by Merlin Hernandez

As a response to the demise of Scandinavian automaker Saab, in conjunction with loss of US market share, Volvo moved to fill the gap in Europe and re-direct its market focus as a viable alternative to arch rival BMW. In the face of large contraction in its US luxury fleet rentals, the company is using the opportunity to carve a place for itself in the re-alignment of the global auto industry and the increasing economic importance of emerging Asian markets. In a subtle shift in brand positioning as mid-range luxury, the primary focus of a revamped grand strategy is on customer satisfaction with the luxury image as secondary. The company continues to capitalize on its reputation for safety with a new emphasis on advanced telematics and better human-machine interaction. This is designed for wider consumer appeal and increased global sales at the retail end.

The re-branding of Volvo is facilitated by a new design culture that places less emphasis on luxury and more on competitiveness through value creation. Performance, comfort, and enhanced features comprise a design aesthetic aimed at increasing customer satisfaction. New market positioning, expanded production, and moves to widen global penetration are expected to set the stage for sustained revenue growth through retail sales with much less of a dependence on luxury fleet rentals in a climate where corporate belt tightening is still necessary. Steadily improving revenues will see a rise in investor confidence to accelerate the stock’s growth and boost Volvo’s ABB classification. In 2011, Volvo recorded a 20% increase in global car sales over 2010.

Volvo advanced its global interests by acquiring Ford’s former plant in China to effectively increase its production volume in anticipation of satisfying the needs of emerging markets outside of the US. The modulating of the classic V40 to become a cross-country wagon is a major strategy in the Volvo thrust to create global buzz and drive the numbers by shifting its sights down market with a high quality product that has caught the eye of the auto world. The V40 Cross Country targets the Chinese market which is wide open with currently only 83 cars to every 1000 people [compared to the US figure of 812/1000], and fast growing disposable incomes. The launch of the Cross Country at the Paris Motor Show last month has stimulated new interest in Volvo in the US market even though the model is not available in the US.

Also in September, Volvo rolled out its FH big rig on e-Bay no less, effectively positioning this new product offering within reach of the average truck driver. This is the client base expected to troll the home of after-market bargains for used parts. Volvo is using Twitter and Facebook to channel traffic to the eBay platform. It is a waking to the Volvo brand as appealing to a wide cross-section of buyers to replace the company’s primary branding in mid-range luxury where a firm like Audi still remains. This is expected to impact sales of the Volvo S80 compact sedan in the US trade. The S80 is a flagship product sold at close to a compact price ($38,000-$46,000) comparing well with the BMW 3 Series ($33,000-$60,000) and the Cadillac CTS Sedan ($39,000-$50,000). The Audi A8 is priced at $72,000.

Meanwhile the European crisis has influenced poor European sales in 2012. Combined with a recent stroke suffered by CEO, Stefan Jacoby, there was the risk of the company’s main goals being derailed by a nervous market that could see the stock price falling. There had also been speculation that Jacoby was reluctant to pursue an opportunity for very high end luxury cars in China, the home market of the company’s owners. In a bid to allay market fears and to spur faster growth in China, Jacoby, under whose stewardship the new direction emerged, was replaced last week. We might expect the company to continue its lower-priced retail thrust to drive sales volume but the luxury tag will be back to satisfy the demand for uber luxury among a new Asian monied class who are not about to be deprived of the full trappings of their recent wealth.

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