Automotive Industry and Volkswagen
US is the second largest automotive market in the world and weak Volkswagens position there results in comparably lower sales. Another weakness Wad is experiencing is that high-end cars are not environment friendly. Volkswagen owns three sport car brands Propose, Languishing and Budgets that emit high amount of CO and are fuel inefficient. Besides Volkswagen group is strongly opposing to legislation requiring tighter regulations on CO emissions and energy efficiency as their cars are not as fuel-efficient and environment friendly as their competitors.
If such legislation would be passed the business would have to aka huge investments to engineer newer engines that emit less CO. With weaknesses brings huge opportunity windows for Volkswagen to innovate and increase product performance. CO emission problems brings a positive attitude towards “green” vehicles. Cars that emit large quantities of CO and fuel inefficient cars pollute air and has a negative effect on the environment. Consumers are more aware of this negative impact and are more positive to “green” vehicles that emit much less CO and are fuel-efficient. GAG has strong synergy created between all 12 separate automotive brands.
All 12 separate companies share a part of R&D and servicing costs, learns from each other best practices and shares distribution channels. This strong synergy could be used to partner with small but large name American automakers because of their positive synergy they bring to the table. Volkswagen has done very well in Growth through acquisitions. So far, Volkswagen Group has been extremely successful in acquiring other auto manufactures and getting access to larger consumer markets as well as faster than organic growth. To continue grow at faster rates and to access vital US market, Volkswagen should intention acquiring competitors.
American companies such as bankrupt or Fiat Chrysler Automobiles NV could help to capture more US market share, and adopt their hybrid technology to also make success in the Green vehicle field. Stakeholder Analysis The Volkswagen Group is made up of a large and diverse array of stakeholders that have large expectations and Volkswagen actively has an open dialogue with their stakeholders. These include analysts, investors, employees, talents, customers, neighbors, suppliers, business partners, legislators, public authorities, academia and non-governmental organizations.
According to Volkswagens main website the Volkswagen Group’s goal is, “to create a dialogue with their stakeholders that ranges from expectation management through innovation initiatives to risk identification. ” Volkswagen pursues a process that’s in favor of an “open and constructive dialogue in which we learn from each other, but also set out our own interest. ” When Volkswagen looks at their stakeholders they want to get a better understanding of who they are and what are their expectations. Volkswagen Group has four categories they break their stakeholders into; Capital Market, Society, Partners and Customers.
The Capital Market consists of shareholders, banks, analysts and investors. There expectations for Volkswagen are to have more resource-efficient products and production. These shareholders would also like to have alternative drive technologies and supplier relations. The society consists of legislators, public concerned with traffic safety, environmental and climate protection. The society would like Volkswagen to be more attractive as an employer and employment. The Partner’s section consists of employees, work councils, trade unions, business partners and suppliers.
Their main expectations are customer satisfaction, economic debility, diversity and equal opportunity. They also want Volkswagen to be more attractive as an employer and employment. The last section is the most crucial and that is the customers. They consist of dealers, fleet operators and consumers. Their main expectations from Volkswagen are environmental and climate protection, road safety and customer satisfaction. For the Volkswagen Group to evaluate and achieve their stakeholders expectations they created a stakeholder panel that has been evaluating their reporting for the past 17 years.
The stakeholder panel follows Volkswagens activities, “especially there environmental and sustainability reporting activities and produces a critical commentary. ” The stakeholder panel produces a Group Sustainability Report every year that details Volkswagens weaknesses and gives them recommendations to improve those areas. The panel addresses several different issues and breaks them up into sections that consist of; important indicators that should be discussed by management, Dilemmas of critical issues and conflicts of interest, product responsibility, intelligent mobility, and dealing with conflict materials and social engagement.
The report emphasizes the important issues in each category and their commendations to The Group. Strengths As we all know, that Research and innovation is one of the major strengths that have facilitated the company growth of Volkswagen. The management of Volkswagen is always ready to adapt to new things in the market, this sort of flexibility is good for the company because it operates in a rapidly changing business environment. Innovation has been at the heart of the company’s expansive nature from that moment on (Volkswagen GAG SOOT Analysis 1).
This strength owes its success from the leadership which has been established under a strong leadership team that incentives the commitment and company values to offer great service to customers and creating value for all the stakeholders (Marketplace 7). The leadership at Volkswagen knows that the most important individuals in the company’s fabric are not only the engineers, but also all the other employees who work to facilitate the organization to achieve its visions. By engaging in research and education, the institution has ensure that its employees are flexible enough to grasp and apply the new technologies.
The most important the internal factors in the company are low cost manufacturing, efficient procurement and distribution of products. The company has strategic locations where it retails its products. It has dealers across the globe who sells the products directly to the customers. This ensures that the customers get quality products at reduced prices. The other essential internal factor is strong financial performance and industry-leading growth. The company has a stable financial base and this enables the company to increase production without adequate monetary resources to undertake such ventures (Hay 134).
Volkswagen also enjoys a lot of strength emanating from its brand awareness and the recognition. Like most German-made companies, Volkswagen rose to fame during the Hitler regimes and has remained one of the most respected cars models in the world. Brand recognition is important in the automotive industry since many people tend to consider brand when making purchase for cars. Although Volkswagen has been described as a luxury car company, the company has produced cars that are within the price range of many people. Basically, the company has striver to meet the interests of the middle class as well as those of the upper class.
This means Volkswagen is able to attract the interest of virtually any car enthusiasts (Barrow 34). Weakness One of the weaknesses of Volkswagen is the lack of touch with the changing customer preferences. Traditionally, German’s car makers have been known for the productions of large to mid-size cars. This has been the trend to date. The problem is that the presences of consumers have been changing. The demand of German cars on a global scale has been on the decline because of the lack of touch with the consumers. German car makers, for example, we are known for the production of real-wheel family of car.
However, the current market demand is pointing towards the production of ex. vehicles with engines of 2 liters. Unfortunately, Volkswagen reduces very few cars in this category. The inability of Volkswagen to adapt to changes in the car industry has meant that the demand of Volkswagen cars have gone down. To this end, the volume of cars sale in Asia, where these considerations are accepted, has been on the rise. The most weakness of the company is certainly the inability of the company to make continuous training part of its manufacturing strategy.
With the rapid changes in the automotive industry, the company cannot afford to be able to be left behind simply because some of its employees are not competent in some new areas of development. With training employees will be able o evaluate their past performance and identify the ways they can improve it whilst improving overall performance of the company and eventually increasing productivity. Moreover, for the quality improvement to be constant, it needs to be monitored so that all problems preventing it from happening would be moved out of the way.
Once the performance improves, employees need to be rewarded or at least recognized by their line managers. In order to identify the areas the company needs improving the most, in the Automotive Enterprises Company needs to get feedback from its customers to determine their needs and develop services that can respond o those needs. However, the needs of the customers have to be balanced with company’s needs in order to continue daily business operation and activities. Lapses in concentrations have caused the company to lose its company competitive edge.
Over the recent years, Volkswagen has been faced with various strategic issues, some of which have led to the company being forced to withdraw and recall some of its vehicles. While some of these factors were contributed by poor corporate governance and organizational culture by Volkswagen, the external environment also paid a role en a culprit of producing ‘inefficient’ cars and that not able to match the taste of the customers. Part of the problem is the high self-confidence Volkswagen top managers. The managers assume that the market position of Volkswagen is everlasting.
However, this assumption might soon prove to be the greatest mistake by Volkswagen. Between 2009 and 2012, Volkswagen has been forced to make a series of recalls, some of which has gone against the tradition of the company p produce effective and efficient cars (Toledo 4413). Opportunities Volkswagen has a lot of opportunities that can propel it to success. One of the major opportunities for the company is the emergence and popularity of environmental friendly cars. To do this, the company has been at the forefront of the development of hybrid cars.
The company realizes that the invention of hybrid cars provides the best opportunity of reducing the amount of greenhouse gases produced by cars. Hybrid cars are vehicles with combustion engines that are designed use gasoline, ethanol or gasoline blended with gasoline. Hybrid cars, thus, produces less volumes of greenhouse gases and are less harmful to the environment. Volkswagen hybrid cars reduce the overbalance on imported fossil fuels. Since ethanol fuel is renewable and produces less greenhouse gases than petroleum (Hay 134).
Volkswagen hybrid cars are popular because they offers the best alternative of dealing with the problems of over dependence on imported oil and the negative impacts of greenhouse gases that result from the combustion of fossil fuels in car engines. Volkswagen hybrid vehicles are designed with alternative engine that can run on either gasoline or ethanol or both. Currently, there are about 8 million light-duty vehicles that are hybrid worldwide. The increase in the global production of ethanol will highly as increased considerable.
This is partly due to government facilitate many people to go for hybrid cars. In the recent years, the production of ethanol h regulations that require vehicle manufacturers o produces cars with minimal impact on the environment. Thus Volkswagen is well placed to harness the likely boom in hybrid cars in the near future. Volkswagen is well placed to increase its market share in Europe. Although there are many vehicle manufacturers in Europe, German-made cars appear to be attracting the most interests of European car owners.
The market share of the four German automobile manufacturers across West-European market as gradually escalated in the last fifteen years (Miter 70). With the inclusion of Soda and SEAT, the market share of Volkswagen would be deemed higher between the periods 20010-2016. The European market is made up of numerous national markets with rare characteristics. Across all these nations, the market share of the national manufacturers has been on the decline and the market share of the German producers, especially Volkswagen has been on the high (Miter 71).
These pictures also portray the varying preferences in the markets. From the all of above, it is evident that the Volkswagen has been successful over the last years. The company has been in a position to uphold or enhance their rank amidst high and stiff competition. Another opportunity for the company is the ability to keep the company relatively stable for a long period of time. The environmental stability that exists within the company is one important aspect that has kept the company afloat. The environment that encourages the company’s ability to thrive.
Besides, the stability of the company has been facilitated by the continued social and political stability in Germany. The organizational stability of Volkswagen has provide the company with he stability and which has given Volkswagen a good opportunity to thrive in the home improvement retails (Cruz 36). A stable environment is often good for any company to excel as long as all other factors remain constant. Volkswagen has enjoyed existing in a stable environment for the longest time, and that has brought more opportunities. Threats The company faces a number of threats which include fluctuation of world currencies.
This is a factor that affects the company’s international sales turnover since it affects not only the company’s distribution operations but also the retail price f the product by the time it reaches the customer. The other threat that faces the company is the demand for high quality products at a low price. This is a great challenge that the company is facing since its competitors are also improving on efficiency to reduce price. To ensure it remains ahead of the competition, it has to continually produce quality goods at a lower price than that of competitors which calls for great efficiency measures (Volkswagen GAG SOOT Analysis 3).
Although Volkswagen is a German company, the company has been employing talented individuals from various parts of the world. With the increasing diversity of the workforce at Volkswagen, cultural management is slowly becoming a problem in the institution. Although most workers in the company are Germans, there is a growing contingent of workers from other parts of the world, especially on its assembly plants outside Germany. These people have different cultural beliefs as well and need to be handled carefully.
There is need for s structured human resource framework that ensures that the cultural concerns of all employees are taken into considerations (Marketplace 9) Cross cultural management is a very critical issue that needs to be efficiently addressed in the hospital. In as much as the culture of the hospital should be adopted by all employees for effective and smooth co- operation between the various employees, it is very important to note that this can be adopted only with time and with a clear and long term understanding of the organization’s mode of operations and beliefs.
The top management still has a very important role to play in ensuring that the various cultural divides represented within the organization are fairly and rationally managed in order to minimize or eliminate cases of cultural conflicts among the employees. Perhaps the most important threats to Volkswagen are the competition coming from other vehicle manufacturers. In particular, Volkswagens market share in Asia has been greatly eroded. He emerge of new car manufactures in China, such as FAA, and the increasing dominance of large Asian players, such as Toyota, has ensured that Volkswagens’ markets shared is at an all- time low(Volkswagen GAG SOOT Analysis 6). The fact that there is an increasing population of middle income earners in Asia has made it possible for many Asians to own cars. In the past, Asian countries, such as China, had a small population of the idle class with majority of the population not being able to afford to purchase cars. This situation has changed over the past 10 years.
Many citizens in Asia have the increase in the purchasing power of Asia has resulted into the emergence of many car manufacturers in Asia, most of which have been able to produce cheap cars BRINE The BRINE model is part off much larger strategic plan off firm. The firm uses this framework to do internal analysis within the company, but is also used as a framework in determining all resources and capabilities of a firm. BRINE is an acronym for Valuable, Rare, Inimitable, Non-Substitutable, and Exploitable; we use these to analyze the core competencies of the brand.
Valuable – Is the firm able to exploit an opportunity or neutralize an external threat with the resource/capability? Rare – Is control of the resource/capability in the hands of a relative few? Inimitable – Is it difficult to imitate, and will there be significant cost disadvantage to a firm trying to obtain, develop, or duplicate the resource/capability? Non-Substitutable – Is the resource/capability is inimitable if competitors cannot acquire the valuable and rare source quickly, or face disadvantage in doing so?
Exploitable – Is the firm organized, and able to exploit the resource/capability? Volkswagen Group’s core competencies are technology, research and development, and environmentally friendly technological development. To get an overview of where Volkswagen stands within these core competencies we have to analyze them. EDIT Diesel Technology is a technological core competency of the Volkswagen group. EDIT Diesel Technology is High-performance diesel technology is a new concept the makes diesel technology even cleaner; nitrogen oxide levels are reduced ninety percent with this technology.
Combined with a new sustainability initiative called Blue Motion Technology that provides more efficient and dynamic perpetrations, make Volkswagen Group technology have an edge. Proving this by producing the Pasta Blunted the most environmentally friendly diesel car in its class (midsized diesel car). High- performance diesel cars are very valuable to the company, as it means cost saving for the consumer. This technology is exceedingly rare as only Volkswagen Group brands may use the technology. Because it would cost a lot of capital in terms of research and development for other companies to compete with the technology it is inimitable.
The technology is not non-substitutable though, simply because there are other diesel cars on the market and they are only a fraction of a bit behind. Lastly, the EDIT Diesel Technology is highly exploitable as it represents large savings to the consumer, combined with other technologies such as Blue Motion Technology Volkswagen has a clear advantage over other firms in the industry. Blue Motion Technology is both a form of branding existing cars as environmentally friendly, introducing a focus on reducing consumption technology with more efficient and dynamic perpetrations, making it an attractive offering for consumers.
The second core competency of Volkswagen Group is research and development. CEO-fuel is currently being developed by Volkswagen Group in order to break into the CEO-friendly and economical car market. Because CEO-Fuel designs reduce both carbon monoxide and nitrous oxides by eighty percent the cars are allowed into all environmental zones. The firm is able to take advantage of a new potential growth market by continuing to although other firms in the industry have it, not all are equal. It is imitable as many other firms have it although by different names, however the specific way in which
Volkswagen produces is difficult copy without heavy investments in research and development making it Non-Substitutable. Volkswagen Group is able to exploit the resource as it’s a very new market and they seem to be among the first entrants. Lastly, Volkswagens environmentally friendly technological development is a core competency of Volkswagen Group. Recycling is a very important component of sustainability not only for Volkswagen Group, but for the whole world. Volkswagen works intensely to enhance the recycling with old cars, lubricants in the cars, and parts to make sure to leave the world as clean as it can.
This is very valuable to the rim because it emphasis to the stakeholders that Volkswagen does care about sustainability and enhances their brand awareness as an environmentally conscious company. For a company as big as Volkswagen it is rare for an emphasis to be on the stakeholders environment. It may be inimitable to some companies because Volkswagen image is built on environmental friendliness, if a company is not going to profit from recycling they may decide not to do it. This is not something that is substitutable by other companies as they may not have a corporate culture that promotes sustainability.
The firm is able to exploit this as they are organized, and hen you are organized and recycling you can get many resources back and tax cuts. Porters five Forces Analysis (Automobile industry) Porters five forces analysis is used to create a frame of reference to evaluate competition within an industry and business strategy development. It was developed in an attempt to see if firms would profit from entering an industry. Porter’s five forces include three forces from “horizontal” competition and two forces from “vertical” competition.
The five forces include threat of new entrants, threat of substitute products or services, bargaining power of customers (buyers), bargaining rower of suppliers, and intensity of competitive rivalry. Threat of New Entrants – New entrants into the automobile industry are increasingly rare, as the high hurdles of capital are astronomical. While the technology to create cars became easier to obtain worldwide brands began to emerge. However these days the only way a car company could be created is if it had radical new technologies in it, or operated in a niche market.
Power of Suppliers – Suppliers hold very little power in the automobile industry, often relying on one or two firms for orders. This is because the automobile supply arrest is very fragmented (there are many firms). Power of Buyers – In the past Americans were the number one producers of cars and people rarely cared what price the automakers demanded. As globalization occurred and foreign entrants entered the market consumers now require car firms competitively price their cars or risk losing their business.
However, as consumers don’t buy cars in large volumes they have only somewhat moderate power. Availability of Substitutes – When talking about the availability of substitutes, we can not only look at the availability of substitute car firms; but the availability of bustiest in the transportation industry. For example, when gasoline prices go up, to more compact vehicle. But if the price of gasoline were to skyrocket people could easily choose different modes of transportation such as walking, biking, or taking public transportation.
Competitive Rivalry – The car industry tends to be labeled an oligopoly, which helps to reduce the effects of price-based consumption. Automakers understand that changing prices does not necessarily means they will get more market share in the auto industry. However, lately price wars have been raging in the forms of rebates, financing offerings, and warranties. Putting pressure on vehicle sales. The automobile industry is not approaching pure competition at this point, and as an oligopoly. They work together to make sure the profits are reasonable and try not to price compete.
With the high barriers of capital and research involved with starting a car firm, there are rarely new firms threatening to eat up market share. With this analysis we clearly see the forces acting on already established automobile firms are not forcing overall profitability down, making it a profitable industry. Value chain A value chain is a chain of activities a firm does in a specific industry to provide a ore valuable final product. Seeing the organization as a system is essential to the value chain because then you can pinpoint at what point in the value chain you are losing value.
Like an engine a company must perform specific times at specific times in order to maximize efficiency. Volkswagen Group uses a as it is a multinational enterprise. In order to maximize profits Volkswagen Group locates different activities in different countries such as research and development, design, assembly, production of parts, marketing and branding. The primary activities of the value Hahn are operations, outbound logistics, marketing and sales, and service. The support activities of the value chain are procurement, human resources management, technological development, and infrastructure.
Primary Activities Operations of the Volkswagen group include creating sustainable relationships with suppliers, buying materials in bundles for all their brands (cost effective), quality, and innovation. The most important thing to Volkswagen Group behind economic profits is to create sustainable relationships with suppliers, where they are responsible for their own actions at the regional, national, and global level. Further, Volkswagen group aims to buy materials not for only one brand at a time but for all its brands. The quality of the supplier must be top notch alongside the supplier’s ability to innovate with new technologies.
Volkswagen Group operates one hundred named Volkswagen Logistics deals with all its outbound logistics. This company deals with all Volkswagen Groups suppliers to move products to applicable markets. Sales and Marketing is implemented by having locations in many different market, that usually headed by people who are culturally intelligent of the area. In this way it can aka sure that different economies get different care, and with communication from the consumer of the market they can decide which brands to bring to market.
Volkswagen Group has superior service that each brand individually manages. It is this service that makes the consumer keep coming back. Support Activities Volkswagen Group procurement of resources is very efficient, often buying resources for all its brands at a discount. Since it is a multinational organization they can source the cheapest raw materials from all over the world. Employees are highly valued in Volkswagen group with development paths, working, living, and basic reminisces that instill a strong corporate culture of economic and social responsibility.
Technological development is highly regarded within the firm, allowing it to have many research partners and to lead the world into the future. Some innovations the firm is working on is autonomous driving, Mobility technology, and better navigation. Infrastructure of Volkswagen Group is top notch having many accounting, legal, finance, control, public relations, and quality assurance procedures in place. Financial Analysis By 2018, Volkswagen wants to become the number one leading automotive many in the world.
In this competitive automotive world Volkswagen will need to compete with their leading competitors such as, General Motors (MM) and Toyota. When we look at Volkswagens financial we can see that there profitability and sustainability compared to their leading competitors. Evaluating Volkswagens financial and comparing them to General Motors and Toast’s we give ourselves an insight into if Volkswagen can compete and finally breakthrough in the U. S market and dominate against their competitors. When it comes to profitability Volkswagen, General Motors and Toyota are among he top contenders in there industry.
Each company sells millions of vehicles worldwide and has operations in many countries and regions. To become the top contender you need to be dominant in all countries and especially in the United States. Volkswagen has taken a backseat in the U. S recently but, now they vow to become the leading automotive in the industry. By the end of 2013, Volkswagen had revenues of $245,019. 60 (in millions) with operating expenses totaling $25,807. 0 giving Volkswagen a net income of $1 1 ,275. 5. Unfortunately sales dropped “6. 9 percent last year but, with the help of Audio’s sales