Strategic Analysis of Business Operations

This assignment delves into the realm of strategic analysis by examining various tools commonly used in business operations. It covers frameworks such as PESTEL analysis (identifying external factors), SWOT analysis (internal strengths & weaknesses, external opportunities & threats), and the BCG Matrix (product portfolio analysis). Students are expected to demonstrate their understanding of these concepts and how they contribute to effective strategic decision-making within organizations.

Business Strategy

TABLE OF CONTENTS
INTRODUCTION....................................................................................................................... 1
TASK 1....................................................................................................................................... 1
Covered in PPT....................................................................................................................... 1
TASK 2....................................................................................................................................... 1
2.1 Organisational Audit to analyse Strategic position of Volkswagen AG.............................1
Strengths:....................................................................................................................... 1
Weaknesses:................................................................................................................... 2
Opportunities:................................................................................................................ 2
Threats:.......................................................................................................................... 2
2.2 Environmental Audit of Volkswagen AG..........................................................................4
Micro – environment factors of Volkswagen AG:..........................................................4
Macro – Environmental Factors of Volkswagen AG:.....................................................5
2.3 Significance of stakeholder analysis in formulation of strategies.......................................6
Importance of Stakeholders Analysis.............................................................................6
Stakeholder Mapping for Volkswagen AG.....................................................................6
2.4 New strategy for Volkswagen AG..................................................................................... 7
3.1 Appropriateness of Alternative Strategy............................................................................9
Market Entry Strategy:................................................................................................... 9
Substantive Growth:....................................................................................................... 9
Retrenchment:.............................................................................................................. 10
3.2 Justification for the strategy selected for Volkswagen AG...............................................10
Suitability Test:............................................................................................................ 10
Acceptability Test:....................................................................................................... 10
Feasibility test:............................................................................................................. 11
4.1 Roles and Responsibilities in Implementation of strategies..............................................11
4.2 Estimated requirement of resources for implementation of new strategy.........................12
4.3 SMART targets to achieve the implementation of strategies............................................13
Specific Targets:.......................................................................................................... 13
Measurable Targets:..................................................................................................... 14

Attainable:.................................................................................................................... 14
Relevant:...................................................................................................................... 14
Time Based:................................................................................................................. 14
CONCLUSION.......................................................................................................................... 14
REFERENCES ......................................................................................................................... 16

TABLE OF FIGURES
Figure 1: Bowman's Strategy Clock............................................................................................. 3
Figure 2: Sales Comparison of VW.............................................................................................4
Figure 3: SMART GOALS........................................................................................................ 13

INTRODUCTION
Business strategy is a summary of business plan to achieve the organisational goals and
objectives and to sustain and improve the position of the organisation in the industry. In this
study, the business strategy of Volkswagen AG has been discussed Including its mission, vision,
organisational goals and objectives, current position in the market, current and new suggested
strategy and various analysis of the company (Ayden, Demirbag and Tatoglu, 2017).
Volkswagen AG is one of the largest automotive manufacturing German based company. Its
products include passenger cars, motorcycles, commercial vehicles etc. Its Headquarter is
situated in Wolfsburg, Germany. It is a parent company of Porsche, Audi, Bugatti, BMW,
Skoda, etc.
TASK 1
Covered in PPT
TASK 2
2.1 Organisational Audit to analyse Strategic position of Volkswagen AG
Organisation Audit is an independent activity that provides objective assurance and is
designed to improve and add value to the organisation (Sedlmair and et. al., 2014).
For analysing the strategic position of Volkswagen AG lets conduct the organisation
audit with the help of SWOT analysis of the company:
Strengths:
 Volkswagen is one of the largest car making parent company with some major brands
under its shelter like BMW, Skoda, Lamborghini, Porsche, Audi, Bugatti, etc.
 It has a strong global position i.e. it is currently present in 153 countries around the globe
and stood at the third position among automobile manufacturers in 2012 (Ingber, 2013).
 The company has a strong focus on engineering and research and development
departments.
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 It has strong market share in china with nearly 20% of market share through Audi and
other brands.
Weaknesses:
 The company has a weak position in US car market. It covered only 5% of the market
share in 2012.
 The cars are little more expensive than that of its competitors (Krupa, 2016).
 The company is lacking behind in manufacturing environmental friendly products as the
most products are not environmental friendly.
 It does not have a strong market presence like Toyota and Hyundai.
Opportunities:
 The company with a little hard work can gain a good market share in US car market.
 The company can emerge in new market by offering new products like environmental
friendly cars, battery driven vehicles, etc.
 Acquisition of small companies to acquire skills and competencies.
 Downfall in the exchange rate Euro.
Threats:
 High competitive market.
 Loosening of goodwill and brand image.
 High Political pressure with increase in government intervention (Jurevicius, 2013).
 Hybrid investment due to fluctuation in fuel prices.
 Appreciation in the Exchange rate of Euro because 70% of its business is outside the
euro zone.
After conducting Organisational Audit, SWOT Analysis for Volkswagen AG and its
strategies as discussed in (1.1), here is the analysis of its strategic position with the help of
Bowman Strategy clock:
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Figure 1: Bowman's Strategy Clock
(Source: Competitive strategy, 2012)
Bowman's Strategy Clock was designed to illustrate the position of the product on the basis of
two dimensions- price and perceived value. Volkswagen AG stands at the position 3 i.e. Hybrid.
Hybrid position involves product differentiation with low price element (Marnewick, 2014). The
company focuses on quality-price ratio. The price of the products of the company ranges
between 19,000 and 21,000 euros. The average price of different version of different products
differs from the price quoted in advertisements.
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2.2 Environmental Audit of Volkswagen AG
Environmental Audit involves various types of evaluations to identify the gaps between
environmental compliance and management system along with measures to rectify them. It is
used to investigate, identify and to understand its environmental position and performance.
Micro – environment factors of Volkswagen AG:
 Competitors: General Motors and Toyota are the major competitors of Volkswagen and
Ford is also competing to a great extent. Toyota has captured a major market in North
America and Japan, General Motors has captured major market in United States and
China.
Figure 2: Sales Comparison of VW
(Source: The Domino Effect of Volkswagen's Emissions Scandal, 2015)
 Customers: Customers of Volkswagen AG have direct impact on their business. The
company attracts customers for successful profit operations (Song, Sun and Jin, 2017).
Being a multinational company, Volkswagen has worldwide customers as it is operating
in 153 countries.
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Macro – Environmental Factors of Volkswagen AG:
Macro environmental analysis includes factors like political issues, environmental issues,
economic issues, etc. For the purpose of macro environmental analysis various tools are used.
PESTEL Analysis of Volkswagen is done here:
 Political Factors: Volkswagen is a German Based company, and it faced many political
difficulties in its development (Song, Sun and Jin, 2017). Because it is present around the
globe i.e. In more than 150 countries, the political pressure is always high because the
political situation in all the countries are not same.
 Economic Factors: Automotive industry is the key industry that effects the economic
growth in any country. Being present in different countries, it contributes to the GDP of
different countries.
 Social Factors: Society includes customers and customers for every industry are very
crucial. Volkswagen has various communities at different locations. It is a huge company
and provides high employment opportunities to the society where it is currently working
with more than 50000 employees.
 Technological Factors: Technology has a direct relation to automotive industry. Society
demands new and improved technology and the company needs to cope up with the
demand of the society (Sia, Soh and Weill, 2016). BMW, Mercedes and Toyota are the
leaders because of their latest technology.
 Environmental Factors: Auto motive industry has a huge impact on the environment of
the nation in which it operates. It uses many natural resources like gas, petrol and diesel
for the purpose of fuel. It also affects the infrastructure of the nation. So, the company
need to take care of the deployment of natural resources in its processes.
 Legal Factors: It is challenging for Volkswagen as it is a multinational company with its
approach in more than 150 countries. Therefore, it is subjected to different legislations
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and regulations of different countries. It needs to meet the requirement of various laws
like, health and safety Act, Consumer Protection Laws, etc.
2.3 Significance of stakeholder analysis in formulation of strategies
Stakeholder analysis is the process of assessing the impact of various decisions on
relevant parties. Decision could relate to Conflict resolutions, project management and business
administrative (Verbeke, 2013). It is performed to evaluate the interest of various groups of
stakeholders on a project plan, programs, policies and other actions. It is crucial for the success
of business.
Importance of Stakeholders Analysis
 It describes the level of impact and involvement of stakeholders in business programs,
policies and procedures.
 It helps in identifying the interests of stakeholders that may affect the project.
 It also helps in removing the negative impacts of disadvantageous groups.
 Helps in improving the relationships.
 Identification of future risks and threats that can jeopardise the interests (Slack, 2015).
 Future Opportunities can be known.
 Participation of different groups at different stages of the project.
 Employee Analysis will help in optimising employee satisfaction and production.
 This will also allow the organisation in forming partnerships.
Stakeholder Mapping for Volkswagen AG
Stakeholder Mapping is the 2nd step of BSR five-step approach to stakeholder
Engagement. It is the organisation of the people according to the criteria with which organisation
will manage them during the projects (Strategy theory, 2016). In other words, it is the Visual
Representation of the analysis. The criteria include interests, financial stake, influence,
emotional stake, etc. It involves 4 steps:
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1. Identify
2. Analyse
3. Plan
4. Engage
 Identify: The 1st step is identifying and defining the stakeholders of Volkswagen AG.
Main influential stakeholder of Volkswagen are its shareholders, Board of Directors,
employees, Customers, suppliers and Government authority.
 Analyse: Analysis the impact and influence of stakeholders. In Volkswagen, the group of
stakeholders like shareholders have a great influence on the company because of their
high profit demands and the impact government authority is high due to pressure and tax
implications of different countries (Tassabehji and Isherwood, 2014).
 Plan: After identifying and analysing the stakeholders and their impacts and influences,
management should plan the strategies accordingly.
 Engage: After formulating strategies keeping in view the above analysis, management
should initiate the process of engaging different groups of stakeholders at different level
of projects.
2.4 New strategy for Volkswagen AG
Here are few suggestions for the new strategy that Volkswagen AG can follow:
 Market coverage and Globalisation: National markets are globalising due to increase in
liberalisation. Therefore, Volkswagen should expand its business to uncovered areas of
the market.
 Diversification and modification of Product Portfolio: As studied, Volkswagen is lacking
behind in manufacturing of Environmental friendly products and battery driven vehicles
(Baumann, 2013). Considering the same, the cited company should increase its
investments in research and development department for the purpose of manufacturing
battery driven cars and environmental friendly products.
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 Increase in innovation: Volkswagen is using little old technology as compared to GM
and Toyota, the company should more focus on innovations of its existing products in
order to retain its existing customers and market.
 Corporate Social Responsibility: CSR of any company increases its brand image in the
market (Mkude and Wimmer, 2015). Company should focus more on its social
responsibility toward to nations in which it is serving. This will increase its
recognizability.
Keeping in view the above suggestions for the new strategy of Volkswagen AG, the
company should also consider the following:
 Alignment with the mission and vision: While formulating and adopting new strategies,
the management should ensure the alignment of the strategies to the mission and vision
of the company. New strategies must cope with the aims stating in the mission and vision
statement of the company.
 Strategic Capability: It refers to the strategic capabilities of the company that contribute
to its competitive advantage and long-term survival in the market. It includes key
resources, cost structure, flow of revenue, client relationship, employee relationship.
 Acceptance by Stakeholder: Adaption of new strategies should be done after the
stakeholders' acceptance (Li and et. al., 2016). The company is run through the
stakeholders only and new strategies for the company must be acceptable by all the
stakeholders.
3.1 Appropriateness of Alternative Strategy
There could be many alternative strategies in context with Volkswagen AG such as:
1. Market Entry Strategies
2. Substantive Growth
3. Limited Growth Strategies
4. Retrenchment
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Below is the description for the appropriateness of few alternative strategies:
Market Entry Strategy:
There are number of ways a company can enter into new markets, but single market
entry strategy doesn't work for all international markets. It includes various strategies like
organic growth, licensing, acquisition and mergers, franchising, etc. Few of the strategies are
explained below:
Organic Growth: It is a pathway for small businesses to grow in the market. It is different from
growth by acquisition. For example, Volkswagen can diversify its products (more equipped
technology, battery-driven, environmental friendly) to capture the new markets. This will
definitely show the growth to the company but in some time.
Acquisition and Merger: This strategy involves purchase and acquisition of existing companies
in order to increase the market share (Bohari, Hin and Fuad, 2017). For Example, Volkswagen
has already acquired many organisations like Skoda, and merger with Porsche has benefited the
company positively.
Strategic alliances: It refers to the cooperative agreement between actual and potential
competitors. These are attractive because it facilitates entry to the new markets and help the
organisation to establish technological standards.
Substantive Growth:
This could be the good decision for Volkswagen to increase its organisational growth.
For example, to meet its customer needs, company can invest in new market investments and
shopping methods (Baumann, 2013).
Retrenchment:
Retrenchment strategy allows the company to withdraw its products from the particular
market where the company is suffering from loss or having a very low market share. For
Example, the market share of Volkswagen is very low in China so it is an option for the
company to withdraw it's not so productive products from China. This will help the company to
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reduce its non- productive areas. The company may also sell off its unproductive parts of
business.
3.2 Justification for the strategy selected for Volkswagen AG
Justification of the selected strategy for Volkswagen AG with the help of SAF
(Suitability, acceptability and feasibility) test.
Suitability Test:
The selected strategy should be suitable for strategic position and for achieving the
strategic objectives of the company for the long run. The following issues are tested for the
suitability tests of the strategy:
Economic sense of the strategy: The new strategy prepared for Volkswagen AG involves
investments in innovation and diversification of the products (Eyvrigh, 2016). The company has
good cash resources. Therefore, in economic sense new strategies are suitable.
Overcome of difficulties: The motive of new strategies is to reduce the areas where the
company is facing difficulties like low product portfolio, old technology, etc. The strategies are
prepared in order to overcome these difficulties.
Acceptability Test:
The new suggested strategy should be acceptable by all the stakeholders and should help
them in achieving their short term and long-term objectives. This involves:
Wealth of stakeholders: The suggested strategy requires the Volkswagen group to focus on its
corporate social responsibility (Lienert, Schnetzer and Ingold, 2013). This will enable the
company to make more efforts which in turn will increase the wealth of the stakeholders and
their satisfaction.
Financial risk: Suggested new strategy requires the company to extend its market through the
way of globalisation. This strategy will attract new customers which will result in low financial
and liquidation risk.
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Capital structure: The strategy requires the company to invest more in various areas, for this
company will need more capital (internal and external), this will ultimately improve the capital
structure of the company (The Domino Effect of Volkswagen's Emissions Scandal, 2015).
Feasibility test:
The strategy should be feasible for the company in relation to its resources and
competencies. The new suggested strategy involves huge investment by the company, this
investment must be feasible for the company. It involves:
Efficient Management: Application and implementation of new strategy requires the efficient
management; Volkswagen AG has qualitative and efficient employees (Mayer and Tonelli,
2017).
Tools: To evaluate the feasibility of the strategy, management can use some tools like cash flow
analysis and forecasting, break- even analysis, resource deployment analysis etc. This will check
the feasibility of the resources required for the implementation of new strategy.
4.1 Roles and Responsibilities in Implementation of strategies
The implementation process requires the group work of all the level of employees within
the organisation. Because employees need to have the knowledge of their roles and
responsibilities in the implementation process and its effect on the organisation. Following are
the roles and responsibilities:
 The person in charge should explain the strategic intent to all the employees of the
organisation.
 The person should assure the compliance of all the legislations and regulations that are
subject to any of the strategy compliance.
 He should ensure the optimum availability and utilisation of resources for the
implementation of the new strategy.
 Delegation of implementation of strategies to the right level of employees (Slack, 2015).
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 Reviewing and rectifying the implementation of new strategies and flaws relate to them.
 Modification and improvements in the strategies if needed.
 Following up the strategies in order to know the impacts of strategies to the organisation
and to ensure that they cope up with the aims stated in mission and vision statement and
goals and objectives of the organisation.
4.2 Estimated requirement of resources for implementation of new strategy
New suggested strategy for Volkswagen AG will require various resources. Here is the
list of resources that are to be required for the implementation of strategy:
 Human resources
 Financial resources
 Natural Resources
Estimation of Resources required
Human Resources  Medium level employees (Human resource)
 low level employees (mechanical engineers,
marketing staff, sales staff)
Financial Resources  Equity Capital (Owners and shareholders)
 Debt Capital (attracting outside investors,
Bondholders, bank, healthy individuals)
 Non- financial resources (goods and
services)
Natural Resources  Petrol
 Gas
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 Land
4.3 SMART targets to achieve the implementation of strategies
Figure 3: SMART GOALS
(Source: Elzubeir and Dye, 2017)
Specific Targets:
 The targets should be accurate and specific to avoid misinterpretation.
 Meaning of targets should be known.
 Strategies should be aligned with the goals and objectives of the company (Verbeke,
2013).
 Consistent actions toward the achievement of targets.
 Identification of location to extend market.
Measurable Targets:
 The implementation of strategies should be measurable.
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 Review to analyse the strategies that are implemented.
 Analysis of how much the strategies implemented have attained the target (Whitehead,
2015).
Evaluation of attainment of targets through non- implemented strategies.
Attainable:
 Strategies implementation targets should be according to the strength of stakeholders.
 Strategies should be realistic and goals should be clear.
Relevant:
 Resources deployed should be relevant for implementation of strategies.
 Volkswagen Group should recruit skilled and trained employees for implementation of
new strategy.
Time Based:
 Targets for the implementation of strategies should be time based.
 The management of Volkswagen should set a standard time for implementation of each
strategy.
CONCLUSION
From this report, it is concluded that the business strategy of Volkswagen AG is on a
slight weaker side. The management needs to emphasise more on its product portfolio. Though
the company has good cash resources but, there is no optimum utilisation of the resources
because of which the company is lacking behind from General Motors and Toyota. Corrective
measures should be taken reduce the weaknesses of the company.
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