Strategic Analysis Essay For Audi: PESTEL, Porter Five Forces, And SWOT Analysis.

Macro and Micro environment

Create a critical strategic analysis report for Audi which for the content of the report please check both of module handbook and the protocol file for detail as both of them contain the word limited, the layout of the report, what does it involved, the guideline and the marking criteria of the report. also please just plenty of academic referencing and different analysis tools such as: PESTEL, Porter Five Forces, SWOT analysis etc to analysis and make the link between macro and micro environment for Audi and at last reach a conclusion as to why Audi gas been successful with their strategic.

 Audi is the automobile brand working under the Volkswagon group. Volkswagon is a giant division that manages other strong brands Lamborghini, Bugatti, Ducati, Bently, Suzuki, Skoda,  Porsche, Scania and Volkswagon commercial (Shukri et al. 2015). As Volkswagon dealing with giant automobile companies and also operates in more than 153 countries thereby giving extended exposure to Audi giving it an opportunity to expand internationally. Audi  has developed itself  as the  leading  luxury  automobile brand  as a  reason for its  immense  technological  and precision engineering capabilities. The leading premium car brand is successful to target multiple segments of consumers while it seeks to provide customers with leading premium vehicle in the world. Audi in progressive line with the Volkswagon group seeks to produce exclusive models that anticipate the desire and vision of clients.  Audi poses significant expertise in the field of comprehension energy efficient processes, light weight construction, and effective heat management technique within the vehicles. Audi’s capability and expertise in the field of technology which in turn leads to innovation initiated since the early years of its collaboration with the Volkswagen group. Audi developed its core competency with the development of four stroke engine.

The micro-environmental factors of AUDI are explained by the SWOT analysis of AUDI.

SWOT	Analysis
Strength	Technology and engineering- Audi is known for its engineering and precision behinds the cars. The design and look of the cars is derived from its high capacity engine and capability of precision engineering (Khatri et al. 2015).This exclusive design will not be achieved without the right technique and process of engineering. Brand Name- The brand name of Audi is a promise that carries its trust. Audi  is  famous as the best car in the world due to its  design, technology and safety(Anisimova 2015). Moreover, the development of innovative, faster and sleek cars of the years has added to the brand name of Audi making it a super premium car manufacturer. Product range- Audi has exclusive range of car models ranging from premium, super premium and ultra premium. The Q series and A series of Audi are the most popular and in demand series (Baur et al. 2012). While on the other hand, Aldi also focuses to innovate cars like  Audi Quattro, Audi sport, Audi ultra, etc.
Weakness	Unlike  Audi, BMW  diversified into cost  differentiation strategy offering a larger  product portfolio, thereby  increasing the rate of turnover(Shukri 2015). Such an approach allowed BMW to take the front seat in the luxury car segments leaving AUDI to lag behind. The promotional approaches by Audi are less as compared to BMW and Mercedes that promotes its products much vigorously.
Opportunities	Target the emerging market- Audi representing the luxury car brand has its presence in limited market. The company can introduce its products in the emerging markets thereby covering extended geographical territory. Audi will facilitate an extra edge than its competitors due to its innovative and diversification capabilities. Audi innovation is mainly in the form of  battery fueled  premium cars and s energy efficient features. Innovation acts as the driving force for differentiation strategy by Audi which will help its long term sustenance (Conradie and van Niekerk 2015).
Threats	Audi may experience saturation in long run due to the limited market of luxury car brands with the share of pie is going to other premium brands as well. Young generations are more focused to spend on gadgets and also realize the value of savings on luxury brand cars (Drake and Rhodes 2015).  Likewise any other industry, competition in the luxury car segment is high. The strongest competitor of Audi is BMW playing smartly to grab the whole of it.

PESTEL	Analysis
Political	Audi being a German automobile manufacturer highly encouraged by the German government.  The political scenario is supportive to the thrive of luxury car brands   and also promotes a phased, integrated and conducive growth of the automotive industry (Duane and Domegan 2013).
Economical	The German automobile company has increased its sales value from 811522 units to 1933517 units between the periods of 2005 to 2014(Endres, Roocks and Kießling 2014). This has increased the revenue of luxury car revenue at an extended range from £26.6 billion to  £ 53.8 billions in the similar period.
Social	Audi being the best employer  to work for  in the  automobile industry , has made consistent effort to  improve its  workshop  conditions  in order to satisfy its workers. Considering the social factors, Audi has designed its new cars in order to meet the demand of consumers through its social behavior. For instance, designing of cars with smaller engine and higher fuel consumption (Jahn and Kunz 2012).
Technological	Audi is reputed for its exclusive skills and expertise of engineering and technology that has significant impact on its brand image. The company exploit its technical  expertise  top develop  efficient  features  of cars such as  fuel stratified injection,  QUATTRO 4 wheel drive system, aluminum space  frame technology.
Environmental	The increasing concern on the environmental issue of global warming, the government has imposed lot of emission regulations (Kagali 2014). Most importantly, Audi has been significantly focused on processes to reduce the CO2 emission at the same time optimizing the performance of its cars. For instance, the new Audi TDI diesel engine has been meeting the standard of future European 5 emission standard.
Legislative	German government has enforced a set of legislation in order to protect the road users of cars such as Crush standard, European standard, etc (Turpault, Tannen and Welsh 2013).  Such legislations have pushed Audi to produce stronger and safer cars.

Porter’s five forces	Analysis
Threat of new entrants	The luxury car brand industry is ruled by giant players like Audi, BMW and Mercedes (Khatri et al. 2015). The threat of new entrants is relatively low as the entry barrier is significantly high and require a very high expenses of initial set up, R&D expenditure and potential strategic move to establish in the ground of strong competition.
Bargaining power of customers	Audi  being the biggest client  to the suppliers due to  its size and   brand loyalty, the bargain power of suppliers  is not high rather  considered to be the moderate(Anisimova 2015).
Bargaining power of consumers	The bargain power of consumers is relatively high, as a result of the high level of competition in the   industry (Kirk, Ray and Wilson, 2013).  Consumers get a number of branded options to deal with like BMW, Mercedes Benz, and Lamborghini. Moreover, the cost differentiation strategy by BMW is engulfing a major proportion of consumers giving the opportunity of consumer bargain (Jahn and Kunz 2012).
Product substitute	Although it is quite hard to replace automobiles in short term as how it is commonly used in global scale.  However, recent statistics makes it evident that increasing number of consumers are shifting to travel through trains, buses and reasonably cheap private cars, instead of choosing luxury brand cars (Drake and Rhodes 2015). Such an attitude of consumers can develop as a potential threat in long run.
Competitive rivalry	The automotive industry is strongly positioned in the western economy. As a result, there is not much room to expand in the North American and European market (Rugraff 2012). However, the market of South East Asia is expanding at a high rate with the increase in its consumption ability. Nonetheless, Audi and its competitors such as Mercedes Benz and BMW will continue to hold on its share in the market.

The strategic capabilities of Audi consider its efficiency, aptness of resources and expertise for long term sustainability and consistent growth.   

Audi has significant expertise in the field of light weight construction, comprehension energy efficient processes, and effective heat management technique within the vehicles. Audi introduces innovative technological options in its luxury brand cars such as MP3 connectivity and RSS feed (Jahn and Kunz 2012). Audi restates its aspiration as the top premium brand with its prominent performance design, high level of innovation and hybrid engine options.

SWOT Analysis

The Audi brand represents Sporty and performance oriented automobiles  that define ingenuity and high level of craftsmanship. The famous emblem and its slogan of “Innovation through technology” has allowed, Audi has enforced consistently effort to live up to the message and  brand promise for the last   45 years has enabled the  company to establish strong brand identity. The brand name of Audi proves to be a tangible asset whereas its reputation is intangible as whole. The key to Audi’ success in a competitive industry is due to its consistent performance and validity of their marketing policies and strategies (LI and LIU 2014). Nonetheless, the Audi automobile owners are significantly focused on their brand image that plays the major role is developing customer loyalty.

The statistics in Economic times highlight the fact that Audi asserts its position as the most desirable German Employer. The management of Audi Group emphasize that employees forms their key success factor. Audi believe that a motivated and dedicated workforce, young talents has the utmost contribution to a company’s success. Miravete, Moral and Thurk (2015) opined that the number of apprentices in Germany are increasing by 10% by 2014 and reaching to 5266 apprentices by the end of 2015.  The company has invested more than €280 million in professional training in order to offer its employees with required skills and expertise (Kagali 2015). Moreover, the competitiveness of Audi is ensured by the adoption of well-coordinated pool of employees within the organization.

 Audi ranked in 3^rd position in the global luxury car market share, with BMW and Mercedez Benz as its active competitors. Audi targets  a significant market segment of luxury  car purchasers  specially in their  20’s, 30’ and 40’s  that makes upto  49% of the  US customers base(Turpault and Tannen 2013). Audi, the third leading  luxury  car brand  position  itself  flaunting its technological expertise  (through the slogan  such as “ Innovation through  Technology” ), strong engineering  (through the slogan  such as “ Truth in engineering”), speed and added upon by bravery recently (Martín-Peña, Díaz-Garrido and Sánchez-López 2014).

As per the recent statistics in January 2014, Mercedes Benz was ranked the highest selling luxury car brand in US with BMW the second lead in the industry (Mikusz, Jud and Schäfer 2015). With the focus to combat similar past results, Audi set its goal to become the leading premium car brand globally. Audi’s current approach proposed in the year 2010 and anticipated to run through 2020 is largely integrated on three tier strategy house considering Mission, Vision and goals.

PESTEL Analysis of Audi

Mission- “We delight Customers worldwide”

The above mission is further explained through its four attributes. They are:

• They define innovation
  
  
• They create experiences
  
  
• They live responsibility
  
  
• They shape Audi

In respect to their recently placed marketing strategies, the goal of Audi to execute their organizational mission is focused to achieve consistent growth, financial strength, to become an attractive employer worldwide and mainly to become the global luxury auto leader.

 Vision: Audi – The #1 premium brand

Audi’s updated strategy anchored on the improvement and sustainability of its products, innovation and processes in order to facilitate its customers with   a delightful experience (Miravete, Moral and Thurk 2015).  Audi also emphasizes on its ecological, economic and social responsibilities as a whole.

With the implementation of its new corporate strategy, Audi has expanded their objectives maintain its existing goals.

The goals of Audi  are considered in details below.

• Reach the top image position and gain customer  mix
  
  
• To achieve long term sustainability of  processes and  its auto products
  
  
• To attain superior financial growth
  
  
• To become the leading innovator

The culture of Audi left unsaid without defining its technological assets. From the very initial stage advanced technology has been the core of  Audi DNA.

. This portion of the report will shed light on the corporate strategies of Audi considering the 4P’s.

Product- The model of Audi car is successful to target multiple segments of consumers while it seeks to provide customers with leading premium vehicle in the world. Audi in progressive line with the Volkswagon group seeks to produce   exclusive models that anticipate the desire and vision of clients.  Audi proved its commitment towards customers thereby listened to them by executing the first crash test in the year 1938.- thus setting the standard of safety within the automobile industry. Post worlwar II, Auto Union AG introduced the new model of four stroke engine, and there is no looking back since then (Turpault, Tannen and Welsh 2013). The Audi model range include  Audi A4, Audi A6, Audi A7, Audi A8, Audi Q5, Audi Q7, Sportback,  Audi RS5, super sorts  car such as  Audi R8, Audi R8  spider.  The exclusive range of products has been developed with the focus to meet the consumer demand of all customer segments.

 Price: The product offering of Audi significantly aims to reach all customers segment in the automobile industry by the implementation of comprehensive pricing strategies. Audi offers a range of products with a tired pricing scheme for each body style with the focus to capture varied levels of consumer spending. Its prices are dictated respective to the engine capacity, vehicle size, sports variant, fuel consumption, etc (LI and LIU 2014).

Porter’s five forces model

In addition, Audi employs skim-pricing model by positioning its brand in a way to facilitate customers with unique value. With its skim pricing strategy, Audi takes advantage of the relatively high demand and within the market of luxury vehicle. Nonetheless, Audi was elected to raise its price on all of its car models at the beginning of 2013 by a rate of 1-5% ( Van der Lippe 2014). This was a positive consequence of Audi’s market penetration and image as a luxury car brand that has produced better recognition and sales than expected. This model of pricing  by Audi  has been set to  attract the  customers of competitors  and consequently  based on the  comparable  vehicles in the line of  Mercedez Benz and BMW.

 Place: Audi place its primary outlets to directly interface with its customers. Audi reach its customers through 2800 strategically placed showrooms and dealers across the world. Audi delivered more than 20,000 vehicles to 7 countries in the first half of 2007 itself (Whitted 2012).  On the other hand, in the second half of 2007, the company successfully delivered over 3000 vehicles across 20 countries (Wittmann and Reuter 2013).

Audi enforce immense effort to enhance the purchase experience of customers practical. Over the years,   Audi Company has added evening hours and weekend timings to let the buyers pick up their vehicles at their most convenient time. In addition, the company also offers valet services in order to deliver vehicles at the closest franchisee for the customers. Moreover, the availability of   dealership location allows convenient access to car repairs and services.

Promotion:  Audi has widely extended its reach by successful promotion of its luxury cars through advertising,   effective communication channel and affluent promotional strategies. The company estimates itself   as the “prestigious” or luxury brand by communicating its engineering excellence to customers. The brand enforces consistent promotions through its slogan of “Truth in Engineering” or “Vorsprung durch Technik” (Wittmann and Reuter 2013). Nonetheless, Audi has surpassed the traditional advertising by means of its emblem promotion, signage, dealership education, etc. Such    an approach of promotion has successfully established awareness in the signature events such Olympics and Super Bowl. Such an approach was implemented by Audi with the ultimate goal to enhance its brand awareness while distinguishing itself from simple luxury to progressive luxury brand.

Needleless to say, the advancement of social media and digital networking has been successful to change the viewpoint of customers about the brand dramatically. Active participation of Audi in Twitter, Facebook, Website media and Blogsite has fostered the ideal that the company is appealing and accessible to all markets (Mikusz, Jud and Schäfer 2015). Further, such means effectively communicate the means through which the brand relates to its customers and how effectively the ownership of luxury vehicle is attainable.

Audi, the famous car brand features an iPad magazine that offers customers with information of its exclusive range of cars, images, diagrams, performance specifications, and also presents the current news to stay in touch with present and perspective customers.

 Audi, the luxury car brand was founded in the year 1932 as a result of merger between DKW, Audi and Horch.   This was initiated by the state Bank of Saxony with the focus to form Auto Union AG.  During this period, a purchase and leasing agreement was undertaken to take over the Wanderer’s Automobile Division.  The emblem of Audi is consisting of four rings, representing the inseparable unity of the founding companies (Kirk, Ray and Wilson 2013).

 Audi merged with NSU in the year 1969 and the company was named as Audi NSU. For the following 8 years, Audi manufactured the NSU products and then moved to the production of Audi vehicles solely. The company sought to amplify its name with a shift in their manufacturing. As a result, the name of the company changed to Audi AG, however AUDI maintains its NSU GmbH and Auto Union GmbH as the subsidiaries in order to hold their rich history and tradition (Anisimova 2015).Moreover, Audi prides itself as the progressive line with the Volkswagon group. Moreover, the company is significantly capitalizing on several key aspects such as Audi’s financial services arm, VW financial services AG, etc.

 Audi have adopted aggressive strategies to expand internationally over the years. The strategies are enforced with the launch of class-defining car models thereby strengthening its dealer network not only in the metros but also across the Tier I and Tier II cities (Baur et al. 2012).

 In addition, Audi formed forms a acquisition with Volkswagon Group’s automotive division   and focused on developing more sporty values. As a result, Volkswagon Group having its root in Europe but operate in more than 153 countries, allows its subsidiary Audi to expand successfully in all of the above countries.

Firm Infrastructure	Audi  follows top-down management style and centralized structure
HRM	The premium car brand considers employees as their key to success.  It has unionized workforce and believe on the apprentice concept. They also provide vocational training to develop skills  among the workforce
Technology development	Famous for its R&D partnership and engineering excellence. It emphasizes on developing interchangeable, environment friendly products.
Procurement resources	With focus to gain quality input, Audi forms a strategic alliance with its suppliers to develop long term relationships. Excellent management of supplier network for the timeliness of resources. Audi’s operational efficiency is augmented by forming exclusive partnership with Google, Apple to offer in-vehicle features to customers.
Inbound logistics	Germany holds 49% of automobile components and parts, thus Audi saves shipping fees to procure the small   car parts (Rugraff 2012). Moreover, Audi gains a market control with few suppliers in process.
Operations	There is a systematic linking of suppliers to the process of vehicle development. The company has more than 300 flexible work schedules, JIT production and low inventory on hand.
Outbound logistics	Audi has developed its vehicle manufacturing units in the developed countries like Australia, USA where the demand is consequently high. The physical s stores are located near customers.
Service	The company offers Motor workshops for customers, well trained customers services and sales staff, long term packages for maintenance of vehicle.
Marketing	Enforce high brand awareness, lavish and clean dealer showrooms, customized services to meet the demand of customers.

Security sector reform is a political situation essentially aimed at the effective, efficient and non-discriminatory provision of the state. Moreover, the strategy focuses on the human security within a framework. Implying the SSR model In Audi, this part of the report considers the safety and security measures of its employees. Audi supported a series of initiatives for its workforce welfare. It offers flexible child care plan for its employees for a better compatibility of family with work life. The company offered expansion of employment guarantee making it effective from s 2014 to 2018( Mikusz, Jud and Schäfer 2015). Offers payment of an employee profit share (MEB) and agreed Audi profit share (AEB) for the employees under pay-scale. The company promotes workers employed under temporary contracts as permanent members making them a part of workforce in  Neckarsulm and  Ingolstadt sites.

Strategic options refer to the core competencies and activities possessed by an organization.  Strategic options come into play when the organization is compared with the competitors, and through companies adds on unique value to its services or products for a long period of time.

The strategic options possessed by the luxury car brand Audi, is thus discussed in details below:

Audi has increased its R&D technological expenditure by 18.2% to 4952 million on 2012 with the aim to propel its innovation leadership in the industry. Technology and engineering capabilities forms the heart of Audi’s strategic decisions for profitability and long term sustainability (Martín-Peña, Díaz-Garrido and Sánchez-López 2014).Considering its technological capabilities, the strategy initiatives of Audi include the following:

• Reduction in carbon emission,
• Engine efficiency
• Lightweight construction
• In-car entertainment features
• Online assistance for drivers

Audi’s leadership and capability in the field of technology and thus innovation started since the early years of its collaboration with the Volkswagen group, with the development of four stroke engine that forms its core competencies. By the year 1990, Audi has minimized the emission and fuel consumption of automobiles that was sold by 30% (Drake and Rhodes, 2015). As a whole, Technology and innovation develops the competitive advantage of Audi in terms of   premium product quality and high performance, thereby providing luxurious driving experience to its customers.

Audi seeks latest avenues of value added techniques with the aim to meet the requirement of customers. Moreover, the company keeps itself updated about the upcoming trends of customer’s preferences. The process of custom-building of cars facilitate Audi to take slack out of the production process, minimize the inventory costs of dealers and also avoid the heavy  rebates on cars  that were not sold (Duane and Domegan 2013).As a result  customers are  more satisfied  with services  which in turn improves the customers  loyalty of Audi. Nonetheless, the strategy of custom-made cars is often encumbered with lots of strategic options resulting into higher profit margins.

The global supplier network of Audi consists of more than 11,000 suppliers in more than 65 countries worldwide. The company implements supportive measures for its suppliers and employees in order to ensure consistent improvement and sustainability throughout the entire global network (Endres, Roocks and Kießling 2014). Besides its own processes and measures, in collaboration with its suppliers, Audi introduces new structures and measures to enforce enhanced sustainability in the supply chain. Such an approach brings about the annual supplier innovation award to complement a competition on the products and processes of Audi in order to enhance its resources and cost-efficiency.

Conclusion

Audi, the premium luxury car brand was founded after BMW and Mercedez Benz, Audi significantly lags its sales in U.S and worldwide (Rugraff 2012).However, the global success and rapid growth coupled with the introduction of new corporate strategy has positioned The Volkswagon group and Audi to remain as the strongest competitor in the industry of luxury vehicle industry. The company is exploiting its strategic options and core competitions to rule over the automobile industry. On overall evaluation of the above report, the influence of various forces discussed above forecast a significant challenging situation for Audi. It has been observed that the significant forces increase the intensity of competition between the competitors and uprising potential threat of the industry substitutes.  Such attributes constantly threatens the market share and position of Audi. In contrary to this, the strong brand identity, technological and engineering excellence and R&D experience are considered to be the key factors that would help Audi to remain competitive in the future. Nonetheless, it is evident on analyzing strategic options; Audi gained sustainability in the supply chain by introducing in structures and key measures in the process.

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