Volkswagen is a German auto making company founded in Berlin, Germany on 1937 by Ferdinand Porsche and has its headquarter in Wolfsburg, Germany (Zhang, 2017). Volkswagen is a flagship brand of the Volkswagen group. It is the biggest automaker in terms of overall sales across the word in 2016. Volkswagen is a German word that translates as Peoples car and the current slogan of the brand is Das Auto. The current chairman of the board is Mr. Herbert Diess. The company had over 600,000 employees worldwide at the end of 2016. It collected a revenue figure of 105.651 billion Euros in the financial year of 2016 ("Strategy", 2017). It is ranked with auto manufacturers like General Motors, Toyota and Honda as one of the largest automotive manufacturing companies in the world. Since Volkswagen’s inception it utilized various management strategies to achieve and sustain its current market position in the automotive manufacturing industry (Kagali, 2014).
One can attain a better understanding of the key markets for Volkswagen buy examination of the markets of Western, Central and Eastern Europe,North and South America and Asia-Pacific The regions where Volkswagen has ha expectation to grow even bigger and sum up more market share are the United States, India, Brazil, ASEAN region, Brazil and China (Pavlínek, 2015). Proper market identification is as follows.
Volkswagen has around 23.2 percent of the total share in Western Europe in the year 2016, which had increased from 22 percent in the year 2015 as compared to the market share in Germany, which is around 40.4 percent. The golf cars of the brand have the highest amount of sale in parts of the Western Europe. The company has seen a rise in its sales since 2016 in comparison to the sales in 2015. The cars which has achieved maximum amount of growth are Passat, Touran, estate, Skoda Fabia, Skoda Octavia, Audi A1, soda Yeti and Audi A7. Western Europe also saw the introduction of the first SUV of the company in the year 2016. The company has more than 47 manufacturing units in Western Europe where almost 25 of them are present in Germany. It can be deduced that Volkswagen has made Germany as the operational center of the company.
In terms of Central and Eastern Europe Volkswagen has a market share of 21.9% in 2016 and has seen some growth in relation to its 20.2 % market share in 2015. The highest recorded growth was in the Czech Republic and Poland. In the case of Russia due to in current weak situation in economy and sever political tension there was a sharp decline in sales of Volkswagen and other companies too. Even though the sales were fine and there was a high demand for polo, Skoda rapid and Skoda Octavia models. The bestselling car of this region was no doubt the Skoda Octavia. Volkswagen operates over 17 plants in the central and eastern region of Europe and one of which is located in Russia.
North America has seen some slight growth in the car market overall in 2016. Volkswagen had an effective market share of 4.5 % in 2016 which the Jetta model being the best seller among the lot. The demand of Volkswagen vehicles in the United States market was down by 2.6% in 2016 primarily to the diesel gate scandal. The overall market was quite stable was quite steady and SUV models saw a peak in demand. Models like Tiguan, Audi Q3, Audi A4 and Porsche Macan has noted higher demand. The Canadian market saw a sharp decline in sales due to the diesel gate scandal. The company has been seeing rising sales in Mexico thanks to the strong momentum in the market as of 2016 sales were up by 12.8%. To cover the North American market in its entirety Volkswagen has set up a few new plants in the United States and Mexico. This is the strategy followed by Volkswagen to increase its market presence in North America (Klier & Rubenstein, 2015).
The current market condition for cars in South America was very tough in the year 2016. The performance of Volkswagen has suffered quite a bit in terms of market share which dropped from 12.5% in 2015 to 10.5 in 2016. There was a rapid deterioration in the Brazilian market in 2016 there was a drop of 34.6% demand of Volkswagen vehicle. As Brazil is the main market for the company in South America it hard n the overall sales in the continent. Where as in Argentina the company was recovering well and has sold marginally more than in 2015 (Latif ,2017).
Asia Pacific region is a very important and big market for Volkswagen. The company saw a rise of 9.8%indemand in 2016 and had a market share of 12.1 %. The biggest market for Volkswagen is China and also the largest automobile market in the planet. China was a key growth driver in the region of Asia pacific and had recorded the highest increase. Entry level SUV segment was very sought after. Still the Jetta, Lavida and Sagitar models were the most popular models (Tian et al., 2014). India saw a minor drop in Volkswagen sales in contrast 2015. The polo is the most popular model of the lot in India (Chacko, 2014). Japanese and Australian sales were down due to the diesel gate issue that loomed over the company. Demand was still high for Polo and Golf models. Volkswagen has over 15 plants scattered around the Asia Pacific zone and out of which 11 are in china.
In terms of market identification one can understand on can understand the strategies Volkswagen in using to increase its presence in the worldwide market. As a company with brands like Audi, Bentley Porsche and more under its belt it has the resources to cement itself as a formidable player in the market.
There are various factors in macroeconomic environment of a company that has effects on the strategic management and decision making. Similar in the automotive industry PESTEL analysis is used to study the various Political, Economical, Social Technological and Environmental factors. In context of Volkswagen the use of PESTEL analysis to done to aid strategic management process (Jenkins & Williamson, 2015).
Political Factors: When in discussion of political factor it is discovered that Volkswagen has to face various political blockades in the development of the company which is not just present in a few countries but has a footprint on more than one hundred fifty different nations. It is also true that political situation in different countries vary from each other vastly and Volkswagen has to implement various unique strategies to cope with different political conditions it may face. For example the political condition of Eastern Europe is very different from that of North America; Volkswagen has different policies to tackle them.
The automotive industry has close ties with the political spectrum as it has to abide by the policies that the governments make in each nation they operate. Also banking and financial sector of a nation has a huge role in sales of vehicles as all the policies regarding interest on bank loans and taxes are decided by government policies. The customers purchase decisions based on current interest on loans and current taxation on vehicles. Many emerging markets are keen on development of an automotive industry which is advantageous for Volkswagen. The biggest challenge that lay in front of the company is to analyze and understand the different political agendas and pressures.
Economic Factors: The automotive sector has a profound position in the development of a nation as it has contributions in the GDP and the national income of the nation. In context of Volkswagen it also delivers a far share to the GDP of the nations it has operations in. For this aforesaid reason a multitude of developing economies are pushing towards to develop a better automotive industry which is a plus point in the books of Volkswagen. Development of automobile industry also leads to the development of other industries like rubber, glass, steel and more. Developing nations like India, China, and Brazil are thus very advantageous market for Volkswagen to cement itself as a market leader in the following years.
There is another spectrum to the economics factors that might not be so advantageous for Volkswagen like economic crisis and uncertainty that looms in more developed countries like United States, United Kingdom and others. For example the European debt crisis was a big problem for the auto manufactures as crisis meant that the possible customers had no disposable money to purchase an automobile due to impending amounts of debt that had collected in banks. This uncertainty is not only limited to developed nations as for example the sales of Volkswagen automobile had a sharp decrease in Brazil in 2015 and the preceding years due to the uncertain economic condition that is in motion.
Social Factors: Society has a huge role to play in progress in the auto manufacturing industry. The setup of an automotive company in a nation or a region affects the society in the way the society operates in total. The societies where Volkswagen operates are huge and structurally and culturally different form one another. Volkswagen provides employment to the people in the society and as we know Volkswagen employs over 600000 personnel all over the world and even more people are directly or indirectly employed by Volkswagen. Automobile manufacturing companies helps in enhancing the level of societal interaction and in some ways improves how people live their life.
Contrary to the boon that the automotive industries bring forth there are some issue that need to be addressed by companies like Volkswagen as safety in cares are big concern of any society and as cars are getting faster and accidents on the rise less safety in care creates a negative atmosphere in a society. Manufacturers like Volkswagen have to keep all the social aspects in mind to contend and sustain itself in any society.
Technological Factors: Technology has huge part on the success of any automotive manufacturer and Volkswagen is not an exception as it is one of those top tier company that uses sate of the art technologies in their manufacturing process as well as in the final product. Volkswagen has brands like Audi, Bentley and Porsche which are well known for their use of the latest automotive technology.
Technology is what keeps and helps car in production, cars are one of the most complex product to manufacture and every weeks millions of vehicles are manufactured all over the globe. Technology is what makes such high volume production a reality. Auto manufacturers use various production tenuous such as Just in Time which is possible on with the latest technology .after sales of Volkswagen has also become much more efficient and hassle free as technicians just need a plug a laptop to the cars onboard system and can get a complete evaluation of the problems in the vehicle.
Environmental Factors: Automotive industries have tremendous impact on the global environment directly and indirectly and this factor deeply affects the automobile industry. As cars use fossils fuels to run and thus huge amounts of greenhouse gasses are released into the atmosphere. Even so the raw materials used for roads also pollute the environment. The raw materials used in automotive industry causes widespread air and water pollution for example steel pants release toxic fumes in the atmosphere and the nearby water bodies. As it is known Volkswagen has various manufacturing plants across the globe these plants cause huge environmental degradation in the regions they operate in (Oldenkamp, van Zelm & Huijbregts, 2016). So to tackle such a major issue Volkswagen has to invest in research and development to improve their emission and reach their productivity goals. It is something that so be of the highest concern for Volkswagen along with passenger safety.
Legal Factors: It is necessary for Volkswagen to follow all the various legal requirements that are require to operate in a country or a state. It is a big challenge for Volkswagen as it operates in over 150 nations and each nation has varying legal requirements that need to be followed. Volkswagen in general has to focus on competition laws, consumer protection laws, labor laws, emission standards, intellectual property laws and various taxation protocols.
A SWOT analysis of Volkswagen will reveal the internal weakness and strength of Volkswagen as well as the external threats and opportunities that the organization is facing. A SWOT analysis will investigate the current strategic situation of Volkswagen (Frynas & Mellahi, 2015).
Strength: Volkswagen’s production and manufacturing process is a great strength. Volkswagen has developed and implemented various techniques that help production in such a scale without compromise in quality and safety of the product. With such advancements in production Volkswagen also attains a benefit of competitiveness in price due to the decrease in production time and costs. Volkswagen has unique production strategies where the various plans it has around the world is designed to produce various parts of the vehicles and final assembly is done in designated plants. With effective utilization of the plants and disposable technologies Volkswagen has increased its output and in turn reduced the manufacturing costs. To sum up the strengths Volkswagen has high focus on research and development and a very robust capability of manufacturing.
Weakness: Volkswagen in the recent times has been seen going opposite to the goals while having the company’s leadership in somewhat incapable hands it has suffer for a bad scandal due to the diesel emission issue where the reports were tampered internally. To sum up the weakness that Volkswagen posses are that it has performance issues in some region namely South America. The employee productivity is relatively low. Suppression and manipulation of information in regard the emission data of diesel vehicles. Recent cash flow in is bit poor (Whittall, et al., 2015).
Opportunities: Volkswagen in its lifetime has been acquiring many companies to develop market share and with profits and various division, it is capable for more acquisition and capture maximum share of the market. It has the opportunity and the capability to invest in newer technologies to help buts its portfolio of vehicles. Summing up the opportunities available there is an increase in demand for fully electric vehicles globally, opportunity to tap markets like India and China, demand for technologically advanced vehicles.
Threats: completion and economic instability are the greatest threats for Volkswagen. Competitors like Toyota, Honda, Hyundai and more are threatening the current position of Volkswagen in Europe with cheaper alternatives. To tackle such threats Volkswagen has segmented there vehicle models on the basis of price and focusing more on cheaper commuter vehicles. The European debt crisis also caused slowdown in sales of Volkswagen and the recent diesel gate sandal issue in North America caused Volkswagen to face a hefty fine and drops in sales (Chossiere et al., 2016). To sum up the impending threats that Volkswagen faces are, global economic uncertainty, drop of sales in UK due to BREXIT, rise in fuel prices weakening the car market, environment protection regulation in regions where Volkswagen operates.
In recommendation, Volkswagen will have to commit all its focus and various assets into re-build the validity of the company. Volkswagen can also decide to rebrand, but this is something that is farfetched and not going to happen soon. It can also opt to join independent verification organizations, which can be more doable and genuinely easy to fulfill. The last, and the costliest option is to offer one of the company’s brands and post it as a bond. This may be a costly choice but it is a likely a strategy for final resort, nonetheless it will help to reestablish somewhat confidence in Volkswagen brand.
A blend of the both choice can be considered as the best proposal. As buyers will gradually gain confidence in the brand, at that point sales will in all probability increase. Customers are right now arguing on whether to buy Volkswagen models in light of the fact that many have minimum confidence that Volkswagen will make any important strides to intervene any embarrassments. It is farfetched that the revenues will equal the past at any point in the future, however if the company indicates shoppers that it is not misleading customers and committed towards better corporate and social duty, at that point it can recapture its old status.
To conclude Volkswagen’s strategic management process it can be noted that the company has a wide range of successful brands in its portfolio which help in achieving the strategic goals and objectives. The strategic objective of Volkswagen is to gain a position as the leading automobile manufacturer in terms of financial and environmental achievements. And has a goal to become a leader in automotive manufacturing and sales by the year 2019. The company is ready to make acquisition of innovations and modern technologies in order to become industry leader in terms of customer satisfaction, service and retention. Amidst all the resent scandals and controversies Volkswagen is still working its way up the ladder to attain its goal and the recent change in leadership will help boost the recovery process. Volkswagen strives to produce high quality vehicles for all budget group be it the average person or the multi millionaire.
The aim of Volkswagen is to get significant increase in the number of sales in the following year and aims to sale more that 15 million automobile per year. The company wants to capture the middle class market share in the key regions across the world. Volkswagen it aiming the financial aspect of the company even stronger but focusing on increasing the return on sales taxes to a minimum of 12%, which will help Volkswagen to operate in difficult markets. Volkswagen also aims to become the top employer in the industry to get access to the best talents and high class teams.
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