Impact of External Environment on Volkswagen

BUSINESS
STRATEGY

Table of Contents
INTRODUCTION...........................................................................................................................3
TASK 1............................................................................................................................................3
P1 Analyse the impact of external environment on the organisation..........................................3
M1 Critical analysis of macro environment to find out and communicate strategic
management decisions................................................................................................................6
TASK 2............................................................................................................................................7
P2 Identify the internal environment and capability of an organization.....................................7
M2 Critical evaluation of internal environment of an organisation............................................9
TASK 3............................................................................................................................................9
P3 Application of Porter's Five Forces in Volkswagen..............................................................9
M3 Strategies for Volkswagen to earn better position in market..............................................12
TASK 4..........................................................................................................................................12
P4 Application of various Concepts and Theories to make Strategic plan for Organisation....12
M4 Tactical strategic priorities and objectives of Volkswagen................................................14
D1 Critical evaluation of information and data with the application of competitive and
environmental analysis to create strategies...............................................................................15
CONCLUSION..............................................................................................................................16
REFERENCES..............................................................................................................................17

INTRODUCTION
Business strategy is a plan of an organisation which is designed to accomplish particular
objectives or goals. It is an important function of management which predetermines future
circumstances and acts accordingly. The main purpose of business strategy is to connect mission,
vision and objectives of company with futuristic needs and determines action for attaining it in
market (Shuen, 2018).It assist in understanding current position in marketplace and work on
overcoming existing weaknesses that affects growth and development of an enterprise. This
study is based on Volkswagen which is situated in Wolfsburg, Germany. It is a German
automotive company and is known for manufacturing ''people's car'' for customers. This study
covers suitable model for analysing effect of macro environment on business activities of
Volkswagen and strategies adopted by company through application of pestle analysis. Internal
strengths and weaknesses of enterprise are discovered with the usage of Swot analysis. Further,
it consists assessment of market's competitive forces of existing business with the
implementation of Porter's five forces model. In addition to this, Ans-off's model is utilised for
explaining and discovering strategic management decisions and plan is devised to apply
strategies in business practices.
TASK 1
P1 Analyse the impact of external environment on the organisation
PESTLE analysis is based on the marketing principles which is used by companies in
order to track or analyse the external factors which affect their business and their operational
activities (Lawton, 2017). Companies conduct this before launching of new product or entering
into new market segment. It helps them in their planning as it conduct research for the success or
attaining competitive advantage of an environment. This framework helps in analysing the
opportunities and threats for the company. Volkswagen use this in order to determine the hurdles
or problems in the market and also identify them and take corrective action for them.
Political: These forces play an important role in increasing the international market.
International trade, foreign supply and manufacturing etc. are affected by the political factors and
impact the performance of business. UK and US are the primary and profitable market for
Volkswagen and their stability and friendly environment helps in its business. It includes trade
policies and threat from the European auto imports. As company provide its auto parts and

vehicles in different areas or region so they face different political situations according to the
political situations of countries. Currently, the issue faces by Volkswagen is the stress around
trade tariffs among US and EU as their tariff duty increases. Moreover, the government end sale
of diesel and petrol cars by 2040 as diesel cars were banned because company caught in the
scandal for generating pollution and harming the environment (PESTLE Analysis of Tesla Inc.:
The growth of the eco-friendly electric car, 2019).
Environmental: These factors performs an important function in automotive sector.
Several laws has been added by government in order to control pollution. In some geographical
areas huge penalties are charged on companies that do not comply with such criteria (Rugman
and Verbeke, 2017).This makes difficult for new businesses to establish its space in auto-mobile
industry. In the year 2015, Volkswagen faced issue as it has not met with emissions standard in
manufacturing of millions of car models (Tesla, Inc. PESTEL/PESTLE Analysis &
Recommendations, 2019). Thereby it has to recheck all models to ensure control of harmful
emissions. Company also faced huge loss approximately in billions during that year. Today, firm
is concentrating on production of new hybrids and electric car models to attract new customers
and attain attention of existing ones. It will improve sales margin and expected sales are enough
for business to survive in marketplace. This new Eco-friendly vehicles will assist Volkswagen in
meeting environmental standards set by government.
Social: Social factors has an impact on buying habits and taste of consumers. They play a
vital role in development of auto-mobile industry. Changing trends like population
demographics, income, education, leisure, lifestyle changes, social mobility in society influences
preferences of customers in market (Orna, 2017). It affects marketing activities and sales of
businesses. Rise in demand of car vehicle sharing platforms like Uber was biggest trend in auto-
mobile industry. It increased demand for adoption of newer technology in manufacturing of car
and henceforth, it produced threat for companies like Volkswagen. These platforms provided
cheaper services and more convenient transportation as compared with that of car ownership
cost. Volkswagen is going to manufacture electric car as per current social trends and prices will
be fixed according to the affordability of people living in different geographical areas. This will
help company in regaining interest of consumers who are switching car models of Volkswagen
for using service of Uber (Tesla, Inc. PESTEL/PESTLE Analysis & Recommendations, 2019).