Volkswagen in Switzerland: A Business Environment Report (BUS101)

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GLOBAL ORGANIZATION AND ENVIRONMENT
VOLKSWAGEN IN SWITZERLAND

Table of Contents
INTRODUCTION................................................................................................................................................... 3
BACKGROUND OF VOLKSWAGEN...............................................................................................................4
BUSINESS ENVIRONMENT OF SWITZERLAND.....................................................................................7
BUSINESS SCENARIO...................................................................................................................................... 11
CONCLUSION...................................................................................................................................................... 14
REFERENCES...................................................................................................................................................... 15
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LIST OF FIGURES
Figure 1 - Volkswagen Brand Sales by Market......................................................................................3
Figure 2 - Volkswagen Sales Worldwide..................................................................................................4
Figure 3 - GDP Switzerland.............................................................................................................................7
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INTRODUCTION
The business environment has been experiencing significant changes and trends in
recent time which influence the organizations in carrying their operations. Due to the
advent of globalization, the organizations have been expanding their business to
different parts of the world. Moreover, it could be stated that the impact of globalization
has been significant on the organization and the host country. A study has been
conducted in order to gain knowledge regarding the expansion of the business
operations by a multinational organization in a new market. The multinational
organization chosen in this study is the Volkswagen Group and the new market in
Switzerland. In addition to this, there are various tools which would be applied in the
study to assess the business environment for the effective business operations of the
organization.
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BACKGROUND OF VOLKSWAGEN
Volkswagen Group is a Germany based multinational automotive manufacturing
company which was established in 1937. The headquarters of the company is based in
Wolfsburg, Germany and its legal structure is a corporation. The company designs
manufacture and distribute commercial and passenger vehicles, engines, motorcycles,
and turbomachinery along with services like fleet management, financing, and leasing
(Volkswagen, 2019). The company is leading automaker by sales in the world and they
have overtaken Toyota in 2016 to attain pinnacle in the industry.
Figure 1 - Volkswagen Brand Sales by Market
Source – Bekker, 2019
The organization has been selling its passengers cars under the brand name of Audi,
Bugatti, Bentley, Porsche, Lamborghini, Škoda, SEAT, and the flagship Volkswagen
marques. In addition, they are providing motorcycles under TRATON and Ducati brand.
Moreover, there are two divisions of the organization such as the Automotive division
and Financial Services Division. Volkswagen Group has been working their operations
on the basis of the international market structure where they expand their business
from Germany to different countries. Moreover, the market share of Volkswagen in the
global market has been huge as the organization has significant potential in the market
through the diverse products range. The major markets for Volkswagen are Russia,
Brazil South America, Central and Eastern Europe (Volkswagen, 2019). The
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organization has been working significantly to attain a substantial position in the global
market such that suitable changes and transformation are carried by them.
There are various organizations in the automotive sector that have been competing
with Volkswagen at a significant level. One of the key competitors of Volkswagen is
Toyota while there are various other competitors also such as General Motors, Ford,
Renault Nissan, Hyundai, Daimler, BMW, Chevrolet, Honda, Subaru, and KIA. The
competitors possess a significant influence on the business operations of Volkswagen. It
is essential for the organization that they effectively work on their core capabilities to
maintain a competitive edge over them.
The operations of Volkswagen Group have been carrying at the international level.
There are various countries in which the business operations of Volkswagen have been
carrying. Volkswagen has been carrying their business operations in around 153
countries where they have been providing their products and services. The organization
has been providing automobiles along with the automobile parts. In addition to this, the
manufacturing units of Volkswagen have been working in Europe, North America, South
America, Asian, and Africa.
Figure 2 - Volkswagen Sales Worldwide
Source – CN, 2018
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The financial performance of Volkswagen is also assessed and it is evaluated that the
sales revenue of Volkswagen is €235,849 million in 2018 while it is €229,550 million in
2017. The profit of the organization has been increasing at a significant rate and in the
future, the market share of the organization would be attaining new height. The share of
Volkswagen in the past three years has been experiencing significant growth
(Volkswagen, 2019). It is essential for Volkswagen that they effectively work on their
business functioning and operations to attain substantial growth in the business.
Currently, the business strategy of Volkswagen is to expand its business operations in
different parts of the world. Recently, they are focusing to expand their business
operations in Switzerland such that it is vital to assess the business environment of
Switzerland for the effective functioning of Volkswagen.
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BUSINESS ENVIRONMENT OF SWITZERLAND
Switzerland is considered as one of the growing countries in the world and it is
considered as one of the potent sources in terms of business. There are various
companies who have been focusing on expanding their business in Switzerland. It is
essential to assess the business environment of Switzerland before conducting business
operations in the country. Volkswagen has been focusing to expand their business in
Volkswagen such that it is essential to carry the analysis of business environment which
could be done through PESTLE model. The analysis of the business environment has
been conducted below:
Political
Strengths Challenges
 Political Stability
 Robust performance on governance
indicators
 Building policies on the basis of
consensus
 EU membership is still a distinct
prospect
Future Prospects Future Risks
 Building relations with the non-
European states
 Bilateral Agreements
 Banking Secrecy laws and strained
bilateral ties
 Discrimination against the Muslims
The political system of Switzerland possesses a significant degree of decentralization. In
addition, the referendums in the political environment of the country reflect direct
democracy. The policy of Switzerland toward Europe is based on various international
agreements. In addition, the EU membership of the country is still remote. Moreover,
the bilateral ties of the country with other countries would be helpful at a significant
level.
Economic
Strengths Challenges
 Well-developed infrastructure  Strengthening of the Swiss franc
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 Growing current account surplus
 Potent capital market
 Unemployment
Future Prospects Future Risks
 Decline in inflation  Risk of recession due to the EU debt
crisis
Figure 3 - GDP Switzerland
Source – TE, 2019
It is evaluated that the economy of Switzerland is considered as one of the competitive
economies in the world and they have a GDP of $709.118 billion in 2018. In addition to
this, the economy of the country has been potent irrespective of the economic
slowdown. There are different sectors which play a huge role in the strengthening of the
economy such as banking, infrastructure, and capital market. Still, there are certain
economic challenges which are experienced in Switzerland regarding unemployment
and the strengthening of the Swiss franc.
Social
Strengths Challenges
 Universal social security system
 High human development
 Poor working
 Lack of affordable housing
Future Prospects Future Risks
 Education reforms  Ageing population
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The human development indicators of the country are potent and they also possess the
highest wage levels for the workers along with developed social security system. The
healthcare system of the country is considered as excellent in the world and significant
improvement has been observed in their educational policies. The country has a high
level of wages but they possess a high cost of living which impacts society. The working
poor in the country is huge in number which reflects a certain challenge in the country.
The country requires carrying structural reforms in order to attain financial
sustainability for the long run.
Technological
Strengths Challenges
 Private Sector participation in R&D
 Strong capabilities regarding
innovation
 The low tertiary enrollment rate
Future Prospects Future Risks
 New programs in Nanotechnology  The reputation of the country
regarding R&D is under threat
The technological innovation of Switzerland has been a key indicator in the growth of
the Swiss economy. In addition, private players have been playing a significant role in
the development of technology. Still, it is experienced that the enrolment in the tertiary
level has been declined which impact the human resources in the R&D sector. The
potential of R&D in Switzerland has been declining such that it is essential for them to
work on their weaknesses to attain effectiveness in the field of technology.
Legal
Strengths Challenges
 Corruption is non-existent
 Ease of doing business
 Government regulations in
different sectors.
Future Prospects Future Risks
 Strengthening the electricity supply
law
 Ineffective administration of
competition policy
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The legal framework and policies of Switzerland are considered a highly potent system
as the laws are well-defined and the judiciary is independent of any branch of the
government. In addition to this, the business environment of Switzerland is favourable
for investors as there are negligible barriers in starting a business. In addition, the
corruption in the country is negligible which is effective in healthy business operations.
Still, there are certain governmental regulations which impact the investment in the
country. It is essential for the country that they manage the regulations in the country
effectively for healthy business operations.
Environmental
Strengths Challenges
 Leading in EPI
 Fulfilment of the international
environmental commitments
 Loss of biodiversity
 Difficulty in meeting the Kyoto
pledge
Future Prospects Future Risks
 Significant growth in the renewable
energy sector
 Lack of integration regarding the
sustainable development
considerations in sectoral policies
The country is considered as the forefront of the environmental legislation as they have
an environmental charter in their constitution. In addition, they have a significant score
in the EPI which results in a leading position for them. Still, the country has been
experiencing challenges regarding the loss of biodiversity and climate change. The
pledge regarding the cutting of carbon emission under the Kyoto protocol is struggled
to meet. It is essential for the country to work on the renewable energy sector.
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BUSINESS SCENARIO
It is essential for Volkswagen that they effectively avail the opportunities in the business
environment of Switzerland. In addition, they should also focus on working with the
threats so that a substantial position in the business could be attained. Moreover, it is
important for Volkswagen that they effectively assess the attractiveness of the market
so that suitable strategies in the business could be developed for attaining effectiveness
in the business.
OPPORTUNITIES AND THREATS
Volkswagen possesses significant opportunities and threats in the business
environment of Switzerland. It is essential for the organization that they effectively avail
the opportunities and work on the treats to attain effectiveness in the business
environment of Switzerland. The major opportunities for Volkswagen in Switzerland
are:
 Central European Location – The location of Switzerland is strategically
beneficial for Volkswagen as it would assist them in their commercial activities.
The key reason for conducting business in the country is the potential
connection with the global market.
 Ideal Operating Conditions – The businesses in Switzerland could be carried
effectively due to various reasons such as political and financial stability,
friendly legislation, trained workforce, and developed infrastructure (SIGF,
2019). In addition, technological advancement is also fruitful for the businesses.
 Tax Benefits – There are certain tax benefits for the companies in the business
environment of Switzerland. Volkswagen could work with the taxation laws of
the country to attain benefits like tax reduction or tax exemptions.
 Business Customs and Etiquette – The business functioning in Switzerland is
similar to other western countries. Moreover, the diversity in the culture would
be helpful in carrying effective operations and attaining substantial advantage
for Volkswagen (SIGF, 2019).
Irrespective for the above opportunities, it is essential for Volkswagen that they work
with certain threats in the business environment of Switzerland. The major threats in
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