The annual World Wealth report of Merrill Lynch Wealth Management and Capgemini, which was published in 2011 indicated that demand for luxury cars in India is growing steadily (Merrill Lynch Wealth Management and Capgemini, 2012). This can be attributed to Indias rapid economic growth and prosperity that has dramatically increased the pool of potential customers. Before entering the Indian market, the commercial vehicle market in India had been dominated by production and supply of single-axe medium range vehicles (Thomson, 2012). However, the inception of the top players such as Mercedes, Jaguar Land Rover, Audi and BMW paved the way for the growth of the Indian luxury car market. With Volvo trying to establish itself in the industry, there is the need of performing an external environmental analysis. This is vital when it comes to understanding various external influences on the Volvo. This can be done by the use of different marketing theory, models and strategic analysis tools.
The Indian luxury car market is made up of the different competing companies. Some of these firms include: Mercedes, Jaguar Land Rover, Audi, Volvo, and BMW. The market segmentation in India includes entry-level, mid-level, luxury level, sports car and sports utility Vehicles. Sports Car and Super Luxury segments is characterized by vehicles whose prices are above 59,400. They constitute most famous car manufacturing corporations such as Ferrari, Aston Martin, Maserati, Bugatti, Bentley, Lamborghini and Rolls Royce. Competition is fierce in this market division, with the key players trying to oust each other through the acquisition of a larger market share in the Indian economy.
Audi is among the top players in the market with a commanding market share of 19% in 2010 and 31% as at the end of 2012. The company has been selling and supplying its car models in the Indian market since 2004. Gradually, Audi has built a strong brand, with the management focusing on brand building as opposed to quick sales. According to consumer surveys, Audi is known for the production of the premium quality vehicles. Audi is the second largest luxury car seller both in the world and in India (Autobei Consulting Group, 2015). Audi boasts of over 20 dealerships across India, selling ten models. By being part of the Volkswagen Group, Audi benefits from the economies of scales which gives it a competitive edge over its close rivals.
BMW Group made its grand entry into the Indian market in 2007. Four years later, the company ousted Mercedes as the top-selling luxury car in India. In 2012, the companys market share in India stood at 33% as compared to Mercedes 25%. BMWs introduction of entry-level SUVs and the X series was a success since it won over the young, affluent Indians, who viewed such car models as fashionable and a replacement for old-fashioned sedans.
Mercedes entered the Indian luxury car market in 1994. As compared to its rivals, Mercedes is well-equipped regarding infrastructures as compared to its competitors. Mercedes has 35 dealerships across India and sells ten models. These ten models are available in 43 different variants. The company has positioned its brand as an emblem of power and prestige. The management of the Mercedes is also embarking on a 42 million investment in introducing new small compact cars in India to cater for increasing popularity of the entry-level luxury car segment of the A class.
As it tries to establish itself in the Indian luxury car market, Volvo is targeting to become the third largest selling luxury carmaker in India by reaching annual sales of 20,000 units by 2020. Volvos management understands that currently, the customers perception regarding its car model is still lower than its competitors. However, the management views this as an opportunity to utilize multiple international marketing techniques to ensure its brand penetrates the Indian luxury car market. Volvo is focusing on the production of high-quality vehicles to capture the attention of the wealthy Indian clients. Volvo is aiming at being identified with the production of safe, reliable and stylish brands.
PESTLE Analysis for Volvo
This analysis is critical in enabling Volvos management to assess the elements of uncertainty in the economy. Such doubtfulness can be as the result of complex and usual changes which make it difficult to forecast influential external factors on the firm.
As part of the external environment, the political environment is characterized by managerial factors which are associated with public affairs and their particular influence on the business organization. According to the Indians auto policy, it is apparent that the country supports integration and favorable development of the nations automotive industry (Thomson, 2012). The government of India has also facilitated automatic approval system for foreign equity investment, which ranges up 100% (Thomson, 2012). A scan of the political environment of various countries should also be evaluated. This involves a consideration placed on the supplying and buying automobiles in relation to the existing importing policies. This implies that Volvo needs to be conversant with laws adopted in India when it comes to setting up car manufacturing plants.
Governments stability is also another external political factor that can pose an outside influence on the operations of a given firm. Political stability in India and its neighboring countries can impact positively or negatively the future conditions and governance of the country, which determine the success of the Indian luxury car market (Verma & Shubhkamna Rathore, 2013). Taxation policies applied by the Indian government are some of the external forces that need to be considered and evaluated by Volvo when forecasting its future challenges associated with the industry. The government of India has been forefront initiating auto policies which focus on supporting the integration and implementation of a conducive development of the automotive sector in India (Verma & Shubhkamna Rathore, 2013).
The economic environment of India is made up of macro level forces which are associated with the process of production and distribution of resources or wealth. Such factors are complex and dynamic, and they are subject to change with alterations in the countrys governance, policies, the purchasing power of consumers and the political stability (Verma & Shubhkamna Rathore, 2013). Indias growing population of wealthy individuals has contributed significantly to the fortunes of the luxury car market. Over 1% of the Indians represent the affluent society. This can be attributed to the Indias increasing disposable income, ultimately leading to a change in the lifestyle and purchasing power of the well-heeled Indians. A critical challenge for the manufacturers of the luxury cars will be the localization of the vehicles to capture and improve on the customer satisfaction level in India.
The luxury automotive sector in India has been growing at an average rate of 21% recently. This has paved the way for the entry, and subsequent establishment of the core overseas manufacturers such as Mercedes, Jaguar Land Rover, Suzuki, Audi, and BMW. The management consulting company, AT Kearney, estimated that the Indian luxury car market was worth just over 640 million in 2010 (Thomson, 2012). The Automotive experts forecasted that the luxury car market is subject to the growth of 25% annually, hitting an excellent high of 150000 vehicles by the end of 2020. On the other hand, the non-luxury passenger vehicles sales are earmarked to grow at annual rates of 10-12% within the same period. This is an indication that Volvo entrance in the Indian luxuries industry is boosted by Indias rapid economic growth, which will enhance the future development of the company.
The Indian car market is segmented into different economies. This includes entry-level, mid-level, luxury level, sports car and sports utility vehicles. The sports and super luxury market division is identified with vehicles whose price is just above 59,400. This market division is also characterized by most of the big carmakers globally such as Ferrari, Aston Martin, Maserati, Bugatti, Bentley, Lamborghini and Rolls Royce (Verma & Shubhkamna Rathore, 2013). Some of the key trends in the luxury car market involve the popularity of the entry-level luxury cars such as Mercedes C-Class, Audi A4, and BMW 3 series. According to the vehicle manufacturers, this segment plays a critical role when it comes to enhancing the advancement of the higher model segments. It is observed that clients who acquire cars from this market segment tend to go for more expensive models in future (Verma & Shubhkamna Rathore, 2013).
The economic environment in India also constitutes of the luxury SUV segment, which is yearly growing at about 50% as compared to other luxury segments are growing at 25-30% (Thomson, 2012). Apparently, the younger wealthy Indians find SUVs more attractive than sedans - fashionable, and possessing a masculine and aggressive images that better reflect their achievements (Thomson, 2012). The majority of the well-heeled young Indians also perceive sedans to be old-fashioned and associate them with older people in the society, prompting them to be more affiliated to SUVs than other luxurious cars. The change in the attitude of the consumers is also another force in the economy which is influencing the operations of Volvo Company in the Indian economy (Verma & Shubhkamna Rathore, 2013). It is observed that recent change in the attitude of the customers and their disposable incomes have led to a rapid acceleration of the luxury market in India. This is an indication that consumers focus has shifted from price consideration, with the emphasis now placed on the product affordability, quality of the car and the experience obtained from the use of particular car models (Verma & Shubhkamna Rathore, 2013).
The social environment is also another component in external environment which can influence the future development of the Volvo Company. The marketing approach adopted by Volvo can be affected by the dynamic nature of the customers behaviors. Customer attitude is one of a social factor which influence the operations of Volvo in India. When it comes to selecting a car, the preference and the mood of the customer play an integral role. Some clients consider safety and price as their top priority when purchasing a particular model of a car: this will compel them to opt for a vehicle which embraces mileage as well as protection (Manishonlin, 2010). The changing attitude of the customers has also compounded with their growing disposable incomes. Travel tendencies of a particular section of the consumers is another social factor that can influence the logistics of the Volvo Company (Manishonlin, 2010).
In the mid-2000s, the acquisition of the luxurious cars was restricted to a small section of the Indian population such as moguls or the members of the royal family. It is alleged that these affluent Indians were uncomfortable when it came to expressing their wealth and prosperity through purchasing of the lavish vehicles. As opposed to the previous generation of the wealthy Indians, the current affluent individuals are not shying from purchasing luxury cars as a way of flaunting their success and wealth. Most wealthy Indians now consider luxury cars like Mercedes and BMWs as symbols of power, recognition, prestige, and status (Thomson, 2012). It is also observed that Indias well-heeled community is brand c...
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