Volkswagen: Business Strategy Report, Analysis, and Recommendations

This report provides a comprehensive analysis of Volkswagen's business strategy. It begins with an introduction to the business environment and the company's background. The report then delves into a macro-environmental analysis (PESTLE), examining political, economic, social, technological, environmental, and legal factors influencing Volkswagen. The internal environment is assessed using the McKinsey 7S model and Value Chain Analysis, exploring the company's structure, systems, skills, staff, style, strategy, and value chain activities. The report further analyzes the competitive landscape using Porter's Five Forces and concludes with an application of Bowman's strategic clock. The analysis aims to provide insights into Volkswagen's strategic direction and decision-making processes, offering a detailed understanding of the company's strengths, weaknesses, opportunities, and threats.

BUSINESS STRATEGY

Table of Contents
INTRODUCTION ...........................................................................................................................................3
LO1..............................................................................................................................................................3
Macro environment in business ..............................................................................................................3
LO2..............................................................................................................................................................5
Organization’s internal environment and capabilities.............................................................................5
LO3............................................................................................................................................................10
Porter's five force ..................................................................................................................................10
LO4............................................................................................................................................................11
Bowman's clock.....................................................................................................................................11
CONCLUSIONS...........................................................................................................................................12
REFERENCES..............................................................................................................................................13

INTRODUCTION
Business environment is a sum of different internal and external factors influence the
overall business operations of organization. This report is based on the case study of Volkswagen
Company in respect to business strategy and policy making. The organization is founded in the
year 1937. Company is associated with automotive sector. Headquarter of the company is
located in Wolfsburg, Germany. Company is currently catering its business practices at a global
level. This report will summarize about various practices of entity related to strategic
formulation. Henceforth, report will emphasis over the macro environment analysis for the
organization. Internal assessment will also reflect in this project. Furthermore, competitiveness
of business entity will address in this project. Strategic direction available with the company will
also analyses in this project.
LO1
Macro environment in business
Macro environment involve different external factors of business environment influence
business operations of organization. Automotive sector is among the major growth oriented
sector part of business environment at a global level. External factors like political, economic,
social, technological, environment and legal factors are part of business operations. External
factors carry direct influence over the strategic decision making of the company.
Political Factor: Automobile sector is among the leading market sector of business
environment. Due to growth of the sector government all across the globe favor with the support
of policies. In the recent time government has focused allot in United Kingdom towards overall
growth and development of sector. In recent time due to increased income buying capacity of
people have improved allot that created a huge interest towards the sector (Goswami and et.al.,
2020). Safety regulations are also strengthened in UK. Emission policy of government further
reflect the awareness in political system towards environment protection. In United Kingdom
government hold a very strong political support that also favor the company in formulating long
term policies.
Economic Factor: United Kingdom growth rate in current time identified as 5.5%. This is an
impressive number especially for developed country. Per capita income of people in United
Kingdom is calculated as £ 42330. Inflation rate in United Kingdom is also registered at 1.8%

(Ivanovich, 2020). All these figure denote the strong economic position of the United Kingdom
that motivate people to take special interest in the developments made under automotive sector.
Per capita income of United Kingdom denote that people based in UK carry strong buying
power. Further inflation rate in country is well controlled that created economic boom in the
area. All the various economic factors allow people to take interest buying in luxury accessories.
Social Factor: In United Kingdom driving is very popular. People in the country likes to drive
vehicle. Income of people also allow the people to buy their own vehicles. According to the
latest information owning one or more motor vehicle is already become the norm in many
developed countries. Another reason behind the people likes to buy such product is that
expectations of people from other part of the world (Mole, North and Baldock, 2017). Localities
in the developing countries expect that people live in UK must own their own four vehicles and
other vehicles. All the different elements allow the company to entertain massive growth rate.
Technological Factor: Technological advancement in the sector also created a huge impact over
the growth of automotive area. Many new technologies could have been innovated already such
as electric cars, self-driving cars, improved safety and may other technologies. New improved
technology could motivate the people in taking more interest in latest automotive products.
Volatility of sector in respect to innovation and creativity created positive impacts over the
growth and development of sector.
Environment Factor: Over the period of time people all across the globe became much aware
towards environment protection. Automotive sector became much advanced for addressing the
ecofriendly concern of the people in society. To meet the environmental requirements and need
of the society sector has already move towards electric automotive products (Papoutsidakis and
et.al., 2021). This technology has favored the sector to protect environment by defeating negative
impacts ion face of pollution.
Legal Factor: Selling of automotive product in international market is subject to legal
regulations related to product quality and safety. In United Kingdom due to governmental
interest pollution law has further become stricter. Exportation of vehicles in the international
market would require to go through strict emission control system established in country. Legal
regulations drive the authorities to ensure every single part of the vehicle. In recent time Toyota
Company had to brought back its vehicle due to the faulty airbags (Petrillo, De Felice and

Zomparelli, 2019). Accident cases all across the glove have emerged significantly that has
further made the government to strict laws and regulations. All such companies ensure the best
quality automotive products even on premium price range carry huge scope of growth and
development.
LO2
Organization’s internal environment and capabilities
Internal environment denotes about internal capabilities and potential of the business
entity. Different models are used to analysis the internal potential of business entity can be
demonstrated with the support of models like McKinsey 7 S Model, Value chain analysis,
SWOT Analysis and many such models.
McKinsey 7 S Model
This is a well-diversified internal analysis model used by companies. This model talks
over different area of organization such as structure, system, styles, staff, skills and strategy. All
the different element project specific area that allow the business entity to meet company’s
objectives.
Structure: Organization structure used by the Volkswagen Company is flatter. This structure of
company allows the management to easily coordinate every single employee. All operations of
company are segregated into different department. Flat structure creates more comfort for the
business entity to easily coordinate with each individual departmental authorities including
workforce also (Lee, 2018). Flat hierarchy create more strength for the business entity to take
quick decisions related to operations. Due to this particular structure inter departmental
coordination has also improved in the organization. Every department has its own individual
team that can further be managed by individual team leaders who report to the head of
department. Volkswagen Company contain this systematic process of initiating, monitoring and
coordination over each project so that best level of productivity can meet. The group is further
influenced from the hybrid stricture where it kept the entire structure decentralized. This
structure could further support organization making best level of decision in a very short time
spam.
System: Volkswagen Company has created a democratic system in place that can ensure the best
level of managerial effectiveness and productivity at utmost level. In the current time

organization is using departmental system in which every operation or functional activity is
segregated into different departments like sales, marketing, finance, operation, human resource
and many such departments. Company has further developed systems and tools that can ensure
the best level of monitoring and control in operations (Pártlová and Váchal, 2019). Continuous
monitoring process in followed to ensure best product quality. Business entity also look for
regular feedbacks of its work force and customers so that constant modifications can accessed in
the organization. Senior management and head of department make sure that every department
coordinate with other departments so that overall culture of company can improved. System of
the Volkswagen Company allowed the management to involve core values like creativity,
honesty, transparency, accountability, trust, quality and heritage like values. Corporate culture of
company also believes sharing diversity at work place.
Style: Leadership style implemented in the Volkswagen Company is more keen towards
involving employees of company under the decision making process. Leaders in the organization
regularly interact with the work force so that all issues employees of company are facing can be
addressed on time. Positive leadership could favor the motivation of the workforce. Practices like
feedback is another good example of effective leadership approach used by company (Astuti and
Rahayu, 2018). Company has given huge emphasis over improving collaboration and
cooperation in its work force. Every single operation in company is delegated to a particular
team. All the styles followed by the leaders reflect the progressive approach of the leaders in
company.
Staff: Volkswagen Company has given employment to thousands of peoples across the globe.
Company’s work force comprises with both skilled and technical work force delegate to various
functional area. Company has further tried to sustain the diversity in its work force. Employee
from all across the globe come together to work in the organization (Xiaoshuai and Jiangping,
2017). Company also give international transfer to its productive employees so that proper
diversity can be maintained at workplace. Leadership in organization also respect all types of
employment law and legislation and its associated implication like equality act, anti-
discrimination, minim wage payment and many such laws.
Skill: Skill management is among the prominent functional area part of the organization. With
the support of human resource department company try to channelizes skill development

campaign with the work force of company. This activity could motivate workforce of the
company towards developing new skills and capabilities along with sustaining the existing skills
of human being.
Strategy: Volkswagen Company follow diversified strategies in its organization. Marketing
practices of company utilize strategic choices like digital marketing, social media marketing and
many such marketing techniques (Nugroho, 2019). Operation management is among the major
strategic choice, Lean management also applied in the company. Company tried to sustain
diversity in its strategic choices so that growth possibilities can maximize by the organization.
The above mentioned elements and factors denote the different functional and operational
area part of the company.
Value Chain Analysis
Value chain analysis is a model used to denote the entire process of converting the
product into finished good. This is the practice used by company to manufacture the final
product offer by business entity. Volkswagen Company usage its manufacturing in a very
systematic way that consume different stages like inbound logistic, operations, outbound logistic,
marketing & sales and service stage. All these are the different stages involve in operation that
allowed the company to offer quality products to end customers.
Inbound logistic: This is the primary stage involve in manufacturing activity entertain by
company. This involve collecting the raw material and equipment’s in stock. All the necessary
supply of raw material and equipment that can allow the company to initiate its manufacturing
process are involve under this stage.
Operations: This the second stage where company further supply the raw material and
equipment from inbound to factory. This is the stage where raw material convert into all the
different products offer by Volkswagen Company (Nurlina, 2021). Management also ensure
quality management practices under this level. Quality at this level influence all the further
performance of organization.
Outbound logistic: Outbound logistic is the stage where company supply its products into all
stores of company. All the showroom across the globe are associated with this stage.

Management of Volkswagen Company try to complete this stage in a limited time spam so that
further sale of product of company can initiated by organization.
Marketing & Sales: Marketing and sales is the most significant and crucial stage part of
operation. This involve promotion for all the products offer by Volkswagen Company over all
the key marketing or promotion platform (Chiu and Jans, 2019). Company also give attractive
offers and discounts to its customers so that sales can be achieved by organization.
Service: This is the post-sale stage where company try to serve the best quality of services. This
stage plat huge role in developing overall brand value of company. Volkswagen Company is
well known for its service quality as company has established a customer grievance center where
all issues and grievances fetch by customers are assessed and analyzed. This stage significantly
boosts the overall performance of organization.
The above mentioned stages are a part of operation hierarchy of company. In order to
achieve all the business objectives Volkswagen Company needed to ensure the best quality of
practices at all level.
SWOT Analysis
SWOT Analysis is an internal analysis model focus over strength, weakness, opportunity
and threat part of the company. All strategic direction form by company put a huge influence of
this stage.
Strength:
 Volkswagen Company carry the widest brand portfolio among all the automobile
companies at a global level.
 New “Together- 2025” strategy of company is a major strength of company (Utama and
et.al., 2020).
 Diversity in strategies and operations.
 Synergy between the brands.
 Company own strategic alliances and joint ventures with various automakers.
 Huge established customer base at a global level.

Weakness
 Negative publicity of company many times.
 Company also own maximum recall rate in some markets.
 Low dominance in some automobile market.
 No competency in battery driven vehicle.
Opportunity
 Acquiring skill and competences through acquisition.
 Demand of autonomous vehicles across the globe.
 Increasing demand of electric automotive vehicles.
 Emphasis over improving sustainability policies to remedy damaged brand reputation.
Threat
 Intense level of market competition.
 Future fines and damages required to be paid.
 Increasing governmental regulations at a global level.
 Fluctuation in automobile sector.
LO3
Porter's five force
This model of competitive force analysis is given by Michael. E. Porter in 1979. This
strategic management tool is help an organization to evaluate the competition landscape of its
industry. In this model there are five force help the manager to understand the inbuilt potential to
generate the profit within the industry. This model help to analysis help Volkswagen to find out
its competitive forces that can effect the profitability of the company (Santiago Vaquerizo,
2020).
Bargaining power of buyers (low)

The bargaining power of its buyer of Volkswagen is low as people not easily shift their
preference to some other brand like Toyota and ford as this brand offer a high pricing products in
the market. As the bargaining power also depends on the information that are provided by
company of their products to its customer's. The Volkswagen also provide premium category of
product which attract higher class buyers those buyers who are not affected by price they want
quality with uniqueness in their products. The company unique style of production of their car
regularly attracting buyers and enhance the loyalty towards the brand which help company to
raise their car prices in international market.
Bargaining Power of Suppliers (low)
The suppliers of Volkswagen are basically specialized the bargaining power is low of the
company. The producer is only produce very limited products for the auto makers in the
particular industry, and they are totally reliant to that auto makers. Yet there are different types
of suppliers in the market but then also the supplier of Volkswagen don't want to stop the
business with the company. This approach of its suppliers gives company more power, and they
can also buy the product in lower price, so they can enhance the profit (WASIM, 2017).
Threat of new entrants (high)
The auto mobile industry generally have large number of entry hurdle so that they can stop to
enter the market. The threats of new entrant are basically low as to compete in the market of
auto-makers the start-up cost is very high and its difficult for new companies to achieve the scale
of economy which is very main to operate in this industry. New entrants are also faces issue to
develop the distribution channel and to maintain as it take huge cost that to compete in the
market. In the auto-makers industry the company also have difficulty to maintain a strong brand
image as the customer's in the market are loyal with the brands which they use earlier.
Thereat from substitute products (medium)
The availability of substitute are basically medium of Volkswagen group as the prices of gas are
increased regularly in the market. So the government taking various steps to promote the product
which are environment friendly products. There are lots of people who are using public
transportation facilities, cycle and walk. Yet in the international market there are lots of
customer's who owns their individual cars rather then any of substitute products. In modern

market buyer are preferred electric cars on the place of petrol or diesal cars as per the
technological development.
Rivalry of existing players (high)
As the competition in the market is very intense in the case of Volkswagen Group. The
companies in the market of auto-makers like Nissan, Ford, Volkswagen and Toyota etc. all the
companies in the market are regularly launching their products to grab the majority of market
shares. The company is trying to invest more in innovation and advertising so that they can stand
out in the market.
LO4
Bowman's clock
This is a model which focuses on exploring the options of strategic positioning as in
general way this model aim to position the product to give most competitive position in the
international market. The goal of this model is that the business have different options to position
the product. Basically there are two dimension the perceived value and the price (Helmold,
2020).
Low price and low value added: As this is not the most comparative position in the model. As
certain products and services are not dissimilar and the customer's in the market not perceive
very little value. In this level the price and value of brand both are low of Volkswagen.
Low price: This level is used when the product quality is not favourable yet Volkswagen have a
premium quality product in auto mobile so this stage is not good for the company.
Hybrid: In this stage the company focuses on product differentiation, so they try to minimize the
price and try to launch different variety of products. The Volkswagen can used this stage to get
comparative advantage.
Differentiation: In this stage of bowman's the company try to focus on product differentiation
with new technologies so that people who can prefer the products of company can attracted
towards the company.

Focused differentiation: This level aim to position the products of Volkswagen at a higher price
level as the people who are buying the products of Volkswagen are buying because of high
perceived value of their products (Lapersonne, 2018).
Risky high margins: This is a higher risk strategy in this approach the Volkswagen can increase
their products price without doing any modification to its product due to perceived value of its
products.
Monopoly pricing: Wherever the pricing in the market as the single business is offer the
particular product in the market. The monopolist is not needed to concern about the customer's
perceives regarding the products in the market. As there are different companies who are
providing auto mobile products in the market so this approach not been used by Volkswagen
(Ferràs-Hernández, Tarrats-Pons and Arimany-Serrat, 2017).
Loss of market share:In this strategy the company is providing low quality of product in respect
of its pricing in the market with this the market share are being decreased.
CONCLUSIONS
Strategic choices are the option available with the business entity to achieve growth and
strengthen development possibilities of organization. Models like porter five forces denote that
company contain a very strong position as compare to its competitors in order to boost up growth
of organization.