Strategic position of the company
Discuss about the Company strategy and organisation evolution.
Volkswagen Group, a German multinational automotive manufacturing company has its headquarters in Germany. Its main operations include designing, manufacturing and distributing of passenger as well as commercial motorcycles, commercial vehicles, engines and turbo machinery. Its offers relate to various services like financing, leasing and fleet management (Oldenkamp, van Zelm and Huijbregts 2016).
In 2016 and 2017, consecutively the company maintained its market position as one of the largest automakers in the globe with respect to the sales. In 2017, it was ranked sixth in the Fortune Global 500 list of the biggest companies in the world. The group sells a large number of cars like Bentley, Audi, Bugatti, Porsche, Skoda, Lamborghini and others. It sells various other vehicles also (Audi.com. 2018). The company has its operations in China as well; the company has been doing well in the country and has become one of the largest companies.
The company was found in the year 1937 and that first car they manufactured was the Beetle. Over the years, the company has adopted various strategies, in order to explore the new markets and expand their particular business around the globe. They have been successful in doing this in various fields however; they have often received backslash from many critics for their management and skills. The given report aims to throw light on the company`s performance. The chosen company for the report is Audi. The report will be divided into various sections each of which will be elaborating upon a certain component. The first section illustrates the Strategic Position of the company; the next part throws light on the resource evaluation and value system of the country. An evaluation of the product/portfolio mix will be done using the BCG Matrix and the last section shall elaborate upon the future direction of the company. Certain recommendations based on the move, which needs to be taken by the company in order to establish them in a better position, shall also be provided.
Strategic Positioning can be described as the relative position of a company within the particular industry in which it operates. The choice made by a company and the kind of value the company wants to deliver is reflected in its strategic position. The strategic positioning of a company should primarily translate into lower costs for the company or its entrance into the premium price market (Barrett et al. 2015).
Strategic positioning of a company presents the overall intended objectives of the company and the approach it takes with respect to a particular situation.
Audi is one of the most successful strategic business units of the Volkswagen group. For more than 80 years, the company has been able to construct the most effective automobile brand for customers. In ordered to achieve this position, the company has combined all essential features of a luxurious car into the particular brand cars (Sheldrick 2015). In its advertising and marketing strategy, the four-ringed company has reflected the key aspects of four major automobile brands.
Another strategy followed by Audi to establish its position is to not pick out at its advantages; Audi tries to concentrate on the stereotypes, which have been associated with the drivers of the other brands. For example, BMW is stereotyped with a driver who cuts off others and Mercedes owner is often portrayed as an old man (the Guardian. 2018). This kind of commercial helps Audi to connect with the audience and hint to them that its customers are the normal crowd.
Hence, Audi has been popular as a brand against the mass population and has established itself as a progressively luxurious brand.
Audi has factories and locations in various countries around the globe. It gets financial resources help from its parent company but the company has been doing sufficiently, well for which it does not require that help very often. Audi tends to fulfill its responsibilities efficiently and uses natural resources in a sustainable manner. It has taken out an e-gas project along with various other environmental commitments, which tend to address every component of the company values.
The company has its own environmental research foundation and it has planted various trees and other natural plants near its facilities (Blackwelder et al. 2016). The company has collaborated with Desertec Industrial Initiative, and international consortium to help them find a way to produce solar power in the desert regions of Africa and the Middle East.
The company has just not made these big steps towards the conservation of the resources but also integrated the aspect in its minute details. When the Audi vehicles are developed, the engineers tend to focus on the environmental (Morschett, Schramm-Klein and Zentes 2015). This is to only in the case of its parts but the efficiency of the manufacturing process as well, supply of energy as well as water cycle and logistic work flows. The systems installed in their factories ensure conservation of resources and runs mostly on green power.
An evaluation of the resources and value systems of the company
It also produces fuel savings models, which are lightweight and tend to cause minimum damage to the environment at large. It also tends to compile life cycle assessments for its vehicles. Audi has been consistently working on its auto transmissions and modular efficiency platform.
Audi has been planning to diversify its portfolio in future by making use of the specially designed engines and bio0fuels product. It will also be selling hybrid vehicles and electronic models.
The executive team of Audi believes that the stakeholders have put in immense trust in the organization, which needs to be paid back to them (Volkswagenag.com. 2018). For this reason, the company has come out with efficient resources and a code of conduct which serves as the company`s value system (Bartels 2013). The value system has been explained below from the various points of view of the company:
The main purpose of the organization is to see to it that they are able to fulfill the vision of the organization and maintain the reputation of the brand. For this purpose, the company makes sure that it is sustainable in its operations and that it takes care of all the compliances while carryout the business activities. It is the belief of the company, that compliance to various rules and regulations is extremely important in order t sees to it that the organization has a good brand name legally. This helps to raise the share price of the company and thereby increase the return to the given set of investors.
The next aspect of the company comes as its responsibility as a member of the society. The directors of the company believe that, as the company is a part of the organization at large it needs to think about the welfare of its people and see to it that the members of the society do not face any harm (Garibaldo and Bardi 2015). The various components are covered by the company`s value system in order to comply with the norms of a society:
- Human rights
- Equal opportunity and Equal treatment
- Product conformity and safety
- Environmental Protection
- Donations, sponsorship and charity
- Communication and Marketing
- Political Lobbying
As a business unit does not function on its own there are various partners of Audi, who help it to accomplish the goals and objectives and to make sure that the business runs successfully. On the other hand, it can be described as the duty of the brand to make sure that it encompasses integrity, transparency and fairness into its system. There are various conflicts of interest that might take place in a business enterprise; however, it is the duty of the brand to see to it that these conflicts do not come in the way of its supplier relationships (Greca 2015).
It conducts various events and functions here all its suppliers are invited and treated with utmost respect and care. The company has certain strict policies with respect to corruption and it is strictly prohibited. It follows a strict conduct for financial laundering and the is against money laundering and terrorist funding (Algesheimer, Dholakia and Herrmann 2015). Various components in this aspect include Export Control, Tax control, Procurement, and free as well as fair competition.
As a responsible worker, the company sees to it that it is able to fulfill the duty of company with respect to its workers as well. It is the fundamental interest of the company to protect the safety as well as the health of the customers.
It takes various measures with respect to the occupational safety and health of its customers, Data protection, protecting of knowledge houses and intellectual property and lastly its IT security as well as company assets. The company wants to make sure that these above-mentioned components have the ability to look after the needs the employees and is able to provide help to them and protect their needs.
A product portfolio ix can be defined as a collection of all the services as well as products, which a company has to offer. The product analysis provides various details of the company with respect to the stock price, type, company growth prospect, income contributors, market leadership and the risk involved (Stead and Stead 2013). This kind of an information is extremely important for the investors and decision makers of the company. Product portfolio proves to be an essential part of the financial analysis as it provides context into the research and one can distinguish between long term and short-term growth plans (Laudon and Laudon 2014). The particular portfolio analysis allows a user to nail down the specific drivers of the performance of the company, which can then be used to make future plans.
It is often believed that a mature company like that of Audi will have a diversified product portfolio. The company often makes acquisitions and development, which are a source of growth for the company. They even tend to have larger resource pool for the development. When a company is geographically dispersed, even then it will be able to have a large variety of products. The main purpose of diversification is to limit the growth potential while reducing the risk of an organization.
The Products and services offered by Audi are given below:
There is a variety of products offered by the company. The below figure provides the segment mix of the offerings made by Audi.
The BCG Matrix also known as the Boston Consulting Group Matrix tends to provide an overview of the product portfolio mix of an enterprise. It helps the decision makers as well as the company to understand which group of product or portfolio is the most profitable one and which group is not (Hill, Jones and Schilling 2014). The matrix has two dimensions the market growth and the market share. It is believed the bigger the market share the better it is for the company.
These products represent the high growth as well as high market share products. They are usually the high return products, which have an equally high investment.
The A5, A1, TT series and the Q5 series are the stars of the particular brand. The demand for these cars is extremely high and in the same way, they have huge investments as they face fierce competition from other manufacturers like the BMW and the Mercedes (Hill and Jones 2013).
The source of income is that component of the brand, which has a low growth but a high market share. In the particular segment, the cash generation is extremely high but as the growth does the segment is particularly low, the investment is not much in the segment, which means this segment does not utilize much cash. The profits are generally high.
For Audi, the Q7, Q3 are its sources of income because they are unique and highly in demand. These products are famous for their unique qualities and the ability to attract the customers even without any customizations.
Dogs are the worst products present under a brand portfolio. Under dogs, the products that are present have a low growth as well as low market share. These can be stated as the brands, which have not, being doing well. These products should be liquidated and minimized in the cost of products offered by the brand.
Application to Audi
The products of the brand, which have the following model umber -A3, A7, A8, are dogs. These have little or no cash generation and do not fit well with the other products offered by the company. They should be liquidated instead of implementing turn around plans.
The last component of the BCG Matrix is the Question mark. These are the products that belong to that group of products that require his investments and have extremely low growth chances. The products have high demands and low returns (BBC News. 2018). These products often absorb great amount of market share and become the dog of the company. They should be sold off or delivered in cash.
The TT range of cars and the R8 are bringing question marks for the company. These products require extremely high investments and generate extremely low amount of cash.
The Audi Company should not invest any more funds in the Dog component of the business matrix, which is the a3, a7 and a 8. These require huge turnaround plans but they often tend to fail. Instead, if possible they should invest in the Question mark component and in the star unit so that they become the sources of income and bring success to the business (Eden and Ackermann 2013).
From the various reports and analysis, it can easily be stated that the company has had a hard time in the previous YEAR. However, the company aims to remain determined, take a bold step in the future, and take up the present challenges (Slack 2015). The company aims to go ahead with its plan of strategic transformation. The company has made a variety of plans for the models, business operations as well as the technologies of the firm. They have been stated below:
- The company shall be rejuvenating their model portfolio and they plan to renew five existing core model series by the mid of 2018. They intend to expand their Q family by 3029 and even introduce new concepts of the Audi Q8 AND Q4. They intent to work more on their electric models.
- The company also plans to introduce its two models this year, which are A8 and A7. The products will be unveiled at an Audi Summit, which is a new concept; this shall help the company to gain popularity in the market.
- In future, the company also aims to systematize its synergies so that the relevant trending topics of the future can be applied in the business more efficiently. It has collaborated with Porsche for future architectural vehicles. This move by the brand shall result in costs savings of millions each year.
- Along with its traditional car, business the company aims to expand its digital services in the future. It aims to do this through My Audi, which provides a vast range o online services. It plans to extend this in more than 15 markets.
- The company aims to become the leading company in the Volkswagen group by implementing the autonomous driving. They also plan to finance its own resources in future and find robust solutions for the current problems.
The current situation of the company was not good as it was faced by certain diesel crisis. However, as seen from the above analysis the company aims to change this in the future and become a global leader in automobiles. The plans and the path that the company has set out for itself is extremely logical and can be easily achieved with persistence and proper planning (Rothaermel 2015). One of the best paths available to the company is the rejuvenating of its existing portfolio and expanding the digital services. The existing portfolios need to be extended and the source of income products needs to be expanded in.
The new move to strive towards the digital path is a extremely useful plan, which shall enable the company to access a new, sphere altogether which is potentially strong and profitable. Hence, it can be stated that these two options shall be best for the company.
After analyzing the case of Audi, the following recommendations can be made:
- Focus on emerging markets
The company needs to focus its energy and resources into the new emerging markets. One of the primary emerging market is China. China has a great potential for manufacturing along with cheap labor and advanced technology options. Opening manufacturing houses in China will help the company to strengthen its position in the Asian Market and even save costs (Peteraf, Gamble and Thompson Jr 2014). The products that shall be manufactured in China can be exported to the other parts of the world.
- Hybrid and electric power train are priorities
Audi should also consider and expand its offering on electric and hybrid cars. As witnessed from the analysis, Audi already has a range of hybrid and electric cars, which it should expand in order to make sure that it caters to the need of the current market ((Wheelen and Hunger 2017).
- Position itself as a pioneer in sustainable mobility and synthetic fuels
The new mantra of the business is sustainability. Therefore, the company should take adequate actions to ensure sustainability in its operations. It should make sure that all the ethical norms and environmental laws are followed by the company. It should utilize minimum resources so that the future generation and their needs are adhered to.
Therefore, from the given analysis of the Audi company under the Volkswagen group it could be stated that the company has been doing extremely well in the professional as well as the ethical domain. The company needs to adopt newer strategies and determine its focus on new fuel saving and electric resources. Known for its image as a progressive brand, the company needs to alter its product offering and spend its resources strategically in order to ensure incorporation of sustainability and cost effectiveness in its operations along with providing satisfaction to the consumers.
The company needs to prioritize its goals and concentrate on establishment of cars and parts, which conserve the environment. Once the company is able to do so it shall become a global leader in automobiles. The reason may be competitive advantage. The company needs to hold on to the present requirement, which requires cars with energy consumption. Once it is able to do that, it will receive appreciation from several environmentalists and can be able to receive various subsidies from the government. These subsidies will help the company in gaining more profits, which will ultimately help the company to give out better dividends. This will raise the value of the company in the eyes of the customers as well. The company has certain responsibilities towards the society as well which it needs to fulfill.
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