Advantages and Weaknesses of the Volkswagen Group (VW). Value Chain and SWOT Analysis

Submitted Assignment , 2018 , 19 Pages , Grade: A

Business economics - Industrial Management

This report analyzes the Volkswagen Group (VW) Company’s current operations and provide strategic recommendations to the board of directors of the company. This report describes on how to analyze the external and internal environment of the company by analytical frameworks. It starts with Company Background, where the company’s mission and current operations will be described. Next is the Environmental Analysis, where a the SWOT analysis is applied for the company with consideration of Porter’s Five Forces model and Value Chain Analysis. Then, the paper identifies what the company’s current sustainable competitive advantages and its weakness are. Recommendation on how to tackle these weaknesses will be given afterwards.

For a huge company like Volkswagen it takes a lot of effort to maintain their great brand reputation, to sustain that they have to make sure they fulfill the needs and wants of their customers and satisfy them. Although the brand portfolio includes brands like Skoda, Bugatti and Lamborghini the company still ranks high in the mind of customers. Even so having some problems in the automotive industry recently they must start looking forward and try finding solution as it might affect their brand image which can cause them huge loss and maintain the trust and build a relation among their customers as well. Volkswagen items are strongly connected with so much feelings as security and sense of pride.

Content

1.0 Company Background

2.0 Environmental Analysis
2.1 Value Chain Analysis
2.1.1 Primary Activities
2.1.2 Secondary Activities
2.2 Porter’s five forces
2.3 SWOT Analysis

3.0 Strategic Competitive Advantage and Major Weaknesses

4.0 Recommendations
4.1 Strategic Recommendations
4.2 Justification of Strategy

5.0 Conclusion

References

1.0 Company Background

Volkswagen Group (VW) is an automotive company founded in 1937. The automobile firm was founded by German Labour Front at Berlin, the capital of Germany. The current headquarters are located in Wolfsburg, Germany. VW has 120 production plants in 31countries. In manufacturing there are 626,715 workers who contribute to produce cars or to maintain ongoing relationships with customers, suppliers and partners in 153 countries. VW also has the Volkswagen brand, which is the focus of the Institute in the development of employee skills and language learning. Volkswagen Bank is a financial institution focused on savings and investment. Volkswagen is currently the largest automobile manufacturer in the world. (Beckwith, 2016)

Volkswagen's vision is to be recognized as a company that is defined in Market, and became the leader in sales and distribution of spare parts, reach economic services of excellence; development and growth are always characterized firm. The Group mission to offer vehicles that are attractive, safe and environmentally friendly can compete in an increasingly tough market and which set world standards in their each class (Volkswagenag.com). For the Volkswagen Group, sustainability means that businesses are conducted in a responsible and long-term basis. The company looks in benefit from the growth, customers and investors, society and of course benefiting employees. In this way, a good job and a careful treatment of resources and the environment form the basis for generating sustainable value. Next will be responsibility for society, Volkswagen supports projects that promote culture and the arts, education, science, health and sports. A company with global operations, VW has the responsibility of being responsible for the global society we cannot be met simply by applying for charity. Instead, Volkswagen took the individual and above all long-term commitment. For the Volkswagen Group , corporate social responsibility (CSR) has been a long time coming to a meaningful commitment to the local which is outside the factory gates. And promote social projects, cultural and social, Volkswagen sees themselves as a source of encouragement for the development of local economy and equal opportunities. VW support 200 projects around the world that are designed to improve the economic and social structure, placing emphasis on continuity and sustainability. Dr Herbert Diess is the Chairman of the company.

Since 2002, Volkswagen has been involved in one of the largest CSR initiative and the most important in the world. Forming the core values of the Global Compact, together with 12,000 companies from over 170 countries, the Volkswagen works in international CSR projects that range towards making the global economy more sustainable and more equitable.. With the reorientation of the Group, Volkswagen will be different, better company. But this process will take some time. Against this background Volkswagen allow members of the UN Global Compact during that time. According to the latest accounting report, Volkswagen have brought in losses with an amount of 1.86 million euros.

2.0 Environmental Analysis

2.1 Value Chain Analysis

2.1.1 Primary Activities

1. Inbound Logistics

Volkswagen has 120 production plants across 31 countries. In 2016 about 75 million metric cubes of production materials were supplied globally for automobile production. Inbound logistics for Volkswagen comprises of two types. The first is the transportation of suppliers to the manufacturing plants in Germany; the second is the global inbound logistics which is transportation of supplies to the manufacturing plants all over the world. Volkswagen adds value to the inbound logistics as they ensure that the raw materials are supplied with precision as most of the materials are supplied within the European Production Network. Volkswagen group have a chain of around 8,500 suppliers.

2. Operations

Volkswagen Group offers passenger vehicles by the brands named Volkswagen and other subsidiaries such as Seat, Porsche, Bugatti, Audi, Bentley, Lamborghini and Skoda. They also sell commercial vehicles under Volkswagen Commercial Vehicles, Man and Scania. The Group also sells motor vehicles under the brand, Ducati. The company sells 10.3 million vehicles in 2016.

Volkswagen offers automobile designing facilities under Italdesign Giuguiaro located in Moncailieri, Italy. Volkswagen also holds financing solutions as they provide financing, insurance and leasing to the customers. Named Volkswagen Financial Service, the sector has made an operating income of 1641 million Euros in 2016.

3. Outbound Logistics

Volkswagen supplies Passenger cars, Commercial Vehicles and Motor Vehicles in 153 countries. Volkswagen has distributed vehicles to the respective dealers through road, sea and air ways. Volkswagen has shipped 5.2 million vehicles to the destinations all over the world. Volkswagen has taken more efforts on distributing through sea as they have shipped around 2.5 million vehicles in more than 8700 shipments.

4. Marketing and Sales

Normally Volkswagen communicates and promotes the brand substantially through print and media advertising. The marketing methods of Volkswagen emphasize innovativeness and efficiency of the brand. Volkswagen sales activities are mainly focused on providing consistent satisfaction to the customers. The German manufacturer is currently focusing on new customer approaches. Volkswagen marketing strategy does not only provide satisfaction by delivering quality but also satisfying emotional demands as well.

5. Service

Volkswagen is known for its remarkable quality of service before and after the sale, which are one of their main sources of the firm’s competitive advantage. The company looks to retain the highest satisfaction level of the customers by equipping precise feedback and resolution to the customer necessities. The company’s service fixes vehicles according to the quality standards by providing the right people with the right tools.

2.1.2 Secondary Activities

1. Firm Infrastructure

Volkswagen currently has buildings, property, factory plants and manufacturing plants with a worth of 54,033 million Euros. They have 120 production plants all over the world. The German automobile maker has formed with the Chinese automakers, FAW Group and SAIC Motors as a fixed term venture. Volkswagen has around 626,715 employees in 2016. Volkswagen has car themed buildings which have a height of 160 feet. These towers are made of silo-like glass and made to store cars. Volkswagen also have two museums in the headquarters Wolfsburg, Germany. The museumdisplays the history of the Volkswagen brand since its formation. The museum which is called AutoMuseum Volkswagen, lines up with vintage and classic cars the firm have produced.

2. Human Resource

Volkswagen and the other subsidiaries have created their unique tailor-made training and development activities. Dual vocation training practices are one of the main activities of the firm’s human resource. In 2016, Volkswagen recruited around 19,500 trainees involved in 60 dual vacation and apprentice schemes.

The German firm structure holds a high value on job of the employees and their family members. The company’s family-friendly human resource policies are one of the main reasons that led Volkswagen become on e of the world’s distinguished employers. As a proportion of voluntary commitment, the company comes up with objective to increase the amount of recruiting women in European countries for a longer period.

3. Technology Development

Volkswagen is looking to find solutions for the future challenges. Volkswagen has brought technology development ranging from powerful engines to comfortable travelling. Volkswagen has brought up infotainment systems which provide more convenience with applications and navigation systems. Volkswagen has introduced car assistance systems such as blind spot sensor and emergency braking to reduce the chances of car getting damaged. Volkswagen have brought up efficient engines such that produces for maximum power within the minimum consumption of the fuel.

4. Procurement

The company is trying harder to create an effective and efficient procurement organization. Volkswagen aims to build on abilities and strengths together with their suppliers. Volkswagen’s primary aim is to become the finest competitive high performing procurement firm.

The company’s procurement involves purchasing of production materials, services and capital expenditure centrally. The volume procured last year was about Euros.The company and its subsidiaries are looking to develop the procurement strategy with uniform and digital processes. Volkswagen aims to connect a digitalized network, called Supplier Interaction Management to connect all the suppliers of the firm within the next five years.

2.2 Porter’s five forces

Threat of New Entrants:

A new firm in automobile industry requires a high amount of capital to compete with the existing firms. Along with the big capital, the new entrants would also require setting up network with regional dealers, obtain licensing and establish brand trust among the customers. Some of the competitors join hands with the current competitors as subsidiaries. Eventually the bigger firms in the industry reduce the threat of new entrants. So the threat of new entrants for Volkswagen is low. (Dediu, 2015)

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• Grade: A
• Author: Moniruzzaman Kiron (Author)
• Publication Year: 2018
• Pages: 19
• Catalog Number: V504948
• ISBN (eBook): 9783346054579
• ISBN (Book): 9783346054586
• Language: English
• Tags: Volkswagen, Strategic Analysis of Volkswagen Group, Porters generic, Environmental Analysis, SWOT Analysis, SWOT of Volkswagen, PESTLE Analysis of Volkswagen, Strategic Recommendation for Volkswagen, Volkswagen Germany, Business Management, International Business, Strategic Management, Vehicle Industry, Brick and Mortar Retail, Business Models, Business Networking, Business Owner, Business Plans, Business Relationships, Business Strategy, Business-To-Business, Companies, Digital Agencies, Ecommerce, Entrepreneurs, Entrepreneurship, Human Resources, Import/Export, Industrial Design, Leaders, Leadership, Local Businesses, Local Marketing, Management, Management Consulting, Organizational Behavior, Organizational Culture, Organization Design, Project Management, Retail, Small and Medium Enterprise (SME), Small Business, Small Business Advice, Small Business Marketing, Social Entrepreneurship, Strategy, Strategic, Customer Relationship Management, Consumer Products, Product Management, Product Managers, Product Launches, Product Market Fit, PMF, Product Marketing, Profitability, Prototyping, Revenue, Sales Commissions, Strategies, Tactics, User Acquisition, Pricing, Product Design