Understanding Volkswagen

Section 14, Group 1

Brooke Brottmen, Andrew Boudreau, Dylan Dimatteo, and Genna Guarino

 Table of Contents

Questions Pages

1. Company’s Strengths and Weaknesses 2-6

2. Macro Environment 7-12

3. Corporate-level Strategy 13-16

4. Business-level Strategy 17-20

5. Differentiation between Competitors 21-25

6. Recommendations for Volkswagen 26-28

7. Resources 29-30

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 1. Company’s Strengths and Weaknesses

Various strengths of Volkswagen are as follows. (1)They have a strong global presence,

(2)they have a very large diverse portfolio, (3)and they have been successful in their ability to

innovate new products and ideas.

Volkswagen is one of the biggest companies in the automobile industry. All around the

world people know the name and logo of Volkswagen especially in its origin country Germany.

Volkswagen newsroom states “In spring 2021, the Group's production network will comprise 118

locations worldwide, of which 70 plants manufacture cars - around 40,000 units per

day”(Production and locations, 2021). With a total of 10.97 million vehicles sold in 2019, they

are one of the top producers in the industry. And with all of their global locations, it has allowed

Volkswagen to continue to produce large amounts of cars to help fulfill the consumers’ demands.

Being such a large company that produces so many vehicles per year requires

Volkswagen to have a large workforce. They have been known to currently employ over 640,000

workers from all over the world. Being a global company allows them to hire the right person for

the job with no restrictions. Volkswagen can create a diverse workforce to help improve their

company environment as well as be able to hire many talented workers. A global presence has

helped to boost Volkswagen's popularity, increase their sales, as well as allow them to grow their

diversity throughout the company. These are all things that Volkswagen has gained from having a

strong global presence.

Volkswagen is a top-tier company not only from being all over the world but because

they understand the benefits of having a large diverse portfolio. They focus on numerous

markets, hoping to be able to provide service for all types of consumers. They can create safe,

high-quality, affordable cars. As well as produce the fastest, most luxurious cars on the market.

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Numerous companies are under Volkswagen's ownership but a few stand out. These companies

would be Volkswagen, Audi, Porsche, Lamborghini, Bentley, Bugatti, SEAT, Skoda, JETTA, and

Volkswagen commercial.

From these companies, it is obvious to see how diverse Volkswagen's portfolio is. Not

just different quality of cars but also companies that are located all around the world. From the

Volkswagen AG website, when talking about its different brands it states “Ten brands with an

individual identity and a common goal: mobility. For everyone, all over the world. Each brand

operates as an independent entity on the market”(Brands & Models of the Volkswagen Group,

2019). Even though Volkswagen owns all these companies it is stated that they all have their own

identity and market. This shows how Volkswagen's ability to have so many brands under their

belt is a strength because it gives them the advantage over others by being able to reach so many

customers with different needs.

Innovation and the ability to change are strengths that all companies need to have to be

successful. Volkswagen throughout the years has been focusing on changing for the better of the

world. Their newest idea is called “Together 2025+” where they plan to create more than 30 new

types of electric vehicles by 2025. They are also planning on recreating the Volkswagen

company as a whole to focus on electric vehicles in hopes to protect the environment from global

warming. They plan to be a fully CO2-neutral company by no later than 2050 and be one of the

top competitors in the electric market (Strategy TOGETHER 2025+, 2021). By creating more

types of electric cars they will be giving people more options to choose from and will be able to

attract more customers.

Innovation is a strength because it allows the company to adapt to the ever-changing

market around them. Ever since Tesla, the rise of electric vehicles has started to change the

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transportation market. Volkswagen, seeing this is already adapting and changing its strategies to

show the world that they are willing to provide for all consumers. This innovation also allows

Volkswagen to not only join the EV market but become a bigger player than other companies. By

focusing on this change Volkswagen will be building a stronger company for the future where

they can continue to grow and be even more successful.

Various weaknesses of Volkswagen are as follows. (1)They have struggled with legal

issues, (2)they have poor positions in large markets, (3)and they have large amounts of recalls.

Volkswagen has been known to be a very successful company but their reputation has

been damaged in different markets including the American market. In 2015 the company

struggled with a cheating scandal where they admitted to supplying their diesel cars with

technology that would cheat the emissions tests. Over 400,000 cars in the U.S. and over 11

million cars worldwide had this technology. From the New York Times, an article talks about

how the higher-ups of the company knew about the issue but decided to let the cars go out

anyway. With the company paying more than 20 billion dollars since the scandal, they are still to

this day being questioned by different countries’ governments (Ewing, 2021). The company saw

the money they could save from breaking some rules but in the end, they have lost their company

billions of dollars as well as ruining their reputation still to this day.

The reason why their past legal issues are weaknesses is because of the harm it has on the

company and the way customers view their organization. From the evidence with Volkswagens

past scandal, it is obvious how the actions of owners and board members can easily cause a

downfall. Many customers and countries still hold a grudge and look down on them for the

crucial mistakes that were made. Brand image is one of the most important things that a

company has so when the public sees the brand and can only connect it to the bad things they

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have done then that will just push more people away. Volkswagen is still trying to build back its

reputation but with so many people being affected there will always be a stigma on the company

and those in charge.

Another weakness that Volkswagen has is that they struggle with poor positioning in

larger markets. The U.S. market is the second-largest automobile market in the world right below

China, many companies understand that having a large market share in the U.S. will lead to huge

earnings. The article from car sales base talks about how Volkswagen is one of the world’s

largest auto manufacturing companies but in 2020 they only had 2.23% of the market share

(BrandVolkswagen Car SalesVolkswagen Market Sales, 2015). This takes away a lot of

opportunities because companies like GM and Ford receive more than half of their revenue from

the U.S. market. Volkswagen on the other hand doesn’t receive as many benefits from the larger

markets. The company has been focused on being an international company but when looking at

the larger markets they just can’t compete with their competitors because of their lack of market

share in these areas.

This is a weakness for Volkswagen because of the opportunities they are missing out on

for both growths in sales and popularity from the U.S. market. Volkswagen has struggled in

popularity ever since its emissions scandal. With a small market share, it makes it harder for

Volkswagen to build back trust with customers by not being able to have as many products in the

industry. Another reason it hurts the company is because of the loss of sales that Volkswagen is

missing out on. The company isn't able to push their product above competitors in the U.S.

market and therefore are losing chances to profit. Volkswagen has missed out on opportunities in

these large markets which has hurt the companies ability to grow, explaining why its poor market

share is a weakness.

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 Finally, Volkswagen has struggled with the number of recalls they have on their vehicles.

Over the years the company has suffered from having to inform customers of defects that are

common on their cars. Customers are required to return their vehicles to the company in hopes

that they can be fixed because it is dangerous to continue operating the vehicle without these

changes. A Green Car Reports article mentions that in 2016 Volkswagen hit a recall rate of 1,800

recalls per 1,000 cars sold (Edelstein, 2016). The reason this can happen is that some cars had to

be called back for multiple different reasons. It was one of the highest recall rates that

Volkswagen has ever recorded.

Having a high recall rate is a weakness for Volkswagen because it can make customers

nervous by knowing that a lot of their vehicles are known for having issues after being produced.

Volkswagen has built cars to be known for their reliability but when customers start hearing

about recalls then they might start to disagree with this idea about the company. Not only does

having high recall affect the trust between Volkswagen and its customers, but it also hurts the

company financially. They are forced to fix problems on their vehicles after they are produced

which causes extra costs in replacements as well as any costs that can come from lawsuits. With

more recalls, there are more costs for the company as well as a larger amount of sales lost. These

are all reasons why high recall rates are a weakness for the Volkswagen company.

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 2. Macro Environment

Macro Environment deals with forces and conditions such as: border economic, global,

technological, demographic, social, and political context in which industries and companies are

embedded. Volkswagen falls under the category of a car manufacturer and much has changed in

the last few years with this market. We will look at the environmental forces that affect the

general health and well-being of the nations that work with Volkswagen. Now that the world is

starting to recover from the covid-19 pandemic countries are in a bit of a holding period.

Affecting all industries in many ways. First let's learn about the state of the US and German

economy. While Volkswagen cars are currently built across the world, we will focus on the hubs

in which the company is located.

When looking at a German economy it is the 4th largest in the world and accounts for one

quarter of the Europeans GDP in 2020. Looking at the trade between Germany in the United

States, Germany is the largest European trading partner with the United States. While also being

the 6th largest market for US exports. Germany has a population of 83.2 million and is the

largest consumer market in the European Union. Making this a great environment for any

business to hold a location in. Even after the devastating effects that were put on the world after

COVID-19, Germany prevailed and was in the best spot in comparison to their EU neighbors.

What helped them so much during this time was the fiscal space and large current account

surplus. While projected GDP growth ranged from 3.2%-3.9% in the year 2021, in 2022 it is

project to go up to 4.3%-4.8%. They are predicting that full economic recovery will be done by

quarter three of 2021 due to this extreme increased forecast. Something that is hurting

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Volkswagen at the time is demographic changes. Which is trending, resulting in labor shortages,

supply chain bottlenecks, high inflation, and higher energy prices due to coal/ nuclear energy

starting to phase out.

Germany has a mixed economy which allows a free market in consumer goods business

services. On the other hand, the government imposes regulations in certain areas to protect its

citizens. While in the United States there are less of these restrictions. The Volkswagen group

operates 117 production plants in 20 different European countries along with 10 countries in the

Americas, Africa, and Asia, along with selling its vehicles in 153 countries. This could arguably

be the hardest time to have business in so many different countries because of the different

COVID regulations and work policies. There has also been a large need for transportation during

this time and many boats coming from different countries into the United States are having a

hard time unloading their product off boats.

Comparing this to the United States there are many of the same things happening on our

side of the world. The virus outbreak and associated measures have delayed the recovery in

Germany. While on the other hand the export focused manufacturing industry is growing

extremely strong despite the supply chain issues. As we know, supply chain issues have affected

industries all around the world. In the car manufacturing industry, there is also a chip shortage

which applies to all new car models. Volkswagen is experiencing this shortage in London

predominantly. While buying power is extremely powerful right now because of the stimulus

checks being received by citizens there is a bigger need for both new and used cars. New cars are

at extremely low cost because the cars cannot function without these working chips. While

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Porsche and Audi, Volkswagen's premium brands have been doing well and delivered positive

results during this chip shortage.

From page 65 in the Strategic Management book, it states that there are four primary

macroeconomic forces. The first being the growth rate of the economy which is a demographic

force. This leads to expansion in the customer buying habits. In turn giving the company the

opportunity to expand and potentially earn higher profits. While comparing this strategy with

Volkswagen's current state in the market it does not seem like an expansion period because of the

health of the current market. Not to say that they cannot grow in one primary location such as

Wolfsburg, Germany which is the hometown of this brand and still makes the Golf, Rabbit, and

GTI models.

Interest rates have a lot to do with determining the demand for a company's products.

This is important when deciding whether customers will borrow money to finance their purchase.

Which in this case because it is such a large purchase many people do finance their cars. More

than 85% of new cars are bought through financing. Right now, the United States market is

extremely likely to find low interest rates. The only hard thing now is finding new cars to buy

because the demand is so high with low interest rates and the manufacturers cannot keep up with

this demand. These rates also have things to do with the company side of business because it

influences Volkswagen’s cost of capital, making the ability to raise funds and investments in new

assets possible. The lower the investment rate the lower in turn the capital cost for the company’s

potential investments are.

Currency exchange rates are the comparative value of different nations currency

exchanges. This has a direct impact on Volkswagen’s business because competitiveness of each

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company's products in the global marketplace are dependent on these exchange rates. Especially

when talking about this specific brand because they are extremely global, this is something that

can impact them each and every day. Typically, products made in the United States are

inexpensive and products made overseas are typically a bit more expensive. A declining dollar

reduces the threat of competitors outside the market while creating opportunities for increasing

sales overseas. There was a fall of the dollar in several major cities during the years of 2004 and

2008 and we can see the same trend happening right now. The decline of the US dollar has been

happening since March of 2021. This has much to do with the economic proposals that are

currently put into place and the amount of money that is getting printed by the government and

put into the economy.

Inflation is the next topic and is currently on the rise as well. As we look at the consumer

price index report it shows that prices have gone up an extreme amount in September of 2021.

For example, overall prices climbed 5.4% year over year according to the Bureau of Labor

statistics and continues to increase while over the last month it has increased by .04%. This

indicates that the price of everything will increase, and the basic financial life of normal

Americans will stretch their dollar more and more. If this inflation trend continues to increase,

investment planning becomes a great scare. A large characteristic of inflation is that it makes the

future a lot less predictable. This may make it impossible to predict with any accuracy or real

value. This makes companies less willing to invest and puts the economic activity into a

depressed mode and could potentially lead to a recession.

Global forces also play an important role. It is important to know that barriers to

international trade and investment have tumbled as more and more countries enjoyed sustained

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economic growth. So far we have looked at countries that have had this extreme economic

growth. They do not consist of Germany but some of the other countries like Brazil, China, and

India are responsible for creating large markets for company’s goods and services. While we

look at the chip shortage this is predominantly coming out of China therefore influences all

global business. Fallen barriers of international trade investment has also made it easier for

foreign companies to enter domestic markets since this in turn lowers the barriers to enter.

Next, we must talk about technology forces because the change in technology lately has

accelerated. This leads to various opportunities in this market. We see the first car being built by

Ford Motors using the assembly line which was one of the largest technologies founded in that

era. That being said, technology from then to now has advanced a significant amount and now

we can see this assembly line still being implemented in the car manufacturing industry but now

people are being replaced for robots to be more efficient. This isn't limited to just efficiency, it's

also for safety measures. When we look at the first car being built it was not nearly as safe as the

cars that are on the road currently. People say that cars need to be the safest form of

transportation because of the accessibility that they have to individuals. When you think about

airplane accidents, trains and other forms of transportation there are much less accidents because

A, people don't have access to them and B, the people that do have access to them are trained

professionals

Following that is demographic forces that result from change in characteristics of the

population such as age, gender, ethical origin, race, sexual orientation, and social class. This is

constantly changing especially for a company that has been around as long as Volkswagen has. It

is extremely important for them to do consumer research on their customers to see who their

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target market is in why it might be them. Right now, the most popular Volkswagen vehicle is the

Volkswagen SUV which is predominantly targeted towards young parents shuttling kids back

and forth from soccer practices and maintaining a busy lifestyle. This does not limit Volkswagen

to potentially changing their target market in the future. Something that I could see Volkswagen

doing is changing their target market to someone which is a little bit more sustainable since they

want to go the electric car route in the coming future.

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 3. Corporate-level Strategy

1) Horizontal Integration

The first corporate level strategy that Volkswagen has used is horizontal integration.

Volkswagen is now the largest Automaker that owns a group of 12 automobile brands and sells

more than 10 million vehicles a year globally. The very first of Volkswagen’s acquisitions was

Audi, which Volkswagen bought in 1966. Volkswagen then successfully acquired Seat, a Spanish

automobile manufacturer, in 1990. In 1998, Volkswagen acquired Bentley, Lamborghini, and

Bugatti. Then, Volkswagen bought Skoda in 2000. In 2012, Volkswagen bought Porsche, and

extended their operations into the motorcycle industry by acquiring Ducati. In 2014, Volkswagen

gained full control over Scania, a truck manufacturer, as well as getting a majority of Man in

2011. This allowed Volkswagen to operate in 153 countries worldwide and even achieve

economies of scale over its competitors. Volkswagen introduced the MQB platform, which

stands for Modular Transverse Matrix. MQB is a set of common parts for different models

(McElroy, 2012). The MQB platform is shared among many Volkswagen models. In total, there

are more than 60 different models using the MQB. This allows Volkswagen to build vehicles at a

low operational cost and achieve economies of scale by sharing one platform with different

models and products.

2) Vertical Integration

Volkswagen is using backwards vertical integration to achieve their security of battery

raw materials supply. Volkswagen aims to secure direct access to battery raw materials such as

lithium and cobalt, to better control the cost of battery production (Szatow, 2021). Lithium is a

key component used in the manufacture of electric vehicle batteries and for energy storage

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systems. Volkswagen is trying to extend their control over the industry’s supply chain, which

would give them direct access to chips and lithium. This would give Volkswagen an advantage to

run their manufacturing plants at full capacity. Gaining direct control over the supply of raw

materials will also help Volkswagen handle their costs more efficiently. The plan is also aimed at

catching up with their rivals, including Tesla and BMW (Automakers move back to vertical

integration for supply resilience). Tesla and BMW have already made supply deals with

producers of lithium, which is the most important ingredient in electric vehicle batteries. With

this plan, Volkswagen aims to have an interest in six battery plants in Europe by 2030. They

hope to increase their share of all-electric cars in Europe to 70 percent of their sales. In the U.S.

and China, Volkswagen hopes to increase the share of electric cars to 50 percent by 2030. After

the year 2025, Volkswagen aims to cut charging time in its batteries for a trip of 450 kilometers

down to 12 minutes using the technology, which is less than half of today's maximum charge

time (Person and Steitz, 2021). It also plans to have 18,000 public battery charging stations

around the world by 2025. Once these electric vehicles hit the market and are in the hands of the

consumer, this will be forward vertical integration.

3) Diversification

One of the leading sources of Volkswagen’s competitive advantage in the automobile

industry is its large and diversified product portfolio it includes. This product portfolio offers a

unique advantage and helps maintain demand and sales even during difficult times (Ramey). It

also helps Volkswagen serve several customer segments including the average consumer segment

and the premium customer segment. The company has a wide range of products to cater to

various segments of customers with different wants and needs. Volkswagen’s company cars are

sold under Volkswagen, Audi, Seat, Škoda, Bentley, Bugatti, Lamborghini and Porsche brands

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(Ramey). Ducati is Volkswagen’s motorcycle brand. The company’s buses, heavy trucks, and

other commercial vehicles are sold under Scania, Man, and Volkswagen’ Commercial Vehicles

brands.

Volkswagen’s technological innovation has become a source of differentiation as well as

an important piece for market expansion. Volkswagen has invested a lot in research and

development for growing their market share by selling products that are more attractive as well

as more technologically advanced (Kacher, 2019). Some of the key areas where Volkswagen has

focused its research and development efforts include autonomous driving controls, sustainability,

virtual technologies, and passenger safety.

Volkswagen has implemented a new strategy which is, “NEW AUTO – Mobility for

Generations to Come” (VWGroup). Volkswagen is a driving force of this transformation and

hopes to go from a vehicle manufacturer to a leading, global software driven mobility provider.

Volkswagen will redefine mobility while also helping the climate as well by going electric.

Volkswagen's New Auto business strategy involves software, and mobility as a service. By 2030,

Volkswagen plans on owning and operating autonomous shuttle fleets, a value chain consisting

of a fully-autonomous driving system, the integration of that system into vehicles, fleet

management, and providing the mobility platform itself to customers (Ramey, 2021).

Volkswagen is also in the financial industry as it implemented a bank known as

Volkswagen Financial Services. Volkswagen saw that it would benefit from having a financial

institution within the company, which would fund customers of the company to buy new cars

from the brand. Volkswagen Financial Services, the company’s in-house bank, has been an

important element in Volkswagen’s rise to become the number 2 carmaker in the world. The unit

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has helped speed Volkswagen’s growth by lending money to buyers, financing leases and

extending credit to dealers (Szatow, 2021). Volkswagen Financial Services introduced a car

subscription service to its customers in 2020, and in doing so this further expanded its mobility

offerings. Customers were able to book various vehicle classes and conclude a contract for a

minimum of three months. Then afterwards, this contract can be terminated on a monthly basis.

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 4. Business-level Strategy

To start off, Volkswagen has many different business level strategies that made them a

great car company over the years. They have taken a broad low-cost strategy and differentiation

strategies to win over their customer’s preferences. To achieve both of these strategies,

Volkswagen has implemented various functional level strategies. When looking into the broad

low-cost strategy they have improved their logistics and transportation system, improved their

information systems, and further enhanced technology in their manufacturing process.

Volkswagen has also touched base with a broad differentiation by implementing a marketing

strategy that is relatable to their entire customer base while pointing out company weaknesses.

(1) Broad Low-Cost Strategy

The first functional level strategy that Volkswagen has undergone to lower their cost has

been through improving their logistics and transportation system. As the world is changing, so is

the type of consumer preference in cars. In the next decade or so Volkswagen believes that the

world is going to shift towards electric cars to reduce the effects of gas-powered emissions. With

that being said, Volkswagen is planning to secure a deal with the Spanish government so they

can locate their battery plants close to their manufacturing facilities in which they are producing

many electric vehicles. In doing so, this will reduce the costs associated with transferring the

batteries from the battery plant to the electric vehicle manufacturing plant by saving them money

on fuel. This will also help Volkswagen with their slack time by making their workers produce

cars at a faster rate since the batteries will be received at the manufacturing plant at a quicker

pace. With workers working at a faster rate this will get cars out of the plants and sold on the lot

much more efficiently. Using location to drive down the transportation costs has positioned

Volkswagen to offer a very competitive price to the broad market.

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 The second functional level strategy that Volkswagen has implemented is through

improving their information systems. In the textbook “Strategic Management An Integrated

Approach” it states that a way to lower costs through a business level strategy is using

information systems and technology to automate the business process” (L. et al., 2020).

Volkswagen was looking to do this prior to the pandemic but was forced to work faster on it

because of the remote measures that had to be taken. At the moment, Volkswagen is building

their cloud platform on Amazon Web Services to reduce their production costs in the near future.

The two companies are looking to build an Industrial Cloud base digital production platform that

will innovate the manufacturing and logistics program. This platform will connect the

information from machines, plants, and systems throughout all Volkswagen’s factory locations to

further enhance their plant efficiency, production flexibility, and vehicle standard (“National

Council”, 2021). Having interconnectivity across all plants will provide Volkswagen with a great

competitive advantage because they will be able to adjust in times of trouble or uncertainty. This

will reduce clustering in the manufacturing plants if production is slower by knowing what the

rate is at each factory. This will also reduce logistics confusion by knowing the correct location

to transport material, and where trucks are coming in and out of. This cloud system will save

Volkswagen money because they will be able to reduce slack time and minimize mistakes by

having a more organized system in place.

The third functional level strategy that Volkswagen utilizes involves further enhancing

their technology in the manufacturing process. A step that Volkswagen is taking in improving

their assembly is the increase of robots in their manufacturing process. These robots are looked

upon to fasten cross beams, fitting belt ends and nuts in the interior engine compartments. This

can be a heavy duty and time-oriented job, and with machines the process will go by much

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quicker and efficient. Volkswagen has programmed these machines to work at the same rate by

having them exert the same amount of effort for each process to ensure consistency in its quality

and production time. Adding on to their technology, Volkswagen makes sure that they aid their

human workers in having all of the necessary tools to get the assembly job done in a quick and

easy fashion. They provide support structures that include assembly seats, lifting aids, and

ergonomic tools to reduce the physical labor aspect for their employees. These employees also

have all of the materials needed right at arm’s length. With Volkswagen’s shop floors being set

up this way they are reducing employee’s steps taken, unnecessary maneuvering, and improving

ergonomics. Volkswagen will be able to save money in the long term by having robots because

they will have less workers to pay out on the assembly line. They will also have a less clustered

assembly line with fewer workers, and robots work at a faster and more efficient manner than

humans.

(2) Broad Differentiation Strategy

To start off, Volkswagen is a company that offers many different types of cars to

consumers. Volkswagen is one of the unique companies that offers from top grade to commercial

vehicles. When producing an array of cars that range from the Volkswagen Beetle to the

Lamborghini, the marketing strategy has to be segmented due to the differing types of customers.

With having to cover many different segments, Volkswagen took a branding strategy that brought

all types of people together. They decided to start the “New Volkswagen” strategy which is in

response to the emissions scandal back in 2015. This rebranding strategy had a focus of

completely turning around what was their biggest weakness into their main strength. Volkswagen

is shifting its focus to tell the world that their main focus is to protect the climate, while

providing its customers with more digitally advanced vehicles. They are completely diving into

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the electric vehicle market to show its customers they have changed as a company and are

looking out for the best interests of the world. They created the “Rebirth” campaign which was a

powerful way of showing that they had found light in the midst of darkness (Beer, 2019). The

advertisement highlighted a man at work all alone in the dark redesigning a new car in the heat

of adversity of the scandal looming over his work. Though the man kept on pushing and

eventually came up with the design of an EV Volkswagen van. The campaign was a chance to

tell the world that they know they messed up, and that they found a solution stemming from

hard-work and passion. In their advertisements Volkswagen also really tries to portray the

experience of the consumer to tell the story (“Introducing Our New”, 2019). Since a main focus

of Volkswagen is to brighten people’s lives with their products, taking this approach is a way to

reach consumers' emotions. A change that Volkswagen has made is including the voice of a

female in all of its advertisements to present a warm, pleasant, and confident feel (“Introducing

Our New”, 2019). Volkswagen wants its customers to feel comfortable and at peace when using

their products and having a women’s soft voice over their advertisements sends the message of

change. From taking the strategy of completely revolving marketing efforts around highlighting a

new era of change, Volkswagen received a great response from customers and has started to earn

back customers’ trust. This strategy is differentiated because no other company has shown

themselves vulnerable from its weaknesses and how they are going to improve its company

through its marketing. Other companies tend to pile onto its strengths and don’t bring light to any

obvious weaknesses.

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 5. Differentiation between Volkswagen and Ford

a) Strategies

Volkswagen and Ford Motor company have been competing against one another for quite

some time. With that being said, they have both taken distinct strategies that have led them both

to be the successful companies that they are today. The first difference between Volkswagen and

Ford’s strategies lies within who they are each trying to target. Volkswagen is a company that

tries to hit as many markets as possible. Volkswagen produces its vehicles in 20 European

countries and 10 countries in the Americas. In those countries Volkswagen has around 117

production plants and is looking to increase that number in its expansion. While Volkswagen

produces cars throughout the entire world, it also reaches many different countries selling to a

total of 153 countries (“Portrait and Production”, 2021). While Volkswagen is worried about

hitting the right number of markets, Ford is focused on controlling the few large pool markets.

With that being the case, Ford manufactures all of its products in North America. Many of the

plants are located in the United States while there are a few others in Canada and Mexico

(“Where are Ford”, 2020). Ford has its production in North America because its largest pool of

customers come from the United States. In 2020, Ford had a market share of around 14% of all

vehicles in the United States. As compared to Volkswagen's market share of 2.4 percent in the

United States. Ford takes on the strategy of focusing more on the needs of its largest pool of

customers rather than shooting for the needs of every single person.

The second difference entails how each company approaches diversification. Volkswagen

is a company that wants to reach as many markets as possible, so they have to offer a diverse set

of options for its customer base. The way Volkswagen has created a differentiated product

offering has been through the acquisition of many companies. Volkswagen owns companies that

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include Audi, SEAT, SKODA, Bentley, Bugatti, Lamborghini, Scania, Porsche, Ducati, and

MAN. These companies are sport cars, commercial vehicles, and premium vehicles that have

helped Volkswagen expand its product offering around the world. Ford has taken the strategy of

only acquiring two companies that are Lincoln and Troller. Lincoln is a luxury vehicle and

Troller makes off road vehicles that are used for special purposes. From Ford’s 2020 fourth

quarter sales, Lincoln only made up around 5 percent of sales for Ford Motor Company. Ford

produces most of its cars on its own including many different types of cars, SUV’s, and top

selling Trucks.

Lastly, Volkswagen and Ford have made moves towards the rising EV market in their

own ways. Volkswagen is putting all of their chips into producing and selling electric vehicles.

Volkswagen is planning to invest over $86.4 billion dollars in the development of their electric

vehicles between the time period of 2021 and 2025 (Thomson, 2020). They truly believe that the

market is going to completely shift to electric cars because of the benefits that they provide for

the ecosystem. Another big reason that Volkswagen is investing so much money into electric

vehicles is because of the emissions scandal in 2015. They are rebuilding their entire brand

image around the fact that they are a sustainable, and innovative company. Ford company plans

on investing around $30 billion dollars into the electric vehicles through 2025 (“Ford to Lead”,

2020). While Volkswagen is looking to have half of its sales to be revolved around electric

vehicles, Ford is looking to ease into the process a bit slower than Volkswagen. They are not

revolving their future sales entirely around electric vehicles but are looking to add a valuable

segment to their arsenal of product offerings.

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b) Competencies

Volkswagen and Ford are two very successful companies that have been on top of the

market for a very long time. Both companies are different from each other by having core

competencies that have allowed them to create a thriving business. Using their strengths they

continue to grow and find more ways to battle with each other in their competitive market.

Volkswagen has done a very good job at being a sustainable company. Over the years

they have continued to grow at a positive rate. Volkswagen's competency in finding ways to have

an impact in the market is what differentiates them from Ford. As talked about, Volkswagen has

put a lot of focus on their EV production. As a company with past issues with emissions, their

giant leap towards this part of the market is a way to show how they want to fix their wrongs.

Their change to helping the world shows how they are focused on building a company that still

wants to adapt to the future market as well as being environmentally friendly.

Ford as well has done a very good job at focusing on being a sustainable company.

Throughout their years they have received high grades in both water security and CO2 reduction.

The company has focused on being well known for its strong environmental impact. They as

well have pushed into the electric market but what makes them different that Volkswagen is how

much of their company they are changing to electric. Ford has started to create more electric

vehicles but Volkswagen has focused on making their entire company electric. Ford is very

environmentally friendly but with VW's bigger push into electricity, they are trying to become an

even more sustainable company.

Another competency of Volkswagen is its ability to create strong brand recognition. As

one of the biggest production companies in the world creating thousands of vehicles every day,

VW has expanded its company around the world. With different types of vehicles, people can

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identify the company based on their logos as well as through their secondary companies. The

company focuses on increasing popularity through a large number of products and diverse

markets they sell to. Volkswagen is different from most companies because they focus their

brand on being recognized all around the world as one of the strongest automotive companies.

Ford's brand recognition is something that they have worked on for years. Their ability to

build up their brand through marketing and advertising has attracted so many consumers. From a

simple look at their logo or their vehicles, people can identify the Ford motor company anywhere

they go. With being one of the oldest car brands in the market the company has been able to

build many strong relationships. With their brand recognition also comes their massive amount

of reliable customers. The company has built a brand that people are proud to show off and with

this, they have grown to be very successful. They are different than Volkswagen because the

Fords brand has grown in mainly the American market while Volkswagen has grown in many

different markets.

c) Recent Performance

Measures for 2021 Volkswagen Ford Motor Company

ROE 13.27% 10.31%

ROS 8.79% 5.26%

Stock Price $32.52 $19.28

Profit $13.5 billion $10.5 billion

Revenue $291,557,700,252,000 $134,615,000,000

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 Overall, Volkswagen has outperformed its competitor Ford Motor Company for the year

of 2021. Car buyers have gained confidence in Volkswagen over the past couple of years,

because they have shown that they have changed as a company after the emissions scandal. Over

the past year their stock price has gone up near half from what it was measured a year prior at 18

dollars. There are many people that have invested in Volkswagen recently, and it is because that

people believe that the future of the automotive industry lies in the electric vehicle market.

Volkswagen has made many moves to show that manufacturing electric vehicles is their main

priority. Ford has performed well within the past year but has still performed under the level of

Volkswagen. Ford’s stock price has more than doubled within the past year, but they still do not

have as many investors as Volkswagen. Their move toward the EV market has been slower and

not as heavy as Volkswagen, but their loyal customer base in North America has kept them in

competition. Ford’s revenue is much smaller than Volkswagen because they do not have the

global outreach that Volkswagen has.

Differences Volkswagen Ford

a) Strategies ● Invested 86.4 billion into ● Invested 29 billion into

EV. EV.
● Hits as many markets as ● Focuses on fewer markets
possible. A small player in but larger pool markets. A
many markets. big player in a big market.
● Has a lot of subsidiaries ● Fewer subsidiaries

b) Competencies ● Sustainability through new ● Consistent sustainability

electric products ● More location focused
● Global brand recognition brand recognition

c) Recent ● Stock price - $32.52 ● Stock price - $19.28

Performance ● Profit - $13.5 billion ● Profit - $10.5 billion
● Strong growth in the ● Doing very well but still
market. below other companies.

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 6. Recommendations for Volkswagen

In the coming years I see the automotive industry trends, trending towards digitalization,

increasing automation and new business models getting revolutionized. We can already see some

of these things starting to happen as new competitors start to enter the market. We can see this

with the new electric car company, Rivian. Volkswagen is in the midst of making their electric

car a larger part of the company and with a new competitor such as rivian it might change the

game.

In the car industry everyone wants the newest and safest automobile. As consumer trends

change the traditional considerations when buying a car have changed dramatically as well. In

the past people really just wanted the safest and what they thought to be the best car on the road

period. Now those things still matter but other choices come into play such as self-driving

vehicles, and this really can depend on the consumer. As we can see other competitors are doing

things completely out of the box.

Volkswagen has recently released two new electric vehicles, the ID 5. This is a sporty

electric SUV that changes the game with over 300 miles of range. If Volkswagen is able to create

a car such as this one who knows what the possibilities can soon be with all of their cars. I know

that Volkswagen has goals to really follow this electric car route since there are so many different

possibilities that they can work with. In this space of electric cars, I see a lot more companies

following in their footsteps and I think the biggest turn off for consumers is going to be the same

look and feel across all electric vehicles. A lot of companies may follow Tesla's lead because of

the lead that they have had in the market, but we feel as though companies need to branch out

and really brand themselves positively in this electric car space. Volkswagen needs a reason as to

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why someone would rather buy a Volkswagen electric car for example rather than a Tesla.

Maybe it has to do with the auto body or the fact that the technology is extremely advanced in

those cars. I think having different models with different features is a great idea.

Since this company is not a super high end company, I find it important for them to give

the customer a luxurious feel without the luxury price. A fitting into the lives of the consumer is

the most important aspect you can do as a brand. Volkswagen already has extremely positive

quality about them so it is easy to convert their target market over to something new and

exciting.

We recommend that Volkswagen improve its quality and productivity with these new

models because Volkswagen is known for its high recall rates. These quality issues are heavily

correlated with low productivity. In 2015, Volkswagen deliberately evaded the Clean Air Law by

not doing emissions testing on 482,000 diesel cars which hurt Volkswagen’s sales and costs

substantially. Better quality would lead to increased sales, product efficiency, and customer

satisfaction. Better quality would lead to fewer defects in the product which would reduce repair

costs.

We also recommend that Volkswagen finds a way to differentiate themselves other than

just pooling all of their resources into the electric vehicle market. Volkswagen is making a great

push into the electric vehicle market but it is uncertain how everything will play out. There are

many outside factors that play into creating the electric vehicle era. Factors such as gas stations

transitioning into charging stations to a quantity in which people can comfortably drive long

distances and not worry about their charge. Many countries are going to have to become more

strict on their emissions laws in order to force people to change their buying habits. Though

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countries have been creating stricter emission laws, it is still at the point where buying gas

powered cars is the cheaper option. In order to differentiate themselves, we believe that

Volkswagen should look into integrating their subsidiaries. They own many luxurious car

manufacturers, and we believe that those companies have the power to be able to market out to

middle to higher class customers. Car brands such as Bently, Buggatti, and Lamborghini offer

cars with prices that only the richest of people can afford. We believe that they should offer a line

of vehicles that are still high end luxury cars, but to a quality and price that upper-middle class

people can afford. From this they would still be able to keep their superior car quality image,

while hitting a new customer segment.

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FORD TO LEAD AMERICA’S SHIFT TO ELECTRIC VEHICLES WITH NEW MEGA CAMPUS IN
TENNESSEE AND TWIN BATTERY PLANTS IN KENTUCKY; $11.4B INVESTMENT TO
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