Business Strategies of Volkswagen: Impact of Macro Environment and Internal Capabilities

This report analyzes the business strategies of Volkswagen, focusing on the impact of macro environment and internal capabilities. It includes a PESTEL analysis to identify the influence of external factors, a SWOT analysis to assess the company's strengths and weaknesses, and a VRIO analysis to evaluate its internal resources. The report also discusses the strategic plan and strategy management plan for the organization.

BUSINESS
STRATEGY

EXECUTIVE SUMMERY
The present report is based on Volkswagen Company in order to understand the business
strategies. In which it includes various concepts like how macro environment influence the
function and activities of business unit. The aim of this report is to explore all these aspects of
business strategies which could help company in carrying out all operation of business in
effective manner. And with help of SWOT, VRIO, PESTLE and so on frameworks, company
can attain its predetermined goal.

Table of Contents
Executive summery..........................................................................................................................2
INTRODUCTION...........................................................................................................................4
MAIN BODY...................................................................................................................................4
TASK 1............................................................................................................................................4
P1 Applying appropriate frameworks analyse the impact and influence of the macro
environment on a given organisation and its strategies..........................................................4
TASK 2............................................................................................................................................6
P2 An analysis of companies internal capabilities with the help of an appropriate framework
................................................................................................................................................6
TASK 3..........................................................................................................................................10
P3 Porters Five Force model to analysis competitive factors of market..............................10
TASK 4..........................................................................................................................................12
P4 Devise a strategic plan and strategy management plan for organisation........................12
CONCLUSSION............................................................................................................................14
REFERENCE.................................................................................................................................16

INTRODUCTION
Business strategies refers as a course of action or decision which assist business unit in
order to achieve specific goal or objective of company. Such set of competitive action helps
organisation in following favourable techniques and measures. This assist in directing right path
for reaching the stipulated targets. Whereas strategic planning means preparation of plan or plan
as well as establishment of path in order to reach organisational goal. It helps company to
increase operational efficiency, market shares and profitability along with this it makes business
more strong. The present report is carried out upon Volkswagen with the point of exploring
strategically decisions taken by firm over course of years. It was founded by German Labour
Front in year 1937. It is a multinational automotive manufacturing company, headquartered in
Wolfsburg, Germany. They operates their business globally with product line in passenger cars,
SEAT, SKODA etc. in order to become leading company in automotive industry. This
assignment belong to PESTEL analysis to identify macro- environment and SWOT along with
VRIO analysis to determine internal resources and capabilities. Furthermore, this paper includes
analysis of Porter's Five Forces model to gain insight into business competitive environment. At
the end, strategies plan is identified with the help of Ansoff's matrix.
MAIN BODY
TASK 1
P1 Applying appropriate frameworks analyse the impact and influence of the macro environment
on a given organisation and its strategies.
PESTEL analysis framework that is used to assess the impact of macro environmental
factor on the functions of an organizational. To carry out operational activities as well function
of an organization in an efficient manner, it is essential to monitor the influence of external
factors (Bocken and et.al., 2016). Managers of Volkswagen are constantly engage in assessing
the influence of macro environmental factors on their business activities that is elaborated as
follow:
Political Factors: Political factors put a great influence on functions of a business. It
included various factors like political stability, tariffs imposed by government and many more.
Volkswagen is a European company has expanded its business worldwide. The operations as

well as business activities of company is being affected by the tariff imposed by the government
of different countries. It is majorly affected by trade tariff between US and Europe as the
company owns a good market share in US market. The business activities is also affected by the
change in the European government. Brexit also put a significant impact on the sale of cars as
Europe imposed high rates of tariff on auto mobiles imported from UK As per the new policies it
has been decided to stop sales of diesel and petrol cars in the market of UK that is influencing
sales of company. Hence, managers are required to analyse the market condition of and then
need to formulate strategy accordingly. In addition, there are several new policies have been
formulated by government of UK such as street to zero is an activity that will highly affect
current performance of company. It is analysed that US and UK both are consider as major
markets for organisation. Here, US impose higher traffic over the goods imported from Europian
countries that will affect overall productivity of entity.
Economic Factors: It is a component of macro analysis that consist factors such as
demand, profit, inflation, employment opportunities and many more. The market of UK is also
affected by the current pandemic situation. Volkswagen acquire nearly 25% market share in the
UK auto industry but, due to the current recession demand of cars is reducing drastically. Apart
from this Due to Brexit there is already inflation is prevailing in the market of UK. It has also a
negative impact over consumer spending as the prices of car has increased at the market place.
Marketing managers of Volkswagen are required to adopt various strategies and plans to
promote their product in an effective manner (Prajogo, 2016). That will help them to recover the
sales and to earn higher profitability at competitive market place. It is analysed that due to
current pandemic condition there is high recession is prevailing in different countries that has
been reduce down overall sales of organisation. Therefore, managers are required to prepare
appropriate strategies in order to minimize the impact of environmental factor over its
productivity and profitability.
Social Factors: It consist the elements such as personality, attitude, perception, culture
and many more. In the current scenario people are giving preference to the vehicle sharing rather
than to purchase their own transportation. As per current Covid-19 situations people are avoiding
social gatherings and public events it also affect revenue of company. They are not able to make
potential profits as earlier. There are various car sharing platforms like UBER, Ola and many
others (Shi and et.al., 2017). This trend is affecting the sales of company as buyers are looking

for less expensive transportation facility. As per the attitude and purchasing trend of consumers
of UK Company is required to formulate effective strategy to provide less expensive transport
facility. It will provide them competitive advantage.
Technological Factors: It consists elements such as high technology, innovation, unique
and different products as well as services. Change in trend as well as technology put a great
impact on business functions. It is important for a company to produce highly innovative
products in order to get an edge over competitors. The major trend for Volkswagen is to provide
new, advanced and unique cars to its potential buyers. As per the market trend of UK which is
highly innovative and tech-friendly, it is essential for the company to produce tech-friendly cars.
They adopt automation system and working on self-driven cars model in order to enhance
efficiency. Apart from this, they are looking forward to use drones and robotics to provide better
pre and post sales services to consumers. These cars are formulated with advance technology that
includes sensors, cameras and analytics for navigated the direction.
Environmental Factors: This component of pestle analysis is developed for the
protection of nature. It is crucial for the auto industry to keep a notice on the impact of their
activities on environment. The cars of Volkswagen was increasing pollution. The company was
not able to meet with emission standers formulated by government of UK. So that the marketing
team of organization had to recall a lot of cars those have been sold earlier. According to the
present market condition company is producing more hybrid and electric vehicles (Zhou and
Wen, 2020). In order to get competitive advantage and trust of Consumers Company is required
to formulate the strategies that is environmental friendly. In this, development of electric cars
will reduce down pollution and emission problems that are the major cause of environmental
disruption. With this, company is able to maintain appropriate image of brand at market place.
Legal factors: These factors consist a lot of components like legislation and laws that has
been formulated by the government and influence actives of an organisation. In case of
Volkswagen company is affected by the considering, rules and regulations formulated by the
higher authorities of UK. As per the analysis of market conditions various laws has been made
by government to reduce down the emission problem. The Management team of company need
to follow the guidelines of higher authorities and local bodies in order to sustain at the market
place for a longer period of time.

TASK 2
P2 An analysis of companies internal capabilities with the help of an appropriate framework
SWOT Analysis of Volkswagen
It is a tool that assist the marketing managers in order to carry out the internal analysis of
company. SWOT analysis helps an organization to analyse the market and to prepare strategies
and plans in order to get competitive advantage.
Strengths Weakness
 Volkswagen is a well-known brand
that is recognized all over the world.
That gives an edge to the company over
other competitors.
 Marketing team of company invest
huge amount in research and
development so that they can offer
unique as well as innovative products
to their potential buyers
 The brand has subnational financial
stability as well resources that allows
managers of company to formulate
attractive marketing strategies (Taneja,
2017).
 The brand owns sufficient financial
resources that assist mangers to prepare
strategies for future growth.
 It has good portfolio of renowned barns
such as Lamborghini, Audi, and so on,
due to the company is able to cater
needs and requirements of all segments.
 The company was found guilty in
emission scandals as they were not
following the predefined guidelines.
 Volkswagen is not able to create trust
among its buyers due to this they don't
have a large customer base who are
loyal towards the brand
 Company is not performing well in
terms of marketing as well as
promotional strategies outside Europe
market.
 Management of company is not lacking
in diversification as they are not
catering requirements of youth who
prefer car sharing, car rentals and
technical advancements.
Opportunities Threats

 They can expand their portfolio in
order to cater needs as well as
requirements of their potential buyers
to satisfy them.
 Manufacturing eco-friendly cars will
give an advantage to brand and help to
regain the trust of consumers.
 To expand in more market segments
like lower income group will enhance
sales and profitability of company.
 They should focus to undertake
advance, innovative technologies in
manufacturing of cars as per current
trend.
 The increasing competition is the
biggest threat for Volkswagen as there
are a lot of other competitors such as
Toyota, ford present at market place.
 Recession in the market is also a factor
that can harm the existing brand image
of company
 Change in rules and regulation of
government will also put impact on the
functions carried out by the
organization (Van Bommel, 2018).
 Prevailing pandemic (Covid-19)
situation is the biggest constrain for
company as it has drastically reduce
down the purchasing power of
consumers.
VRIO model
VRIO model is used for the analysis of internal resources of company, for
assessing the resources whether these are providing a competitive advantage or not at
marketplace. In context of Volkswagen, some of the resources which are valuable, rare,
inimitable and organised is described below:
Resources Valuable Rarity Inimitable Organized What is the
result?
Global
presence
Yes - - - Competitive
Disadvantage
Good quality Yes Yes - - Partially

Products competitive
Innovative
technology
Yes Yes Yes - Competitive
advantage on
temporary basis
Skilled
Employees
Yes Yes Yes Yes Competitive
advantage
To determine internal capacity of Volkswagen, four resources have been aptly
considered, namely, global presence, product, innovation and employees. In which global
presence provides less or competitive disadvantage as other company are also present at global
level. The quality of goods that is offered by this company offers partially competitive at
marketplace because the service or product offered by this organisation is very good compare to
others brands or company. Along with it this organisation adopt innovation technologies on
continuously basis and this delivers them competitive advantage on temporary basis and the last
skilled employees of given organisation is very valuable and this offers a strong competitive
advantage in market.
Valuable: These are resources that have ability to add value for consumers in order to
provide a strategic and competitive side to company in market ( Mukherjee, Makarius and
Stevens, 2018). In this respect valuable resources of Volkswagen are discussed below: Global presence: Volkswagen has a great presence throughout globally marketplace for
gaining strategic edge over competitive firm. Good quality Product: Company offers different kinds of products according to the
needs and demands of consumers. Volkswagen manufactures premium products also for
those consumers who have not concern about money so it become advantage of this firm
and become valuable for company. Innovative technology: Company launching or introducing new products with new
creativity and technology like electric cars. Which attracts ample number of consumers
because of cost and easiness. Due to this it become valuable for company. Skilled Employees: VRIO analysis of Volkswagen shows that employees are a valuable
resource for the firm. They are loyal towards company and retention level of workers is

also high. A important portion of workforce is highly trained and that leads to more
production output of company.
Rarity: These are those resources whose existence and creation is unique in market to
organisation and seek to provide a competitive edge to rivalry in marketplace (Allen and
Truman, 2016). It had been founded that global presence is not rare for Volkswagen as there are
many firm within automobile segment which are globally present. Rare resources of Volkswagen
are: Good quality Product: Goods provide by Volkswagen are Passenger cars, Audi, SEAT,
SKODA, Ducati, Lamborghini etc. these are difficult to copy by other rivalry because of
cost price and creations. Innovative technology: Technologies used by Volkswagen is rare to other company as
they launched electric cars which gives opportunity to consumers at low price they can
buy that car. Which is not be easy for other companies to copy their innovation.
 Skilled Employee: it has been identified that employees are rare resources of
Volkswagen. Workers are highly trained and skilled which is not with other employee in
other company. Healthy environment and better compensation shows that they don't want
to leave Volkswagen firm for other enterprise.
Inimitable: This consist those resource which cannot be copied by other company. In
context of Volkswagen it has been founded that products do not possess this characteristic as
unique and advanced technologies is used to design can be utilised by other rivalry also. Innovative technology: Other rivalry cannot copy the technology or innovation of
Volkswagens Company because of copy right and patents. It is very difficult to imitate
the patents of this firm because it not legally allowed to imitate patent product
(Beamishm and Lupton, 2016).
 Skilled Employees: Employees of Volkswagens cannot be easily imitate because they
gives higher rewards and incentives to their employees compare to other firm which
brings loyalty in them. Company offers them opportunity to improve their skills,
knowledge and encourage their performance which reduce rate of turnover.
Organised: It refers to those resources which need to be organised in effective manner in
order to accomplished organisational goal and objective of company. Innovation of Volkswagen
is unorganized as their patents are not organised.

 Skilled Employee: Volkswagen organised their employee in a very effective manner.
They motivate and encourage them for increasing their effectiveness and efficiency
which maximizes the profitability and productivity of company. Company offers them
training and development session for improving their skills and knowledge. Volkswagen
is able to operate their function globally it is just because of their employees performance
which shows that workers of organisation is very important resources of company. This
aids organisation in order to achieve goal and objective of firm.
TASK 3
P3 Porters Five Force model to analysis competitive factors of market
Porters five forces is a framework that is used by business unit as it help them in analysing
the competitive forces and shapes the structure of company by determining the strength and
weakness. It is crucial for a business entity to considered or take into account all competitive
factor of marketplace to adopt optimum strategies. For this, managers of Volkswagen has made
use of Porters Five Force analysis.
Threat of new entrants: The automobile industry typically has large entry barriers for
new companies that prevent them from entering the market. Hence, threat of new entrants is
generally low in automotive industry. This is because it requires high investment during
installation and become challenging for new companies to achieve economic scale to operate
their functions in industry (Bhattacharyya and Verma, 2019) It is difficult for them to create and
maintain strong distribution channels. It is needful for new firm to build strong image of brand in
front of customers because they are already loyal to their current brand which they are using.
Due to all these Volkswagen take advantage in order to enhance their sales and profitability.
Threats of substitution: This threats is moderate for Volkswagen group, as in the
government's initiative to increase gas price and promote environmental friendly products, many
consumers are using alternatives like public transportation, cycle and walk. Along with that there
are several consumers who prefer their own vehicle rather than substitution. Consumers are more
focused towards electric cars compare to diesel cars because of ease and cost price.
Bargaining power of consumers: In context of Volkswagen, barging power of
consumers is low because of fixed cost and easy to switch option. It is not easy for consumers of
Volkswagen to go for other alternative brand like Toyota and Ford because of cost price. It is

also depends on information they hear about market and cars. They also operate their function in
premium product which attracts ample number of those consumers who are not price sensitive.
Due to differentiated cars, Volkswagens took advantages in acquiring customer loyalty which
gives them power to increase price of cars.
Bargaining power of suppliers: For Volkswagen group, barging power of suppliers is
comparatively low, as suppliers are diversify and manufacture the parts and raw material for
restricted number of automakers in industry & entirely dependent on those automakers. Supplier
can't manage to lose their buyers or contract of automakers in case of sin. There are so many
consumers present in market for parts and items, but suppliers of Volkswagen does not want to
stop working with them. This motivates & gives power to company to buy products at low cost
for increasing their profitability and productivity of firm (Soler and Gémar, 2016).
Competitive rivalry: Competition level from existing competitor are very high in context
of Volkswagen and faces muted rivalry due to others rival like Nissan , Toyota and many more
try to grab market shares at marketplace. It is important for Volkswagen to invest more towards
advertisement & product innovation. Obstacles to exit from market are high and originate
extreme losses for company which gives opportunity to others competitor for staying in market
that leads to increase in rivalry. Instance Toyota exits from Australia market that originate loss of
about 2500 jobs and resources.
TASK 4
P4 Devise a strategic plan and strategy management plan for organisation
Strategy Management is ongoing preparation, observation, analysis and assessment of all
requirements of organisational needs to meet its goal and objective. Changes in external
environment will require company to constantly assess their strategies for success. It helps firm
to take banal their present situation, chalk out strategies, create them and examine the
effectiveness of enforced management strategies (Gauthier, 2017).
Aim: To raise level of business operations and function for maximizing profitability and
productivity of firm.
Vision: To become leading company within globally automotive industry.
Mission statement: To provide good and premium quality product to their consumers for
satisfying their needs and demands as their brand is well known at marketplace.

Goal and objective: To offer attractive, safe, environmentally sound vehicle which will
compete in increasing tough market and maintain good image of brand at marketplace.
Strategies: Volkswagen will use market penetration for considering increment of sales &
profitability within automotive industry.
Tactics: Volkswagen will introduce new product with innovations and creativity. They
will launching its electric vehicle.
Strategically plan
Ansoff's matrix is a tool used by organisation for design and formulate strategies for
growth and development of company's business (Jian, Xu and Zhou, 2019). It includes four
fundamental strategies, which are explained in context of Volkswagen as follows:
Market penetration: This strategy mainly focuses on growth of company by increasing
sales and profit along with it focuses provision of existing product in current market of business.
This strategic will gives Volkswagen a strategic edge as unit already has a loyal base of
customers within Germany which are not willing to switch the good sold by this unit. Market
penetration help company in increasing its market shares. They can penetration by promoting
and advertising their innovations and creation at marketplace for attracting new consumers.
Market expansion: It is also known as market development. This business growth
strategy gives opportunity to company for expanding their business in new market with existing
product. The biggest asset of implementing market expansion is it help the firm to grab attention
of new consumers by gaining entry in new market place. This means an increase in sales and
profit (Mishra and et.al., 2019).
Product expansion: This strategy of business development emphasises on stipulation of
new product in existing market. Product expansion helps Volkswagen to considerably meet the
needs and demands of consumers in existing and revenue making market for increasing its sales.
They can expands their business in product line by doing some innovation in engine of existing
cars that will help them to expand their product.
Diversification: This business strategy of growth is keep non provision of new market
with new product. In this strategy changes of failure is high related to execution of
diversification crosswise organisation postulate. This will function as an expensive strategy for
Volkswagen, as many marketing plan need to be organised by firm to promote new product in
new market.

After analysing above strategies, it has been observed that market penetration would be
most viable strategy for Volkswagen for achieving business development and growth because the
firm is already has a well-established customer base who are loyal towards the brand therefore,
focusing upon existing product with current market would give opportunists to Volkswagen will
lead to increase in its market shares and revenue (Al-Surmi, Cao and Duan, 2020).
Porter's generic strategies: This strategies describes how a firm pursue competitive
advantage across the chosen market scope. In which it includes three generic strategies that are
cost leadership, differentiations and focus.
Cost leadership: In this company ficus to produce products or take advantage of
competitive market by lowering the cost of products. In which the chosen firm is automotive
firm that produces both luxury as well as affordable car.
Differentiation: In this the company manufacture different product from the bother
competitive rivalries for gaining competitive advantage. In order to survive in competitive edge
they manufacture luxury and premium car for grabbing those consumes who are willing to buy
that by which they increase their market shares and generate more revenue.
Focus: In this strategy, company focus on both the above mention factor for instance the
entities produce car by lowering the cost of car as well as have different features also in order to
make differentiation.
So from above discussion it could be analysed that the this strategy which is focus would
be the viable for grabbing more consumers towards offerings.
TOWS matrix:
Internal factors
External factors Strengths Weaknesses
Opportunities Global presence –
VW can expand their
business in those area
where they are not
present with the help
of this strength. This
will aids them in
attracting large
Lack of diversity:
The organisation can
overcome this
weakness by
launching a new
product or car such as
electric car in a new
market where it has

number of people
towards their services.
And by this profit and
sales of the company
will ultimately
increases.
not yet expanded its
business. It will help
the entity to be
focused with
diversification and
meet expectations of
youth. As well as by
taking advantage of
opportunity they will
able to over come this
weakness.
Threats High competitive
environment- VW
have opportunity to
overcome this factor
by focusing on
innovative
technology. For
instance they can
launch new innovative
electric car in market
which reduces the
threat of competition
in market. As well as
by offering training to
their employee related
to innovation and
creation.
Low trust among
buyers: VW is having
lack of trust among its
buyers which may
leave negative impact
upon its market share
which may get
reduced in future
because of lower level
of customer
engagement and their
interest.

CONCLUSSION
From above discussed report it has been analysed that how companies vision mission and
strategic goal and objective modifies strategic planning of Volkswagen. So the discussions have
been made about strategic position of company by carrying out SWOT analysis and VRIO. Both
of these model comes under internal environment which has deep impact on organisation
structure. Furthermore, Porter's fives forces model is being explained briefly which assists
company in order to identify external forces. At last, stagier plan of Volkswagen was identified
with the help of Ansoff's matrix and management plan has conducted for analysis the
requirements of company need to meet goal and objective of company. Therefore it is important
to understand the internal and external forces of business environment to execute plan of action
in effective manner for the growth of company.

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