volvo - success story

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VOLVO - SUCCESS STORY When Volvo Buses appointed a youthful Akash Passey as its first employee in India in 1997 to develop its business in the country, he commissioned a consultancy to explore whether the idea was viable. The consultancy returned with a 600-page report. Its conclusion? Do not bother. The price at which Volvo was looking to sell its buses Rs4m ($82,000, 57,000, £50,000) – was grossly unaffordable in India. Locally made buses were selling for one- quarter of that.

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Page 1: VOLVO - Success Story

VOLVO - SUCCESS STORYWhen Volvo Buses appointed a youthful Akash Passey as its first employee in India in 1997 to develop its business in the country, he commissioned a consultancy to explore whether the idea was viable.

The consultancy returned with a 600-page report. Its conclusion? Do not bother. The price at which Volvo was looking to sell its buses – Rs4m ($82,000, €57,000, £50,000) – was grossly unaffordable in India. Locally made buses were selling for one-quarter of that.

Page 2: VOLVO - Success Story

“My response was simple – I took the report and went to the nearest dustbin and threw it in,” says Mr Passey, who wears frameless glasses and sports a neat black goatee that is just starting to show flecks of grey.

Volvo launched in India in 2001 anyway and within a few years created a new market. Today, “taking a Volvo” has become the generic term in India for riding an interstate luxury bus, no matter what make of vehicle it is.

Page 3: VOLVO - Success Story

The Indian market has become a rare picture of rapid growth for Volvo Buses despite the travails afflicting the industry globally during the economic crisis.

To reserve this growth, the company has opened a new coach-building factory in Bangalore, which has become its most efficient in the world.

Page 4: VOLVO - Success Story

Such has been the company’s success that it is hard to imagine the trials Mr Passey went through in those early days establishing the brand.

In the process, he picked up some valuable lessons about introducing a luxury product into an emerging market, particularly in a country as cost-conscious as India.

Page 5: VOLVO - Success Story

“Even though globally we were a very big company here when we were starting, we were as good as nothing.”

Before Volvo arrived, India’s luxury bus market had been little changed for decades. Most buses consisted of truck chassis built by domestic carmakers, Tata Motors and Ashok Leyland.

And they were tough, rattling their way through the rutted roads of the Indian subcontinent from the Himalayas in the north to the lush jungles of Kerala in the South.

Page 6: VOLVO - Success Story

But they were uncomfortable. In spite of India’s soaring temperatures, they seldom had air conditioning. Baggage was often stacked on the top and exposed to dust, monsoonal rains and theft.

The slow 110-120 horsepower engines roared and strained as they crawled up through mountain passes or tried to overtake on the crowded roads, radiating noise and heat through the passenger section.

Page 7: VOLVO - Success Story

The open windows exposed passengers to dust and the cacophony of honking horns that characterizes India’s roads.

For the business travellers who used these buses, it was difficult to turn up fresh at a meeting in their destination city the next day.

That is if they turned up at all. The buses were maintained by the operators, mostly small “mom-and-pop” outfits, causing delays when they broke down.

Page 8: VOLVO - Success Story

Mr Passey, now managing director of Volvo Buses India, knew he had a vastly superior product.

The Volvo’s 240 hp 260 hp engine, like all modern buses, was tucked comfortably away at the back, where it was less noisy and created more room for passengers.

It was twice as powerful as the conventional Indian bus, meaning the Volvo was fast.

Page 9: VOLVO - Success Story

Business travellers could leave later and arrive at their destination earlier, making one-day business trips possible and saving on hotel bills.

The specially designed bus chassis meant the coach’s interior was spacious and could store luggage safely inside.

The air conditioning and insulated body meant windows could be kept closed, keeping out road noise and dirt.

Page 10: VOLVO - Success Story

Volvo provided post-sale maintenance services, ensuring its buses had a working life expectancy of about 10 years compared with three years for conventional rivals.

It also undertook to train drivers for its customers, so that they in turn could drive more safely and look after the bus.

When Mr Passey went around trying to sell his new product, operators laughed at him. Why spend more on a Volvo when passengers were willing to ride the inferior traditional buses? No one would agree to buy a Volvo.

Page 11: VOLVO - Success Story

“Of course, the resistance was very high. There were many places and many rooms out of which I was thrown,” Mr Passey says.

The only way to penetrate the market, he decided, would be to appeal directly to passengers. The reasoning was, once passengers had experienced a modern bus, they would never go back.

He decided to first seed the market. In 2001, Volvo supplied about 20 subsidised “trial” units to a selected group of operators.

Page 12: VOLVO - Success Story

The first step was to imprint on operators that Volvo’s promise of after-sales service was more than just words. Mr Passey quietly sent trainees to ride on each bus. When something went wrong, they would immediately report to him, allowing him to quickly deploy a service until to the stricken vehicle.

The operators began to realise the value of buying from a manufacturer that also maintained the vehicle. It enabled operators to forgo the usual investment in workshops and maintenance facilities and concentrate on selling tickets.

Page 13: VOLVO - Success Story

As word began to spread among passengers, operators found they were able to increase market share by using Volvos and they could charge 35 per cent more for tickets.

To further stimulate demand, Volvo targeted that institution of the Indian small town – the cinema hall. Each time a Volvo service opened in a town, the company would run an advertisement at the local cinema during the interval.

After the initial years, Volvo rapidly began gaining market share. Today, India’s luxury bus market has become one of the world’s largest after China – with sales of 600-700 vehicles a year. Volvo has 60 per cent market share.

Page 14: VOLVO - Success Story

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