Volkswagen: A Strategic Management Report on Company Strategies

This report provides a comprehensive analysis of Volkswagen's strategic management, examining its origins, various approaches, and the complexity of its relationship with the business environment. It delves into the application of strategic ideas in practice, including SWOT and Porter's Five Forces analyses to evaluate the internal and external factors affecting the company. The report also explores international strategic thinking, utilizing PESTLE analysis to assess the political, economic, social, technological, legal, and environmental factors influencing Volkswagen's global operations. The study highlights the company's strategic decision-making processes, its adaptability, and its efforts to achieve competitive profitability while addressing industry challenges and maintaining its market position. The report underscores the importance of understanding both the internal and external environments for effective strategic planning and implementation within the automotive industry.

STRATEGIC MANAGEMENT

TABLE OF CONTENTS
INTRODUCTION...........................................................................................................................1
TASK 1............................................................................................................................................1
Understanding origins and various approaches of strategy.........................................................1
Understanding complexity of relationships between an organisation and its environment........3
Understanding international strategic thinking...........................................................................2
Understanding application of strategy ideas in practice.............................................................4
CONCLUSION................................................................................................................................5
REFERENCES................................................................................................................................1

INTRODUCTION
Strategic management is the process of setting objectives, analysis of competitive
environment and internal factors, evaluation of strategies and ensure application of created
strategies in the company is done. It is managing of organisation's resources to achieve their
goals and objectives. They identify opportunities and threats against competitors within an
organisation (Hill, Jones and Schilling, 2014).
Volkswagen is an auto mobile company, which was founded in 1937. Its headquarters is
based in Germany. It is Europe's largest car maker, which has gone through many trials and
tribulations and has been successful throughout these years.
This report will cover the various approaches towards creating strategies and will help in
understanding the complexity of relationship between Volkswagen and it’s environment. It will
give an understanding of international/global strategic thinking and application of ideas that
company practises. It will also analyse and evaluate complexities of internal and external
environment and models and methodologies practices that an organisation follows.
TASK 1
Understanding origins and various approaches of strategy
Strategic management was first introduced for militaries. It was used for devising plans
so that offensive moves can be used to defeat enemies. Strategy is derived from a Greek
word. Auto mobile companies have been using it since early 20th century, and have adopted
unique strategies which were boldly presented to the management and used by them (Strategic
Management,2018).
These practice have evolved throughout the years and include five phases, which are as
follows:
 Budgeting: Managers realised that funds should be allocated, therefore budget
development and planning was initiated. Strategic planning and budgeting help in
creating ways to achieve organisational goals.
 Long range planning: This is an extension of creating one-year budgeting into
five years. It included detailed planning and kept growing by involving political
and social factors while making plans.

 Strategic Planning: This ensures that managers should come together and
discuss strategic options for business before creating a budget. It focuses on units,
rather than the entire organisation.
 Complex Static Systems: These strategies were developed due to failure of
initial approaches. It involves understanding of internal and external environment.
 Complex dynamic Systems: This strategy was developed to understand the
economic environment and system. It made managers take complex and dynamic
decisions about the organisation.
Approaches or strategies are different techniques used for taking strategic decisions for
an organisation that is based on degree of formalisation, managerial relationships and nature of
environment of the business (Wheelen and et.al.,2017). Mintzberg has classified strategic
approaches in 3 types and suggests that implementing of strategies involve allocation of
resources and clearly understand the company's mission and goals.
Entrepreneurial Opportunistic Approach deals with creating a plan that saves a
company from environmental barriers or issues. This approach looks out for various takes
advantage of its opportunities and takes advantage of them. The entrepreneur has power of
making bold and unusual decisions. It helps in facing uncertainty in environment and move
organisation forward. This approach creates growth, expansion, asset turnover and high market
shares.
Formal Structured Approach is the strategic decision making with anticipation of
organisation's future state and position. It is based on socio-economic purposes of the business,
value of top management, external opportunities and threats, strengths and weaknesses of
company. Strategies are made on the basis of analysis of various factors that affect previous
strategies. It consists of systematic and structured approach to solve problems and assess costs
and benefits of various alternatives.
Adaptive approach is making of decisions in a reactive manner, by creating changes in
any decisions regarding strategic choices. It is meant for determining solutions for various
problems rather than searching new opportunities. Adaptation is done to meet threats caused by
changes in environment instead of meeting anticipated changes. Progressive steps are taken

while making decisions; it maintains flexibility to adapt to them. It aims at optimization of costs
and organisational effectiveness (Rothaermel, 2015).
Volkswagen uses a combination of these 3 strategic approaches. Decision making is done
by experts as well as the senior management. It analyses environmental, social and economic
opportunities and threats, that create strategic solutions for them and implement necessary
changes to old ones. They keep in mind their major objectives, investments, market share and
create strategies to achieve it. Owners regularly meet and discuss with heads of different
departments to deal with problems that arise, so that development strategic plans can be done
(Engert, Rauter and Baumgartner, 2016). Company aims at increasing efficiency, productivity
and profitably with safeguarding jobs and competition, finance future investments and achieve
group targets. It keeps promoting an entrepreneurial mind-set and approach, along with
increasing efficiency, strengthening competition and provide significant contributions for future
of company. They have created strategies that will help in achieving competitive profitability and
retain their investors and continue to be a reliable company.
Understanding complexity of relationships between an organisation and its environment
Every business receives inputs, information and technology from its environment. They
both are closely related and have a give-take relationship. An organisation has a very complex
relation with its surroundings. It offers opportunities and threats and companies have to respond
to them in a positive manner (Business and the Environment, 2000). Taking corrective actions
has to be done, while keeping consumers', employees' and management's best interests in mind.
Environment helps in various strategic decision making processes that have to be made
by company and conflicts can arise during this process. The internal environment affect business
as well due to high demand of wages by employees, prices by suppliers and dividends by
shareholders. It has to be taken care that demands are satisfied to ensure a proper working
environment.
In order to understand the complexity of Volkswagen's relationship with its environment,
analysis of SWOT and Porter’s model is required. With the help of this, different aspects of
company's environment can be ascertained and evaluated and help get a better understanding.

SWOT Analysis of Volkswagen
Strengths: Volkswagen is one of the biggest and oldest auto mobile companies. It has
created a well-structured brand and have a strong presence around the world and among
it's customers. They have a smooth and efficient strategic business unit responsible for
its branding and success. Its operations are well managed with proper logistics and chain
of supply. Their cars are built with high technology and performance is trusted. They
keep implementing new strategies regularly.
Weaknesses: Volkswagen has recently faced a lot of issues due to the emissions scandal.
It broke a lot of people's trust and has created a bad image in the industry. Their profits
have reduced drastically due to payment of fines and reinstitution. Other auto mobile
companies have created high competition in market and prices. This is causing a negative
effect to company. The creation of battery driven cars have little expertise and skills to
make them. They have highest recall rate and low market share in many countries.
Opportunities: Volkswagen produces small vehicles range which is beneficial for them
as it consumes less fuel. With an increase of fuel prices in the future, company has an
advantage compared to other auto mobile organisations. It has been focusing on creating
environmental sustainability campaigns to repair its reputation and gain trust of
stakeholders. They have partnered with China to grow and expand its business across
Asia pacific regions. It has set plans for restricting and reorganizing for betterment of
business' health.
Threats: Auto mobile industry has heavy competition , which keeps increasing regularly.
It is one of the biggest threats for Volkswagen. They also have to pay high amounts of
fine for the damages caused to many vehicles. Company is stuck with many lawsuits
around the world, which has caused a decline in their profits.
Porter's Five Forces Analysis of Volkswagen
Entry barrier: There is a high entry barrier in auto mobile industry. The chances of new
entries are very low. Start-ups require huge investments and do not get the required
funding , which is why they usually come in form of subsidiaries of current
companies (Frynas and Mellahi, 2015).

Suppliers' power: The power of suppliers of Volkswagen is low, because they have
suppliers all over the world. They have to follow a code of conduct given by company
and can change their supplier whenever they feel like. They manufacture parts using
specific technology which is a big investment and cannot risk the chance of losing a
company.
Consumers' power: This is high and has increased throughout the years, because there
are several options from other brands available to consumers. Volkswagen spends high
amount of money for marketing and advertising, so that consumers would prefer to
buy from them.
Substitutes availability: Substitute threats are medium because even if people don't
buy cars, they have other modes of transport which they can use. Volkswagen's loyalty
towards consumers lessen the risk of substitutions.
Rivalry: There are many rivals for Volkswagen, making its intensity high. That's why
they invest in effective research and development to create the best products they can
provide.
Understanding international strategic thinking
International strategic management is a planning process. It develops global strategies
towards achieving a suitable fit between organisation's skills and resources with international
environment under which company operates. It is a continuous process that works to compete in
an international area and particular strategies are created accordingly (Mitchell and Leiponen,
2016). It is different as compared to national strategic planning. Both internal and external
environments are taken under consideration. Management has to create plans with regard to
company's goals and objectives and senior managers have to create a suitable structure for
international standards.
Volkswagen develops an objective statement that has to be used in order to plan
international strategies. They have to perform PESTLE analysis, in order to determine and find
solutions for them. The strategy formulation starts by setting strategic goals and developing them
according to global business standards. A control framework is prepared and the strategy is
implemented. The macro environment plays a huge role in the preparation of strategic
international thinking and planning and has to be studied in order to create an effective strategy
(Foss and Hallberg, 2014).

PESTLE Analysis of Volkswagen
Political: Volkswagen must face many political difficulties because it is present in more
than 150 countries. Every country has a different political situation and company has to
make its strategies accordingly. Auto mobile industry is closely related to policies
created by government. They play a big role in the sales of cars as their policies let
people buy vehicles with help of loans and low interest rates. It is a big challenge for
Volkswagen to understand political pressure.
Economic: Volkswagen contributes in GDP of many countries in which they operate.
That's why, developing economies help in development of auto mobile industry. There
are many uncertainties as well in the economy. Debts and recessions can cause a
decrease in sales of vehicles, but company easily deals with this by producing high and
low car segments. They also produce variants of diesel and petrol car, which solves
problems of fuel price hikes.
Social: Society always plays a vital role in developing the auto mobile industry as it
affects people directly (Dyer and et.al., 2015). Volkswagen has to cater to a large group
of society, they provide employment to people and produce cars for them to buy.
Technology: Vehicles are manufactured with the help of technology. Volkswagen uses
the best technology while producing cars. It is essential for them in order to
produce high quality machines. It is useful in determining problems and fixing them.
Legal: Auto mobile industry has to follow legal rules and regulations of a country. It
includes competition, consumer protection, intellectual property, labour, emission and
taxation laws. Imports and exports are done by Volkswagen, which involves many legal
obligations that have to be followed.
Environment: Volkswagen has been taking care of environmental issues across nations.
They optimally and efficiently use resources, that helps in conservation of environment
and produce vehicles that emit less pollution. Their research and development team work
hard to manufacture eco friendly cars, that will help keep save the environment.
With the analysis of PESTLE, Volkswagen is able to determine all environment factors
that affect them and create solutions for any problems that arise in that particular area.
Business policies are created to define scopes in which decisions can be taken in an
organisation. These are guidelines prepared by the company that are used to apply strategies in

proper manner. It includes ways on how decisions are to be taken and how use resources are to
be used in order to achieve goals and objectives of company. It studies the roles and
responsibilities of senior level managers (Ruff, 2015). Volkswagen prepares strategies with them
and they are to be made in a clear, specific, appropriate, simple, flexible and stable manner. They
give importance in creating sustainability policies by ensuring that they manufacture their
vehicles in a sustainable manner, which will keep the environment protected and adhere to their
social responsibilities.
Understanding application of strategy ideas in practice
Volkswagen's main strategy is to become an economic and ecological leader of the global
automotive industry. This company wants to hold the position of world's leading manufacturer.
Profit generation in enterprise is expected to increase by this year. High sales of products and
services lead to production of expected profits. This Company is also focussing on
environmental awareness. This company has efficient and effective management staff in order to
make right team of employees. Staff of Volkswagen helps the business to earn more profit. They
are planning to achieve long term success in this automotive world. The industry makes
continues efforts of satisfying their customer's needs. With the use of Innovative and
environment-friendly techniques in the market, firm is stepping towards great success in
upcoming years.
Volkswagen group has planned the 2025 strategy to earn success in the automotive world
and is focussing more on the following development strategies which are as follows:
 Effective production: It is referred as generating the desired quality of output
using. Utilizing skilled labours properly leads to an increase in production
capabilities. Well trained and developed workers help in achieving long term
objectives of an organisation.
 Innovative products: This strategy leads to grasp customer's interest in buying
Volkswagen automotive products. Innovations in the product determines ability of
perusing the ideas in the industry.
 Customer-oriented: These are based on the needs and requirements of
customers. Customers’ needs are to be satisfied by the products which are
developed in the industry. Customer satisfaction regarding the manufacturing of

the product is prioritised. This strategic planning of the management helps to
implement overall plans and targets of the firm.
Volkswagen follows strategic plans that have been developed by management through
extensive discussions and decision making. They have a big group that is divided into classic and
sporty brands of company. They have successful brands across the world and sells cars in over
150 countries. Their main strategic objective is positioning themselves as global leaders in the
economy and environment. They have made strategies that aim at providing safe, attractive and
environmentally friendly vehicles with regard to standards of different nations (Grant and et.al.,
2014).
Their priority is to make competitive cars. They have successfully sustained their position
in competitive industry,and have seen an increase in their market share, after the implementation
of their strategies. They have created such a team of workers and employees that help in
accomplishing all goals and objectives. They keep reviewing their approaches of strategies and
take necessary corrective steps wherever required.
Volkswagen's aim is to increase sales of units, to more than 10 million a year and attain
above average market share in key areas. They have highly innovated technology, which will
help them in increasing customer satisfaction and production quality. They aim at making
themselves financially strong and become the top employer of all brands around the world.
Company has employed right employees for their organisation and follows proper processes of
recruitment. They spend time with research and development, which has helped them acquire
ample knowledge for the benefits of their growth. They have always focused on their consumer's
needs and have built vehicles that cater to their taste, which helps in increasing client
satisfaction. Auto mobiles are one of the main causes of high pollution in environment
(Sakas,Vlachos and Nasiopoulos , 2014). Volkswagen created strategies and have applied it by
researching and developing eco-friendly cars, which can be profitable for company, customers as
well as the environment.
CONCLUSION
The above report can conclude that strategic management of Volkswagen has played an
important role in functioning of company and it's origins of strategies and various approaches.
With the help of Mintzberg's strategic approaches, company has made decisions and determined

solutions for issues that they have faced due to environment, political and social factors. It has
helped to understand complex relationships between Volkswagen and its environment and how
they both have worked hand in hand to accomplish goals and objectives while following strategic
plans of the organisation. SWOT and Porter's 5 forces analysis has helped company to analyse
various macro environment factors that affect company and how they should work towards
solving or implementing them in a positive manner.
Volkswagen has operations in more than 150 countries. They have developed
international strategic thinking and ideas so that, they are able to perform company operations
smoothly. PESTLE analysis has helped in determining various external factors of each nation
and business policies ensure that company will develop strategies accordingly. The application
of practice of these strategies shows that Volkswagen has worked effectively and takes
corrective steps to ensure that company works smoothly.

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