Volkswagen Case Study

Company Overview:

Volkswagen Group which is also known by the name of Volkswagen AG, is a German automobile manufacturer which was founded by the German Government back in 1937 in order to begin the mass production of low-priced cars which would be known as “people’s car”. The company has its headquarters in Wolfsburg, Germany. The company was initially operated by the German Labour Front, a Nazi organization. It was The Austrian automotive engineer Ferdinand Porsche, who was responsible for the original design of the car, who was hired by the German Labour Front back in 1934. Then the outbreak of World War II in 1939 interrupted the mass production which was then rebuilt under British supervision, and mass production of the Volkswagen began in 1946. Control of the company was transferred in 1949 to the West German government and the state of Lower Saxony. By that time, more than half of the passenger cars produced in the country was Volkswagens. The company expanded its production quite rapidly since 1950s. Volkswagen of America came to existence in 1955. However along side of its growth, the company also faced stiff competition from small cars which were equipped with more modern designs. Hence Volkswagen also started with its rear-engine cars by 1970, replacing them with front-engine front-wheel-drive designs. The first of those new cars was the short-lived K70 in 1970, followed by the Passat in 1973. By 1950 Volkswagen already had  established its plants through the globe including Mexico,  China, Brazil and U.S . Along with passenger cars, the company also started to produce vans and various commercial vehicles. Our experts are always available to offer you marketing assignment help services in USA.

Today Volkswagen owns several other automotive companies, including Audi and Porsche in Germany, SEAT  in Spain, Škoda in the Czech Republic, Bentley in the United Kingdom, Lamborghini in Italy, and Bugatti in France. In the middle of 2015 Volkswagen  held the position of being the world’s largest car manufacturer by volume surpassing Toyota Motor Corporation.

Volkswagen Challenges and Crisis:

The Volkswagen emission scandal which is also known as Dieselgate Emissionsgate began in September 2015 when the United States Environmental Protection Agency (EPA) issued a notice of violation of the Clean Air Act to German automaker Volkswagen Group. This agency found that Volkswagen had initially programmed turbocharged direct injection (TDI) diesel engines in order to activate its emission controls only during the laboratory emissions testing while in real-world driving it emitted up to 40 times more NOx. It has also found that Volkswagen deployed this software in about 11 million cars worldwide, including 500,000 in the United States, in model years 2009 through 2015. The company which owned almost 70 percent of the U.S passenger-car diesel market seemed to be in a major fix for duping on diesel emission tests. This “diesel dupe” along with the accusation of EPA of modifying software on the 3 litre diesel engines which were fired to some Porsche and Audi as well as Volkswagen model caused potential damage to the brand reputation of this global automobile brand. If you are looking for case study assignment help Online, then visit us.

Crisis Response:

Immediately after this crisis situation the group’s chief executive Martin Winterkorn resigned and the company had its first quarterly loss for 15 years of €2.5bn. Apart from this EPA had fined the company up to $37500 for each vehicle which did not meet the expected standards of emission. The cost of legal actions by the car owner and the shareholders were also quite huge. This also made the government of Europe aware of such misconduct and made them realise that it was high time to strengthen the EU testing rules needed to be tightened as almost 90 % of diesel vehicles did not tend to meet the emission limits. We are also providing Jaguar case study solution.

SWOT Analysis:

Strengths (S):

Some of the major strengths of this global automotive company is:

• It has one of the strongest and widest brand portfolios in comparison to all the other automotive companies. The  company sells its vehicles under 12 different brands which includes Audi, SEAT, Skoda, Bugatti
• Improved brand image with new emission strategy to meet its sustainability goals in 2025. This new “Together-2025” strategy aims to introduce 30 new electric vehicles by 2021. Volkswagen has identified this as its objective as the ‘major company’s electrification’. Up until now, the company was reluctant to engage in costly race for electric vehicles. Along with this the company also aims to develop new competence in the sector of battery driven technology accompanied with digitalization and autonomous driving. Further the company also aims to increase its research and development (R&D)
• Strong diversification strategy is another major strengthen of this brand which has helped Volkswagen to expand its brand’s presence across different geographic areas through different types of products and build better revenue base in comparison to its rivals. Only 74.5% of Volkswagen’s income come from the main ‘Passengers Cars’ segment. ‘Commercial Vehicles’, ‘Power Engineering’ and ‘Financial Services’ generate the rest 12.4%, 1.9% and 11.2% of the revenue, accordingly. Assignmenthelp.us provides Volkswagen case study help.
• Synergy between brands is another key strengthen where many of Volkswagen’s brands, including Škoda, SEAT and Volkswagen, or Bugatti, Lamborghini and Porsche, share their R&D spending, build technology, access to different markets and customer knowledge to increase sales and decrease costs. At the same time, they are able to cater for different consumer groups.

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Weakness (W):

• Negative publicity concerning the “Dieselegate Scandal in 2015 has been a big corporate would on the brand image of this global automotive brand. Vehicle recall has been another major blow on the brand image where Volkswagen had to recall millions of vehicles order and received a lot of criticism
• Low market share in the U.S automotive market
• Low competence in making battery driven vehicles. Up until now, Volkswagen only has 2 all-electric vehicles. Volkswagen e-Golf range is only about 83 miles, compared to Nissan Leaf’s 107 miles at nearly the same price.

Opportunities (O):

• Expected rise in fuel price will provide Volkswagen to expand its growing line of light trucks and has opted to compete in the smaller vehicle range. The demand for small vehicles always rises when the fuel prices are high.
• Acquire new skills and build brand competence in the field of battery technology, digitalization and autonomous driving
• Increasing demand for autonomous vehicles will open new market opportunity in for Volkswagen
• Weakening euro exchange rate is another major opportunity for Volkswagen to push on its export to U.S or to other countries for as long as the euro exchange rate is low against other currencies.

Threats (T):

• Intense competitive in the traditional automobile industry and new players are bringing in saturation in the new market
• The fines and damages that the company has to pay for its emission scandal around €16.2 billion in damages and fines. This, though, is not the end of it the company is still involved in many lawsuits all over the world, which seek to convict Volkswagen for cheating on their emission data. The company will have to pay billions in additional fines and damages, decreasing its profits for the next few years

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PESTEL ANALYSIS:

Political Factors:

Both United States as well as United Kingdom are two major markets for Volkswagen Unfortunately, there are serious doubts about the future of trade regulations between Germany — the company’s home base — and those countries. In 2018 as well as in 2019 U.S has shown repeated interest in placing these tariffs on goods imported from the EU, yet till now the automobile industry has not been subjected to such tariffs but the risk definitely remains.

Economic Factors:

Another favourable factor for the growth of Volkswagen’s business is the growing consumer spending across all corners of the globe. Increased consumer spending is especially significant for automotive brands in poorer markets, where consumers may have previously purchased no vehicles whatsoever. This favourable economic condition will actually help the business expand its consumer base

Socio-cultural Factors:

Various brands under Volkswagen Group are relatively well-perceived. Its most esteemed brands include Lamborghini, Audi, Porsche, Buggati, and — to an extent — Volkswagen itself. However, some of Volkswagen’s brands are less appealing to consumers, such as Seat or Skoda. However the millennial or the younger generation is definitely looking for more innovation and technology in the automotive industry. However there is another very vital trend that can be observed is the shifting away from driving. For financial as well as environmental reasons consumers are going away from the trend of driving and owing a car rather are choosing options like ride-sharing apps and buses or trains. This is definitely not quite an encouraging trend for automotive brands like Volkswagen.

Technological Factors:

 From a technological perspective, there are both hardware and software challenges involved in developing autonomous vehicles. There are numerous hardware challenges like high-quality video cameras and precise sensors, have already been overcome. However, it appears that the key to safe, reliable self-driving cars lies in developing software which can accurately recognize and respond to even the most unusual road situations. However it is definitely a positive sign that Volkswagen has the financial capabilities of investing in these research and developments.

Environmental Factors:

It is very much important for the brand to strengthen on its green technology and support sustainable business strategy. Volkswagen Group has already shown its ability to produce battery-powered electric cars with various Audi and Porsche models.

Legal Factors:

Volkswagen has confronted with several legal obligations and cases owing to its failure in the engine emission test. Hence the company has shown greater concern in meeting regulatory standards to safeguard its brand reputation.