Global Trucking Ltd Case Study Solution
The quality of Trucks:
It can be argued that the trucks of Volvo Group are of the highest quality, the fact that Volvo group charges more than its rivals further indicates that the trucks of Volvo are superior to others regarding quality. Furthermore, it can be assessed that the Volvo Group have huge amount of financial reserves, those reserves could be used to make the highest quality trucks.
Brand Loyalty:
As Volvo group is charging more than many of the players in the truck manufacturing industry and still the sales are in the second place regarding the most units sold, this suggests that the loyalty of customers are high. High brand loyalty might result in the longer retention of clients, and slight faults can be ignored by the customers if the brand loyalty is strong.
Technology:
It can be said that the world’s leading truck manufacturer should have the latest technologies in place for the manufacturing of the trucks. There can be many benefits for the producers as well as customers of the latest technologies. Firstly, the production cost would be minimized as a result of using up to date production plant because the machines break ups would be very low. Secondly, the production can be completed in lower time which will allow Volvo to cater the urgent demand of the customers and the customers will be more rely on Volvo if it delivers the orders early. Lastly, the quality of the products of Volvo will be increased, this will result in the lower maintenance cost to the customer and will also increase the reputation of Volvo.
Weakness:
High Staff Turnover:
It can be argued that the staff turnover of Volvo is too high, this could be very dangerous situation for the company like Volvo which is operating in the industry which requires high skill of workers. Furthermore, the high staff turnover will also increase the risk of leaking of the secrets of production which could ultimately result in the loss of competitive advantage.
Cost Structure:
The company has second largest sales revenue but, the costs are also very high as compare to the competitors who ultimately causes loss of profits. Although, these low profit margins have not affected the customers directly, this may affect the customers indirectly. Low profits enforce the management of Volvo to pursue variouscost-cutting strategy which might threaten the quality of its manufactured trucks.
Increased debt burden:
The proportion of debt finance is way too high in the statement of financial position of Volvo Group. Increased gearing might have many negative implications on the operations of Volvo, firstly, the increased debt increase interest cost which ultimately reduces the profits of Volvo Group. On the other hand, the high gearing ratio results in the number of covenants being place on Volvo by the debt providers which might reduce the pace of growth.
Opportunity:
Mergers and Acquisitions:
In the modern business days, many companies are using these strategies in order to gain many benefits, the main benefits are as follows, and firstly, the economies of scale can be achieved by combining the marketing, administrative functions of two or more organization. Furthermore, the range of the products can be increased as a result of the acquisition of the other manufacturer of trucks. On the other hand, the Volvo group can better negotiate with the suppliers as the Volvo will now be a larger company after the acquisition.
Innovation:
It can be argued that Volvo can increase the quality and features in its trucks by incurring more research and development expenditure and by incorporating more innovative features in its trucks. Furthermore, there are considerable opportunities available for Volvo for reducing the carbon emission from their trucks as they will be more beneficial for Volvo and Global Trucking Ltd because many tax savings are available on the vehicles which have lower carbon emission. On the other hand, it will also increase the good reputation of Volvo Group and Global Trucking Ltd because they will now consider more environment-friendly companies.
Relocating the Plants:
This strategy is also very popular in these days, many of the world’s leading manufacturing companies are pursuing this strategy. Volvo Group might relocate its production plant to developing countries where the production costs are very low as well as the availability of skilled labor is high and cheap. Furthermore, the Volvo Group might save a huge amount of taxes as well as the governments of developing countries are offering substantial tax reliefs to the foreign companies who are investing in their country, this will allow Volvo to reduce its costs and charge thelower cost to customers which ultimately increases the revenue. However, the quality of the trucks might be reduced; proper consideration should be given to the quality of trucks.
Threats:
The Threat of Substitute:
The main threat that Volvo is facing is the threat of substitute. Currently, there are many alternatives available for the cargo trucks which are air transport, railway transport, and the transportation through thesea. Particularly, rail and maritime transport are very cheaper as compare to the transportation through trucks; this might reduce the demands for the trucks in the future as the customers want only low prices and they don’t want to give consideration to the channel of delivery...........................
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