MGT4100 International Business Strategy: Porter's Diamond - Audi AG

This report provides an analysis of Audi AG's international business strategy, utilizing Porter's Diamond model to assess the competitive advantages and challenges faced by the company in the global market. It begins with an introduction to international business and the significance of strategic planning for multinational corporations. The report then delves into Audi AG's background, including its history and global operations. The core of the analysis involves applying Porter's Diamond model to evaluate factors such as firm strategy, rivalry, factor conditions, related and supporting industries, and demand conditions within Germany. The report identifies opportunities for Audi AG, such as targeting emerging markets and fostering innovation, while also addressing challenges like international market risks, competition, government policies, and material costs. The conclusion summarizes the key findings, emphasizing the importance of strategic adaptation for success in the international automotive industry. Desklib offers a range of study tools and past papers for students to further explore this topic.

INTERNATIONAL
BUSINESS STRATEGY

Table of Contents
INTRODUCTION...........................................................................................................................1
MAIN BODY...................................................................................................................................1
Introduction of company..............................................................................................................1
Porters diamond Model................................................................................................................1
CONCLUSION................................................................................................................................4
REFERENCES ...............................................................................................................................5

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INTRODUCTION
International business is business which includes trading of products, service, capital,
knowledge, technology across geographic border between two or more nations (International
business, 2021). It is important for managers of company to adopt various strategy for smooth
running of their business in international market. Porters Diamond Model is one of model which
is used by government in order to analyse competitive advantage possessed by nation. This
project report includes study of Audi AG which is a Germany based organisation providing their
service in automotive industry. This organisation in established by August Horch in the year
1919. This project report includes discussion of information about company. It also includes use
of porter’s diamond model in order to analyse competitive advantage of nation. Additionally, it
also consists discussion of various challenges and opportunity possess by company.
MAIN BODY
Introduction of company
Audi Ag is Germany based organisation conducting various activities in market including
designing, engineering, marketing, distribution and production (Davis, 2020. This organisation is
one of subsidiary of Volkswagen and also has expanded their root to Bavaria, Germany.
Company has their production facilities in around 13 countries and has around 90783 employees
working in their organisation to carry out their operation successfully. Company is having their
production facilities in different countries like Hungry, Mexico, Belgium, Brazil, China, India,
Spain, Slovakia.
Porters diamond Model
Porters diamond model is used to analyse competitive advantage of nations which is
introduced by Michael Porter in book of Competitive Advantage of Nation (Dash, 2017. This
model is used by government in order to analyse external competitiveness in market place to
determine strength along with reason for competitive advantage. Diamond model is important as
it helps to understand competitiveness in market. It helps to understand suppliers power and also
buyers power within a country in which firm is operating. Use of diamond model also helps in
understanding threat of substitutes and threat of new players within industry. This includes
various factors including factor conditioning, demand conditioning, firm strategy, rivalry, related
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and supporting industries. Discussion of Porters Diamond model in context of Audi is mentioned
below:
Firm Strategy and rivalry: This factor is focused with competition in home country
market from different contemporary industries and which create challenges for organisation
offering innovative products, efficient manufacturing techniques and customers services (Wu,
2016). Competition in a country helps to focus on development of innovative products and
technology which helps firm to grow and also ensure development of country. Competition
among firm helps for continuous development. There is increasing competition in market of
Germany as there are various market players operating in automotive industry. These market
players are competing with each other by providing innovative as well as quality products. To
overcome of competition, Audi AG is working on innovation, customers service and
manufacturing techniques.
Factor condition: Factor condition is another component of porter’s diamond model
which is concerned with domestic buyers of nation or with local buyers. These local buyers are
of sophisticated nature as well as aware with having flair products which are of high quality,
innovation and class. These people are also preferring products which belong to home ground in
compare to international labels that provide growth, development for national or domestic
industries. Audi AG is Germany based organisation and buyers of that country will prefer
products of their home country. All these factors create favourable condition for Audi Company.
Related and supporting industries: It is important for different industries to be
interconnected with each other in order to provide help for growth and flourish to have holistic
approach as it helps in overall success and growth of enterprise along with nations (Eddleston,
Sarathy and Banalieva, 2019). Government is playing important roles in development of regional
advantage by providing supports as well as funds for scientific research. Government ensure
development of roads and canal in Germany which create favourable condition for Audi AG by
increasing demand of car manufacturing firm. There are various other industries like steel
company, iron industries which are providing support to automotive industries. Audi Company
can improve quality of their products and services in market.
Demand conditioning: Demand conditioning includes input factors which is important
for production and includes skilled labour, raw material, skilled as well as expert human
resource, education, capital, well infrastructure, favourable condition of weather and other vital
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factors (Shmeleva, 2017). In Germany, home buyers have demand conditioning as there is not
limit on money spend and as a result, sophisticated local buyers are more likely to buy powerful
cars. So Audi company is focused with catering needs of their customers with providing them
developing along with innovative products. In Germany, there are various related and supporting
industries including steel and iron industries in order to provide materials for manufacturing of
car, training and education to employees, IT infrastructure, component suppliers, capital which
create favourable condition for Audi AG.
From above mentioned analysation it can interpreted that there is various opportunity
possess by Audi in market of Germany. These opportunity helps business in expanding their
market share and also provide success to company in both domestic and international market.
Opportunity possess by Audi company are as follows:
Target Emerging Market: Audi Company is operating in automotive industry which is
targeting emerging market in order to sell their products and service. Emerging market provide
opportunity to firm like Audi to earn more profit and expand their market share. These emerging
market for company includes China, India, Brazil, Russia and many more.
Innovation in existing market: Innovation is important factors for any company as it
ensures their survival in market and also helps them in remain competitive (Rialp-Criado and
Komochkova, 2017). Audi company needs to adopt innovation in order to increase profit in
existing market. For this, organisation needs to introduce new version of car like low cost
version for middle class families as there is increasing demand of low cost car in middle class
families which provide opportunity to business. Company can offer innovation in form of new
services along with their products or can offer other products related to their existing products.
There are various challenges faced by managers of Audi AG which create negative
impacts on operation of company. These challenges faced by Audi Company are as follows:
Risk in international market: Audi AG is not able to get more profit and expanded
market share by providing their service only in their home country Germany. In order to increase
market, share and to earn profit, it is important for firm to expand in international market. Audi
can be offering their services in different countries which increased risk of business as risk in
international market are high in compare to domestic market that increases cost of operation of
organisation. Firm can conduct PEST analysis in order to identify various factors which can
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create negative impact on business which allow them to handle situation of company for long
period.
Competition: There is increasing competition in automotive industry as there are various
market players which are providing their products and services in this industry (Håkanson,
Kappen and Zander, 2021). This create challenges for Audi Company as they need to develop
various strategy to overcome of competition. There are various market players which are offering
their products in this segment including Ferrari, BMW, Mercedes and many more. To overcome
of competition and expand business, firm needs to launch vehicles which contain low cost,
innovative products, excellent customer service and many more.
Government policies: Audi needs to follow various rules and regulation of government
as they are providing their services in international market. Government of Germany has made
various rules related to taxation, import, export, licensing and many more which is to be consider
by Audi.
Cost of material and labour: Increase in raw material or steel prices can create negative
impact on production cost of company which results in increase in total cost of company.
Increasing cost is not good sign for an organisation like Audi as it can reduce their profitability.
This create threat for business as to cover cost of company they need to increase prices which
make it difficult for companies to compete with other market players.
CONCLUSION
From above mentioned project report, it can be concluded that International business is one in
which business is providing their products and service in more than one countries. This business
provides various opportunity and threat for company in international market. Business adopt
Porters Diamond Model as it allows them to analyse various factors including Firm strategy or
rivalry, demand condition, factor condition and supporting industries. These components create
various opportunity and threat for business. Opportunity for company includes they expansion in
emerging market which provide opportunity to earn more profit for firm and innovation in
organisation as it helps to ensure long term survival of firm. It also includes various challenges
government rules as well as regulation, cost of material and labour, competition, risk in
international market.
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REFERENCES
Dash, R., 2017. Research in multipoint competition: what do we know and where are we
headed?. International Business Strategy, pp.69-91.
Davis, P.J., 2020. Getting employees involved in strategy planning. Journal of Business
Strategy.
Eddleston, K.A., Sarathy, R. and Banalieva, E.R., 2019. When a high-quality niche strategy is
not enough to spur family-firm internationalization: The role of external and internal
contexts. Journal of International Business Studies, 50(5), pp.783-808.
Håkanson, L., Kappen, P. and Zander, I., 2021. Strategic Knowledge Creation in Multinational
Enterprises. The Oxford Handbook of International Business Strategy, pp.109-135.
Rialp-Criado, A. and Komochkova, K., 2017. Innovation strategy and export intensity of
Chinese SMEs: The moderating role of the home-country business environment. Asian
Business & Management, 16(3), pp.158-186.
Shmeleva, N., 2017. Green path as a business strategy for russian manufacturing companies:
challenges and opportunities. International Multidisciplinary Scientific GeoConference:
SGEM, 17, pp.559-565.
Tang, R.W. and Gudergan, S.P., 2018. A Meta-analysis of the international experience–
ownership strategy relationship: A dynamic capabilities view. Management
International Review, 58(4), pp.541-570.
Wu, C.W., 2016. The international marketing strategy modeling of leisure farm. Journal of
Business Research, 69(4), pp.1345-1350.
Online:
International business.2021.[Online]Available through:<https://www.prospects.ac.uk/jobs-and-
work-experience/job-sectors/business-consulting-and-management/why-study-
international-business>
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