This document discusses the strategic alliance formed between Renault and Volvo in 1990. It notes that both companies had complementary competencies that could be leveraged through collaboration. The alliance led to increased sales, market share, and global competitiveness for both firms. Within 10 years, their combined sales reached $14 billion, making them the 6th largest automaker globally in terms of sales and 2nd in commercial vehicles. The alliance addressed threats from new entrants and substitute products while strengthening the firms' negotiating power with suppliers.

1. University College of the Caribbean/COL
Lecturer: Dr. Horace M. Williams
04 March 2012
Presented by : Leslene Lawrence

3. • Renault S A was operated as a private car
manufacturer in Boulogne, France since 1898
• Nationalized in 1945 by the French Govt.
• Post World War II - loss - near bankruptcy in
1980
• 1993 - Revenues of FRF170 billion
• Ranked 9th worldwide car unit output
• Loss FRF1.5 billion – operating income –
commercial vehicle in Europe

4.  Volvo AB operated Gothenburg, Sweden
since 1927
 Scandinavia’s largest industrial group and a
source of pride for the Swedes
 Cars, diversified trucks, buses & marine
engines
 Global competitor, plants Belgium Peru
Canada
 1992 – Sales SEK83 billion assets SEK117billion

5.  Post world war II the automobile industry
suffered a distinct decline in demand for motor
vehicles
 To remain viable auto manufacturers were
reassessing their market shares and ways of
strengthening their profitability
 The industry landscape was bleak and
partnerships and alliances were forged
 ....DesktopAppendix A STRATMGT.docx

6.  1971 Renault and Volvo swapping gasoline
engines for gearboxes – successfully
 1990 agreed to strategic alliances – sharing of
core competencies, exploiting synergies in
product development , purchasing and
collaboration on new projects
 Shift the strategic paradigm in Europe and
create a firm large in size to compete effectively
in the global market
 Two had complimentary competencies in
market positions, geographic regions

8.  Renault – 3 new successful lines of cars
 Volvo – increased sales , North America Japan
Southeast Asia
 Less than 10 years - SEK14 billion
 World position - sales 6th commercial -2nd car

10.  Threat of New Entrants: Major Capital required to enter this market. Post
war, most European countries were facing financial difficulties. Small
manufacturers unable to compete with large competitors in product
development and style changes. Acquisition of approved international
standards
 Supplier Power: Economies from volume purchase to be realized
 Threat of Substitute: The operation of the alliance and size of the
committees formed, effectively increased the switching costs
 Degree of Rivalry: The ‘Poison Pill’ was part of the intricate network of
the alliance which discouraged dismantling, imposing sizable costs on the
firm terminating the marriage. Position in the world market 9th for car
output and 2nd for heavy trucks and buses. Brands were strong Volvo
trucks and buses and Renault cars
 Buyer Power: Two major automobile manufacturers leveraging
advantageous buying power through the alliance. Volvo was know for
its high quality engineering and safety measures and Renault for style
and cost control

11. SWOT
Strengths Weaknesses Opportunities Threats
(internal factors) (internal factors) (external factors) (external factors)
• Expertise, competencies • Profit margins were low New Technology
• World Market share on trucks & bus • P4 executive line of cars The Japanese and
• 10% Trucks/Buses • Mid range Volvo cars • Emerging and American Manufacturers
10.3%cars could be substituted developing alliances
• The alliance provided • P4 platform cars were • Coming out of a
financial resources long overdue recession
• Dominant in N.A ,Asia
& Continental Europe
• Cars, Trucks, Buses
• Renault FRF170 Billion
Volvo SEK 117 Billion
• Renault cars

12.  Full merger – all complimentary had been
identified
 Would make a good marriage as Volvo is
leader in commercial carriers and Renault in
passenger cars
 Could be successful – manage cultural ,
relationships of middle management, better
dissemination of information from the top
down
 Consideration on the use of a common
language

14.  Eliminate the strained relationships of white
collar workers and stockholders
 The difficulty of departing from the path of
alliance is implied in an article by Bleeke and
Ernst (1995) who warns that alliances are often
precludes to a sale.

15.  Bleeke, J. & Ernst, D. (1995). Is your alliance
really a sale? Harvard Business Review
January-February 1997 – Pg.105
 Burner, R. & Spekman, R. (1998) Lessons from
Renault-Volvo . European Management
Journal Vol . 16 April 1998
 Carpenter, M.A. & Sanders, W.G. (2009)
Strategic Management 2nd Ed., Prentice Hall