cultural diagram that lay emphasis on the intersection of varied cultural factors (Amos, Akpoviroro, Sariat & Arike, 2019).

Figure 1: Sources of culture

Source: Adapted from Hammad (2013)

Since Volvo operates in multi-cultural markets that also involve UK, China,US and Inda, there are many cultural facets that the company must consider (Pelliccione et al., 2017). US and UK have many aspects that are similar to each other that involve the language and religion-related aspects. However, in other markets such as India, the scenario is quite different, this is so because the cultural factors are different here. Here a strict caste system exists along with the diverse cultural beliefs that alter along with each state. Volvo must consider the varied factors and must also study the impact of each factor on the marketing campaign that it practices especially the advertising campaigns and product packaging.

2. Effect of Culture on Service Operations

2.1 Marketing mix

• Product

It is one of the largest business firms in Europe and is continually expanding. Volvo is popularly known for its zeal in the manufacturing process and in investing technology to manufacture the latest technology-driven cars (Vaughan, 2017). It aims to target different customers in the country by offering a wide portfolio of products that incorporate an assortment of vehicles. It launches new cars and models by comprehending the price and size. The products offered by the brand have high safety standards and this is what differentiates it with the other firms delivering the cars.

Also, its cars are large in size offering the premium comfort and luxury to the customers. Maslow's Hierarchy of Needs is marketing theory which states that for offering a premium experience to the customers, it is of utmost importance that the preliminary needs of the customers are satisfied (Bouzenita & Boulanouar, 2016). It states that the fulfilment of the basic needs of the individuals results in the motivation in their buying behaviour. For car buyers, the preliminary need is to ensure safety standards. Customers want cars that have adequate size and offer safety.

The brand has expertise in manufacturing various products that incorporate buses, industrial drive systems, trucks and, sports utility vehicles and construction equipment. Its car division exclusively manufactures non-hybrid cars and is further aimed at introducing new models which will be completely based on electricity. It has many series of cars under the product umbrella that incorporate Volvo S-series, Volvo V-series and Volvo XC-series. Its latest car models are Volvo XC60, Volvo XC40, Volvo XC90, Volvo S90 and many more.

• Price

As a part of its price mix, the organization ensures to indulge in the optimal pricing stratagem. As per the varied customer base, the firm ensures to adopt a clear segmentation strategy. Most of the cars in Volvo are priced between the range of $25,450 and $40,800 (Vaughan, 2017). Its major objective behind its pricing strategy is to ensure that the profit optimization is attained and after-sales market segmentation is done in a logical order. It uses its pricing strategy as a source of its global market balance. As per the market segment that it targets, it makes sure that the competition-based pricing is done. It also makes use of the product-bundle pricing as a stratagem to ensure that the channel members, retailers and other stakeholders are able to make profits an appreciable level.

It has designed its pricing strategy in such a way that the stakeholders are satisfied. It marks the fixed prices of the final products so that any sort of discrepancy is avoided.

Competitive pricing is a technique that enables the firms to maintain the pricing strategy as per the competition prevailing in the market. This strategy suggests that on the basis of the competition, the pricing must be done in a way that it justifies the value of the product and fits in with the perspectives of the customer. Volvo offers both luxurious cars and mid-luxury cars as per the needs of the customers (Vaughan, 2017). The luxury cars are marketed in the niche market however the mid-luxury cars are for the customers having the appreciable dispensable income. Since most of the consumers in UK nowadays are shifting from buying the large-engine luxury cars to the ones that are efficient as well. Therefore, at this stage, Volvo has to maintain the pricing in such a manner that it can gain a competitive advantage on the other cars that are more fuel-efficient.

• Promotion

The product-efficient machines are a critical component that is used by the company to market its products. It adheres to the safety standards and communicates the same to the media which has resulted in an increment in the number of customers buying its products. It employs the conservative marketing strategy to market its products. It makes effective use of digital media for marketing its products (Wu, Ma, Lv & Ihme, 2017). It has acquired the position of digital leadership. The firm makes use of the social media platform for marketing the products. Since the population in UK is highly sensitive to the latest-technology driven vehicles and actively indulges in the usage of social media, Volvo makes use of the same and ensures that the same is communicated to the population so that their interest is sustained. The car division is promoted via the international car show in Europe and other regions involving US and India to promote the latest car models.

Since in UK, people are highly responsive to the products that are sustainable and pose the least harm to the environment, keeping this in mind, the Volvo designs its products as per the culture of the region and continually communicates the progress in sustainable practices to the customers via social media platforms (Wu, Ma, Lv & Ihme, 2017).

• Place

The company has more than 2300 local dealers across the globe. Its sale centres are dotted across many cities in around 100 countries. In the year 2015, there was an increment in the sales in Europe by 10 per cent (Wu, Ma, Lv & Ihme, 2017). The organization also has its Omni-channel and its integrated it’s online as well as the offline channel. The organization has a robust system of supply of the Volvo products in UK. The culture of UK also encapsulates the political situations sustaining in the market. The stability of the same is also a key reason that influences the Volvo’s distribution system.

The increasing regulations for the environment-friendliness of the automotive industry in UK have pressurized Volvo to ensure that its manufacturing centres to incorporate the sustainable practices. Adhering to the strict regulations of UK government, the industry has made sure that the stores also communicate the same to the market. The company has a large retailer network in UK which has enabled it to comprehensively distribute in the market. It has strong relationships with the Volvo dealers, Volvo new car sales, service centre and maintenance, Volvo Selekt and Volvo insurance.

3. Strategies Adopted to Overcome the Cultural Challenges

3.1 Marketing mix of Volvo

• Product

The products being offered by the firm are intended to capture the market by stressing on the basic needs of the people of UK. Still, the company faced issues in terms of embedding the culture of UK in its practices. It overcame the issue by ensuring that the products meet as per the British standards so that the people perceive the product culturally inclusive. It complies with the EU regulations of the automotive. It is stated by the authors Schuessler, Frenkel & Wright (2019) that the organizations which comply with the nation’s standards and codes cultivate a sense of loyalty among the customers. The customers automatically feel strong ties with such organizations.

• Price

Considering the dispensable income of the people of UK, Volvo majorly stresses on the mid-luxury cars. Customers mostly prefer firms that offer the best products at reasonable prices. Authors Razak, Nirwanto & Triatmanto (2016) state that the people in UK are more inclined towards the products that offer the premium experience at the reasonable charges, hence, Volvo makes use of the same to set the prices.

• Promotion

In UK, the people are more culturally receptive towards the environmental regulations and the organizations especially the automobile sector in adhering to the same. Volvo has ensured the same by making sure that the solar energy installation is confirmed. It has confirmed to install around 10500 solar panels (Fureby, 2019). In today’s world more and more organizations are thriving towards the sustainable practices and it is a key facet of promotion which is playing a critical role in luring the customers (Ozbekler & Ozturkoglu, 2020).

• Place

Since in UK, the offline shopping culture is more dominant unlike the online buying culture in US, Volvo majorly lays emphasis on its offline distribution. Authors have stated that ease in the accessibility of the product is the crucial facet that impacts the purchasing behaviour of the customers (Kang & Namkung, 2019).

4. Implications of The Service Marketing

There are numbers of automobile manufacturing companies in Australia. The automotive sector is a well-established sector of the country. The companies in UK are well-known for the sports car Marque and the exclusive premium cars. Some of the car manufacturers that operate in UK are McLaren, Vauxhall, Bentley, Jaguar and many more. All these organizations operate across many countries and have to similarly trail the cultural of the region for practising marketing activities. Culture has a specific value in the marketing of the firms.

It not only iterates around the religious values but also incorporates the behaviour and beliefs. The world comprises of the smaller markets. There is a need for the organizations to be more culturally-inclusive so that the marketing activities are further enhanced and the customers are targeted in an effectual custom. The following are the key recommendations that the other competitors operating in varied cultural environments and UK can adhere to:

• Considering the alignment of the purchasing decisions with the culture

Culture is an eminent part of the individuals and plays an integral role in defining the purchasing behaviour of the customers. The customers not only go for the product but also look at the packaging, price and quality. This assessment has clearly elaborated on how Volvo stress on these factors while marketing in UK. Considering the perception of the consumers, the company makes sure that the environmental concerns are adhered to. Such activities can be helpful for the other competitors such as McLaren and Vauxhall to function in UK and make their practices more sustainable and compliant with green technology.

• Stressing on the basic needs

It is quite evident from the sales that the X series of the car has managed to attract most of the customers in UK because of the fact that the culture of UK in terms of cars was mostly focused on the comfortable and safe cars (Vaughan, 2017). Considering this requirement of the customers, the marketing strategy must be framed by the other companies in the industry so that the needs of the customers are effectively catered to (Engström, Jonsson & Medbo, 2018). SUVs are in higher demand in US as compared to UK, the reason behind the same is the cultural differences which is reflected in the needs of the customers and the purchasing decisions.

• Culturally incisive marketing

The marketing of the product must demonstrate the culture of the region so that the customers can easily resonate with it. It complies with to the standards of safety and communicates the same to the media which has resulted in an increment in the number of customers buying its products. It employs the conservative marketing strategy to market its products. This strategy has effectively worked for it. The other competitors can use this insight and make sure that the audience’s needs are culturally involved while marketing. Volvo did its promotion of Sports Sedan through the events and promotions keeping in mind the purchasing behaviour of the customers. Also, it employed the ambitious mobile promotions to target the customers via online websites and applications.

Volvo comprehended that the market of UK is driven by high-performance and culture and this is the reason it majorly stressed on the quality rather than on the looks (Vaughan, 2017). The same in the other country like US is focused on the quality and the looks as well. However, in India, the products are marketed majorly on the performance. The marketing contrast adopted by Volvo is quite adaptive as per the devise of the market which allows it to penetrate deeper in the market. Other companies that are operating in UK must infer the ways to adjust according to the culture.

5. Conclusion

This assessment has brought forward a picture of the ways in which culture can pose an impact on the marketing mix of a corporation. It is evident from the assessment that Volvo has adopted diverse stratagems to adapt as per the culture in diverse cultural settings that involve US, UK, China and India. It is contingent from the assessment task that the organization is trailing the marketing activities by encapsulating the culture and beliefs of the individuals. The recommendations section suggests that the key aspects that can be inferred from the marketing case and can be employed by the other firms in the same industry as well. The recommendations involve considering the alignment of the purchasing decisions with the culture, stressing on the basic needs and adopting culturally incisive marketing tactics.

References

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