Business Strategy Report: A Strategic Analysis of VW AG's Business

This report provides a comprehensive analysis of Volkswagen AG's business strategy. It begins by exploring the importance of mission statements, visions, objectives, goals, and core competencies in strategic planning. The report then examines factors crucial to formulating a strategic plan, including targets, resources, communication, and innovation. It evaluates the effectiveness of techniques like the BCG matrix for developing strategic business plans. The core of the report involves a detailed organizational audit of VW AG using SWOT analysis and an environmental audit using PESTEL analysis. It assesses the significance of stakeholder analysis in formulating a new strategy for VW AG and presents strategic recommendations, including market penetration and market development strategies. The report concludes by analyzing the roles and responsibilities of personnel in strategy implementation, estimating resource requirements, and evaluating the contribution of SMART targets to the achievement of strategy implementation.

Business Strategy
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TABLE OF CONTENTS
INTRODUCTION...........................................................................................................................3
TASK 1............................................................................................................................................3
1.1 Assess how business missions, visions, objectives, goals & core competencies inform
strategic planning when formulating strategic plans ..................................................................3
1.2 Analyze the factors that have to be considered when formulating strategic plan ..............4
1.3 Evaluate the effectiveness of techniques used when developing strategic business plans....5
TASK 2............................................................................................................................................6
2.1 Analyze the strategic positioning of VW AG by carrying out an organizational audit ........6
2.2 Carry out an environment audit for VW AG......................................................................7
2.3 Assess the significance of stakeholder analysis when formulating new strategy for VW
AG................................................................................................................................................8
2.4 Present a new strategy for VW AG...................................................................................10
TASK 3..........................................................................................................................................11
3.1 Analyze the appropriateness of alternative strategies relating to market entry, substantive
growth, limited growth or retrenchment for VW AG................................................................11
3.2 Justify the selection of a strategy.......................................................................................12
TASK 4..........................................................................................................................................12
4.1 Assess the roles & responsibilities of personnel who are charged with strategy
implementation..........................................................................................................................12
4.2 Analyze the estimated resource requirements for implementing a new strategy for VW AG
....................................................................................................................................................13
4.3 Evaluate the contribution of SMART targets to the achievement of strategy
implementation in VW AG........................................................................................................14
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CONCLUSION..............................................................................................................................15
REFERENCES..............................................................................................................................16
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INTRODUCTION
The objective of the report is to study Business Strategies that can be applied to get
succeed in the business. Strategy is required by every company to achieve its targets and
objectives . Strategic plan is formulated by the top level management members which is then
communicated to the other members of the team (Scholes, 2015). Study will asses importance of
mission statements, visions , goals and objectives of the company to formulate business plan.
Factors involved in formulating strategic plan such as innovation, communication, resources etc
will be studied. BCG matrix technique will be used in development of strategic plan.
Organization audit of Volkswagen will be performed using SWOT analysis and PESTEL
analysis will be used for environmental audit. Market penetration and Market development
strategies will be used for VW and appropriateness of this strategy will be analyzed.
TASK 1
1.1 Assess how business missions, visions, objectives, goals & core competencies inform
strategic planning when formulating strategic plans
The process of defining strategies of an organization in which it will direct its works and
make decisions by using available resources to implement the current strategy is known as
strategic planning. Strategic planning for any business involves certain elements that are
described below:
 Mission: Mission statement of the organization is identified before planning any strategy.
Objective of mission statement is to fulfill goals of the organization. Mission statement is
useful to identify market size of any company. For example, VW's mission statement is
to offer safe and attractive vehicles to the customers which does not produce sound as it
could be harmful to others. Environmental friendly vehicles can challenge in inflexible
market by setting standards into specific field (Leonidou and et.al., 2015).
 Visions: Vision statement presents description about what company would accomplish in
the long term future. It also declares mid term goals of the company. Basically Vision is
the steps required to attain mission statement.
 Goals: Goal represents something that you working on to achieve. It includes planning
for accomplishing targets. Goals can be classified into categories: short term goals and
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long term goals. Short term goals contributes in achieving long term goals of the
organization. It involves challenges that are being faced on daily basis. Long term goals
includes attaining company's objectives in order to achieve mission statement.
 Objectives: For achieving goals successfully blueprint of the steps involved are
formulated. Basic objective of the VW are :
1. Customer should be satisfied with the product.
2. Usage of advanced technology to facilitate comfort.
3. Revenue generation should get increased.
 Core competencies: It is useful in strategic planning which involves utilization of
resources in order to achieve target.
1.2 Analyze the factors that have to be considered when formulating strategic plan
For aching desired goals and objectives strategic planning is required to be formulated.
Several factors are involved in strategic planning that requires to be checked. But choosing these
factors becomes difficult when they are to be chosen opposite to priorities. Factors involved in
formulation of strategic plan are described below. Targets: Top level management sets desired benchmark with the aim of increasing profits
to the organization. Analytical skills are required to set the targets. Logical skills are also
involved in the process to encounter analysis of profit and losses for the next year. The
most important consideration during setting up of targets is time. Resources: To achieve strategic plan resources are required by the organization.
Formulation of strategic plan is carried out by considering goals and objectives of
business. For the above purpose resources are required such as knowledge, equipment
and skills (Rothaermel, 2015). Human capital and finance are also needed for fulfillment
of targets. Output of the procedure is the deciding factor in allocation of resources. Lack
of resources can bring problems to the organization. Communication: For successful implementation of strategic plan communication
between management levels is required. The process starts with informing about the
strategic plan to the employees of the organization. Input for the plan will be provided by
employees by various means such as meetings and group discussions. Surveys can also
be conducted and feedback can be taken asking their views and perceptions.
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 Innovation: Innovation is required for business to be successful. Innovative ideas brings
creative products . Risk factor is involved in innovation.
1.3 Evaluate the effectiveness of techniques used when developing strategic business plans
BCG matrix: Boston Consulting Group Matrix can be used for developing strategic
business plans. Matrix constitutes four cells (2*2) which is an effective analysis method.
Graphical representation of the firm is provided by BCG so that businesses can be examined
considering market share and growth rates of the organization (Hambrick and et.al., 1982).
According to the BCG matrix, high and low are the two categories for classification of business
that depends on market share and growth rate.
BCG matrix consists of four cells where:
 horizontal axis represents relative market share
 vertical axis represents market growth rate
Mid point of relative market share is set at 1.0. Average growth rate comes into existence if all
the Strategic Business Unit are working in similar industry. If Strategic Business Units are
working with different industries ,at that time mid point is put at the growth rate .
(Source: BCG Matrix, 2017). Stars: Stars represents high market share and high growth rate of the organization. They
have capabilities to produce cash as a result of growing and emerging market. Large
amount of investments are required for maintaining lead in the market.
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Illustration 1: BCG Matrix

 Cash Cows: It represents high market share and low growth rate. Small amount of
investments are required by cash cows. Cash produced by it can be used for investing in
other businesses. Question Marks: Question marks demonstrates low market share and high growth rate.
Large amount of investment is required for maintaining shares into market. Viability of
the firm is required to be identified.
 Dogs: Dogs represent low market share and low growth rate. They don not require large
amount of cash and does not produce cash either. As market share is low due to which
they bear downside in costs.
TASK 2
2.1 Analyze the strategic positioning of VW AG by carrying out an organizational audit
SWOT analysis can be used for carrying out organizational audit of VW. SWOT analysis
is used to identify strengths and weaknesses of any organization. It can also be used to identify
opportunities for the company and potential threats of the organization. Volkswagen AG is one
of the prime manufacturer of automobiles that produces more than 10 million automobiles every
year. In China company and widest has the largest market (Hollensen, 2015). Volkswagen is
coming up with new strategy 'TOGETHER-2025'. It focus is to deliver its basic goals by 2025
year.
SWOT Analysis of Volkswagen
Strengths
 It is one of the biggest and extensive
automobile company compared to
other companies of automobiles.
 'TOGETHER-2025' is the new strategy
of Volkswagen.
 Strategies to become more varied and
diverse into world (Jurevicius , 2016).
 Team work among other companies. Local Chinese manufacturers of
Weaknesses
 Brand is getting weaken due to its
negative promotion and advertisement.
 In U.S. Market recall rate is highest.
 Market share is low in markets of U.S.
 They have very few expertise.
 They do not have abilities to make
vehicles that can be driven by batteries.
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automobiles have joint venture with
Volkswagen.
Opportunities
 There are chances that in future prices
for fuel may increase.
 Skills can be gained.
 Competencies can be procured.
 Demand for automatic automobiles
may arise.
 Exchange rate of euro may decline. Emphasis on improvement of
sustainable policies in order to protect
brand image .
Threats
 High competition into market.
 Charges and fines that might be
required to be settle.
 Regulations of government are
increasing that may become threat in
near future.
2.2 Carry out an environment audit for VW AG
Pestel Analysis can be used for performing environmental audit. Objective of performing
PESTEL analysis is identify external factors that are affecting company and possibilities of the
factors that may change .
 Political : Political factors are used to construct legislation and laws for the firm that
helps in making market among its customers. If a company has quality relations then
opportunities for making profits gets enhanced.
 Economical: It is required to identify market's economic conditions before putting up any
strategic plan. Research helps in identification of potential buyers to the company.
Economic factor helps in understanding of economic condition of the country. It also
identifies current exchange rate and recession about the country.
 Social: Developing relations with employees and customers ensures smooth working of
the process. Staff of the company is required to be trained enough.
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 Technological: As technology is changing in every few years, thus it is required to invest
more on RANDD so that machines and resources can be identified that could help in
making work easier and faster.
 Environment: environmental factors plays significance role in business to get successful.
Demand for sustainable development has raised over past decade. Legal: Legislation and laws are different for different countries and companies are
restricted to follow them.
Political factors
 Corruption
 Restriction on importing
 Regulating competition
 laws of education (Jurevicius , 2013)
 Laws of environment
 Laws for Discrimination
 Laws for copyright and patents.
Economic factors
 Interest and Growth rates
 Costs for labor
 Policies for Monetary
 Fluctuations in price.
 Trends of stock market may change.
 Availability of Credit.
Social factors
 Consciousness about health
 Level of education provided.
 Outlook for work and career.
Technological factors
 Change in technology.
 Incentives for technology.
 Infrastructure for internet and
communication.
2.3 Assess the significance of stakeholder analysis when formulating new strategy for VW AG
In any organization an important role is played by stakeholders. Stakeholders can have
impact or can impact business plan. They could be internal or external employees and customers.
It could also be government and union. Stakeholder mapping consists of four dimensions which
can be relate as follows:
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 Keep satisfied: This section illustrates high power and low interest. Customers of VW
AG can be classified into this section . Customers are the key revenue generators in any
business. Customers needs should be understand by the firm and hence satisfy customers. Manage closely: This section illustrates high power and high interest. People that can be
categorize in this section are investors of the company, financial institutions that are
financing to the company and share holders of the firm (Yang, 2014). Keep informed: This section illustrates low power and high interest. Employees of the
VW can be classified into this category. Incentives, opportunities for growth and salary
makes int erst into business for the employees.
 Monitor: This section illustrates low power and low interest. Monitoring according to the
available time can only help in fulfillment of requirements.
Following assessment can be accomplished with stakeholder analysis:
 Analysis helps in identification of stakeholders.
 Determining power and influence level that could be beneficial for the management for
designing strategies and business plan. Management of Volkswagen can now identify
influence level and accordingly can manage them.
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Illustration 2: Stakeholder Mapping

 If importance is given to the stakeholders, it could help in identifying employees
expectations that management will fulfill.
 Stakeholder analysis is used to identify expectations of stakeholder into business which
is beneficial in maintaining long term relationship with investors that are investing in
VW and customers of Volkswagen (Lienert and et.al., 2013).
2.4 Present a new strategy for VW AG
Strategies helps organization to achieve desired goals and objectives. They are road map
to success. Strategy should be designed in such a way that it should achieved objectives of the
instigation. New strategy for Volkswagen will be the Market Development and Market
Penetration. Market penetration strategy is useful in increasing market value of the
Volkswagen's existing products (Zhou and et.al., 2015). It is also used in promotion of new
product in the market. Market share of any product can be increased by modifying prices and
performing modifications into strategies. Market development will foster Volkswagen to create
and set new targets of the existing products into market. Market development targets those
customers that have no interest in purchasing products. For example, number of buyers of
Volkswagen is very less in U.S. Market. Therefore, Volkswagen could design some strategies to
target customers in the same service segment. Pricing of the product could also be changed.
Volkswagen could also enhanced its promotional strategies to attract more number of customers.
In this way customers can be pulled and develop interest for the brand. As a result, scope of the
market value of the VW will also increase. Framework of the plan would be based on following
criteria:
 Needs and requirements of customers are required to be identified.
 Benefits of using Volkswagen automobiles are required to be enlightened and promoted
in promotional campaigns.
 Innovation are required to be supported by the company because taste of customer
changes with the time.
 Customer's Preferences should be considered.
 At the time of delivering value all the processes are needed to be integrated.
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TASK 3
3.1 Analyze the appropriateness of alternative strategies relating to market entry, substantive
growth, limited growth or retrenchment for VW AG
Appropriateness of alternative strategies is described below:
 Market Entry: A totally new market is determined by market entry. Volkswagen is
available everywhere across the globe and setting up of new market requires large scale
study and research work to be successful in operating business (Kramarz and et.al., 2014).
There are several factors involved which forms its basis and these are:
 customer preferences
 Taxation by government
 Current taste of customers
 Competition level
 Factors for localization.
Market entry strategy will not be fruitful for Volkswagen due to large amount of investment.
Risk factor is also involved into it. Substantive growth: It is used by the company to maintain market position where
competition level is high. Substantive growth can be divide into horizontal integration
and vertical integration. In horizontal integration, two or more companies merge with one
another. For example, VW Sharan and Ford galaxy. They set up a totally new company
which is legally not dependent on others. Resources of the company are provided to the
new joint venture. Objective of the merging was to cut down costs which increased
market power. Limited growth: This strategy limits the growth of VW in certain areas with aim of
focusing on several others fields of business. It enables company to develop business in
specific area only. It is not reasonable strategy for VW due to excessive competition in
the market across the world.
 Retrenchment: During recession time this strategy come into existence. During business
losses and large amount of failures, in order to maintain market position company would
cut down prices of products (Ung and et.al., 2016). This strategy will also be not
applicable for VW as it is required for the company to identify reasons of shifting of
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