Analyzing the Impact of Macro-environment on Volkswagen

This report analyzes the impact and influence of macro-environment on Volkswagen, including political, economic, social, technological, legal, and environmental factors. It also discusses the internal environment and capabilities of the company, as well as the application of Porter's Five Forces and strategic planning concepts.

Business Strategy

Table of Contents
Introduction......................................................................................................................................1
LO 1.................................................................................................................................................1
P1. Analyse appropriate frameworks analyse the impact and influenced of macro-
environment on the given organisation.......................................................................................1
M1. Critical analysis of macro environment to determine and inform strategies management
decision.......................................................................................................................................3
LO2:.................................................................................................................................................3
P2: Analysis the internal environment and capabilities of a given organisation.......................3
M2: Critically evaluate the internal environment to assess strengths and weaknesses for the
organisation.................................................................................................................................4
LO3:.................................................................................................................................................5
P3. Application of Porter's Five Forces in context of organisation. ...........................................5
M3. Discussed about appropriate strategies to improve competitive edge in the market..........6
LO4:.................................................................................................................................................7
P4 Application of concepts, models & theories to interpret as well as devise strategic planning
of company..................................................................................................................................7
M4 Strategic management plan considering tactical & tangible strategic priorities as well as
objectives.....................................................................................................................................9
Conclusion....................................................................................................................................10
REFERENCES..............................................................................................................................11

Introduction
Business strategy is a course of action or set of action which helps entrepreneurs in
achieving business objectives. In the other words, it is a set of competitive moves and actions in
the business which attracts a customers and compete successful in the market by strengthening
its performance and achieve organisation goals. It is a backbone of the business as it lead to
roadmap of desire goals. The main aim of a business strategies is to fulfil the goals and
objectives of the organisation within the time-frame. This process gives vision and the direction
to the business regarding the what needs to be done, how it needs to be done . The organisation
implement different levels of strategies such as corporate, business and functional levels so that
all the departments function in proper manner to achieve desire results(Nagy, Oláh, Erdei, E
2018.)This report is based on Volkswagen, is a German auto-maker founded in 1937. This
company manufacture car's for its world wide customers and provide world class services to its
target market. Under this report, the external factors of Volkswagen as discussed and how such
factors affects the performance in the market will be explained and pestle analysis will be done
to see which factors are to be taken into consideration.(Thompson, Strickland, and Gamble, 2015)
For the internal analysis SWOT is conducted to make best use of opportunities present in the
work environment. Further their will be discussion on the porters five force in the context of
Volkswagen and Ansoff model is used to explain different business strategies.
To analyse the external environment factors which affects the productivity of the
Volkswagen are discussed as follows. The PESTEL analysis are in-depth analysis of external
factors and their impact on the automotive industry.
Political factors: Under this factor, all the rules and regulation related to the government
has a implementation on the performance of such companies.(Akter, Wamba, Gunasekaran, 2016).
The united states and united kingdom are the major target market of the Volkswagen and issue is
related to such countries are the Trade tariffs .Throughout 2018 and 2019, the US are willingness
to place tariffs on the goods imported from the European market which lead to increase in the
tax duties for the customers. Further it is notices that their will be shortages in the sale of diesel
and the petrol in the coming year. Anther political issue is a Brexit, which affects the demand
and supply in the market and affects the productivity of the Volkswagen.
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Economic factors: Here inflation has a huge impact on the change in the demand of the
customer as the price of the car's are higher as usual which tends to decrease the purchasing
power of the customer. Another factors is Brexit which mean the withdrawal of the united
kingdom from the European market further it means to decline in the demand of the cars. (eh and
Corbitt, 2015)
Social factors: Under this factors, the social and cultural trends are different for every
customer in terms of income, attitudes, and social beliefs and demographic etc. The social
environment has a huge impact on the sale of Volkswagen as some of people chose to use
different medium such as Uber and ola and many another rental car services instead of taking the
ownership of the car.
Technological factors: It is a factor which affects the market of Volkswagen as advance
technology is coming up in the market such as self-driving cars with the use of artificial
intelligence, radar and sensors techniques. (Torrent-Sellens, 2015).Further this will make changes
in the technology use by the Volkswagen which will increase the price of the cars and decline in
the demands of car in the target market.
Legal factors: Here,in the US in the 2015, the authority of environment protection
agency has sparked as scandal which has announced that Volkswagen had intensely cheated on
diesel engine emission test. Between 2009 and 2015, Volkswagen] has built temporary software
which decline the emission during the test and fails on the ground of legal regulation
requirement. This scandal results in decrease in the sale of the cars as well in the stock price and
company have to bear loses in the billions of dollar.
Environment factors: As the environment in which Volkswagen works is complex as
well as dynamic in nature. Company can make use of such changes as a opportunities and
dominates the market like electric and self-driving car in the market(Anwar and Hasnu, 2016)
According to the Pestle analysis, it is examined that external factors of Volkswagen
group current and future business strategies can be affected to certain areas. While having trade
tariffs, legal regulation and consumer preference can pose threat to Volkswagen and while on the
another hand, using green vehicle helps them to build good image in the market.
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Under the Macro-environment, there are various different factors which affect the growth
and development of the Volkswagen in the long run. With the reference of Pestle analysis,
Volkswagen are able to examine which factors can have positive and negative impact on the
development of the business strategies. (Švárová and Vrchota 2014).These factors provide that
what changes are coming in the environment and how to make best use of such opportunities to
enhance the growth of the business and to reduce the negative impact like imposition of the
taxies by the government, obsolete technology and change in the taste and perfernce of the
customer regarding various different models of car (Anwar, Shah and Hasnu, 2016) . The
automotive industry comes at first place in the terms of revenue as their provide trending
produces such as automatic cars, electric cars, block chain and self-driven. This analysis provide
a roadmap for the developing the business strategies to take the competitive advantages in the
market.\
To analysis the internal environment of the Volkswagen, SWOT analysis is cared out in
the organisation. This will evaluate the strength and weakness of the company and match with
the opportunities present in the environment and reduces the effects of threads of the
environment on the performance of the organisation(Yuliansyah, Rammal and Rose 2016)
Strengths: Volkswagen is a largest car maker in the world and have a huge brand
portfolio such as Audi, Soda, Bentley and BMW and Lamborghini. (Buckley and Ghauri, 2014) It
is a widest brand portfolio among the automotive companies and these brand act as a strength of
the organisation. Due to its good image in the market, it can enhance the operation activities in
the new market. Effect the of emission scandal and the external market pressure Volkswagen has
come up with the new business strategies plan that is “ New together- 2025” which focus on
providing services by 2025. key objectives of the company are to introduce the 30 new electric
vehicle by 2025 called as the major company electrification. (Chu, KrishnaKumar and Khosla,
2014)They are also focus on developing the new competence in the battery technology,
digitalization and autonomous driving in the target segment. They also have a synergy between
the brands which is strength as their research and development department share the expenses,
access to different market and which increases customer knowledge in sales and decrease the
cost.
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Weakness: The whole Volkswagen brand faces negative publicity due to diesel-gate
scandal in the 2015. The company had installed the software code into diesel vehicle which
control emission level during the test when evaluated to real emission. The Volkswagen has a
lowest market share in the U.S automoblie marketplace. At the current moment, the company has
barely compete with other electric cars and lack behind Tesla as there are no technology
expertise in the organisation.
Opportunities: The company are expecting a increase in price of the fuel in the coming
years so Volkswagen have a opportunity to introduces the first competitive electric vehicle in
the target market. Another point is the increase in the GDP in the economy which further will
increase the demand of the car in world wise platform. (Evans, Vladimirova, Holgado and et.al.,
2017).Many countries are emerging in the environment, here Volkswagen can tries to grab such
opportunity to introduce existing and new products and services in the target segment. With the
modern times, there is increasing demand of the auto-driving car in the world wide.
Threats: The major threats is emission scandal to the Volkswagen as it damage the brand
image in the market. More than 5 million car are called as recalled which results in loosing the
confidence in the company. (Sung and Ashton, 2014).Another issues is the different government
has a legal regulation for the different countries, as most counties have formed policies which
are in favour of local manufactures. Other brands like Tesla are making best of innovation in the
market which is threads to the Volkswagen.
The SWOT analysis provide internal strengths and match with the external opportunities
which can improve the performance and develops new product and services of the organisation.
Their are various different factors present in the environment which can be beneficial the
organisation to grow their business in the different target segment. Similarly the weakness of the
organisation sometimes match with threads present in the environment. (Hinkelmann and
Pasquini, 2014).Such factors needs to be minimizes in its impact on the organisation. The
company make strategies to overcome such threads and do what they can necessary do to cover
such activities in the organisation. This the emerging new countries there is a opportunities for
Volkswagen to capture such segment and take competitive advantages in the market.
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The porter's five forces is a model which provide a way to analysis the five competitive
forces that shape whole industry and provide the strength and weaknesses of the organisation. To
make the business strategies for the organisation porters five forces are used to make effective
strategies. The Volkswagen is one of the most reputed brands of the world, uses this model to
make best use of available opportunities in the competitive market. (Johnson, 2016).The
company uses such model as a tool for the growth of the organisation and make business more
competitive in the market.
Bargaining power of suppliers: Here number of the supplier in the market are examined
to know the competence in the automotive market. The customer will choose to less expenses
supplier for the different brand values. The bargaining power of the Volkswagen supplier is low
as this company supply in whole world. (Klettner, Clarke, and Boersma, 2014)This company is a
large and financial strong, having global supply chain and distribution chamber but bargaining
power of the supplier is low as their can switch to new suppliers. As company have grow in
different counties which make it low at supplier power in the target marketplace.
Bargaining power of customer: Under this factor, bargaining power of the customer are
high in the market as there are various different brands that provide all necessary product and
services. It is very important for the company to gain the faith of its employees to hold them for
the long term and don't switch other substitute present in the market.(Scholes, Wolfson, 2014)
Customer examine the market very well to choose it product according to the taste and
references and to spend less in the term of cost of the product and services. The customer has a
power in the market to choose their product and service as there are huge competition in the
market and availability of the substitute goods in the market.(Kossyva Sarri, K. and Georgolpoulos,
2015)
Threat of substitute products: Under this forces, the threat of substitute goods and
services are high in the market due to large competition present in the automotive industry. As
there are lot of several brands as well as another substitute product available in the different
target market. In the Volkswagen term , they have good quality of raw material and provide
luxury to its customer which lead to less threat from the substitutes product. The research is
conducted in the market top know the taste and preference of the customer and the examine the
cost that made customer to switch to another product in the market. This threat is available very
organisation and their tries to hold on the existing and new customer in the environment.
(Leonidou, Christodoulides, 2017).
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Threat of new entrants: Here threats from the new entrants is low for the Volkswagen
company in the market. The reason being is the high barriers to entry level which are set by the
government and local manufacturer which make is impossible for any brands to enter into
established market. It will be very expense for the new business to settle in the new market as it
include cost of manufacturing, marketing and supply chain management . Their are various legal
regulation which make its different to enter into new market.(Linder and Williander,2017).
Threat of rivalry: This force, provide the tough competing in the market, as various
companies are competing with each other to gain better position in the market. Their are various
company in the market providing similar product and services to the same market. The rivalry in
the automotive industry is high as there are good brand name available in front of Volkswagen in
the market. Here many companies is expending lot of money to examine the market completion
and finding the way to fight in the target market and sale its goods and service , Volkswagen
always tries to very good completion by adopting new and effective technologies in the
marketplace.
According to above discussion, it is stated that Volkswagen is having good market for
growing and expanding the business operations in the target market. Volkswagen has a huge
completion in the market and it is still holding a great position in the market as they provide
good quality of product and luxury comfort to its customer. The company make most suitable
business strategies for themselves to survive in the market and take advantages of the
opportunities to enhance its operations activities at the global levels. Their is proper balance
between the demand and supply of the product in the market for increasing the productivity of
the organisation in the long run. The company make a plan to grow its business at different
segment of the whole market and give tough completion to another brand and attract loyal
customer for the organisation for long run.( Meckling, 2015)( Moseley 2017).
In order to identify different forms of strategic directions that is available to an
organisation , the higher authorities of Volkswagen uses Ansoff Matrix. By the assistance of this
matrix, the management team of Volkswagen develops strategies that increases its profitability
as well as market position. This model is defined below:
Ansoff Matrix:
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It is a growth matrix that provides direction to companies to devise and build an effective
strategy which facilitate an organisation towards future growth & development. This framework
involves four strategies which is discussed in detail below:
Product Development: Herein, an organisation brings innovative products and services
into the existing market in order to gain attention of high number of customers (Bentley-Goode,
Omer and Twedt, 2019). In context to Volkswagen, adoption of this strategy by higher
authorities will raise goodwill of company. Moreover, it will also help company to enhance the
level of sales as well as profit in future.
Market Development: In this, companies enter into new market by its existing goods
and services with an aim to gain high market share. This strategy involved high risk as an
organisation did not have knowledge about buying behaviour of customers of new market. So it
is important for management team of Volkswagen to conducts market research if they adopt
market development strategy.
Market Penetration: Herein, companies focuses on selling existing goods in the existing
market in order to increase profitability level. With reference to Volkswagen, company can offer
discounts, schemes and organise loyalty programs which help to raise sales within the existing
market.
Diversification: At this level, companies enter into new market with new products as
well as services with an aim to increases market share and business expansion (Cagnin, 2018). In
relation to Volkswagen, adoption of this strategy involves higher risk of failure of product at
market and requires higher investment as it is not feasible for company to launch new car.
Horizontal & Vertical Integration
In order to facilitate higher growth and development, Volkswagen can also use horizontal
& vertical integration apart from Ansoff Matrix. This integration is mentioned below:
Horizontal Integration: Hereby, companies acquire those business function which
works on the same value chain and on the same sector in order to increase its presence in market.
Acquisition of this strategy by Volkswagen helps them to strengthen competition level and
enhance market share that leads to generation of higher profits.
Vertical Integration: It is defined as a process where an organisation acquire other entity
which works on downstream or upstream level with an aim to business expansion. With
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reference to Volkswagen, acquisition of vertical integration strategy will decline the level of
transportation cost and develops coordination in supply chain.
Recommendations: After analysing the above strategies, it is recommended that
Volkswagen should acquire product development strategy which helps them to raise sales and
market share (Maniora, 2018). Moreover, the company can plan to launch electric vehicles in
order to offer something innovative in market and gain eyes of large number of audiences due to
which sales & profit increases of Volkswagen.
Management Plan
Strategic management involves tactics, plans and strategies which is developed by
companies to achieve desired goals within the time frame. The management plan of Volkswagen
is discussed below:
Mission: The mission statement of company is “ To provide attractive, environmentally
& safe vehicles to customers that raise standard of people and compete with its rivals”.
Vision: The vision of company is “ To be the leading, innovative and profitable
organisation globally”.
Objectives:
 To increase its sales by 30% in coming 4 months by raising promotions about its high
quality products and services to customer's.
 To raise market share of Volkswagen by 15% in coming 6 months by introducing
innovative idea of electric vehicles in market.
Strategies: In order to effectively launch electric vehicles in Germany, the higher authorities of
Volkswagen focuses on two strategies which is mentioned below:
 Extensive Marketing: An organisation requires to do extensive marketing before
launching its new product and services in market. This will assist company to reach large
number of customers in a short span of time. The marketing team of Volkswagen can use
digital technology in order to educate and aware customers about features of electric
vehicles.
 Market Research: The higher authorities of Volkswagen continuously conducts market
research. This will help them to know innovative technologies and current trends which is
prevailing at marketplace.
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Tactics: In order to attain desired goals effectively and timely, the top level management
of Volkswagen can use two tactics that is adoption of advanced technology & value addition
(Yuan and et. al., 2018). By the assistance of this, organisation is able to raise its market position
and can satisfy customer. Along with this, management team of Volkswagen would apply
marketing mix of a product which is launched by organisation that is electric vehicles. This will
also help company to analyse the competition level prevailing in market.
Strategic management plan is basically a blueprint of business activities and strategies
which is carried out by companies with an aim to gain desired goals within specified time frame.
This plan involves a process which are as follows:
Mission: “ To provide attractive, environmentally & safe vehicles to customers that raise
standard of people and compete with its rivals”.
Situation Analysis: This analysis is conduct by organisations in order top the affect of
uncontrollable factors on the productivity and performance of organisation. For this, company
can make use of PESTLE Analysis.
Marketing Strategy: In order to educate and aware customers about its launching of new
electric vehicles in market it is essential for marketing team of Volkswagen to develop effective
marketing strategies which will help them to reach more number of people within short span of
time.
Marketing Mix: It is a framework that assist company to build awareness and promote
its product in the market. It includes 7P's that is price, promotion, product, physical evidence,
process, people and place as well.
Implementation & Control: Herein, the strategies which is developed by marketing
team of Volkswagen is implemented in market (Matzembacher and Meira, 2019). Along with
this, the higher authorities of company can control and evaluate performance so that goals is
achieve within the time frame.
As per discussion , it is conducted that business strategies are important for growth of the
company and it enhances the operations activities at different levels. With the reference of
Volkswagen, various macro-environment factors are evaluated on different ground and
determine the impact of such factor on the performance of the Volkswagen. After examine the
external environment on both side a positive as well as negative way, internal environment are
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study in the content of their strength which are matched to opportunities present in the market
and focus is to make best use of available resource.(Ryu, Lee and Choi, 2014).The threads are
matched with the weakness of the company so that precaution can be taken to reduce the impact
of such thread in the organisation. Further Ansoff-matrix is use to see where company can extent
its business in the existing as well as in the new emerging marketplace. Research and
development are carried in the market to know the taste and preference to produce such goods
and service in the marketplace.
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