Established in the 1930’s in Wolfsburg, Germany Volkswagen has 60 manufacturing plants in 15 countries. Inside of Volkswagen AG there’s roughly 563,000 employees who contributes to the production of vehicles and to maintain continuous relationships with customers, suppliers, and partners in 153 out of a total of 196 countries which is very impressive. Volkswagen AG consist of two divisions; the automotive division (Passenger Cars & Commercial Vehicles), and the Financial Services division (Dealer and customer financing, Leasing, Direct Bank, Insurance, Fleet Business, and Mobility Offerings).
The Automotive division Vehicles sales totaled around 9.73 million vehicles 2013 which was a increase from 2012 sales. Although Volkswagen AG has maintained success they still have weaknesses they want to overcome. Volkswagen AG is currently looking to improve from its weak position in the US passenger car market. In 2012, Volkswagen had only about 5% market share in the US passenger car market. US is the second largest automotive market in the world and weak Volkswagen’s position there results in comparably lower sales.
Another weakness VW is experiencing is that high-end cars are not environment friendly. Volkswagen owns three sport car brands Porsche, Lamborghini and Bugatti that emit high amount of CO2 and are fuel inefficient. Besides Volkswagen group is strongly opposing to legislation requiring tighter regulations on CO2 emissions and energy efficiency as their cars are not as fuel-efficient and environment friendly as their competitors. If such legislation would be passed the business would have to make huge investments to engineer newer engines that emit less CO2. With weaknesses brings huge opportunity windows for Volkswagen to innovate and increase product performance. CO2 emission problems brings a positive attitude towards “green” vehicles. Cars that emit large quantities of CO2 and fuel inefficient cars pollute air and has a negative effect on the environment.
The Essay on The Use Of Cars Causes Market Failure
To achieve an efficient use of resources it would be better if governments intervened to affect both the production and the use of cars. Explain the meaning of the terms ‘market failure’ and ‘the efficient use of resources’ and analyse whether economic theory can be used to support this argument. [25] Market failure exists when the operation of a market does not lead to economic efficiency. It is ...
Consumers are more aware of this negative impact and are more positive to “green” vehicles that emit much less CO2 and are fuel-efficient. VW AG has strong synergy created between all 12 separate automotive brands. All 12 separate companies share a part of R&D and servicing costs, learns from each other best practices and shares distribution channels. This strong synergy could be used to partner with small but large name American automakers because of their positive synergy they bring to the table. Volkswagen has done very well in Growth through acquisitions. So far, Volkswagen Group has been extremely successful in acquiring other auto manufactures and getting access to larger consumer markets as well as faster than organic growth. To continue grow at faster rates and to access vital US market, Volkswagen should continue acquiring competitors. American companies such as bankrupt or Fiat Chrysler Automobiles NV could help to capture more US market share, and adopt their hybrid technology to also make success in the Green vehicle field. Stakeholder Analysis
The Volkswagen Group is made up of a large and diverse array of stakeholder’s that have large expectations and Volkswagen actively has an open dialogue with their stakeholder’s. These include analysts, investors, employees, talents, customers, neighbors, suppliers, business partners, legislators, public authorities, academia and non-governmental organizations. According to Volkswagen’s main website the Volkswagen Group’s goal is, “to create a dialogue with their stakeholder’s that ranges from expectation management through innovation initiatives to risk identification.” Volkswagen pursues a process that’s in favor of an “open and constructive dialogue in which we learn from each other, but also set out our own interest.”
The Business plan on Technical Analysis & Efficient Market Hypothesis
In finance, technical analysis is a security analysis discipline used for forecasting the direction of prices through the study of past market data, primarily price and volume. Behavioral economics and quantitative analysis use many of the same tools of technical analysis, which, being an aspect of active management, stands in contradiction to much of modern portfolio theory. The efficacy of both ...
When Volkswagen looks at their stakeholder’s they want to get a better understanding of who they are and what are their expectations. Volkswagen Group has four categories they break their stakeholder’s into; Capital Market, Society, Partners and Customers. The Capital Market consists of shareholders, banks, analysts and investors. There expectations for Volkswagen are to have more resource-efficient products and production. These shareholders would also like to have alternative drive technologies and supplier relations. The society consists of legislators, public authorities, municipalities, neighbors and academia. They expect Volkswagen to be concerned with traffic safety, environmental and climate protection. The society would like Volkswagen to be more attractive as an employer and employment. The Partner’s section consists of employees, work councils, trade unions, business partners and suppliers. Their main expectations are customer satisfaction, economic stability, diversity and equal opportunity. They also want Volkswagen to be more attractive as an employer and employment. The last section is the most crucial and that is the customers. They consist of dealers, fleet operators and consumers. Their main expectations from Volkswagen are environmental and climate protection, road safety and customer satisfaction.
For the Volkswagen Group to evaluate and achieve their stakeholder’s expectations they created a stakeholder panel that has been evaluating their reporting for the past 17 years. The stakeholder panel follows Volkswagen’s activities, “especially there environmental and sustainability reporting activities and produces a critical commentary.” The stakeholder panel produces a Group Sustainability Report every year that details Volkswagens weaknesses and gives them recommendations to improve those areas. The panel addresses several different issues and breaks them up into sections that consist of; important indicators that should be discussed by management, Dilemmas of critical issues and conflicts of interest, product responsibility, intelligent mobility, and dealing with conflict materials and social engagement. The report emphasizes the important issues in each category and their recommendations to The Group.
The Essay on The Volkswagen Beetle Car Porsche Model
The people's car - generically, Volkswagen in German - is almost as old as the automobile, and the type was familiar in Germany long before the advent of the Volkswagen. Usually these 'popular'; cars were minimal cars, though size and simplicity did not necessarily bring them within the reach of the ordinary man in the street. Henry Ford did build a successful universal car, to sell at a low ...
Strengths
As we all know, that Research and innovation is one of the major strengths that have facilitated the company growth of Volkswagen. The management of Volkswagen is always ready to adapt to new things in the market, this sort of flexibility is good for the company because it operates in a rapidly changing business environment. Innovation has been at the heart of the company’s expansive nature from that moment on (Volkswagen AG SWOT Analysis 1).
This strength owes its success from the leadership which has been established under a strong leadership team that conceives the commitment and company values to offer great service to customers and creating value for all the stakeholders (Marketwatch 7).
The leadership at Volkswagen knows that the most important individuals in the company’s fabric are not only the engineers, but also all the other employees who work to facilitate the organization to achieve its visions. By engaging in research and education, the institution has ensure that its employees are flexible enough to grasp and apply the new technologies. The most important the internal factors in the company are low cost manufacturing, efficient procurement and distribution of products. The company has strategic locations where it retails its products.
It has dealers across the globe who sells the products directly to the customers. This ensures that the customers get quality products at reduced prices. The other essential internal factor is strong financial performance and industry-leading growth. The company has a stable financial base and this enables the company to increase production without constraints. It is also capable conducting market research with ease since it has adequate monetary resources to undertake such ventures (Hay 134).
Volkswagen also enjoys a lot of strength emanating from its brand awareness and the recognition. Like most German-made companies, Volkswagen rose to fame during the Hitler regimes and has remained one of the most respected cars models in the world. Brand recognition is important in the automotive industry since many people tend to consider brand when making purchase for cars. Although Volkswagen has been described as a luxury car company, the company has produced cars that are within the price range of many people. Basically, the company has strived to meet the interests of the middle class as well as those of the upper class. This means Volkswagen is able to attract the interest of virtually any car enthusiasts (Barrow 34).
The Research paper on Ford Ka: Breaking New Ground In The Small Car Market
Central Issue With the small car market in France undergoing rapid change, the strategies of yore are making way for newer methodologies. No longer can a car manufacturer simply make a big car for the wealthy and a small car for the less fortunate. For Ford, it is critical that they determine their target market for a new addition to their lineup, the Ka. But first, Ford needs to determine who ...
Weakness
One of the weaknesses of Volkswagen is the lack of touch with the changing customer preferences. Traditionally, German’s car makers have been known for the productions of large to mid-size cars. This has been the trend to date. The problem is that the presences of consumers have been changing. The demand of German cars on a global scale has been on the decline because of the lack of touch with the consumers. German car makers, for example, we are known for the production of real-wheel family of car. However, the current market demand is pointing towards the production of 4×4 vehicles with engines of 2 liters. Unfortunately, Volkswagen produces very few cars in this category. The inability of Volkswagen to adapt to changes in the car industry has meant that the demand of Volkswagen cars have gone down. To this end, the volume of cars sale in Asia, where these considerations are accepted, has been on the rise. The most weakness of the company is certainly the inability of the company to make continuous training part of its manufacturing strategy. With the rapid changes in the automotive industry, the company cannot afford to be able to be left behind simply because some of its employees are not competent in some new areas of development.
With training employees will be able to evaluate their past performance and identify the ways they can improve it whilst improving overall performance of the company and eventually increasing productivity. Moreover, for the quality improvement to be constant, it needs to be monitored so that all problems preventing it from happening would be moved out of the way. Once the performance improves, employees need to be rewarded or at least recognized by their line managers. In order to identify the areas the company needs improving the most, in the Automotive Enterprises Company needs to get feedback from its customers to determine their needs and develop services that can respond to those needs. However, the needs of the customers have to be balanced with company’s needs in order to continue daily business operation and activities. Lapses in concentrations have caused the company to lose its company competitive edge. Over the recent years, Volkswagen has been faced with various strategic issues, some of which have led to the company being forced to withdraw and recall some of its vehicles.
The Essay on Saturn: A Different Kind Of A Car Company
1. What is Saturn’s strategy? * Improvement in the Labor-Management Partnership. Changing the established relationship between GM and its unions * Clear definition and articulation of company’s mission and values. Challenge to the established norms of customer service. Making sure that every employee is aware of his goals and the ultimate purpose * Improvements in design and ...
While some of these factors were contributed by poor corporate governance and organizational culture by Volkswagen, the external environment also paid a role in the downfall of Volkswagen. Besides, from a business perspective, Volkswagen has been a culprit of producing ‘inefficient’ cars and that not able to match the taste of the customers. Part of the problem is the high self-confidence Volkswagen top managers. The managers assume that the market position of Volkswagen is everlasting. However, this assumption might soon prove to be the greatest mistake by Volkswagen. Between 2009 and 2012, Volkswagen has been forced to make a series of recalls, some of which has gone against the tradition of the company p produce effective and efficient cars (Toledo 4413).
Opportunities
Volkswagen has a lot of opportunities that can propel it to success. One of the major opportunities for the company is the emergence and popularity of environmental friendly cars. To do this, the company has been at the forefront of the development of hybrid cars. The company realizes that the invention of hybrid cars provides the best opportunity of reducing the amount of greenhouse gases produced by cars. Hybrid cars are vehicles with combustion engines that are designed use gasoline, ethanol or gasoline blended with gasoline. Hybrid cars, thus, produces less volumes of greenhouse gases and are less harmful to the environment. Volkswagen hybrid cars reduce the overreliance on imported fossil fuels. Since ethanol fuel is renewable and produces less greenhouse gases than petroleum (Hay 134).
Volkswagen hybrid cars are popular because they offers the best alternative of dealing with the problems of over dependence on imported oil and the negative impacts of greenhouse gases that result from the combustion of fossil fuels in car engines. Volkswagen hybrid vehicles are designed with alternative engine that can run on either gasoline or ethanol or both.
The Dissertation on Effect of Foreign Car Companies on the American Auto Industry
The development of the automotive assembly line by Henry Ford in 1908 increased the success of the American car industry exponentially, helping it become one of the most prominent industries in the world. The increased manufacturing efficiency and affordability of the Ford Model-T made the American industry the first industry to mass produce affordable automobiles. Another technological ...
Currently, there are about 8 million light-duty vehicles that are hybrid worldwide. The increase in the global production of ethanol will highly as increased considerable. This is partly due to government facilitate many people to go for hybrid cars. In the recent years, the production of ethanol h regulations that require vehicle manufacturers o produces cars with minimal impact on the environment. Thus Volkswagen is well placed to harness the likely boom in hybrid cars in the near future. Volkswagen is well placed to increase its market share in Europe. Although there are many vehicle manufacturers in Europe, German-made cars appear to be attracting the most interests of European car owners. The market share of the four German automobile manufacturers across West-European market has gradually escalated in the last fifteen years (Mitra 70).
With the inclusion of Skoda and SEAT, the market share of Volkswagen would be deemed higher between the periods 20010-2016.
The European market is made up of numerous national markets with rare characteristics. Across all these nations, the market share of the national manufacturers has been on the decline and the market share of the German producers, especially Volkswagen has been on the high (Mitra 71).
These pictures also portray the varying preferences in the markets. From the all of above, it is evident that the Volkswagen has been successful over the last years. The company has been in a position to uphold or enhance their rank amidst high and stiff competition. Another opportunity for the company is the ability to keep the company relatively stable for a long period of time. The environmental stability that exists within the company is one important aspect that has kept the company afloat.
The management of Volkswagen has worked on the means of maintaining a sound environment that encourages the company’s ability to thrive. Besides, the stability of the company has been facilitated by the continued social and political stability in Germany. The organizational stability of Volkswagen has provide the company with the stability and which has given Volkswagen a good opportunity to thrive in the home improvement retails (Cruz 36).
A stable environment is often good for any company to excel as long as all other factors remain constant. Volkswagen has enjoyed existing in a stable environment for the longest time, and that has brought more opportunities. Threats
The company faces a number of threats which include fluctuation of world currencies. This is a factor that affects the company’s international sales turnover since it affects not only the company’s distribution operations but also the retail price of the product by the time it reaches the customer. The other threat that faces the company is the demand for high quality products at a low price. This is a great challenge that the company is facing since its competitors are also improving on efficiency to reduce price. To ensure it remains ahead of the competition, it has to continually produce quality goods at a lower price than that of competitors which calls for great efficiency measures (Volkswagen AG SWOT Analysis 3).
Although Volkswagen is a German company, the company has been employing talented individuals from various parts of the world. With the increasing diversity of the workforce at Volkswagen, cultural management is slowly becoming a problem in the institution. Although most workers in the company are Germans, there is a growing contingent of workers from other parts of the world, especially on its assembly plants outside Germany. These people have different cultural beliefs as well and need to be handled carefully.
There is need for s structured human resource framework that ensures that the cultural concerns of all employees are taken into considerations (Marketwatch 9) Cross cultural management is a very critical issue that needs to be sufficiently addressed in the hospital. In as much as the culture of the hospital should be adopted by all employees for effective and smooth co- operation between the various employees, it is very important to note that this can be adopted only with time and with a clear and long term understanding of the organization’s mode of operations and beliefs. The top management still has a very important role to play in ensuring that the various cultural divides represented within the organization are fairly and rationally managed in order to minimize or eliminate cases of cultural conflicts among the employees. Perhaps the most important threats to Volkswagen are the competition coming from other vehicle manufacturers.
In particular, Volkswagens market share in Asia has been greatly eroded. the emerge of new car manufactures in China, such as FAW, and the increasing dominance of large Asian players, such as Toyota, has ensured that Volkswagens’ markets shared is at an all-time low(Volkswagen AG SWOT Analysis 6).
The fact that there is an increasing population of middle income earners in Asia has made it possible for many Asians to own cars. In the past, Asian countries, such as China, had a small population of the middle class with majority of the population not being able to afford to purchase cars. This situation has changed over the past 10 years. Many citizens in Asia have been able to purchases the houses regardless of the increasing prices. Interestingly, the increase in the purchasing power of Asia has resulted into the emergence of many car manufacturers in Asia, most of which have been able to produce cheap cars VRINE
The VRINE model is part of a much larger strategic plan of a firm. The firm uses this framework to do internal analysis within the company, but is also used as a framework in determining all resources and capabilities of a firm. VRINE is an acronym for Valuable, Rare, Inimitable, Non-Substitutable, and Exploitable; we use these to analyze the core competencies of the brand. Valuable – Is the firm able to exploit an opportunity or neutralize an external threat with the resource/capability? Rare – Is control of the resource/capability in the hands of a relative few? Inimitable – Is it difficult to imitate, and will there be significant cost disadvantage to a firm trying to obtain, develop, or duplicate the resource/capability? Non-Substitutable – Is the resource/capability is inimitable if competitors cannot acquire the valuable and rare resource quickly, or face disadvantage in doing so? Exploitable – Is the firm organized, and able to exploit the resource/capability?
Volkswagen Group’s core competencies are technology, research and development, and environmentally friendly technological development. To get an overview of where Volkswagen stands within these core competencies we have to analyze them. TDI Diesel Technology is a technological core competency of the Volkswagen group. TDI Diesel Technology is High-performance diesel technology is a new concept the makes diesel technology even cleaner; nitrogen oxide levels are reduced ninety percent with this technology. Combined with a new sustainability initiative called Blue Motion Technology that provides more efficient and dynamic powertrains, make Volkswagen Group technology have an edge. Proving this by producing the Passat BlueTDI the most environmentally friendly diesel car in its class (midsize diesel car).
High-performance diesel cars are very valuable to the company, as it means cost saving for the consumer. This technology is exceedingly rare as only Volkswagen Group brands may use the technology.
Because it would cost a lot of capital in terms of research and development for other companies to compete with the technology it is inimitable. The technology is not non-substitutable though, simply because there are other diesel cars on the market and they are only a fraction of a bit behind. Lastly, the TDI Diesel Technology is highly exploitable as it represents large savings to the consumer, combined with other technologies such as Blue Motion Technology Volkswagen has a clear advantage over other firms in the industry. Blue Motion Technology is both a form of branding existing cars as environmentally friendly, introducing a focus on reducing consumption technology with more efficient and dynamic powertrains, making it an attractive offering for consumers. The second core competency of Volkswagen Group is research and development. Eco-fuel is currently being developed by Volkswagen Group in order to break into the eco-friendly and economical car market. Because Eco-Fuel designs reduce both carbon monoxide and nitrous oxides by eighty percent the cars are allowed into all environmental zones.
The firm is able to take advantage of a new potential growth market by continuing to research Eco-fuel making it potentially very valuable. The technology is rare because although other firms in the industry have it, not all are equal. It is imitable as many other firms have it although by different names, however the specific way in which Volkswagen produces is difficult copy without heavy investments in research and development making it Non-Substitutable. Volkswagen Group is able to exploit the resource as it’s a very new market and they seem to be among the first entrants. Lastly, Volkswagens environmentally friendly technological development is a core competency of Volkswagen Group. Recycling is a very important component of sustainability not only for Volkswagen Group, but for the whole world. Volkswagen works intensely to enhance the recycling with old cars, lubricants in the cars, and parts to make sure to leave the world as clean as it can.
This is very valuable to the firm because it emphasis to the stakeholders that Volkswagen does care about sustainability and enhances their brand awareness as an environmentally conscious company. For a company as big as Volkswagen it is rare for an emphasis to be on the stakeholder’s environment. It may be inimitable to some companies because Volkswagen image is built on environmental friendliness, if a company is not going to profit from recycling they may decide not to do it. This is not something that is substitutable by other companies as they may not have a corporate culture that promotes sustainability. The firm is able to exploit this as they are organized, and when you are organized and recycling you can get many resources back and tax cuts. Porters five Forces Analysis (Automobile industry)
Porters five forces analysis is used to create a frame of reference to evaluate competition within an industry and business strategy development. It was developed in an attempt to see if firms would profit from entering an industry. Porter’s five forces include three forces from “horizontal” competition and two forces from “vertical” competition. The five forces include threat of new entrants, threat of substitute products or services, bargaining power of customers (buyers), bargaining power of suppliers, and intensity of competitive rivalry.
Threat of New Entrants – New entrants into the automobile industry are increasingly rare, as the high hurdles of capital are astronomical. While the technology to create cars became easier to obtain worldwide brands began to emerge. However these days the only way a car company could be created is if it had radical new technologies in it, or operated in a niche market.
Power of Suppliers – Suppliers hold very little power in the automobile industry, often relying on one or two firms for orders. This is because the automobile supply market is very fragmented (there are many firms).
Power of Buyers – In the past Americans were the number one producers of cars and people rarely cared what price the automakers demanded. As globalization occurred and foreign entrants entered the market consumers now require car firms competitively price their cars or risk losing their business. However, as consumers don’t buy cars in large volumes they have only somewhat moderate power.
Availability of Substitutes – When talking about the availability of substitutes, we can not only look at the availability of substitute car firms; but the availability of substitutes in the transportation industry. For example, when gasoline prices go up, people will be more fuel conscious and stop buying sports utility vehicles and move to more compact vehicle. But if the price of gasoline were to skyrocket people could easily choose different modes of transportation such as walking, biking, or taking public transportation.
Competitive Rivalry – The car industry tends to be labeled an oligopoly, which helps to reduce the effects of price-based consumption. Automakers understand that changing prices does not necessarily means they will get more market share in the auto industry. However, lately price wars have been raging in the forms of rebates, financing offerings, and warranties. Putting pressure on vehicle sales.
The automobile industry is not approaching pure competition at this point, and as an oligopoly. They work together to make sure the profits are reasonable and try not to price compete. With the high barriers of capital and research involved with starting a car firm, there are rarely new firms threatening to eat up market share. With this analysis we clearly see the forces acting on already established automobile firms are not forcing overall profitability down, making it a profitable industry.
Value chain
A value chain is a chain of activities a firm does in a specific industry to provide a more valuable final product. Seeing the organization as a system is essential to the value chain because then you can pinpoint at what point in the value chain you are losing value. Like an engine a company must perform specific times at specific times in order to maximize efficiency. Volkswagen Group uses a as it is a multinational enterprise. In order to maximize profits Volkswagen Group locates different activities in different countries such as research and development, design, assembly, production of parts, marketing and branding. The primary activities of the value chain are operations, outbound logistics, marketing and sales, and service. The support activities of the value chain are procurement, human resources management, technological development, and infrastructure. Primary Activities
Operations of the Volkswagen group include creating sustainable relationships with suppliers, buying materials in bundles for all their brands (cost effective), quality, and innovation. The most important thing to Volkswagen Group behind economic profits is to create sustainable relationships with suppliers, where they are responsible for their own actions at the regional, national, and global level. Further, Volkswagen group aims to buy materials not for only one brand at a time but for all its brands. The quality of the supplier must be top notch alongside the supplier’s ability to innovate with new technologies. Volkswagen Group operates one hundred production facilities in twenty seven countries. Through the use of a subsidiary named Volkswagen Logistics deals with all its outbound logistics.
This company deals with all Volkswagen Groups suppliers to move products to applicable markets. Sales and Marketing is implemented by having locations in many different market, that usually headed by people who are culturally intelligent of the area. In this way it can make sure that different economies get different care, and with communication from the consumer of the market they can decide which brands to bring to market. Volkswagen Group has superior service that each brand individually manages. It is this service that makes the consumer keep coming back. Support Activities
Volkswagen Group procurement of resources is very efficient, often buying resources for all its brands at a discount. Since it is a multinational organization they can source the cheapest raw materials from all over the world. Employees are highly valued in Volkswagen group with development paths, working, living, and basic principles that instill a strong corporate culture of economic and social responsibility. Technological development is highly regarded within the firm, allowing it to have many research partners and to lead the world into the future. Some innovations the firm is working on is autonomous driving, Emobility technology, and better navigation. Infrastructure of Volkswagen Group is top notch having many accounting, legal, finance, control, public relations, and quality assurance procedures in place.
Financial Analysis
By 2018, Volkswagen wants to become the number one leading automotive company in the world. In this competitive automotive world Volkswagen will need to compete with their leading competitors such as, General Motors (GM) and Toyota. When we look at Volkswagens financials we can see that there profitability and sustainability compared to their leading competitors. Evaluating Volkswagen’s financials and comparing them to General Motors and Toyota’s we give ourselves an insight into if Volkswagen can compete and finally breakthrough in the U.S market and dominate against their competitors.
When it comes to profitability Volkswagen, General Motors and Toyota are among the top contenders in there industry. Each company sells millions of vehicles worldwide and has operations in many countries and regions. To become the top contender you need to be dominant in all countries and especially in the United States. Volkswagen has taken a backseat in the U.S recently but, now they vow to become the leading automotive in the industry.
By the end of 2013, Volkswagen had revenues of $245,019.60 (in millions) with operating expenses totaling $25,807.0 giving Volkswagen a net income of $11,275.5. Unfortunately sales dropped “6.9 percent last year but, with the help of Audi’s sales increasing by 13.5% put Volkswagen behind Toyota and GM in worldwide sales.” (Trop) Toyota had revenues of $234,601 with operating expenses totaling $220,556 giving Toyota a net income of $10,230. In the first half of the year, “Toyota sold 5.1 million vehicles and Volkswagen reported sales of about 5.07 million units.” (Trudell) Volkswagen is slowly closing the cap on Toyota and both companies are ahead of GM. General Motors reported revenues of $155,427 with operating expenses totaling $12,382 giving GM a net income of $5,346.0 GM is the largest U.S automaker and has better sales in North America and it makes up for their lack in sales in China, Europe and South America compared to Volkswagens and Toyota’s sales.
To get a further look into Volkswagen’s profitability we can look at their net profit margin. Volkswagen’s net profit margin for 2013 was 4.58% which means, Volkswagen keeps $.0458 for each dollar of revenue. In September if 2012, Volkswagen had a profit margin of 23.06%, $.23 of every dollar of revenue. It was there highest margin in 7 years. It was due mainly to a “record operating income of $15 billion, which surpassed General motors $7.9 billion and Toyota’s $11.1 billion” (Rauwald) Volkswagen’s outstanding profit margin was due to selling 9.07 million vehicles and improving sales in China and expanding in the U.S. They had a better control over their cost compared to their competitors. Volkswagen’s margin slipped substantially and it’s very near to Toyota’s 2013 margin of 4.36% and GM’s margin of 3.51%. Toyota increased their sales by the U.S demand for sport utility vehicles (SUVs).
“Rising deliveries of the new Toyota Highlander and Lexus GX drove U.S market share gain as Volkswagen posted sales declines and pledged to introduce a mid-size SUV in 2016.” (Trudell) GM’s net profit margin is the lowest of the three automakers with a 3.51% and a $.0351 for every dollar. This is due to lower reported income then Volkswagen and Toyota. GM is still the largest U.S automaker but their worldwide sales cannot compare to Volkswagens and Toyotas.
When comparing Volkswagen’s financials to its competitors we must look at the companies’ ability to meet its long-term financial obligations. In 2013, Volkswagen reported a debt to equity ratio of 1.345, which indicates what proportion of equity and debt Volkswagen is using to finance its assets. Toyota had a debt to equity ratio of 1.145 and GM is the lower of the three with a ratio of 0.8492. GM’s lower percentage could mean that there using less leverage then Volkswagen and Toyota and the GM might have a stronger equity position. By looking at GM’s balance sheet, there total liabilities were $123,170.0 and a total equity of $43,174.0. Comparing that to Volkswagen’s total liabilities of $292,007.8 and total equity of $112,214.9 it shows that Volkswagen had a higher debt to equity die to substantially more current and non-current liabilities and a finance division debt.
Volkswagen’s liquidity allows companies to see how they are able to cover their current liabilities with a proportion of their current assets, so they can easily be converted into cash. Looking at Volkswagen’s and their competitors current ratios they seem to not be far from each other. Volkswagen has a current ratio of 1.030, Toyota has 1.07 and GM is 1.31.GM’s current ratio
By looking at the chart Volkswagen and its competitors have a quick ratio of less than 1. By comparing each company we see that this is an industry average and that each company is able to pay off their short term obligations. General Motors has a slight edge against it competitors with a cash ratio higher than Volkswagen and Toyota. It shows that have more of an extent to pay off short term obligations. Stakeholder Analysis Volkswagen AG (VLKAY) net profit in 2014 Q3 jumped an impressive 56% much thanks to the successful growth in China, while the European market is still struggling. However Volkswagen AG net profits rose to 2.97 euros ($3.8billion) from 1.91billion euros a year ago. Sale went from 48.9billion euros ($62.4billion) which is a 4.1% sale revenue increase.
In Germany Volkswagen bounced back by selling 11.4 percent more vehicles during Q3. The Russia and Ukraine conflict has made an impact on the sales of VW in Russia, Argentina, and Brazil. Max Warburton an analyst at Sanford C. Bernstein mentions that some of Volkswagens better than expected gains in Q3 came from foreign currency hedges (estimated at about 400 to 500 million euros) and not improved core business. Overall Volkswagens profits surpassed analyst expectations of 2.43 billion euros ($3.1 billion), and company shares rose 1.17% to 164.40 euros. Volkswagen AG has synergy with 12 strong branded companies. Strategic Alternatives
All companies hit a point where they need to innovate and be flexible to survive. It is very important for companies to have strategic alternatives. Alternatives are made up of price focus, differentiation, diversification, and adjacent businesses. Volkswagen group has being dealing with some issues they need to find alternatives in to improve their market share. We have some ideas that may help increase US market share, set Volkswagen apart from Big 3, and earn respect to lowering CO2 emissions, and successfully entering the hybrid/green vehicle market. Volkswagen group has the synergy and ability to acquire falling auto companies and add value and make them better than ever. That’s why we felt that purchasing the bankrupt fisker from wanxiang, or some of its technology or teaming up with tesla would be a huge leap into the hybrid/green vehicle market and it would also generate and increased US market share if done properly. Currently VW huge competitors are GM, and Toyota, the competition is getting more intense.
Toyota set a target of selling 10 million vehicles in 2014 after leading General Motors Co. (GM) and Volkswagen AG (VOW) in global auto deliveries for a second straight year. VW plan to overcome this is over the next two years the company, along with its Chinese joint ventures, will invest almost $80 billion in ten new plants and develop of products, from an American-style SUV to a $9,000 starter vehicle for emerging markets, also technologies like plug-in diesel hybrids and advanced infotainment systems. If VW merged with Fiat Chrysler it would create a well-balanced global automaker that would be highly profitable because these two companies have a natural attraction to each other. Fiat Chrysler does well in sport-utility vehicle sales such as Jeep and has a powerful market share with Ram pickups. VW does well in the premium car segment with Audi and has a good model line of mainstream cars, and brings along a synergy of companies that would be hard to say no to.
Merging the two companies together, the new entity would create $36 billion in U.S. revenue from sport-utility vehicles, $20.2 billion from traditional passenger cars, $17.2 billion from pickups and $14.6 billion from luxury cars which is exactly what VW would need to catch US market-share. This graph above shows the percentage of market share in the US of all major automakers. Although Volkswagen is the biggest most powerful automaker in the industry VW still have a lot of work to do to win over Americans. VW could also look into investing more money into their marketing/advertising in the US. Volkswagen spent $691 million and still has had troubles capturing the US. Our group recommends that VW conduct more focus groups and find out what Americans want and need out of VW, then apply the responses and adapt to the mainstream global market and start meeting US market needs. 1 thing our group wants to see VW do is jump into the Crossover vehicle market which has a lot of opportunity for VW to reach Americans as well.
The crossover market has been huge this decade with our economy and society wanting to more energy efficient vehicles and green vehicles crossover have been flying off lots. If Volkswagen can build a crossover in the future that can compete with GM’s terrain, equinox or Toyota’s RAV4, and Highlander they will be a more valuable asset to our US market. The company that Volkswagen should use to Increase market share is Porsche. Porsche already has a huge part of the US market with their SUV Cayenne jumping in sale over 50% than last year this would be the perfect time for Volkswagen to use this as an advantage to create a possible affordable crossover by Porsche as their competitor in the US. Consumers in US loved the Cayenne and rated it 8.5 out of 10 in Luxury SUV in America. Although this vehicle is pricey critic have nothing but good things to say about the Cayenne. Critics say things such as
“Porsche Cayenne is more engaging and enjoyable to drive than just about any other SUV on the planet, and it has some of the richest cabin furnishings. If you’re shopping for a high-end crossover, put it on your list.”(Edmond) “As the ‘Porsche’ badge would require, the 2014 Cayenne is arguably the sportiest SUV on the market, striking a truly unique compromise between performance and utility.” (Kelly Blue Book) “Now in its second generation, the Cayenne offers the handling, comfort, and family-friendly size that made the original a hit in a lighter package with greater power and fuel efficiency.” (Left Lane News)
Recommendations
To improve the market share and consequently increase its profitability, the Volkswagen automobile should implement the measures below. The company should invest on research so as to innovate and incorporate the most desired new technologies on its automobiles for customer satisfaction. This ensures the vehicles produced are more efficient and flexible to suit the customer tastes and preferences hence increase revenue from sales. The company should first conduct a market research to determine what the customers in the market want to ensure high demand vehicles are produced. The new technologies entail the investment in alternative fuel options. The company should invest in their employees as they contribute a significant portion to the growth of the company and improvement in sales. The company should carry out training, coaching and motivation on its employees to maximize their outputs.
This ensures that its employees are fit, qualified, and motivated. Volkswagen should invest in local production of new models that have more demand in the US market. An example is Porsche, which contributes to 15% of the operating profits of the company. Manufacturing more porches will positively impact sales as their demand supersedes that of other models like Sedan. The Volkswagen automobile manufacturers should also maintain good customer relationships and engage in promotions or advertisements to effectively capture a larger customer base. If all the above measures are well implemented, it will see the increase of the Volkswagen automobiles US market share I recommend that if Volkswagen plans on gaining US market share and becoming the biggest Global automaker they must find out what american consumers want out of VW AG. Which to achieve that they must conduct marketing research to get a feel of what direction they must take to attract Americans.
I suggest focus groups, advertising positioning, customer satisfaction, and test marketing research can get Volkswagen where they need to be to with understanding the US markets taste and preferences when coming to vehicles. Focus groups will determine customers perception of Volkswagen as a whole receive valuable feedback about concepts or product designs VW is expecting to present to customers. Starting by conducting a focus group will lead to the other research success and will help spot Americans pros/cons vs Volkswagen AG. The secondly I truly believe that if VW can work out a deal with Fiat-Chrysler and offer Jeep, Chrysler, Ram Trucks, and SRT a deal that would benefit all 4 companies in a positive way and increase their market share and also give them power in the European market. These 4 brands hold a huge market share in the US roughly around $88 billion and can be a valuable asset to VW to become the number 1 global automaker in the world.
Bibliography
http://www.bloomberg.com/news/2014-11-04/vw-combining-with-fca-would-be-brilliant-krafcik-says.html http://usnews.rankingsandreviews.com/cars-trucks/Porsche_Cayenne/
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