Home Education and Learning Analysis on the Global Strategy of Volkswagen

Analysis on the Global Strategy of Volkswagen

by admin
41 views

Introduction

Dr. Ferdinand Porsche challenged the creation of vehicles for the German people in the late 1930s, and so started the voyage of tiny cars. Due to the participation of other projects and designs on the vehicle prototypes, this concept was postponed. Adolf Hitler wished for every German, even ordinary citizens, to own a vehicle. The phrase was also known as the people’s automobile. Hitler openly endorsed Porsche’s concept. The car’s design was developed with the assistance of Erwin Komenda and Daimler Benz. The automobiles were put through their paces by both manufacturers and Nazi soldiers. They established a factory in Wolfsburg in 1938 to maintain their enormous output for the German people. During WWII, however, Volkswagen’s automobile manufacturing was transformed into a military vehicle. While the British wanted to do rid of the beetle moniker, Volkswagen was renamed Wolfsburg Motor Works. Despite their efforts, Volkswagen was relegated to the annals of history. The automobiles were built to assist the warring nations, putting Volkswagen’s future in jeopardy (Gunnel 6-7). Heinrich “Heinz” Nordhoof’s appointment as general manager secured Volkswagen’s future. The beetle was widely spread across France, Germany, the United Kingdom, and the Netherlands. Volkswagen was restored to Germany by the British government in 1949. Volkswagen continues to manufacture commercial and premium vehicles. It has met its objective of surpassing the “legendary milestone” set by Ford Motor Company’s Model T. Furthermore, the original design was modified for mass manufacturing. With the launch of the Golf GTI (“Brief Journey”), Volkswagen’s popularity skyrocketed. Volkswagen continues to develop in order to meet the preferences of its consumers, thanks to its dedication to innovation. The primary goal of this study is to examine Volkswagen’s worldwide strategy as a global leader in the automobile sector. It also aims to link the worldwide strategies of other industry leaders in order to identify the elements that contribute to their success.

Mission Statement

            Volkswagen changes its mission statement. The CEO Martin Winterkorn announces publicly of their new vision that Volkswagen “would strive to be the number one automobile maker within a decade in worldwide unit sales, profits, quality, and image” (Ireland, Hitt, and Hoskisson 28). Being number one requires Volkswagen to outperform Toyota. Toyota was able to eclipse General Motors, which was previously the number one auto dealer, according to The Guardian (“Toyota Holds”). In 2018, the business wants to be the “global economic and environmental leader among mobile manufacturers,” according to the corporation. Volkswagen tries to innovate and use technology to accomplish the company’s objectives while maintaining the fundamental element of customer happiness and quality. Second, since the market is still growing, unit sales must rise beyond the 10-million-car-per-year norm. Third, Volkswagen’s return sales increased by 8% before taxes, securing its financial position and ability to function despite the challenging market climate. Finally, Volkswagen aspires to be the greatest employer among all businesses, brands, and areas; as a result, the firm must build a world-class team (“Strategy”). Furthermore, profitability is the primary goal of the Volkswagen Group in order for it to stay viable in the automobile industry. Their profitability is affected by the economy, yet they try to create economic equilibrium in their system. While the business gains efficiency and flexibility, the capital expenditure must stay manageable.

Analysis on the Global Strategy of Volkswagen

Global Strategy

            Multiple Brand-Strategy

            In the automobile business, a multi-brand approach is a typical practice. Volkswagen comes in two varieties: classic and sporty. VW, Skoda, and Bentley are classic brands, whereas Audi, Seat, and Lamborghini are sport brands. In the automobile industry’s target market, brand name is very sensitive (Schmid 3). As a result, it is critical to create a new brand to meet the requirements of additional customers. Furthermore, multiple brand strategy localized the brand, which connects with consumers. Ideally, Onkvisit and Shaw attest that consumers prefer localize product because “it is easily understood and meaningful” (392). In an interview with Marie- Christine Caubet, the multi-brand strategy of Volkswagen is considered as a strategic asset because it allows them to be diversified and differentiated. The company enables the market to select among the ten brands of Volkswagen depending on their preferences (qtd. in Neu). Therefore, the multiple brands cater to wide consumers with diversified choices. The market is segmented to cater customers’ demand effectively. For an instance, Volkswagen Group develops Passat, Beetle, Jetta GLI, Golf R, Tiguan, and CC in North America market (Lohscheller 19).

Through the multi brand strategy of Volkswagen, the company’s market share increases. In Western Europe, from 19.9%, the market share boosts to 21.6%. However, in Germany, the market share decreases from 37.2% to 35.8% due to the low demand of German. Generally, the Central and Eastern Europe have a market share of 32.1%. The share also increases in South Africa by 22.2%, previously 20.0%. In South America, Volkswagen Group has experienced a fall in the market share by 24.2%. Lastly, the Asia-Pacific continued to increase the market share of Volkswagen by 17.9% (“Interim Report” 9-10).

            Global Strategic Rivalry Theory. The modern international trade theory proposed by Krugman (1985) determines the trade flow between multinational companies. The intra-industry trade struggles for the domination of the global market place that defines their strategy. Global companies establish headquarters in a country and distribute products in other countries. The theory says that export has a relative advantage than import because companies will not be restricted by government interference and non-economic factors. However, Porter argues that it depends on the innovative strategy of companies to gain competitive advantage (Dachin 48). This is in contrast with the recommendation to establish a production site locally. Schmid and Grosche affirm that low market share of Volkswagen in North America, except in Argentina, is caused by the lack of production sites. Among the global market of Volkswagen, North America is the hardest to penetrate. The authors suggest that in order to achieve the goals in 2018, Volkswagen has to put up a plant in North America to decrease the risk in fluctuating exchange rate, and the cost of transport (38-39). Therefore, there is a need to localize the product to attract consumers in North America. In contrast to Toyota, the brand is considered as an American product due to its relativity to Americans. It was originally established in the US and built consumer relationship. Moreover, Volkswagen has to break the pattern to penetrate the market and increase its sales.

Localization and R&D Strategy

            As part of being socially and environmentally responsible, the Volkswagen Group was the first to initiate the environmental management system in 1996. Until now, the company continues to invest in modernizing the mechanical parts of cars into “fuel efficient combustion engines, hybrid and electric vehicles, ad second generation bio-fuels” (“Volkswagen” 27). This is evident in the environmental awards received by Volkswagen Group. Furthermore, the company invests in Multi Media Interface (MMI), which is utilized for information and entertainment. DSG incorporates the controlled consumption of fuel and better performance. The system called Park Assist aids drivers in parking automatically with warnings on the front and back. Then, the ACC system provides information that regulates the allowable distance from the front row. Finally, the products followed the standard carbon emissions globally. The company enables to reduce CO2 emission by 22 g/kg; hence, it accounts 15 % in the past five years (“Interim Report” 57-58).

            The success of Volkswagen in China is caused by the localization of R & D strategy. Volkswagen establishes partnership with Chinese to gain an understanding of the new environment and advice to achieve efficiency in China. The maintenance of R&D site is governed by the belief of Chinese that it attains efficiency in terms of input and output. In addition, Volkswagen is concerned with the product quality; hence, the company motivates Chinese suppliers to undergo training abroad. The company finds for the best partner that can manufacture localized products with quality. Volkswagen group evaluates the technical qualification of suppliers that can pass the standard of German cars. Lou asserts that Volkswagen’s “persistent effort to localize served a dual role of lowering costs of production and gaining the support of the national government” (129). Within 10 years, the company garnered 90 percent of localization, which marked their successful penetration in China.

Perception of Local Market Employees

            The employees view the Volkswagen Group positively. This is apparent in the award received by Volkswagen Poznan as an employee-friendly employer. One of the purposes of Volkswagen is to become the top employer of the year (“Strategy”). Thus, the management of employee is synchronized in other countries. The Volkswagen aims to develop and train employees and ensures of the involvement of employees in matters that might affect the company. Furthermore, the company desires to encourage employees of their commitment and loyalty. Brown, Kirpal, and Rauner share the development of company’s trainee who became identified as the Volkswagen employees. The employees that joined the training and development system assert that they perceive “as though they are among friends and acquaintances.” This feeling is associated with the positive atmosphere inside the company. This term referred as German Dual System wherein the employees’ training evolves from school to labor marker (282). Thus, the positive reinforcement and training of Volkswagen contribute to the optimistic view of employees.

            Furthermore, the company ensures of the parental education and employment opportunities for single mother through a part time job. The company commits itself in securing the health of its employees through the employee’s protection employees. The aim of the company is to prevent diseases to guarantee long term employees. This strategy implies that the company cares for the employees’ welfare (Zimmerli et al. 203). Employees stimulate companies to invest in corporate social responsibility, so Volkswagen declared their social rights and industrial relationship in 2002. The declaration proves that Volkswagen is an employee-oriented company. They allow Union in their company comprising 90 percent in the United States (Steers and Nardon 336). The company also pledges to manage conflict between the employer and the union. Thus, when the Union demanded that employees must have a break from e-mail, Volkswagen Group limits the functionality of e-mail from 6:30 pm to 7:30 am. Employees will never receive e-mail from the company. Holliday, Schmidheiny, and Watts affirm that employers with CSR values increase the employees’ satisfaction and loyalty. It ends with a positive feeling toward their job (110).

Relation to Other Global Leaders

            According to Ghemawat, most successful companies have discerned two important factors: the distinction of each geographic location has not immersed from the advent of globalization, and company’s performance elevates when the local and global strategies connect. Thus, globalization cannot eliminate cultural diversity of people. In effect, they adjust their strategies based on the demographic of individuals. The author added that there are five types of regional strategies that the company uses such as home base, portfolio, hub, platform, and mandate. Other companies utilize five strategies in order, but others utilize strategies that are useful. In the case of Procter and Gamble, they have brand portfolio. The company has created 250 brands from hair products to detergent products. This is similar with the multiple brand strategy of Volkswagen, which allows it to innovate and diverse. Moreover, all market leaders have built home base manufacturing plant that will distribute the production of goods and services. The products are exported while the materials are imported.

            Technology also influences the economies of scale and scope of most companies through a “strong network of hubs” (Ghemawat). Developing products, which are eco-friendly, fulfilled the corporate responsibility of Volkswagen that is akin to other leading companies such as Procter and Gamble. P&G invests in developing products that mitigate risk to the environment.

Conclusion

            The mission statement of Volkswagen group is committed to being the number one leading car manufacturer globally with Toyota as the basis for achieving their goal. The company employs global strategies to survive the fierce competition and the uncertainty of the environment. Through multiple brand strategy, Volkswagen group enables innovation, diversification, and flexibility. The company caters to segmented customers by offering different products. Moreover, the company engages in localization and investment in R&D technology. Localization or regionalization secures the company’s performance to boost because the products are made according to their wants and needs. Lastly, employees create a positive impression on the management of Volkswagen through their CSR activities.

Works Cited:
  • A Brief Journey Through a Long History. Volkswagen, 2012. Web. 17 Jan 2012.               <http://www.volkswagen.com/vwcms/master_public/virtualmaster/en2/                    unternehmen/geschichte.html>.
  • Brown, Alan, Simone Kirpal, and Felix Rauner, eds. Identities at Work. Netherlands: Springer, 2007. Print.
  • Dachin, Anca. “Structural Changes of International Trade Flows Under the Impact of Globalization.” Theoretical and Applied Economics 6.501 (2006): 47-52. Print.
  • Ghemawat, Pankaj. Regional Strategies for Global Leadership. Harvard Business Review. Harvard Business School Publishing, 2005. Web. 17 Jan 2012. <http://hbr.org/2005/12/regional-strategies-for-global-leadership/ar/1>.
  • Gunnel, John. Standard Catalog of Volkswagen 1946-2005. USA: Krause Publications, 2004. Print. 
  • Holliday, Charles O., Stephan Schmidheiny, and Philip Watts. Walking the Talk: The       Business Case for Sustainable Development. UK: Greenleaf Publishing, 2002. Print.
  • Interim Report. Volkswagen, 2011. Web. 17 Jan 2012.<http://www.volkswagenag.com/content/vwcorp/info_center/en/publications/2011/04/Q1_Report.bin.html/binarystorageitem/file/Q1_2011_e.pdf>.
  • Ireland, R. Duane, Michael A. Hitt, and Robert E. Hoskisson. Understanding Business    Strategy: Concept and Cases. USA: Cengage Learning, 2012. Print.
  • Lohscheller, Michael. Volkswagen in the U.S.: An Evolving Growth Story. Deutsche Bank Global Auto Industry Conference, 10 Jan 2012, USA: Volkswagen, 2012. Print.
  • Lou, Yadong. Guanxi and Business. 2nd ed. Vol. 5. Singapore: World Scientific, 2007. Print.
  • Neu, Mathieu. “The Volkswagen Group Strengthens its Multi-Brand Strategy.” Commerce International. Commerce International, 7 July 2011. Web. 17 Jan 2012. <http://actu-cci.com/en/Entreprises/Industrie/Le-groupe-Volkswagen-renforce-sa-strategie-multimarque>.
  • Onkvisit, Sak, and John J. Shaw. International Marketing: Strategy and Theory. 5th ed. New York: Routledge, 2009. Print.
  • Schmid, Stefan, and Philipp Grosche. Managing the International Value Chain in the Automotive Industry: Strategy, Structure, and Culture. USA: Bertelsmann-Stiftung, 2008. Print.
  • Schmid, Volker. Branding, Positioning and Segmentation at Volkswagen. Germany: GRIN Verlag, 2005. Print.
  • Steers, Richard M., and Luciara Nardon. Managing in the Global Economy. USA: M. E. Sharpe, 2006. Print.
  • Strategy: Group Strategy 2018. Volkswagen, 2012. Web. 17 Jan 2012.                               <http://www.volkswagenag.com/content/vwcorp/content/en/the_group/strategy.html>.
  • “Toyota Holds Top Spot as World’s Number One Carmaker.” The Guardian. Guardian    News and Media Limited, 24 Jan 2011. Web. 17 Jan 2012. <http://www.guardian.co.uk/business/2011/jan/24/toyota-world-number-one-carmaker>.
  • Volkswagen: 2010 Company Profile Edition 1. Germany: Just Auto, 2010. Print.
  • Zimmerli, Walter Christoph, Klaus Richter, and Markus Holzinger, eds. Corporate Ethics and Corporate Governance. New York: Springer-Verlag, 2007. Print.

Related Posts

Leave a Comment