Volkswagen Group's Strategic Analysis: Environmental, Political, Economical, Societal, Technological, Legal, Competitive Factors (essay).

About Volkswagen Group

Question:

You will present a report covering a strategic analysis of an organisation that you will choose. You are required to select the organisation then undertake the analysis. This work will help you achieve an understanding of the key strategic issues that are likely to influence the performance of the company into the future. These concepts look both externally and internally to the company.

Headquartered in Wolfsburg, Germany, Volkswagen AG is a multinational company which manufactures automobiles. It is internationally known as the Volkswagen Group. Founded in the year 1937, the German based company produces, designs as well as distributes the commercial and passenger vehicles, engines, motorcycles and turbo machinery. Furthermore, the company provides with offers related to the financial services, fleet management and leasing. Volkswagen Group got recognition as the largest automaker of the world in the year 2016, by overtaking Toyota (Volkswagen.com. 2017).

The report highlights Volkswagen’s strategic positioning by carrying out an organizational audit. The environmental audit includes the analysis of its external and internal factors. In addition to this, the report consists of several factors affecting the organizational environment by identifying the core competencies and its competitors. Furthermore, the report throws light on the analysis of the internal as well as external environmental issues by prioritizing them.

The environmental audit is a specific technique, in which the senior authorities of the given company study about the external forces in order to formulate their strategies. PESTEL analysis is implemented for the purpose of checking the factors affecting the company directly or indirectly.

Political Factors

On discussing about Volkswagen’s political factors, it is found that the organization has been facing some difficulties in terms of politics. The company has its stores in more than hundred countries. Volkswagen Group is currently facing different political situations in different countries. The political conditions of different places are not the same and therefore, the company needs to plan its organizational strategies, in accordance with that. For example; the government policies of the Western countries are not the same as that of Asian countries (Ball et al., 2012).

Economic Factors

The automobile industry is regarded as one of the major industries for the development of the country. It contributes a lot to the national income of the country. Taking the Volkswagen Company’s case into consideration, it is seen that the organization marks its contribution to the Gross Domestic Product of the country. This is considered as a major advantage for the Volkswagen Group because it helps in the economic development of the developing nations (Cavusgil et al., 2014).

Social Factors

Society also plays a crucial role in the overall development of the automobile industry. The operations of the automobile industries affect the whole societal development. The operating sector of Volkswagen Group is bigger and highly varies from country to country. The organization provides the individuals with employment, belonging to different regions. Total number of employees, currently serving for the company is more than six lakhs. Therefore, the automobile industry is contributing a lot in enhancing the societal level by making it adaptive to the changes (Killing, 2012).

Organizational Audit of Volkswagen Group

Technological Factors

In addition to the other factors, technological factors also play a crucial role in the success of the industry. Volkswagen is one of those automobile industries which use the best technology for manufacturing their cars, making them both sporty and classy. The technology used by the automobile industry, benefits in manufacturing high profile cars like Audi, Bentley and more. Moreover, it offers best after sales services, with the implementation of innovative technology (Putnam, Myers & Gailliard, 2014).

Environmental Factors

The Volkswagen Group has successfully won the hearts of many car lovers. However, the automobile industry hugely impacts the country’s environmental factors and affects the overall development of the nation. Cars use diesel and petrol as fuel, which highly causes environmental pollution. In addition to this, the usage of raw materials by the automobile industry also impacts the environment. Volkswagen has several plants in different countries and therefore, the organization is facing some issues related to the environmental pollution. It is immensely necessary to undertake some strategies regarding its unit of manufacturing. Moreover, the automobile industry needs to take proper care of the environment, in order to reduce pollution. Investment on the R & D department can assist the company in producing the cars locally and hence, protecting the environment (Majaro, 2013).

Legal Factors

Automobile industries need to follow some legal requirements in the countries they operate. Volkswagen Group operates at over hundred countries and it is a major challenge for the industry to meet all the legal requirements. The company needs to stress on the competition laws, labor laws, taxation laws, emission laws, intellectual property laws and consumer protection laws. In addition to this, Volkswagen imports as well as exports their products and therefore, the company should deal with several laws related to taxation. Moreover, the industry should also focus on the labor requirements, in order to meet their expectations and needs. Furthermore, it also needs to emphasize on various labor laws of different countries (Killing, 2012).

Barriers to entry (High)

Volkswagen Group has huge barriers in relation to the new market entrants. Automakers need to set up dealer networks, apart than start up costs and acquire proper licensing. In addition to this, the company should establish a trust in the brand as new competitors keep on coming as subsidiaries of the current competitors.

Power of Suppliers (Low)

Suppliers produce parts for one or two automakers. They specialize in this field and heavily depend on the automakers. Therefore, the suppliers can face huge loss if the company cancels their automaker contract with them.

Power of Consumers (Low-Medium)

Volkswagen has a large collection of cars and there is an abundance of the brand’s substitutes. However, the consumers rarely buy large quantities of vehicles. This is due to government’s control over purchasing behavior of the companies as well as customers.

Availability of Substitutes (Medium)

Majority of the consumers, now a day, are opting for public transit, walking or cycling due to the ever increasing gas prices and other government initiatives for promoting eco friendly transportation.

Rivalry (High)

The automobile industry of United States is regarded as an oligopoly market. With the insurgence of Japanese automakers, the Volkswagen Group is facing huge rivalry in this context (Ireland, Hoskisson & Hitt, 2012).

This section of the report throws light on the analysis of internal factors.

Conclusion

To conclude, the above report has successfully presented an idea of the internal and external factors of Volkswagen Group. The internal and external factors are being presented in an appropriate manner. The overall study has helped in gaining an understanding of the factors which are required for a successful business environment. The PESTEL, SWOT and Porter’s Five Forces Analysis have helped in gaining useful insights. Volkswagen Group is not just a car producing company; it also provides the customers with automobile as well as financial services. However, it is found that the company is having some issues in the international market. Therefore, some alternative strategies need to be implemented in order to revive their current positioning in the market.

References

Anitha, J. (2014). Determinants of employee engagement and their impact on employee performance. International journal of productivity and performance management.

Ball, D., Geringer, M., Minor, M., & McNett, J. (2012). International business. McGraw-Hill Higher Education.

Cavusgil, S. T., Knight, G., Riesenberger, J. R., Rammal, H. G., & Rose, E. L. (2014). International business. Pearson Australia.

Dunning, J. H. (2012). International Production and the Multinational Enterprise (RLE International Business). Routledge.

Forsgren, M., & Johanson, J. (2014). Managing networks in international business. Routledge.

Hamilton, L., & Webster, P. (2015). The international business environment. Oxford University Press, USA.

Ireland, R. D., Hoskisson, R. E., & Hitt, M. A. (2012). Understanding business strategy concepts plus. Cengage Learning.

Killing, P. (2012). Strategies for joint venture success (RLE international business) (Vol. 22). Routledge.

Majaro, S. (2013). International Marketing (RLE International Business): A Strategic Approach to World Markets. Routledge.

Putnam, L. L., Myers, K. K., & Gailliard, B. M. (2014). Examining the tensions in workplace flexibility and exploring options for new directions. Human Relations, 67(4), 413-440.

Volkswagen.com. (2017). Volkswagen International. En.volkswagen.com. Retrieved 20 December 2017, from https://en.volkswagen.com/en.htm