Business Strategy Analysis and Recommendations for Volkswagen

This report provides a comprehensive analysis of Volkswagen's business strategy, beginning with an introduction to business strategy principles and their application to the automotive industry. It then delves into a detailed organizational audit, employing a SWOT analysis to assess Volkswagen's strengths, weaknesses, opportunities, and threats. An environmental audit, utilizing a PESTLE analysis, examines the external factors impacting Volkswagen's operations, including political, economic, social, technological, legal, and environmental considerations. The report emphasizes the importance of stakeholder analysis in strategy preparation, outlining the roles of various stakeholders and their influence on the company. A new strategy for Volkswagen is proposed, including a limited growth strategy and the application of Porter's generic strategies to achieve cost leadership and differentiation. The report concludes with a discussion of alternative strategies, their appropriateness, and the justification for the chosen approach, along with the roles, responsibilities, and resource requirements for implementing the new strategy, including the contribution of SMART targets.

Business Strategy

Table of Contents
INTRODUCTION...........................................................................................................................1
TASK 1............................................................................................................................................1
1.1, 1.2 & 1.3..........................................................................................................................1
Covered in PPT.......................................................................................................................1
TASK 2............................................................................................................................................1
2.1 Organisational Audit........................................................................................................1
2.2 Environmental audit of Volkswagen................................................................................3
2.3 The importance of Stakeholder analysis in preparing strategies......................................4
2.4 New strategy for Volkswagen..........................................................................................5
3.1 Alternative strategies appropriateness..............................................................................6
3.2 Justification of the strategy...............................................................................................7
4.1 Roles and responsibilities of personnel in strategy implementation................................7
4.2 Resource requirements for implementing the new strategy for VW AG.........................8
4.3 Contribution of SMART targets in business strategy.......................................................9
CONCLUSION..............................................................................................................................10
REFERENCES..............................................................................................................................11

INTRODUCTION
A plan of action that aids organisation in achieving different goals and objectives in a
efficient manner is known as a business strategy. It is a art of mangers which is used for planning
out, directing and controlling different programmes and activities in the organisation. It assist
company in analysing different cross departmental decisions that are to be taken as to complete
specified task. It is essential to ensure that all resources are directed towards same direction so as
to achieve a higher efficiency rate. It also aids in bringing organisational alignment and
consistency in business process which is the need of the hour. Basically, business strategy is used
as a tool to gain competitive advantage over market forces (Hesterly and Barney, 2010). This
report is focused on Volkswagen which is a multinational car manufacturer. It is a global brand
and is known to provide world class services, but recently it has been subjected to breaking
environmental laws which has damaged its image as a quality and sustainability focused
company. Now it needs a new business strategy which will define a path that can be followed for
attaining growth while minimising resource consumption. Different tools and techniques are
used in this report and they will be used for registering organic growth.
TASK 1
1.1, 1.2 & 1.3
Covered in PPT
TASK 2
2.1 Organisational Audit
Every organisation which is currently engaged in market has to analyse market and its
forces for attaining better market positioning. An audit is managed or designed to set whether the
company take is in vertical allocation, to suggest adjustment to company's action to meet or
refrained alignment as well as to evolve policies, practices, and programs to make certain
individual are stimulated to stay on the path. It very very vital for company to keep on
conducting its own audit, so as to match its strengths with market requirements. If any
organisation does not undertake this task than its operations might get hampered. In order to
achieve their basic requirements, it is essential to evaluate Volkswagen's strengths, weakness,
opportunity and threats as to ensure that it is able to overcome any uncertain situation (MA and
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WANG, 2016). Currently, Volkswagen is facing a condition where it has to pay huge amount of
penalty to US environmental commission. It needs to conduct organisation audit as to gain
knowledge regarding variables present in market and enhance its own capabilities furthermore.
Volkswagen is presently present in more than 100 countries and it has manufacturing facilities in
27 countries which are present in every continent of earth (López-Campos and et. al., 2013). It
will be using SWOT as a tool to conduct analysis which is stated below:
(Source: SWOT Analysis, 2017)
Strengths These are the strengths which aid organisation in gaining competitive
advantage:
 Volkswagen has a strong recognition and effective portfolio along with
wide variety of services and products.
 The company has strong and huge human resource group i.e. 350000
people.
 Volkswagen is well established in hybrid and motor sports.
 Company has wide range of services and products along with distinct
market recognition and extensive background.
 Efficient and effective manufacturing units and is famous automate
brand dealing with numerous operations and resolutions.
Weakness  High market competition in automate sector can lead to tremendous
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Illustration 1: SWOT analysis theory.

issues.
 Limited growth of market and EMISSION SCANDLE can lead to
numerous issues.
 Image is hampered due to scandals.
Opportunities  Hybrid cars and advanced technological investment that organisation is
dealing with.
 The emerging economies present higher return potential
 Developing relationship with different car manufacturers and trading in
untapped and open economies like India etc.
Threats  Cost of raw material is rising
 Governments of third world restricts Volkswagen to expand as to protect
local car makers.
 Environment laws can shake up whole market of company
 Faster technology changes are increasing cost of company.
2.2 Environmental audit of Volkswagen
Environmental audit can often termed that can portray numerous evaluations types
intended to recognise framework of management and environmental compliances along with
execution gaps as well as associated corrective activities. There are different types of factors that
surrounds Volkswagen and managers need to control them as to manage them in a effective
manner. The macro environment is very turbulent and needs to be managed by organisation so
that any change that is taking place in it does not hamper company ability to serve market
(Bhasin, 2011). Volkswagen operates in different countries and hence faces more risk from these
external factors. It has to keep on analysing them so as to gain better knowledge and have a
action plan to overcome threats. It conducts PESTLE analysis to evaluate different factors in
more effective manner and protect organisation from any damage.
PESTLE of Volkswagen:
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(Source: PESTLE Analysis, 2017) Political Factor : At present there is unstable environment in United Kingdom which
have certain level of impact on Volkswagen (Izumi and et. al., 2012). Also, UK plans to
ban sell of petrol and diesel cars by 2040 which will hamper company ability to serve
market. Economic Factor : The impact of recession of 2008 is still there because of which the
organisation has to use its resources in more efficient manner. Also, they need to pay
penalty to US environmental agencies which can limit its ability for expansion. Social Factor : Due to globalisation and migration there are carnages in social structures
and also society is becoming more diverse (XIE and SUN, 2010). This leads to
generation of new type of demand that has to be fulfilled by company. Technological Factor : Constant changes are taking place in technology, company is
also investing a lot in keeping itself updated. But rapid changes are increasing cost for
organisation which needs to reduce cost by using innovative approach. Legal Factor : There are different changes in rules and regulations with government
change and Brexit and they need to be adopted by company. Examples are potential
changes in labour laws and employing personnel from EU nations.
 Environmental Factor : This is the current trend where countries are minimising
emissions caused by manufacturing units and vehicles of all type (Aaltonen, 2011). These
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Illustration 2: PESTLE Analysis.

treaties have impact on company as it has to develop products that does not rely on fossil
fuel and runs by clean energy.
2.3 The importance of Stakeholder analysis in preparing strategies
Stakeholders are parties who has some interest in business and they provide different
types of funds as well as resources that enable organisation in producing product and services.
They need to be satisfied as to keep company running and gain more market share. Hence,
stakeholder analysis in the project management, conflict resolution and business management,
can be defined as the procedure of evaluating an influence of business on authentic parties which
is a key part of stakeholder management. In more simple terms, they are the people who are
impacted by activities of organisation. Volkswagen is blamed for breaking palaeoenvironment
laws, that is why now it has to focus more on their needs and wants as to attain a better market
position (Geneletti, 2010). The stakeholder matrix is used by company to understand how it has
to serve different types of parties in a more effective manner:
KEEP SATISFIED
(Highly interested, maximum power)
They need to be informed on time and on
constant.
 Shareholders
 Employee's
MANAGE CLOSELY
(Lower interest, more power)
They have to be satisfied by constant reports.
 Suppliers
 Government
MONITOR
(more interest, less power)
The reports prepared in a financial year are
enough to inform them.
 Customers
 Financiers
KEEP INFORMED
(less interested, less power)
Important data has to be shared instead of
constant interference.
 Local Community
Importance of Stakeholder Evaluation: Stakeholder analysis is very important for
Volkswagen. They are as following:
 This assist organisation in gaining better market understanding and position.
 It gets support from all parties which improves its productivity.
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 IT also aids in informing strategic planning as to motivate people who are working in
company.
 Managers use it for enabling organisation in aligning its resources and gaining
consistency.
These are the importance which makes stakeholders and their analysis important (Harley
and et. al., 2010). All the task needs to be completed in a set period of time and this evaluation
enables organisation in doing so.
PROCESS OF STAKEHOLDER ANALYSIS
1. Stage 1: Identification and analysis of those stakeholder is done who affect operation
performance such as Volkswagen's supplier, creditors, directors, investors etc.
2. Stage 2: Manager prioritise those stakeholder according their power and operations
interest such as:
◦ More interest & power show more interest in performance. Liable for policies
determination.
◦ Low interest and extensive power who influence the framework of company.
◦ Adverse power and adverse interest who pay no attention to operations and
functioning.
3. Stage 3: In last phase, manager of organisation need to evolve communication and
stakeholder link. This helps in delivering support and repose of business action.
2.4 New strategy for Volkswagen
The cited car manufacturer requires a new strategy which will enable it in serving market
in more effective way. It has to align its capabilities with market requirements and ensure that it
is able to achieve its goals in desired manner. After undertaking environmental analysis and
organisational auditing, it is clear that company is facing many challenges that can cause it to
lose it edge over other market forces. Volkswagen has to pay the personalities that are levied by
US environmental commission as to stay and operate in USA market. That is why it needs a new
plan of action that will enable it in gaining better market position and will assist it in maintaining
its current capabilities. It has to adopt limited growth strategy which will limit resource
consumption and maximise productivity. It can form new joint ventures in African countries at
present instead of investing all resources to establish itself, this will be an efficient way of
entering into new market.
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Stated strategy has proved its worth in past as it assisted different other companies in
recovering and becoming market leader (Afifi, 2011). The CEO of company has also mentioned
that they will be reducing consumption while enacting their efficiency level. They would not
stop major programmes while cutting cost where it can as to keep on growing at a higher speed.
That is why managers have decided to use Porter generic approach which is made up of four
different segments. It will enable company in gaining cost leadership while differentiating itself
in the market. Volkswagen will try to improve its manufacturing as to gain more profits and
garner more revenues. New methodology of business is stressed overt enhanced and high
productivity, profitability and management of items as well as consumer effectively. An
imaginative thinking of E-versatility can also be intended to present through this and further can
produce battery vehicle along with accomplish 20-25% of aggregate deal which an be attained
through 2-3 million unit creation.
TASK 3
3.1 Alternative strategies appropriateness
Volkswagen can resolve their issues and emphasise their values through the assistance of
numerous techniques and methods effectively. It depends on the company and its capabilities as
to which type of strategy it can adopt and use. There are various plan of actions that have been
used in past as to enhance effectiveness and efficiency of organisation. Here are stated some of
the methods or strategies which affirms the suitability of accumulated theory mentioned as
below: Market entry: There are different types of techniques that can be used by company to
enter into new market while keeping cost at minimum. Volkswagen will be using
strategic alliance as its primary approach to enter into new markets. Substantive growth strategy: This is one of the strategy which is used for gaining market
aggressively. It uses two types of methods that are merger and acquisitions. Basically,
company is able to gain more market share as it merges with smaller companies that are
serving in same product line or acquires a supplier or company that can assist it in
enhancing its ability to perform.
 Limited growth strategy: This is a strategy that has to be used by companies which does
not have sufficient resources (Van Buren, Greenwood and Sheehan, 2011). Basically, it is
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also used for organic growth while minimising resource consumption. It uses a method of
joint venture where organisation does not have to invest complete amount and only has to
partly provide funding and other type of resources.
◦ This is a strategy which will be used by Volkswagen as it will ensure that all
programmes keep on running while cost of each activity is minimised.
 Retrenchment: This is a strategy which is used by organisation that have a condition
from which they can not operate. It states that sick companies have to repay all the debts
and shut down it operations. It sells off its assets and exit market (Arora and Dharwadkar,
2011). This is not a recommended strategy for Volkswagen AG.
3.2 Justification of the strategy
Volkswagen has to focus on limiting its activities and program as to ensure that it is not
over spending and saving funds to pay back penalties. It will be focusing on enhancing efficient
of company and will allow managers in maintaining current capabilities while slowly gaining
more. There are certain reasons that will justify why limited growth strategy was chosen: Hefty Penalties: There are different agencies who have levied penalty on Volkswagen in
USA. The total amount stands at a staggering $19 billion. This amount can not be paid by
organisation in one go and hence it is in talks of paying it in instalments over next 10-15
years. Also, now UK environmental agency is investigation company cars pollution
check as to ensure they did not broke law in the country. Maintenance of current capabilities: It is very important to maintain current capabilities
of company so that it can grow in future. Limited growth strategy will assist in
maintaining present abilities and assist in attaining organic growth.
 Expansion into new markets: This strategy will also assist company in entering into new
market by using joint venture or strategic alliance as a method (Lu, Wu and Fu, 2011). It
has already formed two separate ventures in China.
The limited growth strategy allows company in minimising different cost and allows
managers in improving productivity at the same time. Basically it aids in maintaining its abilities
and enhance its capabilities. Hence this can be state that business strategy developed by
Volkswagen is more appropriate and suitable. This is: Feasible: As this is leading to industry growth and revenues increment of Volkswagen.
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 Sustainable: This focus over long-term surviving and objectives that enlarge
Volkswagen's sustainability in market.
 Acceptable: Stakeholder and consumer are more satiate and convenient with the plan and
are satisfied with the plan.
TASK 4
4.1 Roles and responsibilities of personnel in strategy implementation
Role of organisational personnel has extensive role in the execution of an strategy and
theory in more significant manner. There are different types of roles and responsibilities that will
given to various employees. It is important that these individuals fulfil all the required task as to
implement strategy in a effective way. With every change in policies and rules of organisation
there are certain changes that takes place in the job profile of people. This allow management in
integrating changes in its core business process that will enable it in facing future contingencies.
There are certain roles and responsibilities that are required to be fulfilled by people and they are
stated below: Top management: The senior managers are involved in strategy formulation and
decision making process of Volkswagen. They have new responsibility of developing an
action plan that will assist employees in overcoming issues that are there due to uncertain
situation of sited company. Middle level managers: They are the ones who assist top management in implementing
strategies that are derived out by them (Li and et. al., 2011). They allow company in
measuring different situations and take corrective actions as per the situation of
Volkswagen. They guide employees in attaining a higher level of efficiency and also
make sure that they reduce doubts from their mind regarding policies. A manager in
Volkswagen is liable to supervise different activities that are important to complete task
efficiently. Technical and research Staff: They are the one who keep on evaluating different process
as well as ensure that all the technical task are completed in a set period of time. Research
personnel need to keep on checking all the required task so that they can achieve better
market positioning (Bhasin, 2011). The prime task of these people is stated to engage
manufacturing process while making it more efficient.
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 Expatriates: These individuals are the one who are on the duty in different country as
they have skills which company could find in that nation. He has to ensure that people are
able to align different resources in the direction that is required by company.
These are the roles and responsibilities of different individuals who are engaged in
strategy implementation. They have to complete their job as to fulfil all the requirements in set
period of time.
4.2 Resource requirements for implementing the new strategy for VW AG
Whenever there is a strategy implementation going to take place in organisation,
managers need new resources so that they can stop any issue that might hamper their
productivity (Hesterly and Barney, 2010). It will also aid in maintaining capabilities of
individuals as par requirements. All the required resources are stated below: Finances: There are different types of monetary resources that are required by company
as to complete different processes. Each and every task has a a certain cost which needs
to be available for its completion. At Present, Volkswagen can not spend more as it has to
pay back penalties to US environmental agencies. So a optimum distribution is required,
so that its abilities are not hampered. Fixed resources: Volkswagen needs manufacturing units as well as sales oulets which
are part of fixed assets. These facilities are required to serve market in a more effective
manner (A, Y and WANG, 2016). The management has to keep on analysing the need of
developing new units as to increase producing capacity. Raw material: It needs different parts as to assemble cars, managers in Volkswagen need
to manufacture cars with qualitative products and for this they need to find suppliers who
would supply higher quality of goods.
 Human resources: Volkswagen has to ensure that its workers are satisfied and if there is
requirement of new people then they need to recruit more. As these resources play vital
and extensive role in the execution of organisational activities.
4.3 Contribution of SMART targets in business strategy
At present, Volkswagen does not have a very good condition. It needs to approach every
task innovatively and use strategy to attain a better market position. They need to conserve
resources and ensure that they are used in a effective way. This will enable them in maintaining
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