Volkswagen: Analysis of External Influences on Business and Management

This report provides a detailed analysis of Volkswagen, focusing on the external factors that influence its business operations and management strategies. The report begins with an introduction highlighting the impact of global market conditions on businesses, particularly the significance of external factors like social, economic, political, technological, environmental, and legal influences (PESTEL analysis). Task 1 delves into the primary external influences on Volkswagen, emphasizing their importance to the organization. It examines how factors such as political stability, economic conditions, social trends, technological advancements, environmental regulations, and legal frameworks affect Volkswagen's operations and decision-making processes. Task 2 then explores the relevance of technological disruption and innovation, analyzing how these forces influence Volkswagen's policies and decision-making. The report highlights the role of technology in enhancing efficiency, improving product quality, and facilitating digital marketing. The analysis concludes with an assessment of areas where Volkswagen can improve its response to these external factors. The report underscores the need for adaptability and strategic planning to navigate the complexities of the global automobile industry.

Contemporary Developments in
Business and Management

Table of Contents
INTRODUCTION...........................................................................................................................1
TASK 1............................................................................................................................................1
1. Primary external influences and importance of each to the organization.............................1
TASK 2............................................................................................................................................4
1. Analyse its relevance and how it influences policies and decision-making within
Volkswagen.................................................................................................................................4
2. Critically evaluate the effectiveness of the organization’s response....................................6
3. Demonstrate some areas for improvement...........................................................................7
CONCLUSION................................................................................................................................8
REFERENCES..............................................................................................................................10

INTRODUCTION
In recent times there has been frequent change in global market conditions. Businesses
are highly impacted by the external factors in which they operate which includes social,
economic, etc. due to its impact many medium size companies are not able to survive in industry
for long term (Renwick and et.al., 2016). Also, any change in this effect on growth and
development and decision making process. They have to change their policies and way of
working. Thus, effective strategies are developed by organization to reduce impact. This report
will briefly describe influence of external factor on organization and its importance. Moreover, it
will show how it influences policies and decision making. At last areas will be discussed where
improvements are required. For present report organization taken is Volkswagen. It belongs to
auto mobile sector and operate globally.
TASK 1
1. Primary external influences and importance of each to the organization
Automobile industry plays a significant role in economic growth and development of a
country. it contributes a major part in GDP of a nation. Besides this, many other industries are
dependent on auto mobile sector growth (Chang, 2016). They include glass, steel, rubber, etc.
thus, any impact on it will affect overall country economical condition. But in recent time, this
sector is been influence by change in many factors. Also, globalization has led to increase in
competition among different countries and companies as well. Business is surrounded by both
micro and macro factors. It sets boundary within which business has to operate. Moreover, every
firm is closely related to external factors. Thus, any change in it influence operations and
decision making.
Volkswagen is a German auto mobile company founded in 1937 and headquartered in
Wolfsburg, Germany. It is the largest auto mobile maker in the world. The company subsidiary
are Audi, Bugatti, etc. it operates worldwide. Company is giving tough competition in this
sector. The competitors are Hyundai, Toyota, etc.
Volkswagen operations are spread in different countries. they have to analyze the factors
so that impact can be minimized. Furthermore, the importance is without this business can not
grow and sustain. Here, PESTEL analysis is conducted to identify influence on Volkswagen
(Pestel analysis of Volkswagen. 2018). It is as follows :-
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Political – the political situation of any nation should remain stable. Government develops tariff
policy to create trade relations and supply chain network. It is because entire nation is run by
government by developing laws and regulations (Hammer, 2015). Thus, any change in this will
result in political disturbance. Also, it reflects the relation with neighboring countries.
Volkswagen is successfully operating in many countries. so, if there is any change in political
situation, then company growth will be hindered. But on the other hand its importance is friendly
regimes and international trade relations helps business growth. also, government supports in
sales by providing funds to and allowing FDI investment. along with this, political condition in
21St century is playing a vital role in expansion of business. Auto mobile industry has been able
to improve their product quality by following policies and guidelines. For example – in India
government has banned the production of BS3 vehicles. This step is taken to reduce pollution
and provide better environment to society. Moreover, laws and standards set by different
countries enabled Volkswagen to manufacture vehicles accordingly.
Economic- this is most important factors that consists of currency rate, tariff and trade policies,
etc. the government and central bank of nation is responsible for regulating and controlling
economic situation (Vom Brocke and et.al., 2014). Auto mobile sector is directly related to this
as they are strong pillar of country economic condition. Fluctuations in economic condition can
lead to increase or decrease in supply or demand of products. Due to rise in prices of oil demand
of vehicles has decreased. This has led to fall in sales and profits of Volkswagen. Furthermore,
company has suffered a huge loss due to diesel scandal. This has impacted on their brand image
as well. But when economic forces are in stable and in favor of company it ensures survival for
long time. Volkswagen is successfully expanded their business in countries like Germany, UK,
etc. for example – The developing nation like India has provided opportunity to Volkswagen to
produce vehicles. It has provided hand to contribute in GDP and improving economic growth.
Social – it is related to society and culture of country. In includes living standard, income level,
class, needs, etc. the change in taste and preference of customer forces business to modify
product features or develop new ones. Socio cultural forces has changed habits of people. Now
they are demanding cheap vehicles. Now demand of electrical and high average vehicles has
raised. Volkswagen growth is affected by this as they have to manufacture electric vehicles. The
importance of social forces to Volkswagen is it helps in determining needs of people. Then,
products are developed to fulfil their needs. In addition, it is useful to categories needs on basis
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of different market segments and class (Conway and Byrne, 2018). Volkswagen manufacture
vehicles by identifying culture and society of different countries. for example- for developed
countries they produce cars for high class people. But for developing nations, company is more
focused on middle class people so that living standard can be enhanced.
Technological- this force plays a vital role in auto mobile industry. Many companies are
dependent on using technological tools and equipment’s in machines. AI has been a major
technological advancement that has affected auto mobile sector. It has forced Volkswagen to
invest lot of amount in research and development. Thus, company has acquired shares in DFKI.
It is difficult for company to implement technological changes in production process. Due to this,
demand of vehicles is not been fulfilled. Therefore, sales and profits are affected. Moreover,
customers satisfaction has decreased due to ineffective providing of services. Volkswagen is
making efforts to produce eco friendly cars. Importance of technology in auto mobile sector is it
enables company to install more safety measures to reduce accidents. Also, it helps in reducing
cost and time of manufacturing vehicles (O'Gorman and MacIntosh, 2014). Through this, ROI
and profit margin is increased. Moreover, by integrating company share resources with each
other in different countries. it provides new platform for government to invest in it.
Environmental- it refers to protection of environment due to change in laws and regulations.
Here, certain agencies work with government and industries to monitor their practices.
Companies are bounded to implement and work with boundaries of different policies set by
government. Auto mobile sector is closely related to this factor. So, any change in it will impact
growth to great extent. Many governments have imposed certain restriction on laws related to
emission, fuel usage, etc. It has affected Volkswagen operations and revenues. It has made it
tough for Volkswagen to focus on models that are more environment friendly. Now, they are
emphasizing on producing electric and hybrid vehicles. The importance of environment factor is
it provides a blueprint for auto mobile to set standards for vehicle design, fuel capacity, etc. then
accordingly cars and trailers are manufactured (Vanclay and Esteves, 2015). Moreover, it guides
them to contribute towards society so that they can remain sustain for long time. Volkswagen is
globally expanded. They have to analyze every country environment situation so that vehicles
are designed accordingly. Furthermore, if there is any change in law it must be mandatory
followed.
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Legal- in 21st century legal framework has also played crucial role. Legal force includes rules
and regulations related to employment, labor laws, working hours, wages, etc. they have to
followed by organization while developing their policies. also, local authorities are responsible
for regulating and monitoring of these laws. Any change in this impact organization operations.
Volkswagen has to follow rules of different countries. due to diesel scandal countries legal
structure has changed. Company has to recall their models from all over the world and have to
pay huge amount of fine. It has affected Volkswagen growth. they have to formulate different
laws. The importance of legal factor is it provide standards on basis of which Volkswagen can
develop their policies. they are able to pay fine and identify problems in their vehicles. Besides
this, legal framework gives an insight to evaluate overall laws related to wages, safety, etc. of
different countries.
Therefore, it is stated that Volkswagen is highly influenced by change in external factors.
This has also impacted on their decision making process (De Vita and Case, 2016). Due to this
company is being involved in many controversies and legal cases. It has affected their growth
and development. The rise in scandals has enforced them to formulate strict policies regarding
quality of vehicles and their safety.
TASK 2
Technological disruption and disruptive innovation
1. Analyse its relevance and how it influences policies and decision-making within
Volkswagen
Any change or disruption in technology impact on business to a great extent. Due to this
process, methods, etc, in business operations and functions have to be modified. In today’s era
industries are highly dependent on using advanced and highly level of technology. This is done
to enhance efficiency so that it can be expanded in different countries. Technology has boosted
growth of different sectors. It has provided vast number of opportunities. but on the contrary
disruptions has also resulted in impacting in negative way due to lack of strategies. It has
influenced in decision making process (Davidsson, 2016). Hence, it has become essential for
organisation to adopt certain tactics so that influence can be reduced. There are many other
things which is considered in it.
Technology advancement creating a platform through which businesses are interlinked
and connected with each other. the different technological tools have helped in developing of
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products and services. it has also enabled in taking customer feedback so that their needs can be
identified. Besides this, solutions to problems are now provided in real time. The evolution of AI
has transformed operation of auto mobile industry. the use of advance tools’ and equipment has
benefited Volkswagen in maintaining product quality. The integration of AI in machines has
given advantage to remove small errors and maintain quality of vehicle. The vehicle is passed
through different test to ensure its safety. Also, technology has increased ease of production. The
operational cost has decreased resulted in generating more ROI. Employees are able to operate
machines in effective way. thus, companies are able to fulfil market demand. The
communication between different departments has become quick and easy (vom Brocke, Zelt
and Schmiedel, 2016). Therefore, company efficiency has improved. In addition to this, digital
marketing has emerged as well. Volkswagen is marketing their products and services on various
social media sites. It has led to attract large number of people and increase customer base. Now,
Volkswagen has created their own blogs and pages on social platforms where information about
vehicles is displayed. It has made it easy for people to gather that and compare it with other. also,
the data is collected from sites in form of feedback. The data is stored in database or severs.
Moreover, website trafficking is conducted to evaluate customer response with website. through
it, customer touch points are identified and changes are done to improve their experience.
Volkswagen analyse data to determine change in taste and preference of customers. this means
need are identified through it. in order to do digital marketing a proper plan is developed. thus,
any change in it will influence their policies and decisions taken by them.
Volkswagen is using AI in machines to manufacture cars. For this they have developed
several strategies and plan on how it will be implemented. This has led to change management.
In context to this, policies and procedures are modified (Kerzner and Kerzner, 2017).
Volkswagen has to use technology which is permitted by country and resources that are
available. Furthermore, technological changes have led to innovation of vehicles. now, company
have to install latest technology in different vehicles. frequent developments have highly
influenced on decision making of organisation. due to this entire auto mobile sector is been
affected. Now government are more focusing on production of electric and hybrid cars. This has
forced companies operating in sector to modify their production process and invest large sums in
R&D. likewise, government has set standards about safety, quality, engine, etc. of vehicles.
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Similarly, Volkswagen is also affected due to technological interruptions. They have to
follow rules and regulations related to technology in different countries. Due to this their policies
and decision making process are influenced. They are being forced by government to
manufacture electric cars. Hence, Volkswagen has to formulate standards and deign on which
basis technology can be utilised.
2. Critically evaluate the effectiveness of the organization’s response
In response to disruption in technology Volkswagen are able to maintain their product as
well as service quality (Parsons, Maclaran and Chatzidakis, 2017). They have already
developed plans and strategies on how to deal with change. Also, risk assessment is done to
minimise risk so that operations are not affected. Volkswagen is effectively working in different
countries. They have analysed the resources of that country and utilised them. Besides this,
company has shared technology with other countries so that it is easy to cope up with any change
in it. the implementation of AI is been successfully implemented by Volkswagen. for this, first
they tested and then noticed what changes will occur in operation. Therefore, a proper plan is
developed and executed. Moreover, employees are provided effective training so that tools and
equipment can be used by easily. Systems are monitored and controlled by experts. it has led to
increase in efficiency of Volkswagen production department. The overall process has become
automated. Also, robots are being used by Volkswagen in painting and cutting of body parts of
vehicles. it has improved car design, quality, structure, etc. robots are being highly controlled by
experienced employees and managers so that they work properly.
The digital marketing concept is adopted by company to advertise their products and
services. in many countries they have developed a separate department of digital marketing that
monitors and control all activities (Wachowiak, 2016). The data collected by them is thoroughly
analysed to determine needs of people. furthermore, blogs and videos created by them are
advertised through various sources. The data gathered is stored in database and at time of
formulating marketing strategies it is evaluated. This provided them information about customer
touch points, their experience, product quality, etc. it has been easy to make changes in designs.
The designs of vehicles are created in 3-D and 5-D format. This gives a new experience of
visualisation of car in different ways. The prototype is developed and tested to identify any errors
in design quality, safety, etc. this helps in ensuring that vehicle can be manufactured. The
countries standards are also considered.
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Volkswagen is been able to segregate countries and market on basis of technological
advancement. Due to this it has become easy for them to utilise resources and develop car
design. also, standards are set that show to how much extent changes will be implied in
production process. If there occurs any change in it then actions are taken.
But in recent time, company has suffered a huge loss due to technological disruption. The
popular diesel scandal has created a bad impact on their brand image. This shows lack of proper
implementation and execution of strategies (Derous and De Fruyt, 2016). This scandal was
occurred due to improper testing of car and diesel emitted by them. Also, the machines or
systems through which vehicles were tested showed inaccurate results and then it was launched
in market. After it there customers started complaining about faults or errors in cars. Due to this
Volkswagen has to recall overall stock that was manufactured in that particular time period.
Volkswagen R&D department is now emphasising on deciding whether technological
advancement can be implemented in business or not. They have limited their area of research. It
has resulted in improvement in process and procedure. The policies are developed by top
management by discussing it with R&D department. It has benefited in managing technological
changes in proper way. every vehicle is checked through similar testing methods. this gives
results of each method.
Hence, from above it can be said that Volkswagen has been able to utilise technological
advancement in positive way. after the incident of scandal management has taken strict action to
maintain quality and service measures (Conway and Byrne, 2018). They policies developed and
decision taken are approved and monitored by managers. Reports are prepared on how policies
are implemented and what action will be taken in case of any incident.
3. Demonstrate some areas for improvement
It is very necessary for Volkswagen to implement technological changes in different
business functions so that operations are not affected. Otherwise it can affect overall production
capacity and growth and development. Through this, weak areas can be identified and it can be
improved by taking some correct and proper measures. In addition to it, company can take
proper decisions. The changes can be implemented in efficient way. There are several
recommendations that can be implemented by Volkswagen for improvement. These are as
follows :-
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 Volkswagen can evaluate type of technological disruption. They can search areas where
it has occurred. Then, accordingly changes can be made in process or procedures. It will
be easy for company to implement it by formulating strategies (O'Gorman and
MacIntosh, 2014). Alongside this, risk assessment should be carried out in specific time
period so that risk can be mitigated and controlled. It will enable in maintaining smooth
flow of operations.
 Another improvement can be done is in area of safety and emission. Here, Volkswagen
can evaluate results of car manufactured with each other and compare them on several
elements. Then, modification can be done in features of cars.
 In production machines a fix figures should be set so that each part is tested. through this,
errors can be identified and part can be rejected.
 Organisation can implement some testing system as per country standards. This will be
beneficial for them to test its features like safety, quality, emission control, etc. (Vanclay
and Esteves, 2015) other than this it will be easy to make changes by identifying errors.
The testing systems can be modified after particular time period so that quality is
maintained.
 Volkswagen can monitor and evaluate impact of technological disruptions in different
department and take measures accordingly. Here, changes in policies can be made and
implemented. For this a committee can be formed that will look after all the necessary
things.
 The R&D department must be given right to make policies regarding use of technology.
It must be according to countries so that proper measures are taken. This will give insight
to management about what type of resources can be used to enter in that market.
Furthermore, vehicles can be manufactured regarding standards set (De Vita and Case,
2016). it will be easy for them to launch it. by this R&D and production area will be
improved.
 Volkswagen can develop some principles of business management that can be applied
overall. They are based on some standards and applied in different situations. They
consist a framework which enables in taking correct decisions. The principle remain
common throughout entire business process.
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 A report should be developed by committee that describes type of technological
disruption and what improvement was done. So, in similar situation in the future,
Volkswagen can easily apply those changes. It will be useful to maintain quality of
vehicle in countries.
Thus, by making improvements in these areas Volkswagen will be able to deal with
technological disruption. It will help in them to take effective decision and develop policies. The
influence of this will be low and it will led to production of vehicles effectively.
CONCLUSION
It is concluded from report that external factor impacts on growth and development of
organisation to large extent. It is not possible for companies to control them. Also, each force is
equally important to organisation in their own way as it helps in growth and development. The
favourable political conditions of EU have enabled Volkswagen to expand their business. The
countries are having common trade policy that enables in import export. Moreover, change in
social force helps in identifying taste and preference of customers so that vehicles are produced
accordingly. Volkswagen is been impacted both in positive and negative way due to
technological description. Thus, they have made changes in their policies and develop some
more. this has enabled in coping up with any advancement in technology.
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