Comprehensive Business Strategy Report for Volkswagen: Analysis & Plan

This report provides a comprehensive analysis of Volkswagen's business strategy, covering aspects such as its mission, vision, objectives, goals, and core competencies. It examines the factors that influence strategic planning and evaluates the effectiveness of techniques used in developing business plans. The report includes an analysis of Volkswagen's strategic positioning through an organizational and environmental audit using PESTLE analysis, along with a stakeholder analysis to highlight its significance in strategy formulation. Furthermore, it proposes a new strategy for Volkswagen, considering market entry, substantive growth, and limited growth strategies, while also defining the roles and responsibilities of personnel and the requirements for implementing the new strategy. The importance of SMART targets in achieving successful strategy implementation is also discussed. Desklib provides access to this report and many other solved assignments.

BUSSINESS
STRATEGY

Table of Contents
INTRODUCTION...........................................................................................................................1
TASK 1 ...........................................................................................................................................1
1.1 Business mission, vision, objective, Goals and core competencies......................................1
1.2 Factors that needs to be considered when formulating strategic plan...................................1
1.3 Effectiveness of techniques used while developing business plans......................................1
TASK 2............................................................................................................................................1
2.1 Strategic positioning of Volkswagen....................................................................................1
2.2 Environmental audit of Volkswagen.....................................................................................3
2.3 Significance of Stakeholder analysis when formulating new strategy..................................4
2.4 New strategy for Volkswagen...............................................................................................5
3.1 Appropriateness of alternative strategies relating to market entry, substantive growth,
limited growth.............................................................................................................................6
3.2 Justification of strategy for Volkswagen...............................................................................7
4.1 Roles and responsibilities of personnel at Volkswagen. ......................................................7
4.2 Requirements for implementing new strategy for Volkswagen............................................8
4.3 Contribution of SMART target to achievement of strategy implementation in Volkswagen.
.....................................................................................................................................................9
CONCLUSION................................................................................................................................9
REFERENCES..............................................................................................................................10

INTRODUCTION
Business is a set of activity that helps to make product available to the people and making
profit out of it. Business strategy refers to as means by which companies sets to achieved its
desired goals. It is long term business planning. It can be termed as a process to identify vision,
mission and objectives of the firm hence applying plans and policies so as to achieve all these
goals. It is important for the business as it provides the path way for making it successful. It
guides organisations to fight out through the tough competition in the market (Ackermann, and
Audretsch eds., 2013). Volkswagen is a one the world's largest auto mobile company established
in the year 1937 by German labour front. It makes luxury cars, people's car (affordable cars for
masses), trucks. It is a part of group that Audi, Bentley, Bugatti, Scania, Skoda. In 2016 this
company has generated a revenue of 105 billion pounds. It is employers of around 626,715
employees throughout the globe. This report highlights the business strategy of Volkswagen. It
also showcases that business strategy is important for an organisations so as to achieve their
objectives (Acquaah, 2011). Factors that effect the strategic business plan and decision making
process. It also depicts the significance of strategic positioning, choices and implementation in a
business process.
TASK 1
1.1 Business mission, vision, objective, Goals and core competencies.
Covered in PPT.
1.2 Factors that needs to be considered when formulating strategic plan.
Covered in PPT.
1.3 Effectiveness of techniques used while developing business plans.
Covered in PPT.
TASK 2
2.1 Strategic positioning of Volkswagen.
It is important for any company to understand its strategic positioning. It can be found out
by doing organisational audit. It has the essence of how company competes and serve customers
in the market. It is influenced by many factors and by analysing and evaluating company can
find its strategic position. Factors are as follows:
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Strength:
 Manufacturing and production processes is one of the biggest strength of company. It
uses many techniques which helps to produce world class cars at greater scale.
 High use of technology helps company in reducing cost in the price wars among its rivals
(Acquaah, 2013).
 Bigger brand name facilitates it when it enter into the new market . It has approx 4%
market share in US and approx 20% in Europe and its was in the 25 largest companies of
the world according to Forbes 2000.
 There are many manufacturing plants of Volkswagen in approx 27 countries that helps
company in meeting the global and local market demands and maintaining demand and
supply chain. Company stands third in terms of production in automaker industry. Its
global sales figure was around 10.3 million in 2016.
 Robust capacity of production, it was possible due to high investment on research and
development projects.
 It has a employee strength of around 6 million which helps company in fulfilling its
various business needs.
Weaknesses:
 Leadership of the company is in the incapable hands as it can be seen that company is
moving away from its goals.
 Performance of the company in certain regions have been slow like in south America
(Annabi, and McGann, 2013).
 Employee productivity has been low consistently in past few years as compared to their
rivals.
 Cash flow has remained poor after the great losses in past few decades.
Opportunities:
 Acquisition of many companies so as to increase its market share has helped company in
increasing its profit. Its has plans to go for further acquisitions to capture maximum
market share.
 Volkswagen has opportunity of investing in new technologies in the industry.
 There has been increase in the demands of buses in the world.
 Hybrid electric cars are in higher demands.
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 Potential of growth in countries of Asia pacific, south east Asian countries.
Threat:
 Increasing competition throughout the globe especially emerging local auto makers in the
regional markets. Rivals like Toyota, Honda, Mercedes etc. has made company to make
cost cuts in its operating procedures.
 Uncertain economic condition of the world has made it difficult for company to make
long term plans. Slowdown in American economy and European debt crisis has effected
the company's business.
 Regulations to protect environment has made company's profit to reduce.
 High fuel prices is a threat to this industry.
 Environmental scandal of Volkswagen has put a blot on the image of the company and
trust in the minds of its customers.
2.2 Environmental audit of Volkswagen.
There are certain internal and external factors upon which the company's growth potential
depends. These factors and there impact can be understood by doing Environmental audit
(Auzair, 2011). PESTLE analysis is tool that can be used so as to audit its environmental
conditions:
 Political: As this company is operating in approx 150 countries, it is facing political
issues throughout the globe. Political situations are getting changing every every where
and so is its policy making. Auto mobile industry is closely related to the policies made
by the government. Policies regarding vehicle loans and their interest rates is decided by
the government which increases or reduces the sales of this company. In Europe factors
like Brexit will change the procedures of business especially free trade between UK and
other European countries.
 Economical: Auto mobile industry has faced a lot of economical problem especially in a
last decade. Many countries especially developing economies are helping Companies like
Volkswagen to open there business as they contribute in the GDP of the country (Azar,
O.H., 2011). Auto makers also helps the industries from where it takes its materials like
steel or glass industry. Various uncertainty in the economic condition in and around the
globe like European Debts crisis has possessed a threat to car manufacturing companies.
If people do not have enough money they wont go for buying cars and vice versa is also
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true. Serious decline in purchase of companies products in the south American market
has possessed a great threat for companies future in that region (Azar, 2011). Fuel prices
in many countries have been fluctuating on the regular basis hence has effected the
companies business.
 Social: Society for Volkswagen varies from place to place. It has provided employment
to approx 6 million people which helped in changing there standard of living. High speed
cars have created a feeling of negativity as they invite road accidents. In many societies
there is a problem of limited space especially in densely populated countries hence
buying cars have reduced.
 Technological: Cars now a days are moving towards being a computer on wheels. This
industry have seen a tremendous change of technologies over the years. Volkswagen is
among those companies which uses best of technology this industry has. Brands like
Audi, Skoda and Bentley have high technological features (Campbell, Edgar and
Stonehouse, 2011). Speed of production depends on the technology used in
manufacturing of this car. Catching problems in cars have become easier as it can only be
diagnosed by connecting laptops to the cars.
 Legal: There are various legal requirements of this industry. Employment legislations,
consumer laws, emission laws, taxation laws are different in all 150 countries in which
this company operates. Company has faced a legal issue in the US which has costed them
heavily regarding use of illegal softwares.
 Environmental: This industry is highly subjected to be under pressure of environmental
issues such as global warming and other pollution related problems. Finding alternative
fuels rather than petrol and diesel has become requirement of this industry. Volkswagen
needs to invest more on the research and development department so that it does not face
the problems like what it faced in U.S.
2.3 Significance of Stakeholder analysis when formulating new strategy.
Stake holders refers to as the person, group that has involvement with organisation
directly or indirectly. Investors, employees, directors, suppliers, government, community
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customers all are part of stake holders. Stake holder analysis helps to identify people who
supports business activities.
Significance can be understood by following points:
 Get opinion from stake holders about companies policies, future plans and products.
 Take support from from powerful stakeholders like investors can help financially in the
time when company needs support.
 Understanding their nature by various communication.
 To estimate their reaction about their business.
Steps of stakeholders analysis:
Step 1: Figure out people who are involved and effected by business operations of Volkswagen.
Step 2: To make stake holder's grid it is important for this company to identify the power,
interest and influence of stake holders.
Step 3: To make great understanding between the important stake holders in order to get their
feedback and support as an when required.
2.4 New strategy for Volkswagen.
Strategy making is important for the companies growth. Every organisations needs to
implement new strategies so as to grow in a sustainable manner (Bharadwaj, et al., 2013). There
are various strategies prevalent in the market and are used by the companies. For the companies
like Volkswagen New product development can be effective strategy.
As this company is in the auto mobile industry which has a lot of competition. Facing this
immense competition can only be possible by developing new products according to different
target markets around the world. This strategy helps company in meeting customer needs and
satisfying them by offering them what they want. This strategy helps company in generating
revenue and create further opportunities for expansion. This strategy also helps company in
opening new industries. For this strategy company has to select the target market, this selection
must be done on the basis of economy in which company is planning to launch its new product
(Chang and Chuang, 2011). As Volkswagen produces luxury as well as budgeted cars, so it is
important for the company to innovate its products accordingly. Environmental concerns have
provided opportunity for the company to make cars that uses renewable source of energy.
Electric cars are competitively cheaper and can be suited for customers who are in search of
affordable and environment friedly cars.
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This company can also use Market penetration strategy. This there is large opportunities
that are available for these companies in African and Asian sub continents. Since this company
has wide range of cars that too in different economical ranges (Chen and Jermias, 2014). This
could help company in increasing its market share in the new countries as well.
3.1 Appropriateness of alternative strategies relating to market entry, substantive growth, limited
growth.
There are various strategies that are related to growth of an organisation. These are
helpful for organisation as they provide solutions to their business challenges. These are as
follows:
Market entry strategy: In Volkswagen market entry strategies are implemented by two factors.
 Merger: it is referred to as combining of two different organisations which was
previously separated. In merger typically the size of the company is equal, and they are
equal partners then after. Volkswagen can implement merger as the market entry strategy
because of its market strength and it can help company in those regions where it is facing
loss.
 Acquisition: In this strategy one company takes the ownership of other. This is generally
done between two unequal sized company. Where generally bigger company acquires
smaller ones. It is better market entry strategy for Volkswagen than merger due to its
market power.
Limited growth : In this strategy Volkswagen introduces limited growth in the form of joint
ventures. In this two or more organisations shares the ownership. In the joint ventures there is
narrow gap in the competitive advantage (Fowzia, 2011). Volkswagen due to its large market
share in the industry it is not advisable for the company to opt for this strategy.
Substantive growth: This strategy is implemented by two effective strategies namely
diversification and integration. To reduce the costing of various procedures horizontal or vertical
integration can be used. This suggests that company can make its own raw material rather than
taking from other suppliers. Distribution channel can be strengthened by the company itself. This
strategy leads to increment in companies operations. Other than integration diversification
strategy could be used in this strategy Volkswagen can increase the range of product in the
market. This helps company to enter into new markets or industry. This strategy helps company
in reaching to new target sections of the society.
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Retrenchment: It is always seen as remedial action. These actions needs to be taken by a
company in case of financial loss, insufficiency, strong competition or failure. In case of these
situations organisations has to sell of its assets, cost reduction or revenue generation strategy
(García‐Rodríguez, et al., 2013). It can be applied in those areas or products of Volkswagen
where it is facing revenue losses.
3.2 Justification of strategy for Volkswagen.
As it can be seen from the companies portfolio that it is big organisation but right now it
is facing problem in certain areas of its operations. Therefore suggested strategy for this
company will be substantive growth. Using this strategy company can reach to new market and
can establish a confidence in the minds of customers. Integration of its products can help
company in making cost cuts which is necessary for the company as it can be seen in the given
case study. Rather than taking raw materials from other companies it can manufacture its own.
This helps company in raising the standard of its products and will reduce the chances of product
failures due to any specific part. Establishing of distribution chain helps company in reaching to
new customers. By using diversification strategy company can focus on new target markets like
middle class families in the society. It helps attract more number of customers with its new range
of products. For the companies expansion policy, it is important to have new range of products
into the market and must be developed according to different sections of the society (Ghezzi, A.,
2013). Other than Substantive growth strategy retrenchment can also help company in reducing it
revenue losses due to its failed products.
4.1 Roles and responsibilities of personnel at Volkswagen.
There are several roles that are defined for the strategy implementers. These personnels
needs to understand their specific responsibility in any strategy implementation.
 Top management: There are various responsibilities of top management like making
decisions on how a particular strategy will get implemented, how it will be governed and
monitored etc. One of the main responsibility is to arrange raw materials and set up there
production plants. It is necessary for the management to decide that which raw materials
needs to be made by the company and which needs to imported from other companies.
They have to conceive government so as to set up new plants that can provide job
opportunities and other benefits to people.
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 Middle management: Middle management is able to convert various strategies into
SMART goals and hence can divide budget accordingly. It also has the responsibility of
setting up communication between several units of the organisation as it is the foremost
requirement of the companies growth strategy (Higgins, Omer, and Phillips, 2015).
 Human resource management: In implementing substantive growth strategy like
diversification role of HRM becomes important as new production units needs new
employees. Selection and training of appropriate candidates for the new product
development is the responsibility of the this functional unit. Setting up companies own
distribution channel needs more employees and must be fulfilled by this department.
 Employee: Employees are generally reluctant to new changes but it is responsibility of
employee to handle these. Strategical changes must be harsh for employees sometimes
especially retrenchment strategy. It is responsibility of experienced personnels to share
their experience with the young employees or new selected employees. Newly selected
employees should understand the needs of place for which these strategies are
implemented.
4.2 Requirements for implementing new strategy for Volkswagen.
Every new strategy has some or the other requirements and these needs to be fulfilled so
to make it a success. Some of the requirements are as follows:
 Finance: It is important for the company to generate funds for the expansion policy.
Integration can help in making certain amount of cost cuts but that is not enough. Adding
new investors can be beneficial for setting up new plants for the manufacture of raw
materials required in auto mobile. Establishing own distribution chain will need funds
(Helms and Whitesell, 2013).
 Land: Setting up new plants requires land that needs to be managed by the company.
Top official needs to persuade government about allocating land for company's new
plants as well as distribution centres.
 Human resource: Any strategical changes involves human resource. Diversification and
integration both requires new skilled labours and training of old existing employees of
the company. Without this all other resources cannot be utilised in a proper manner.
 Technology: In this industry cited company has to make technological advancements so
as to increase the production. New product development part of diversification strategy
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cannot be possible without making technological advancements (Khalili Shavarini, et al.,
2013). Cars are becoming advanced everyday in terms of technology used in it and the
largest amount of diversification can only be possible with this factor only.
4.3 Contribution of SMART target to achievement of strategy implementation in Volkswagen.
SMART targets are the first and foremost requirement for the organisation. It helps to
understand goals in a better way so as to work under the given timeline (Montgomery, ed.,
2011). It helps to increase the efficiency of the company. These targets are parameters that are
fixed and help in providing direction to the company.
'S' stands for specific targets that helps in increasing market share and profitability of the
company. The cited company aims to make costs cuts in the coming years.
'M' stands for measurable targets that is set by Volkswagen. Setting up of new distribution chain
is a part of this target only.
'A' stands for achievable targets. Making technological advancements so as to compete with
Google and Japanese car makers is one of targets of cited company.
'R' stands for realistic targets. It is clear from the case study that company's targets are realistic.
Volkswagen plans to make necessary changes in the next five year investment plans.
'T' stands for time bound targets. Company makes time bound targets for next few years and
have plans to take back all those cars which have faced legal complications throughout the
world.
CONCLUSION
Business strategy is the set of procedures that a company implies so as to achieve its
targets. Mission, vision, goals provides path way for company's making of organisational
business strategies. Volkswagen being a bigger firm needs to implement these strategies in a
more planned way. It has strong hold in the auto mobile industry with a very large amount of
stake holders that are associated with this company. Substantive growth strategy can help
company in increasing its profit as well as its market share. In implementation of this strategy
role of top management, middle management and experienced employees are more significant.
There are certain requirements like finance, human resource that arises while implemented a new
strategy and it needs to be fulfilled.
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