The market position of the automobile company Audi


Term Paper, 2019

19 Pages, Grade: 1.7


Excerpt

Table of Contents

1. Introduction

2. Stakeholder Analysis

3. PEST Analysis

4. Value Net / Porter

5. Portfolio Modell

6. Value Chain

7. SWOT Analysis

Bibliography

In this thesis, a strategic analysis of the Audi brand is carried out. Using different models, the current market position of Audi will be presented. I will also outline how the brand deals with its competitors, which are the biggest threats to Audi and what could be improved. I will give a brief outlook into the future.

The data contained in this homework was obtained mainly through secondary research methods such as web-based research, using information from the classes and distributed books and articles. The reason for this is that time pressure makes it difficult to obtain information directly from board members or executives. The information required could also be found elsewhere.

1. Introduction

The German Audi brand was founded in 1899 by August Horch. Since the founding of this automobile company, Audi has been developing and producing vehicles with a focus on innovation and future concepts. Today, Audi is one of the three major German automobile manufacturers, producing the complete range of economy, sports, luxury and SUV models. In the current Audi Annual Report, total sales amounted to 59.2 billion euros and profits to 4.7 billion euros by the end of 2018. In addition, Audi's sales rose significantly from 653,000 to 1,878,105 between 2000 and 2018, particularly in the Middle East and Chinese markets1.

Audi just launched the new four door coupes A5, A7 and the all new generation flagship A8 with autonomic driving in series.

Since the invention of the car, Germany has been known for the production of high-quality cars. Mercedes, BMW and Audi are the ultimate German car brands, followed by Volkswagen and Porsche. They are encouraged by the federal government to emphasize that the cars are "Made in Germany" as they enjoy worldwide fame.

2. Stakeholder Analysis

As Audi is one of the global players in the automotive industry, the company has an impact on a wide variety of people. These are referred to as stakeholders. One of the main goals of every brand is to satisfy these stakeholders in the best possible way. This is quite a difficult goal to achieve since every person has different interests. Therefore, it is indeed necessary to set guidelines for each group. Audi divides its stakeholders into five groups, with which the brand wants and must build a strong relationship in order to ensure the long-term success of the company. The different opinions and suggestions of the individual groups provide Audi with information on how they can further develop their sustainability strategy2.

The five groups mentioned above are the following:

Audi staff, non-profit organizations from the fields of education, culture, society, social affairs, environment and science. Business partners and investors belong to an interest group, as do representatives of media and sustainability experts and, last but not least, representatives of politics and trade unions, neighbors and communities at the sites of the plants3.

It is indispensable for the company to have satisfied employees. The overall attitude is that only those who are enthusiastic about what they do can inspire others. Audi offers a working environment that gives every individual the opportunity to fully develop themselves and their ideas. The company's culture includes transparency, exchange and open, fair cooperation at all hierarchical levels4. The satisfaction of non-profit organizations is important in the sense that they have a major impact on potential customers. The organizations should report positively about the brand and thus help Audi to be strong and have its back free. One of the most important groups are partners and investors, as they want to be kept up to date. This is why Audi invites selected interest groups to the “Audi Stakeholder Forum” every two years. The meeting is conducive to the discussion of strategic issues and took place for the first time in 2012 in Ingolstadt, Audi's headquarters5. Not to mention the media for marketing purposes. The more different magazines report on the brand, the higher the brand awareness. In addition, customers or interested parties are informed about which trend Audi will follow in the future or which new release is due. In this context, sustainability experts take a closer look at how Audi meets the requirements or is perhaps even one step ahead. Finally, the labor union representatives who need to be informed in order to lead the union in the right way. The neighbors and those directly affected by a plant are represented by the mayors of the cities where the factories are located.

For them, the sustainability and the environmentally friendly operation of these plants is essential, as they are huge and affect the direct environment of the citizens.

In summary, it is extremely important for a company like Audi to stay in constant contact with its stakeholders. They need to be informed about every step the company takes, and vice versa, by sharing their needs, ideas and opinions with Audi, which they then define as guidelines for the company. Only when everyone is satisfied will there be no more obstacles to generating more market share and value.

3. PEST Analysis

The PEST analysis is a typical strategic management tool to break down different perspectives such as political, economic, social and technical variables. Audi's PEST analysis shows the impact of the various factors on the luxury car market.

The Audi headquarters is located in Ingolstadt, Bavaria. With 87,112 employees6 worldwide from more than 100 different nationalities7, Audi has a strong human resource base. By implementing Audi's global strategy, the brand has built several large factories in countries around the world. Examples include Martorell in Spain, San José Chiapa in Mexico, Changchun in China and Aurangabad in India8.

Let’s now have a closer look at the economic aspects in Audi’s history.

In 2012, demand for passenger cars and light commercial vehicles reached record highs with 66.6 million vehicles. This was due to a current trend towards fuel-efficient and/or low-emission vehicles. According to the latest report by ACEA (European Automobile Manufacturers' Association), demand in Europe has risen steadily until 20189. As a result of the economic crisis in 2009, some industrialized countries in Europe were negatively affected by the ramifications.

However, new strategies and the global market expansion into China, Mexico and India, as already mentioned, remained a strong focus of demand. With the production of the very first A8 in 1994, the company has firmly established itself in the luxury car segment. More than half of the world's luxury cars are produced by the German Super 3, namely Mercedes, BMW and Audi. Around 300,000 luxury cars are delivered annually, more than 70% of them to North America and the Middle East. The market for luxury cars was not impacted by the economic recession, on the contrary, the demand for luxury cars has increased over the years, especially for new entrants. According to an interview Precision had with Audi, even the Brexit vote had no bearing on car sales to Audi in the UK10.

As Audi is a major car manufacturer in the world, social impacts are inevitable. With more than 85,000 employees, the German giant takes care of the same number of families. In 2016, Audi released 365 workers for further training11. The company offers childcare for an employee's children during the summer holidays to facilitate the struggle. Around 300 children take part each year12. More than 2,230 company employees took parental leave in 2016, 78% of whom were men13. Against this background, Audi strives to do everything in its power to ensure the satisfaction and well-being of its employees.

The production of the best possible vehicle requires exceptional quantities of high-quality material. This is why Audi has established several partnerships with suppliers. Due to the economic recession, customers are more likely to opt for the fuel-efficient car than for the big-engined SUV. That's why Audi is sticking to its prices, as they used to be, but is now adding more technology to every car. The brand promise, which also is Audi's motto, has always been and still is: Leading through technology.

This yields the technological aspect whose development is Audi's core competence. The brand is best known for the revolutionary "quattro" four-wheel drive system, which came onto the market in 198314. Having developed this pioneering technology, Audi won several races over and over again. It wasn't long before other brands began to imitate their invention. One of the first competitors was Mercedes, which adapted the four-wheel drive and called its version 4matic. In order to remain at the forefront of technology, Audi then introduced the air-adapted suspension, which above all has a comfort aspect, but also offers better performance under varying road conditions. The next important milestone was set in 2010, when the Audi A8 was equipped with an 8-speed gearbox for the first time. This enables softer and even faster acceleration, whilst also reducing fuel consumption. The A8 is synonymous with technology, comfort and luxury from Germany. Moreover, Audi worked together with the Italian super sports car manufacturer Lamborghini to enhance its sporting value. The S8 and RS models are equipped with Lamborghini's engine and transmission system.

Today, quattro technology can be found in most Audi models. It increases driver safety and enjoyment in any situation, in any weather. Particularly in winter, snowy and icy roads are of no concern to the quattro system.

4. Value Net / Porter

If you want detailed information about all threats to your business, it's essential to analyze them by looking at the bargaining power of suppliers, customers, substitute product threats, new market players, and of course competitors themselves. Using Porter's Five Forces model helps analyze the attractiveness of each industry by providing information about the competitive status and strength of any brand in all industries.

Audi is one of the largest car manufacturers in the world, albeit not the largest after being topped by Mercedes and BMW15. However, it is a global company known for technological innovation and high-quality car models. As the technology leader with the strongest position, the brand is also investing heavily in automated driving to be second to none in this emerging market. While Audi is one of the best-known car brands in the world, there are several environmental factors that have a significant impact on the business.

Based on the bargaining power of Audi's suppliers, this power is weak. There are several reasons for this. Apart from the large number of suppliers16, their relatively small size is only one reason why they have no influence on Audi. In general, these suppliers are small or medium-sized and diminish their ability to develop. In addition, Audi has many alternatives due to the large number of suppliers. The company can easily switch to another supplier at any time. But for any of the Audi suppliers, this can mean a huge loss of business, as Audi is quite a large customer. All these circumstances give Audi better control over the suppliers and keep their bargaining power low.

And the bargaining power of Audi customers? They have a high clout in the automotive industry in general. Customers have many choices and the cost of switching is low as there are competing companies offering similar products at comparable prices. Every customer is a well-informed customer and can make their own decision. They have the opportunity to easily access information and then select the option that is most suitable for them. All these constraints increase the bargaining power of Audi buyers. Audi's negotiating power in every phase is driven by technological and design-oriented innovations. On this basis, the company has achieved impressive customer loyalty. However, this power is countered by monumental competition in the business.

Turning to threats, starting with the risk of substitutes, which in my opinion is moderate for Audi. From cars of other brands to public transport, there are several substitutes for Audi's products. The cost of switching is also quite low, and in some areas, such as large cities, it is potentially easier for people to use the substitutes. For middle and lower middle-class consumers, public transport is often an alternative due to its lower cost. To mitigate this risk, Audi has launched models that are fuel-efficient, more environmentally friendly and affordable for young families. These conditions together counteract the risk of alternatives, but only to a limited extent. Overall, the threat from substitutes is moderate.

[...]


1 (Volkswagen AG, 2019)

2 (Audi AG, 2019)

3 (Audi AG, 2019)

4 (Audi AG, 2019)

5 (Audi AG, 2019)

6 (Audi AG, 2019)

7 (Audi AG, 2019)

8 (Audi AG, 2019)

9 (ACEA, 2017)

10 (Precision Software, 2017)

11 (Audi AG, 2019)

12 (Audi AG, 2019)

13 (Audi AG, 2019)

14 (Audi AG, 2019)

15 (Interbrand, 2019)

16 (Audi AG, 2019)

Excerpt out of 19 pages

Details

Title
The market position of the automobile company Audi
College
BSP Business School Berlin (form. Potsdam)
Grade
1.7
Author
Year
2019
Pages
19
Catalog Number
V520136
ISBN (eBook)
9783346115348
ISBN (Book)
9783346115355
Language
English
Tags
audi, brand, analysis, inquiry, swot, pestel, term paper, hausarbeit, english, future, ai, artificial intelligence, development, car, luxury, manufacturer
Quote paper
Tim Meyer (Author), 2019, The market position of the automobile company Audi, Munich, GRIN Verlag, https://www.grin.com/document/520136

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