Strategic Planning Report: Volkswagen's Emission Scandal and Recovery

This report provides a strategic analysis of Volkswagen's (VW) efforts to recover from its emission scandal. As a business planner from New Phoenix consultancy, the researcher conducts an organizational and environmental audit, examining internal and external factors affecting VW's operat...Read More

BUSINESS STRATEGY
Executive Summary
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In the following research study, the researcher develops a report based on the strategic
planning of Volkswagen. VW has involved in emission scandal and to overcome it and regain
the brand loyalty it requires the suitable amount of strategic planning and management. The
data used is secondary. SWOT analysis of VW along with new alternative strategies is
suggested. Ways to implement those strategies are also discussed.
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Table of Contents
Introduction............................................................................................................................4
Methodology...........................................................................................................................4
Findings..................................................................................................................................4
Organisational Audit and Environmental Audit.....................................................................4
Roles stakeholders play in formulating new strategy.............................................................6
SWOT Analysis......................................................................................................................7
New Strategy of VW AG.......................................................................................................8
Discussions.............................................................................................................................9
To what extent alternative strategies are significant..............................................................9
Process involved in implementing new strategies..................................................................9
Recommendations................................................................................................................10
Conclusion............................................................................................................................10
Reference List.......................................................................................................................11
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Introduction
The strategic planning regarding a company is the process through which the organisation
works to reach its goals. The decisions related to the company's operations needs to be
properly planned and resources need to be allocated properly following the strategy. Strategic
planning appears as a guide that consists of actions and decisions related to the aims of the
company for the future. In this research study, the researcher plays the role of a business
planner working under the consultancy group New Phoenix. The Volkswagen Group VW EG
has got involved in Emission scandal and needs to be provided with a strategic planning. The
researchers provide an organisational and environmental audit along with providing a new
business strategy to the VW EG. The stakeholders need connections between the agreements
and results and hence they play a major role is influencing the strategic planning of the
company. The different framework of methods is used in the strategic planning of the firm
(Smith, 2013). The current study also explains the strategic positioning of VW EG and to
what extent the new strategies would be helpful is explained. As a strategic planner, the
researcher needs to analysis to what extent the new strategies are appropriate related to the
company's growth in the market. Implementation of the new strategies also involves methods
and ways through which the new strategies are suitable. Requirements of the available
resources and the targets also contribute towards the success of strategic planning.
Methodology
The following report is based on the case study analysis of Volkswagen Group which appears
to be a large manufacturer firm of automotive. VW sells different types of cars and vehicles
for both private and commercial use. The data used is the report is secondary. Information
from the case study provided as well as information and data from various online sources,
books, journals, and websites are collected and analysed. The method of data collection used
here is qualitative. The researcher researchers and provides an appropriate strategic planning
that would help the company to sustain the growing competitive market (Silverman, 2016).
Strategic planning also involves steps for strategic management.
Findings
Organisational Audit and Environmental Audit
Preparing and implementing new strategies requires auditing the company’s financial affairs.
The internal factor that may affect the functioning of the firm is taken under organisational
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audit while the external factors that affect the operations of the firm are taken under
environmental audit. With reference to the case study provided related to the VW group and
its activities in the UK, the effectiveness of the strategic planning can be explained through
proper auditing of the firm's activities. To what extent will the new strategies affect the
functioning of the firm both internally and externally is reflected through the auditing
process. According to Lee and Wilhelm (2010), the factors of an organisational audit are
objective and independent and increase the value of the operations of the organisation. The
process of auditing helps the company to function in a disciplined manner and be more
efficient in managing risk as well as controlling the governance activities. Organisational
audit reflects the internal strength and weaknesses of the organisation and analysing those
helps in the company’s progress.
The customers of the VW EG purchase the output produced by the company hence the targets
of a firm are retain the loyal consumers of the Volkswagen’s groups. Products customisation
and changes need to be made in upgrading the quality of the product keeping in mind the
demands of the buyers. The units selling Volkswagen automobiles gives sufficient amount of
importance to the feedbacks provided by the customers purchasing its goods and develops its
product accordingly (Heger and Rohrbeck, 2012). VW also focuses on controlling the quality
and upgrading the product quality from time to time. Efficient product along with
minimisation of cost helps to gain customer satisfaction. The purchasing power is different
for different customers and hence VW provides a large variety of cars for sale operating in
about 150 countries all over the world. In order to lead the competitive market satisfying the
needs of the customers is essential (Rohrbeck and Schwarz, 2013). Buyers have more
knowledge related to different types of goods and indulge themselves in the bargaining of the
different products. Thus satisfying the needs of the customers would help the company to
sustain in the market and increase the revenue of the company.
Strategic positioning of the company is low with respect to its buyers and the company has no
power to control the other external factors. The competition among other automobile
company is also large. The sales of the company have dropped recently which indicates a rise
in the sales of other customers. The products are less differentiated in the automobile market
and the competition is very high (Thompson and Martin, 2010). Buyers in the perfect
competition market always compare the price and quantities of the products and choose that
products that satisfy their needs along with low costs. Advertising and promotional strategies
also attract buyers. Hence in order to attract a large number of buyers' innovation of ideas and
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use of new technologies to create differentiated products are essential. The performance of
the employees and the business ethics followed by them also affects the functioning of the
firm.
There are other external factors also that affect the functioning of the firm. These reflect the
threats and opportunities of the firm. Environmental factors affect the performance of the
business by realising the key factor that influences the operations of the organisation and
develops strategies in such a way that the threats can be overcome. Economic progress can be
affected by the functioning of the company. Environmental factors include the economic
factors in the operating market (Uggla, 2014). The technical progress, as well as the use of
advent information technology, impacts the business to a large scale. Using social platforms
as well as the use of technologies has the large influence on the business. VW has upgraded
its technology by producing electric cars. Different types of passengers care with efficient
model up gradation are also undertaken by VW. They attempt to make cars as computers on
wheels. The VW has hampered the environmental laws by crossing the pollution limits of the
environment. Creating pollution affects the well-being of the general public and that prohibits
the smooth functioning of the company. The company also is facing financing crisis.
Roles stakeholders play in formulating new strategy
All the stakeholders play an important role in influencing the aims and goals of the company.
While developing new strategies the interest of the stakeholders needs to be protected.
Stakeholders are the ones who provide funds to the company. Development of new strategies
requires innovation of ideas as well as huge amount of expenses are incurred in utilising
those. Planning as a strategy needs proper communication with the stakeholders and full
cooperation and support is also essential in developing the new project (Burki, 2015). On the
contrary, Thompson and Martin (2010) say evaluating the characters of the shareholders as to
what extent the new ideas encourages the stakeholders to need to be analysed. Influence of
the stakeholders is analysed by collecting information about the influence of the stakeholders.
Influences of the stakeholder also affect the success and failures of the business. While
developing a marketing strategy importance needs to be given to the group to customer
stakeholders. While communicating about the operations of the company the information
provided need to be transparent and honest.
An important technique involved in the marketing strategy is having a fair interaction with
the customers and meeting their expectations. Researching the market properly and designing
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keeping in mind the preferences of the customers is essential. If the feedback from the
customers is valuable the stakeholders also get pleased. Influences of the customer's demand
help in analysing the stakeholders and hence for it a proper market research is important. A
company's level of production and to what extent the customers are satisfied is found out
through the performance level of the employees. For a company's long-term growth the
efficient employees need to be retained and employees' turnover needs to be low (Kapferer,
2012). Creating a comfortable work environment and satisfying the needs of the employees
encourages the employees to work harder and collect efficiency gains from the customers. the
employees also expect that the inputs would be provided to them when they demand it and
the ability to meet their demand would motivate the customers more. Stakeholders also get
influence by the ethics a business entity follows keeping based on the laws and regulations of
the economy. Stakeholders also provide faith to the company that protects the integrity of the
society and does production abiding by the business laws and ethics.
The openness of the business along with proper supply chain management helps in efficient
functioning of the business. Stakeholders are influenced by the goodwill of the firm which is
promoted by online or offline promotional methods. VW faces a financial crisis and only way
to overcome the financial crisis is through the investments of the shareholders. Stakeholders
tend to review the investments that are planned. The scam of VW globally has increased the
burden of the company which can be overcome by the influences of the shareholders.
Shareholders influence other shareholders and environmental groups and also benefit the
company following other corporate responsibilities with cost minimisation techniques and by
giving votes to the new ideas (Kenne et al. 2012).
SWOT Analysis
For developing strategic planning for any company studying about the strengths, weaknesses,
threats and opportunities of the VW is important.
Strengths: VW is very well structured. The cars are developed with highly skilled ideas. The
expansion of the business for Volkswagen is large. As it is well known and is an old company
in the automobile market operating in about 150 countries. The brand is well recognised,
especially in the European market. The operations of the company are also covered over a
large scale. VW has incorporated new technologies and developed hybrid automobiles hence
the Research and development related to its products is good. The contribution of revenue
amount in the EU economy is also significant.
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Weakness: Volkswagen got involved in the emission scandal which affected the enterprise
worldwide. Many cars got returned to the company which has affected their operations
largely. The software installed turned out to be harmful to the functioning of the company
which reflected the lack from the top managerial level of the firm. The increase in the number
of competitive brands entering the markets has increased which increases the market
competition related to price. The competition provides the advantage to the customers,
however, affects the brands operating in the market. The position of Volkswagen is not same
in all countries. It is strong in Germany while weak in developing countries. The brand many
times fails to meet the market requirement.
Opportunities: The purchasing power of the automobile industry keeps increasing. From
luxury goods, automobiles turned out to be necessities which would lead to an increase in the
sales of Volkswagen. With the rise in the purchasing power of the people, the GDP of all
countries worldwide is also increasing. Spreading and localising products on different
countries may expand the operations of Volkswagen. VW needs to increase the efficiency of
its fuel to overcome the scandal in which it got involved. It needs to produce modern cars that
are fuel efficient (Elson et al. 2015).
Threats: Due to the emission scandal the reputation of the brand got affected largely.
Rebuilding a brand name requires a large number of strengths and costs. The competition is
the market is increasing and the government regulation for a different country is also
different. The same strategic plans may not work for all the countries. VW is kept under strict
scrutiny of law regarding its emission issues.
New Strategy of VW AG
The suitable strategy for Volkswagen group would be creating human resources that would
provide the competitive advantage to the company. The needs of the employees need to be
developed along with providing training so that the employees can work efficiently and
compete in this cut-throat competition market. In this context Freeman (2010) says
that developing the skills of the employees along with protection of their rights would
increase the quality of the services they provide. Interactive strategies are also essential in the
market. Utilising the resources of the company fully would help them to gain comparative
advantage in the economy. The basic aim of Volkswagen is to make profits to overcome the
financial debt of the company. However to achieve long-term goals successfully the company
needs to improve technologies in order to achieve cars that are emission free. It also needs to
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upgrade its technology and provide vehicles that are self-driven to meet the growing market
demand (Kapferer, 2012).
Discussions
To what extent alternative strategies are significant
Interactive strategies help in achieving the competitive advantage as the company can gain
knowledge related to the strategies the competitors' users in the market. Enabling cooperative
strategies along with influencing the strategy related to price and quantity is also important.
Collaboration in the market along with interactive strategies would help the firm to achieve
competitive advantage. Game theory in the marketplace along with competitors is also
essential. As due to the emission scandal the brand name of VW has decreased in the market.
Even if it improves the technology to provide emission free cars it would require time to
regain the brand loyalty in the market (Rosenbaum et al. 2015). To regain that loyalty quickly
interactive strategies in the market is required. These would help to provide the best quality at
a given price to the customers. This alternative strategy would help to understand the local
market worldwide and also help to entry and sustain in the market where other brands are
already popular.
Process involved in implementing new strategies
Choosing a strategy would not be successful until the strategies are implemented properly.
Proper methods of delivering the strategy are also needed according to the strategic planning
made. The role to implement a strategy needs to be taken by two parties that are the managers
of the middle level and the outsiders. The strategic plans are made by the top-level of
management after consulting the board of directors and are implemented by the managers of
the middle order (Buiga, 2012). The outsider's group includes consultants or the stakeholders
those who are also important in the implementation of a plan. The market situations keep
changing and consultants' advice plans according to the changing situations. Stakeholders
also bear important responsibilities regarding strategic plans.
For strategic planning allocating the available resources is important. Interactive strategies
involve allocation of resources from company to company or from one strategy to another.
The resource requirement is determined by the availability of the resources and also the
business environment of a country. The resources that are physically available that are the
resources used in production process, the finance and marketing plans, human resources as
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well as the start-up costs of the companies are the resources required for implementing these
strategies (Burki, 2015). Hence improving the skills of the people through learning and
development is essential in improving the performance regarding the new strategies (Kenne
et al. 2012). Implementation of a proper plan also includes costs and for that funds are
required. Along with implantation, proper monitoring of the strategies is also essential.
Monitoring of the strategies also includes SMART goals that need to be fulfilled. In applying
the interactive strategies the managers needs to observe if the strategies can deal with the
main opportunities and obstructions of the company. Criteria of acceptability can be used in
this case to check if the stakeholders' needs are satisfied. The risk involved and the returns to
be received would also be set appropriately. The managers also need to check if the strategies
are feasible or not. Measuring feasibility is important in providing success for the company.
Recommendations
Both the microeconomic as well as macroeconomic factors need to be analysed to check the
progress of the company. Development of the employees' skill through training and education
is essential and for that huge amount of training cost would get involved. In order to
overcome the business scandal, proper business ethics needs to be followed by all the
management levels. In the competitive market, it needs to keep the price as low as possible.
The company needs to focus on the environment with greener future. Along with its focus on
profitability low-cost efficient models also needs to be provided. It needs to develop more
electric vehicles and the fueling system needs to be kept in mind regarding the safety of the
environment. The company needs to focus on the commercial vehicle to cover up the scandal
and methods applied so that further it would not be penalised under law.
Conclusion
Environment-friendly techniques along with efficient vehicles need to be produced by VW
EG. Cutting the costs as well as increasing the production is important. The company needs
to focus and make strategic planning related to the expansion of the market for electric
vehicles. The scandal has involved a lot of fines for the company and hence the company
needs to provide vehicles that would help to retain some amount of loyal customers. Efficient
management along with strategic position is also important regarding the company's success.
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Reference List
Buiga, A., (2012). Investigating the role of MQB platform in Volkswagen Group’s strategy
and automobile industry. International Journal of Academic Research in Business and Social
Sciences, 9(2), pp.391-399.
Burki, T.K., (2015). Diesel cars and health: the Volkswagen emissions scandal. The Lancet
Respiratory Medicine, 3(11), pp.838-839.
Elson, C.M., Ferrere, C.K. and Goossen, N.J., (2015). The bug at Volkswagen: Lessons in co‐
determination, ownership, and board structure. Journal of Applied Corporate Finance, 27(4),
pp.36-43.
Freeman, R.E., (2010). Strategic management: A stakeholder approach. Cambridge
University Press.
Heger, T. and Rohrbeck, R., (2012). Strategic foresight for collaborative exploration of new
business fields. Technological Forecasting and Social Change, 79(5), pp.819-831.
Kapferer, J.N., (2012). The new strategic brand management: Advanced insights and
strategic thinking. Kogan page publishers.
Kenne, J.P., Dejax, P. and Gharbi, A., (2012). Production planning of a hybrid
manufacturing–remanufacturing system under uncertainty within a closed-loop supply
chain. International Journal of Production Economics, 135(1), pp.81-93.
Lee, C. and Wilhelm, W., (2010). On integrating theories of international economics in the
strategic planning of global supply chains and facility location. International Journal of
Production Economics, 124(1), pp.225-240.
Rohrbeck, R. and Schwarz, J.O., (2013). The value contribution of strategic foresight:
Insights from an empirical study of large European companies. Technological Forecasting
and Social Change, 80(8), pp.1593-1606.
Rosenbaum-Elliott, R., Elliott, R.H., Percy, L. and Pervan, S., (2015). Strategic brand
management. Oxford University Press, USA.
Silverman, D. ed., (2016). Qualitative research. Sage.
Smith, R.D., (2013). Strategic planning for public relations. Routledge.
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Thompson, J.L. and Martin, F., (2010). Strategic management: awareness & change.
Cengage Learning EMEA.
Uggla, H., (2014). Make or buy the brand: strategic direction of brand management. Strategic
Direction, 30(3), pp.1-3.
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