Report on Financial Comparison between Volkswagen Group and BMW

Financial statement Analysis
(Financial Comparison between Volkswagen Group and BMW)
V/S
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Table of Contents
INTRODUCTION ..........................................................................................................................3
OVERVIEW OF VOLKSWAGEN ...............................................................................................3
INTERNAL AND EXTERNAL MARKET ANALYSIS OF VOLKSWAGEN ..........................4
SWOT analysis of Volkswagen..............................................................................................4
Porter's Five force analysis ....................................................................................................5
FINANCIAL RATIONS ANALYSIS ............................................................................................6
Profitability ratios .................................................................................................................8
Liquidity ratios ....................................................................................................................10
Efficiency/ Activity Ratios...................................................................................................12
Solvency ratios.....................................................................................................................14
CONCLUSION .............................................................................................................................16
RECOMMENDATIONS FOR INVESTORS ..............................................................................17
REFERENCES .............................................................................................................................18
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INTRODUCTION
Financial analysis is the most crucial aspect of comparing performance of competitor
companies. In this regard, financial ratio analysis is the most flexible method to evaluate
financial health of companies as well as it also supports investment decisions (Contributions
Published in Strategic Analysis, 2013). The report herewith is going to analyse recent
performance and position of Volkswagen group in the market. Further, the internal and external
market analysis is done while using various strategic tools such as SWOT and Porter's five forces
analysis. To compare the financial position of the company, BMW a leading competitor of
Volkswagen is taken into consideration. The ratios analysis of both companies is done and the
performance is compared on the basis of activity, liquidity, solvency and profitability ratios. The
reasons behind financial performance are presented in the section while recommending investors
and shareholders for a better option to invest among both mentioned entities.
OVERVIEW OF VOLKSWAGEN
Volkswagen is the renowned automotive manufacturing company which is based on
Germany. The company was founded in the year 1937 and it is headquartered in Wolfsburg,
Lower Saxony, Germany. At present, the mentioned car manufacturer is the second-largest auto-
maker in the world. This company is the largest car manufacturer in Europe. The number of
vehicles delivered to consumers has been increased from past years and has reached to 10.137
million in the year 2014. Volkswagen captures market shares of 12.9% of whole world's
passenger car market. In the years 2014, the group revenue of mentioned entity was €202 billion
while earning the profit of €11.1 billion. The Volkswagen Group include different brands
including Audi, SEAT, ŠKODA, Bentley, Scania and MAN, Porsche, Ducati, Bugatti,
Lamborghini, Passenger and Commercial Vehicles.
UK luxury car market
The luxury car market of UK is continuously booming however, UK is among one of the
few European countries where people are willing to buy luxuries car. In other words, it can be
said as a place where people incentivised themselves to purchase a new car. As per the
investigation of Society of Motor Manufacturing Traders the car market of UK launched 2.4
million cars in the year 2014 so it could be said that the demand of luxurious car is backed in
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Europe before the recession. In UK, number of early registrations of upcoming models of cars is
witnessed. For Volkswagen, the Europe market is the second biggest market after Germany for
Volkswagen. The UK market share for Volkswagen and BMW is as follows:
ARQUE 2014 sales % Market share 2013 sales % Market share Up or down?
Volkswagen 214,828 8.67 194,085 8.57 +10.7%
BMW 148878 6.01 135583 5.99 9.80%
INTERNAL AND EXTERNAL MARKET ANALYSIS OF VOLKSWAGEN
SWOT analysis of Volkswagen
In order to assess the current performance of company and to analyse the internal
strengths and weaknesses and external opportunities and threats SWOT analysis of the company
is presented in following points:
Strength: The firm has strong global presence which is known as the biggest strength of
Volkswagen. The operations of company are based in more than 160 countries and are
considered to be the second largest auto- manufacturer all around the world. The company is
well known for its quality products. It has strong brand portfolio as there are total 12 brands
which are selling under Volkswagen Group. The largest selling brand of Volkswagen in UK is
Bentley and Audi. Hence, it could be said that the company has created product portfolio while
considering the needs of each and every customer (Bragg, 2000). The research and development
and engineers team of company is very strong in making effective cars that is significant to keep
competition in global market. Audi is the most demanded car under Volkswagen Group.
Weaknesses: The biggest weakness of Volkswagen is that the company has limited
presence in emerging market whereas the competitive brands have captured significant market
share. The company is also having weak presence in US passenger car market as it has capture
only 5% market share in the year 2012. Many of the products such as Porsche, Lamborghini and
Bugatti are not environmental friendly as these cars are not fuel efficient and emits high amount
of CO2 (Carbon roof tops BMW. 2006).
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