1. Suppliers– low bargaining power With the growth rate of the international auto market falling sharply, foreign dealers and component suppliers face the pressure of overstocked product. At present, China has a huge potential auto market that numerous car companies regard as the biggest overseas investment. To reduce the expense ofproduction, workforce and transport, component suppliers like Bosch and Delphi would also build production bases in China. Since 2012, Volvo has increased their procurement share in the Chinese market each year. The increasing number of suppliers allows Volvo to have more choices, and this reduce the bargaining power of Volvo’s suppliers. In order to further reduce the influence of the supplier, Volvo had built a new engine factory in Zhangjiakou. In addition, Geely has also extended their industrial chain, including car parts, transmissions and engines, Volvo can use this portion of the resources after it has been acquired by Geely. From the point of scale economy’s view, these two sources are a good way to control the cost at a low level, and also develop a sustainable advantage to weaken the supplier power.

2. Buyers - high bargaining power The arrival of the financial tsunami caused global auto market downturn. The Chinese market has begun to become the strategic focus for car companies. While the government gradually reduces the tariffs on imported parts and the appreciation of RMB currency convert reduces the cost of imports, it lowered the threshold for imported cars to enter the Chinese market. The growing number of choicesin the auto market has caused increased competition. Additionally, the financial tsunami has reduced consumer purchasing power. Although the impact on Chinese consumersis smaller than in the developed countries, but it has still been affected. Therefore, it passively increases the bargaining power of buyers because they are now very price sensitive.

3. New Entrants – Low threat A new entrant sometimes is an important source of competition in the industry. However, new entrants are difficult to find in the Chinese auto market. There are four main reasons: First, the competition is intense in China's automobile market, and the supply of cars in first-tier cities tends to be saturated. Market saturation limits the new competitors from join in the car industry. Second, the speed of product development is very fast requiring large capital and high technology to compete. New competition with little capital is difficult to support. Thirdly, the policies of exhaust emission and fuel consumption will further restrict the threat of entrants. Lastly, even if the entrants enter the market, it usually tries to share the market shares though the lower price. This strategy will not only cause the market to become more intense, but also lead to a competition for materials with other car companies. The cost of production will increase and the profitability of the existing enterprise will decrease.

4. Substitutes - Low threat in Second and Third Tier cities but high in First Tier cities Substitute product and services limit profits of industry. The substitutes of Volvo are other types of transport. As for other private transportation, including electric bicycle, motorcycle, and bicycle, each of them has its own special purpose and function to meet the specific needs of customers. So, they do not have the completely threat with cars. But since residents in big cities has faced the growing costs of insurance, parking, maintenance and others, some of them will not keep their private car. Instead, they will take subways, buses, trains and other public transport. In fact, environmental protection is one of the major problems of car industry. If Volvo wants to reduce the threat of this view, it should pay more effort on developing its hybrid and electric vehicle. This will also be the mainstream development direction of the Chinese car industry. In other words, the threat of substitutes are low in third to fourth tier cities where public transport is not convenience and the cost of keeping a private car is comparatively low. However, in first and second tier cities, the threat of substitutesare high.

5. Industry Competitors – high threat With the continuous development of economy, the market will evolve from the product competition to the brands competition. The main competitors of Volvo include Audi, BMW and Mercedes Benz. In 2013, the sale of Volvo in China is 61,146, while Audi is 491,989, BMW is 362,100 and Benz is 228,000. The mainly reason for this discrepancy is the company size of Volvo is too small when comparing with the other three luxury car brands from Germany. To fill the gap, Volvo has been expanding the scale of production in recent years. Comparing the four brands’ performance in the the Chinese market, the sales growth of Volvo is reach up to 45.6% in 2013. It shown Volvo have the ability to compete in the Chinese market.