Business Strategy Report: Analyzing Volkswagen's Challenges

This report provides a comprehensive analysis of Volkswagen's business strategy, addressing the challenges posed by the environmental scandal and subsequent penalties. It begins with an introduction to business strategy and its importance for Volkswagen, followed by an organizational audit that assesses the company's strengths, weaknesses, opportunities, and threats (SWOT). An environmental audit using PESTLE analysis evaluates political, economic, social, technological, legal, and environmental factors impacting the company. The report emphasizes the significance of stakeholder analysis in formulating strategies, and proposes a limited growth strategy as the most appropriate approach for Volkswagen, given its current financial constraints and need to repay penalties. The report justifies this strategy, outlining its advantages and detailing the roles, responsibilities, and resource requirements for implementation, including the use of SMART targets to ensure effective execution.

Business Strategy

Table of Contents
INTRODUCTION...........................................................................................................................1
TASK 1............................................................................................................................................1
1.1, 1.2 & 1.3..........................................................................................................................1
Covered in PPT.......................................................................................................................1
TASK 2............................................................................................................................................1
2.1 Organisational audit..........................................................................................................1
2.2 Environmental audit of Volkswagen................................................................................2
2.3 The importance of the stakeholders in preparing of the strategies...................................3
2.4 New strategy for Volkswagen..........................................................................................4
3.1 Alternatives strategy appropriateness...............................................................................5
3.2 Justification for selection of strategy................................................................................6
4.1 Roles & responsibilities of personnel in strategy implementation...................................6
4.2 Resource requirements for implementing the new strategy for VW AG.........................7
4.3 Contribution of SMART targets in business strategy.......................................................8
CONCLUSION................................................................................................................................8
REFERENCES................................................................................................................................9

INTRODUCTION
A business strategy is a plan of action that is used by organisation to set a path for
achieving long term goals. It is also considered to be an art which is used for planning, directing
and controlling all the activities that are taking place within an organisation. It allows managers
in evaluating all the cross functional decisions that are being taken to complete a certain task. It
is a very important tool that is used for aligning all the resources and gaining consistency in
business process (Astrachan, 2010). It provides competitive advantage over a all the market
forces. For Volkswagen, a business strategy is required as to overcome all the issues that are
prevalent in current scenario. The company has been penalised by the Environmental Protection
Agency and the company has been fined very heavily. It has damaged its image which can be
only fixed by a proper business strategy. There are different tools and techniques that can be
used for enhancing efficiency of organisation while overcoming this critical time.
TASK 1
1.1, 1.2 & 1.3
Covered in PPT
TASK 2
2.1 Organisational audit
The company which has a global presence and offers products as well as services in
different parts of world has to ensure that all organisational capabilities are at par with
requirement. For doing so it has to conduct organisational audit which will assist it in identifying
variances that might hamper its capabilities and operations (Bharadwaj and et. al., 2013). It is
important as this will enable company in identifying its own strengths, weakness, opportunities
and threats. Currently there are certain gap that exist in Volkswagen own ability and standards
that were set, as to understand these issues company needs to conduct SWOT analysis which will
enable it in evaluating its capabilities against required levels. The organisation has more presence
in more than 100 countries and it is considered to one of the best organisation when it comes to
manufacturing cars.
The SWOT of Volkswagen:
Strengths There are certain certain strengths which enables company in performing better:
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 Major recruiter having a employee strength of 350,000
 Establishing itself in motor sport and hybrid car market.
 Effective and efficient manufacturing
 Very innovative marketing and advertising of products.
 Huge range of products.
Weakness There are few issues in company capability.
 The level of competition is very high and it is constantly rising.
 Sue to higher level of competition the company have limited growth and
market share.
 Image is damaged due to environmental scandal.
Opportunities These need to be exploited by organisation:
 New innovative and creative features need to be introduced.
 The developing markets present a opportunity to the company which can
be exploited.
 There is huge requirement to enhance interaction with other car
manufactures as to gain more knowledge and skills.
Threats  Environmental legislations will hamper sale of petrol and diesel cars.
 The technology is changing at a very fast speed which is leading to
introduction of new features which increases cost for company
(Campbell, Edgar and Stonehouse, 2011).
 Raw material and parts of cars are getting expensive.
 The government in developing countries are limiting company
capabilities as to protect local manufactures of cars.
2.2 Environmental audit of Volkswagen
The company is always surrounded by factors which it can not control but only manage
or adopt. The macro environment is considered to be uncontrollable factors that has to be
managed by changes in policies and process (Casadesus-Masanell and Ricart, 2010).
Volkswagen is a global company that has to keep on evaluating all these factors so that it can
prepare itself for all the changes and overcome issues in future. It can use PESTLE analysis as a
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tool to analyse and evaluate all factors that can hamper organisation working directly or
indirectly.
PESTLE of Volkswagen:
 Political: Currently there is huge political instability prevailing in UK and other parts of
worlds due to many reasons (such as Brexit, American polices, Middle east issues).
Constant changes in leadership has impact on frameworks followed by organisation
(Eccles and Krzus, 2010). It needs to analysed and managed in a effective manner.
 Economic: There are constant changes in the economic environment and these have to be
managed by organisation in a effective manner. The impact of penalties are there on
company as it has to pay a hefty fine of $19 billion dollars. The inflation rate and
recession are also concern for company.
 Social: The changes in the structure of society is leading to the changes in preference and
demand of products. Due to rise in migration and movement of people the social ethics
and values are changing to be more complex.
 Technological: All the changes in this filed are taking place at a very high speed. It will
boost overall effectiveness and efficiency of company but it has a additional cost added to
the expenditure.
 Legal: There are changes in legislation of country as to improve the working environment
and protect businesses as well as workers (Elliot, 2011). Also with Brexit there will be
issues in the labour movement between UK and EU.
 Environmental: There are various treaties and legislations that are being formed as to
protect environment from the impact of global warming. German, Britain and France
have already called in to ban sale of petrol, diesel cars in their country from 2030-40. this
will impact organisation productivity and sales.
2.3 The importance of the stakeholders in preparing of the strategies
Stakeholders are the one who provide various resources to company which can be used
for enhancing productivity and profitability in long term (Hahn, Kolk and Winn, 2010). In
simple terms, they are the parties which have some interest in business and they aim to gain with
the expansion and profitability. It is very important for Volkswagen to keep on evaluating all the
all the stakeholders as to fulfil their needs and wants. The stakeholder matrix will assist
managers in fulfilling the requirements of various parties in more effective manner:
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KEEP SATISFIED
(Highly interested, maximum power)
All information needs to be shared constantly.
 Shareholders
 Employee's
MANAGE CLOSELY
(Lower interest, more power)
The important information has to be shared to
keep them satisfied.
 Suppliers
 Government
MONITOR
(more interest, less power)
The half yearly or annual reports are used as a
method of information.
 Customers
 Financiers
KEEP INFORMED
(less interested, less power)
Constant interference is not required and only
important information has to be shared.
 Local Community
The importance of stakeholder analysis is as following:
 It aids company in formulating various CSR activities.
 They assist in providing information that can be used for formulating plans and
procedures.
 It informs strategy planning and assist in motivating individuals working in company.
 Managers are assist by it as it provides consistency and alignment (Haley, Haley and Tan,
2011).
It is very important and has to conducted as to ensure that all task are completed in a
limited time period and with efficiency and effectiveness.
2.4 New strategy for Volkswagen
A new plan of action is required as to sort out the issues that are hampering company
working capabilities. It will also assist organisation in keeping its current effectiveness and
efficiency as per requirement (Li and Tan, 2013). After conducting organisation audit and
environmental analysis the manager will be able to formulate a new strategy that will assist
organisation in maintaining current capabilities while enhancing market share. Volkswagen has
been penalised and to pay back the penalties it needs to reduce the gaps and enhance its
efficiency levels. The new plan of action will include a limited growth strategy which will allow
firm in expanding while using methods that do not require more resources.
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The strategy is known to assist companies in minimising resources consumption while
maintaining existing capabilities. Also as stated by CEO of company, it needs to cut down all
plans of expansion and conserve resources for paying up the penalties (Melville, 2010). But he
also said that the strategy will be bold as we will keep investing in the existing plans and
improve efficiency level. Also they will be using porter generic strategy which focusing on
gaining differentiation, reducing cost by increasing efficiency and focusing on the sectors that
will bring more profits. The company will try to improve its existing portfolio while increasing
efficiency and reducing cost. It will garner more profits and revenues.
3.1 Alternatives strategy appropriateness
There are different types of strategies that can be used by organisation as to ensure that
the effectiveness and efficiency are maintained. It has to channelise all resources in a direction
that will bring in more results. The alternative strategies are stated below:
 Market entry: There are various methods that can be used by company as to make market
entry into new markets. These methods are usually cost efficient yet effective and allow
organisation in establishing itself in the market (Meskendahl, 2010). There are various
techniques which can be used by company such as, turnkey project, licensing, etc.
 Substantive growth strategy: This is a aggressive strategy that is used when company has
a lot of resources available for itself. They are used in two ways, merger and acquisition.
This method is used for gaining market share at a rapid speed. Basically, these methods
allow company in merging a firm that is working in same product line but is smaller in
size. Also it enables them in acquiring suppliers that will reduce the cost of raw material.
 Limited growth strategy: This is a strategy which is used at the time when company
wants to expand but it do not have sufficient resources to invest (Mithas and Lucas,
2010). The method that is promoted by it is joint venture, where a company forms an
alliance with other organisation and enter into a new market. The prime goal of this
strategy is to limit expenditure and enhance productivity with profitability.
◦ This is a recommended strategy that can be used by Volkswagen as this will allow
company in entering into new market and establishing itself while it have bear less
risk.
 Retrenchment: This is a strategy which is used when company is in losses and has to
repay its debt or shut down its operations. The condition of VW AG is not that bad, and
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company needs to keep its operations intact while reducing the overall expenditure to
profitability ratio.
3.2 Justification for selection of strategy
The chosen strategy for Volkswagen as per the scenario is Limited growth. It will assist
company in repaying its debts and penalties while cutting down additional cost. This will stop
any over consumption of resources as to ensure that all goals are achieved in a required manner
(Montgomery, 2011). There are three reasons which will justify why this strategy was chosen:
 Hefty Penalties: The company has to repay penalties of $19 billion dollars in US and also
UK environmental agency is investigating the case, as to find out if Volkswagen broke
any law while manufacturing cars or not.
 Maintenance of current capabilities: This strategy will allow company in managing and
maintaining its current abilities (Wang and Verma, 2012). It has to ensure that all
portfolio and sub brands of company do not get impacted by the change in plans.
 Expansion into new market or fields: This will allow company in expanding into new
market by forming joint venture, such as it did in China where it formed two different
joint ventures.
The limited growth strategy will assist organisation in lowering down all the expenses. It
will aid in maintaining the quality and introduction of new changes in products without
increasing cost.
4.1 Roles & responsibilities of personnel in strategy implementation
There are certain roles and responsibilities that has to be fulfilled by various individuals
in the strategy implementation process (Scholes, 2015). With every new change, these people are
tasked to do something that will enable company in achieving its goals and objectives. They
assist management in integrating changes that are required to be adopted for overcoming future
contingencies. There are certain roles and responsibilities that has to be fulfilled and they are
stated below:
 Senior Authorities: The top management has the responsibility to prepare strategies for
their company while analysing all trends and dynamics. They also provide guidance to
managers in implementing all the strategies in a very effective manner.
 Managers: They are the most important individual in the company when it comes to
strategy implementation. They implement different policies and procedures that are
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required to achieve goals and objectives in a effective manner. They also aid top
management in decision making. A manager in Volkswagen has to keep on supervising
the activities as to ensure that all task are conducted as per requirements.
 Engineers and research personnel: They are the one who are engaged in manufacturing of
goods. All the individual need to be trained while change is being introduced (Smith,
Mills and Dion, 2012). The prime task of these individuals in strategy implementation is
related to integration of changes in their core process.
 Expatriates: They are the one who are sent out by company for managing activities in
new venture abroad. These people are highly effective and efficient and they are tasked
with aligning all activities as per organisation requirement in new country.
These are the individuals who are tasked with implementation of all strategies and
procedures. They have to fulfil their roles and responsibilities as per requirements.
4.2 Resource requirements for implementing the new strategy for VW AG
Every strategy implementation requires additional resources, as it enables managers and
other individuals in integrating changes into their own working process (Spender, 2014). It also
assist in maintaining all capabilities at par with requirements. The resources are stated below:
 Human resources: The company has to ensure that all employees are placed on right job
at right time. This will increase efficiency and effectiveness of every single task. If
company wont have any people then it wont be able to function that is why it is important
to keep them satisfied.
 Finances: If the monetary condition of organisation is at par with requirement then it will
be able to run all process at their maximum capability (Teece, 2010). In current scenario,
Volkswagen can not take risk of investing higher amount of resources into activities as
this will hurt its ability to maintain current capabilities as well as ability to pay all
penalties.
 Fixed resources: There are many resources which are fixed in nature. Such as,
manufacturing facilities and equipments. The management has to ensure that the
equipments and tools are as per the requirement, otherwise this will increase expenditure
of organisation. It has to be maintained in a proper manner so that cost reduction can be
done effectively.
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 Raw material and finished goods: There are different types of parts and material that is
required to manufacture a car (Verbeke, 2013). Volkswagen managers have to look for
suppliers who will provide all the material at a very low cost yet of higher quality.
4.3 Contribution of SMART targets in business strategy
Volkswagen had a situation that has to be managed by using various innovative and
strategic approaches. They have to conserve resources so that all penalties can be paid off. All
the strategies, action plans has to be aimed at maintaining the current capabilities. The managers
have to use the concept of SMART targets which will make all goals and objectives more
specific, measurable, achievable, realistic and time bound.
A short and simple example of SMART targets is that, if employees are told to work for
140 hours in month, they will panic but they are told to work for 35 hours a week then they will
be fine (Woodcock, Green and Starkey, 2011). This is what this concept is about. Specifying
whole target into short and achievable objectives.
The SMART objectives for Volkswagen are as follows:
 Increasing sales in next months by 10%
 Improving production rate by 1 percent in next 6 months.
 Efficiency levels has to be improved by 20% in one year.
 Expansion into new market by forming strategic alliance.
These targets has to be formed so that all goals can be achieved in a set period of time
and efficiency can be improved.
CONCLUSION
This report covered various aspect as how business strategy assist an organisation in
achieving its goals and objectives in an effective manner. There are different types of capabilities
that has to be updated with changes in market dynamics as to maintain organisational
productivity. The environmental scandal has affected Volkswagen in a very negative manner.
The company has to0 increase its interaction with other car manufacturers as to understand their
capabilities and gain knowledge about new markets. The concept of SMART targets will help
organisation in setting goals which are more realistic and achievable. Volkswagen is advised to
use limited growth strategy with porter generic model as to differentiate, reduce cost and focus
on fields that will bring more profits.
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