Scania in the Swedish Truck Market : A study of how themanagement conducts the marketing according to the MarketingMix

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Bachelor Thesis in Business Administration EFO703, 15 ETCS

Västerås 2009-06-08

SCANIA IN THE SWEDISH TRUCK MARKET

---- A study of

A study of

A study of how the management conducts its

A study of

how the management conducts its

how the management conducts its marketing

marketing

according to the

according to the Marketing Mix

Marketing Mix

Authors: Liselott Holmstedt Daniel Sjögren Group: 2201 Tutor: Per Nordqvist

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Abstract

Level: Bachelor Thesis in Business Administration, 15 ETCS

University: Mälardalen University, School of Sustainable Development of Society and Technology , Västerås

Authors: Daniel Sjögren 86-11-21 Liselott Holmstedt 86-02-22 Tutor: Per Nordqvist

Date: 2009/06/08

Title: Scania in the Swedish Truck Market – A study of how the management conducts the marketing according to the Marketing Mix

Background: Scania is an old and well established company within its industry, thus the company has understood, through experience, that it is simply not enough to be product oriented in the truck industry, instead the company has to focus on what is of value to the customer. To know and understand the customer’s business or area of business is a key success factor which develops trust for the company, this trust and knowledge of the customer’s area of operation is of critical importance during economic slowdowns. Purpose: The authors have investigated and analyzed how Scania’s

marketing is conducted from a management perspective. The investigation will focus on the Marketing Mix, how the firm applies it in practice and on if the current financial crisis has affected the firm’s Marketing Mix.

Method: This investigation has an interpretative approach. The authors attempt to understand how the theoretical concept of the Marketing Mix is used in Scania by interviewing top managers at the company. The investigation is limited to a qualitative study. Conclusion: Scania is more and more embracing a new Marketing Mix

concept based on the values of their customers, it is a further development of the four P’s and the four C’s. The financial crisis has not changed Scania’s Marketing Mix significantly, this is because the company’s Marketing Mix is already so far developed to meet the challenges of the truck market.

Key words: Marketing Mix, Scania, Four P, Four C, Development of the Marketing Mix, Truck industry

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Sammanfattning

Nivå: Kandidatuppsats i Företagsekonomi, 15 ETCS

Högskola: Mälardalens Högskola, Akademin för Hållbar Samhälls och Teknikutveckling, Västerås

Författare: Daniel Sjögren 86-11-21 Liselott Holmstedt 86-02-22 Handledare: Per Nordqvist

Datum: 2009/06/08

Titel: Scania i den svenska lastbilsmarknaden – En studie om hur ledningen använder Marknads Mixen för att sköta företagets marknadsföring

Bakgrund: Scania är ett gammalt väl etablerat företag inom lastbilsindustrin. Företaget har förstått, genom erfarenhet, att det inte är tillräckligt att vara produktorienterad i lastbilsindustrin, istället måste Scania fokusera på vad det är som är av värde för kunden. Att veta och förstå kundens affär är en av de viktigaste framgångsfaktorerna i lastbilsbranschen, detta skapar förtroende för företaget bland kunderna. Förtroendet för företaget och Scanias kunskap om kundens affär är kritiskt i lågkonjunkturer. Syfte: Författarna har undersökt och analyserat hur Scanias

marknadsförning hanteras från ett ledningsperspektiv. Undersökningen kommer att fokusera på Marknads Mixen, hur företaget applicerar den i praktiken och om den nuvarande finans krisen har påverkat företagets Marknads Mix.

Metod: Den här undersökningen har en tolkande infallsvinkel. Författarna har försökt att förstå hur de teoretiska koncepten som Marknads Mixen består av används av Scania genom att intervjua personer i företagets ledning.

Slutsats: Scania tillämpar mer och mer ett nytt Marknads Mix koncept baserat på kundernas värden, ett koncept som är en vidareutveckling av de 4 P:na och de fyra C:na. Den nuvarande finansiella krisen har inte ändrat Scanias marknadsförning markant, på grund av att företagets Marknads Mix redan är så utvecklat för att möta utmaningarna i lastbilsindustrin.

Nyckel ord: Marketing Mix, Scania, Four P, Four C, Development of the Marketing Mix, Truck industry

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Acknowledgements

The authors would like to thank the following people for their contributions, without their help this thesis would not have been possible:

First of all the authors would like to thank Hans-Åke Danielsson, Stefan Lindblom, Per Malmström, Jon Månson and Staffan Sjögren, for taking your time to contribute with great information about Scania. With a friendly attitude they gave the authors good insight in the company’s utilization of the Marketing Mix.

The authors would also like to thank the Seminar groups, Matthias Holmstedt and Per Nordqvist for providing us with constructive criticism and encouragement to improve our thesis.

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List of Figures

FIGURE 1:SCANIA CORE VALUES... 9

FIGURE 2:SHAREHOLDER STRUCTURE WITHIN SCANIA... 10

FIGURE 3:RESEARCH MODEL... 11

FIGURE 4:THE ELEMENTS OF THE CLASSICAL 4’PS MARKETING MIX... 17

FIGURE 5:LAUTERBORN’S FOUR C’S VS. THE FOUR P’S... 18

FIGURE 6:THE CONCEPTUAL FRAMEWORK... 20

FIGURE 7:THE CONCEPTUAL FRAMEWORK FOR THE SECOND PART OF THE RESEARCH QUESTION ... 20

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1. INTRODUCTION

The aim of this chapter is to introduce the reader to the background of the investigation, the problem area, the problem formulation, the purpose, the delimitations, the choice of company, the target group and the reference system, that the authors have used throughout the investigation.

1.1. Background

“Today’s financial crisis is just the beginning of what is to come.” (Quotation with own translation) (Nilsson, November 07, 2008) (www.aftonblandet.se)

The financial crisis began in 2007 in the United States, it was caused by banks over lending to people who did not really have the means of paying back their loans, the result was default and the banks were left with huge debts which they could not collect on (Aktiefinansanalys, 2008). This crisis has been unpredictable as well as inevitable for both companies and households (Aktiefinansanalys, 2008).

In a market, such as the truck market, where complex packages consisting of both goods and services are sold, there are great marketing challenges (Strategic Platform). There are numerous issues that need to be considered and numerous problems that need to be solved, thus the financial crisis has hit the truck industry hard with negative orders becoming a reality for some firms (Stockholm TT, 2008). The crisis has also brought about large layoffs, in previous financial crises the market has decreased with 15-20% (Sjöberg, 2008) The economy is forecasted to fall by 30% this decade (Sjöberg, 2008).

Scania CV AB and Volvo Trucks are two world-famous Swedish truck producers (Ollevik, 2009). Both companies have completely different growth strategies, Scania focuses on natural growth while Volvo focuses on growth by acquisition (Sjögren). Scania CV AB is the most profitable manufacturer of heavy trucks, busses and engines for marine and industrial appliances, the company offers solutions consisting of goods and also various services (Dagens Industri)(Annual report, 2008). Scania’s sales have decreased due to the financial crises (Sjöberg, 2008). Inflows of orders, deliveries and profits have reduced dramatically. However, despite the crisis, Scania’s market share has not yet decreased (Sjöberg, 2008).

There are several ways for a company to handle a financial crisis. Some companies act defensively, they layoff personnel, cut or cancel promotion efforts to cut costs in the short term, curb investments, etc. (Eriksson and Flood, 2008) Other companies act more offensively employing aggressive marketing, they see business opportunities and ways to develop and improve its process (Skogström, Westin, Mörtsell, Edvinssona and Anderse’n, 2009).

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1.2. Problem Area

The market place has changed radically as a result of the major societal forces today such as the financial crisis. This has forced customers and companies to change their behavior (Kotler, and Keller, 2006)

The financial crisis has heightened competition between the European truck producers, the availability of customers, that are financially able to purchase a truck, has sharply decreased, due to this fact it is becoming increasingly important for Scania CV AB to find unique ways in which to capture and retain its customers. At present the focus has shifted from the physical product which Scania produces, mainly heavy trucks, to instead include more of a total transport solution (Grönroos, 2007).

Scania no longer offers its customers to buy a truck, the customer is rather offered a solution to their transportation problem, the customer who buys a truck, in the Swedish market, is not so much interested in the truck itself but rather the transportation opportunities which it provides (Grönroos, 2007).

As competition stiffens it is becoming increasingly important for Scania to conduct its marketing based on the needs and values of its customers, it is no longer possible to compete solely on the attributes of the core product. (Grönroos, 2007). Scania’s customers are increasingly becoming more demanding as they become more informed, as a result the customers are more and more seeking a trouble free environment in combination with lower total costs and better value (Grönroos, 2007). “… it is essential to understand the customers’ business or business area in order to understand the customers’ value. Scania aims to understand the customers’ business, otherwise it becomes almost impossible for the company to communicate correctly with the customer and convey that which is of value to him.” (Quotation from interview, Sjögren) When a company understands the customers’ business it can easily carry out the element of the Marketing Mix to suit it customers. The customers’ purchasing power has changed, due to the financial crisis, and the company is forced to cut down on spending, therefore the Marketing Mix has to be adopted to meet the challenges of today’s market. It also has to be modified to stay ahead of the competitors due to the heightened competition in the truck market. A modification of the Marketing Mix is aimed to create more value for the individual customer. (Jedberatt, 1999)

1.3. Problem Formulation

1. How does Scania conduct its marketing according to the Marketing Mix? 2. Has the financial crisis influenced Scania’s Marketing Mix?

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1.4. Purpose

The authors have investigated and analyzed how Scania’s marketing is conducted from a management perspective. The investigation is focused on the Marketing Mix, how the firm applies it in practice and on if the current financial crisis has affected the firm’s Marketing Mix.

1.5. Choice of Company

The authors have chosen to focus the investigation on Scania because it is a very successful global company. Scania operates in an industry that has generally been hit hard by the financial crisis, however Scania is the company that has fared the best in the face of the crisis, in its industry. The authors have made a logical assumption that since Scania is one of its market leaders in its industry it must have been successful in conducting its Marketing Mix.

1.6. Delimitations

The authors have limited the investigation to strictly look at Scania CV AB in Sweden and the marketing of heavy trucks, thus the finished product. The Authors have investigated Scania from a top management point of view. The theory considered will be limited to the Marketing Mix model.

1.7. Target Group

The target group that will benefit from this paper is university students and teachers in the field of marketing, also managers at Scania because they get to see a third party’s perspective on the application of the Marketing Mix and if the financial crisis has affected the company’s utilization of its Marketing Mix. The thesis can also be used as a benchmark for managers at other companies.

1.8. Reference System

The work will be sited in accordance with the American Psychological Association (APA) system of referencing, thus the work will be cited in the text, mentioning the author or authors’ surname of the text as well as the year of publication and if the text is a direct quote, the page number on which the text was found will be listed. The full details are presented in an alphabetic list at the end of the work (APA Referencing, 2009).

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1.9. Disposition

The aim of this chapter is to introduce the reader to the background of the investigation, the problem area, the

problem formulation, the purpose, the choice of company the delimitations, the target group and the reference system that the authors have used throughout the investigation.

In this chapter some common terms, used throughout the investigation, will be defined.

This chapter will describe the company of investigation. The authors have chosen to first present a short overview of the truck industry and then give a historical background to show that the company has, through the ages, worked to reduce the cost to the customer. Scania’s history is also something that the company is very proud of. The historical background will be followed with a description of Scania today.

The aim of this chapter is to introduce the reader to how the authors have approached the work with the intent of fulfilling the purpose. Furthermore, the reader will be introduced to the method of data collection, compilation and evaluation. The separate parts of the method section will explain what the authors have done, how it was done and a motivation as to why it was done.

In this chapter the authors presents the theory of the investigation. The theory will be used as a base for the construction of interview question and when analyzing the empirical data collected during the interviews with managers at Scania. The theories about the Marketing Mix consisting of the four P’s and the four C’s have been found in students’ literature.

INTRODUCTION

DEFINITION

METHOD

THEORY

INTRODUCTION

TO SCANIA

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This chapter is based on the authors´ findings and interpretations about the Marketing Mix collected from the four different interviews conducted with five top managers at Scania. The empirical data collected from the interviews will be strengthened by information presented on Scania’s homepage and in the annual Report.

In this chapter the findings are structured according to the similarities and further developments of the chosen theory of this investigation. The authors have also analyzed how the financial crisis has affected Scania’s Marketing Mix.

This chapter of the investigation will directly answer the research question based on the analysis.

This chapter will give some recommendations about topics that the authors would find interesting to further investigate in relation to the results of this investigation.

EMPIRICAL DATA

ANALYSIS

CONCLUSION

POSSIBLE

FURTHER

INVERSIGATION

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2. DEFINITIONS OF TERMS IN THE TRUCK INDUSTRY

This chapter will define some common terms used in the truck industry.

Financial Lease:

The process by which a customer is granted the use of a truck for a prearranged time, the customer is charged a fixed fee per month. The customer does not own the truck, a lease is thus an alternative to ownership provided by many dealers. At the end of the leasing period, the customer must return the truck to the dealer or he can sometimes purchase it for, most often, a prearranged residual value (Sjögren).

Heavy trucks:

Truck with a gross weight exceeding 16 tons (Malmström).

Operating Lease:

Unlike in a financial lease, the customer owns the vehicle, he signs a service agreement which ensures him a trouble free environment, if the truck breaks down it is covered by the operating lease which functions like an insurance to ensure that the truck is available for operation, the customer is charged per kilometer driven. (Sjögren).

Response time:

The time from when the customer initially contacts the call center to the arrival of the mechanic on site (Aronsson & Hall, 2005).

Service Agreement:

An agreement that encompasses oil change, filter change and other components that need to be changed with regular intervals, it also includes regular inspections with the aim to prevent breakdowns (Sjögren).

Service and Repair Agreement:

An agreement that encompasses all the aspects of the service agreement plus any major repair work, the agreement can be expanded to include tires, batteries and trailer (Sjögren).

Stop time:

The time the truck is not available for operations because it is broken (Sjögren).

Ton/Kilometer:

Ton transported per kilometer (Sjögren).

Up time:

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3. INTRODUCTION TO SCANIA

This chapter will describe the company of investigation. The authors have chosen to first present a short overview of the truck industry and then give a historical background to show that the company has, through the ages, worked to reduce the cost to the customer. Scania’s history is also something that the company is very proud of. The historical background will be followed with a description of Scania today.

3.1. The Truck Industry

The truck industry is structured so that each manufacturer sells its product through dealers, each dealer has responsibility for workshops. It is the dealers who have direct contact with the customers. (Scania, n.d) The current financial crisis has curbed the need for transportation, thus transportation companies do not utilize their trucks as much as they used to, leading to less wear and thus less need for the investment in new trucks and also less need for service (Lindblom). The truck industry has for many years shown evidence of ten year cyclical demand with substantial demand decreases at the end of each ten year cycle (Blomberg, 2009). “If one was to take a look back in time, it would become evident that larger crisis are normal at the end of every decade.” (Blomberg, 2009, P. 16)

Scania and Volvo are the main players within the Swedish truck industry. Volvo has handled the financial crisis by lying off personnel to cut costs. This has created an upset reaction of employees, stockholders, unions and the media. Scania has a different strategy, instead of lying of personnel they use some of the work time for education. Scania has met the crisis with optimism (Blomberg, 2009). Traditionally Scania has obtained market shares as a cause of the financial crisis (Blomberg, 2009).

3.2. Historical background

The Scania, that exists today, started out as two separate companies, Vagnfabriks-Aktiebolaget (Vabis), established in Södertälje in 1891 and Maskinfabriksaktiebolaget Scania, established in Malmö in 1901. The two companies did not initially start out producing trucks, Vagnfabriks-Aktiebolaget (Vabis) produced railway carriages and Maskinfabriksaktiebolaget Scania produced bicycles, however in 1902 each company introduced a truck which had been developed independently of each other (Scania World, n.d.).

At the turn of the twentieth century the very idea that transporting goods by anything other than horse and wagon was in itself revolutionary and it therefore took several years to gain the acceptance of business owners and the general public (Scania World, n.d.). A few years later, in 1911, Vagnfabriks-Aktiebolaget (Vabis) and Maskinfabriksaktiebolaget Scania merged to form one company under the name

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Scania-Vabis which allowed for the combination of the two company’s technical skills, this eventually lead to the decision, in 1919, to focus on trucks as the company’s core business. Scania-Vabis’ concern with their customers’ operating costs of the trucks led them to develop new more fuel efficient engines and in 1922 the company presented a new range of engine which could be adapted to run on either petrol, a petrol-alcohol mixture or on pure alcohol. This made it possible for the customers to make the engine run on which ever fuel was most economical at the time. This range of engines was to be the base for the modular system, the modular system allows the customer to combine preexisting parts to personally customize a truck which suits their specific needs (Scania World, n.d.).

In 1951 Scania introduced the company’s first V8 diesel engine equipped with turbocharger. The turbocharger further decreases the fuel consumption while at the same time increasing the engine’s power output (Scania World, n.d.). As competition in the domestic market sharpened, Scania was forced to invest heavily in research and development to stay ahead of its competitors, the company focused mainly on developing engines which produced high output at low revs which would lead to a better fuel economy, longer service life and less noise. Secondly the company tried to further its understanding of how loads affected truck components under differing driving conditions, this knowledge was used to design new vehicles that offered higher carrying capacities (Scania World, n.d.).

In 1969, Scania presented a new version of the V8, this time a turbocharged 14 liter engine with an output of 350 hp making it the most powerful engine available on the market while keeping fuel consumption down because of the power it delivered at low revs, this meant that the driver could achieve good fuel economy and long service life. In 1980 Scania introduced the 2-Series which amongst other things brought with it a new and improved modular system which meant that the customer could build his truck based upon his exact transportation needs (Scania World, n.d.). The modular system also meant that Scania’s delivery times could be shortened and manufacturing costs could be cut due to the small number of unique components that make up the modular system. At this time Scania also began field tests on computer-aided gear changing (CAG) which was designed to help the driver select the right gear to decrease fuel consumption by keeping the engine revs as low as possible. In 2000 Scania introduced a new 16 liter V8 engine producing 620 hp and 3,000 Newton meters of torque, allowing the driver to transport heavy loads with relative ease thus decreasing the fuel consumption and decreasing the operating costs. (Scania World, n.d.)

Scania’s successful growth in the last 60 years has largely been attributed to the modular system and the ability of the customer to tailor his truck to exactly fit his

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specific operating conditions. The modular system has also allowed the company to introduce technical developments into existing model ranges with relative ease, technical developments occur constantly, although major model changeovers occur with intervals. Scania’s work towards lowering fuel consumption has also made it one of the most environmentally friendly truck manufacturers, working to provide transportation solutions to ever growing transportation needs. Scania continues to develop its trucks and experiment with new solutions so that the customer will always benefit from the latest technology, reliability, efficiency, low maintenance and low overall operating costs (Scania World, n.d.).

3.3. Scania today

Scania is today the leading company in its industry both when it comes to profitability and brand. In 2008 the company had a turnover of 91,924 million SEK. (Annual Report, 2008). Scania now operates in over a hundred countries, with some 33,631 employees (Interim Report January-March 2009).

Scania aims to create lasting value for its customers, employees, shareholders and the societies in which it operates. Scania always puts its customers first, this can be illustrated in a figure of Scania’s core value (Annual report, 2008).

Figure 1: Scania Core Values

(Source: Scania n.d.)

Scania manufactures high quality products with the aim to reduce the total cost to the customer during the product’s life time, at the same time as it causes minimal impact on its surroundings. Scania produces trucks with a gross weight of 16 tones, busses and coaches, engines for various marine and industrial applications, services and financial services. The company is divided into two main parts, vehicles and services, and financial services (Annual report, 2008).

Scania’s truck business is divided into four segments, long haulage, construction, distribution and public services, these Segments can be further divided up to include a total of 24 segments (Malmström) (Månson).

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During 2008, Scania sold 66,516 new trucks for a total value of 55,566 million SEK, the company delivered 7,277 new buses for a total value of 8,186 million SEK, for a grand total of 73,793 SEK (Annual report, 2008). The company sold engines for 1,151 million SEK, services for 16,393 million SEK, used vehicles for 4,370 million SEK and miscellaneous for 3,812 million SEK (Annual report, 2008). The net profit for the Vehicles and Services department was 12,098 million SEK and a net profit of 12,512 million SEK for the Financial Services department (Annual report, 2008). The net profit for the whole company was 8,890 million SEK (Annual report, 2008). Scania’s Financial Services department offers, amongst other services, financing for purchases of vehicles and various leasing agreements, the department presented a net profit of 12,512 million SEK in 2008 (Annual report, 2008).

Even though Scania’s sales have decreased due to the financial crises it has obtained a strong position in the market. Scania has gained sympathies from different unions as well as from the government for its way of handling the financial crisis Scania has a strong corporate culture and a well working business strategy (Dagens Industri, 2009). Scania has met the crisis with optimism. Scania sees opportunities to improve its business, it is an opportunity to streamline and improve their operation as well as eliminate waste. (Blomberg, 2009)

Scania has a large and profitable service net work, that is right now favorable for the company since service for trucks are still in demand despite the financial crisis, thus the service department is less affected then the sales of new trucks. The customers are keeping their trucks longer due to the crisis, this creates higher demand for service because of wear on the products. (Scania, 2008)

Figure 2: Shareholder Structure within Scania

The largest owner of shares in Scania is Volkswagen AG. Other owners are MAN AG, Investor AB and the Wallenberg Stiftelsen.

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4. METHOD

The aim of this chapter is to introduce the reader to how the authors have approached the work with the intent of fulfilling the purpose. Furthermore, the reader will be introduced to the method of data collection, compilation and evaluation. The separate parts of the method section will explain what the authors have done, how it was done and a motivation as to why it was done.

4.1. Research model

Figure 3: Research Model

(Source: Own construction)

The model illustrates how the authors have planed their research

The authors started their research by choosing a company that they wanted to investigate. After evaluating different companies the authors found that Scania was

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the company that was the most unique and interesting. The authors made a pre-investigation and a secondary source review that led up the topic of pre-investigation and the problem formulation. Since the financial crisis is highly relevant for Scania, the authors decided to investigate if the financial crisis has influenced Scania’s Marketing Mix to put an extra interesting edge to the investigation. Since the authors attempted to understand how the theoretical concept of the Marketing Mix was used in Scania they utilized an interpretative approach as a method and they limited the investigation to a qualitative study since this was the most appropriated concerning the problem formulation. The authors managed to contact five different top managers at Scania that they interviewed. The theory chosen was the Marketing Mix since this is the theory most relevant to Scania’s marketing. The data collected in the forms of interviews with managers from Scania, formed the basis for the analysis and finally led to a conclusion with an attempt at answering the problem question. The model is constructed by the authors.

4.2. Pre-investigation

At the commencement of the thesis, the authors had frequent contact with Staffan Sjögren, Vice President Franchise and Factory Sales North East Asia Region, concerning possible issues that Scania faces. These discussions contributed to the problem formulation and the purpose.

4.3. Secondary Source Review

Once the problem was formulated, the search for relevant theories was initiated. After meticulous evaluation of the different theories the authors found that the Marketing Mix was the theory they considered the most relevant to the work. Although Scania is a manufacturer of producer goods, the Marketing Mix is applied because the seller is the active and dominant part. The books used during the secondary source review were mostly gathered from the library at Mälardalen University and the articles used were mostly gathered from databases such as ELIN, provided by the library at Mälardalen University. Other books that were used included course literature from various marketing courses which the authors had previously attended. Information about the financial crisis was collected from different articles in magazines and the internet.

4.4. Interpretative Approach

The methodology that the authors have chosen is the interpretative approach, thus “understanding provides a context for thinking about action but does not specify it.” (Fisher 2007 P. 41). The interpretative approach best coincides with the purpose of the investigation, it primarily aims at collecting information concerning the chosen

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subject of study to find out how things are being done but does not aim at offering advice on how the object could be modified (Fisher 2007). The authors attempt to get an understanding of how Scania’s management conducts its marketing according to the Marketing Mix and if the financial crisis has had any impact of the Marketing Mix, thus the optimum way to go about this is through conducting a study using the interpretative approach composed of literature reviews and interviews with persons of interest within Scania (Fisher 2007).

4.5. Qualitative Study

The authors have chosen to limit the investigation to include only a qualitative study due to the fact that a qualitative study perfectly coincides with the purpose. The authors also attempt to go deep into the subject and therefore a qualitative study was the best option. A qualitative study is composed of words, which are then interpreted and analyzed by the researcher to arrive at a conclusion, while a quantitative study relies on numbers which are then used to form statistical data (Christensen, Andersson, Carlsson and Haglund, L., 2001). According to Fisher, qualitative studies allow the researcher to gain a more holistic account of the subject matter which he or she is researching, furthermore Fisher states that quantitative studies are not suitable for the study of complex matters (Fisher, 2007).

4.6. Interview

By conducting interviews one can gain a deeper understanding of material presented by the respondent, another positive aspect of interviews is that the respondent is able to answer the presented questions in his own words as well as giving the authors the chance to ask follow up questions and clarify possible uncertainties (Christensen, et al. 2001).

The authors decided to conduct the interviews face-to-face with the respondent due to the fact that the problem area is complex and that the respondents are senior managers at Scania who may not be willing to answer questions other then in a face-to-face interview. An interview conducted in person thus also develops trust between the respondent and the interviewers which can lead to the willingness to share more information. Some other advantages of conducting interviews is that complex questions can be asked, the interview situation can be controlled by the interviewer, also the time required to conduct and interview is considerably short compared to the time required to conduct a questionnaire (Christensen, et al 2001). Some possible shortcomings concerning interviews can be the need for both parties to have to meet in person, there is a chance that the respondent in some way becomes influenced by the interviewer, the personal interview may not be suitable for

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sensitive topics of investigation, interviews also require that the interviewer is well educated in the field which is being investigated, finally the data analysis following the interview can be complicated (Christensen, et al 2001).

The interviews were recorded in order to allow the authors as well as the examiner to reference the exact words that the respondent said during the interview. The biggest advantage of recording an interview is that the interviewer can concentrate on asking questions and listening to the answers given by the respondent. Another advantage of recording the interview is that the authors can, at a later instance, play back the answers to review exactly what the respondent said (Christensen, et al 2001).

However technical malfunctions can potentially hinder the interview and the facts that the interview is being recorded can have a negative effect on the respondent (Christensen, et al 2001). The analysis was based upon the information gathered in the interview process to determine if the theory, as presented in the literature study, is in fact what Scania does in practice.

The interviews took place at three different dates at Scania’s head office in Södertälje. The authors felt very welcome and got a very positive response from the respondents. One of the interviews took place in a more relaxed environment at Staffan Sjögren’s home in Gnesta.

4.6.1. Semi-structured

The interviews were conducted in a manner of semi-structured interviews, thus the authors presented the respondent with a number of questions but other questions that arose during the interview, as a result of the answers given by the respondent, were also perused (Fisher, 2007).

The authors saw it fit to use a panel interview consisting of more than one interviewer and only a single respondent, one of the authors acted as the head interviewer while the other author took notes and operated the recording equipment, she was however also allowed to ask the respondent follow up questions (Christensen, et al 2001). The authors composed an interview guide, a list of questions or general issues which the interview would concern (Christensen, et al 2001).

4.6.2. Selection

The authors have chosen to conduct interviews with persons of interest within Scania to gain a deeper and more developed understanding of how the organization conducts its marketing according to the Marketing Mix. The authors have managed to get four interviews with five different top managers at Scania. Staffan Sjögren, Vice President Franchise and Factory Sales North East Asia Region, Per Malmström,

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Head of Business Market Intelligence, Hans-Åke Danielsson, Press Manager Corporate Relations, Jon Månson, Head of Market Communication, Stefan Lindblom, Head of Brand and Marketing Communication. These persons were selected because they could give the authors an insight into the company from a top management’s perspective and because they hold positions in different parts of the company the authors could get a broader view and different perspectives of how the company conducts its marketing according to the Marketing Mix. Also if two managers, in different parts of the company say the same thing then the answer will be strengthened and confirmed.

4.7. Empirical Data and Analysis

The empirical data part of the investigation presents the empirical data, derived from the interviews and structures it into the different concepts of the Marketing Mix theory to show similarities and developments. The empirical part is structured according to the conceptual framework as the authors created to guide their investigation.

In the analysis part of the investigation the authors have found and highlighted similarities and differences between the empirical data and the theory. Furthermore, the authors present and discuss reasons as to why certain similarities and differences exist.

4.8. Validity and Authenticity

• Validity - the state of being logical and true (Oxford Advanced Learning’s Dictionary, 2005, P. 1692).

• Authenticity - the quality of being genuine and true (Oxford Advanced Learning’s Dictionary, 2005, P. 88).

The Authors confirm that this investigation is valid and authentic. The findings were derived though the use of personal, semi-structured, panel interviews with the five selected top managers at Scania. The managers had good insight into the marketing at Scania and could thereby enlighten the authors as to how the company conducts its marketing according to the Marketing Mix and also how the financial crisis has impacted the company’s marketing. The fact that the authors interviewed several people at Scania adds validity and authentically to the investigation. The theories used in this investigation are found in course literature written by well know authors. The authors have analyzed all the information critically, the interviews were also recorded in order for the authors to be able to go back and listen to the exact words spoken by the respondents in order to present the empirical data correctly.

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5. THEORY

In this chapter the authors present the theory of the investigation. The theory will be used as a base for the construction of interview question and when analyzing the empirical data collected during the interviews with managers at Scania. The theories about the Marketing Mix consisting of the four P’s and the four C’s are found in the author’s course literature.

5.1. Choice of theory

The authors started by conducting a pre investigation to search for marketing theories which could be relevant to Scania. The authors researched the theories which could be applicable to Scania’s marketing and arrived at the Marketing Mix as the most relevant. The authors also considered relationship marketing and industrial marketing from a network perspective as alternatives to the Marketing Mix, however relationship marketing happens between the seller and the customers and industrial marketing from a network perspective is more applicable when a collection of manufacturing firms sell to each other, where the output of one firm is the input of another firm, thus they were not relevant to this investigation since the authors wanted to see how the company conducts its marketing form a management perspective. Towards the end of the pre investigation stage, the authors had a conversation with Staffan Sjögren, Vice President Franchise and Factory Sales North East Asia Region, to inquire about the company’s method of marketing, he confirmed that Scania applies the Marketing Mix when conducting the company’s marketing. Thus the authors decided to use the Marketing Mix to conduct the investigation. After finding out which theory the authors were going to utilize, they researched what had previously been written about the Marketing Mix. The traditional concept of the Marketing Mix is the four P’s. Many studies have been conducted concerning the various applications of the Marketing Mix model and their success and shortcomings.

Research has ranged from analyzing the marketing strategies in many kinds of markets and firms of different sizes and from different perspectives, as well as attempts to extend the usefulness of the four P’s.

Some research has even rejected the 4 P’s, suggesting other frameworks. There have also been studies conducted into how firms have developed their Marketing Mix, depending on the requirement, environment and need for the firm to evolve to stay competitive and also critiques of the general Marketing Mix model. The information gathered was used to find and formulate a relevant theory. To see a list of the key words that the authors used during the secondary source review please see appendix A.

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5.2. Marketing Mix

The American Marketing Association defines the act of marketing as follow: “Marketing is the process of planning and executing the conception, pricing, promotion and distribution of ideas, goods and service to create exchanges that satisfy individual and organizational objectives” this definition is in fact based on the Marketing Mix model of marketing.

The Marketing Mix model, introduced in 1964 by E. Jerome McCarthy, is based on the four P’s, product, price, place and promotion. (Gummesson, 1999) Product refers to the good or service which the firm produces, price refers to what the customer has to give up in order to attain the product, place refers to where the good or service is made available to the customer and promotion refers to how the firm goes about informing their potential customers of the good or service which the firm has to offer. (Bennett, 1997)

Figure 4: The Elements of the Classical 4’Ps Marketing Mix

Product Place

Product variety Channels Quality Coverage Design Assortments Features Locations Brand name Inventory Packaging Transport Size Service Warranties Price Promotion

List price Sales promotion

Discount Advertising Allowance Sales force Payment period Public relations Credit terms Direct marketing

(Source: Kotler, P. and Keller, K. 2006, P. 19) T TT

TARGET ARGET ARGET ARGET MARKET MARKETMARKET MARKET MARKETING

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This figure was taken from Marketing Management by Philip Kotler and Kevin Lane Keller and it describes all of the elements which the classical Marketing Mix, consisting of the 4 P’s, encompasses.

Traditionally the four P’s were introduced as controllable factors that would be likely to influence the ordinary customer’s buying decisions. (Constantinides, 2002) These traditional definitions of the four P’s that make up the Marketing Mix model have, since their introduction, been changed and modified to better correspond to the needs and wants of customer.

The management of the traditional Marketing Mix, the four P’s, has frequently been criticized for its shortcomings. What most textbooks avoid to mention is that more than 75% of marketing academics are not satisfied with the four P’s as a pedagogic tool (Constantinides, 2002). Thus there is a need to further develop the Marketing Mix concept to better suit the challenges of today’s market, the Marketing Mix based on the 4 P’s can be said to be obsolete and not applicable to the demands of personalization that the modern market has, it can be considered to be a byproduct of the by gone era of mass marketing (Constantinides, 2002).

Robert Lauterborn has developed an extension of the four P’s called the four C’s. The four C’s are composed of Customers wants and needs, Cost to the customer, Communication and Convenience to buy (Kotler, P. and Keller, K. 2006).

Figure 5: Lauterborn’s four C’s Vs. the four P’s

(Source: own construction based on information from Kotler, and Keller 2006, P. 20) The figure explains Lauterborn’s development of the Marketing Mix.

Customer wants and needs Vs Product: Customers refer to who will buy the goods or service that the firm has to offer. It is no longer possible to first develop and produce a product and then sell it to the market. The company must identify and understand the target group’s needs and then manufacture products in response to those specific needs. It is the customer who is in charge and effort must be put on satisfying the customers (Kotler, and Keller, 2006) (Constantinides, 2002). Needs are the basic human requirement such as water, air, food, etc. When these needs are defined to a specific object, they become wants. A company cannot create new need, however it can influence wants. Companies satisfy customer’s needs by combining a set of benefits by offering products, service, information, and experience. At present,

Product Vs. Customer wants and needs Price Vs. Cost

Promotion Vs. communication Place Vs. Convenience

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offering customers what they want is no longer enough, a company must also educate the customer on what they want. To get a comparative edge the company must customize the features of the product and service to corresponds to the customers’ different needs. (Kotler, and Keller, 2006)

Price Vs Cost to the customer: The price is just one part of the total cost of obtaining, operating and servicing the product over its lifetime. The cost to the customer refers to all the costs that are involved in acquiring a product. This includes for example traveling in the form of time and fuel costs. The Price concept has the philosophy that customers prefer products that are cheap and highly available, but this philosophy is more applicable for developing countries than for the mature market where the customers are more informed. (Kotler, and Keller, 2006) A company can charge high prices for its product as long as it manages to convince the customer that its products provides lower total cost than any of its competitors.

Promotion Vs Communication: Communication is seen as less manipulative than promotion. It is more a give and take interaction between the seller and the buyer. Communication is focused on personal selling and service and it is more direct than promotion. Through communication the seller is able to adopt the message and the product to fit each customer. (Kotler and Keller, 2006)

Place Vs Convenience: A company must think convenience instead of place, it has to know how its customers prefer to purchase for example on the internet or on the phone. Convenience also refers to the physical distance that the potential customer has to travel in order to be able to purchase the good or service in question. The distance, that the potential customer has to travel in order to acquire a particular good or service, may very well be the determining factor in his or her choice of which firm to patronize. Convenience also includes how easy it is to find the product and information about the product. Customers prefer to purchase the whole package related to ownership of the product in one place because it is more convenient then searching for other places where they can purchase the rest of the package. (Korler, and Keller, 2006)

The previously mentioned four P’s is based from a producer’s perspective, meanwhile the four C’s is from the customer’s perspective. (Kotler, P. and Keller, K. 2006, P. 19)

According to Michael Porter, the marketing effort within many companies have to gain better insight into the dynamic and ever changing marketing of the 21st_century,

if this does not happen, marketing will cease to exist as a value adding corporate activity. The marketing effort should rather be geared towards understanding and meeting the customers’ needs, wants and values. (Constantinides, E. 2006)

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5.3. Conceptual Framework

The conceptual framework has been developed based on the problem formulation, the purpose and the chosen theory during the secondary information review.

Figure 6: The Conceptual Framework

(Source: own construction)

The above figure has been constructed by the authors to guide the investigation. It pictures how Kotler’s 4 P’s of the classical Marketing Mix have evolved to Lauterborn’s 4 C’s, the figure shows which P corresponds to which C.

Figure 7: The Conceptual Framework for the Second Part of the Research Question

(Source: own construction)

Figure 5 has been constructed by the authors to guide the investigation for the second research question, if the financial crisis has influence Scania’s Marketing Mix.

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6. THE EMPERICAL DATA

This chapter is based on the authors´ findings and interpretations about the Marketing Mix collected from the four different interviews conducted with five top managers at Scania. The empirical data collected from the interviews will be strengthened by information presented on Scania’s homepage and in the annual report.

6.1. Findings, Interpretation of Scania’s Marketing Mix

“It has become apparent that the customers in the truck market are not as interested in product features as they used to be, rather the customers are more interested in how much money they can make from the use of the truck. This is why Scania has changed their marketing from a product focus to customer focus” (Quotation, Sjögren).

Staffan Sjögren pointed out that the meaning of the letters that make up the Marketing Mix does not matter that much, the letters are there to capture the concept of the Marketing Mix, to get all practitioners of marketing on the same page, so that everyone understands the concept. “Theoretical models are mostly developed to have a common language (within a specific profession), the models are made up of certain common sense elements but everyone has heard of the four P’s. It is easy for professors to tell Scania what to do but implementation is a lot harder” (Quotation, Månson).

Thus Kotler’s four P’s should be considered as a concept to understand the Marketing Mix from a product focus, such as features of the product. However Scania soon discovered that selling to the customer by only focusing on the aspects or features of the truck was becoming increasingly difficult, thus the 4 P’s concept of the Marketing Mix had started to become obsolete (Sjögren). It started to become apparent that in order to sell trucks, Scania had to understand the customers’ costs and how these could be reduced, at this point the four C’s were discussed to better understand the customers’ costs. Later on Scania developed their thinking and started to talk about customer values. The customers’ values are today in the center of the concept discussion. The letters are just a description (Sjögren).

According to Staffan Sjögren the four P’s are more developed for consumer products. For example a customer of consumer products will be interested in how fast he can drive in his car and how fast it accelerates because he does not have to make money from the use of his car. That is why Scania realized that the four P’s are no longer applicable. It is more about being customer focused. (Sjögren)

“One has to approach the situation from a different perspective when it comes to the truck business then from the regular consumer market” (Quotation, Sjögren).

Scania has had different slogans through the years. During the time it was focusing on the four P’s its slogan was: “King of the Road”, this was the time when the company was still talking about the features and performance of the truck (Sjögren).

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Later on it developed the slogan: “For Demanding Customers” (Sjögren). This shows that Scania changed its focus to be more customer oriented (Sjögren). Today Scania communicates Pride and Trust, this is more to illustrate the values of the customer (Månson).

Picture 1: Slogan during the time Scania was still using the Four P’s

(Source: visbytungafordon.se)

Figure 8: The Development of the Marketing Mix within Scania

Product Customer wants and needs Value to customer

Price Cost Value to customer

Promotion Communication Value to customer

Place Convenience Value to customer (Source: own construction)

The figure illustrate that Scania today has develop a value concept of its Marketing Mix. The figure was constructed by the authors to give the reader an overview of the findings that the authors derived from the interviews, the figure shows how each link of the Marketing Mix has developed within Scania. The following text in the empirical investigation will be section up according to the figure.

Product

Scania speaks more in terms of customer wants, needs and values then the features of their product because it is a producer good that people have to make money from.

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Product goes to Customer Wants and Needs

Scania’s core value is: customer first, the organization aims to be close to its customers to gain deep knowledge about their needs and wants (Annual report) (Malmström) (Lindblom).

Scania works hard to understand the customers’ business or area of business to be able to provide them with a truck that has the right specifications suitable for the customer’s application, thereby the company is simply supplying already existing needs (Sjögren) (Malmström). Scania also listens to its customers when developing its products to try to improve certain aspects of the trucks which the customers are not satisfied with. It is impossible to satisfy all customers’ needs, the company has to focus on certain selected customer segment to serve those in the best possible way (Malmström).

Scania identifies the customers’ needs by market research, other forms of analysis and through meetings with customers (Malmström). The business of the customer has to be understood by the seller because the truck is a producer product and not a consumer product (Sjögren). The customers’ needs, wants and values are gathered though market research, Scania has a department called Market Intelligence which monitors the different information channels and keeps track of the customer satisfaction index (Malmström).

Scania works continuously to satisfy its customers’ requests, the company has since the 1940’s used what is referred to as the Modular System (Månson). The Modular System “… can be said to work like a Lego system…” (Quotation, Sjögren), this is to say that the Modular System allows the customer to build his truck from a preexisting range of parts, thus he is given the opportunity to specially customize his vehicle for the purposes in which it will be used (Sjögren).

Using Scania’s Modular System one can theoretically produce over one million specifications, thus the customer is presented with almost endless variations which he can use to tailor his truck from (Sjögren). The Modular System allows for a large variety of combinations without it costing a fortune to produce, this means that requests for special purpose vehicles can be accommodated rather easily because the Modular System allows for such a large variety of combinations, this is unlike most other truck producers who need to special build everything (Lindblom).

The Modular System also ensures that the customer can use his truck for a long time due to the availability of spare parts, due to the fact that many of the same parts make up different kinds of vehicles and some parts being reused in new truck models, with some parts being in use for as long as 30 years (Sjögren). The longevity and wide use of many of the different parts that make up the Modular System also makes service easier and cheaper for Scania since a lesser amount of spare parts has

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to be stocked, which in its turn is of value for the customer since service becomes easier and cheaper for him (Sjögren).

Product goes to Customer needs and wants to a Value Development of the Marketing Mix

”Over the last few years the products have become more and more alike and because of this it has become more important for the company to differentiate itself on other things” (Quotation, Lindblom).

Environmental aspects are important to take into consideration, this is of value to the customer, however not for the sake of being environmentally friendly but rather because a profit can be made from being environmentally friendly (Lindblom). Many of Scania’s customers demand low fuel consumption, not necessary the haulage contractor company itself but their customer such as IKEA or ICA that aims towards a better environmental image (Malmström). “... the Co2 debate is very intense, it is strongly related to fuel consumption, if we can present the customer with ways of saving fuel then they will be interested regardless if they care about the environment or not” (Quotation, Lindblom). This is to say that low fuel consumption is a value for the customer since it reduces his operating costs and is at the same time good for the environment no matter if this, in itself, is of value to the customer or not (Månson).

Some retailers demand low emission trucks because they are trying to maintain an environmentally friendly image (Malmström). The retailers know that they will attract more business because of this image and are therefore willing to pay more for trucks that has a lower impact on the environment (Lindblom). The retailers are trying to be environmentally friendly not because they have an ideological profile which calls for this but because they see a potential for profit (Lindblom). However, according to Per Malmström, the fact of the matter is that all transportation with fossil fuel driven vehicles is harmful to the environment (Quotation, Malmström). Another major concern that Scania works constantly to improve is road safety, improved road safety is a part of Scania’s brand image, strategy and the company’s heritage (Scania safety on road, 2008). The truck and the roads that it drives on are a major factor that affects road safety but the single biggest factor is the driver, their behavior and attitudes have a big impact on road safety (Scania safety on road, 2008). Scania designs its vehicles to support the driver in the best possible way (Scania safety on road, 2008). Scania also offers driver training to educate the driver in proper use and maintenance of his vehicle and safe ways to drive, the goal is to change the drivers’ behavior to increase road safety (Scania safety on road, 2008). Scania works in conjunction with the World Health Organization (WHO) to improve road safety (Scania safety on road, 2008).

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The importance of price to the customer depends on the maturity of the market. In a market that is not yet mature the price of the truck is a significant factor in the customers’ purchasing decision (Sjögren). In Sweden where the operators are highly advanced the price is not as important to the customer as the total expense in the form of service, financing, fuel, stop time, residual value etc (Sjögren). Thus the customer is more interested in the total cost of the truck over its operating life (Sjögren). Scania aims to be the price leader but not the cost leader in its industry. Scania does not want to be known in its market as a producer of cheap trucks (Malmström).

Price goes to Cost to the Customer

Some operators today are more interested in operating leases instead of owning the truck (Sjögren). In an operating lease the service of the truck and financing are included (Sjögren). What is importance to the customer is the cost per ton/ kilometer, this is calculated thoroughly (Sjögren). Why the customers sometimes prefer an operating lease is because they want to have a fixed cost per driven kilometer (Sjögren). It makes it possible for the driver to decide his margin and to avoid risk factors in his calculation (Sjögren).

Scania’s whole concept revolves around reducing the cost for the customer per ton/ kilometer, which gives the company a competitive advantage (Sjögren).

Scania works constantly to lower fuel consumption, it also has its own development center where it continuously develops, designs and constructs trucks in a way which makes them easier to service, thus lowering the customers’ service cost (Sjögren). Another aspect in the driver training that was mentioned before is to educate the drivers on how to drive safe and economically (Scania, n.d). With a well trained driver the customer will get lower fuel-consumption, he will lower the risk for accidents and thereby less unplanned downtime and lower insurance premiums, he will also get less tire wear, the power train will last longer and consume less oil (Scania.co.uk). Lower cost to the customer is equal to higher margins (Scania, n.d).

Picture 2: Scania Driver Training

Scania offers their customers driver training to help drivers to drive more economically and safer. (Scania, n.d) (Source: scanianewsroom.com)

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Price goes to Cost to the Customer to a Value Development of the Marketing Mix

“… Scania’s customers are prepared to pay more for quality and good service” (Quotation, Malmström).

“We are not ashamed to have a reputation of being expensive, because we can offer the customer better operating cost and quality, over time the customers will receive value in the form of profit from purchasing a Scania” (Quotation, Malmström).

“If the option is cheap but not trustworthy service, or a bit more expensive, I believe that the decision is easy” (Quotation, with Malmström).

The customer has different values depending on his area of business (Sjögren). If he is a long haulage drive he values comfort and low fuel consumption (Sjögren). Scania has to understand the business of their customers to identify their values, in order to communicate and deliver the right values, this creates credibility (Sjögren). Customers are willing to pay more for reliability and trustworthiness. The customers want value for money. Scania delivers value by doing the right thing during a very long time (Malmström). This means that Scania continuously deliver good products and good service (Malmström). The company keeps what it promises (Malmström), (Sjögren).

Promotion

The Promotion Scania engages in is only to strength its image. Promotion, for example, advertising in the traditional sense, does not work for an industry like the truck industry (Månson). It is more about direct communication (Månson).

Promotion goes to Communication

Scania communicates through their truck dealers, the communication is done faces-to-face (Månson). “Personal contact is always going to be our foremost communication channel” (Quotation, Månson). “It does not always have to be a sales man who sells our products, sometimes it can be a good workshop employees who does. If the customer knows that he will get quick service and that he will be taken care of in a good way he will buy this product. These channels are irreplaceable” (Quotation, Månson).

“Beside a good product the most important thing is a good relation to the customers” (Quotation, Månson). Scania’s communication is a give and take procedure. Customers get invited to the development center to give their opinions about what Scania can do better (Sjögren). Word-of-mouth is the most important aspects of Scania’s communication (Månson).

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Promotion goes to Communication to Value development of the Marketing Mix

The company aims to create a feeling of status when owning a Scania truck, the company also wants to give its truck drivers the feeling of pride (Lindblom)

(Scania. n.d). For example, some drivers consider a V8 the best thing you can have, it makes you the “King of the Road”. Some drivers even tattoo Scania’s V8 logo on their arm (Danielsson).

Picture 3: The V8 logo

Even if a transportation company buys a Scania truck as a tool to help their business, it is more than that for their drivers, it is an important part of the driver’s life (Månson). Truck drivers spend many hours a day on the road and for them it is important that it is the right truck that gives them value in form of pride (Månson). According to Stefan Lindblom, it is a question of status to drive a Scania truck

(Lindblom). (Source: scania-bilarsyd.se) Place

Scania has approximately 30 truck dealers that have the responsibility for 100 workshops in Sweden (Scania n.d).

Place goes to Convenience

Scania’s customer should not have to accept to have an unreasonably long drive to a workshop, long distances to the workshops means loss of time, money and potentially spoiled cargo (Malmström). Most drivers work on commission, they lose money if their truck brakes down and as a result their deliveries are late (Malmström). There are also times when the drivers have frozen fish or fresh fruit to deliver, for this reason they must have a workshop within a reasonable distance, thus Scania places its workshops near major transportation routes (Malmström).

Scania offers something that they call one-stop-shopping (Sjögren) (Malmström). It means that everything that involves a purchase is offered at one place, such things as consulting, financing, service, spare parts, registration and insurance (Sjögren) (Malmström). It is all about convenience for the customer (Sjögren).

Place goes to convenience to a Value Development of the Marketing Mix

In a one-stop-shopping location the customer can consult with a skilled seller, finance his purchase, register his vehicle, insure it, acquire spare parts and repair his

Scania in the Swedish Truck Market : A study of how themanagement conducts the marketing according to the MarketingMix