Influence of External Forces on Volkswagen

This assignment analyzes the impact of external forces on Volkswagen, evaluates its strengths and weaknesses, and applies Porter's Five Forces model to understand the market. It discusses the influence of political, economic, social, technological, legal, and environmental factors on the company. The assignment also explores the internal business environment of Volkswagen using SWOT and VRIO analysis.

BUSINESS
STRATEGY

Table of Contents
INTRODUCTION...........................................................................................................................3
TASK 1............................................................................................................................................4
P1 Influence of external forces on Volkswagen.........................................................................4
M1 Critical analysis of macro environment on Volkswagen and its operations.........................5
TASK 2............................................................................................................................................6
P2 Analysis of internal business environment of Volkswagen...................................................6
M2 Evaluation of strengths and weaknesses of Volkswagen.....................................................8
TASK 3............................................................................................................................................8
P3 Application of Porter' Five Forces model for understand market of Volkswagen................8
M3 Strategies for improving competitive edge.........................................................................10
TASK 4 .........................................................................................................................................10
P4 Strategic plan of Volkswagen using Ansoff Matrix............................................................10
M4 Volkswagen's tangible and tactical objectives....................................................................12
CONCLUSION..............................................................................................................................12

INTRODUCTION
Business strategy is actions or set of decisions which company take for achieving its
objectives and expected standards. Business strategies provides top levels managers with an
integrated action plans which helps them in exploring and understanding external environment.
Various elements are present in external environment of business which can be beneficial and
harmful for organisation if company do not act upon them. Business strategy helps company to
observe, analysis and evaluate all opportunities and threats which they can explore and make
future plans accordingly. In this assignment, several tool like PESTLE, SWOT, VRIO and
Porter's Five Forces models are used for analysing and understanding all the aspects related to
business and work in relation with them(Peng, 2017). Volkswagen is chosen for analyses of this
report, which is a German automobile manufacturer. Volkswagen was founded in 1937 by a
German Labour Front and a Nazi Labour Union. It is serving and offering its services to
worldwide customers and headquartered in Wolfsburg, Germany. Volkswagen was the third
largest automaker in world and shifted to second biggest by 2016 and its biggest market is in
China where it makes 40% of its sales and profits.
TASK 1
P1 Influence of external forces on Volkswagen
PESTLE analysis is used to know the impact of macro factors on the organisation and
accordingly identify future trends. It has six elements Political, Economical, Social,
Technological, Legal and Environmental these factors enhance the knowledge of company and
make plans in accordance with it. These units of external environment will let company to take
appropriate measures and work in relation to them. Political- These factor refers to governmental intervention in economy and on different
industries existing in that economy. It basically, related to those elements in which
government has some effects either positive or negative. Volkswagen is facing biggest
issues due to current political environment and tensions going on between US and EU
about trade tariff's(Leonidou and et. al, 2017). The second impact UK government has
on Volkswagen is their new policy of stop sales of diesel car by 2040. These issues are
hindering the company's plans and strategies it made for future and now they have to
make amends in their present function to deal with these problems.

 Economical- It determines the performance of economy and factors responsible for it
like growth of economy, inflation rates, employment and unemployment ratio. These are
some factors which directly or indirectly affects the economy and along with it the
businesses of that economy. The biggest economic issues of element which is affecting
Volkswagen operations in negative form is Brexit. Due to this inflation has gone up,
purchasing power of consumers has decreased which ultimately impacted on the
spending of people(Moseley III, 2017). This leads to decline in demand and supply of
cars and specially luxury cars. Social- This dimension of macro factors represents the preference, customs, values,
beliefs and taste of population in which company is doing business. These elements also
change according to the gender, age, income and size of population along with related
barriers in that social atmosphere. The increasing demand of vehicle and specially cars is
proving beneficial for Volkswagen. These increase in demands is due to the regular
growth of cab and taxi services like uber in UK and around the globe. Technological- This element highlights the impacts of new innovative technologies and
new trend of techno friendly nature people are developing and economy is adopting,
technology is something which is now part of day to day lives of people, it is becoming a
need of customers and general public. Therefore, it has huge impacts on buying decsions
of customers and influence them towards particular brands and products. The new trend
in automotive industry is development of self-driven cars, which are designed with
advanced technology like terrain sensors, mapping cameras and radar
technology(Grayson and Hodges, 2017). This is the biggest technological threat
Volkswagen is facing currently and working on it, to survive, grow and satisfy needs of
buyers. Legal- This dimension is somewhat similar to political factors but with more specific
laws, rules and regulation of economy. It is a very influential factor if the company is
operating on global level, they have to be well informed and attentive about international
laws and global trends. Recently, Volkswagen was charged huge fine by government for
criminal penalties for violation of environmental regulations. This is why its important
for Volkswagen to known and understand all the legal aspects of those economies in
which it operated from keeping itself safe from any legal fees or penalties.

 Environmental- This factor has been into limelight only very recently, it has been very
important to be considered by organisations because is increasing scarcity of resources.
Elements which covers in this section is weather, climate change and environment
offsets. This has led more companies to take part and perform their Corporate Social
Responsibilities (CSR) for at least adding a little bit of what they are taking form mother
earth(Evans and et. al., 2017). This has become a growth opportunity for Volkswagen, as
demand for electric vehicle is increasing regularly and effectively. This element for now
has really positive impact on Volkswagen opening new doors for it.
M1 Critical analysis of macro environment on Volkswagen and its operations
Macro factors are something which is very influential and put lots of impacts on
functioning of organisations. These impacts can be positive and negative both in nature, by
which Volkswagen will make its strategies along with various decisions in relation to business.
As seen in above section that social, technological and environmental factors are beneficial for
Volkswagen it has positive impact on it. These elements are creating and opening new business
doors for Volkswagen(Linder and Williander, 2017). On the other hand, political, economical
and legal factors are affecting it in negative manner. Brexit has caused inflation affecting
demand and company faced some penalties which is another harm caused to company.
TASK 2
P2 Analysis of internal business environment of Volkswagen
Internal business environment also plays a vital role in making decisions and deciding
action plan of the organisation. Two very essential and effective tools are used for Volkswagen
which helps in understanding the organisational atmosphere and grab new opportunities.
SWOT analysis is a framework which is used by companies to analyse and evaluate
position of organisation and make strategic plans accordingly. In SWOT analysis internal factors
of Volkswagen which are its Strengths and Weaknesses as well as it external elements,
Opportunities and Threats are observed for making business plans(Boyd and et. al., 2017).
Strengths Weaknesses
 Volkswagen uses diversification
strategy for its business. It diversify its
operation geographically and on the
 The company is lacking in expertise
which is weakening it. Also,
Volkswagen holds very low

basis of their products and services.
 Volkswagen have the widest portfolio
amongst all automotive organisation or
its competitors. This serves as an
competitive advantage to company and
provides expected results(Yuliansyah,
Gurd and Mohamed, 2017).
competence in making battery driven
cars or vehicles which is its another
weak area.
 Volkswagen is the second largest
automotive manufacturer in the world,
still its market share in US is really low
in comparison with other automobile
providers.
Opportunities Threats
 Demand for autonomous vehicles is
rising and that is a huge chance for
Volkswagen to produce better products
and provide effective services to
consumers for earning more revenue.
 Volkswagen should focus on improving
its sustainability plans and also adopt
some remedies for increasing its brand
reputation.
 Every company face the threat of
aggressively increasing competition,
same is with Volkswagen as it is
dealing in automotive industry, where
in past few years many new businesses
have stepped in.
 Due to Brexit, various political and
legal changes are taking place and they
are becoming very serious threat for
Volkswagen.
VRIO model is another strategic tool which used to analyse and uncovers the resources
plus capabilities of companies. VRIO is acronym for four questions which are Valuable, Rare,
Inimitable and Organized(Shuen, 2018Strategy, 2017). These are the four elements on which this
evaluation is based and helps Volkswagen to know and protect its resources, by gaining long-
term competitive advantages.
Resources Valuable Rare Inimitable Organized
Brand Image Brand Image - - -
Financial
Resources
Financial
Resources
Financial
Resources
- -

Technological
Advancement
Technological
Advancement
Technological
Advancement
Technological
Advancement
-
Human
Resources
Human Resources Human Resources Human Resources Human Resources
Valuable- Those resources which adds value to company by letting it explore more opportunities
and face all threats are known as valuable resources. Brand image- It is a very valuable resource Volkswagen holds, company's has strong
brand value which provides higher position to it in market. Financial resources- The most important resource for every organisation and same is
with Volkswagen. Company need finances to work and perform effectively(Lawton,
2017). Technological advancement- Another, valuable resource of Volkswagen is technology it
uses for producing goods and offer to public.
 Human resource- The one who execute all plans and strategies of businesses are its
employees, so they automatically becomes important and valuable for Volkswagen.
Rare- Resources which are only acquired one or very few organisations are determined as rare
and precious. They provide temporary competitive edge to company until it is imitated by others. Financial resources- Money is not rare but the quantity and the means it is acquired is
rare. Every organisation has its unique ways and methods of acquiring finances which
depends on the ability and flexibility of company. Technological advancement- Volkswagen has various technology involved in its
operations but they are rare and very few organisation know about them.
 Human resource- Every organisation has their personal staff, but rarity depends on the
expertise they hold(Habib and Hasan, 2017).
Inimitable- Company's assets which are hard to imitate or even impossible to imitate are
considered here. Technological advancement- Volkswagen uses unique technologies in its products
which are also patented by them, therefore, its not possible for competitors to imitate and
make similar products.

 Human resources- Employees holds unique characteristics, skills and talents which are
inimitable.
Organized- It refers those systems and resources which helps companies to work in an
organized manner and provide effective results in an expected manner(Noe and et. al., 2017).
 Human resource- Staff of Volkswagen are the people who perform several assigned
activities. They can bring management and organized atmosphere in company exploring
new better ways of performing tasks.
M2 Evaluation of strengths and weaknesses of Volkswagen
Various strengths and weaknesses are associated with Volkswagen which are discussed
in earlier sections. These strengthens can bring huge earning and obtain better results for the
company if analysed properly(Holotiuk and Beimborn, 2017). Effective evaluation of strengthen
of Volkswagen will bring more power and efficiency, but if ignore it will result in waste of
potential resources. On the other hand, weaknesses of company can cause great harm to it but if
they are known to the management then better plans can be made in relation with them, by
reducing its effects.
TASK 3
P3 Application of Porter' Five Forces model for understand market of Volkswagen
Porter's Five Forces Model is a technique that determines five competitive forces which
help organisations to shape its operations according to industry and know its weaknesses. This
model is applicable to all segments to understand the level of competition company is facing and
how they can enhance their profitability. Those five forces are as follows: Bargaining power of suppliers- This force is talking about the number of suppliers who
offer same goods to buyers and their concentration. Bargaining power of suppliers can
also be explained as the level of power and emphasis supplier have on the cost or pricing
strategy of the good(Oldman and Tomkins, 2018). Volkswagen has high bargaining
power as supplier because of its diversification strategy, it supplies its products in various
regions and has huge distribution channel. Bargaining power of Customers- This element is talking about the influence individual
buyers and concentrated customers have on the prices of products. Either customers hold
high bargaining power of low or moderate according to their number and suppliers

present in marketplace. In case of Volkswagen, its customers has moderate power of
bargaining and making price strategies according to themselves. This is because of the
number of suppliers present in marketplace and also increasing competition aggressively. Threat of substitute products- This is threat exist in marketplace and for every industry,
it reflects to the number of substitute goods and similar producers exist in industry.
Substitutes are similar goods which are produced by the competitors in industry,
providing same level of satisfaction to consumers(Brewster, 2017). This threat is really
high for Volkswagen, as the competition is rising in automotive field on a very fast rate.
New companies and existing competitors are producing exact same goods and services
which Volkswagen offer to public. Threat of new entrant- This force is determining the new competition entering the
automobile world. It depends various factors like barriers to entry and exit, cost of
entering or leaving the market, expertise company's hold and many others. Volkswagen
facing huge competition but this threat is moderate as the cost of entering an automotive
market is really high. This is why it is very difficult for small or medium businesses to
enter, which provides temporary benefits to company.
 Existing rivalry- It refers to the existing competition organisations face, these are the
businesses which already exist in marketplace. The larger the number of competitors the
more and high risk company has along with low powers in market. Volkswagen is the
second largest automaker still has lot of competitors. Therefore, all the plans, strategies
and objectives are set in accordance with the market condition and by seeing the
competition.
M3 Strategies for improving competitive edge
All these five forces has huge influence and on the company and its operations,
Volkswagen has to set its action plans in contrast with the internal and external factors. These
tools will help Volkswagen to work in better manner and choose effective methods for
functioning(Rugman and Verbeke, 2017). SWOT analysis will enhance company's knowledge
about its strengthen and weaknesses so that they can work on them. It enables Volkswagen to
explore new opportunities with which they can enhance their business size along with keeping in
mind all related threats. Five forces model will enable Volkswagen to identify its position in
market and make improvement for attaining and maintaining its competitive edge.

TASK 4
P4 Strategic plan of Volkswagen using Ansoff Matrix
Ansoff Matrix was developed by business manager H. Igor Ansoff, who was also a
mathematician in 1957. This matrix was very useful for the marketers and managers of business
to analyse and understand the risks associated with the growth and expansion of their business
activities. In this matrix four quadrants are there which represents four different strategies which
are discussed as follows in context of Volkswagen:
 Market penetration- This strategy is used by organisation to increase sales of its products
in existing market. The company aims to increase its market share in existing business
market by using differentiating pricing strategies(Anwar, 2019). For Volkswagen market
penetration strategy can result in better business and earnings. Volkswagen is making
sales and offering its products in low costs according to various segments. They are also
using proper promotional techniques, this ways they can give tough competition to its
competitors and manage to attain competitive edge.
 Product development- Next quadrant is of product development, where companies
develop entirely new good by conducting lots of research and development a new
product range for consumers. They offer or produce this new product line for their
existing market after proper understanding of their current market position and the needs
of buyers. Volkswagen is using this strategies of introducing new innovative goods for
their existing buyers for giving them something new and retaining them for longer
duration.
 Market Development- This plan refers to developing new market for the existing goods
of company(Fineman, 2017). Here, organisations move to new marketplace with their
existing products and services for establishing their foot in various locations.
Volkswagen is using this strategy and delivering its products in several regions and
increasing its distribution channels. By this they are reaching to more and more people
making its presence in various regions.
 Diversification- Here, in this strategy organisations make new goods or develop new
services for entering entirely new market, targeting fresh audience or toughing new
segment of population. Volkswagen, one of the strength is its diversification strategies, it

makes very effective and efficient plans for acquiring new markets by providing them
what they want with their inventions.
Company overview
Volkswagen was founded in 1937, since then they are providing best vehicles of various
kinds to the world(Madhushree, Kumar and Aithal, 2018). It became second largest automaker in
2016, because of the quality of products and services it provides to its customers. Volkswagen
provide innovative goods to public and works with all new dimensions which gives its customers
utmost satisfaction and fulfil their needs.
Vision
Volkswagen vision statement show generic qualities and do not talk much about future
and future plans. It shows that company is engaged in developing and providing sustainable
goods to public. Its clear that the company is trying to develop an image of sustainability and
safe driven cars.
Mission
Volkswagen mission statement is entirely customer oriented and focus on consumer
satisfaction(Orna, 2017). Their mission is to provide sustainable cars and vehicles to the public
and retain them by maintaining good relationship.
Strategic Objectives
 Intent to provide innovative and technology driven cars and become the leaders in
automotive industry.
 They are concentrating on employing more expertise workforce having huge talents and
skills.
 They want to grow and expand, also desire to increase their market share in the U.S.
M4 Volkswagen's tangible and tactical objectives
For attaining the above objectives and performing the planned strategies company will be
needing some resources(Kahre, Hoffmann and Ahlemann, 2017). Those resources can be
tangible like finances for performing, developing and maintaining the business action. Also,
some intangible resources like brand image, customer loyalty etc. will help Volkswagen to attain
all its goals and effective outcomes.

CONCLUSION
From above report it is summarised, that for having effective business and obtaining
effective results companies have to make effective strategies and plans for its operation. Various
internal and external factors of organisations needs to be analysed, marketers needs to understand
the company and then make plans accordingly. For evaluation of company and all the forces
either internal or external which can have great influence, management can use various tools.
SWOT analysis is very helpful for knowing the strengths and weaknesses of company and
accordingly grab new opportunities. PESTLE can be used for understanding the macro
environment in which company is doing business. All these unique models which are used and
elaborated in above sections are beneficial and helpful in setting business strategies and
objectives.

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