Strategic Management and Sustainability in Volkswagen

This report discusses the key business strategies, resources and capabilities of Volkswagen over the past five years and how it has tried to become more competitive while taking into consideration sustainability and the environment. It also provides recommendations on how further sustainability practices can help the organization to develop competitive advantages in the future.

STRATEGIC
MANAGEMENT AND
SUSTAINABILITY

Table of Contents
INTRODUCTION...........................................................................................................................3
MAIN BODY...................................................................................................................................3
Identifying the key business strategies of VW over the past five years. ....................................3
Identifying the resources and capabilities of VW over the past five years and analysing to what
extent the company has aligned its resources and capabilities to its current business strategies.
......................................................................................................................................................5
Evaluating how VW has tried to become more competitive while taking into consideration
sustainability and the environment. ............................................................................................6
Recommendations on how further sustainability practices can help the organisation to develop
competitive advantages in the future...........................................................................................7
CONCLUSION................................................................................................................................8
REFERENCES................................................................................................................................9

INTRODUCTION
Sustainable strategic management can be defined as studying, speculating and
implementing business strategies that are economically competitive, socially responsible and
maintain balance with the cycles of nature (Barbosa, Castañeda-Ayarza and Ferreira, 2020).
Volkswagen is one of the leading auto mobile group in the world that operates in various
countries including UK which is its top market. The “dieselgate” scandal erupted in 2015 that led
VW to face litigation in several countries as it was found that its cars were emitting 40 times
more pollution gas than it had been certified. This forces VW to make new strategies to rebuild
its trust in the market. The current report identifies the business strategies of the car
manufacturer along with the resources and capabilities of the company over the past five years.
It also evaluates how VW tried to become more competitive while taking in consideration
sustainability and the environment.
MAIN BODY
Identifying the key business strategies of VW over the past five years.
Volkswagen is one of the leading car manufacturer in the world with big subsidiaries like
Audi, Seat and Skoda. After the incident of the “dieselgate” scandal in 2015, it faced huge
criticism around the world (Holtbrügge and Conrad, 2020). This forced the company to make
new strategies and take steps to rebuild the trust in the market. The company also suffered
huge financial losses due to payment of fines to several governments. The company had a big
market share especially in UK where they had top position. After it was found that the company
was breaching the pollution law by emitting 40 times more nitrogen oxide pollutants, it faced
litigations and had to apologise to the high court for emission cheating devices and also to its
customers for what they have done to them. This led the officials of the company to start
thinking of new strategies as only fines and apologies will not be enough but better business
strategies are required to rebuild the brand trust and get the customers back. It became a big
challenge for the company to come out from this situation (Gaultier and Marcello, 2021). The
key strategies that Volkswagen used in the last five years to overcome the incident were-
Cost Leadership Strategy- This strategy was used by the company to increase its
customer base on the basis of price. The strategy focus on minimizing the prices at the lowest
level. It decreases its per sale profit but when the sales increase, the overall profit gets
automatically maintained. The cost leaders always have the advantage to absorb bigger cost
increases before those costs needs to be passed on. This type of strategy can impact heavily

on the competitors and may force them to even leave the market as they could not keep up with
the price and quality factor of the company (Datta, 2022). Thus, the company can end up in a
monopoly position. VW aimed at building loyal customers through lower costs and also to scale
down the new entrants.
Differentiation strategy- This strategy aims at creating broader customer base on the
basis of uniqueness of the product. VW used this strategy and focussed on creating unique
features in its cars to win the minds of the customers in the marketplace. This feature of was
used in its premium co- brands as it requires high cost of installation and certainly increases the
price. The common features of this strategy are higher quality, design, modern and unique
ideas/ features etc. the company aimed at creating features that the buyers may not get
elsewhere and hence, this uniqueness prevents competitors from taking away the market share
(Garina and et.al., 2018, April). It also helps the company to better absorb the cost increases. It
prevents the customers to switch to new entrants or alternatives.
Introduction of EV and hybrid technology- The company decided to produce vehicles
that used environment friendly gas such as CNG and produce technology that can reduce
carbon emission to the lowest level. It also focussed of creating high mileage cars that will save
driving cost of the customers and make the most affordable and sustainable auto mobiles. The
company also drew its focus on the trend of electric cars that has been growing since the last
two decades. The company planned strategies to build environment friendly concepts in order to
improve its sustainability and also to regain trust that they lost due to pollution related
misconduct (Bohnsack and et.al., 2020). It planned long term strategies for sustainable
development and advanced featured vehicles. This was done to create and enhance a
completely new image of the company. The VW group started its green technology from
Europe. This kind of technology was still new in the market and designing hybrid cars was
limited to some luxury segment or areas or companies. It influenced the minds of the customers
emotionally by surrounding the thoughts about environment issues.
Investments, technology and joint ventures- The company focussed o high
investments and making collaborations with other brands to maximize its reach and share
benefits that they previously did not have. It also focussed on entering new markets where there
type and technology was unavailable and increase its sales and profits (Yufeng, 2019).

Identifying the resources and capabilities of VW over the past five years and analysing to what
extent the company has aligned its resources and capabilities to its current business
strategies.
Being one of the largest multinational company in the world, VW never lacked resources.
It has made use of maximum resources during its long run in the market. The present success
and its position in the market is a proof of how well they have utilized its resources and
enhanced them with time. From a medium- sized German company to a global brand, the
resources have been tremendously beneficial for it and the way they have been utilized (Jung
and Sharon, 2019). One such resource that has contributed to the company's success in the
last five years is its human resource. It has one of the best human resources of the market
working for them and therefore, the talent, skills, ability and capability of its employees has
contributed to its success at national as well as international level. Its employee strength is
growing as innovative techniques attract new employees to enhance their skills and create
better opportunities. They also retain old staff by offering incentives, pay raise and promotions
on appropriate occasions.
Another important resource that the company acquires is its financial capability. It is one
of the most profitable companies in the world that generated huge annual revenues and
therefore, its financial ability is one of its biggest strength. It's revenues have been consistently
growing since last few years and better than other manufacturers as it has different types of
segments of cars that no other company has (Sergio and Rylova, 2018). Hence, it has storage
of money for investments. The company use this money for investments in technology,
expansion in new markets and marketing activities. Due to the fact that they have better sum of
investments, it also benefits them to counter its competitors that have lower financial position
than VW. This resource allows the company to plan heavy strategies in marketing and expand
its presence in new markets. It also benefits them in getting collaborations as organizations are
more likely to join with profit making firms. It becomes a big advantage in the competitive
market.
The other resource that has contributed adequately for the success of the company is
technology. The use of technology plays an important role in generating high profits and
sustainability. The company has enough funds to buy new technology and also has skilled
human force that can make use of the technology to the best extent. Therefore, the technology
becomes an important resource altogether. The financial position of the company allows it to
ensure that high level of technology is being available and quality employees are hired to make
sure the best results are brought out by using and installing the technological resources (Allam,

Scagnelli and Corazza, 2020). The technology has proved to be important resource for the
company especially in its new generation high- tech projects. These projects include electric
cars, low pollution engines and high mileage vehicles. It has also enhanced its luxury segments
by installing unique features in them.
Evaluating how VW has tried to become more competitive while taking into consideration
sustainability and the environment.
VW is one of the leading multi brand groups in the automotive sector. It produces wide
range of cars from lightweight to heavyweight and simple to advance cars and from normal to
luxury segments. Due to its high presence in the industry, it becomes crucial for it to maintain its
sustainability and comply with the environmental laws and also strengthen itself in the
competitive market (Turna, 2022). The VW group is the first one to sigh on to the Paris
Agreement that aims at contributing to reduce global warming below two degree Celsius by
2050. It has launched the industry's largest decarbonization offensive and targets to make the
entire VW group carbon neutral by 2050. This has had a great influence on the customers, and
they have marketed it in an intention to create competitive advantage.
The steps that are taken by the VW to become more competitive in the market taking
into consideration the sustainability are- the company has created a fruitful work environment in
its industries. The employees are well maintained and are provided opportunities to enhance
their skills and create good careers for them. The human resource of the company are given
handsome pays and regular promotion to maintain good performance of the company and
strengthen its employee sector (Sergio and Rylova, 2018). The multi brand group has
committed to various laws and agreements to get fine support from the local authorities where
its operating around the world. It has invested highly on technology and expansion that its
market capitalization has become enormous and strong enough to survive for long term. The
company uses and implements various marketing strategies that improves the brand image and
has involved different business strategies in the process that helps the company to maintain its
market share and even increase its overall profits.
The group also considers environmental issues such as pollution, harmful elements and
recycling activities as important in its operations. It has tried to maximize the use of renewable
energy in its factories and units, it also tries to ensure that recycled materials are given priority
and emission of harmful, gases is reduced to the lowest level. The use of technology has helped
in contributing to the environmental factors and the introduction of EV and low burning engines
have been favourable for the environment. In the last five years many brands have come up
with EV as a solution to the environmental issues (Turna, 2022). To keep up with the trend and

innovation, VW also drove its focus on environment friendly options such as high power
batteries that had longer backups than its rivals, low co2 emitting engines etc. It has also taken
initiative such as planting trees, sponsoring green energy events and joining hands with green
energy campaigns.
It has already reduced carbon emission of its vehicles by up to 30 percent and a big
percentage of its new vehicles and 90 percent of its operations are based on renewable sources
of energy.
Recommendations on how further sustainability practices can help the organisation to develop
competitive advantages in the future.
Sustainability refers to simultaneously striving for economic, social and environmental
goals in a way that they are given equal attention. Some of the sustainability practices that VW
can adapt to develop competitive advantages in future are-
 It can focus on creating budget cars with higher facilities. It is the best way to increase
the customer base as the people always desire to get the best value of their investment.
This can also result in high profitability in case of higher sales.
 The company can endorse celebrities and associate with social campaigns as it can be
quite helpful for increasing the brand recognition in a positive sense. This kind of
activities enhance the image of the company and create positive promotion for the
company.
 The multi- brand car manufacturer should focus on safety concerns of the passengers.
Though its luxury segments have one of the best safety standards but it can focus on
improving the safety standards of its other economic segments as well (Jawed and et.al.,
2022). It can install safety features and make them available at low cost so that its
maximum customers are benefited. This will definitely influence the buying decisions of
the people and also customer loyalty will be enhanced. Having high standards of safety
measures can easily create competitive advantage.
 The company is already working on green energy to sustain environment factors. It may
work for collaboration with energy distributors and installers to make its services easily
available to its customers (Ab Yajid, 2020).
 It can use advanced technology to enhance its operations and produce new and unique
features as it already has availability of finances at a good level.
 It may focus on its promotion functions and make sure the best and right message is
conveyed through its marketing functions. This makes a big difference in the competitive
market.

 It can take measures on improving its employee satisfaction rate and retention rate. It
can provide facilities such as incentives, bonuses, promotions, higher pay metrics etc. to
create a fruitful work environment. This will initially increase its operations as the
employees are more engaged and loyal to the company.
 It can work on applying different business strategies to target market and customers and
identify the areas of improvement and the areas where it can further progress and
increase its reach.
CONCLUSION
It has been concluded from the above report that strategic management of a business is
quite essential for an organization in order to maintain its reputation in the market. There are
different business strategies such as cost leadership strategy, differentiated strategy etc. that can
be used by the companies to enhance its business and find the ideas about how it can increase its
sales and generate more profit. There are various resources that a company may require tackling
with its competitors and establish a strong presence in the market. These resources are human
resource, technology and finance. The competition in the market sometimes drive the decisions
of the company so it is important to make strategies that are sustainable and long term beneficial.
There are different ideas that the company can adapt to boost its sustainability and position in the
competitive markets such as improved quality, complying with social and legal factors and
environment friendly approach.
REFERENCES
Books and journals

Ab Yajid, M.S., 2020. Determinants of car sales in business and E-business. Systematic
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Allam, I., Scagnelli, S. and Corazza, L., 2020. Sustainability reporting, a new type of companies’
hypocrisy: Zara and Volkswagen cases. In Responsible Business in a Changing
World (pp. 195-211). Springer, Cham.
Barbosa, M., Castañeda-Ayarza, J.A. and Ferreira, D.H.L., 2020. Sustainable strategic
management (GES): Sustainability in small business. Journal of Cleaner
Production.258. p.120880.
Bohnsack, R. and et.al., 2020. Driving the electric bandwagon: The dynamics of incumbents'
sustainable innovation. Business Strategy and the Environment. 29(2). pp.727-743.
Datta, Y., 2022. A Critique of Porter's Cost Leadership and Differentiation Strategies: An
Update. New Innovations in Economics, Business and Management Vol. 9. pp.165-
181.
Garina, E.P. and et.al., 2018, April. Exploring alternative strategies for managing the complexity
of a product. In International Conference Project “The future of the Global Financial
System: Downfall of Harmony” (pp. 741-747).
Gaultier, C. and Marcello, K., 2021. VOLKSWAGEN GROUP SUPPLY CHAIN ANALYSIS IN
EUROPE. African Journal of Emerging Issues. 3(8). pp.1-10.
Holtbrügge, D. and Conrad, M., 2020. Decoupling in CSR reports: A linguistic content analysis
of the Volkswagen Dieselgate scandal. International Studies of Management &
Organization. 50(3). pp.253-270.
Jawed, S. and et.al., 2022. AI and Data-Driven Mobility at Volkswagen Financial Services
AG. arXiv preprint arXiv:2202.04411.
Jung, J.C. and Sharon, E., 2019. The Volkswagen emissions scandal and its aftermath. Global
business and organizational excellence. 38(4). pp.6-15.
Sergio, R.P. and Rylova, M., 2018. Employee engagement and empowerment as gateway
towards retention: The case of Volkswagen group. Journal of Eastern European and
Central Asian Research. 5(2).
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towards retention: The case of Volkswagen group. Journal of Eastern European and
Central Asian Research. 5(2).
Turna, G.B., 2022. How “Dieselgate” Changed Volkswagen: Rushing to Erase the Traces of
Greenwashing. In Socially Responsible Consumption and Marketing in Practice (pp.
255-273). Springer, Singapore.

Yufeng, G.A.O., 2019. A Study on Cross-Cultural Management of FAW-Volkswagen. China-
USA Business Review. p.67.

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