Business Strategy: Impact and Influence of Macro Environment on Volkswagen

This report analyzes the impact and influence of macro environment on Volkswagen's business strategy. It examines the internal environment and capabilities of the organization using appropriate frameworks. It also evaluates the competitive forces in the automotive sector using Porter's Five Force model.

BUSINESS STRATEGY

Table of Contents
INTRODUCTION...........................................................................................................................1
TASK 1............................................................................................................................................1
P1: Apply appropriate frameworks analyse the impact and influence of macro environment
within an organisation..................................................................................................................1
TASK 2............................................................................................................................................4
P2: Analyse the internal environment and capabilities of a given organisation using
appropriate frameworks...............................................................................................................4
TASK 3............................................................................................................................................6
P3: Applying Porter's Five Force model evaluate the competitive forces of a given sector for
an organisation.............................................................................................................................6
TASK 4............................................................................................................................................8
P4: Applying a range of theories, concept and models, interpret and devise strategic planning
for a given organisation...............................................................................................................8
CONCLUSION................................................................................................................................9
REFERENCES................................................................................................................................1

INTRODUCTION
Business strategy is useful in setting the priorities of company and defines the structure
which is useful in developing the business for the growth and development to achieve business
goals and objectives. It is useful for the management team and helpful in attracting and retaining
talent within an organisation. In business environment there are three different kinds of strategy
such as general strategy, corporate strategy and competitive strategy (Akter and et.al., 2016). It
purpose is to clarify and make difference between these kinds of strategy and also provide
suitable questions. Overall, it is useful in meeting the expectations and sustaining the competitive
advantage within the marketplace. This report is in the context of Volkswagen which is a
German automotive company, headquarter in Wolfsburg and incorporated in 1937. This report
cover topics like analyse the impact as well as influence of macro environment to set the
business strategies. Access internal environment and capability of an organisation along with that
apply Porter's five force model to evaluate the role of competitive forces within market. Further,
desirable theories as well as model by understanding and interpreting strategic directions for an
organisation.
TASK 1
P1: Apply appropriate frameworks analyse the impact and influence of macro environment
within an organisation
Strategy refers to the integrated activities of an organisation which are designed by
manager in order to attain the predetermined objective. It simply refer to actions which are
involved to perform systematic activities. Strategy management is the identification as well as
description of detail strategy that is implemented by overall organisation to enhance the
performance and gain competitive advantage. Thus, to devise strategies it is essential for the
manager of Volkswagen company to analyse internal as well as external factor.
PESTLE analysis: It is the macro environment framework which is designed to
determine the impact of environment factors (Buckley, 2014). As business function in changing
environment so it is essential for them to examine the role of external factors while mapping out
the strategies. As external factor like changing requirement of customer and government policies
can affect the company's performance.
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Political: In the field of global business, political forces are progressively playing a major
role. Through global trade and global supply chains and alliances in production. The United
States also demonstrated an ability to tax goods purchased from the European Union regularly
during 2018 and 2019. Volkswagen provides a worldwide network for manufacturing and
delivery. The supply chain is distributed in these areas across several markets and regions and
political stability, which leads to positive impact in terms to effectively conduct its operations.
Environmental: Economic factors could have a significant impact on industries and
influence demand. Economic instability or decreases in production may result in lower demand
and damages. Increased consumer purchasing in lower local conditions is particularly important
to auto-mobile manufacturers, where customers have not previously bought any cars. The
increased consumption in affluent economies is advantageous because it contributes to more
cost-effective product options and the purchase of several extras.
Social: In the business sector development of the 21st century, social forces still play an
increasingly important part (Johnson, 2016). Societal factors influence the buying behaviours
and consumer choice. Sales and promotions was influenced by social and cultural influences.
Brands must therefore establish their marketing and sales programs based on specific markets
and cultures.
Technological factor: The quality of automotive companies also relies on how
technically advanced they are. Of AI to robotics driving, the automotive marks are in a battle to
stay ahead of others, and so invest heavily in R&D. VW has acquired an interest in the German
Artificial Intelligence Research institute (DFKI). At the Audi Centre for Business Development,
concepts for potential urban mobility are to be created. The company invests in technology to
improve customer experience across all categories and market segments.
Environmental: In the automotive industry, external factors also play a major role.
Environmental laws have become more strict around the world but on some sectors, products
that do not meet the requirements are being penalized very heavily (Klettner, Clarke and
Boersma, 2014). Due to their inability to reach emissions standards, Volkswagen was forced to
dump millions of cars in 2015.
Legal: In the 21st century, legal considerations also became very significant. In all
aspects from jobs to atmosphere to driver safety, the legislation and regulatory environment has
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become stricter and products face immense risks of enforcement. It was necessary to recall VW
models and to pay fines in trillions. Generally, governments and regulation use rigorous means to
avoid any breach by brands and semi-compliance is extremely risky.
Stakeholders analysis
This framework is used to identify the role of internal or external stakeholders and group
them based on their power participation as well as interest which can influence organisational
project. It helps to access the strategies and influence the behaviour of group to flourish the
internal operations. Within Volkswagen, which is a competitive automotive company involves
the participation of all stakeholders to make viable decisions and accordingly modify existing
strategies. Presentation of stakeholder matrix is illustrates below:
Interest Level (HIGH) Interest Level
(LOW)
Power Level (HIGH) Owners, Board of Director Sponsors, Government
Power Level (LOW) Employees, Investors Consumers, Supplier
High Power with high interest: The manager, owner and Board of Directors share high
power and interest level within Volkswagen company. This assist company to analyse external
environment and articulate effective strategies which is further implemented by overall
organisation in order to strengthen internal operations. On the basis of external circumstances
roles or actions are guided other to gain immense success and maintain renowned position.
High power with low interest: Certain stakeholders like government and sponsors are
not interested in internal affairs but have power to take vital decision and give direction to
company (Leonidou and et.,al., 2015). Like, Volkswagen company are required to abide by
government rules and regulation of the county where it is operation its business. Otherwise local
authorities can interfere and company has to bear repercussion in form of fines or penalty.
Similarly, sponsors invest fund on company and spread awareness about innovation or latest
offering. If due to undesirable condition they make decision to lower down sponsor amount then
it leads to negative affect on the event and can disturb company's image.
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Low power with high interest: Stakeholders like employees fall under this category as
they can put forward their valuable suggestion but does not have privilege to make decisions of
Volkswagen company. Along with that, Investor overview financial statement of company with
the objective to either invest or withdraw funds. Thus, involvement of such stakeholders assist
company to perform operations promptly and build up favourably strategies.
Low power with low interest: Although stakeholders like customers and supplier have
low interest and authority over Volkswagen company but the manager makes efforts to maintain
long term relationship with such stakeholders. Like, company anticipate potential customer's
requirement and offer them desirable vehicle to accommodate their requirement effectively.
TASK 2
P2: Analyse the internal environment and capabilities of a given organisation using appropriate
frameworks
Internal environment encompasses factors like work processes, member as well as
organisational culture that can influence the role of human resources and internal decisions at
huge level. It involve SWOT analysis which is defined below in relation to Volkswagen
company:
SWOT Analysis
Strength
 Volkswagen offers immense range of
personal car as well as buses in the
global market due to wide range of
portfolio it has effectively catered the
requirement of different group. This led
company to establish unique identify
and maximise its operation effectively.
 To remain high in adopting latest
technology Volkswagen company
invest on research and development
techniques to retain the interest of
customer.
Weakness
 The company at-times faces difficulty
to manage wide product line and build
desirable strategy against competitors.
Like, due to existence of competitive
rivalry company in certain countries
like India has dropped down its
profitability margin to survive and
manage its sale (Moseley III, 2017).
 Additionally, the emission scandal has
affect image of company which has
lower down footfall of stores.
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Opportunity
 Volkwagen company has effectively
diversified its business in developing
and developed country which is an
opportunity for company as disposable
incomer of consumer is increase due to
easy financial availability.
 The company can refine its structure by
investing in fuel efficient products
which leads to low carbon emission and
helps to maximise market share.
Threat
 After emission scandal company has to
recall its cars from physical store
which badly hurt its image. This is a
threat to company which can be
overcome by re-establishing trust and
loyal of existing customer.
 Moreover, regulations of diverse
country too acts threat for company as
it restrict the profitability and areas of
operation (SWOT Analysis of
Volkswagen, 2019).
VRIN Analysis: The purpose of VRIN analysis is to examine existing resources and
capabilities of business entity with the objective to gain sustainable advantage. On the basis of
this framework Volkswagen company can devise effective strategy and function to gain benefit
of sustainable performance.
Capabilities Valuable Rare Imperfectly
Imitable
Non-substitutable
Global presence ✔ ✘ ✘ ✘
Product
manufacturing
secret
✔ ✔ ✔ ✔
Brand image ✔ ✔ ✔ ✘
Valuable: Based on VRIO analysis table, Volkswagen company have valuable resources
like global presence, patents right and global presence. Global presence helps to enhance the
recognition value and set distinct brand image for its passenger's car that assist company to
outperform and gain loyalty from customer. The product manufacturing secret helps to maximise
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efficiency as it let company to adopt innovation and sell its offering without experiencing any
interference from rivalry (Peng, 2017).
Rare: Resources that are rare for Volkswagen company include product manufacturing
secret and distinct brand image which is not available to competitors. This led company to
establish successful strategy and retain the interests of stakeholders within competing
environment.
Imperfectly Imitable: The product manufacturing secret and global brand image of
Volkswagen company cannot be replicated by existing or new entrant because company has
made enormous investment to make market familiar about its offerings. Thus, the top executive
needs to successfully manage the resources of company in order to gain competitive edge.
Non-substitutable: With the help of extensive market research the manager gains
informative insights and launch new vehicle through secret processes. It reduces the availability
of alternatives in market and led company to exploit the opportunity of sustainable advantage.
TASK 3
P3: Applying Porter's Five Force model evaluate the competitive forces of a given sector for an
organisation
Competitiveness refers to the ability or skill of company to compete with other rivalry
that are into similar type of business or fall under same type of industry. Generally the company
compete with each other to maintain its position or strive out to gain success. Volkswagen
company experiences competition at global level as it has diversified its business in various
countries. This determine that it is essential for company to devise its diversification strategy
effectively and maximise overall profitability.
Porter's five force model: This model comprises of five competitive forces that assist
company to shape its performance and maximise competitiveness level. In relation to
Volkswagen company basically deals to design, manufacture as well as sell vehicle all across the
world. So prevailing model can assist company to revise its strategy and gain immense
profitability successfully (Scholes and et.al., 2014).
Barrier of new entrant: Automotive sector usually act as a barrier for new entrant to
enter into market as it involve huge capital expenditure in terms to adopt latest innovative or
technology. Involvement of high start up cost leads and no advantage of economies of scale
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restrict the operations thus leads to low barrier of new entrant. Even if new automotive
operations that it is not easier for them to break the loyalty of customer for Volkswagen
company.
Barrier of existing rivalry: The threat of substitution is high in case opf Volkswagen
company because different companies like Toyota, Ford and Tesla enormously practice to adopt
innovation and reduce carbon footprint. Along with that due to the increases in prices of fuel and
government promotion to adopt environment friendly products has even encouraged people to
use cycle or public modes of transportation rather than personal cars. Therefore, to participate in
changing reforms it is vital for company to bring transition and appeal the interest of existing as
well as potential customer.
Competitive rivalry: The existence of competitive rivalry within automotive sector is
intense in terms of Volkswagen company experiences pressure from the rivalries like Toyota,
Nissan and many more. It is vital for company to constantly invest within innovative techniques
as well as advertisement to retain its market share effectively (Five Forces Analysis of
Volkswagen, 2018). As there is immense pressure on company due to which possibility of exit
from market is high like Toyota could not survive in Australia due to which they exist and bear
immense loss. Therefore, Volkswagen needs to explicitly focus on market research and
development in order to secure the interest of local residence and generate success.
Bargaining power of supplier: The role of supplier is to timely deliver the material or
parts with objective to carry out smooth business operations. As Volkswagen company perform
global operation due to which supplier bargaining power is low that mean they are not in state to
negotiate. Thus, the supplier of company offer quality raw material because they are less
reluctant to lose any auto maker contract. Therefore, this possibly help company to increase
profitability margin by producing specialised good as well as services.
Bargaining power of buyer: As Volkswagen company offer wide varieties of product
and pricing options in market which led to low bargaining power of buyer (Webster, 2014) . It is
less likely preferable for loyal customers to switch amongst other brands like Toyota or Ford
because of high switching cost. Additionally, extensive product line of company helps to cater
wide target market like it even offer premium vehicles for buyer that have high purchasing
power and are not sensitive to pricing structure. The differentiation strategy of company helps to
maintain the wide base of loyal customers.
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TASK 4
P4: Applying a range of theories, concept and models, interpret and devise strategic planning for
a given organisation
Ansoff matrix involves diverse strategies which are implemented by an organisation in
order to carry out systematic marketing planning processes. Application of desirable tactics can
help entity either to expand market share or widen up profitability margin. The explanation of
different strategies in context to Volkswagen company are determined below:
Market penetration: According to this strategy, the objective of company is to expand its
market share for which it deliver existing product within confined palaeographical market. It is
considered as least risky strategy because company lower down its prices to successfully expand
its operations (Soltanizadeh and et.al., 2016). This strategy can be applied by Volkswagen
company where it focuses to deliver quality product and penetrate in market through price
discounting and promotional method.
Product development: As per product development strategy firm develop new or
innovative product for current geographical market. This process relatively involve higher level
of risk for Volkswagen company in comparison to market penetration because on the basis of
market research they launch new vehicle with additional attributes to gain additional revenue.
Market development: This third strategic option assist Volkswagen company to diversify
its offering within completely new market due to which it involves high level of risk. It requires
key consideration of company in terms to expand the route as well as channel to effectively
target the new market through promotion strategy successfully.
Diversification: It is considered as riskiest strategy where business focuses to develop
new product for the customers of new market. As an organisation deals in unfamiliar market due
to which they need to effectively understand external market. Herein, Volkswagen company
before expanding needs to understand the customer behaviour with the object to mitigate risk and
gain best possible effort.
Therefore, on the basis of different strategies Volkswagen company can effectively adopt
product development strategy because it deals in the competitive environment. So by anticipating
changing requirement of customer it can bring innovation and retain customer requirement
effectively.
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Strategic management plan: It involvement document that comprises of the innovative
that can bought up company on the basis of availability of resources and changing presence of
customer (Thompson, Strickland and Gamble, 2015). In relation to Volkswagen company
prepare strategic management plan to effectively introduce driverless cars and evolves the
untapped requirement of customer.
Vision: Volkswagen vision is to establish global identity by brining vital changes and
establish unique image of company in terms to bring revolution effectively.
Mission: The mission of company is to effectively understand customer requirement and
support uniform changes in order to accommodate the requirement effectively.
Objective: The aim of Volkswagen company is to launch driverless taxis or sharing cabs
that is incorporated with advance technology and helps to reduces carbon emission. The
objective of company is to expand market sales by 15% within 9 months.
Strategies
Promotion: This strategy is used to spread market awareness and establish vital position
of innovative product within market. Volkswagen company can promote driverless cars through
digital tools like website, social media, email marketing and so on.
Research and development: it helps the company to gain deep information about the
external market as well as customer preference. It is basically used to tap the untapped market
opportunity.
Tactics
Fund arrangement: Launching driverless cars leads to immense pressure on Volkswagen
company due to which financial manger can extend the credit from financial statement, raise
debenture and can use retained earning at optimum level.
Advancement of technology: The company is immensely based on latest technology to
effectively launch driverless taxis. It is the responsibility of internal manager to carry out diverse
expenditure effectively (Yuliansyah, Gurd and Mohamed, 2017).
CONCLUSION
From the above report it has been determined that business strategy helps can
organisation to overview internal and external environment. This assist business entity to devise
out sustainable strategy and take organisation at favourable direction. It involve SWOT and
PESTLE analysis that is used to diversify the business successfully. Along with that Ansoff
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matrix is used by company to successfully implement the innovative strategy and maintain long
term sustainable performance.
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REFERENCES
Books and journal
Akter, S., and et.al., 2016. How to improve firm performance using big data analytics capability
and business strategy alignment?. International Journal of Production Economics. 182.
pp.113-131.
Buckley, P. J., 2014. International Business Strategy. Taylor & Francis.
Johnson, G., 2016. Exploring strategy: text and cases. Pearson Education.
Klettner, A., Clarke, T. and Boersma, M., 2014. The governance of corporate sustainability:
Empirical insights into the development, leadership and implementation of responsible
business strategy. Journal of Business Ethics. 122(1). pp.145-165.
Leonidou, L. C., and et.,al., 2015. Environmentally friendly export business strategy: Its
determinants and effects on competitive advantage and performance. International
Business Review. 24(5). pp.798-811.
Moseley III, G. B., 2017. Managing health care business strategy. Jones & Bartlett Learning.
Peng, M. W., 2017. Cultures, institutions, and strategic choices: Toward an institutional
perspective on business strategy. The Blackwell handbook of cross‐cultural
management. pp.52-66.
Scholes, M. S., and et.al., 2014. Taxes & business strategy. Upper Saddle River, NJ: Prentice
Hall.
Soltanizadeh, S., and et.al., 2016. Business strategy, enterprise risk management and
organizational performance. Management Research Review.
Thompson, A., Strickland, A. J. and Gamble, J., 2015. Crafting and executing strategy:
Concepts and readings. McGraw-Hill Education.
Webster, T. J., 2014. Managerial Economics: Tools for Analyzing Business Strategy. Lexington
Books.
Yuliansyah, Y., Gurd, B. and Mohamed, N., 2017. The significant of business strategy in
improving organizational performance. Humanomics.
Online
Volkswagen SWOT Analysis 2019. [Online]. Available
through:<https://statstic.com/volkswagen-swot-analysis-2019/>
Five Forces Analysis of Volkswagen. 2018. [Online]. Available
through:<https://notesmatic.com/five-forces-analysis-of-volkswagen/>