GROUP H

STAKEHOLDERS• Manelisi Rarani• Maningi Mkhonto• Manduleli Mquqwana• Mphumleli Nqabeni

INTRODUCTION

AIMGroup H has decided to select a Volkswagen Group for strategic management case study analysis and evaluation.

OVERVIEW Type Public companyIndustry AutomotiveFounded Germany (1937 May 28)Founders Ferdinand Porsche, Bodo Lafferentz &Jakob Werlin Headquarters Wolfsburg, Germany

Number of locations 61 production plants in 21 countries

Area served Worldwide

Key people Dr. Ferdinand K. Piëch (Chairman of the supervisory board)

Prof. Dr. Rer. Nat. Martin Winterkorn (CEO and Chairman of the board of management)

Products Automobiles, commercial vehicles, enginesProduction output 6,054,829 units for sale in 153 countries (2009)[2]Services Financial servicesRevenue €105.2 billion (2009)Operating income €1.855 billion (2009)Profit €960 million (2009)Total assets €177.2 billion (2009)Total equity €37.43 billion (2009)Employees 368,500 (end 2009)Divisions Automotive Division,

Financial Services Division

INTRODUCTION

MARKET SHARE

INTRODUCTION

GLOBAL MARKET SHARE

COMPANY NAME

LAST CASH SALE PRICE OF THE DAY (€)

CLOSING PRICE VARIATION FOR THE DAY (CENTS)

CLOSING PRICE VARIATION FOR THE DAY (%)

HIGHEST TRADE PRICE FOR THE DAY

LOWEST TRADE PRICE FOR THE DAY

VOLUME TRADE ON DAY SHARES

VOLKSWAGEN GROUP

70.41 € +1.73 +2.52 72.20 € 68.89 € 751,921

INTRODUCTION

BRANDSDivision/Segment Brand/ Business Field

Automotive Division

Volkswagen Passenger CarsAudiSkodaSEATBentley Volkswagen Commercial VehiclesScaniaBugattiLamborghini

Financial Services Division

Dealer and customer FinancingLeasesing Direcbank Insurance Fleet business

VISION

Innovative solutions for the tasks of the future.

MISSION STATEMENT

We are a team of highly qualified professionals, dedicated to providing services of unparalleled quality to our customers. To that end and through our services, we will create a collaborative environment that:

Provides a quality product, Creates a safe environment, Enhances productivity, and Enables our customers to be more successful.

MISSION STATEMENT

Components                  Organisation Cust

omers

Products Services

Markets

Concern for Survival, Growth, Profitability

Technology

Philosophy

Self-Concept

Concern for Public Image

Concern for Employees

                   

Volkswagen Group Yes   No No No Yes Yes No No No

EVALUATION MATRIX

EXTERNAL ASSESSMENT

Political - 1970 Clean Air Act - Energy Policy and

Conservation Act

Economic -South America/ South Africa/ Europe/China

Social - Sport

Technological – High Breed, Electric Motor and ethanol

PEST

EXTERNAL ASSESSMENT GLOBAL SITUATIONS

Global Auto Industry Market Share by Production

Manufacturer Rank 2008 2009 Change in Production

Manufacturer Rank 2008 2009 Change in Production

GM 1 13.00% 11.90% -11% Suzuki 11 3.60% 3.80% 1%

Toyota 2 11.80% 13.30% 8% Chrysler 12 3.50% 2.70% -25%

Volkswagen 3 8.70% 9.30% 3% Daimler 13 2.90% 3.10% 4%

Ford 4 8.70% 7.80% -13% BMW 14 2.10% 2.10% -7%

Honda 5 5.40% 5.60% 0% Mitsubishi 15 2.00% 1.90% -7%

PSA 6 4.80% 4.80% -4% Kia 16 1.90% 2.00% 2%

Nissan 7 4.80% 4.90% -1% Mazda 17 1.80% 1.90% 5%

Fiat 8 3.70% 3.60% -6% Avtovaz 18 1.00% 1.20% 9%

Renault 9 3.70% 3.50% -9% Faw 19 1.00% 0.90% -6%

Hyundai 10 3.60% 4.00% 6% Tata 20 0.80% 1.10% 36%

EXTERNAL ASSESSMENT

FIVE FORCES OF COMPETITION MODEL BY PORTER

EXTERNAL ASSESSMENTEFE MATRIX

Opportunities Weight Rating Weighted Score

1.Volkswagen Group China (VGC), is by far the largest joint venture automaker

0.06 2 0.12

2. Progress in technology have allowed for fewer engineers to be needed by auto companies.

0.06 3 0.18

3. Increasing technology in automobiles forces customers to return to dealer for service.

0.08 4 0.32

4. European division expected to be more profitable. 0.04 4 0.325. Sluggish global economy could lower price of oil. 0.05 3 0.156. Customers desires for hybrid and fuel efficient vehicles 0.1 3 0.37. By 2010, electronics are expected to account for nearly 40% of an average vehicle’s value.

0.06 4 0.24

8. China and south Africa as vibrant markets. 0.04 2 0.08

EXTERNAL ASSESSMENTEFE MATRIX

Threats Weight Rating Weighted Score

1. The US $ & € devalues against most major currencies since 2002 0.08 4 0.32

2. GM, Toyota, Ford and other manufacturers offer great discount. 0.06 3 0.18

3. Most South African feel foreign cars are of superior quality. 0.05 2 0.14. German auto union is one of the most powerful unions in the in Germany

0.04 2 0.08

5. The US motor vehicle market has become the world’s most dynamically competitive auto market since eth 1970s.

0.08 2 0.16

6. US Germany market shares is on a stable decline from 20.5 percent in 2003 to 18 percent in 2008.

0.01 2 0.02

7. New Toyota manufacturing plant in Texas that will be capable of producing 200.000 full-size pick-up trucks per year.

0.1 2 0.2

8. High inventory cost of dealers cause decrease in profit margin. 0.06 2 0.12

9. Global Recession. 0.03 3 0.09Total 1   2.98

EXTERNAL ASSESSMENTCPM

  GM TOYOTA FORD VOLKSWAGEN

Critical SF Weight Rating Score Rating Score Rating Score Rating Score

Advertising 0.2 4 0.8 3 0.6 3 0.6 3 0.6

Product Quality

0.1 3 0.3 2 0.2 2 0.4 4 0.2

management 0.1 3 0.3 3 0.3 3 0.3 3 0.3

Finance position

0.15 4 0.6 3 0.35 2 0.45 3 0.3

Customer loyalty

0.1 3 0.3 4 0.4 4 0.3 3 0.4

Global expansion

0.2 4 0.8 4 0.8 4 0.6 3 0.8

Market shares 0.05 4 0.2 3 0.15 2 0.2 4 0.1

Total 1   3.3   2.8   2.85   2.7

INTERNAL ASSESSMENTIFE MATRIX

Strengths Weight Rating Weighted Score

Strong R & D department 0.07 4 0.28

Audi Q5 winning an award 0.08 3 0.24

Staff Development program 0.08 3 0.24

VW Golf sales more than 26 million 0.06 2 0.12

Environmental Protection awareness 0.04 3 0.24

4.5% increase in sales revenue 0.05 3 0.15

VW Financial Services increase in contracts by 5.3% 0.06 2 0.12

VW Bank gained increase of 26.1% 0.07 2 0.14

Taking over Scania as the new brand 0.05 3 0.15

INTERNAL ASSESSMENTIFE MATRIX

Weaknesses Weight Rating Weighted Score

Bad management image 0.06 3 0.18

Quality Control 0.07 3 0.21

4.5% decrease in demand for Golf in North America 0.05 2 0.1

Decline of 1.4% in sales revenue for VW Passenger Cars brand

0.03 3 0.09

Decline of 0.4% in vehicle sales for VW Passenger Cars brand

0.05 2 0.1

Operating profit drop of 20.6% for Skoda brand 0.05 3 0.1

Decline of 11.9% in sales revenue for Seat brand 0.04 3 0.12

Operating profit drop of 93.5% for Bently brand 0.05 3 0.15

Operating profit drop of 6.7% for Financial Services Division

0.04 2 0.08

Total 1   2.81

STRATEGY FORMULATION SWOT MATRIX

SO STRATEGIES WO STRATEGIES1. Continue R&D for hydride automobiles, pure battery and electric vehicles (S6, O7, and O6).

1. Create a department for quality control (W2, O2, O4)

2. Increase or introduce new technology in automobiles to keep the customers returning and attracting new customers. (O3, S1)

2. Increase or introduce new technology in automobiles to keep the current customers and attract new ones to increase profit. (W3, W8, W9, O3)

ST STRATEGIES WT STRATEGIES1. Focus on developing cutting edge fuel automobiles

1. Focus on customer oriented approach than on production oriented approach. (T8, W2)

2. Increase marketing to the current customers and also expand to other market. (T2, S10)

 

3. Increase quality to their products in order to compete in foreign markets. (T3, S1)

 

4. Create a strong HR department to meet the employees’ rights and responsibilities. (T4, S1)

 

STRATEGY FORMULATIONSPACE MATRIX

FINANCIAL STRENGTHS (FS)   ENVIRONMENTAL STABILITY (ES)  

Return on Asset (ROA) 1Rate of Inflation -4

Leverage 1Technological Changes -3

Net Income 2Price Elasticity of Demand -3

Net Asset 2Competitive Pressure -6 -3

Return on Equity 1Barrier to entry into the Market -2

Financial Strengths (FS) 1.4Environmental Stability (ES) -3

       

COMPETITIVE ADVANTAGE (CA)   INDUSTRY STRENGTH (IS)  

Market Share -3Growth Potential 5

Product Quality -2Financial Stability 3

Customer Loyalty -2Ease of entry into the market 6

Technological know-how -1Resources Utilization 3

Control over supplier & Distributors -2Profit Potential 4

Competitive Advantage (CA) -2 Industry Strength (IS) 4.2

       

X-axis: 2.2    

Y-axis: -1.8    

STRATEGY FORMULATIONSPACE MATRIX

No DIVISION REVENUE (BILLIONS)

% REVENUE PROFITS % PROFIT % MARKET SHARE

% GROWTH RATE

1 Volkswagen Passenger Cars

72,928 50% 2,700 34% 90  +11

2 Audi 34,196 23% 2,882 36%  25 +17

3 Škoda 8,039 6% 565 7%  24  +10

4 SEAT 5,196 4% 86 1%  10 -10

5 Bentley 1,084 1% 10 0%  15 - 9

6 Volkswagen Commercial Vehicles

9,607 7% 375 5%  58 -4

7 Scania 3,865 3% 417 5% 9 +5

8 Financial Services Division

10,929 7% 893 11%  56 +12

  Total 145,844 100% 7,928 100%  -  --

STRATEGY FORMULATION BCG MATRIX

5%

36%

5%

11% 7%

1%0%

34%1

2

3

45

6

7

8

THEIFETOTALWEIGHTED SCORES

High3.0 to 4.0

Medium2.0 to 2.99

Low 1.0 to 1.99

+20

0

-20

1.0 0.0

The IFE Total Weighted Scores

STRATEGY FORMULATION BCG MATRIX

Question Marks IStars II

Dogs IVCash Cows III

STRATEGY FORMULATION INTERNAL EXTERNAL TOTAL WEIGHTED SCORES

No DIVISION SALES REVENUE

% PROFIT % IFE SCORES

EFE SCORES

1 Volkswagen Passenger Cars 72,928 50% 2,700 34%  3,5  3,5

2 Audi 34,196 23% 2,882 36%  3,0  3,0

3 Škoda 8,039 6% 565 7%  2,0  1,5

4 SEAT 5,196 4% 86 1%  1,0  1,5

5 Bentley 1,084 1% 10 0%  1,5  1,0

6 Volkswagen Commercial Vehicles 9,607 7% 375 5%  2,5  2,5

7 Scania 3,865 3% 417 5%  3,5  2,5

8 Financial Services Division 10,929 7% 893 11%  2,5  3,0

  Total 145,844 100% 7,928 100%  -  --

STRATEGY FORMULATION INTERNAL EXTERNAL MATRIX

5%

36%

5%

11%

7%

1%

0%

34%1

2

3

4

5

67

8

THEIFETOTALWEIGHTED SCORES

High3.0 to 4.0

Medium2.0 to 2.99

Low 1.0 to 1.99

4.0

3.0

2.0

1.0

Strong Average Weak3.0 to 4.0 2.0 to 2.99 1.0 to 1.99

3.0 2.0 1.0

The IFE Total Weighted Scores

STRATEGY FORMULATION THE QUANTITATIVE STRATEGIC PLANNING     Continue R&D for

Hybrid Automobiles, Electric

Create Department for quality control

Focus on customer orientated approach than on production approach

Create strong HR Department to meet employees rights

       

KEYS FACTORS WEIGHT AS TAS AS TAS AS TAS AS TAS

STRENGHTS                   Strong R & D department 0.07 4 0.28 3 0.2 2 0.14 1 0.07

Audi Q5 winning an award 0.08 3 0.24 4 0.3 2 0.16 1 0.08

Staff Development program

0.08 4 0.32 2 0.2 1 0.08 3 0.24

VW Golf sales more than 26 million

0.06 3 0.18 2 0.1 4 0.24 1 0.06

Environmental Protection awareness

0.04 4 0.16 2 0.1 3 0.12 1 0.04

4.5% increase in sales revenue

0.05                

VW Financial Services increase in contracts by 5.3%

0.06                

VW Bank gained increase of 26.1%

0.07                

Taking over Scania as the new brand

0.05                

STRATEGY FORMULATION THE QUANTITATIVE STRATEGIC PLANNING

WEAKNESSES                   Bad management image 0.06                 Quality Control 0.07 3 0.21 4 0.3 2 0.14 1 0.07

4.5% decrease in demand for Golf in North America

0.05 4 0.2 2 0.1 3 0.15 1 0.05

Decline of 1.4% in sales revenue for VW Passenger Cars brand

0.03 3 0.09 2 0.1 4 0.12 1 0.03

Decline of 0.4% in vehicle sales for VW Passenger Cars brand

0.05 3 0.15 2 0.1 4 0.2 1 0.05

Operating profit drop of 20.6% for Skoda brand

0.05 3 0.15 2 0.1 4 0.2 1 0.05

Decline of 11.9% in sales revenue for Seat brand

0.04 3 0.12 2 0.1 4 0.16 1 0.04

Operating profit drop of 93.5% for Bently brand

0.05 3 0.15 2 0.1 4 0.2 1 0.05

Operating profit drop of 6.7% for Financial Services Division

0.04                

Total 1                

STRATEGY FORMULATION THE QUANTITATIVE STRATEGIC PLANNING

OPPORTUNITIES                   Volkswagen Group China (VGC), is by far the largest joint venture automaker

0.06 1 0.06 2 0.1 3 0.18 4 0.24

Progress in technology have allowed for fewer engineers to be needed by auto companies.

0.06 4 0.24 3 0.2 2 0.12 1 0.06

Increasing technology in automobiles forces customers to return to dealer for service.

0.08 3 0.24 4 0.3 1 0.08 2 0.16

European division expected to be more profitable.

0.04                

Sluggish global economy could lower price of oil.

0.05 1 0.05 4 0.2 2 0.1 3 0.15

Customers desires for hybrid and fuel efficient vehicles

0.1 4 0.4 2 0.2 3 0.3 1 0.1

By 2010, electronics are expected to account for nearly 40% of an average vehicle’s value.

0.06 4 0.24 3 0.2 2 0.12 1 0.06

China and South Africa as vibrant markets.

0.04                

STRATEGY FORMULATION THE QUANTITATIVE STRATEGIC PLANNING

THREATS                  The US $ & € devalues against most major currencies since 2002

0.08                

GM, Toyota, Ford and other manufacturers offer great discount.

0.06                

Most South African feel foreign cars are of superior quality. 0.05                German auto union is one of the most powerful unions in the in Germany

0.04 1 0.04 2 0.08 3 0.12 4 0.16

The US motor vehicle market has become the world’s most dynamically competitive auto market since 1970s.

0.08                

US Germany market shares is on a stable decline from 20.5 percent in 2003 to 18 percent in 2008.

0.01                

New Toyota manufacturing plant in Texas that will be capable of producing 200.000 full-size pick-up trucks per year.

0.1 3 0.3 4 0.4 2 0.2 1 0.1

High inventory cost of dealers cause decrease in profit margin.

0.06                

Global Recession. 0.03                Total 1   3.82   3.39   3.13   1.86

STRATEGY IMPLEMENTATION

Regional

Divisions

Department

STRATEGY EVALUATION

Area of Objectives Measure/Target Time Expectation Primary Responsibility

People      

Improve Customer Relationship 40% 2 years HR Department

Improve Employee morale 20% 1 year HR Department

Employee Training 20% 1 year Training &Development

Operations/Processes      

Manufacture Electric Vehicles 30% 2 years R & D

Get Electric Vehicles into the Market 10% 1 year Marketing Department

Community/Social Responsibility      

Invest more in community projects 30% 2 years Communication Department

Natural Environment      

Minimize CO2 release 30% 2 years R & D

Environmental protection 40% 2 years R & D

Financial      

Improve sales 20% 1 year Marketing Department

Increase in revenue 30% 2 years Marketing & Financial Departments

Reduce operating revenue 20% 2 years Marketing & Financial Departments

BALANCED SCORECARD

CONCLUSION

QUESTION???