Business Strategy Report: Analysis of Volkswagen Group

This report offers a comprehensive analysis of Volkswagen Group's business strategy. It begins with an introduction to business strategy, followed by an organizational audit using SWOT analysis, highlighting strengths, weaknesses, opportunities, and threats. An environmental audit using PESTLE analysis is also included, examining political, economic, social, technological, legal, and environmental factors impacting the company. The report then explores the significance of stakeholder analysis in formulating new strategies for VW AG, followed by a discussion of potential new strategies. Alternative strategies, such as market entry, substantive growth, limited growth, and retrenchment, are evaluated, with a justification for the chosen strategy provided. The report further delves into the roles and responsibilities of personnel involved in strategy implementation, estimated resource requirements, and the contribution of SMART targets to achieving strategy implementation. Finally, the report concludes with a summary of the key findings and recommendations, providing a thorough examination of Volkswagen Group's strategic landscape.

BUSINESS STRATEGY

TABLE OF CONTENTS
INTRODUCTION...........................................................................................................................3
TASK 1............................................................................................................................................3
Covered In PPT......................................................................................................................3
TASK 2............................................................................................................................................3
2.1 Organisational audit of Volkswagen................................................................................3
2.2 Environment Audit for Volkswagen................................................................................5
2.3 Significance of stakeholder analysis when formulating new strategy for VW AG.........6
2.4 New strategy for Volkswagen Group...............................................................................7
TASK 3............................................................................................................................................7
3.1 Appropriateness of alternative strategies relating to market entry, substantive growth,
limited growth or retrenchment for Volkswagen Group........................................................7
3.2 Justify the selection of a strategy......................................................................................9
TASK 4............................................................................................................................................9
4.1 Roles & responsibilities of personnel who are given charge of strategy implementation.. .9
4.2 Estimated resource requirements for implementing a new strategy...............................10
4.3 Contribution of SMART targets to the achievement of strategy implementation in VW AG
..............................................................................................................................................10
CONCLUSION..............................................................................................................................11
REFERENCES..............................................................................................................................12

INTRODUCTION
A business strategy may be defined as a document which is considered as action plan of
any business. It defines the way how a company will operate its activities or what kind of plan it
will be adopting to achieve the desired goals. Business strategy is the model for growth and
include purpose, structure and functions of the employees who are employed in certain
organisation. Business strategies are made by making future assumptions and from where the
resources will come to implement those strategies (Scholes, 2015). It includes elements like
financial features, concept of the business, business position of the company and what all
achievements it have achieved till now. How you define your business plan will determine the
direction of your business, so the policy makers who design the business strategy need to make
sure that all the areas of growth are included where scope of improvement can be done. This all
assignment deals with various areas of business strategy through taking different scenario.
Volkswagen company which is a German auto mobile company has been selected for this
assignment.
TASK 1
Covered In PPT
TASK 2
2.1 Organisational audit of Volkswagen.
Volkswagen is considered as one of the biggest auto mobile company and its
organisational audit can be done by carrying out the SWOT analysis to identify its market
positioning. SWOT analysis defines company’s internal strengths and weakness as well as its
opportunities and threats.
STRENGTHS
 It has the biggest brand portfolio when compared to other automotive companies existing
in the market. The company sell its vehicle under 12 different brands.
 It has joined with local auto-makers of China and which has made China its largest
market in terms of vehicle sold (Teece, 2010).
 To overcome emission scandal, it has introduced a new strategy plan called “Together-
2025”, and through this strategy they will be introducing 30 new electric vehicles till
2025.

 It has adopted the diversification strategy through which its revenues are spread across
different brands.
 It shares a corporation environment between its brands on technology, customer
knowledge and through this they are able to fulfil customers’ needs.
WEAKNESSES
 In United States of America, it has the highest recall rate in comparison to other car
makers.
 By the above mentioned point, it is easily predictable that it also has low share in US
automotive sector.
 It has negative image as in 2015 it was found that it used software chip into its diesel
vehicles which controlled emission levels during the vehicle testing (Bharadwaj and et.
al, 2013).
 Volkswagen has not introduced much electric vehicles till now as of today's date; it has
only two electric vehicles. By this, it reflects that they have no experience and does not
stand anywhere in the electric car market.stand out of the competition in the electric car
market.
OPPORTUNITIES
 In future, it has predicted that the fuel price will see a hike which could benefit
Volkswagen because during that time the lighter vehicle sales will go high.
 They have to adopt strategy of the sustainable development which was damaged due to
the emission scandal.
THREATS
 They are facing a tough competition with other automotive brands and almost every six
month a new player enters in the car market and they offer cars at low prices which
decrease the sale of Volkswagen (Astrachan, 2010).
 Fines and damages have to be paid and the company is still involved in court proceedings
other than the emission scandal has hit the image of company hard.
 The environment regulations made by government of different countries will increase the
production cost of the vehicle and by this they might fail in fulfilling the competitive
demands.

By this SWOT analysis, we have found that it has great competitive advantage but still they
are facing a competitive market and they are also improving their image by adopting sustainable
ways of production.
2.2 Environment Audit for Volkswagen.
In order to carry out an environment audit of Volkswagen a PESTLE analysis can be
done. PESTLE is expanded as political, economic, social, technological and environment are
included.
 Political Factors:-
It has to face political restrictions as it operates its operation in 150 countries so they have
to adopt different strategies according to the norms made by that nation's government. Banking
sector or the financial sector of the nation has different policies like the bank interest on the car
loans etc. They have challenge of understanding different political pressures as UK government
have different policies as compare to China (Meskendahl, 2010).
 Economic Factors:-
Auto-mobile companies contribute a major share in the GDP of country in which it is
operating. Different government of various countries try to focus on this sector as this helps the
nation economy to grow at a rapid speed. When a car company enters any country it requires
steel, glass or other metal to make their cars so through this there is rise in steel and glass
industry. The car company also heavily depend upon the economic situation like crisis or the
currency fluctuation in the international market. For example, Pound value is falling down and
Britain's economy is also showing negative signs so this will decrease the sales for Volkswagen
because people are unable to purchase the car (Woodcock, Green and Starkey, 2011).
 Social Factor:-
Volkswagen have to face different kinds of society in different countries and by this they
have to adapt those social factor and make strategies according to it.. It provides employment to
people who are living there and they are employed directly or indirectly. Currently, 626715
people are working for them and they are also improving their life style. They need to develop a
faith in people out there and should make them aware about increasing road accidents which is
their prime responsibility as a car manufacturing company.
 Technological Factor:-

Technology is a crucial factor in the car industry segment and Volkswagen is known for
their advanced car technologies. It has 12 brands under different names and these brands cars are
basically classical and sporty cars. Brands like Skoda, Audi and Bently are known for their hilly
technologically sound cars. Company need to change its technology on frequent interval of time
this will give buyer an updated technology option. Every day lots of cars are produced so the
company need to make sure that every car is passed from technology tests (Verbeke, 2013).
 Legal factors:-
Volkswagen has to follow the legal requirements in all 150 countries as all have different
laws; they have to make a separate department for this in every nation. They have to focus on
consumer protection law, labour law, emission laws and taxation laws. While importing some of
its body parts from different countries, they have to pay duty so they should check that these
formalities are done in the right manner.
 Environmental Factors:-
Car manufacturing market has a big influence on environment of a nation, as we know
that almost all cars run on petrol and diesel which makes environment polluted. Cars needs
tracks to run so the government constructed roads by deforestation activity and other than this
the manufacturer uses steel to build the body of the car and when the steel is made from the iron
than a lots of smoke is created which pollutes the air and water. Volkswagen has created a bad
image after the emission chip they have used in their cars so that while testing it does not show
more pollution level. They have to take care of the natural environment and make sure that they
use eco- friendly ways in the car making process.
2.3 Significance of stakeholder analysis when formulating new strategy for VW AG.
Stakeholders of the company are employees, board of directors, creditors, shareholders,
suppliers, unions and the community where it is operating its operation. Basically, in simple
language stakeholders are the person, group or organizations that are directly or indirectly
attached with the firm. They are the image of the industry and they represent company in the
market. Any company existing in the market tries to catch more and more stakeholders as
through this the crediblity and the goodwill of the company is maintained. Stakeholder analysis
means to check or analyze the attitude or nature towards the company (Campbell, Edgar and
Stonehouse, 2011). The aim of this is to coordinate in the project team and the stakeholders and
before starting a project or carrying out any activity it is important to know all the stakeholders

of the company. Through stakeholder the Volkswagen can get opinion on the new ideas and can
predict people's reaction about their business.
 The first thing which is done in stake holder analysis is to find out all the people who are
somehow involved or affected by operations of Volkswagen.
 In the next step, they could identify the power and influence of those stakeholders,
 In the last step, they have to understand the importance of the most crucial stakeholders
and they have to make a communication with them.
2.4 New strategy for Volkswagen Group.
Volkswagen Group strategy is required to focus on requirement and demands of the
customers so that they could create a value for them. Volkswagen could come out with a new
strategy where they will introduce new cars which are economical in range and are Eco-friendly.
This will boost their sales which have gone down by the emission scandal (Cinquini and
Tenucci, 2010). In US, where the recall rate is high in comparison with the other competitors, so
they have to build a separate department which will be totally focusing on quality check and
monitoring the defects. Through this strategy, they could generate more revenues and can hold
the market more tightly because through this all the loopholes will be covered. This is a product
testing strategy, which is created for taking care of the quality. Before launching the cars in
management will make sure that it passes all the quality standard tests. Each and every parts of
the car will be checked from inside and outside. Quality testing strategy insures that no
complaint should come form the customers. Whatever is the issue, it will be resolved by this.
TASK 3
3.1 Appropriateness of alternative strategies relating to market entry, substantive growth, limited
growth or retrenchment for Volkswagen Group.
Market entry:
Merger: - In this two firms combine together and act as a single company. Volkswagen
can combine with small car company and could expand their market in countries where they
don't have their presence.
Acquisition: - This happens when an organization buys a full 100% ownership of another
company. As we know it owns 12 brands under its name and these 12 brands at time was owned
by someone else and but Volkswagen brought those brand under their name.

Strategic alliance: - When two companies share its some part to each other so that
whatever goal they have set can be completed. If the Volkswagen is facing some losses in a
country than it could sell its shares to other car manufacturer.
Franchising: - In this the head company or the main company provides things like its
brand name , maintenance, cost or strategy. A small car company can get help of the
Volkswagen to settle their business through running its operation under their name.
Substantive Growth:
Horizontal Integration: - When different companies involved in businesses at the same
stage of production in same or different industries is called horizontal integration.
Vertical Integration: - It happens when the different companies are involved in different
stage of production in the same sector (Klettner, Clarke and Boersma, 2014).
Related Diversification: - When a company makes diversification that is related to the
product.
Unrelated Diversification:- When a company makes diversification that is different from
the current one is called as unrelated diversification.
Limited Growth:
Market Penetration:- It includes expanding of the current market through increasing the
market share of the current items or coming out with a new item and this can be done through
advertising or by providing any discount.
Market Development:- It is a plan in which the firm offers current product or item in
different market.
Product development:- This means that creating, designing and marketing the new
product according to customer's needs.
Retrenchment:
Turnaround:- This strategy is used in order to make a nonperforming firm to a profitable
firm and this strategy is applied on the company which poor so to recover the financial crisis.
Liquidation:- It is the strategy which is adopted at the last moment of the company when
it is closing down so the owners sells all its assets and by the amount which they get he pay that
to the creditors.
Divestment:- This is strategy in which the business or the operation of the company is
sold to the another company.

3.2 Justify the selection of a strategy.
The aim of the Volkswagen Group is to become the world's biggest car manufacturer. So
to achieve this goal, they should adopt market development strategy. Through this strategy they
can begin their activities at the places where they are facing losses or does not have any
existence. The countries in which they are facing downfall there they could join other companies
by strategic alliance. This will help them to increase the revenues and will assist them in
expanding their business (Burlton, 2010). Adopting new strategy will improve the product
because they will be more focused on the quality check of the cars.
TASK 4
4.1 Roles & responsibilities of personnel who are given charge of strategy implementation.
This task of strategy implementation requires a person who could take all the
responsibility to him and can lead & divided the work to the employees according to their role.
Volkswagen Group should properly define the roles and responsibilities to the leader and make
them clear about their tasks. CEO is the responsible person who will communicate all the
information to employees and other stakeholders. The person who has been given the role of
leading the team should maintain proper record of the changes which are going to occur. This
will help them in avoiding the legal restrictions which are coming underway. A hierarchy should
be followed and every person roles should be defined in that and the employees like a mechanic
to the top official should be very clear about their role. Mechanic should makes sure that they
obstruct the materials which are not good and inform the above authority. The quality reject team
should be very specified and should follow norms that what kind of cars will pass and will be
introduced in the market. A proper monitoring is important so that strategy can be implemented
successfully and they should take feedback and the opinions on the regular basis (Hamel, 2012).
This allows them to know actual situation and encourages them in overall performance of the
strategic planning.
4.2 Estimated resource requirements for implementing a new strategy.
Normally, three types of resources are required in implementation of a new strategy that is as
follows:-
1. Financial resources
2. Human resources

3. Time or material resources
Financial resources: This means that how the Volkswagen group will finance their
strategy so that it could become more effective. It could be done either by debt or by the equity
and equity is a better option as there is no interest bearing cost on principle (Hsieh and Chen,
2011).
Human Resources: HR plays a crucial role in implementation strategy as company
performance depends upon HR in comparison to other department. The HR department should
be well trained and have all the knowledge of the strategy.
Time and material resources: - A time limit is set for the strategy on particular time
period this plan will be carried out and for this there are some material which are required for
this. The materials can be technology, machines or the labors.
4.3 Contribution of SMART targets to the achievement of strategy implementation in VW AG
SMART targets means that the target which is fixed by Volkswagen Group should be
specific, measurable, should be attainable, reliable and time bounding. It has its own significance
in achieving strategy which is as follows:-
 If the Group are not sure about what they want to achieve than the effort which is put in
this process will go in waste. While making the strategy VW should be sure about their
audience and what kind of car they wants to give to them.
 If the target which is set by the VG are not measurable according to the goal than there
will be no link between them (Hamel, 2012).
 They should not set any target which is not attainable because this will give them loss and
the morals of the employees will go down. If they have decided that they will be selling
that number of cars and if the target does not get completed than their moral will go
down.
 After researching all the market they should come with those targets which are realistic,
Volkswagen trying to achieve something which is far away from them will not help them
in any way.
 A specific period or time limit is described that till the particular time they will attain
those goals. VW should set a time limit that certain strategy for a particular nation will be
implemented in a particular period time.

CONCLUSION
To make sure that the implementation on the strategy is proper the Volkswagen Group
needs to analysis their external environment. Their main strategy is to come out with the Eco
friendly cars so that their image which was badly affected by the emission scandal could be
improved. For this they can use strategy of product development and this will attract more
customers to them. Effective implementation of the strategy can only take place if the current
conditions of the market can be improved. In Task 2 a audit of Volkswagen Company is done
like the environment and organization audit. Other than this significance of the stakeholder is
discussed and how they effect the growth and image of the organization. In other tasks a detained
explanation is given on the role of different people and what resources are required to implement
those strategies.
REFERENCES
Books and Journals
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Bharadwaj and et. al, 2013. Digital business strategy: toward a next generation of insights.

Astrachan, J.H., 2010. Strategy in family business: Toward a multidimensional research agenda.
Journal of Family Business Strategy. 1(1). pp.6-14.
Meskendahl, S., 2010. The influence of business strategy on project portfolio management and
its success—a conceptual framework. International Journal of Project Management.
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Woodcock, N., Green, A and Starkey, M., 2011. Social CRM as a business strategy. Journal of
Database Marketing & Customer Strategy Management.18(1). pp.50-64.
Verbeke, A., 2013. International business strategy. Cambridge University Press.
Campbell, D., Edgar, D and Stonehouse, G., 2011. Business strategy: an introduction. Palgrave
Macmillan.
Cinquini, L and Tenucci, A., 2010. Strategic management accounting and business strategy: a
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Klettner, A., Clarke, T and Boersma, M., 2014. The governance of corporate sustainability:
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Burlton, R., 2010. Delivering business strategy through process management. In Handbook on
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Hamel, G., 2012. What matters now. Strategic Direction. 28(9).
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Online
TOGETHER – Strategy 2025. 2017. [Online]. Available through.
<https://www.volkswagenag.com/en/group/strategy.html>. [Accessed on 16th May,
2017].