Q 1: Use PEST analysis to identify challenges for Volvo in future.

Political Political element points to governments stability (present and future),favourability

towards business ,foreign investment and membership of supranational union like EU ( Worthington & Britton,2009). Political decisions impact hugely at economic ,social,cultural environment and tend to influence pace of emergence, adaption of new technology( Palmer & Hartley ,2005). 2010 UK elections brought hung parliament with Conservatives in majority(Ian Dunt,2010) that vows to reform corporate taxation and other business practices ( Conservatives,2011). Volvo will keep enjoying governments stability ,there are no pressure groups .However government , already struggling with increasing unemployment,stalled economic

recovery(Stevenson,2011a) and inflation (Stevenson,2011b) may rise taxes or not be able to provide subsidity,financial aides to automotive sector. However real challenges include ambiguity on Euro debt crises thats currently prevailing utmost at Greece but may grab Europe if got worsen.Good news is that European leaders seem to agree at a three-pronged agreement that seems to make the situation better (BBC ,2011a ).Debate whether Britain should leave EU got intense when about 81 MPs resisted over EU referendum amid concerns that leaving EU would be dangerous mistake for UK (BBC ,2011b) .the weakening value of Pound is major issue for businesses and consumer prospective (this is money,2011) .Both these factors may stand like giant challenges for Volvo in future.

Economical

Pointing at

availability of favourable business infrastructure (Worthington &

Britton,2009)levels of economic indicators ( GDP,interest rate,taxation,inflation), their stability over long term,it has direct impact at supply,demand,productivity,profitability, labour etc ( Needle,2004) creating opportunities and threats for companies (Leeflang & Raaij ,1995) and so firms rely heavily at these indicators levels (Oxelheim & Wihlborg,1995). Second automotive century brought profits,losses,bankruptcies ,mergers and acquisitions (Oliver & Holweg ,2008) .The global financial crisis has impacted soundly at UK,resulting in slower economy with GDP stalled in Q2 after 15 years of continuous growth (Economic Outlook ,2008).Due to it, deterioration in financial institutes is having negative

consequences on whole UK economy ( Blanchflower,2009).This is fatal as UK economy is relying more on services sector since continual decline of manufacturing from 1950s ( Needle,2004). Volvo could enjoy optimistic future as UK economy is racing out of recession (Oxlade,2011) growing at 0.1% (BBC ,2011d ) ,interest rate staying at 0.50%( BBC,2011c) , AAA credit rating by Standard & Poors (BBC,2011e) and governments five year austerity program that aims to reduce budget deficit to 1 % by 2015 (CIA factbook,2011) .However biggest challenge would be fierce competition and more technological solutions

(Backman,Borjesson & Setterberg,2007) that may lower production costs (Styhre & Kohn , 2006) which the companies are anxiously seeking due to economic environment.Also Volvo may need to battle over pricing strategy as record high unemployment and inflation are reducing purchasing power ( Pankhurst,2011).

Socio-cultural

Culture is explained as integrated set of distinguished learned behaviour patterns (Czinkota & Ronkainen ,2007 ) comprising of both material and abstract elements ( Worthington & Britton,2009,p148).Overall socio-cultural includes structure of population(age,lifestyle,social class,family) and its affect upon demand,quality,modification of marketing offers ( Worthington & Britton,2009). Cultural differences played role in failure of successful merger between Renault and Volvo in 1993 ( Dwyer ,1993).So customer focused companies tend to get closer to customers ( Dahlsten,2004) in order to be able to adapt to customer demands ( Styhre & Kohn , 2006 ) because technology is never completely technological but combination of soical,cultural components that are flexible ( Pohl , Styhre & Elmquist,2009).Unlike most automotive firms paying less attention to customer based concepts ,Volvo is working hard to develop brand associations with values like luxury,safety and adventurous lifestyle( Backman, Borjesson, Setterberg,2007). Emerging challenges for Volvo includes more complex social behaviours of people (Carrier & West , 2009) , increasing ethnic diversity ,single person orientation ,single parent families ,desire for instant gratification ( Palmer & Hartley ,2005)shift towards small cars for fuel economy.More Asians are coming to UK,their strong family values have favourability towards stylish family cars.However higher divorce rates.( Palmer & Hartley ,2005).,single parent families,tendency towards freedom from parental responsibilities have having huge impact at British people values and ultimately their purchasing behaviour.

Technological

Technology points to knowledge of accomplishing tasks in more efficient way.Companies must be technological advanced for survival and growth.(Dibb et al,1997).Technological innovations might be out of necessity, are open ended , need to mobilise support. So even service concepts seek stronger integration with technological developments in products.(Backman,Borjesson & Setterberg,2007) The increasing climatic effects from fossil fuel is propelling automotive firms to push technological research.(Pohl & Elmquist , 2010) .Technological innovations are viewed to reduction of environmental pollution.European Commissions has emphasized need for cleaner automotive technologies because most of modern technologies were not intended for necessity and lack of prediction,degree of scepticism and understanding their potentials delayed their implementation( Pohl , Styhre & Elmquist,2009). Major future technological challenges include more safety, light weight cars for fuel economy ,electric cars and low CO2 emissions.Over 30,000 test accidents have took Volvo beyond minimum legal standards (Svensson , Wood & Callaghan ,2006) .They have started making flywheels with carbon fibres(Volvo Newsroom,2011a) but more advancement is needed to make light car.Batteries for electric cars are costly, take 8-10 hours in recharging when fully exhausted.Making lighter,powerful and quickly rechargeable Lithium Ion Batteries for electric car( Boston Consulting Group,2011) is needed.Though models like V50 DRIVe and V70 DRIVe have CO2 emissions of 99 g/km and 119 g/km respectively (Volvo Newsroom,2011b) less than EU standard of 130 g/km in 2015 but need steps to bring it within 95 g/km EU standard for 2020.