Marketing Review Analysis On company strategy of Volkswagen on global perspectives Question??
NEED VOLKSWAGEN strategy with Global perspective
- Section 1 = company brief
- Section 2 = company strategy ( global perspective)
- Section 3 = Recommendation
- Section 4 = Conclusion
Answer the question frame is::
Company Brief
Volkswagen is a multinational automobile manufacturing company of Germany. It is the largest automaker in Europe. The company was established in 1936 in Wolfsburg, Loer Saxony, Germany by Ferdinand Porsche Ferdinand Porsche. In German, “Volkswagen” means “people’s car. It manufactures passengers as well as commercial vehicles. Its current tagline is “Das Auto” means “The Car”. It contains a number of car brands: Audi AG, Bentley Motors Ltd., Bugatti SA, Lamborghini, Scoda Auto, SEAT and truck manufacturer Scania AB. Each of these brands has its own features and they operate as a separate independent entity in the market. The product spectrum ranges from low-cost small cars to luxury class vehicles to buses and heavy trucks: from family convertibles to exclusive sports car. It has 501,956 employees worldwide who produce around 34,500 vehicles per day.
Adolf Hitler, chancellor of Germany had assigned the project of developing a mass production car to an Australian engineer Ferdinand Porsche. NSU (Nazi Trade Union), a German vehicle manufacturer produced the cars and it was acquired by Volkswagen Group in 1969. The Volkswagen Group of companies has two divisions that are Automotive and Financial Services. There are 342 group companies included in Volkswagen Group. These companies are engaged in vehicle production and related automotive services like dealer and customer financing, banking, leasing and insurance activities. The Automobile division of the company is in development of vehicles, trucks, buses and parts of vehicles. It provides a complete comprehensive selection of vehicles that are individualized in terms of body design, elegance, quality, technology and safety features. The company operates 44 production plants in 12 Euro countries and 6 countries of America, Africa and Asia. The vehicles manufactured by the company are sold in more than 150 countries around the world. Around 50 percent of Volkswagen is held by Porsche Automobile Holdin, 2.5 percent by Porsche Holding GmbH, 20 percent by State of Lower Saxony, 17 percent by Emirates of Qatar and 10 percent by the miscellaneous.
Board at Volkswagen
Volkswagen AG is the parent company of Volkswagen group. This company is registered as public limited liability company and it includes management board and supervisory board. The management board consists of 5 members, and supervisory board has 20 members. Each members of management board are responsible for different functions and the members of supervisory board are responsible for appointing members of management board and to monitor the corporate decisions taken by the management.
Prof. Dr. Martin Winterkorn is the chairman of the board of management and Dr. Ferdinand K. Piech is the chairman of the supervisory board of Volkswagen AG. Dr. Fransisco Garcia is responsible for procurement, Dr. Jochem Heizmann holds the responsibility of group commercial vehicles; Hans Dieter controls the finances of the company. Christian Klinger is responsible for sales of vehicles, Michael Macht has the responsibility of production, Horst Neumann monitors human resources.
Vision and Values
Volkswagen is a huge well established car manufacturing corporation. It aims at modifying the product as per customer needs for the local country. They aspire to restructure their product in order to meet the demands of the different geographical markets. It gives unique feature set to its cars. The company has a large dealer network. The company has its deep roots in integrity, respect for its employees and customers, responsibility, teamwork, commitment to common goals, leadership skills and high professional qualifications. It focuses on well organized work groups and believes in personal and professional development. It fully assists its employees and helps them in developing the skills by providing training centers. In long term perspective, the corporate responsibility of the group is committed to the sustainability safeguards the future viability of the group, and also respecting the need to harmonize economic, environmental and social goals. Volkswagen group commits itself to play a leading environmental role. The company aims at steering group’s work for fostering networks that links international functions and facilitate smooth sharing of information between the departments.
Company Strategy
There has been an enormous economic momentum due to globalization. The trade, transport and division of labor are the driving forces to boost economic development. Volkswagen focuses on its core business of car production. It aims at reducing productions costs and increasing profitability. To achieve these goals, the company applies different strategies and business development programs. It applies certain strategies which are as follows:
- Divesture of non-core business segments
- Adapting modular strategy in production process
- Restructuring
- Introduction of new models.
It also emphasizes on anticipating the future needs of the customers and clients and process them to convert into innovative technologies. The company has intensive research and development segment in order to tackle technological challenges. The group research department is established in Wolfsburg. The global trend scouting and technology scouting form part of the strategic orientation and the company operate research bases in markets of US, Japan and China.
Sustainability forms the foundation of Volkswagen’s corporate strategy and is embedded in the value added processes of the group. The strategy of Volkswagen for the coming years emphasizes on positioning the group as a global economic and environment leader among automobile manufacturers. They have the mission of making Volkswagen to reach new heights and making it the most successful and fascinating automaker in the world in the coming 5 years. They are focusing on the following issues:
- It aims at deploying intelligent and creative innovations and technologies to make it a leader in the world in quality and customer satisfaction.
- They strive at increasing unit sales up to 10 million vehicles a year and it intends to capture larger share of global growing markets.
- It intends to become top employer among all big brands and to develop the world class teams of highly skilled people.
- It aims at strengthen the financial position of the group and enable company to tackle the difficult market scenarios by increasing returns on sales.
Key Challenges and objectives for the company
There are several key issues for Volkswagen group, such as extreme global competition from automobile manufacturers of America and Asia, stagnancy in demand due to overcapacity and product proliferation in western markets, slow revenue growth because of rising administrative and raw material costs, controlling cost while simultaneously generating revenue, and large foreign investment in the Chinese and Indian markets. The group strives to tackle these issues by increasing their operating cash flows, expanding target-market segment, increasing sales and market share, conducting financial feasibility study, introducing innovations with new products, maximizing fuel efficiency, introducing hybrid vehicles.
The objective of the car manufacturer is to provide customers the perfection in various features such as driving pleasure, safety, fuel economy, competitive prices, effective ecology and achieving the best of quality. The Volkswagen group has changed its production systems, business model and internationalization strategy in the last decade. There are 3 dimensions of major changes in the company’s profile: corporate governance and profit strategies, product and market strategies, and production systems. It has converted it from Multinational Corporation to Transnational Company.
The main concerns of strategic growth lie on the specific structures of company and geographical distribution of resources, competencies, functions and interconnecting power between the plants and headquarters.
During its first phase, i.e., 1940-1969, Volkswagen acted as distribution oriented multinational company. It was directly linked to Canada, USA, and France. The strategic aim was to access potential markets and using cheap labor. During its second phase, i.e., 1970-1992, Volkswagen changed its status to production oriented multinational company. The main emphasis was made on corporate governance, profit strategies, market strategies and product structure.
Production System and Risk Management System
Volkswagen is a huge German consortium which is controlled by a group of shareholders. It’s most successful strategy is to integrate the economies of scale and economies of scope. This strategy intends to create strong bonds and real global cooperation of all its organizational units regarding product structures and market strategies. The execution of some of the fundamental strategies needs homogenization and integration of product technologies, of organization and of skill requirements. Volkswagen group adopts a double strategy of buying existing foreign brands, which is related to its internationalization path of the company.
The structure of production system is the specific configuration of technologies, organization and work in the given plant. The platform strategies of the company motivate homogenization of production systems. The outcomes of production systems are in terms of productivity, quality and flexibility of the system. These outcomes need to be similar in all plants across the world, which are the part of networks of global production.
Under the risk management system of the company, all of the business activities identify and exploit the various opportunities in order to accelerate the business value. As the group operates at global scale, it is certainly exposed to different types of risks. Efficient handling of global uncertainties is the responsibility of risk management system, operated at Volkswagen. The risk management system aims at identifying the business risks frequently on timely basis and at limiting these risks in such a manner that the economic and commercial benefits of the business activities overweigh the risk. Risk management system is considered as an integral part of the global management practices in the company. It is mainly assessed by external auditors of the company. It conforms to the needs of German law controls and transparency in business.
E-Business Operations
Volkswagen started its e-business activities in 2001 in close collaboration with the suppliers and customers. There is a portal of the group with the name “www.vwgroupsupply.com” which expands the information flow between the Volkswagen group and its business partners. It also helps in establishing strong bond between suppliers and group processes. The supplier database “VWGroupSupply” represents one of the largest component supplier listings in the automobile industry. All its suppliers record the range of products and services they provide to the Volkswagen Group in the database. There are also certain virtual applications, for example, ESL (Electronic Supplier Link), online inquiry facility, online negotiating, online catalogue purchasing, eCAP capacity management, online standard texts etc. these applications helps the group in saving time, cut costs and increase production. It enhances the competitiveness of the Volkswagen group. The other processes like invoice processing and technical modifications are also online integrated in the communication platform. Volkswagen manages its complete procurement volume of above 50 Euro billion through internet and e-business applications.
Volkswagen Financial Services
From the beginning of 1990s, the financial services hold an important and prominent position in Volkswagen group’s sales support tools. The successful merger of leasing and banking services formed Volkswagen Finanz GmbH in 1992. Further in 1994, it is extended to Volkswagen Financial Services AG (VWFS) by Group’s European financial services operations. The financial services segment of the group is separated from automobile division. This enables both of the divisions to assess various risks more accurately. The ability of the group of know-how transfer and standardization of product offerings marketing strategies arise the earning power. Since 1994, Volkswagen Financial Services has been providing financing and leasing services in seven European countries: France, Germany, Italy, Czech Republic, Slovakia, and United Kingdom. It has a workforce of more than 3000 employees. VWFS has become a well established international company providing various range of banking, leasing and insurance services.
Volkswagen Commercial Vehicles
The Volkswagen commercial vehicles brand forms a prominent and an integral body of the group which has been growing rapidly in terms of sales and profits. The brand of commercial vehicle was established in 1995 for pooling the commercial vehicle expertise and resources of the group. This is not an independent branch of the group but is included in automobile manufacturing group. It has its main plant at Hanover and established its international facilities in Spain, Poland, Mexico, Brazil and South Africa. Volkswagen commercial vehicle had played a key role in the industrialization of Brazil. The products range consists of Caddy, Transporter, Pick-up and Caravelle as well as heavy trucks. At present, it has a total workforce of 19,700 employees. It is one of the most highly considerable supplier of trucks and buses all over the world. The brand has become a market leader in many segments, pioneering role in the transporter in Germany and other European countries.
Volkswagen group has a long term direction that it has set achieve by year 2018. Their target is to double the annual sales of vehicle from 1 million to 2 million and to renew at least 4 models per year. It is also planning to start a new operational plant in CHINA (Li Fangfang). It has set a target of increasing its market share in US markets from 2 percent to 6 percent by increasing its sales to 800,000 vehicles per annum in USA. Also, it has a plan to export 125,000 vehicles from North America to European countries and a large expansion of the Mexico plant. The group is looking towards developing markets such as Brazil and China in order to reduce the production costs by utilizing cheap labor and raw materials. It can give Volkswagen group competitive advantage in the global markets.
Recommendations
The sustainable development can be achieved by the company by first achieving commercial success. A successful company can ensure itself sustainable throughout and can handle all its processes. It can make valuable investments in the environment and develop sustainable products, services and solutions. The customer satisfaction should a main motto of the group in corporate success. The customer satisfaction can be explained in three categories: satisfaction with purchasing process, satisfaction with product and satisfaction with most recent workshop visit. There should always a proactive approach of reducing risk exposure to incorrect operations. The conservation of resources and several philanthropic activities should on chart for such a huge organization. The regular surveys are required to be performed to access the risk situation on continuous basis. The company should set up a research branch for analyzing causes of road accidents and to prevent them by introducing measures in their vehicles. The company needs to sustain its values and success and meet all the needs of the customers. There should always be an aspiration for changing the processes of system in organization with the changing global world.
Conclusion
The German multinational has its main focus on three main aspects: costs, quality and quantity which provide it optimal levels in each of its operational processes. In the coming years, Volkswagen group can beat its automobile maker competitors BMW and Daimler with its strategic presence. Each brand of Volkswagen group retains its differentiated brand image and operates as an independent entity in the market. Across all its brands, the brand group responds to the declining world markets with flexible adjustments of production, which gives it an edge over its competitors. Volkswagen group is the manufacturer of one out of every five cars in the Western Europe. It captures 12.1 percent of market share in the automobile industry all around the world. The sales revenue of the company in year 2011 was reported around 159 Euro billion and net profit amounted to 15.8 Euro billion.
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