Volkswagen Strategy Case Analysis
Following the emissions scandal in September 2015, Volkswagen Group, a German multinational automobile manufacturing company, has established a long-term strategy to recover from the crisis they have been facing.
According to the article: A Real-Time Case Analysis, Volkswagen’s strategy was to “become the most successful, fascinating and sustainable automobile manufacturer” (Volkswagen Goals and Strategies, 2017). Volkswagen’s strategies could be divided into:
- Strategy for Competitive Advantage –“to become a world-leading provider of sustainable mobility” (Volkswagen Annual Report, 2015). Volkswagen realized they need to catch up with the latest automotive trend, the environmentally friendly vehicle. Therefore, they are expected to spend up to 1 billion dollars on electric vehicles to develop at least 30 new electric vehicles (Volkswagen’s Strategy 2025, 2016).
- Organizational Structure — One of the strategies suggested by Volkswagen CEO, Mueller, is to significantly reduce the number of models it makes and slashing almost $9 billion in annual spending (Bomey, 2016). Another strategy is to divide their groups based on its modular toolkit system and brand groups.
- Management & Leadership — According to Volkswagen Strategy 2025, Volkswagen intends to change their management style from the old cutthroat culture into the new modern management based on mutual trust, equality, and open-mindedness.
- Company Performance & Financial Results — According to the research, Volkswagen is highly inefficient in utilizing shareholder equity and capital to generate profit. Thus, to improve company performance and financial results, restructuring the management and improve efficiency will be the answer to this problem.
Based on this article, key elements of Volkswagen’s Strategy 2018 included: “innovation, increasing market share, increasing productivity (as measured via return on sales), and becoming a top employer to build a first-class team.”
The most important key element of Volkswagen’s Strategy 2018 is the strategy that is related to Management and Leadership improvement, that is becoming a top employer to build a first-class team. Because by improving their management and leadership style, Volkswagen will be able to achieve the other objectives too. By changing their management to be more adaptive, innovative, and open-minded, Volkswagen can encourage their employees to increase their productivity and generate more innovations that will lead to the increase of the market share.
Volkswagen’s Strategy in 2018 failed due to the emission scandal. It was believed that the confident, cutthroat, and insular company’s management culture was the main reason. It was known from the article that the eight engineers who installed the “defeat devices” to alter the performance emissions readout decided without consulting with other management nor the engineering team.
Let’s analyze the four approaches that were recommended in this article:
Recommendation #1 — Develop & Implement Culture Change Initiatives
According to the research done by Dr. Giselle A. Castillo (2018), the micromanagement and cut throating culture will negatively affect the self-esteem and morale of the employee by 40%. Therefore, this recommendation will give a positive impact on VW. By developing and implementing the culture change from cut throating culture to a more open-minded and innovative culture, VW is enabled to encourage more innovation from their employees.
Recommendation #2 — Improve Brand Image & Regain Consumer Trust
Branding helps the customers to recognize the USP (Unique Selling Point) of the product (Rob Stokes, E Marketing. P.21). Improving the brand image and regaining the lost customer trust by building the futuristic “Sustainability” concept is one of the applicable approaches for VW.
Recommendation #3 — Improve Quality and Productivity
This recommendation is related to Recommendation #1. By improving the working culture, employees’ productivity will increase and by encouraging innovation, the quality of the product also can improve significantly.
Recommendation #4 — Develop Joint Venture Partnerships to Rapidly Develop Core Competency in Battery Technology
Joint Venture Partnership with a local manufacturer like what VW has done with Chinese local automobile manufacturer also a good approach to win the competition especially in the closed market country such as China. A Joint Venture Partnership with Tesla also might be another option.
The overarching vision driving Volkswagen’s Strategy 2025 is clear. As we go through the previous strategies’ analysis, hopefully, the action that VW has been taking will help them achieve their target.
The initiatives designed to transform certain areas of Volkswagen’s core business are achievable because they are taking on responsibility for the Emission Scandal. Despite what happened, VW can keep their performance to deliver their product to their customers. This will help them regain the customers’ trust. In their 2025 strategy, it was clear that they are being honest about their shortcomings and are willing to breaking the barriers and change their company policy.
References:
Magadia, R., et. al (2019, January 11). Volkswagen: A Real-Time Case Analysis. ResearchGate. https://www.researchgate.net/publication/330324062_A_Real-Time_Case_Analysis
Principles of Marketing. (2015). University of Minnesota Libraries Publishing.
Castillo, G. A. (2018, January 8). Micromanagement Behavior: A Qualitative Empirical Phenomenological Study. INTERNATIONAL JOURNAL OF CREATIVE RESEARCH THOUGHTS (IJCRT).
Glazer, R. (2006, January 8). The biggest lesson from Volkswagen: Culture dictates behavior. Entrepreneur. https://www.entrepreneur.com/article/254178
Jurevicius, O. (2016, December 10). Volkswagen SWOT analysis. Strategic Management Insight. https://strategicmanagementinsight.com/swot-analyses/volkswagen-swot-analysis.html
Winton, N. (2016, November 20). Volkswagen Restructuring Plan Receives Lukewarm Reception, But Garners Praise For Trying. https://www.forbes.com/sites/neilwinton/2016/11/20/volkswagen-restructuring-plan-receives-lukewarm-reception-but-garners-praise-for-trying/#b1489ad35341
Note:
This article is written based on University of The People Marketing Management (BUS 5112) written assignment by Fristy Tania in September 2021
