Analyzing Volkswagen's International Supply Chain Networks

This report provides a comprehensive analysis of Volkswagen's global supply chain management, focusing on international procurement and network strategies. The report examines the application of Porter's generic strategies, including cost leadership and differentiation, to optimize supply chain performance. It explores changes required in global procurement, including the identification and management of international suppliers, performance measurement, and the importance of supplier feedback and certification. The report also investigates how expansion and knowledge sharing affect supply chain networks, emphasizing technology transfer and improved absorptive capacity. It analyzes the strategic fit between Volkswagen's international business strategy and its supply chain strategy, identifying key elements such as facilities, sourcing, inventory, transportation, and information sharing. Recommendations are offered to enhance Volkswagen's global supply chain, ensuring quality, efficiency, and competitive advantage in the automotive industry.

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Supply chain
Supply Chain Management
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SUPPLY CHAIN MANAGEMENT 1
Table of Contents
Introduction..........................................................................................................................................2
Task 1: Changes Required In Global Procurement..............................................................................3
Identifying International Suppliers...................................................................................................4
Measuring supply performance.....................................................................................................5
Gaining supplier’s feedbacks........................................................................................................5
Achieving certification..................................................................................................................6
Development partnership and Buying from them............................................................................6
Ensuring quality for consumers....................................................................................................6
Management and Development of Selected International Suppliers................................................7
Task 2: Expansion and Sharing Of Knowledge Affects Supply Chain Networks...............................8
Changes in Global Supply Chain Management Network.................................................................8
Technology and Knowledge Transfer............................................................................................10
Improved Absorptive Capacity Leads to Effective Knowledge and Technology Transfer...........10
Possible problems in the implementation of recommendations and Conclusion...................................
11
Bibliography.......................................................................................................................................13

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Introduction
Supply chain management refers to all activities which include mapping a plan, control, and
executive the flow of production to the point of acquiring raw material as well as final distribution
to customers within a cost-effective manner (Farahani, Asgari & Davarzani 2009). These are the
ways by which operational, as well as the production cost of the company, can be reduced so that
the profit of the company can be increased.
The various objectives of this assignment are going to be further analyzed by using Porter's generic
theory or strategies. This theory helps an individual to achieve competitive advantage over other
companies in the market it is going to serve. In the main model of this theory, there are three types
of generic strategies, which are cost leadership, differentiation and focus. Focus further divided into
two more strategies.
This theory is considered to be very efficient in order to determine its differentiation strategy by
adopting cost leadership over others and maintain continues to focus on their journey of success.
With the help of this theory, every aspect of this assignment is going to be analyzed.

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Figure 1: Model of Porter's Generic Theory
Task 1: Changes Required In Global Procurement
To implement changes in business operation it is very important for the organization makes changes
in the process (Waters & Rinsler 2014). The global supplier has to be properly selected, managing
and buying by which it becomes easy for organizations to make a strong image in the marketplace.
Nowadays it has usually suggested by a top economist to invest in countries like India, China, and
Africa. It is so because as they are becoming the new giants of changing technology hub and
provide many opportunities for any business which want to start its new venture or expand the
existing one.
In the selection of suppliers, globally it is the responsibility of Volkswagen Company to look into
the strategies of getting a competitive advantage over others and it can be done with the help of
Porter's generic theory. Its components help the company in getting overall cost leadership over
others, on the other hand, it will help in creating focused differentiation. The organizations always
want those products, which are supplied by the supplier to have to cost efficient as well as work
effectively so that values can be, maximized (Magal & Word 2011).

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Figure 2: Standards of measuring suppliers’ performance
The process of selecting supplier has been changed so that as according to the recommendation in
business suppliers are been selected from the emerging markets of the world like India, China,
Africa, and other effective Asian markets. This will help the plant to get easy setup in a short span.
The challenges involved in selecting international supplier areas:-
Identifying International Suppliers
As to select the appropriate supplier for the selected company Volkswagen, managers have to take
opinions of the stakeholders of the company. To select particular supplier specified criteria have
been being defined by managers to all the people of the company (Azadnia, Mat Saman & Wong
2014). The stakeholders of Volkswagen identified ways that include quality insurance, research &
development, purchase marketing, quality assurances and other people connected to the supplier. In
between this process, with the help of Porter's generic strategies, the Volkswagen Company can
also select a few more suppliers and compare their prices or capabilities of completing work in
time.

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It is advised to Volkswagen company to also decide its geographical region. As explained earlier
the company can select new emerging markets of China, India or Africa. The company also require
explaining properly how the product from the supplier is effective as well as benefit supplier as it is
a win-win situation (Aksoy & Öztürk 2011).
Measuring supply performance
This step includes the process of the assessment program and the development of an audit. The
company always have to make a proper audit before signing a contract with the supplier so that
after that no issues will arise (Shepherd & Günter 2010). The organization Volkswagen has to
understand the supplier’s weakness and strength before making a relationship official or before
signing any type of document.
It is always said that it is easy to establish a business; however, for attaining a demanding place in
the market it becomes difficult for the companies. It can be less complicated for the company if
they make effective use of Porter's generic strategies. Volkswagen Company has to continue as well
as regularly monitor the performance of each supplier by which company is able to track sustained
strong performance as well as negative trends (Zacharia, Nix & Lusch 2011).
Gaining supplier’s feedbacks
Once, the agreement is made between the supplier and Volkswagen Company. They must use
another tool, which is a self-assessment questionnaire by taking Porter's generic strategies as a
basis. Informative metrics are also calculated which is directly valuable to the business. (Shepherd
& Günter 2010)
Achieving certification
After sometimes, a strong relationship is built then suppliers must get a certified status as both the
parties are receiving positive performance. This certificate must compete if the performance of both

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the parties that is supplier and Volkswagen Company, is positive and incomplete if performance is
poor as well as a negative outcome in the audit (Danese, Romano & Formentini 2013).
Development partnership and Buying from them
If the Volkswagen Company and supplier relationship are at best then it can form a strategic
partnership, which fully allows the source of knowledge. The companies should make such partners
those can provide them a way of making more profits. It can be possible with the help of cost
leadership and focused differentiation. Hence, it is important for the company to consider Porter's
generic strategies while developing the partnership and buying behavior for them.
This makes suppliers of selected countries like China, Africa or India feel more anticipated towards
the need for a manufacturer or begins to take a leadership role in communication (Srinivasan,
Mukherjee & Gaur 2011). In these decisions, huge risks are also associated, once the parties
become more reliant on each other or if one side is dissolved then other one faced much more loss.
Ensuring quality for consumers
Once the strong relationship is built between manufacturer and supplier then the company is in the
peace of mind that they are delivering the best quality products to the customers of Volkswagen
(Yang et al. 2009). The product quality and differentiation are the strategies of Porter's generic
theory, which will focus on the effectiveness of products. If the quality of raw material is best then
products are of the best quality as well as the company also easily retains customers.

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Management and Development of Selected International Suppliers
Figure 3: Model showing the development strategy of International Suppliers
Once the changes are made in, selecting supplier from the new emerging markets of countries like
China, Africa, and India then organization wants to buy products from them or manage them
properly so that a strong relationship is maintained (Kuei, Madu & Lin 2008). With the help of
Porter's generic theory, proper management and development of selected international suppliers for
Volkswagen Company can be done efficiently.
To set up a plant in new areas, the Company has to find new suppliers so that raw material cost also
minimized (Zhang et al. 2010). The product which organization is going to buy from the supplier
has to be examined properly before making a product out of it (Chan et al. 2008). It should be
differentiated from other competitive products. This can be done with the help of a focused
differentiation strategy of Porter's generic strategy. The negotiation in price will take place once the
raw material expectation is clear to the supplier (Steinle & Schiele 2008).
Volkswagen Company’s global presences can face certain challenges when they are attempting to
streamline their international procurement (Nollet, Rebolledo & Popel 2012). The company wants

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to set-up a new plant for that maintaining and managing complicated web vendors efficiently
(Branch 2009). To manage international procurement organization has to focus on people,
technology, process and appropriate supply chain management (Haddadian, Khodayar &
Shahidehpour 2015).
To have extreme quality Products Company will set up a new plant in which they require just raw
material. The selection of supplier has been done effectively with the full-fledged process as to get
delivery in time. The owner of the company should also take into consideration various cost
leadership and differentiation strategies for creating the uniqueness of its product all over the world.
Task 2: Expansion and Sharing Of Knowledge Affects Supply Chain Networks
The Volkswagen Company can gain a high competitive advantage by changing its network in
supply chain scenarios; evaluating and proactively implement the changes, which are required by
the current trends. The current trends are the introduction of new products, the addition of new
supply sources, changes in demand pattern or certain changes in laws related to taxes. In order to
expand the business to various distinct places, the company has to have good profit margins and a
competitive advantage over others. The company can achieve this by following set strategies of a
path to success. These strategies are cost leadership, differentiation in the product and their
manufacturing methods and these all have to be done by maintaining the right amount of focus
every time. The fourth pillar is having a strong supply chain in which the organization has to make
integration with suppliers so that products can deliver to customers in time with extreme quality.
Changes in Global Supply Chain Management Network
The supply chain network plays a powerful modeling approach proven as to deliver a significant
improvement in the services level by better alignment of strategies and reduction in the cost of the
supply chain (Levi et al. 2008). There are many companies, which have operated in an integrated

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global fashion. These things have to be done by taking into consideration various strategies of
Porter's generic model of attaining competitive advantage over others in the market.
Figure 4: Global Supply of Volkswagen
The Volkswagen changes the certain structure in strategies of supply chain network or they have
operated as an integrated. The company maintains presences in several markets, which are of
different variety in different continents. The company have maintained extensive manufacturing
capacity; as companies are to required to change, optimize or rationalize their network fewer sites,
which are capable of being a severing global market (Tsiakis & Papageorgiou 2008).
Volkswagen Company has changed the design of the supply chain network as an inbound network
of the company also needs to change as per the requirement of the market or according to the
trends. The supply chain network can optimize the system of designing a holistic strategic and
quantitative view of an organization up to the end process of the supply chain. (Huang et al. 2015).

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Technology and Knowledge Transfer
To facilities technology so that the company effectively establish the plant in a new region and
make the product accordingly (Lichtenthaler & Ernst 2008). If technology properly facilitates in
between employees then the performance of a company will also improve (Tseng et al. 2009). In
order to take the business on higher heights, it is the responsibility of the Volkswagen organization
to make its technology efficient and different from others. This can be done by the company with
the help of various strategies of Porter's generic theory.
It is also seen that interest in IT capabilities ensures organization in achieving organizational agility.
This technology driver is a key aspect by which the organization will achieve growth and
development (Kaplan & Tripsas 2008). In practical implication, knowledge transfer is taken place
from part of the organization to another (Kaminski, Oliveira & Lopesa 2008). There are six steps
and three strategies to effectively transfer knowledge.
The first step is that the company have to make a proper document which is related to rules of
transferring technology. After communicating or transferring information, the top managers have to
create opportunities by informal gathering with employees in exchange of information as well as in
the development of network (Khan, Shenkar & Lew 2015). The last is based on knowledge, to keep
employees of a company up to date with advanced technology.
Improved Absorptive Capacity Leads to Effective Knowledge and Technology Transfer
As Volkswagen want to set-up a new plant in different regions so that the company is being able to
share information with employees by which goals can be accomplished (Gebauer, Worch & Truffer
2012). The companies have to adopt the participative method so that knowledge absorption can be
done effectively in the process of implementing a recommendation or plan into reality.
Improvement in absorption capacity is an effective move by the company. The company with the
help of Porter's generic theory chooses this option.

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Possible problems in the implementation of recommendations and Conclusion
It can be concluded from the above information that Volkswagen Company have made appropriate
changes in the global procurement process at the international level. As they are about to set-up a
new plant, the suppliers present globally is going to provide the raw material. To get the delivery of
raw material in time it is essential to maintain a positive relationship with the supplier. It is also
concluded that while analyzing and accomplishing the objectives of this report the use of Porter's
generic theories have helped a lot. They have the capacity to suggest a company the way to achieve
competitive advantage over others, with its three main strategies that are differentiation, cost
leadership and focus.
The selected organization Volkswagen has to change its global supply chain network design as
according to advance technology trends. In order to implement the recommendations regarding the
whole supply chain of the Volkswagen Company, the company these are as follows can face some
problems.
 There are certain problems, which are associated, while set-up of plant and maintaining a
positive relationship with suppliers.
 The Volkswagen company will incur huge taxes or require more investment as they are
going to establish a plant.
 To maintain the relationship between the Volkswagen Company and selected suppliers, it is
required to having an appropriate agreement between them so that futures conflicts can be
resolved.
To improve the performance of an organization, in this case, Volkswagen, it has to maximize their
absorptive capacity by making transferring external knowledge in employees. These transfers of
knowledge make employee’s performance improve due to which the organization will generate
huge profits.

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