jensencmgtba490-final capstone paper
TRANSCRIPT
VOLKSWAGEN
COPRORATE ANALYSIS: VOLKSWAGEN
By:
Christopher Jensen
BA 490
Presented to the faculty of Eastern Oregon UniversityIn partial fulfillment of the requirements for the degree of
Bachelors of Business AdministrationDecember 2014
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Approval Page
I approve the Capstone Paper of Christopher Jensen.
________________________________________________________________________ Gary F. Keller, Ph.D., Professor December 6, 2014
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Executive Summary
The Volkswagen Group is a fascinating and impressive automotive giant that has produced
automobiles since the Second World War. Throughout Volkswagen’s history, many successful
major brand acquisitions have been accomplished and many great products introduced. Through
having great leadership and management, the Volkswagen Group has developed a worldwide
network for producing and distributing vehicles of all types. Volkswagen’s business strategies
and organizational structure facilitated their success over a span of 77 years, and allowed the
company to grow into a very respectful and responsible company on every level. The ownership
of 12 prestigious automotive brands has placed the Volkswagen Group in a major competitive
position in the automotive industry that will bring success and pride to the company for many
years.
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Table of Contents
Page No.
Executive Summary...................................................................................................3
Table of Contents.......................................................................................................4
List of Tables.............................................................................................................6
List of Figures............................................................................................................7
Section 1 History of Volkswagen..............................................................................8
1904-1945......................................................................................................8
1937-1945......................................................................................................8
1945-1960......................................................................................................9
1961-1972......................................................................................................10
1973-1991......................................................................................................10
1992-2012......................................................................................................12
Section 2 Volkswagen’s Mission...............................................................................12
The Group......................................................................................................13
Brands and Products......................................................................................13
Innovation......................................................................................................14
Sustainability and Responsibility...................................................................14
Human Resources..........................................................................................14
Section 3 Stakeholders...............................................................................................15
Section 4 Governance Structure.................................................................................17
Management and Supervisory Board.............................................................18
Compliance....................................................................................................19
Section 5 Corporate Social Responsibility................................................................20
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Section 6 Macroenvironment.....................................................................................23
Section 7 Competitive Advantage.............................................................................27
Section 8 Business-Level Strategies..........................................................................30
Section 9 Life Cycle...................................................................................................36
Section 10 Corporate Structure..................................................................................39
Section 11 Control Systems.......................................................................................41
Section 12 Conclusions and Recommendations........................................................44
References..................................................................................................................48
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List of Tables
Page No.
Table 1: Shareholder Equity (USD)...........................................................................17
Table 2: Continuing Volkswagen Models.................................................................35
Table 3: Volkswagen AG Management Board..........................................................40
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List of Figures
Page No.
Figure 1: The Volkswagen Group’s Stakeholders and Their Expectations...............16
Figure 2: Total Donations by Volkswagen AG in 2013...........................................21
Figure 3: Volkswagen AG SWOT Matrix.................................................................26
Figure 4: Volkswagen AG Modular Parts.................................................................28
Figure 5: Volkswagen AG Strategy...........................................................................31
Figure 6: Supplier Sustainability Through Structured Processes..............................31
Figure 7: Volkswagen AG Passenger Car Deliveries 2012-2013..............................38
Figure 8: Volkswagen Group Brands........................................................................46
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Section 1: History of Volkswagen
1904-1936
The European market had yet to mass-produce a vehicle that would be affordable and
available to anyone who desired such an item. Many European engineers followed the success of
Henry Ford with his release and market saturation of the Model-T. Henry Ford’s business model
became the industry standard in regards to how to manufacture and distribute vehicles. Henry
Ford’s production structure was particularly interesting to the German engineers because they
had already decided that the future of automobile manufacturing would be focused on
inexpensive, mass-produced vehicles that would transform everyday life for the citizens.
Ferdinand Porsche, born in Maffersdorf, Bohemia in 1875 was one of the brilliant minded
engineers working on small racing cars rather than a “Volkswagen”, or people’s car in German.
On June 22, 1934, Ferdinand Porsche was commissioned by “Reichsverband der Deutschen
Automobilindustrie” to design a Volkswagen that would be paid for by the state. After two years
of design and preparation, the VW series 3 was presented to Reichsverband der Deutschen
Automobilindustrie.
1937-1945
The Volkswagen project was introduced during its cornerstone ceremony on May 26,
1938. Adolf Hitler announced the Volkswagen would be produced in the new factory and would
be known as the “Kdf-Wagen”. The new factory begins production of tooling and training of
new laborers necessary to produce the vehicle. Soon after, production was shelved due to the
beginning of World War II in order to make way for production of armament. The onset of
WWII caused issues in producing the Volkswagen because the war efforts demanded more
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material, labor force, and time than was available. Rather than producing the Volkswagen, the
factory output many military vehicles that were widely used during the war.
Production of military vehicles and equipment ended once the Nazi dictatorship was
halted and the war finished. This meant the factory could finally begin production of what it was
initially intended for, the Volkswagen Beetle.
1945-1960
After the war, Germany’s economy was in trouble. For the factory, this meant they could
begin production of the Volkswagen, which would be helpful by providing jobs, housing, and
food for the employees. Once the British gained control, they reopened the factory to support the
locals as well as provide their own country with much needed vehicles. Many countries, such as
the United Kingdom, Switzerland, and Belgium, were in desperate need of vehicles and supplies,
which enabled Volkswagen to export to several countries and led to them to being the largest
exporter of German vehicles during the 1950’s. Volkswagen started to develop a good reputation
for quality products, great service, and in-stock supplies and began exporting to many countries
like Canada and the United States, as well as began building production facilities in foreign
countries such as South America, South Africa, and Australia. The design and production of the
Beetle was a major factor in the success of Germany’s economy and would continue to sell in
high numbers. In the United States, vehicles were more luxurious and more expensive, which
made exporting to third world countries very difficult. Volkswagen was exporting vehicles to
foreign countries at nearly the cost to build in order to compete with the expensive US vehicles,
expand to a larger market, and increase overall sales and production.
Volkswagen was experiencing great success in the automotive industry. Through their
success came the ability to increase pay to workers and offer benefit packages, which created a
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great synergistic working relationship between the workers and managers. In addition,
Volkswagen set out to reduce employee turnover in attempt to retain its highly skilled workforce,
and to enable employees to become part of the Volkswagen family. Volkswagen created an in-
house wage agreement that aided in Volkswagen becoming the top rated, trend setting
automobile company in the industry.
1961-1972
Volkswagen continued to increase production and exports to foreign countries, which
expanded their popularity and reputation. However, the success of Volkswagen brought them
closer to the stage of disruption in the cycle of strategy and chaos. The stage of disruption is a
point in an innovative company’s life cycle where one or more different companies have
observed the success of the innovative company and then release a competitive product to offer
the market as an alternative (Gary Keller, personal communication, 2014). Other automobile
manufactures were creating competition by reducing price and increasing quality in attempt to
match the standards set by Volkswagen. Volkswagen considered joining with Daimler-Benz to
increase competitiveness, and eventually did acquired 75.3% of the subsidiary. Volkswagen was
challenged to get Daimler-Benz out of financial ruin, which was a result of low sales because
their cars were cheaply made, and very expensive. Out of this challenge came the “Audi 72”,
which didn’t immediately solve the problem, but it did become the main model offered by
Daimler-Benz, and facilitated the independence of the Daimler-Benz brand and Volkswagen.
The economy flourished for many years, as did Volkswagen. However, once the
economy settled down to a normal rate Volkswagen had to increase efforts, such as increasing
training for technicians and managers, and increasing research and development, in order to
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make up for the loss in sales and earnings. The once market quenching Beetle was now being
phased out because of consumers’ desire for larger, newer, and more convenient vehicles.
1973-1991
Due to the oil crisis of 1974/1975, many automakers faced significant losses in sales and
growth. Volkswagen had timed the release of the Passat and the Golf just right as to reduce the
effects of the crisis on their sales. The success of these two cars facilitated perseverance by
stabilizing Volkswagen’s finances during the crisis. By 1976, Volkswagen had survived the
crisis and increased sales by 15%.
During the mid 1970’s, sales figures for Volkswagen dropped from 540,354 to 238,167,
which gave the company a difficult situation to solve. The initial idea was to set up a production
site in the United States in order to reduce import costs and facilitate sales and delivery.
However, the high wages required in the United States encouraged a different solution. The next
idea was to manufacture vehicles in Mexico and then import to the United States from that
facility. Volkswagen feared a negative image of this solution in the eyes of Americans, so they
decided that setting up a plant in the United States was the only way to retain their position in the
United States market.
In 1979, Volkswagen took over a Brazilian subsidiary of Chrysler Corporation.
Volkswagen began producing a line of commercial vehicles with a variety in about the same
magnitude as their standard production vehicles. Success of these vehicles dropped in the early
1980’s because of competition from Japan, and yet another oil crisis. However, Volkswagen’s
line of economical vehicles such as the Passat, Golf, and Diesel Golf, made better than industry
average sales even during the current economic downturn. Between 1972 and 1982, Volkswagen
had invested nearly 10 billion German Marks in automation machinery to make the plant and
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build process more efficient. This investment in machinery also enabled Volkswagen to offer
customers the option to customize their new car that would then be manufactured accordingly.
Volkswagen continued to attempt entering other foreign markets in areas such as China
and Japan. Success in the United States had started to fall due to the increased competition from
Japan and other countries. This increase in competition meant closing the United States plant in
1987 and importing Volkswagens to the United States from Mexico. As international business
increased, Volkswagen acquired a few more automotive brands making a total of four being
Volkswagen, Audi, Seat, and Škoda.
1992-2012
During the early 1990’s, Volkswagen started to change their focus from increasing
international business operations and production to cutting costs, streamlining production, and
diversifying their product range. Price cutting and streamlining efforts were in attempt to offer
more competitive prices in comparison to the high competition from Japanese automakers.
Volkswagens efforts paid off with an increase in production of 30% between 1994 and 1996, and
a nearly 40% decrease in production times on some models.
The increase in production enabled Volkswagen to focus on further diversifying their
brand. In 1998, Volkswagen purchased several prestigious automotive brands including Bentley,
Bugatti, and Lamborghini. Volkswagen is continually trying to increasing productivity and
efficiency, and by 2018, Volkswagen intends to become the automaker with the highest sales and
most innovative products. They continue to show signs of reaching this goal such as having
record sales and earnings in 2007. Today, the Volkswagen Group owns 12 automotive brands.
These brands are Volkswagen, Audi, Seat, Škoda, Bentley, Bugatti, Lamborghini, Porsche,
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Ducati, Volkswagen Commercial Vehicles, Scania, and Man. Currently, Porsche Automobil
Holding SE, Stuttgart, holds 50.73% voting rights in the Volkswagen Group.
Volkswagen, 2014a
Section 2: Volkswagen’s Mission
A mission statement can be defined as “a short sentence or paragraph used by a company
to explain, in simple and concise terms, its purposes for being. These statements serve a dual
purpose by helping employees to remain focused on the tasks at hand, as well as encouraging
them to find innovative ways of moving towards an increasingly productive achievement of
company goals. It is not uncommon for the largest companies to spend many years and millions
of dollars developing and refining their mission statement, with many of these mission
statements eventually becoming household phrases” (Investopedia, 2014a, para. 1).
The Volkswagen Group does not have an official mission statement entailing the goals of
the company. Instead, they have information on their views of several sections within their
company explaining their views and goals for each section. This may be because of the their
detailed description of their goals within each area of a typical mission statement, or perhaps
their long history has built their reputation in such a way that they feel it unnecessary to have a
single mission statement for the company as a whole.
The Group
Volkswagen is a large automaker with 12 brands, approximately 570,800 employees, 106
production plants in 19 different countries, and services 153 countries worldwide. For the Group
as a whole, they have defined a simple goal. “The Group’s goal is to offer attractive, safe and
environmentally sound vehicles which can compete in an increasingly tough market and set
world standards in their respective class” (Volkswagen, 2014b, para. 8).
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Brands and Products
Volkswagen owns a diverse range of automotive brands and is challenged by delivering
those brands to the market in such a way as to maintain their individuality as a brand and
company. Retaining each brand’s identity is a way of creating diverse cornerstones within the
automotive market, and Volkswagen intends to maintain and deliver each brands’ qualities and
characteristics as have been developed through their history (Volkswagen, 2014c).
Innovation
Innovation at Volkswagen AG is driven by the trends and tendencies of social culture.
This means that they respond to what the customer desires by conducting intense research in
order to create innovative technologies and solutions. “Our mission is to continue meeting our
customers’ wishes for individual and affordable mobility through sustainable technologies. We
work together with our partners to achieve this goal” (Volkswagen, 2014d, para. 3).
Corporate Responsibility and Sustainability
Volkswagen is dedicated to creating lasting value for its customers, employees and
shareholder, and countries and regions in which they operate. This is a difficult task considering
the diversity of the markets, countries, and regions in which they conduct business. Furthermore,
shifting markets, differentiated economies throughout the world, and a vast range of applications
in which automotive technology can be applied, create a demand for sustainability and
responsibility of the Volkswagen Group if they are to achieve their goals as an organization and
continue to provide innovative solutions for the future (Volkswagen, 2014e).
Human Resources
The success of Volkswagen has been created from the dedicated employees throughout
the company. Volkswagen believes the only way for the company to survive is by employing
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people who offer a high degree of dedication, competence, and inventiveness, which combined
will create a top-level team.
Volkswagen is focused on offering innovative products that respond to, and satisfy, the
demand from their customers for simple, sensible, adaptive, economic, and responsible products.
They make this possible by employing people who believe in this goal and are dedicated to
furthering the company in all areas such as responsibility, sustainability, and innovation
(Volkswagen, 2014f).
Section 3: Stakeholders
Stakeholders within a business can be anyone who holds a vested interest within the
company in question. This may be creditors, shareholders, employees, or anyone who is affected
by decisions or changes made by the business.
A party that has an interest in an enterprise or project. The primary stakeholders in a
typical corporation are its investors, employees, customers and suppliers. However,
modern theory goes beyond this conventional notion to embrace additional stakeholders
such as the community, government and trade associations” (Investopedia, 2014b, para.
1).
Volkswagen has developed into an automotive group with a diverse range of products,
career opportunities, and facilities that create an attractive corporation in which to become a
stakeholder. Volkswagen believes their stakeholder relations are a vital component to long-term
success. Creating an understanding between all stakeholders is the goal, meaning, the
stakeholder’s ideas are presented and heard, concerns of all parties are taken into consideration,
and everyone has a clear understanding of the other party’s beliefs. Volkswagen wishes to have
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at least a mutual understanding of the stakeholder’s views and the company’s views, but would
prefer a joint solution to the issue in question.
Volkswagen has categorized its stakeholders into four groups to facilitate equal
consideration of each group: Partners, Capital Market, Society, and Customers. Within each
group they have identified the important expectations of each stakeholder type (see Figure 1).
Figure 1. The Volkswagen Group’s Stakeholders and Their Expectations
Volkswagen, 2014g
In 2011, Volkswagen opened a production plant in Tennessee that would be producing
the new Passat, a family sedan. The main headline from opening this plant was that it would pay
employees a much lower average wage of $27 per hour for salary and benefits compared to $52
per hour from other Detroit auto manufactures. This plant may not offer the same amount of
income for employees, but the lower wage rate does provide a major benefit for the customers.
Volkswagen was selling the Passat for about $28,000 at the time and with the opening of the new
facility, they would reduce that number to around $20,000 (Ramsey, 2011). Lower wages and
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lower product price are examples of Volkswagen improving stakeholder relations through
customer satisfaction, increased potential revenue and profit, and an increase in company
employees.
Volkswagen has continued to decrease emissions from their vehicles and have also been
converting their company energy sources to renewable energy options, which now amount to one
third of their usage. In 2013, emissions from vehicles had decreased 6% from the previous year,
and 19.5% from 2010. In addition, energy consumption per vehicle built has decreased 12.5%
from 2010 (Green Car Congress, 2014).
Volkswagen has increased the value of the company to all its stakeholders and especially
its shareholders. By steadily increasing the company’s profitability and growth, they have made
a significant increase in shareholder equity, and have created a valuable and safe investment for
future shareholders. The information in the following table shows Volkswagens’ shareholder
equity changes on a yearly basis dating back to 2009.
Table 1
Shareholder Equity (USD)
June 30, 2014 $122.27B
June 30, 2013 $108.97B
June 30, 2012 $77.50B
June 30, 2011 $76.44B
June 30, 2010 $47.03B
June 30, 2009 $51.21B
YCharts, 2014
Volkswagen has identified its stakeholders and has identified how to address and
accommodate those stakeholders’ needs, interests, and desires. This has been made clear through
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the Stakeholder Management publication entailing their goals on creating understanding with
stakeholders, managing stakeholder relations at a group level, annual evaluation by a panel of
stakeholders, and conducting stakeholder surveys.
Section 4: Governance Structure
Corporate governance is defined as:
The system of rules, practices and processes by which a company is directed and
controlled. Corporate governance essentially involves balancing the interests of the many
stakeholders in a company - these include its shareholders, management, customers,
suppliers, financiers, government and the community (Investopedia, 2014c).
Governance within Volkswagen is based on the German Corporate Governance Code, a
standardized code created for German business to facilitate implementation of proper business
management functions and to create the best possible business environment. The Code includes
internationally recognized standards that each company can adopt to improve its business
practices (Deutscher Corporate Governance Kodex, 2014). Volkswagen publishes an annual
corporate governance report entailing many aspects of their governance structure including
compliance with the German Corporate Governance Code and any exceptions to the code.
Management and Supervisory Board
The Management Board at Volkswagen AG is comprised of eight people with Prof. Dr.
Martin Winterkorn as Chairman, with primary responsibility of group research and development,
Chairman of the Supervisory Board of AUDI AG, and Chairman of the Board of Management of
Porsche Automobil Holding SE. Volkswagen AG Management Board members and their
primary responsibilities are:
Martin Winterkorn, Chairman, Group Research and Development.
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Francisco Javier Garcia Sanz, Procurement.
Jochem Heizmann, China.
Christian Klingler, Sales and Marketing.
Horst Neumann, Human Resources and Organization.
Leif Ӧstling, Commercial Vehicles.
Hans Dieter Pӧtsch, Finance and Controlling.
Rupert Stadler, Chairman of the Board of Management of Audi AG.
Volkswagen, 2014h
The supervisory Board of Volkswagen is made up of 20 members and its specific
composition has been exactly defined in the Corporate Governance report. At least three
members of the Supervisory Board should have an international characteristic. The shareholder
representative members must include four members who do not have a potential conflict of
interest, that is, “conflicts of interest that could arise through a position as a consultant or
member of the governing bodies or customers, suppliers, lenders, or other third parties”
(Volkswagen, 2014h, p. 56). At least four should be independent as defined by the German
Corporate Governance Code article 5.4.2. At least three Supervisory Board members, and two
shareholder representatives should be women. Finally, those who are selected for election should
normally be under the age of 75. The Management Board and Supervisory Board consult
regularly to determine strategies of the business as well as other major concerns of the company
such as company direction. The Supervisory Board monitors and acts as a consulting body for
the Management Board (Volkswagen, 2014h).
Compliance
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At Volkswagen, fair business between partners and competitors, and compliance with
international laws is taken very seriously. Volkswagen is committed to upholding their
compliance in all areas because they believe is it a key component in sustainable business. There
have been several compliance management processes implemented that help govern compliance
within Volkswagen and also to help with issues such as corruption and illegal business activity
outside of Volkswagen. While they help to reduce crime outside of their business, Volkswagen
also has systems in place to prevent corruption and illegal activities within the business, and that
also protect those who report violations. One major focal point within Volkswagens practices of
compliance is within the Chinese market. Entering the Chinese market comes with a high
potential for illegal activities and corruption. China’s exceptional growth rate had facilitated
ubiquitous corruption throughout the economy. For Volkswagen, this means tighter regulation
and closer monitoring of all activities in the Chinese market. The Governance, Risk and
Compliance organization within the Volkswagen Group make up nearly 200 employees
throughout 49 countries, and conducts annual compliance surveys to aid in their efforts and
review progress (Volkswagen, 2014h).
The Volkswagen Group has a high interest in all of its stakeholders. The Group provides
clear information for shareholders including shareholder rights and meeting dates. In addition,
they reach out to the stakeholders in several ways such as through surveys. The Group also
carefully manages risk through several financial audits, and has implemented systems that
govern the company as a whole. The attention to detail within the Volkswagen Group has aided
in success throughout their history and has made it possible to become the company they are
today.
Section 5: Corporate Social Responsibility
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Volkswagen AG has many channels through which they are socially responsible and
involved in the communities in which they do, and do not operate. Efforts from Volkswagen AG
include making company donations as well as employee contributed donations. Many employees
donate “spare cents” off their checks, or donate an hour worth of pay. Volkswagen AG is clear
about the destination of their donations. Specifically, they do not donate to political parties of
any kind, and they do not donate to and party favoring a political side. Volkswagen AG is about
donating to better society through improving the quality of life for societies’ members.
Volkswagen AG’s donations in 2013 totaled €19 million and were split into several categories
(see Figure 2).
Figure 2. Total Donations by Volkswagen AG in 2013
Volkswagen 2014i
Volkswagen AG is also committed to educating people on road safety, driving technique,
and laws in the world of transportation. Volkswagen accomplishes this by using several different
of their automotive brands to specialize in each topic of education. For example, Porsche
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conducts a driving school for kids across Germany. Škoda uses a multimedia program to teach
young children about traffic and transportation laws. Volkswagen has a school initiative in
Wolfsburg Germany, which serves the surrounding area and educates children in five key areas:
science and technology, business, international focus, and the promotion of talent. Volkswagen
AG also provides a program through which employees can volunteer in the community. This
helps to boost the appearance of volunteer work in the community, which hopefully will draw in
more employees and initiate more volunteer work outside Volkswagen AG’s efforts
(Volkswagen, 2014i).
Members of Volkswagen AG educate, donate, and volunteer to help with the social
responsibility of the company. As shown in Figure 2, Volkswagen AG is a generous company
that donates many millions to improve the well being of society’s members and to educate young
children. This shows consumers that Volkswagen AG is a company that cares about more than
profits and selling cars. Being socially responsible can be used as a marketing tactic where the
company might connect with a consumer on a different level than what their products offer. This
can make the consumer feel more inclined to do business with the company depending on what
is important to that individual consumer. Consumers who are only interested in their products
may never know of Volkswagen AG’s efforts in society and may have no affect on their
purchasing decisions even if they were to know. To some consumers, the efforts put forth by
Volkswagen AG will put them in good light and cause a deeper connection. However, when a
few important numbers are considered, the magnitude of these donations may become less
impressive. Volkswagen reported a net income of just over €3 billion, which means the €19
million in donations equates to about 0.006% of their net income (Volkswagen, 2014j).
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Regardless of this, Volkswagen AG has taken great initiative towards social responsibility and
societal involvement.
Section 6: Macroenvironment
The macroenvironment in terms of business can be defined as “the major external and
uncontrollable factors that influence an organization's decision making, and affect its
performance and strategies. These factors include the economic factors; demographics; legal,
political, and social conditions; technological changes; and natural forces” (BusinessDictionary,
2014, para. 1). A product of evaluating the macroenvironment of a company is a SWOT analysis.
SWOT is an acronym for Strengths, Weaknesses, Opportunities, and Threats. SWOT is
particularly valuable to a business because it can help determine the company’s position within a
market and determine which areas of the business need to be focused on in order to prevail by
creating value, and sustainability.
The demographic factors of a market’s consumers include income, age, gender,
geographic location, and education. The combined information from these categories creates a
marketing profile of the consumer. Researching efforts yield valuable information to the
marketing department within an organization, which is then used to create a marketing plan
specific to the target market.
Volkswagen AG owns many diverse brands, which means they have a large consumer
demographic range in which to market products. Volkswagen’s product range includes small
passenger cars, vans, commercial vehicles, motorcycles, and high-end luxury sports,
performance, and comfort vehicles. Volkswagen’s products range from about $2 million for the
Bugatti Veyron, to the new Volkswagen Jetta, which starts at $17,325 (Volkswagen, 2014k).
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Volkswagen is endlessly trying to expand and become the world’s leading automotive
manufacturer. Expanding their products into new areas can be difficult if there is already a
dominant competitor in the area of interest. In 2009, Volkswagen initiated an effort to partner
with Suzuki. The reasoning behind this attempted partnership was so that Volkswagen could gain
market share in India, where Suzuki was dominant, and have access to information on effectively
building small cars. This partnership could have benefited both companies if not for the major
leadership disagreements between Osamu Suzuki and Volkswagen’s chairman Ferdinand Piech,
which eventually halted the attempted partnership and resulted in a legal battle between the two
companies over returning share ownership in each company (Autonews, 2013). Volkswagen AG
is a large company with many brands and markets, but the failed partnership with Suzuki is one
example of how they still have several countries and competitors to enter and overcome. Due to
the major disagreements between Volkswagen and Suzuki, it seems as though these two
companies may have a long time to wait until a partnership can be established. Until a
partnership can be created, Volkswagen will have to look for a different source of information
and experience on small Japanese sized car manufacturing, and reconsider how to be an effective
competitor in India’s market.
Volkswagen’s decision-making is affected by many factors such as social conditions, or
corporate social responsibility, which means they must consider these areas as a primary focal
points. In the 2013 Sustainability Report, Volkswagen defines several ways in which they are
socially responsible such as making donations, providing volunteer work, and providing
educational services. In 2013, Volkswagen’s corporate decision-making was affected to the
amount of $19 billion euros (Volkswagen, 2014i). More companies are beginning to initiate
some form of corporate social responsibility whether it is because of their original mission or
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vision, or they have adopted this for other reasons. Many CEOs have explained that by being
socially responsible, employees seem to work better, feel better, and the business attracts better
employees overall (Thorpe, 2013). When employees are happier and feel their work is
worthwhile they tend to work more diligently and in turn better the business overall.
In recent years, the push for renewable energy sources and green processes has
challenged strategy development and decision making for many companies. Volkswagen is in
the automotive market, which means their focus is on developing efficient vehicles and new
technology to further the automotive industry. Volkswagen has made efforts in research and
development, specifically for electric, and hybrid electric, vehicles. The research and
development efforts have brought forth a few solutions such as their twinDrive system and the
eT!, both of which are electric solutions (Volkswagen, 2014l). Volkswagen, along with a few
other manufactures such as Honda, are looking into fuel cell cars, which essentially run on
hydrogen, which creates only one byproduct, water vapor (Volkswagen, 2014m). The push for
renewable energy sources whether for cars, homes, or businesses, is an external factor that has in
part changed what Volkswagen is focusing on for future sustainability.
The range in which the natural environment can affect the Volkswagen Group is quite
vast. Volkswagen conducts business from manufacturing to sales and distribution in many
regions including North and South America, Africa, Asia, Australia, and Europe (Volkswagen,
2014n). Volkswagen’s operations are exposed and threatened by many different natural forces
such as hurricanes, tropical storms, and fluctuating climates. These natural forces affect the
business on an immediate and strategic level. The immediate level is where natural forces can
affect the day-to-day business operations. The strategic level is where natural forces can affect,
or influence, product design and market selection of those products. Natural forces may be a
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concern for many companies, but more so for companies that operate in several locations
throughout the globe because their chances of natural forces impacting the company overall will
increase. However, because Volkswagen has operations all over the globe, they have a lower
overall chance of natural disasters affecting the company. Having operations all over the globe is
somewhat like an investor diversifying their portfolio, which is important because the investor
relies less on one specific investment. Volkswagen placing manufacturing plants in different
regions is not a tactic for diversifying their operations but rather a form of strategic management.
Volkswagen’s regionally diverse operations however create the added benefit similar to having a
diverse portfolio.
Deriving information from previous sections can support the following SWOT matrix for
Volkswagen AG.
Figure 3: Volkswagen AG SWOT Matrix
Marketline, 2014
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An interesting weakness listed within the SWOT matrix is the frequent product recalls.
Volkswagen uses modular parts to construct vehicles, and is continually trying to increase the
use of modular parts because it helps to increase revenue by decreasing production intervals. A
modular assembly is essentially a sub assembly used to create a larger assembly. The reason why
this is an interesting point to be made in regard to the stated weakness is because by having
modular parts that are common to many models within their product range, they increase the
volume of a recall. If they have a modular sub assembly that is fit into many models, then a
recall of that assembly is greater in volume compared to if every car had a unique sub assembly,
in which case a recall would only affect that model.
Section 7: Competitive Advantage
A competitive advantage is very valuable to every competitive business. “An advantage
that a firm has over its competitors, allowing it to generate greater sales or margins and/or retain
more customers than its competition. There can be many types of competitive advantages
including the firm's cost structure, product offerings, distribution network and customer support”
(Investopedia, 2014d, para. 1).
Volkswagen AG has developed a few distinctive competitive advantages in the
automotive industry. Consistencies in quality and satisfaction have become a characteristic of
Volkswagen cars specifically, but also those brands within the Volkswagen Group. Another
advantage the Volkswagen Group has is the diverse range of products offered, which in 2012
totaled 245 different passenger cars, trucks, and commercial vehicles (Taylor, 2014). A very
important competitive advantage that Volkswagen holds is their ability to engineer multiple
brands of products that carry completely different consumer bases while using interchangeable,
or modular, parts. By using interchangeable parts, Volkswagen can reduce costs and increase
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revenue by cutting production time and reducing the amount of engineering required to design a
new product. Interchangeable parts were first popularized by Eli Whitney during the Industrial
Revolution of the 19th century, and helped to keep manufacturing numbers high, costs low, and
repairs extremely easy (History, 2014). Application of the interchangeable parts method to
Volkswagen’s production and engineering can facilitate production, cuts unnecessary costs, and
create an easy method by which to service and repair their vehicles. Volkswagen has done a
good job integrating interchangeable parts into the manufacturing and design process to the
extent of showing little evidence between vehicles. However, using interchangeable parts
between vehicle brands such as Audi and Volkswagen may create some issues in the eyes of the
consumer. If the consumer knows about the interchangeable parts between their expensive Audi
and the inexpensive Volkswagen, then the brand value may be diminished. The risk of
diminished value of Audi, and other brands, by using interchangeable parts is reduced by
increasing efforts to make those interchangeable parts more seamless and unnoticeable to the
consumer.
Volkswagen’s interchangeable parts, or Modular Toolkit, provide a system that once
fully implemented will provide an excellent synergistic production line that can decrease
production intervals and increase profits. The idea is to create a car from common modular
sections apart from those pieces that make the vehicle a specific model (see Figure 3).
Figure 4: Volkswagen AG Modular Parts
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Volkswagen, 2014o
Figure 4 essentially shows the progression of implementation of modular parts within the
design and build of a vehicle. Notice the increase in synergy when the number of modular pieces
increases. To the right of the orange “modules” triangle shows the vehicle in two parts, which
combine to make 100%. What is important to this triangular section is that everything will
become modular apart from what is essential to keep the vehicle a specific model, which helps to
keep the brand identity. Of course, almost all automotive brands have implemented modular
design in some way, but Volkswagen is planning to take the idea to a new level. Volkswagen
expects to be able to produce some of their new vehicles up to 20% faster with their new
standardized modular designs and improved production process (Volkswagen, 2014o).
Volkswagen’s main competitive advantage comes from their ability to be economical in
their design and build processes. Another competitive advantage is the diverse range of products
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under the Volkswagen Group’s ownership. However, having many automotive brands under the
same company might cause issues such as self-competition, when one of their product brands
competes with another of their product brands. By retaining each brand’s identity, this self-
competition is not really a serious issue because either way, Volkswagen gets the sale.
Section 8: Business Level Strategies
Business level strategies include any of the firm’s tactics of creating a competitive
advantage in order to progress the business forward. Strategies a business may take include
“forward integration, backward integration, horizontal integration, market penetration, market
development, product development, related diversification, unrelated diversification,
retrenchment, divestiture, and liquidation” (David, 2013, p. 135). Volkswagen does not use some
of these strategies such as retrenchment, which is a strategy that takes measures to reduce assets
and costs in the firm in order to make up for continued loss of sales. Retrenchment is used when
a business is declining, which is why the Volkswagen Group is not employing this strategy.
Currently, Volkswagen is using backward integration, horizontal integration, market penetration,
market development, and product development. The organizational strategies and goals set by
Volkswagen AG are complex and deep-rooted. However, a simple description of the goals to be
achieved by 2018 is as follows:
The Group Strategy 2018 sets the pace. By 2018 the Volkswagen Group aims to be
the world’s most successful, fascinating and sustainable automaker. Achieving this calls
for responsible long-term business practices that benefit everyone – employees,
customers, investors, environment and society. In all of this we put our trust in proven
concepts, which we also transfer – from brand to brand, from region to region.
Volkswagen 2014p
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This strategy is depicted in visual form in Figure 5
Figure 5: Volkswagen AG Strategy
Volkswagen, 2014p
Backward integration can be defined as “seeking ownership or increased control over a
firm’s suppliers (David, 2013, p. 137). Volkswagen’s strategy for dealing with suppliers is
mainly not to take ownership over the supplier but rather, set strict requirements for the supplier
to remain a supplier of Volkswagen. If these suppliers do not conform to the standards set by
Volkswagen, then they will receive coaching and help from Volkswagen to bring their processes
up to the required standards. The reason for having control over suppliers is to increase product
quality and to maintain consistency. Volkswagen has identified a few processes that a supplier
must go through before becoming a supplier of Volkswagen (see Figure 5).
Figure 6: Supplier Sustainability Through Structured Processes
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Volkswagen, 2014q
As noted in Figure 5, Volkswagen AG has specific processes for a supplier to become a
supplier, for a current supplier to prove conformity to the requirements if suspected otherwise,
and for their sustainability questionnaire. All suppliers are monitored to ensure they are
complying with the requirements set by Volkswagen. Volkswagen sends out questionnaires’ to
get a feel for how the supplier is coping with their requirements, and if Volkswagen suspects that
there is an issue with compliance they will go through the process as depicted in Figure 5.
Volkswagen also aims to develop and inform suppliers, through an eLearning course, of their
standards in areas such as environmental and social standards. Efforts for increasing control and
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improving relations between Volkswagen and their suppliers are meant to increase sustainability
and improve product quality.
Horizontal integration can be defined as “seeking ownership or increased control over
competitors” (David, 2013, p. 137). Volkswagen started out, like many automotive brands, as a
single brand automaker. Through their years of operation, Volkswagen has obtained 11 other
automotive brands, some aimed at inexpensive everyday cars, some at commercial vehicles, and
a few aimed towards high performance luxury cars. By owning many automotive brands,
Volkswagen creates a more diverse product line and controls a larger portion of the automotive
market. Of course, controlling the entire market would be considered a monopoly. Considering
there are about 70 automotive brands on the market, the chances of developing a monopoly are
low (Autosaur, 2014). Volkswagen’s latest purchase was of the sports car manufacturer Porsche.
The purchase of Porsche was especially important to Volkswagen in consideration of the founder
and creator of Volkswagen, Ferdinand Porsche. Volkswagen is not currently looking to acquire
any specific brands, but they are remaining open and ready to do so when the opportunity arises.
Volkswagen’s CEO Martin Winterkorn said “we have no further projects in the drawer, but we're
always wide awake to what's happening in the world” (Automotive News Europe, 2013, para. 3).
Market penetration can be defined as “seeking increased market share for present
products or services in present markets through greater marketing efforts” (David, 2013, p. 137).
The goal of most retail companies is to increase market share. By increasing market share, a
company can maximize profits and gain dominance over competitors. As mentioned previously,
Volkswagen is in control of 12 automotive brands, each of which have their own target market.
Each brand under Volkswagen operates and controls the brand as an independent business,
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which means they have their own marketing efforts. The only way for a company to not be using
a marketing penetration strategy is if it doesn’t increasingly advertise products.
Market development can be defined as “introducing present products or services into new
geographic area” (David, 2013, p. 137). Volkswagen had made the decision to introduce their
brand to the Chinese market, which turned out to be a great decision considering the rate of
growth in new vehicle purchases in China. As of 2013, the market in China has demanded about
6.5 million vehicles, nearing the volume of some large European countries such as Germany at
about 7.1 million (Volkswagen, 2014r). Market penetration of this scale is very important to
future company development and strategies.
The most recent new market entry for Volkswagen was in the Indian market during 2010.
However, Volkswagen has seen difficult times in trying to succeed in the Indian market for a few
reasons. The major reason for Volkswagen’s low success in India is because Suzuki, Honda, and
Hyundai dominate by controlling over 70% of the automotive market. This high percentage
market share held by foreign competitors is because they offer several very inexpensive models
that cater to the first time buyers in India. Volkswagen has become somewhat of a luxury brand
automaker and therefore doesn’t compete with the low-end vehicles. However, Volkswagen does
own many other brands and certainly would have something to offer in that range, but the truth is
they do not have many products that compete, and the inexpensive models they do have are not
as good as the competition from Suzuki, Honda, and Hyundai (Forbes, 2014). In 2013,
Volkswagen reported sales loss in India of 18.9% compared to 2012 (Volkswagen, 2014s).
Regardless of India, Volkswagen has seen market improvements in most of their current market
positions.
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Product development can be defines as “seeking increased sales by improving present
products or services or developing new ones” (David, 2013, p. 137). Product development is a
strategy used my many firms. Volkswagen’s first model was the beetle in the early 20th century
and is still in production today, which means the Beetle is Volkswagen’s model that has been in
production for the longest period of time. The Beetle is a perfect example of Volkswagen
updating and improving a model in search of increased sales. The added benefit of continuing
production of the Beetle is the attention on the Beetle from the generation of individuals who
grew up with the original Beetle. People who grew up with the Beetle may have a special
connection with the Beetle that can influence them to purchase one if in the market for a new
automobile. Of the current models offered from Volkswagen, five core models are continuations
of their originals created in the 1970s, and the Beetle is a continuation of its original in 1938. The
models listed may have different holes in their history (periods where they may not have been
produced), but the model name has survived and is present today (see Table 2).
Table 2
Continuing Volkswagen Models
Model Years Produced
Beetle 1938-Present
Passat 1973-Present
Polo 1975-Present
Golf/Rabbit 1974-Present
Jetta 1979-Present
Scirocco 1974-Present
Volkswagen, 2014t
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The vehicles listed in Table 2 are not just kept in production, they are also updated and
restyled to meet the demand from consumers and to meet environmental and governmental
regulation in categories such as pollution and safety. In addition to these updated models,
Volkswagen has introduced many new models that appeal to different target markets. Over
different periods these models are evaluated and refined to become more reliable and more
attractive to consumers.
Through these several different business level strategies, Volkswagen has shown an
increase in units delivered from 2012 to 2013 of 5.1%, and if not for the unfortunate loss of sales
in India, that figure would have been higher (Volkswagen, 2014s).
Section 9: Life Cycle
The life cycle of an organization is similarly characterized to the life cycle of a product.
Product life cycle can be defined as “the course of events that brings a new product into
existence and follows its growth into a mature product and into eventual critical mass and
decline” (Investopedia, 2014e, para. 1). A typical life cycle will be comprised of five stages.
These stages are:
Product Development Phase - Includes market analysis, product design,
conception, and testing.
Market Introduction Phase - Initial release of the product, usually marked with
high levels of advertising.
Growth Phase - Sales growth begins to accelerate, characterized with increasing
sales year-over-year. As production levels increase, gross margins should
steadily decline, making the product less profitable on a per-unit basis. An
increase in competition is probable.
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Maturity Phase - The product will reach the upper bounds of its demand cycle and
further spending on advertising will have little to no effect on increasing demand.
Decline/Stability Phase - This is where a product has reached or passed its point
of highest demand. At this point, demand will either remain steady or slowly
decline as a newer product makes it obsolete.
Investopedia, 2014e
Once a product, or company, has passed the maturity phase and entered the
decline/stability phase, they may experience a shift where instead of declining or stabilizing they
might return to the growth phase.
Volkswagen, like many companies, has had products throughout its years of operations
that have traveled through each stage of the life cycle and are now gone. However, the life cycle
in this case is in consideration of the historical nature of the company rather than just their
products. Volkswagen is a fairly old company and therefore they have a lot of history where the
company has had positive periods and negative periods. However, reflecting on their history,
Volkswagen’s positive times are more numerous than its negative times. As a result of their long
history, the main focus here will be on recent issues with which the company has resolved.
The most recent crisis that Volkswagen had to deal with was in one of its major markets,
China. In China, March 15th celebrates Consumer Rights Day when CCTV, an influential
broadcaster, focuses on the treatment of Chinese consumers by large companies such as
Volkswagen. In March 2013, Volkswagen was accused of selling vehicles with faulty
transmissions. This accusation was particularly critical to Volkswagen because the Chinese car
market is the largest in the world. Volkswagen responded by not only by issuing a recall on
380,000 vehicles, but also by sincerely apologizing to the Chinese consumers. The importance of
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a sincere apology in China is because the Chinese people care about the attitude of the company
and that they are genuinely concerned about the consumer. Also, Chinese consumers take very
well to recalls because in their eyes it means the company is showing their acknowledgment of
their problem and taking initiative to fix the issue. Out of this crisis, Volkswagen learned the
importance of their relationship with the Chinese consumers and as a result, they have become
more involved in issues directly relating towards the well being of the consumers (AdAge,
2013).
The second most recent crisis that Volkswagen, along with the rest of the world, dealt
with was the global financial crisis of 2008. During the crisis, most of the automotive
manufactures faced large drops in sales, Volkswagen too. However, Volkswagen turned the
issues around quickly and began increasing car sales through 2009. Volkswagen’s success in the
US market prior to the crash in 2008 wasn’t like that of Toyota, and while many automakers
suffered heavy losses due to their dependence on the US market, Volkswagen saw this as an
opportunity to gain market share by introducing a new model to compete with the Toyota Camry
(Boston, 2009).
The two previous examples show that even with a large automotive company such as
Volkswagen, there can be may fluctuations in their success, all of which lie on the timeline of
their life cycle. In reference to the definition given by Investopedia, Volkswagen is in the growth
phase of their life cycle. The growth phase is characterized by steady growth and increasing sales
year to year, which is currently being demonstrated by Volkswagen (see Figure 7).
Figure 7: Volkswagen AG Passenger Car Deliveries 2012-2013
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Volkswagen, 2014s
Section 10: Corporate Structure
Corporate structure, or organizational structure, can be defines as:
explicit and implicit institutional rules and policies designed to provide a structure where
various work roles and responsibilities are delegated, controlled and coordinated.
Organizational structure also determines how information flows from level to level
within the company. In a centralized structure, decisions flow from the top down. In a
decentralized structure, the decisions are made at various different levels.
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(Investopedia, 2014e, para. 1)
The Volkswagen Group is controlled by its Management Board, which is regulated by the
Volkswagen Group’s Articles of Association and rules of procedure. The Volkswagen
Supervisory Board creates the rules and articles by which the Management board is governed.
The Management board at Volkswagen is in charge of directing the company with consideration
of the interest of the Group and brand managers. The senior brand managers oversee their
specific brand and act in accordance to the law laid by the management board. Each brand is
managed independently by the senior brand manager and according to their specific implemented
management system. The Volkswagen AG Management Board is comprised of eight individuals
(see Table 3).
Table 3
Volkswagen AG Management Board
Prof. Dr. rer. nat. Dr.-Ing. E. h. Martin Winterkorn
Chairman,Research and Development
Dr. rer. pol. h.c. Francisco Javier Garcia Sanz
Procurement
Prof. Dr. rer. pol. Dr.-Ing. E. h. Jochem Heizmann
China
Christian Klingler Sales and MarketingDr. h. c. Leif Ostling Commercial VehiclesHans Dieter Potsch Finance and ControllingProf. Rupert Stadler Chairman of the Board of
Management of AUDI AGProf. Dr. rer. pol. Horst Neumann Human Resources and OrganizationVolkswagen, 2014h
The Supervisory Board at Volkswagen AG is comprised of 20 individuals selected in
accordance to the specific requirements detailed in the corporate governance report. Important
roles of the supervisory board include appointing members of the management board and
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monitoring and approving important corporate decisions. The structure of the Volkswagen Group
continues down through all levels within each brand including managers, technicians, and
production workers, but each brand is managed independently of the Group.
Section 11: Control Systems
Control systems within a business can be defined as “methods put in place by a company
to ensure the integrity of financial and accounting information, meet operational and profitability
targets and transmit management policies throughout the organization” (Investopedia, 2014f,
para. 1). Volkswagen AG’s approach to internal control is combined with their risk management
system and is based on the Committee of Sponsoring Organizations of the Treadway
Commission (COSO). COSO is a joint initiative between the American Accounting Association
(AAA), the American Institute of CPAs’ (AICPA), Financial Executives International (FEI), the
Association of Accountants and Financial Professionals in Business (IMA), and the Institute of
Internal Auditors (IIA). COSO has developed a framework for risk management on which
companies like Volkswagen can base their efforts (COSO, 2014). Using a framework, such as
the one provided by COSO, helps Volkswagen to ensure proper handling of financial
information. When a company uses external sources that are internationally recognized, such as
COSO, they gain the added credibility towards their process and control systems. For example,
adopting COSO is similar to a company that might adopt a quality control system such as ISO
9001, which is an internationally recognized system. A major potential benefit of adopting ISO
9001 would be if that company was trying to become a vendor of a much larger corporation and
the adoption of ISO 9001 would facilitate certification of becoming a vendor. This essentially
shows that the smaller company is certified and practices internationally recognized procedures,
which gives them credibility in regards to their quality control system. An added potential
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benefit of basing the internal control system as well as the risk management system on the
framework of an internationally organized initiative might be the acquisition of new investors.
The reason this might attract new investors is, once again, because it gives added credibility to
Volkswagen’s financial control system, which shows Volkswagen is serious about their
sustainability and relationship with investors.
Volkswagen is also bound by law to fulfill a certain level of financial accountability and
reporting. In addition to this, they have implemented a three lines of defense model, which is a
requirement of the European Confederation of Institutes of Internal Auditing (ECIIA). The three
lines of defense model provides a systematic way of dealing with risk and matters concerning
internal control. Implementing systems to deal with these issues is important to the sustainability
of the company.
The first line of defense pertains to operational risk management. This first line of
defense is set at the level of the individual groups of Volkswagen AG and is meant to provide a
way of dealing with risk, or events that may lead to risk, at the time of notice. Upon notice of an
issue, immediate action is taken to correct the problem, and then a system is implemented to
catch potential issues of the same nature in the future. Should a problem occur, the report is filed
in the monthly reports and forecasts, which eventually end up being reviewed by the
Management Board of Volkswagen AG. Having risk reports allows the Management Board to
have a comprehensive view of the risks currently in play for the company as a whole. These
reports also facilitate making informed decisions. The standards of risk management are uniform
throughout the brands under Volkswagen AG.
The second line of defense involves capturing systemic risk using the standard
governance, risk, and compliance process. The second line of defense is basically a preventative
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process where standard and regular surveys are sent to analyze the current risks, as well as
analyze the risk management and internal control processes to determine effectiveness. Along
with these topics, the reports and surveys are also in place to control risk arising from issues of
compliance. Much like the first line of defense, once an issue has been noticed it is reported and
dealt with by management. The information provided, whether financial or not, is analyzed to
determine the possibility of future risk occurring.
The third line of defense is based on internal auditing. Group Internal Audit is an entity
within Volkswagen AG that assists the management board in monitoring different sections of the
company in attempt to control risk. KonTraG, the German Act on Control and Transparency in
Business, audits the systems in place at Volkswagen AG to ensure they are compliant to their
requirements. In addition to the evaluation of the internal control processes, regularly scheduled
audits of financial information and reporting practices are in place to continually create
accountability and assurance that the correct procedures are followed. These defense systems aid
in the continuing improvement of Volkswagen AG’s internal control forces (Volkswagen,
2014u).
Volkswagen AG has many control forces in every area of the business, which range from
the management board to the operations within each brand under Volkswagen AG. These
internal control systems are important to the company because they provide a way of maintaining
accountability and accuracy in financial statements and operational procedures. Internal control
systems are essentially just checks and balances that every company should have to some degree.
However, it is more important for larger corporations to employ control systems because of the
increased variables that could cause error. These variables may exist as a result of a document
transferring processes, high number of departments through which a document or process must
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pass, or anything else that increases the scope of a process. Internal controls help to reduce the
possibility of errors that can occur in large corporations from variable such as the one mentioned
previously. It is difficult to fully understand the degree to which Volkswagen’s processes extend
without extensively studying the control procedures and checks and balances that are currently in
place. However, it is apparent that most to all aspects have been considered and are being
controlled within Volkswagen AG’s organizational structure.
Section 12: Conclusions and Recommendations
For 77 years, Volkswagen has been a progressive company that constantly strives to
create new and innovative engineering solutions in the automotive market. The Beetle was the
first model introduced by Volkswagen, which paved the way for Volkswagen’s major success
and strong growth. Volkswagen has had many periods of positive and negative growth and has
implemented practical business solutions to keep the company growing and maintaining
sustainability for future generations. Volkswagen’s success is in part due to the ability of its
leadership to maintain focus, identify goals, identify the mission, identify company values, and
implement strategies, which then shape the company and create an everlasting impression in
Volkswagen’s history. The ability to create and maintain a properly functioning business that
constantly grows and innovates new ideas is especially important in regards to the stakeholders.
The stakeholder’s main concern is the company’s comprehensive success. A stakeholder is
anyone who holds valuable interest within a company, which is why the uniform success is of
utmost importance. Volkswagen creates uniform success through implementation of control
systems, and execution of highly detailed business strategies.
When a company, such as Volkswagen, grows and functions to a high degree, it must
experience and invite a synergistic environment from which the company can develop. Synergy
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is “the interaction of elements that when combined produce a total effect that is greater than the
sum of the individual elements, contributions, etc” (Dictionary, 2014, para. 1). Therefore,
employing a workforce that is as committed as the top-level managers, brand managers, and
those in operations, is extremely important when nurturing a synergistic environment.
Volkswagen believes that employing a highly skilled and dedicated workforce is imperative to
the success of the company. In order to attract employees who are dedicated and highly skilled,
Volkswagen maintains high values through being a mature, honest and charitable company.
Volkswagen’s success is also due to its ability to create and maintain a competitive
advantage in the automotive industry. By exercising horizontal integration, Volkswagen has
become a powerful company with many brands and product offerings that facilitate market
control. Through the implementation of several internationally recognized systems covering risk
management and detection, and internal control, Volkswagen is able to maintain sustainability by
evaluating and controlling many aspects of its macroenvironment and business level strategies.
Volkswagen has gone through many steps to ensure the viability and sustainability of the
company. From the efforts put forth to ensure viability and sustainability, Volkswagen enables
itself to implement and maintain a high level of corporate social responsibility. By introducing
educational systems and donating funds and volunteer work to charitable causes, it is apparent
that Volkswagen genuinely cares about giving back to the consumers and caring for the regions
in which they operate.
Volkswagen appears to be a strong company that has a deep-rooted business structure. By
maintaining the core values and upholding the missions and visions of the company, Volkswagen
will remain a strong competitor within the automotive market for an indefinite number of years.
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Volkswagen is the parent company to many prestigious automotive brands. It is advised
that Volkswagen maintains limited control over these brands in order to preserve the brand’s
identity and integrity. In recent years, Volkswagen has obtained the automotive brand Porsche.
The unity of Volkswagen and Porsche is very important because of the historical relationship
between these two brands. Ferdinand Porsche designed the Beetle, among many things, and
Porsche’s first production car, the 356. The Beetle was designed to be a car for the people, hence
the name “volkswagen” or “people’s car” in English. It is important and advised that
Volkswagen reserves the Porsche brand for what it was originally intended for, and has become
synonymous of, which is performance vehicles. Advisement of maintaining brand identity is not
limited to Porsche alone. When a company, such as Volkswagen, becomes large and in control of
many brands, blurred brand identity is facilitated and can occur. Comprehending the scope of the
brands which Volkswagen is parent to is more impactful when depicted in visual form (see
Figure 8).
Figure 8: Volkswagen Group Brands
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Volkswagen, 2014c
It is desirable that Figure 8 reinforces the need for maintaining brand identity throughout
Volkswagen. Maintaining control over the high number of important automotive brands requires
a high level of accountability and responsibility if to do so successfully without negative effects
reflected onto those brands.
Volkswagen has grown to employ nearly 580,000 people throughout the world
(Volkswagen, 2014b). This high number of employees means that there is a need for continuing
human resource management. It is advised that Volkswagen AG continues to care for its
employees by implementing programs and systems that build trust with the employees. A
trusting relationship between all parties within a company is vitally important to creating a
synergistic work environment. Often time’s companies will overlook the importance of the
employees in pursuit of unsurpassed customer care. It is important for Volkswagen to remember
this concept because employees are the ones who create success through adding value and
integrity to the business.
The last advisement to Volkswagen AG is to acknowledge and remember its potential to
dominant the automotive market. This point is to be made in respect to maintaining the integrity
of the business through continually improving relationships with customers, employees,
competitors, suppliers, distributors, communities and even other markets because these are the
channels through which any business exists and achieves success. Conducting business while
maintaining respect and consideration of all factors relating to the continuation of success in
global business is an essential concept in maintaining sustainability for future generations.
Volkswagen will continue to produce great products, provide great service, and offer a great
working environment for employees as long as the integrity within the company is protected.
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