Background: Volvo’s safe, trusted cars – a mainstay of affluent suburban enclaves in the US and Europe – have been called many things. However, the Swedish brand has rarely been compared with a predator of the forest – at least until now. Li Shufu, the colourful chairman of Chinese car maker Geely, Volvo’s new owner, on Sunday likened Volvo to a tiger penned in a zoo that needed to be let loose to run free in the broader world. ‘I think we need to liberate this tiger,’ Mr Li declared. At a ceremony in Volvo’s hometown of Gothenburg, Mr Li’s company signed a deal to buy Volvo for $1.8bn from Ford motor, marking the US carmaker’s last disposal of an overseas brand and China’s first purchase of a premium western car marque. Mr Li told reporters that the Volvo tiger’s ‘heart’ would remain in Sweden, where it has two plants, and in Belgium, where it has one. Geely’s boss vowed to keep Volvo’s manufacturing footprint in Europe, but said that the tiger’s ‘power should be projected across the world,’ giving new life to its operations in mature markets. Volvo sits in the ‘near-luxury’ or ‘only-just-upscale’ part of the car market, alongside rival Swedish brand Saab and Fiat’s loss-making Alfa Romeo – a subsection of the premium market under attack from luxury leaders BMW, Mercedes-Benz, and Audi since the car industry’s crisis began in 2008. The German brands’ superior sales and higher prices have allowed them to outspend Volvo on research and development, and ride out the crisis in fitter shape. Volvo’s signature contribution to car industry history is the three-point seatbelt, which it claims has saved more than 1m lives since it pioneered it in 1959, prompting other car makers to follow suit. The Swedish brand celebrated the belt’s 50th birthday last year – a fitting event for a car maker with a solid reputation for safety, but a dull and worthy image among some consumers and an urgent need to raise its game. The brand is still seen as an industry leader in safety technology, though rival German brands and Toyota’s Lexus have recently matched or outdone it in pioneering some safety features. However, Volvo’s reputation for building safe cars could help its business in China as safety becomes an increasing priority in the world’s largest car market. In design, Volvo is moving away from making boxy, square cars into more edgily fashioned, smaller and alternative fuel models – an area where Geely, which is developing electric cars, can help it. Questions: 1. How has Volvo achieved differentiation over the years? 2. Why did Geely acquire Volvo? 3. Suggest strategies for Volvo to build upon its unique strengths.
Background:
Volvo’s safe, trusted cars – a mainstay of affluent suburban enclaves in the US and Europe – have been called many things. However, the Swedish brand has rarely been compared with a predator of the forest – at least until now. Li Shufu, the colourful chairman of Chinese car maker Geely, Volvo’s new owner, on Sunday likened Volvo to a tiger penned in a zoo that needed to be let loose to run free in the broader world. ‘I think we need to liberate this tiger,’ Mr Li declared. At a ceremony in Volvo’s hometown of Gothenburg, Mr Li’s company signed a deal to buy Volvo for $1.8bn from Ford motor, marking the US carmaker’s last disposal of an overseas brand and China’s first purchase of a premium western car marque. Mr Li told reporters that the Volvo tiger’s ‘heart’ would remain in Sweden, where it has two plants, and in Belgium, where it has one. Geely’s boss vowed to keep Volvo’s manufacturing footprint in Europe, but said that the tiger’s ‘power should be projected across the world,’ giving new life to its operations in mature markets. Volvo sits in the ‘near-luxury’ or ‘only-just-upscale’ part of the car market, alongside rival Swedish brand Saab and Fiat’s loss-making Alfa Romeo – a subsection of the premium market under attack from luxury leaders BMW, Mercedes-Benz, and Audi since the car industry’s crisis began in 2008. The German brands’ superior sales and higher prices have allowed them to outspend Volvo on research and development, and ride out the crisis in fitter shape. Volvo’s signature contribution to car industry history is the three-point seatbelt, which it claims has saved more than 1m lives since it pioneered it in 1959, prompting other car makers to follow suit. The Swedish brand celebrated the belt’s 50th birthday last year – a fitting event for a car maker with a solid reputation for safety, but a dull and worthy image among some consumers and an urgent need to raise its game. The brand is still seen as an industry leader in safety technology, though rival German brands and Toyota’s Lexus have recently matched or outdone it in pioneering some safety features. However, Volvo’s reputation for building safe cars could help its business in China as safety becomes an increasing priority in the world’s largest car market. In design, Volvo is moving away from
making boxy, square cars into more edgily fashioned, smaller and alternative fuel models – an area where Geely, which is developing electric cars, can help it.
Questions:
1. How has Volvo achieved differentiation over the years?
2. Why did Geely acquire Volvo?
3. Suggest strategies for Volvo to build upon its unique strengths.
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