Strategic Analysis and Business Strategy Report for Volkswagen AG

This report analyzes the business strategy of Volkswagen AG, encompassing an organizational audit, environmental factors, and stakeholder analysis. It explores the company's strengths, weaknesses, opportunities, and threats (SWOT) along with a PESTEL analysis to assess political, economic, social, technological, environmental, and legal factors. The report delves into the significance of stakeholder analysis and proposes a new strategy leveraging the Ansoff Matrix and Porter's differentiation strategy. It evaluates alternative strategies, discusses implementation roles, resource requirements, and the importance of SMART targets. The analysis provides insights into Volkswagen's strategic positioning, market challenges, and potential pathways for future growth and success. The report concludes with a summary of key findings and recommendations for strategic improvements.

Running head: BUSINESS STRATEGY
Business Strategy
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Table of Contents
1. Refer to the power point presentation................................................................................2
2. Overview/Introduction.......................................................................................................2
2.1. Strategic Positioning of Volkswagen AG....................................................................3
2.2. Environment audit for Volkswagen AG......................................................................4
2.3. The significance of stakeholder analysis.....................................................................6
2.4. New Strategy for Volkswagen AG..............................................................................7
3. Approaches to Strategic Evaluation...................................................................................9
3.1. Appropriateness of alternative strategies.....................................................................9
3.2. Justification of the strategic selection........................................................................10
4. Implementation of a chosen strategy................................................................................11
4.1. The roles and responsibilities of personnel in charge of strategy implementation. . .11
4.2. The estimated resource requirements for the new strategy implementation.............12
4.3. The contribution of SMART Targets........................................................................12
5. Conclusion........................................................................................................................13
6. References........................................................................................................................14

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1. Refer to the power point presentation
2. Overview/Introduction
A business strategy can be defined as simply any firm’s planning in order to reach
their specific business goals or objectives. The business strategies succeed only when they
lead to the growth and progress of the business, holding a strong and competitive position as
well as financial performance. At times, when the strategies fail to meet the organizational
aims and goals, the company should consider either changing the existing strategies or going
for a whole new one. As per Verbeke’s (2013) opinion, a business strategy can be referred to
the working plan of the company in order to achieve their vision and objectives, while
competing with other companies successfully as well as optimizing the financial performance
with their existing business model.
The report highlights the strategic positioning of Volkswagen AG by carrying out an
organizational audit. Headquartered at Wolfsburg, Germany, Volkswagen AG, also known
internationally as the Volkswagen Group, is a German based multinational company
manufacturing automobiles. The company manufactures, distributes and designs the
commercial and passenger vehicles, turbo machinery, engines, motorcycles as well as other
offers related to the leasing, fleet management and financial services. The mission and vision
of the group is to focus on the global economic positioning and become the leader among
automobile manufacturers. Their goal is to offer safe as well as environmentally sound
vehicles in order to compete with the tough market. In the year 2016, it got recognition as the
largest automaker of the world, overtaking Toyota (Rugraff 2012).
The report throws light on the strategic positioning of the company, by carrying out
an environmental audit. Moreover, it includes the significance of the stakeholder analysis,

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while formulating the new strategy of the company. The report consists of a new strategy for
Volkswagen AG, in order to analyze the appropriateness of the alternative strategies related
to the market entry, substantive growth and strategy selection. In addition to this, the report
assesses the roles and responsibilities of the personnel who are charged for the strategy
implementation and the estimated resource requirements for the strategy implementation,
along with the SMART targets.
2.1. Strategic Positioning of Volkswagen AG
The organizational audit is a unique technique of internally assessing the organization.
The strengths, weakness, opportunities, competitive advantages along with threats available
in the existing markets come into play. The organizational audit is done with the assistance of
SWOT analysis (Ireland, Hoskisson and Hitt 2012). In this report, the organizational audit is
done with relevance to the organization of Volkswagen.
Strengths
The company’s crystal clear business segments and objectives prove to be the major
strength of the organization. However, since the last few years, the company has achieved
continuous profits. The ratio is lower but Volkswagen has managed to gain profitability.
There international expansion is a major strength, which has helped them improve their
global market understandings. Better programs of investments and capital expenditures have
also benefitted the company. The brand has the widest portfolio among the existing
automotive companies. Strategies like Together 2025, diversification and others have proved
advantageous for the company. Volkswagen has joint ventures within the local automakers of
China, which benefitted its growth and progress (Ball et al. 2012).
Weaknesses

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The company’s unfocused business approach led to its increasing cost structure. The
prices of their products are higher and the inventory is increasing. However, the company’s
installment of illegal software for cheating emission tests has marred its brand recognition to
some extent. The company’s negative publicity has weakened the whole brand, along with its
highest recalling rate in the market of United States. It has lower market share in the
automotive market of United States, which proves its less competence and little expertise in
the making of battery operated vehicles (Cavusgil et al. 2014).
Opportunities
The fuel prices may increase or rise in future. The demand for the autonomous
vehicles and competences as well as skills through acquisitions may increase. The euro
exchange rate may weaken. The company needs to focus on the improving policies of
sustainability in order to revive its damaged reputation (Wild, Wild and Han 2014).
Threats
The threats of the company are mainly the existing competitive environment of other
established companies. Volkswagen has lesser entry restrictions in the industry and its
frequent changes in the technological aspects posed a threat for the company. The company
has to pay further fines for the damages because of increased government regulations
(Dunning 2012).
2.2. Environment audit for Volkswagen AG
The environment audit is referred to the specific technique where the higher
authorities study the given organization’s external environment for formulating its strategies.
PESTEL analysis of the company is implemented for this purpose.
Political Factors

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On discussing the political factors of Volkswagen AG, it is found that the company
has faced many difficulties in the political aspect. The company is present in more than
hundred fifty countries. Therefore, Volkswagen AG is currently facing different situations in
the political aspects of different countries. The political situations of different countries are
not the same and therefore the company has to make the organizational strategies in
accordance with that. For instance, the government policies of Asian countries are not the
same as that of European countries (Killing 2012).
Economic Factors
The automobile industry is one of the major industries responsible for the country’s
development, due to its contribution to the nation’s national income. Taking Volkswagen’s
case into consideration, the company marks its contribution to the countries’ Gross Domestic
Product, where it is present. This is a big advantage of the Volkswagen group, as it helps in
developing the economy of the developing countries (Twarowska and Kąkol 2013).
Social Factors
The society also plays a major role in the automobile industry’s overall development.
The automobile company also affects the whole society, where it operates. Volkswagen
Group’s operating society is bigger and moreover, it varies from region to region. The
company provides the people of different society with employment. The total number of
employees is more than 626,700, who got directly as well as indirectly employed to the
company. Therefore, automobile industry helps in enhancing the societal level and makes the
company adaptive to changes (Forsgren and Johanson 2014).
Technological Factors
The technological factors also play a bigger role in the automobile company’s
success. Volkswagen is one of those companies having the best technology for manufacturing

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cars, both classy and sporty. The technology Volkswagen uses benefits it in making cars like
Bentley, Audi and others. The company also offers better services after sales. With
innovative technology implementation, the company has won the hearts of many car lovers
(Tian 2016).
Environmental Factors
Automobile industries have a very large impact on the country’s environmental
factors, as it affects its development. Cars use petrol and diesel as fuel, due to which
environmental pollution occurs. Usage of raw materials also affects the environment.
Volkswagen Group has its plants in various countries. Recently, the company faced issues
related to the creation of environmental pollution. Therefore, Volkswagen Group needs to
take full care regarding its manufacturing unit. It needs to check out its existing strategies and
implement new ones in order to take care of the environment. The company needs investment
on its R & D department, in order to produce cars locally and protect the environment (Grant
2016).
Legal Factors
Automobile industries are required to follow all the legal requirements of the country.
Volkswagen is present in more than one hundred fifty countries and it is a challenge for the
company to meet the legal requirements, as it is varies from country to country. The company
needs to focus on their competition laws, intellectual property laws, consumer protection
laws, emission laws, taxation laws and labor laws. Volkswagen imports and exports its
products, therefore, it needs to deal with several taxation laws of the government. Moreover,
to deal with labor requirements, the company also needs to focus on the varying labor laws of
many countries (Hamilton and Webster 2015).

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2.3. The significance of stakeholder analysis
Stakeholder analysis is also referred to as stakeholder mapping, which helps in
gaining an understanding of the stakeholders’ role in the making of decisions and formulation
of new as well as innovative strategies. In accordance with that, Volkswagen Group can also
prepare the strategies, in order to convince the stakeholders for the implementation of new
strategies. The significance of the analysis of stakeholder’s behavior is very crucial for the
whole procedure of new strategic formulation. Volkswagen group needs to gain an idea
regarding the stakeholders’ satisfaction and how their consensus is required for the new
strategic formulation, at each and every stage. According to Hoejmose, Brammer and
Millington (2013), the primary significance of the analysis of the stakeholders is that it
benefits on the grounds of expanding the level of satisfaction among them.
Moreover, another advantage of this analysis is that it helps in identifying the
employees’ competency. The success of the strategies totally depends on the capacity and
potential of the employees. Therefore, with the assistance of stakeholders’ analysis,
Volkswagen Group can successfully gain knowledge regarding the employees’ skill set,
against the new strategies. The making of decision at a large scale can be improved in
accordance with that. The study of consumers’ mindset also comes into play and through the
analysis; one can understand and assess the recent market trends as well as the consumers’
demands. Moreover, it helps in gaining positive responses from the investors and
shareholders. Financial requirements can also be fulfilled after finding out new strategies,
which are beneficial and lucrative for the business. In addition to this, the analysis also helps
in developing the confidence of directors and managers. Anitha (2014) stated that the support
of the stakeholder analysis is a major factor, which Volkswagen needs to avail.

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2.4. New Strategy for Volkswagen AG
In order to propose a new strategy for the Volkswagen group, the strategic planning
tool of Ansoff Matrix can be implemented in such scenario. Volkswagen group’s new
strategy is that the company needs to focus more upon the development strategy of the
market as well as their products. There is a need of identification of the new market, in which
the consumers can be acquired or captured by the company. Moreover, it is hugely essential
for gaining an understanding of the market development, which always requires huge
investment. If the strategies are properly implemented, then Volkswagen can improve their
generation capacity of the revenue. Furthermore, the development of the products are
important as they have faced legal issues earlier, therefore, environment friendly products is
the main area of concern for the company (Deyoe and Fox 2012).
In accordance with the support of the product development strategy, the generic
strategies of Porter, suggests the differentiation strategy, which is ideal for the company. In
the differentiation strategy, the company can introduce and implement some appealing as
well as attractive elements. Volkswagen has high competition from other renowned brands,

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therefore the implementation of experienced strategies is considered to be important.
Therefore, through the strategy of differentiation, surpassing the competitors would be
possible and establishment of unique branding can be done. This would help the company in
gaining an advantage in the competitive aspect, which would further strengthen its strategies
(Dillon 2012).
3. Approaches to Strategic Evaluation
3.1. Appropriateness of alternative strategies
Alternative strategies will prove to be beneficial for providing with more
opportunities and get additional assistance for solving the problems and business challenges.
Entry to the market strategy is much effective and efficient for the development of the
market. Along with the assistance of the market entry strategy, the share can be increased,
which in turn helps in gaining more customer base. Furthermore, the techniques can be
merger and acquisition, franchising in more countries, joint venture and more. It will
immensely support the business operations if the market expansion is more. The substantive

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growth can also be ensured via integration strategies and effective diversification. In order to
cut down costs, the company can manufacture their products by using local yet qualified
manufacturers. Furthermore, the channels of distribution can be also established as per
Girling’s (2012) opinion.
Substantive growth is directly related to the increment of the operations of the
company. The diversification is also related to the product line’s increase; therefore, new
range of innovative products can be introduced in the market. The company can also target
the middle class groups by introducing new range of low priced products. Moreover, with the
limited growth strategies, the organization can also handle adverse situations in the business.
In adverse situations, the existing business strategies can be applied and existing market can
be penetrated. This can also help in identifying the market trend and the strategies as well as
plans of the competitors. In addition to this, the strategy of retrenchment can also be applied
for dealing with the adverse situations. According to Homan (2013), the strategy can be
applied when some particular products are not good in the market. Therefore, the company
can adopt the divestment strategy, along with turnaround and liquidation. It helps in the
overall management of the resources by meeting the consumer expectations and ensuring cost
efficiency.
3.2. Justification of the strategic selection
Volkswagen AG is doing very well in the market; however, the company has faced
some legal issues, which marred its image to some extent. The company needs to recheck
their decisions as well as various business aspects, in order to design the strategic plans in an
appropriate manner. The strategy selected is the growth limited strategy, which emphasizes
on the market as well as product development. With the assistance of such strategies, the
company can also focus on the competitors as well as consumers. It can also make their

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approach of the business more focused. Furthermore, limited growth strategies can also help
in resolving the current business problems and issues (Kumar et al. 2012).
The differentiation strategy can also strengthen the strategy of product development.
It can produce a new range of innovative products in the market to increase its customer base.
An alignment can be done in between two different strategies and aspects. More investments
must be done in order to improve the existing quality of the business and the company should
keep on focusing upon investment opportunities. However, by investing more on
international market, the company can check on its profitability. The company can also
concentrate on the business size as well as structure. Hence, the strategies which are selected
are feasible and much justified for the stability and growth of the company (O’Donnell and
Vogenberg 2014).
4. Implementation of a chosen strategy
4.1. The roles and responsibilities of personnel in charge of strategy
implementation
Volkswagen Group should understand that experienced people must be getting the
responsibilities of implementing new strategies within the company. It is highly required that
experienced old employees should be given the priority while discussing about the business
strategies. The primary roles and responsibilities of the employees are related to the
communication of the strategies, which are to be directed to the departments in order to take
proper measures. Moreover, the personnel must have a clear reason behind the
implementation of such strategies which can be beneficial for convincing the staff members
in an appropriate manner (Oleszek 2014).