VW AG Business Strategy Report

This report provides a comprehensive analysis of Volkswagen AG's business strategy, focusing on its response to the emissions scandal. It begins with an introduction outlining the importance of business strategy and its application to Volkswagen's situation. Task 2 delves into a SWOT analysis of VW AG's strategic position, followed by an environmental audit considering political, economic, social, and technological factors. The significance of stakeholder analysis in formulating a new strategy is discussed, leading to the proposal of a new strategy for VW. Task 3 evaluates the appropriateness of alternative strategies, justifying the chosen approach. Task 4 outlines roles and responsibilities for strategy implementation, details resource requirements, and highlights the contribution of SMART targets. The report concludes by summarizing the key findings and emphasizing the importance of adapting to the changing automotive industry landscape. The report includes a substantial list of references, both online and from journals and books.

BUSINESS STRATEGY

Table of Contents
INTRODUCTION......................................................................................................................1
TASK 2......................................................................................................................................1
2.1 Strategic position of VW AG...........................................................................................1
2.2 Environmental audit for VW AG.....................................................................................2
2.3 Significance of stakeholder analysis while formulating new strategy.............................3
2.4 New strategy for VW........................................................................................................4
TASK 3......................................................................................................................................4
3.1 Appropriateness of alternative strategies for Volkswagen...............................................4
3.2 Justification of the selection of strategy...........................................................................5
TASK 4......................................................................................................................................6
4.1 Roles and responsibilities for strategy implementation....................................................6
4.2 Resource requirement to implement a new strategy for VW AG....................................6
4.3 Contribution of SMART targets to the achievement of strategy implementation in VW
AG..........................................................................................................................................6
CONCLUSION..........................................................................................................................7
REFERENCES...........................................................................................................................8

INTRODUCTION
The business strategy concept is the means by which the business organisations sets out
activities to achieve their desired goals. Simply, it can be referred to long-term business
planning. Further, there are several issues about resources is considered in the business
strategy, i.e. raising capital for the introduction and operation of any project. The strategies
are also about making decisions related to resources quality to be allocated for the decided
products manufacturing. Developing productive and effective business strategy is the main
activity of management in any business firm. The best possible strategy can be selected after
the determination of internal and external factors that boost the business in attaining
competitive advantage in the market. Here, the report is briefing about the strategic planning
process of Volkswagen due to the emission scandal negative impact on the company’s
operations and image in the market. The following paper is aimed to determine sustainable
strategies for the company to rebuild its market position and achieve long-term success in
business.
TASK 2
2.1 Strategic position of VW AG
The following SWOT analysis is illustrating strategic position of Volkswagen in the
automotive industry:
Strengths
 Strong portfolio of brand
 Worldwide presence
 Well performing brands
 Strong presence in China
 Synergy
Weaknesses
 Weak position on the passenger car
market of US
 Most of the Volkswagen cars are not
environmental friendly
Opportunities
 Changing needs of customers
 Rising prices of fuels
 Growth by acquisitions
 Positive attitudes of the management
towards green techniques of
manufacturing vehicles
Threats
 New standards related to car emission
 Increasing prices of raw material
 Fluctuating prices of fuel
 Fluctuating rates of exchange
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2.2 Environmental audit for VW AG
The following environmental factors influence the business activities of VW:
Political factors – The political factors comprise the main regulations, laws, restrictions and
security measures that apply to the entire automotive sector. Due to the distinct political
decisions Volkswagen have to take some care and precautions regarding the environmental
issues while manufacturing cars. At present, hybrid cars are in more demands and country’s
government is also supporting such type of projects. Therefore, all production of VW should
comply with vehicle emission standards of EU and Euro standard regulations (Brinkschröder,
2014).
Economic factors – These are mainly in relation to global economic growth, exchange rates
and certain setting of business that predominate the whole industry. In past some years, the
automobiles prices have enhanced because of rise in inflation rate. In terms of automobile
industry infrastructure development is most demanding. The key factor that influences the
elasticity of external prices comes from the industry’s dependence on oil (Eyceoz, 2009).
However, high prices of petrol does not bring any changes in vehicles demands as most of the
Volkswagen cars are fuel efficient. The changes in productions and demand based on motor
trade create sizable impacts not on the company alone but also on the supply chain activities
of the business. Furthermore, in an increasingly rising international markets, the alterations of
currency have significant influence on the VW supplies and goods competitiveness (Freeman,
2010).
Social factors – These generally includes changes in global demographics and culture apart
from the customers buying patterns changes. The cars choices not just influenced by
economic changes but through socio-cultural aspects as well. The rising awareness of
customers and concern about the vehicle driving implications is the most significant social
tendency to be addressed by manufacturers of automobile. Volkswagen is attempting to
address the issue by enhancing its hybrid and electric cars range (Hill, Jones and Schilling,
2014). Another essential demographic factor that affect the overall sales of VW is aging
population. Also, the company is greatly affected by the additional range of social aspects
like changes in the attitudes of customers, changes in family values, opinions towards
travelling and automobiles, media perception about brand and target customer’s welfare and
health. The ability of VW to bring the world-class vehicles depends on the hard work and
craftsmanship of Americans who manufacture parts for its trucks and automobiles. Due to
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this, the company believes that it is essential to support the communities where the suppliers
are located (Jones, 2014).
Technological factors – The key factor of air pollution in the globe is an automotive sector
and thus, there have been rising demands for the increasing manufacturing of eco-friendly
cars. In this regards, VW attempt to reduce the emission and fuel consumption in its
offerings. Recently, many eco-friendly cars has been designed on the basis of electrical
system by the company (Phaal, Farrukh and Probert, 2004). Moreover, all technical process
run in the plants of VW are created with a view to ensure maximum environment care. Some
main solutions applied in the organisation are heat recovery, closed water circuits and the
chemical substance management concept. The company also uses the latest devices,
technologies and the systems of utilities management to reduce its manufacturing activities
environmental impact (Kaplan and Norton, 2001).
2.3 Significance of stakeholder analysis while formulating new strategy
There are two types of stakeholders present in any company, such as external and
internal. The internal stakeholders comprise employees, management team and shareholders
while financial institutions, government bodies, customers, suppliers and society are included
in the external stakeholders. Among these, the shareholders role is to facilitate finance for the
company on the regular basis by expecting increased value for constant business development
(Maxwell and Van der Vorst, 2003). The role of employees is to explain the features of
vehicles and new launches of company adequately to all customers and take active
participation in achieving competitive edge. These employees expects growth and welfare in
their career from the company. The team of management play their active role in effective
operations of management by incurring less expenditure. They offer their inputs in a career
growth expectation along with the corporate success (Makos, 2016).
In addition to above, the country’s administration play an essential role in developing
trade policies that can influence the company to expand and sustain its business operations.
The government expect that the organisation must comply with developed regulations and
rules as well as offer their outputs at fair prices and provide good employment opportunities
to locals. Moreover, an adequate contribution to society’s welfare is expected by the
government from any business organisation (McGee, 2016). Besides this, several financial
institution allows easy finance of VW business operations by demanding effective
maintenance of liquidity. Also, the society expect from the company to fulfil all of its
obligations towards corporate social responsibility. The customer’s role is to remain loyal for
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the brand and they expect in turn the vehicles at affordable prices. Finally, the supplier’s role
is to offer material at reasonable costs to facilitate bulk production (Rubin and Chisnell,
2008).
2.4 New strategy for VW
From the above analysis it can be said that the automotive industry is in the phase of
transition, the autonomous driving, connected car concepts and e-mobility that is determining
the future of automobiles. The rapidly changing situations together with the issues of diesel
are posing various challenges on the car manufacturers including VW (Lowe and Jones,
2004). Therefore, the company has planned to launch the ‘Together – Strategy 2025’, as a
great process of change in its history. This will definitely support the organisation in
sustaining its future success in the world of mobility and will make its evolution as a leading
provider of sustainable cars (Schwartz, 2016). For the current strategy effective execution,
the management should try to employ experts from all units of the company and unites their
ideas, knowledge and vision to develop a unique output. In order to achieve good level of
success, the future program of VW should developed on four main building blocks:
 Build business mobility solutions
 Secure funding
 Transform core business
 Strengthen innovation power
TASK 3
3.1 Appropriateness of alternative strategies for Volkswagen
Substantive strategies – It can be vertical or horizontal integration and related or unrelated
diversification. Volkswagen can make related diversification by expanding its traditional
engines through drivetrain electrification. There are increasing number of drivers
predominantly travelling to short distances. It include residents and commuters and the
population is regularly shifting to urban areas (Sekaran, 2006). To the customers who travel
to short distances, the company will design electric vehicles like e-Golf and e-up, which are
emission-free. These customers can also provide battery charging services at charging station
installed at different locations of the city. Also, there are some customers who prefer long
journey in their vehicles in addition to short distance travel (Levy, Powell and Yetton, 2001).
These clientele group can be targeted by hybrid vehicles that combine high effective
combustion engines with electric motors that makes zero-emission. The given strategies will
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support Volkswagen to re-build customers trust in its new techniques and to gain their
acceptance for e-mobility (SILVESTRO, 2016).
Limited growth strategies – In order to improve sales in US, Volkswagen need to create
something new. With its Beetle, the company first gained a foothold in UK due to its
uniqueness (Jones, Temperley and Lima, 2009). The existing products offered by
Volkswagen like Tiguan and Jetta are well developed but lack a point of unique selling.
Nothing can truly differentiate them from rivalries cars in the market. Even though, the
company is making progress for achieving 2018 goals but it should focus more product
development rather than the market penetration (Ulrich, 2003).
Market entry strategies – Kenya is an opportunity market for Volkswagen due to its sales
drop in US. The company can enter the country with traditional strategy of appointing a
distributor or agent and then register and enter as a US organisation after the sufficient
growth in sales (Huang and Yen, 2010). Many foreign firms are operating in Kenya under
their own name to penetrate the regional market. The country appreciate companies that
creates employment opportunities and fulfil corporate social responsibility and thus,
Volkswagen should employ local workforce of Kenya and focus on social responsible
activities to sustain its position in the market (Volkswagen, 2017).
3.2 Justification of the selection of strategy
The justification of business strategy can be done by Ansoff’s matrix that display whether the
organisation grow into existing or new market and produce existing or new products. The
following strategies would support Volkswagen to improve and sustain its lost image in the
global market:
Product development – It is the essential course of action to improve the company’s present
position, as it has a wide range of products for the premium segments and has less range of
offerings for the compact, budget and mid-size segment, which hold major share of the
market (Wheelen and Hunger, 2011).
Market penetration – Volkswagen by employing this strategy can launch more cars for the
customers belong to low cost segments. This strategy also required adequate promotions and
ad campaigns by the company to penetrate the market as local companies pose tough
competition in the market (Acur and Englyst, 2006).
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TASK 4
4.1 Roles and responsibilities for strategy implementation
The personnel who are charged with strategy implementation have three main roles –
envisioning future strategy, aligning the organisation to deliver that strategy and embodying
change. Envisioning future strategy involve with communicating the strategy clearly with
internal and external stakeholders (Hart and Milstein, 2003). Next role is aligning the
organisation to deliver the strategy which relates to ensure commitment of all people of the
organisation towards the implementation of the strategy by motivating and empowering them
to deliver the change. The final role is embodying change by the strategic leader to follow the
strategic change process. Apart from these roles, managers, consultants and other personnel
are responsible to formulate operational plan for the strategy implementation including
human resource planning (Baumann, Boons and Bragd, 2002).
4.2 Resource requirement to implement a new strategy for VW AG
For implementing the new strategy, adequate resource allocation is vital for VW AG.
The requirement of resources depends on the organisational environment and nature of
resources. There are several key resources for implementing the new strategies such as
physical resources, people resources, and financial resources (Harris and Rae, 2009). The
physical resources are consisted of the assets of the company related to production resources.
It is advisable to allocate more physical resource as the new strategy is for the quality
improvement. People resources also a major requirement for strategy implementation and the
company should develop their human resources by implementing more learning and
development activities. The financial resources are related with the initial start-up cost and
VW AG is expected to allocate sufficient finance for the implementation activities (Bowen
and et.al., 2001).
4.3 Contribution of SMART targets to the achievement of strategy implementation in VW
AG
SMART targets helps the VW AG to conceptualize and articulate the future direction.
It also contributes the organisation to successfully achieve the strategy implementation in
following ways:
 Specific targets helps to clearly understand the actual expectation of top management
from the implementation of new strategy.
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 Measurable targets helps to monitor the progress according to the already set
performance standards.
 Attainable targets helps to managers to motivate and energise people towards new
strategy implementation (Eppler and Platts, 2009).
 Relevant targets contribute towards achievement of the organisational vision and mission
and to reduce conflicts between long term and short term objectives.
 Time bound targets contributes to assess the progress and intensifies the effort towards
strategy implementation within a stipulated time period (Dangayach and Deshmukh,
2001).
CONCLUSION
The above report concludes that the process of executing business strategies is
undertake on the basis of internal capabilities and external business environment audit. The
company’s main consideration is to offer hybrid technology car to control the emission and
air pollution. Furthermore, by its core competencies and utilising new eco-friendly product
designing techniques, the organisation can achieve sustainable competitive growth in the
automotive sector. The process of strategy implementation success and failure is also heavily
depends on the existing situation of the target market by which production, designing and
marketing department of VW should always remain updated.
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REFERENCES
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Wheelen, T.L. and Hunger, J.D., 2011. Concepts in strategic management and business
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