Volvo's Product Development Practices: Focus on Safety

            
 
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Case Details:

Case Code : OPER042
Case Length : 18 Pages
Period : 1991 - 2004
Organization : Volvo Car Corporation
Pub Date : 2004
Teaching Note :Not Available
Countries : Sweden
Industry : Automobile

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This case study was compiled from published sources, and is intended to be used as a basis for class discussion. It is not intended to illustrate either effective or ineffective handling of a management situation. Nor is it a primary information source.



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Introduction Contd...

The Volvo Safety Centre, which the company inaugurated in 2000, had facilities for conducing crash tests which, analysts said, had not been replicated anywhere till late 2004.

Commenting on the value proposition offered by Volvo to its customers, Maryann Keller, an automobile industry analyst noted, "Since the introduction of airbags in the late 1980s, the industry has understood that safety sells. A customer who buys a Volvo may find that incremental value is worth the cost simply because (he or she) already places a higher than normal value on safety."5

Operations Management Case Studies | Case Study in Management, Operations, Strategies, Marketing Management, Case Studies

Background Note

Volvo was founded on July 25, 1924, when Gaustaf Larson (Larson), an engineer and Assar Gabrielsson (Gabrielsson), an economist, met over a meal and agreed to build a car more suited for the roads and climatic conditions in Sweden, a cold country in a part of Northern Europe called Scandinavia.

The two founders worked earlier for SKF, a famous Swedish bearings manufacturer, where they nurtured the dream of building a car. In 1926, the duo prepared 10 prototypes of a car in a bid to convince SKF into investing in the company. The company not only agreed to invest Swedish Krona (SEK)6 200,000 in the venture, but also lent its patented name, AB Volvo.

On April 14, 1927, the company rolled out its first car, the OU4, from a factory near Goteberg, Sweden. The day marked the official date of inception of AB Volvo (Volvo)7. In 1928, Volvo started producing trucks. In September 1929, Volvo reported its first ever profit. The positive truck sales made its operations financially viable.

In 1934, Volvo launched its first bus, the B-1. The product rapidly gained acceptance as a vehicle fit for rural areas.

By the time World War II broke out in 1939, Volvo had established itself as a profitable automobile manufacturer with a broad product range. The company's automobile engines were recognized by industry for their reliability and were used in cars, buses, boats, fire tenders and military tanks...

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5]  Zillah Bahar, "Is Volvo guilty of car safety overkill?," www.cnn.com, May 06, 2001.

6] As on October 09, 2004, 1US$ = SEK 7.3038.

7] The Latin meaning of Volvo is 'I roll.'

 

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