Volkswagen's Strategy: Digital Performance and Market Entry Analysis

This report analyzes Volkswagen's business strategy, beginning with an introduction to strategic planning and its importance for business improvement. It details an environmental audit to assess Volkswagen's current positioning, including an analysis of its strengths, weaknesses, opportunities, and threats (SWOT) and a PEST analysis of the macro-environment. The report then formulates a new strategy, advocating for 'Ramp Up Your Digital Performance,' emphasizing digitalization of services, particularly online presence and e-tailing. It explores alternative strategies such as market entry, substantive growth, limited growth, and retrenchment, justifying the selection of a substantive growth strategy through integration, focusing on horizontal and vertical integration approaches. The report also discusses the implementation of the chosen strategy, outlining the roles and responsibilities of personnel, resource requirements, and the contribution of SMART targets for effective strategy implementation. The conclusion summarizes the key findings and recommendations for Volkswagen's future strategic direction.

Business Strategy

Table of Contents
INTRODUCTION...........................................................................................................................1
TASK 1............................................................................................................................................1
TASK 2 FORMULATING A NEW STRATEGY..........................................................................1
2.1 Strategic positioning of Volkswagen after carrying out an environmental audit..................1
2.2 Organisational Audit for Volkswagen..................................................................................2
2.3 A new strategy for Volkswagen............................................................................................3
TASK 3............................................................................................................................................4
3.1 Analysis of appropriateness of alternative strategies relating to market entry, substantive
growth, limited growth or retrenchment for Volkswagen...........................................................4
3.2 Justification for selection of strategy for Volkswagen..........................................................5
TASK 4: IMPLEMENTATION OF CHOSEN STRATEGY.........................................................6
4.1 Roles and responsibilities of personnel at Volkswagen who are in charged with strategy
implementation............................................................................................................................6
4.2 Analysis of estimated resource requirements for implementation of new strategy..............7
4.3 Contribution of SMART targets for achievement of strategy implementation.....................8
CONCLUSION................................................................................................................................9
REFERENCES..............................................................................................................................10

INTRODUCTION
For business improvement strategic planning is essential to compete with the
environment in which the organisation exists. Articulating an effective strategy is an essential
part of strategic management. Before formulating the strategy, first step is to carry out an
environmental audit for the organisation so that the internal (micro) and external (macro)
environments are analysed and evaluated for the purpose of selecting the best alternative strategy
out of all available strategies. There are few alternative approaches to analyse the business
strategies like market entry, substantive growth strategies, limited growth or retrenchment
(Kourdi, 2015) However, CEO and COO of company are responsible for implementation of
strategy, all other departments are also affected. Owners have to communicate the plan
thoroughly because shared vision is important for organisation to motivate employees. It brings
energy and focus in workforce, creating a learning organisation. To achieve full potential out of
Strategy formulated; SMART targets are considered in strategy planning i.e. targets should be
Specific, Measurable, Attainable, Relevant and Time Specific such that they contribute towards
effective strategy implementation.
TASK 1
Enclosed in PPT.
TASK 2 FORMULATING A NEW STRATEGY
2.1 Strategic positioning of Volkswagen after carrying out an environmental audit.
Environmental audit is broadly conducted to evaluate the current positioning of business.
Also, named as Cycle Audit, to assess capacity of the organisation in all areas of cycle: planning,
resourcing/funding, or marketing etc. It is the self diagnosis of organisation, Volkswagen's
strategic vision is to become the most successful, captivating and viable auto-mobile
manufacturer, company is realigning the targets due to fundamental changes in the industry. The
main goal of company is to become global ecological and economic leader of automobile
industry, in that context company has come up with intelligent innovations to satisfy customers'
needs and quality demands.
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The organisation has relied upon market growth expecting 10 million vehicles to be sold
per year. Company pays particular attention to the environmental protection and profitability to
its vehicle-related projects, simultaneously controlling the size of investments (Campbell, Edgar
and Stonehouse, 2011). The attractive range of environment friendly vehicles has elevated the
company's market position in the industry. Continous expansion of individual brands has taken
the company to excellent position in the Car Industry. Volkswagen wants to be the global dealer
in Electric cars by 2025 i.e shift to clean energy vehicles. To determine new ecological criteria
efforts are being put in production of vehicles, aggregates and light constructions. Daily
activities aiming to productivity are performed to increase customer satisfaction without any time
limit, irrespective of overall economic situation. Standardisation of production cycles are being
done, with consistent cost investment discipline to achieve long term objectives concerning
profits and financial solvency. Additionally, the “future tracks” plan has already been laid for
realigning the future e-mobility issues, new business strategies and digitalization.
For year 2025, the strategy focusing on digitalization, integrity and legal affairs, and
sustainability, presented results in mid-2016. Satisfied customers and motivated employees,
excellent quality products and services, sustainable profitability and ecological responsibility are
the aims of Strategy 2018, and remained unchanged. Company is seeking 8 percent sales before
tax to ensure solid financial positioning in the industry. It wants to achieve the best employer
title in automobile industry, having best team in car industry. Having highly professional and
qualified staff who would be motivated and passionate towards their work is what company
requires. Lazy and unprofessional staff gradually leads to failure of organisational goals.
2.2 Organisational Audit for Volkswagen
After conducting organisational audit by SWOT and PEST analysis to evaluate the
Volkswagen's strategic positioning. It has been found that the company's strengths are well
structured brand, being one of the oldest car manufacturing company. Volkswagen is growing
fast and high technology inbuilt in cars shows the strength in Research and development,
weaknesses of the company are 'The Emissions scandal' which affected the brand thoroughly and
competition eating away margins. Opportunities for the company is increased purchasing power,
possible world expansion, modern and innovative design after emission scandal. Organisation
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may come up with new and really skilled engineers to produce increased fuel efficient cars.
Threats to company are brand reputation been hurt due to emission scandal, increased
competition, different government regulations, innovation being implented all across car
industry.
Further, to analyse macro environment of the company PEST analysis has been
performed. It is the company dealing in more than 150 countries; have to face different political
situations, and also car industry is closely related to policies made by government, for example
Chinese government has different policies than Brazilian. Automobile industry contributes to
national income of the country and it's the plus point for the company. Prices of fuel also affects
the sales of car directly related to economic situation of the country. To deal with this type of
difficulty the company has focused on lower segment cars. Social factors that are important for
company are: increasing accidents on roads, religious faith of people and the organisation giving
employment to people of society.
Volkswagen has the best technology in cars and deals in both segment classical and
sporty; Audi, Bentley and Skoda are highly technological cars. After sales services are made
better with the changinng technology in the business environment. Today a technician just needs
to connect a laptop and he will get the problem in the car. To follow legal requirements of 153
countries is not an easy task for Volkswagen, needs to focus on labour law, emission law and
taxation laws. Also, company have to focus on natural environmental factors of the society and
save the plants' destruction due to company and invest in R & D department to produce the cars
in local region only.
2.3 A new strategy for Volkswagen
After considering the strategy of 'future tracks' initiative for 2025, a new strategy that is
being suggested to the organisation is “Ramp Up Your Digital Performance”. Today consumers
search for online services, parts or distributors, company should focus on digitalization of
services and most importantly online services (Ike, 2017). The website must be the 'centre of
digital experience', having no traffic on digital content, online advertisements, social posts are
drivers of website traffic. Web pages attract more customers, they show interest in products and
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services, concerning which the company should optimize site with fresh content and continually
share to third parties.
According to a survey by google (a search engine), named “Understanding consumers” 4
to 5 buyers use search engines before making a purchase decision. 53 percent of searchers click
on first result on search engine and 25 percent go to second or third, of course company should
rank high. Additionally, these sites should be optimized for mobile views so that the users can
easily access the product range available., When a site is not mobile-friendly, the customer will
shift to other rivals who are delivering mobile sites for online purchases. Companies dealing in
online selling are highly appealing to consumers today, a new trend in industry gaining
momentum is e-tailing i.e. selling retail goods on internet. It can be business to business (B to B)
or Business to Consumer (B to C), advertisements are medium for such trade. Traditional
business practices are to be curtailed to face rapidly changing environment. This requires many
products and services specifications to make customer feel like personal shopping and know the
offerings of looks and qualities of different products and services.
TASK 3
3.1 Analysis of appropriateness of alternative strategies relating to market
entry, substantive growth, limited growth or retrenchment for
Volkswagen
Market entry strategies are Organic expansion or Exporting, first point considered while
opting for exapansion in domestic or foreign market is that the organisation is not growing.
When an organisation makes a decision to enter new markets there are lots of risks in front of the
company like costs, marketing channel, sources of funds, or degree of control can be exercised
on the company in new market (Spender, 2014). Examples of Market Entry Approaches are
Turnkey contracts, counter trade, contract manufacturing, mergers or acquisitions.
Substantive growth strategies are horizontal integration, vertical integration, related
diversification or unrelated diversification Above mentioned are organic strategies and
alternatively organisation can follow external growth strategies. They are exporting, licensing,
partnership, franchising or joint-ventures, so that firm can make arrangements with behind or
ahead channel in process of manufacturing or distribution of products or services. Limited
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growth strategies are followed when the organisation wants to cut off their debts, broadly four
approaches can be followed market penetration, market development, product development or
diversification. Market development is trading existing product in different market
segments, product development is trading new product in existing market. Market penetrating
approach is selling existing product in existing market. Diversification is entering into new
market where the organisation is not currently in. Concentric diversification or Horizontal
diversification are types of diversification strategies. Retrenchment strategies are followed with
the purpose to cut off the operational expenses. Approaches to this strategy are turnaround,
divestment or liquidation. Turnaround approach suggests withdrawing from strategy previously
chosen, and restart again. Reasons for such conditions may be continually negative cash flows or
losses, falling market share, high turnover of employees. Divestment strategy is sale of
liquidation of a portion of a business or SBU (strategic business unit), this strategy is followed
when the firm is unable to face market competition or a better alternatives is available for
investment (Yuliansyah, Gurd and Mohamed, 2017).
3.2 Justification for selection of strategy for Volkswagen.
Automation is must in the industry looking towards the current scenario of commercial
business, consumers' demands and their expectations from industry requires digitalization. To
increase the revenue and high customer loyalty with keeping them for long term company has to
fulfil their desires and requirements from brand. Increasing market share is also a reason for
transformation to automation. (Different Types of Business Strategies, 2017). To enter into new
markets Volkswagen should follow substantive growth strategy of integration. Horizontal
integration or vertical integration can be followed by the organisation in order to fulfil its long
term objective to achieve digitalization in 2025.
Company can go with the acquisition of online marketing company as a vertical
integration approach who will advertise the company's products and services in the market
Online marketer would be having knowledge of all market segments into that country and will
best select the online promotional strategies for the company.
Additionally, online marketer would be aware of the rival firms in the industry and their
promotions. However, advertisements are not enough to enter into new market, the company
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should make contracts with the existing firms in the same industry as part of horizontal
integration, for example turnkey. So that they will complete the manufacturing process and sell
in the market on behalf of Volkswagen. The risks of funding will be on part of contractee firm,
who must be knowing the market well and the company will only have to sell their products and
services into the new market. For which online advertisement company would have chosen the
best distribution channel online, as the future strategy of company aims at digitalization, and
therefore online distribution of products would be facilitated by this integration. The risk of
control from new market would also be minimised due to integration in the industry. Buying and
acquiring value added channel will help company to flourish in new market.
TASK 4: IMPLEMENTATION OF CHOSEN STRATEGY
4.1 Roles and responsibilities of personnel at Volkswagen who are in charged with strategy
implementation
Attainment of strategy implementation has the cornerstone of managerial leadership. It is
the Chief Executive Officer or Chief Operating Officer of the organisation who is responsible for
the success or failure of the strategy implementation. They are experts for strategic regulation
and management of companies, to encourage and coordinate business operations constructively.
Though, all other managers and employees of organisation are also responsible for the effective
implementation of strategy (Soltanizadeh, and et al., 2016). Without the staff's input, strategy
implementation and control would be impossible. Board of Directors articulates strategy at top
level of the organisation, they should explain the strategic intent, future objectives of
organisation and clear out the vision. Along with this, organisational leaders should be aware of
the shareholder's expectations. At business and functional level the employees are engaged in
drafting their own strategies for execution of the main strategy formulated and implemented by
Board of Directors of organisation.
Role of Information Management department is decision making process. Research and
Development department has skills in elementary research, Marketing department has
responsibility to promote brand, to maintain the reputation of goods understanding industry
trends. Sales department is responsible for effectively and efficiently affecting sales.
Although,all the departments at all levels are affected by the new strategy formulated but failure
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of strategy implementation is held upon board; Chief Executive Officer and Chief Operating
Officer of the Volkswagen.
Successful implementation of strategy have often reported shared vision and motivated
employees. Clear and understandable communication of strategy guides to reach mapped and
desired outcomes. When owner celebrates company's large and small wins with their teams, and
tell the success stories to the employees it has always been a milestone for effectively
implementing strategies. Shared vision is important to create learning organisation, it is what
Volkswagen wants to accomplish as an organisation. It is not learned or implemented by one or
two persons, rather to be committed by all other employees (Wu, Gao and Gu, 2015)
4.2 Analysis of estimated resource requirements for implementation of new strategy.
With the growth of technology the customers are demanding instant replies to their
queries. Also, expects to receive instant delivery of the purchases made and want to keep track
of their orders. Growth of real time requires digitalization and automation in the industry
(Yuliansyah, Gurd, and Mohamed, 2017). This assessment shows that in coming near future
their will be relatively fewer winners in the Car industry. To Ramp Up Company's Digital
Performance following resources are required: Abend, knowledge based and more to reach
abend there are three series recently running recordings, slides and demo files, recruit skilled
technical hault as there are many features in Cars. It requires software engineers, who are
talented and has ability to work in more dynamic surroundings.
Abend is webinar's another name for account name or access number. Landing pages are
created in abend and information needed can be successfully accessed (Veiga and Franco, 2015).
Another resource is developing the FME server, that helps accomplish the automation needs
Server has its functionality through modern REST framework, used to develop server webinar.
HR automation is another tool to achieve automation, because it involves document-driven
processes. Documents are prepared in paper based offices, employment contracts are read and
signed by new employees and one HR employee has to verify that such documents are carefully
prepared, printed and signed by the employee.
Such procedures take a lot of time and spending hours on such procedures are not
possible. HR automation is done through ECM (enterprise content management) where standard
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documents are kept in digital repository in standard format. Original documents in digital
repository are kept in digital format. Business process automation (BPA) is integral part of ECM
facilitates paper based procedures to be performed digitally. As a result, to acquire technical
experts the company has to go for mergers and acquisitions to undertake in-house technical
know-how and experts.
4.3 Contribution of SMART targets for achievement of strategy implementation
When a goal is formulated for the company at first it leaves the organisation with lot of
unanswered questions. There are few pitfalls in implementation of a strategy. They are, lack of
communication from top level managers to middle level managers, due to small problems of
daily operations mangers tend to forget future goals. Sometimes managers forget discussing the
implementation process and take planning document end itself (Toor, 2016). In order to
effectively achieve the set goals for the short term, the targets should be SMART; S for Specific
it should very clear to the owners and managers, so that strategy implementation is accomplished
accurately to achieve the goal, as in case of Volkswagen the new strategy has a specific target for
achievement of digitalization, it is clearly understood through the new strategy been
formulatedto be achieved by 2025. Another target is M for measurable that says that the
information relating to objectives should be quantifiable that can be collected, obtained and
uncovered, rather there would be wrong intentions for the strategy formulated; measurable goals
are successfully implemented.
A for Attainable the goals i.e. should be achievable, for instance if the company promises
100 percent customer satisfaction, it is impossible. Only realistically achievable goals should be
set because such targets are attainable. Volkswagen's short term goal is to achieve greater
customer satisfaction but it has to keep in mind that 100 percent success is not achievable
(Alsudiri, Karaghouli and Eldabi, 2013). R for relevant, targets should incorporate the long term
goals of the organisation, and clear in the heads of the personnel involved in strategy
implementation. T for Time Specific there must be a timeline to achieve the set targets, for
example the company has set target 'improve after sale services by 10 percent' it should be
'improve after sale services by 10 percent within the time frame (say 10 months).
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CONCLUSION
After going through this report it is understandable that, to formulate an effective
strategy, Volkswagen, should at first conduct an environmental audit. Evaluate the micro
(internal) and macro (external) factors to select the best alternative strategy. To achieve the
targets set while formulating and selecting the new strategy, company is recommended to
analyse alternative approaches relating to market entry, substantive growth, limited growth or
retrenchment. Organisation is advised to follow the integration (horizontal and vertical) strategy
to establish itself in international market. Roles and responsibilities of personnel is also
important in the strategy implementation process. Resources required for effectively
implementing the new strategy, should be analysed before the formulation. And to achieve best
out of strategy articulated, Volkswagen has to put up with SMART targets.
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REFERENCES
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Palgrave Macmillan.
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OUP
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Wu, P., Gao, L. and Gu, T., 2015. Business strategy, market competition and earnings
management: Evidence from China. Chinese Management Studies. 9(3). pp.401-424.
Yuliansyah, Y., Gurd, B. and Mohamed, N., 2017. The significant of business strategy in
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