STRATEGIC MANAGEMENT: VOLKSWAGEN

INTRODUCTION

Volkswagen is an automobile manufacturing company from Germany. It has three cars in the top ten best selling cars of world: Volkswagen Golf, Volkswagen Passat and Volkswagen Beetle. Volkswagen is a German word which means ‘People’s car’. Currently slogan of Volkswagen is “Das Auto”. Volkswagen was founded in 1937 by Ferdinand Porsche. Headquarter of Volkswagen is in Wolfsburg, Germany. Current chairman of the company is Martin Winterkorn. It has more than 3658500 employees and revenue is 94.7 billion euro (2011). Volkswagen is among world’s largest car manufacturer. Others are Toyota, General Motors, and Honda etc. Volkswagen has used many strategies to achieve the leading position in car manufacturing. We would be further discussing the strategies made by Volkswagen to become the leader in automobile industry. Later in this report we would be analyzing the Market Identification, PESTEL and SWOT analysis of the Volkswagen.

MARKET IDENTIFICATION

Volkswagen is a big group and it is divided into two categories of cars according to its brands. These two categories and their brands are given below:

Category 1: “Classic” brand group. This group includes following brands:

• Volkswagen
• Skoda
• Bentley
• Bugatti

Category 2: “Sporty” brand group. This group includes following brands:

• Audi
• Seat
• Lamborghini (PWC 2002)

With all its successful brands VW serves all over the world. It sells its cars in more than 150 countries. While talking about its market identification we find that VW has covered approximately all the important areas of the world. VW has made its goal to provide safe, attractive and environmentally sound cars which are according to the different standards of the different parts of world. Making competitive cars is the first priority of the VW group. Currently the main markets of VW group are Western Europe, Brazil, China, The US, Mexico and Russia. VW successfully sustained its competitive position in the key market areas of the world and has increased its market share in those areas as well. We can better understand the key market of VW by the figure given below:

The regions where VW is expected to grow are the US, China, India, Russia, Brazil and the ASEAN region. Some of the important markets and performance of VW in those markets are described below:

Western Europe:

Total market share of VW in Western Europe is 23% in 2011 which was 21% in 2010 and in Germany Volkswagen has achieved 35.9% market share. The bestselling car in Western Europe of Volkswagen is Golf. Sales of all the brands increased in 2011 in comparison to the previous year. The brands which have seen maximum growth are Touran, Passat Estate, Passat Saloon, Skoda Fabia, Skoda Octavia, Skoda Yeti, Audi A1 and Audi A7 etc. There are 47 plants of VW in Western Europe and 25 plants are situated in Germany only. We can say that VW has made Germany as its operating center.

Central and Eastern Europe:

Market share of VW was 13.7 % in Central and Eastern Europe and in Russia it was 8.8 % in 2011 which was 7 % in 2010. Especially in Russia it has seen high growth. It has seen an increase of 74.4% in Russia in deliveries. The bestselling car in Central and Eastern Europe market is Skoda Octavia. The demand is rising for approximately all the models in models in Central and Eastern Europe. The main models which are expected to grow in the upcoming years in Central and Eastern Europe are Audi A6 and A8, all models of Skoda, Seat etc. VW has 17 plants operating in Central and Eastern Europe and one of which is located in Russia (Volkswagen 2012).

North America:

VW has seen a slight increase in market share in North America as well. It was 3.7% in 2010 and became 3.9% in 2011. There was an increase of 23.3% in the deliveries in 2011. In 2010 – 2011 US economy was suffering due to economic slowdown but the car market in US saw increase in sales figures. Even in the deteriorating economy demand for the Audi Q5, Q7 and A8 increased. Jetta, Touareg and Tiguan also saw increment in sales figures. The bestselling car of Volkswagen in North America is Jetta. To cover maximum market in North America Volkswagen has set up a new plant in Chittanoonga (US). This is a strategy of Volkswagen to increase its market share in North America.

South America:

While looking at the performance of Volkswagen in South America we find that in this particular market company has suffered. In 2011 it had 22.3 % market share in Brazil which decreased by 0.6 % from 22.8 % in 2010. Volkswagen saw a slight decrease in market share in South America from 19.6 % to 18.9 % but the deliveries increased in 2011 as compared to the 2010. The bestselling car of Volkswagen in South America is Volkswagen Gol. In light vehicle manufacturing Volkswagen comes at second in Brazil. In South America Volkswagen have 9 plants 6 of which in Brazil and three in Argentina. Brazil is the main market of Volkswagen in South America.Asia Pacific:

Asia pacific is another big and important market of Volkswagen. The main market of Volkswagen in Asia Pacific region is China. It has seen an increment of 17.4 % in the deliveries in China in 2011. Market share of Volkswagen in Asia Pacific and China are 11.3 % and 18.2 % respectively. It has seen 1.7 % increment in the market share in Asia pacific region and 1.4 % increment in China. China is the main market of Volkswagen in Asia pacific region as it has total 15 plants in this region and 11 out of 15 plants are located in China. The bestselling car of Volkswagen in Asia Pacific region is Volkswagen Lavida. The most successful models of Volkswagen in Asia Pacific region are Audi Q7, Passat and Touran (Volkswagen 2012).

From the above description of markets we can easily understand that the strategy of Volkswagen is to cover the car market of entire world. With the help of its successful brands like Audi, Bentley, Bugatti etc it can easily do that and can become the number one car manufacturing and selling company of the world.        

PESTEL ANALYSIS: VOLKSWAGEN

There are many factors in the macro – economic environment of an organization which affect the decision making process of the company. Similarly, in automobile industry these factors are Political factors, Economic factors, Social factors, Technological factors, Environmental factors and Legal factors. Study of all these factors simultaneously is known as PESTEL analysis. Further in this report we would be analyzing all these factors for Volkswagen.

Political Factors:

While discussing about the political factors for Volkswagen we find that it has to face many political difficulties in its development as it is a company which is not present in just two or three countries but in more than 150 countries. Obviously Volkswagen is facing different political situations in different countries. Political situations of all the countries are not same and accordingly Volkswagen has to make its strategies like the political situation in Europe is different from Asian countries. Car industry is closely related to the policies made by the government of a country. Also banking industry and financial sector of a country plays a big role in the sales of cars as they provide vehicle loans and the interest rates on those loans are decided according to the government policies. Many emerging economies are keen to develop automobile industry and Volkswagen is taking the advantage of it. The biggest challenge in front of the Volkswagen is to understand the different political pressures. For example Chinese government has different policies than the Brazilian (Oxbridge Writers 2012).

Economic Factors:

Automobile industry is a key industry in the development of any country as it contributes in the national income of the nation. Similarly, Volkswagen contributes in the GDP of the countries in which it is present. This is the reason many developing economies help in the development of automobile industry which is a plus point for Volkswagen. Automotive industry also helps in the development of other industries like steel, glass etc. Development of these industries are important for emerging economies like India, China etc and Volkswagen has a great advantage of it.

There is also another side of economic factors which is uncertainty in the economic condition of the world. For example European Debt crisis is a big problem for the car manufacturing companies as if people will not have enough money they will not go for the purchase of a car. We have seen a decline in the sales of Volkswagen cars in South America in 2011 which is due to the uncertain economic situation. To deal with this type of difficulty Volkswagen has a range of brands which are of higher segment as well as lower segment. If the economic situation of a country in which Volkswagen operates is not good it can focus on the cars which come under lower segment. Prices of fuel also affect the car sale which is directly related to the economic situation of a country. To deal with this difficulty Volkswagen can focus on alternatives of diesel and petrol (Papers4You 2009).

Social Factors:

Society also plays a big role in the development of automobile industry. Automobile company affects the society in which it operates as a whole. Society for Volkswagen is big and different from place to place. Volkswagen gives employment to the people of the society. We have discussed above that total number of employees in Volkswagen are more than 502000. Thousands of people have got employment in Volkswagen directly and indirectly all over the world. Car manufacturing company enhances the level of the society and changes the way people live their life.On the other hand there are some social issues which a car manufacturing company needs to handle like some religious faith. Other examples of social factors are increasing accidents on the roads. With the cars having high speed chances of accidents increases which creates a negative sense in the society. Also maintenance and space required to a car is a problem for many societies. Volkswagen needs to take care of all these social problems (Oxford University Press 2007).

Technological Factors:

Technology plays a big role in the success of a car manufacturing company and Volkswagen is among those companies which have best technology of car manufacturing as we know that Volkswagen operates in both the segments: Classical as well as Sporty. Brands like Audi, Bentley, and Skoda are highly technologically well maintained cars. Toyota, Mercedes and BMW are the world leaders in the car manufacturing because of the technology they use in production of the cars. A better technology is essential for the production of strong cars like Mercedes or BMW. Volkswagen also has such technology with the help of which it makes cars like Audi and Bentley.

Technology also helps in the production of cars. Cars are the most complex products and each week millions of cars are produced all over the world. Without technology production of cars in such a high volume is not possible. A company uses many production techniques like ‘just in time’ etc which is possible with the help of technology. Volkswagen has made its after sales services better with the help of technology as catching the problems in the cars have become easy with technology. Today a technician just needs to connect a laptop with the car and he can get the problem in the car. Toyota recently brought back its 2.5 million cars due to some problems in air pump which was causing accidents (Oxbridge Writers 2012).

Environmental Factors:

Car manufacturing industry has a big impact on the environment of a nation and it affects the development of the car manufacturing industry. A car uses diesel or petrol as fuel and due to this air in the environment get polluted. The raw material used and roads also affect the environment of the society. Steel is made from the iron and in transforming iron to steel, steel production companies pollute the air as well as water. We have discussed above that Volkswagen has many plants in different parts of the world and from these plants smoke is emitted in the air and wastage is thrown in the water. Volkswagen needs to take care of the natural environment of its plants. Volkswagen needs to invest on R & D department so that it can produce the cars locally and can protect the natural environment of its society (Oxford University Press 2007).

Legal Factors:

Automobile industry also need to follow the legal requirements of a nation and for Volkswagen it’s a big challenge as it is present in 153 countries and legal requirements of different countries are different. The legal requirements on which Volkswagen needs to focus are competition law, consumer protection law, intellectual property law, labor law, emission laws and taxation laws. Volkswagen needs to import and export the raw material and produced cars many countries. While import or export it should take care of the taxation requirements of government. Similarly, many workers work in the plants of Volkswagen and the company is required to understand the labor laws of different countries to deal with the labor problems (Oxbridge Writers 2012).

SWOT ANALYSIS

SWOT analysis of Volkswagen will tell us the internal strengths and weaknesses of the company as well as external opportunities and threats that the company is facing. SWOT analysis of the company will explore the strategic situation of Volkswagen. Analysis is described below:

Strengths:

The manufacturing and production processes of Volkswagen are its biggest strength. It has developed many techniques with the help of which it produces cars at a greater scale. With the help of technical production Volkswagen also gets the benefit of price competitiveness as the production cost gets decreased. Volkswagen has also developed ideas for the full utilization of its different plants as we already discussed that it has many plants in different parts of the world. If one plant is busy in producing some part of the cars it uses other plants for the production of other parts and hence gets the optimal utilization of plants as well as saves the time. With the effective use of its plants and technology Volkswagen has increased its sales and reduced its cost (123 Help me 2012). We can describe strengths of Volkswagen in brief as follows:Strong portfolio of brands

• High focus on research and development department
• Robust capabilities of production

Weaknesses:

Volkswagen has been seen going away from its goal having its leadership in incorrect hands. Volkswagen has suffered from some hard times in past. Currently Volkswagen has again achieved the right path towards its goal by having multi brand car manufacturing company serving in more than 150 countries and it needs to focus on it so that it can sustain its growth and can remain competitive. Weaknesses of the company can be described in brief as follows:

• In few regions performance of the company is sluggish e.g. South America
• Employee productivity of the company is relatively low
• Cash flow of the company is little poor (You Sigma n.d.).

Opportunities:

Volkswagen has acquired many companies to enhance its market share and with the help of its increased profits and other divisions’ i.e. financial division, it can go for further acquisitions to capture the maximum market share. It has another opportunity of investing in new technologies so that it can give a new look to the car manufacturing industry (123 Help me 2012). The opportunities available to the company are described below in brief:

• Increasing demand for the buses globally
• Increasing demand for the vehicles which are hybrid electric
• Potential of growth in Asian region like China and India

Threats:

The main threats in front of the Volkswagen are increasing competition and uncertain economic condition of the world. The main competitors of Volkswagen are Toyota, Honda, Hyundai, Mercedes, and BMW etc. Volkswagen produces a range of cars from lower segment to higher segment to compete with these competitors. Economic slowdown all over the world is another big problem of Volkswagen. European debt crisis affected its business in Europe and slowdown in American economy also decreased its sales figures. If the consumers are in trouble they start purchasing cheaper quality vehicles and Volkswagen needs to focus on it. Threats to the company are described in brief below:

• Recession in 2009 globally
• Automotive industry is weakening globally due to high fuel prices and uncertain economic condition
• Regulation to protect the environment of the society in which company operates (You Sigma n.d.).

CONCLUSION

Volkswagen is not just a car manufacturing company but it is a big group which can be divided into two groups: first automobile and second financial services. It has a range of successful brands which help it in achieving its strategic objectives. The main brands of the company are Volkswagen, Audi, Bugatti, Skoda, Bentley, Seat and Lamborghini. The strategic objective of Volkswagen is to position itself as a global leader in economic and environmental terms. The group has decided to achieve the four goals to become the global leader in car manufacturing by 2018:Volkswagen is ready for the acquisition of highly intelligent innovation and technology so that it can become world leader in the customer satisfaction and quality.

• It has aim to increase the number of units sold in a year and it should be more than 10 million vehicles per year. In short Volkswagen wants to capture the above – average market share in the key market areas of the world.
• Volkswagen goal is to make the company financially strong and for that it aims to increase its return on sales before tax to at least 8 %. With the help of this the group will be able to operate in difficult market conditions as well.
• Another goal of Volkswagen is to become the top employer of all the brands in this way it will be able to get the high class team (Volkswagen 2012).

 If you want HR Writing AssignmentHelp study samples to help you write professional custom essay’s and essay writing help.

Receive assured help from our talented and expert writers! Did you buy assignment and assignment writing services from our experts in a very affordable price.

To get more information, please contact us or visit www.myassignmenthelp.Com