The Volkswagen Group – from a company providing affordable cars for the German people to a global group producing broad-range models including premium vehicles for upper-classes.
The success of the today’s VW AG began in 1937 when VW was founded with the intention to provide affordable cars for the German people. After years of developing further models, acquisitions of other car manufacturers such as Audi and SEAT, and starting international operations, the Volkswagen Group has become the largest automobile manufacturer in Europe and one oft the leading car producers worldwide. Today there are almost 50 production plants in Europe, America, Asia and Africa. (Datamonitor 2008)
The Volkswagen AG consists of two divisions. Next to the Financial Services Division there is the Automotive Division that develops vehicles and engines, produces and sells passenger cars, commercial vehicles, trucks, buses, vans, pick-ups and campers. Brands that are part of the VW Group include: VW, Audi, SEAT, Lamborghini, Skoda, Bentley and Bugatti. (Datamonitor 2008)
Concentrating on the Automotive Division, the Volkswagen Group’s strategy is analysed by looking at its value chain. It is examined what is performed well, where strengths are that create value, and what might be improved.
Table of Contents
1. Introduction
2. The Strategy of the Volkswagen Group
3. The Value Chain of the Volkswagen Group
4. Conclusion
Research Objectives and Topics
The primary objective of this assignment is to conduct a strategic analysis of the Volkswagen Group's Automotive Division by applying the framework of the value chain to evaluate its operational performance, identify value-creating strengths, and propose areas for improvement.
- Strategic orientation and future growth objectives of the Volkswagen Group
- Analysis of core value chain activities (primary and support)
- Evaluation of operational efficiency and modular production strategies
- Importance of R&D and technology development for competitive advantage
- Role of procurement and human resource management in value creation
Excerpt from the Book
Operations
The main performance of the VW AG is the assembly that allows the final automobile to develop. Different efficient, and constantly improved processes can be mentioned as value enhancing here.
First of all, the Volkswagen Group operates a turntable concept, multi-brand locations and a modular strategy. All three in combination enable to produce different kinds of vehicles, even of diverse brands on same production lines. This for one thing supports flexibility concerning changes in demand and for another increases standardisation and economies of scale. (VW AG 2006, p.92) However, these methods are common within the today’s automotive industry and do not create strong superior competitive advantages. Although, the VW Group already applied a component strategy before GM did. Furthermore, the Group is said to be exaggerating and customers begin to prefer the cheaper car brands that are built up of nearly the same parts. (Anon, 2005 p.9) In this way, sales are lost and the Group competes with itself.
Nevertheless, to guarantee a worldwide provision of “high-tech and competitive components”, the coordination of component production and development will be centralised in future. Also co-operations with third parties are planned. (VW AG 2006, p.93) One example is the project of 2006 with Porsche for the production of the Touareg, Audi Q7 and the Porsche Cayenne. (VW AG 2006, p.88) This intention, to include strategic partners and eventually to form a kind of network, arises from a world with a highly volatile environment that continuously calls for new challenges. In the case of ecological, social or technological changes together with a rising complexity of products, the availability of flexible processes and high-qualified people becomes inevitable. Most companies cannot feature these characteristics, and hence establish networks. In doing so, external expertise can be used enhancing quality as well as process speed. In addition, enormous cost reductions are realisable by means of less asset or equipment purchases also reinforcing flexibility required when new trends occur. (Baldwin and Clark 1997, Cravens et al 1996) However, also this strategy cannot be seen as absolutely superior because it is used by diverse car manufacturers. Although, co-operations with a partner such as Porsche is likely to be seen as valuable. Consequently, the VW Group should further on seek for professional partnerships.
Summary of Chapters
Introduction: Provides an overview of the Volkswagen Group's history and its structural division into Automotive and Financial Services, setting the context for the strategic value chain analysis.
The Strategy of the Volkswagen Group: Details the 'Strategy 2018' goals, focusing on market expansion in emerging economies and the ambition to outperform Toyota through increased production and model variety.
The Value Chain of the Volkswagen Group: Analyzes the firm’s competitive advantages by examining primary activities like operations and marketing, alongside support activities such as technology development, procurement, and human resource management.
Conclusion: Summarizes the effectiveness of the Group's strategic approaches and notes that continuous optimization of the value chain remains critical for future success against global competitors.
Keywords
Volkswagen Group, Automotive Division, Strategy 2018, Value Chain, Competitive Advantage, Modular Strategy, R&D, Procurement, Human Resource Management, Brand Portfolio, Market Expansion, Emerging Markets, Operational Efficiency, Customer Nearness, Strategic Partnerships.
Frequently Asked Questions
What is the fundamental focus of this document?
The document provides a strategic management analysis of the Volkswagen Group's Automotive Division, utilizing Porter's value chain framework to evaluate its internal activities.
What are the central themes discussed in the analysis?
The central themes include the 'Strategy 2018' expansion plans, the application of modular production strategies, the importance of R&D for innovation, and the role of brand management.
What is the primary goal stated in the Strategy 2018?
The ultimate mission of the Volkswagen Group under the 'Strategy 2018' is to increase global sales significantly and outperform the current world leader, Toyota.
Which scientific framework is used to analyze the company?
The study employs the Generic Value Chain model developed by Michael Porter to identify and analyze activities that contribute to cost advantages or differentiation.
What core aspects are covered in the main section of the paper?
The main section evaluates specific business functions, specifically operations, technology development, procurement, human resource management, and marketing activities.
Which keywords best characterize this work?
Key terms include value chain, strategic management, modularity, innovation, operational efficiency, and global market expansion.
How does the Volkswagen Group utilize the 'turntable concept' and modular strategy?
These methods allow the company to produce diverse vehicle models from different brands on the same production lines, thereby increasing standardization, flexibility, and economies of scale.
What role do partnerships, such as the one with Porsche, play in VW's strategy?
Partnerships are seen as essential for managing volatile environments, leveraging external expertise, and reducing costs by sharing assets and equipment for complex product development.
- Quote paper
- Nadine Wiese (Author), 2008, The Value Chain of the Volkswagen Group, Munich, GRIN Verlag, https://www.grin.com/document/138216
