From this case study, we can understand the Importance of Joint Ventures for two different countries to keep their brand reputation and earn profits rather than competing in line with their business objectives.
The logistics operations in India is gearing up in India due to many reasons like FDI, Increase in Manufacturing inline with Make in India Initiatives etc., which has created a tremendous demand for trucks, tippers with wide range of capacities, models etc., In this case study Eicher which is an Indian Company based out of Gurgaon which has a strategic alliance with Swedish based truck manufacturer Volvo in capturing business demand in India with technological and strategically aspects by protecting their individual business objectives and profitability getting ahead of competition.
Objectives of the case study:
To understand the Logistics & Supply Chain Management Industry trend in India.
How Indian companies are trying to come up with the Increasing demand in line with increasing the market share.
How strategically the foreign companies are entering into Indian markets either Individually or in association with Indian companies.
The Association of Eiche and Volvo (VE Commercial vehicles) in meeting the demand of trucks in India and how it leads to mutual benefits.
Need of the Study:
Any business if it has to grow irrespective of Industry or the nation is purely based on the trends in the industry and increase in economy of the particular country/nation. Indian GDP, Per Capita Income is increasing as the Industrialization is growing as a part of Make in India or the Government initiatives like foreign policy, Industrial Policy, Foreign Direct Investment etc., lead to tremendous change and demand in Indian Supply Chain, Warehouse Management, Logistics and allied segments and Industries and Heavy and Normal commercial Vehicles and one of the key components in transportation etc., Based on above mentioned reasons I felt there is need and because of my interest I have selected this case study for assessment on how Volvo has streamlined their business in India after series of concerns, issues and damages etc.,
The scope of the Study:
The Scope of the study is confined to Eicher which is one of the leading truck manufacturers in India and the Volvo which is a Swedish truck manufacturing company and the scopes here is further confined to the trends in the market and their business growth etc., which will not speak about the key strategies and decision-making, key points in alliance and the financials.
The major limitation is the data availability. The major data analysis is purely based on the strengths, weakness, opportunities, and threats of Volvo and Eicher inline of their association to tap Indian Market as per increasing demand. The financials, top line, bottom line, legal terminologies, etc, were not discussed or not evaluated which is a limitation while arriving for the conclusion and writing suggestions and recommendations. The time is one more constraint along with the getting the data from companies associates and even from the market.
The case taken in this study is how Volvo has resolved its issues while entering into Indian market which came with a plan of penetrating into the Indian market and the methodology used in this study is:
Primary data & Secondary data was collected from the websites of the Volvo & Eicher Companies. The merging business-related data is been collected from different articles and the theoretical part of data pertaining to business metrics has been collected from academic and other books. The SWOT analysis was the technique used in this case study to arrive at a conclusion and to give suggestions and recommendations.
Data Analysis & Interpretation:
SWOT Analysis & PESTLE Analysis:
Eicher is an Indian Company which has its presence in the automobile business since 1948 which entered into Heavy trucks business in 1986 with vast experience on Market.
Infrastructure facilities: Recently Eicher has built world-class facility at Gurgaon which is built on green concepts where there are maximum resources which are renewable. It’s based on Mantra “Maximum utilization of available resources”
Availability of resources: There is the availability of wide range of resources like Manpower, Infrastructure, Government subsidies etc., which will help them to expand.
Financially Strong: Volvo has Invested Rs.1083 Crore in India on VECV (Volvo Eicher Commercial Vehicles) which has given a boost to Eicher to get set and go.
Technology: It took 7 years for Eicher to build a truck and the cost Implication is Rs 25 Crore after association with Volvo Eicher has Managed to produce trucks with the very low process. The technology and changing demands and needs of the market helped Eicher and Volvo to capture the market. The vehicles from 6 ton capacity to 40 ton capacity with the latest technology were made to cater the needs of the Industry in India.
Technology: Eicher has got experience in service and retail model business of Automobile and it has no R & D facility and even the latest technology to build high-end commercial vehicles.
Expansion: The commercial truck manufacturing and selling business are viable only if the business is carried out in more than one country whereas Eicher don’t have operations other than India.
Financial: Eicher cannot afford to build high-end trucks and sell them within India and even expanding business across the horizons which is an obstructive aspect of Eicher.
They don’t have an understanding of the needs of the logistics, warehousing, Supply Chain, Manufacturing, power etc. in India which is a demand.
The cost Implications will be more if they have to start from scratch.
The government policies on FDI & may change because it is a political area and the Investment etc., will go on the toss.
Eicher can improve technologically as they are associated with world No. 2 truck manufacturer Volvo and the strategies and the mode of operandi can also be Improvised.
Eicher can expand its business in other parts of the world as they have expertise in maintaining retail business in Automobile Industry along with service centers.
Volvo can get exposure and expertise in Indian Market.
Volvo can sell its vehicles like trucks and buses in India with low cost in India.
It can have trusted service centers in India as it is in association with Eicher.
If Volvo gets market leader position in India it will have a wide range of opportunities and which may affect the market presence of Eicher.
As Volvo is Investing on Eicher in terms of technology, etc. and Eicher is providing only Infrastructure facility may lead to misperceptions.
Eicher can adopt the technology, mode of operandi etc., from Volvo and can Start its own manufacturing and produce high-end commercial vehicles at low cost.
Volvo has already Invested Rs. 1083 Crore in India as a part of Joint Venture / Strategic Alliance and if anything goes wrong there may be so many legal consequences which will lead to stake of Brand Reputation etc.,
The Political stability and if the government is firm on its policy on foreign direct investment etc. will give a positive wave to this alliance.
The legalities and the inconsistency in Politics and the governments at the state level and central level may lead to unnecessary obligations.
As the economy, GDP & Per Capita Income grows the earning capacity Increases which lead to business transactions at various levels which is a boost to Industry.
The people in India are emotional and sentimental and as Volvo is a foreign company it always has to ensure that the emotion of Indians is been taken care of Business at various levels like Promotional activities, designing the product etc.
Volvo may be very strong in Technology but the Roads and Infrastructure challenge any technology which means the technology has to be customized as per the requirements and Infrastructure of India and the locations.
The constitution of Indian and the legal framework of India is a typical framework which will give results often after postmortem of the issue.
Volvo & Eicher has to focus more on a legal framework which has to be in long-term relationship in line with their respective business needs and objectives.
The Eicher Plant at Gurgaon is strategically located where the climatically it is a cool place and the chance of natural calamities are low. The connectivity to different parts of the country and logistically to the ports and other means of transport is good.
Swedish based company Volvo is the second largest manufacturer of trucks in the world after Daimler which is from Germany has tied up with Indian truck manufacturer Eicher to expand their Business in India by Investing Rs. 1083 Crore which is equal to 50% share.
Volvo has contributed and brought their advances technology in Manufacturing, Warehousing, Retail and after-sales service in Eicher in India.
Volvo is clear in Expanding its business India and on the other hand, Eicher is keen on and working towards expanding its business through exports to other nations keeping India as a base.
VECV Volvo Eicher Commercial Vehicles has Invested Rs. 1300 Crore on New facility which is been set up in Pithanpur, Madhya Pradesh which has got the capacity of making 100000 Engines/ Year out of which the target is to export 30% of the engines to Europe. The VEVC has also Invested Rs. 1200 Crore on Body Shop plant to make closed body trucks.
The growth rate of VEVC is consistent by recording 27 % growth every year. The VEVC has crossed the turnover of Rs. 5443 Crore with a cash surplus of Rs. 700 Crore recording net profit of Rs. 366 Crore.
The exports of 4% were recorded for neighboring countries like Srilanka, Nepal, Bangladesh & Bhutan whereas 12% exports were to Southeast Asia, West Asia & Africa.
Conclusion & Recommendations:
Joint venture will always have tricky issues as there will be an alliance of two businesses with two philosophies. VEVC has to concentrate more on Management principles: Convergence, Complementaries, Compatability, and the Commitment. Now VEVC stood as 5th Largest commercial Vehicle manufacturer at the Global level and they have to strive hard to keep this alliance alive and expand strategically t other locations as they have reached only 50% of the targeted exports.