International Business Strategy Analysis: Volkswagen Case Study Report

This report provides a comprehensive analysis of Volkswagen's international business strategy, examining its evolution from a distribution-oriented multinational company to a production-oriented and, eventually, a translational company. It explores the application of global business strategies, emphasizing the pressures of competition and cost reduction. The report delves into Volkswagen's historical context, its diversification, and its strategic alliances, particularly its joint venture with SAIC in China. It analyzes the impact of mergers and acquisitions, joint ventures, and strategic alliances on Volkswagen's global expansion and market performance, highlighting the benefits of such partnerships in terms of resource acquisition, market penetration, and risk reduction. The analysis covers Volkswagen's changing strategies, the benefits of the SAIC joint venture, and the evolution of its international business approach over time. The report also explores the three phases of Volkswagen's industrial-relation model, comparing and contrasting its internationalization strategies and corporate governance across different periods. The report concludes by highlighting the company's ability to adapt to market changes and expand its operations across international platforms.

INTERNATIONAL BUSINESS
STRATEGY

Table of Contents
INTRODUCTION...........................................................................................................................1
MAIN BODY...................................................................................................................................1
CONCLUSION................................................................................................................................9
REFERENCES..............................................................................................................................10
APPENDICES 1:...........................................................................................................................11
APPENDICES 2:...........................................................................................................................12
APPENDICES 3:...........................................................................................................................13
APPENDICES 4:...........................................................................................................................14
APPENDICES 5:...........................................................................................................................15
APPENDICES 6:...........................................................................................................................16

INTRODUCTION
A business strategy refers to a means by which a company sets out plan to achieve the
specific objectives, in predetermined period of time. It is also considered as a long-term business
planning that covers near about 3 to 5 years or more. While, in context with international
business strategy, it defines a plan through which commercial transaction can take place between
organisations of different countries. The present report is mainly described concept of
international business strategy and actions taken by private organisations for increasing their
profitability. For this purpose, some case studies of Volkswagen is considered for critically
analyse whether its strategies changes with time or seems to be consistent.
MAIN BODY
Global business strategies are mostly appropriate for those companies which are faced
strong pressures of intense competition, for cost reduction. It assists firms for tightly coordinate
with their product and pricing strategies across global markets. In business, global strategy is
explained in terms in strategic guide of organisation to globalisation. Under this, business can be
employ the global business strategy in order to reap trading rewards in international market. It is
business strategies that engaged through organisations which are operating the the global
business environment and also serve customers throughout world. In addition to this, global
business strategies are concerned to businesses which developing strategies and adopted through
business to meet the short as well as long term objectives. Short term objectives of business will
be related to make improvement in day- to- day operations of firm. On the other hand, generally
long term objectives targeted towards enhancement of profits, earning as well as sales of firm. It
will help in sustainability of business for long period of time.
The global business strategy is differed from national business development strategy as
various other factors like an instance adaption and product standardisation. In addition to this,
global business strategies have emerged as result of internationalisation and globalisation of the
established domestic firms which are purported to enhance value of firm in an effective manner.
In the developing global strategy, it is more useful to difference among three different forms of
the global expansion which can be arise from the resources of firm, current international position
and capabilities. If firm is focus towards the home market then in this case its outside strategies
can be seen as international. It is highly centralised on developing a thinking about all aspects of
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business in an integrated way. It includes suppliers, nature of market, production sites and
competition. All these things aid to meet international standard before move business on global
level. For developing such strategy, company's management concern on issues first which may
create barriers in achievement of business goals. It includes lack of financial resources, need of
organising training for workers, deciding on resource allocation and more. Therefore, to develop
strategies management focuses on organisation activities to determine what and where to
produce. In context with Volkswagen, it is one of the German auto-maker company that founded
in 1937 and headquartered in Wolfsburg. In terms of sales, it is one of the largest manufacturer
in world. It offers a range of automobile vehicles where current models include Hatchblack,
Sedan, city cross over SUV and more. This company has diversified brand portfolio that includes
cars, light trucks, motorcycles, engines, machinery and financial services (see appendix 1). It
offers such products and services in more than 117 countries which help in getting near about 1.5
billion Euros annually (SWOT Analysis of Volkswagen. 2016). This would have shown its widest
brand portfolio in the world among other automotive companies. Volkswagen Group is laying
foundation for lasting the success in mobility world and also its evolution in to world leading
provider of the sustainable mobility. Volkswagen began its life as Nazi dream to give German
masses with an affordable personal transportation. In this present time period, Volkswagen is
driven through various ambition such as dominate world motor affordable sector.
As per the article given by Palgrave Macmillan, it has been evaluated that the automobile
sector is considered as one of the most archetypal industries at global level (Accelerating from a
multinational to a transnational carmaker: The Volkswagen consortium in the 1990s, 2019). Due
to internationalisation strategies as well as impose of social practices, companies dealing in this
sector are the main drivers behind homogenisation of global markets. Volkswagen in 1990s was
only the German carmaker while its competitors BMW and Daimler-Benz used to sell out more
than half of products outside this nation. The internationalisation structure of German carmakers,
has stated about Volkswagen consortium that it is the only automobile company of German that
pursued global strategies such as European oriented corporation for its production system. This
article has distinguished three periods of development of I-R model (Industrial-Relation) of
Volkswagen, on the basis of periods of internal crisis, trial and error approaches, internal
controversies and uncertainty, as shown below:-
Resources, functions, Phases
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competencies and
power to define
Distribution oriented
multinational
company
(1940s to 1967s)
Production oriented
multinational
company
(1967s to 1990s)
Globally operating
translational
company (1990/92)
Strategies on the basis
of Corporate
governance and
profitability
Centre-periphery
configuration
Centre-periphery
configuration
including
centralisation
Intra-organisational
competition and
globalised centralism
Strategies related to
product and market
structure
Centre-periphery
configuration
Centre-periphery
configuration
Globalised platform
including regionally
specified hats
Production system Centre-periphery
configuration
Production networking
in world-wide manner
Global learning with
transfer of general
production principles
Through above table, it has been analysed that during first phase Volkswagen was
operated its business as a distribution oriented multinational auto-maker, that was organised by
direct dependencies such in Volkswagen Group of America. Here, main aim behind adoption of
this strategy was to get secure access to big markets and get cheap labour. During second period,
internationalisation trajectory of respective auto-maker was labelled as a production oriented
multinational company. Here, production structure have tendencies mostly towards centralisation
of profitability and turn efforts in the field of production networking in world wide manner. At
last phase, Volkswagen was begun to move from domestic market to international one. Its
internationalisation profile and traditional centre-periphery configuration was also changed by
reorganising the corporate governance structure as per foreign companies. Therefore, all these
discussions have reflected that moving operation of Volkswagen from German market to
Volkswagen Group of America. Its strategies has changed across time to move business from
local market to international platform. This would can be shown by its three year periods of
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journey where during First period, as a distribution oriented multinational company, as
comparison with turnover and sales, the foreign production as well as employment of
Volkswagen were very low. This would began change in second phase where it has started to
operate as a production oriented. It led to increase its production and foreign shares of
employment to near about 30 to 40 percent of total (As shown in Appendix 2). Similarly, the
growing distances of Volkswagen in third phase due to work as a translational company
indicated its increasing labour productivity.
For moving business into international platform, firms uses various approaches like
Mergers Acquisitions, Joint Ventures and Strategic Alliances. Here, success cooperation of
business can deliver a company more resources, larger skills and talent base, sharing of
managerial load, bigger pool of contacts, reduce commercial risk and more. Strategic alliances
can be defined as a partnership between two companies in which they used to take advantages of
strengths of each other. Usually, strategic alliance fall short of legal partnership entity, corpora
affiliate relationship and agency. The two organisations form strategic alliance when every
possess one or more than one business assess or help other through increasing business. It can
help in developing outsourcing relationship where parties need to attain the long- tern win- won
innovation and advantages which are based on the desired outcomes. It includes market
penetration, distribution capabilities, proprietary processes and more. In this type of business
formation, companies sign agreement on contractual basis rather than legal partnership.
Generally, alliance includes transfer of technology, shared risk, economic specialisation and
shared expenses. Under this, two firms pool the resources in creation of the separate business
entity. These firms will maintain autonomy in strategic alliance while gaining new opportunity.
The strategic alliance is helpful for organisation to provide the effective process, develop in to
new market and also develop edge over rivals. In context to this, an arrangement allows two
businesses to work for attaining the common goals that will aid in provide advantages to both
firms. While with respect to joint venture, in this legal partnership two entities are signed to form
a new entity in order to win competitive advantages. Joint venture is not only the business firm in
sense of partnership, corporation and proprietorship. In context to this, it is arrangement among
parties for specific purpose and defined the time frame in a better manner. The organisations do
joint venture for some specific project. These can be formal or informal and also can be short
term or the long term. In addition to this, joint venture develop separate business entity to which
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owners contribute towards assets, agree and also have equity to how an entity can be managed in
an effective way. The main benefit of doing joint venture is access to the better resources for an
instance technology and specialised staff. The major benefits of this agreement is allowance to
share experience, people, equipment, skills and customer basis, which would help in open new
market or improve sales performance in existing one. Moreover, Merger and Acquisition
(M&A), is considered as the most popular form of partnership which also known as 'merger of
equals'. Here, one company takes over other business and becomes a new owner. These are the
transactions under which ownership of firms and other organisation operating their business
unites and also consolidated with the other entities. Under this, merger occurs when the two
different entities combine forces for develop new or joint firms. On the other hand, acquisition is
related to takeover of the one entity through other. In addition to this, mergers and acquisitions
both may be finished to expand reach of firm in an attempt to develop value of shareholder. The
main reason behind Merger & Acquisition given is that the two different firm together and
develop more value as comparison to individual stand. With an aim of wealth maximisation,
organisations keep evaluating various opportunities by route of Merger & Acquisition.
Therefore, in terms of legal point of view, company which is targeted ceases to exist
while purchase take over the same. As China is considered as one of the largest automotive
market share in the world. Therefore, this would lead to raise high sales performance to
Volkswagen after merger its business with SAIC Volkswagen. Through this partnership, it has
gain benefits to offer a range of diversify products i.e. near about 150 different models. After
joint partnership, respective company has gained the highest position in recall rates as compared
with other automobiles like Ford, Toyota, General Motors and more (see in appendix 4). This
would happened through earning a high revenue to near about 3.5 million units a year (SWOT
Analysis of Volkswagen. 2016).
In context with Volkswagen, it has been analysed through case study that it has formed a
joint venture in 1985 with Shanghai Automotive Industry Corporation (SAIC). This formation of
SVW agreement has enabled Volkswagen to manufacture and sells cars in marketplace of China,
by capitalizing its foreign investment and increasing local production as well (Shanghai
Volkswagen Automotive Co. Ltd. (SVW), 2013). Further, this agreement was amended as well as
restated in 2004 that will continue till 2030. During 1990s Shanghai Volkswagen (SVW)
Automotive had been a leader in automotive market of China where market share had also
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reached to 50%. Through annual growth of auto mobile production in China from last decades, it
has been analysed that such process is increasing at faster rate in this country (As shown in
Appendix 3). The Shanghai plant of Volkswagen was through far winner between new joint
venture as it manufactured the cars which could function as vehicles and taxies for the
government official and transport for new emerging business elite. In addition to this, car imports
fell to some of 34000 in production of Wagons-lits of Santana models reached around 19000
vehicles each year. On the other hand, Volkswagen encourages the suppliers of foreign parts in
order to develop the joint ventures in China that resulting the product top helped SAIC
Volkswagen to attaining 85% content rate. It had given advantage to VW to increase investment
in Chinese market and focused more on increasing sales performance over there. But as in such
type of mergers, companies are agreed to go forwards as a new firm and follows same kind of
action to establish itself in new marketplace. Therefore, it may create various issues with their
operational activities.
As per case study, it has also been analysed that in such type of merger and acquisitions
process, various issues have arisen within Volkswagen and SVW. These issues are included
conflicts among workers of both companies where culture and way of working of labours of both
German and Chinese were different. This lead to force VW to change its structure to become
able to respond towards changes more quickly as well as establish proper communication at
workplace. Along with this, for successfully implementation of joint venture it is clear from this
case that significant changes are necessary for both Volkswagen and SVW. As cultural
disparities was the major problem for both firms' alliances, therefore, using some change models,
Volkswagen German was required at that time to ensure than all associated people and
management team should identify issues of current situation. In addition to this, it has been
identified that for bringing organisational changes and come over business issues, management
of Volkswagen focuses on some main areas related to SVW analysis. It includes capitalizing on
propitious moments; combining caution with optimism; understanding resistance to cultural
change; recognising the importance of implementation; maintaining sustainability; select, modify
and create appropriate cultural forms; modify socialisation tactics. Through concerning on these
key areas, management of Volkswagen has necessitated a new way of thinking as well as an
openness to change.
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In today's competitive world, to run business effective at international marketplace,
corporate social responsibility is considered as another main business strategy. It plays a high-
profile role in developing brand image of a company, especially when any unethical behaviour
done by it leads towards objectionable consequences. These consequences mostly impact
negatively on reputation of a business at global marketplace. Therefore, in context with
Volkswagen, as per the article given by Clifford Atiyeh, it has been evaluated that a half-million
diesel models of this company have been cited to emission violations. Since Volkswagen majorly
emphasises on promoting 'Clean Diesel' which is an alternation to electrical and hybrid vehicles.
But to a scandal related to cheating on diesel-emission tests, it is agitation in own toxic vapors. It
has installed an emission software in approximate half-million of its diesel cars in US and more
than 10.5 million across another countries (Everything You Need to Know about the VW Diesel-
Emission Scandal, 2019). This software helps in passing diesel-emission test by developing a
sense of unique parameters set by Environmental Protection Agency of emissions drive cycle. It
is also called defeat device that detect steering, throttle and more within test for switching
between two different operational modes. In this regard, in 2015 this vast scandal has been gone
public in automotive industry when Volkswagen caught up for its cheating on pollution emission
measures (see in appendix 5). The clean green image of respective automobile company has been
wiped away after admitted to cheat on emission standards. After popping up to further
investigation, EPA has started searching to know about how much damages has been done by
Volkswagen across the world. Consequently, it has estimated that over 11 million is based on
such vehicles which are equipped with 189 engines like Type EA. It has impacted enormously on
reputation of entire automotive industry in negative manner because at that time VW was listed
as one of the most sustainable auto-maker. It leads to long term damages of business such as
customer dissatisfaction, negative impact on trust and brand reputation, employee morale,
investor loyalty and more. This would results in losing more than 30 billion dollar from market
value.
Corporate social responsibility is a kind of international private business of self
regulation. Under this, self regulating model of business is helpful for firm to be accountable
socially. In an organisation, generally CSR is understood as private firm policy. Corporate social
responsibility is evolving the business practice that helps in incorporates the sustainable
development in business model of firm. It has positive affect on economic, environmental and
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social factors. It is mechanism for the businesses to be evaluate affect on society and also
consider the putting responsible environment, local community and also ethical policies to
support people. In addition to this, there is a need to organization to include its all stakeholders in
the activities and decision making. On the other hand, it is the responsibility of company to
develop some of the social activities for people of society. It will help in positive impact on their
mined and also firm can sustain at the marketplace for long period of time in a better manner.
Therefore, to regain its reputation and branded image from consequences of scandal,
Volkswagen has made some investment in CSR activities. This type of activities has made a firm
capable to overcome from mistakes and build a positive image in eyes of customers. The reason
behind this increasing awareness of public towards socio-economic and environmental problems.
Therefore, for cheating of hazardous emission of nitrogen oxide or other diesel-emission, VW
has bear responsibility for continuous improvement within environmental tolerability of its
products. To disparate the CSR policies, Volkswagen has concerned more about supply chain
issue of minerals. For this purpose, it has recently joined an open industry collaboration which
concerns on- Application of Blockchain Technology for tracing minerals, Network covering the
Whole Supply Chain and Concern on Responsible Sourcing of Cobalt (Volkswagen
Sustainability, 2019). It includes LI-ION battery value chain would help in increasing efficiency,
transparency and sustainability in global mineral supply chains (see in appendix 6). This LIB
manufacturing capacity includes serving all end market applications, where the technology has
enabled automotive companies in earning high competitive advantages in the field of portable
consumer electronics end application. It enables VW to gain greater insight in terms of
prevalence of Cobalt used for electric vehicles in lithium-ion batteries as well as other type of
minerals. These Blockchain technology and Lithium-Batteries refers to give complements to
both current assessment, audit procedures and support towards responsible sourcing standards,
which are developed by Organization for Economic Cooperation and Development (OECD). It
will enable to make a permanent record for addressing compliance requirements. As generally,
miners, smelters as well as consumer brands mostly rely on laborious manual processes and
third-party audits for establishing compliance with traditionally accepted industry standards.
Therefore, in this regard, through IBM Blockchain Platform and Hyperledger Fabric powered by
Linux Foundation, a new platform is developed. It enables in designing traceability as well as
provenance of minerals that provide easy access for manufactures and smelters in supply chain.
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This kind of CSR activity for improving supply chain management process aid Volkswagen in
improving its brand image and gain investors' loyalty for running business successfully.
CONCLUSION
As per this report, it has been concluded that for moving business on international
platform, a company needs to develop effective global strategies. This would help in determining
in what manner organisations can take their business in global market and gain competitive
advantages over there. Along with this, through adopting major approaches like merger and
acquisition, joint venture and partnership, strategic alliances etc. such companies can also merge
their business with foreign entities to expand business internationally. Furthermore, for building
brand image and gain loyalty or trust of customers, organisations mostly concern to make more
investment in CSR activities. This would help in promoting business and running in ethical
manner also. Along with this, by using advanced technologies like Lithium-Batteries and
Blockchain, automotive companies can reduce energy consumptions from production as well.
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