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Business Strategy : An Assignment on Volkswagen

Table of Content

Introduction. 2

LO2 Formulating Strategy. 2

2.1.     Organisational Audit 2

SWOT analysis. 2

2.2.     Environmental Audit of the organisation. 3

PESTEL Analysis. 3

2.3.     Significance of stakeholders in formulating strategy. 4

2.4.     New Strategy for Volkswagen. 5

LO3: Understand approaches to strategy evaluation. 6

3.1.     Analysis of the appropriateness of alternative strategies for Volkswagen AG Company. 6

Market Entry. 6

Substantive Growth. 6

Limited Growth. 7

Retrenchment Strategy. 8

3.2.     Justify the selection of a strategy. 8

LO4: Strategy Implementation. 8

4.1.     Roles and Responsibilities of New Personnel 8

4.2.     Implementing a new strategy for Volkswagen AG Company. 9

4.3.     Evaluation of the contribution of SMART targets. 10

Conclusion. 11

References. 12

 

 

 

Introduction

Volkswagen AG is one the largest automobile companies in th ........

p; Environmental Audit of the organisation. 3

PESTEL Analysis. 3

2.3.     Significance of stakeholders in formulating strategy. 4

2.4.     New Strategy for Volkswagen. 5

LO3: Understand approaches to strategy evaluation. 6

3.1.     Analysis of the appropriateness of alternative strategies for Volkswagen AG Company. 6

Market Entry. 6

Substantive Growth. 6

Limited Growth. 7

Retrenchment Strategy. 8

3.2.     Justify the selection of a strategy. 8

LO4: Strategy Implementation. 8

4.1.     Roles and Responsibilities of New Personnel 8

4.2.     Implementing a new strategy for Volkswagen AG Company. 9

4.3.     Evaluation of the contribution of SMART targets. 10

Conclusion. 11

References. 12

 

 

 

Introduction

Volkswagen AG is one the largest automobile companies in the global market. The company is famous for their passenger cars under Bentley, Bugatti, Lamborghini, Audi, Porsche and motorcycles under Ducati. Besides it also produces commercial vehicles which it sells under Man, Scania and Napoleon. Furthermore, VW AG has two major divisions, the automotive and the financial service divisions (Ülengin, et al., 2014).  VW AG also has 340 subsidiary companies under its belt which adds to the profit making.  The company is spread through 150 countries and have over 100 production facilities across 27 countries.

The focus of this assignment would be on strategic planning of VW AG. The company underwent law suit due to illegal use of software to cheat the emission test.  Strategic planning is meant for these situations when business face problems or have the hard time managing up with the market (Yang, et al., 2014). The strategic planning allows business to bring some changes in its operations or management to gain a convincing position which would help to deal with the problems or revive from the effects. Therefore, the assignment deals with strategic planning, analysis and discussion which would help Volkswagen AG to recover from the loss which has been created by calling off around 482,000 cars from the market. Besides, these vehicles have been complained to have cheated the emission test. The loss from recalling of the cars was added with bad reports of cheating in the USA market.

Hence, the strategic planning is designed and proposed which would help to recover from the void which has been created. The alternative strategic will also be provided to act as a secondary planning and also display of knowledge acquiring and understanding on strategic planning. The assignment will be designed strictly based on VW AG and its issues which the company faced in the US market recently.

LO2 Formulating Strategy

    1. Organisational Audit

SWOT analysis

SWOT analysis of Volkswagen well helps to fulfil the organisational audit. The aspects of SWOT analysis would focus on internal strength weakness, threats and opportunities. In this way, the organisational aspects of the company would be analysed. Therefore, these factors would help to design or suggest a strategy for the business.

Strengths

The strength of the company lies with its manufacturing units. Volkswagen already possesses over 100 production facilities across 27 countries (Yang & Shen, 2015).  The techniques Volkswagen developed for productions helps them to produce automobile at much greater scale. This benefit gives them price competitiveness which occurs due to decrease in production costs.  Furthermore, Volkswagen can make full utilisation of its plans. 

Weakness

The movement away from the organisational goals and handing off responsibility in incorrect hands have affected the company and it’s effectively in the market (Wolf, 2014). The limited regions of marketing have made the company sluggish. The negative impact in the market due to emission software cheating has fostered the goodwill of the company in the market.

Opportunities

Association of companies like Porsche, Audi, Lamborghini, Ducati provides excellent opportunity to maintain the profit making (Talib, et al., 2014). The financial division can invest on new technologies.

Threats

Increasing competition and the unstable economy is a problem. The competitors have capitalised on negative impression of Volkswagen (Shende, 2014). There is also a decrease in sales figure due to negative market impact.

    1. Environmental Audit of the organisation

PESTEL Analysis

Political Factors

Since the company have spread its business in so many countries there would be many political difficulties which Volkswagen cannot avoid. In this context, it is must be known that there are 150 countries where Volkswagen does business. Besides, already Volkswagen is facing law suit in Europe against the use of software to cheat emission test (Sarangee & Echambadi, 2014). Therefore, Europe being one of its key markets would now face political constraints due to the law suit.

Economic Factors

Volkswagen contributes to the GDP of all the countries where it functions. Automobile industry contributes to the GDP of any country at a large scale (Sarangee & Echambadi, 2014). Therefore, developing countries are benefited by Volkswagen and its business.  However, the recession and uncertainty create a problem. 

Social Factors

Volkswagen serves to various types of societies in different countries its markets. There are around 50200 employees associated with Volkswagen (Salar & Salar, 2014). Hence the employed people are benefited from Volkswagen Company.

Technological Factors

The technology which Volkswagen uses from production upgrade provides an edge over the competitors. Moreover, the use of new technology for car diagnosis provides a developed functionality for the car.

Environmental Factors

The advancement of electric car technology would help to produce environment-friendly automobiles (Okanga & Drotskie, 2016). Besides the company needs to take care of emission and wastage from the factories to improve its standards.

Legal Factors

The law suit against the company on cheating the emission test needs to be resolved. It has created a negative impact on the market as well as the company (Nikjoo & Saeedpoor, 2014). Besides, the company has to manage legal standards of 150 countries which are a daunting task.

    1. Significance of stakeholders in formulating strategy

 Stakeholders play a significant role when it comes down to designing and formulating the strategy.  Stakeholders help to shape the projects in various stages. They also make sure the resources are available to work for project success (Mok, et al., 2015).  They also provide a project insight which helps to acquire a forecast of the results.  Stakeholders have to be involved right from the planning stage.  There would be a reduction of distrust and clarity in processing when stakeholders are directly involved in the strategic planning.  They can also commit themselves more actively during the implementation of the planning.

The situation of Volkswagen requires more support and assistance from the stakeholders. It is a matter of salvaging the loss of recalling vehicles from the market and also trusteeship among the customers (Mayfield, et al., 2015). If the stakeholders are involved, they would be more actively assisting to planning and effective implementation. If the stakeholders are complying with the projects and planning, the resources would be fulfilling and aiding to successful implementation and execution of the plan.

    1. New Strategy for Volkswagen

The company of Volkswagen have to comply and manage with the situation and law suit filed in Europe. When a company of Volkswagen calibre got accused of cheating the emission system test, the company had to recall many vehicles. In this way, the company had hampered its market as well as the good will in other markets. Hence, the strategy would be to capitalise on the existing associated companies of Audi, Porsche and Lamborghini to adjust the loss due to recalling of vehicles (Luthra, et al., 2014). Besides, Volkswagen has to drive campaigns which would work with new planning and acquire the lost trustworthiness. The aim is to reproduce a and recapture the market and the trust of the customers. The lawsuit also has to be dealt with full professionalism which would help to reflect a fair outlook of the company.  

Diversification would not be an effective planning since already the company has various companies under its belt (Kwoka, 2015). Hence, Volkswagen can rely on these subsidiary companies until the main law suit is resolved. The subsidiary companies are well known enough to earn a remarkable profit.  A price raise strategy can be utilised, but it should be properly promoted so that the extra price can recover the loss from automobile recall.

LO3: Understand approaches to strategy evaluation

    1. Analysis of the appropriateness of alternative strategies for Volkswagen AG Company

Alternative appropriate strategies are the very helpful in the business. It provides the opportunities to gain the additional resolutions for the challenges and problems in business. The business organisation creates alternative business strategies to face the different scenarios in the upcoming situation.

Market Entry

Market entry is the important element in the business. The market entry business strategy is appropriate operative or appropriates with a interpretation of emerging the market in business. The business strategy market entry increased the opportunities to capture a significant number of customers (Klonowski, 2014). Market entry strategy is related to the few main elements as the alternative business strategies such as organic growth, acquisition, merger, licensing and strategic alliance. The organic growth strategy is defined as the when the business organisation can gain achievement by the rise of sales and output. In this strategy, the growth is developed from acquisitions, takeovers and mergers. Organic growth suggestive the existent development for the core of the business organisation and perceive whether managers had been used their abilities to expand the business and how glowing establishment had been used its exclusive assets to intensification earnings (Izogo, 2015). The merger is the technique which is used to process by two initiatives becomes combined and opportunities into an individual through the lawful alliance. In this strategy, the business organisation had combine if the companies belong in the same industry and also the equal position in the market. The acquisition is the business technique in where one accurate business organisation purchases another whole business organisation and accumulates lies up it for the owner.  Licensing is the business technique in which a mother organisation allow to the another business organisation to use the trademark of the mother organisation and deal the services or merchandise on the ground of confirmations on many times of periods.

Substantive Growth

Substantive growth strategies are frequently applied over and done with merger, acquisition or joint venture in its place than organic growth. This strategy associated with the related and unrelated diversification, horizontal and vertical integrations. Franchising can make available another instrument of generating external growth, but it is only possible to be appropriate for confident types of business organisation (Hill, et al., 2014). The horizontal integration is arising during if an organisation obtains with competitors of this organisation. In this strategy an another organisation must be operating i9n the added value chain at the same time. These two business organisation will receive entreaty into the different market rather than compete directly. Vertical integration takes place during an establishment develops its contractor or supplier. This strategy is related to the business connections with the business organisation or the partners of the organisation of the offer sequence. Diversification is categorised into two segments such as related diversification and unrelated diversification (Hautz, et al., 2014). Diversification arises at what time a business organisation approves to create new products for new markets. Related diversification is defined as the business organisation stay in the industry or market in which the organisation is familiar. Unrelated diversification is defined as where the organisation obligates no former industry or market experience.

Limited Growth

By the limited growth business strategies, the business organisation may control the confrontational corporate circumstances. This strategy could be applied to the circumstances of dropping market share, low profitability, and monetary loss of the particular organisation. The possibility for limited growth is the market expansion, revolution and product improvement (Gustafsson, et al., 2015). The foremost suitability of such types of strategies is that it makes the available modification to appreciate the market movement and most significantly the opponent's approach and strategies might be recognised. For the market development, a business organisations market and its existing product in a new market, which considered that the product stays identical, nonetheless it is promoted to a new purchaser. For the market penetration, the business organisation markets its prevailing goods to its existing consumers (Grant, 2016). In this way, the organisation can increase its profits by repositioning, promoting the products, changing the brands. For the product development, the business organisation enlarge and strategy for the innovative product to substitute prevailing ones, and those goods are noticeable to its surviving consumers. Sometimes it is showed that innovation is related to the development of business and it is the most significant way to the improvement of the business organisation.

Retrenchment Strategy

The use of this strategy the organisation balances back the diversity or the last size of the technique of the business. This business technique is utilised to reduce expenses with the purpose of altering into an additional financial stable innovativeness (Epstein & Buhovac, 2014). This business technique is related to the cost reduction, asset reductions and revenue generation. In the end, the unconventional approaches comprise the retrenchment business strategy which might correspondingly be operative with an opinion of commerce with the confrontational business condition. The retrenchment strategies might be applied as soon as convinced goods of the organisation are not responding well to the market. In this situation business organisation can implement the strategy of insolvency, divestment and turnaround strategies.

    1. Justify the selection of a strategy

In this particular case study has focused on the business organisation of Volkswagen AG. This is the automobile company. This organisation is running well in the market but not according to the expectation of the organisation (Flemming, 2014). The growth rate of this organisation is upright but not incredible therefore this organisation required relooking their business judgements and several characteristics of professional consequently that the strategic strategies might be premeditated in the most suitable method. In this particular business, the organisation can select the limited growth business strategy to develop its business in the market. In this business strategy, the business organisation has been placed on the invention improvement and marketplace expansion (Doufene, et al., 2014). Through the support of these business approaches, the Volkswagen AG Company can provide emphasis on equal consumers and also challenges. This business strategy may establish its business methodology with more concentrated.

LO4: Strategy Implementation

    1. Roles and Responsibilities of New Personnel

Implementation of the business strategy within the business organisation is inconceivable significant, and it conveys a confident implication for the proceeds of the business association. Within the application of the business strategies, it specifies to the business strategies that expense component selected and observed to produce revenue for the business organisation (Buuren, et al., 2014). In the business organisation, various level of management has various kinds of characters and responsibilities for business strategy execution of the particular business organisation. The roles and responsibilities at various management levels had associated and deliberated below.

The highest level management plays the significant role of business strategy execution. The business organisations fixed the long term objective and strategy of an organisation and described the method in which the organisation will be executed the business strategies. The highest level of management controlled the internal level management and established the objectives for them to accomplish to contrivance the particular business strategies (Ajupov, et al., 2015). Internal level management conveys the intentional business interpretation of the highest management in the interior the business organisation. The particular business organisation established the middle term strategies with the determination of accomplishing the long term strategies established by top management. The business organisation controls the lower level management (Boone & , 2015). Within the business organisation, the lower level of management plays a significant role in the business strategy execution. The organisation controls the organisation in the method which supports the selected strategies and objectives established by the middle level of management. The appropriate and effective communication may support immeasurably proceeding the pulverised of distributing the genuine or reviewed mission, the vision of the Volkswagen AG Company. This is a responsibility of the organisation to make sure that the participation of the determined number of individuals towards the business strategy execution procedure and on behalf of the similar determination the statement procedure might be cooperative.

    1. Implementing a new strategy for Volkswagen AG Company

The sustainability of the Volkswagen AG Company’s competitive advantage is be determined by on the required resources of the company. At the time of the resources are collective the business organisation can be central to the development of capabilities and proficiencies. The suitability communicates to the predictable reoccurrence from the selected business strategy, the level of threat and the probable reaction of stakeholders of the organisation (Bamberger, et al., 2014).  In imperative to contrivance, the business approach for market expansion and manufactured goods improvement in attendance might be the requirement of assured resources which can support in continuousness of business accomplishments in the market. In the organisation without competence of resources, it is not conceivable to the concentration of the efficiency of strategy execution procedure. In the business organisation raw materials, financial resources, organisational resources, technological resources and human resources and environment are mainly required for implementing a new strategy for Volkswagen AG Company in the market. These resources are playing the significant role for the implementation of the new strategy in the market.

    1. Evaluation of the contribution of SMART targets

In the Volkswagen AG Company, the SMART target may be helpful for the gain the achievement of the objective of the organisation. The SMART targets are established constraints that make sure the association of organisation into the assured trend (Akhavan, et al., 2015). The explanation of SMART targets is describing below:

In SMART targets, ‘S' represents the specific target of any organisation which is the growth in the market share and effectiveness for the Volkswagen AG Company. The automobile company has dedicated to developing its market share by 9.8% and this organisation increase the number of vehicles delivers to the consumers to 6.189 million in the car market (Bourne, 2016).

‘M’ stands for the measurable target which is established by the Volkswagen AG Company. In this target, this company has targets 9.8% increment its market share in the measure as the numerical terms by measure the profitability of the organisation.

‘A’ is designed as the achievable target. In this target, this one is considered that in the condition of the exceeding business approach had been executed in a vigorous technique rather than achievable target might stay accomplished in the operational method (Doufene, et al., 2014). The Volkswagen AG Company has the ability of unquestionably become the predictable consequences out of the designated strategies.

‘R' is indicated as the real target of the organisation. In this measurement, it is cleared that the selected object which is established by the company is realistic. In attendance, there have not any unrealistic entitlement through the Volkswagen AG Company concerning intensification the market share by 9.8 % (Akhavan, et al., 2015).

‘T’ is indicated the time bound approach of the, particularly selected organisation. In these targets, the period group is scheduled on the base of yearly valuation. The established targets might be reviewed subsequently the two years uncertainty each year efficaciously conveys the 9.8 % growth in the market segment.

Conclusion

In simple terms, the purpose of strategic planning is to generate a business growth strategy. The VW AG Company had hit a bottom-line when EPA had accused that Volkswagen had installed software which cheated the emission test. Therefore, around 482,000 vehicles had to be withdrawn from the market.  Besides the accusation is a big blow to the good will of the company. The scam worldwide wiped out 40 percent of Volkswagen market capitalisation. In these situations, the company needs a changeover to make a turnaround from the bad patch (Izogo, 2015). Hence, new planning is produced after evaluation of the situation as well as the probability of the forthcoming loss.

Therefore, strategic planning is linked with the case study where the planning is required for the company to salvage the downfall of markets.  The new strategy is proposed, the approaches to the new strategy are discussed. The approach to the strategy is evaluated, and the concept is provided on how to implement the chosen strategy. The three sections reflect the step by step creation, utilisation and implementation of strategic planning. Strategic planning concept requires designing, approach and implementation. In this case, the strategy is aimed towards a problem-solving.  It would deal with the down size of the market which Volkswagen has faced due to scam in the market (Mayfield, et al., 2015). Therefore, the learning objectives have helped to reflect the knowledge of designing strategic planning, approach to the evaluation of the strategy, and implementing chosen strategy. Alternative strategies are also provided to demonstrate the learning as well as the understanding of the student.  The alternative strategy is also a backup plan in case the initial strategy fails to make its mark.  The overall assignment helped to acquire an extensive learning of strategic planning and its use and implementation of the plan during emergency situations as depicted in the case study.

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