SWOT and PEST Analyis of Volkswagen - Case Study Example

 A Study OF VOLKSWAGEN Company Background: Volkswagen Cars more popularly known as the VW. This is one of the largest companies in terms of the sales volume. Volkswagen means ‘people’s car’. Volkswagen was started in 1934, by Ferinand Porsche. The aim of this company was majorly to provide affordable and a reliable means of transportation to all. The production of the cars was first located in Wolfsburg, Germany. The company initially started off with only one kind of car, i.e. Beetle. Over the years the company has grown to become one of the most popular vehicles. Volkswagen is works on the values, ‘the best way to honour our past is to invest in the future’. Thus the company has shown immense growth and constantly try to be the pioneers in developing in terms of the technology, initiatives and environmental friendly (Volkswagen, 2009). The company has shown continuous growth and there seems to be not much that can stop the company from reaching higher success. Company Strategies: Volkswagen across the world is a committed and is a strategically well designed operation. Volkswagen’s slogan is ‘Passion for cars’. This in its own shows the company’s values. The company has seen immense growth over the years and has been recognised to be the topper in the European Market. The table below highlights the growth of the brand as well as that of the competitors. Make Dec-07 Dec-06 % Change Dec Year 2007 Year 2006 % Change Year Volkswagen 111,249 122,135 -8.90% 1,607,750 1,671,550 -3.80% Opel / vauxhall 91,752 95185 -3.60% 1,323,076 1,322,316 0.10% FORD 87,818 86,651 1.30% 1,287,182 1,272,877 1.10% RENAULT 81,335 78,599 3.50% 1,179,729 1,286,563 -8.30% PEUGEOT 70,153 72,445 -3.20% 1,092,388 1,108,142 -1.40% FIAT 65,447 57,443 13.90% 964,116 895,022 7.70% CITROEN 60,649 58,822 3.10% 937,066 912,857 2.70% TOYOTA 66,546 62,390 6.70% 894,323 874,158 2.30% MERCEDES 49,570 49,791 -0.40% 728,628 725,771 0.40% BMW 58,517 61,730 -5.20% 704,669 680,073 3.60% Table 1: Top Ten Brands (JATO, 2008) Also based on the national trends of the company, the company has seen large amounts of benefits world wide. The company has seen a growth of 0.8% worldwide for the year 2006 – 2007. This includes the high increase in the German markets in 2006 and the repressed condition in 2007. Highest growth rates have been noted in the Baltic States with a growth percentage of 22%. Also in Lithuania which showed an increase of almost 52% in 2006. Overall the company has performed well across the world. SWOT Analysis: SWOT analysis, is one of the most useful tools which provides for understanding and decision making in every kind of situation in a business. SWOT stands for Strengths, Weaknesses, Opportunities and Threats (Jobber, 2004). Volkswagen’s strength has been in the industry for a very long time. It has created a brand image for itself over the years. Volkswagen is a company which works on ensuring that the defects in the end products are as minimal as possible. In the past five years the comp any has shown a reduction in the defects by almost 60%. The company’s excellent performance is leading to an increase in the share prices of the company as well. The company has seen an increase of almost 36% in the previous year and this has been at a double pace in the German market. Also with the newer brands and the new Beetle that has been introduced by the company, provides a solid backing for the company in terms of the performance. Volkswagen with its excellent performance has also out beaten General Motors to a great extent. The owner of the company has a strong knowledge about the cars and this is majorly from the experience of Audi. However to top of every thing, the major strength of the company is the fact that the company is very particular that every person within the company understands how the cars differ from one another and also a non stop need to try something new and innovative, separates the company and is one of the biggest reasons for the success of the company. This is clear from the different brand of cars that they own and the importance given to both the traditional drivers as well as the performance minded drivers. Despite all the strengths the company, Volkswagen has also been noted to be lacking behind in terms of overall quality. The companies that it trails behind are Nissan, Honda, Toyota, and Merc. The company has also faced serious consequences post the GM suing the company. Also under the management of Piéch, the company has faced loads of issues that relate to the working of the management departments. Also the lacking management skills in terms of company interest is a major weakness of Volkswagen. The company however has a number of opportunities that they can use to their benefits. The new Beetle forms one of the biggest opportunities for the company to increase the customers to go in for the point of sales. Also with the growing American markets, the company has also risen in America and can expect a high rise of market share in America, when compared to its competitors. Also the new strategy of reduction in the cost of production also forms a strong opportunity for the company. However, the major threats of Volkswagen are aspects like the reduction of the sales of cars in Europe and South America which form a major part of their market. Also the misunderstanding of and confusion of the brands with the Audi A4 is also a threat for the company. This majorly highlights the dilution of the brand (Grant, 2002). PEST Analysis: This section considers the operations and working of the UK markets. PEST is an acronym for Political, Economical, Social and Technological factors (Doyle, 2002). These will be discussed here in detail to highlight the external factors that can affect the working of Volkswagen. Political factors that affect the company mainly fall under the following categories, a) legislation, b) Taxes and duty, and c) Subsidies (Allen, 2009). The EU environmental ministers have set down offers the manufacturers to cut the amount of carbon – di – oxide from the exhausts of the car over a ten year period. Also as per the legislation the taxes will be charged based on the miles and the emission that is emitted by the cars. The number of legal restraints in the last five has also increased making it more competitive for the car companies. Also the increase in the road tax, and MOT and duty is a factor that affects the company’s performance. The economical factors that affect the company are the foreign imports. There is a higher supply that is available when compared to the demand. This leads to higher spending in terms of the marketing and also in terms of the new product design. Almost 80 % of the UK production is exported to other countries. The social factors that influence the company include the increase in environmental friendly cars. This mainly includes cars with lower emissions. The companies are also required to produce green vehicles, to reduce any harmful affects on the environment to the maximum. Also there has been a clear change in the fashion and taste and also increased redundancies. Lastly, the technological factors that have affected the company and its performance to a great extent are the increase in the e – commerce field and the higher need for safety. Also it has been noted that the plants in the UK have been 20% lesser productive than the US due to working practices. All the above mentioned factors affect the company’s performance to a great extent. All these factors have affected almost all the car companies and the entire industry. Conclusions: Volkswagen has shown immense growth across the countries despite any factors both internal and external, which could have dampened its success. The company has been in the industry for a very long period and can be expected to remain in the industry for the years to come as well. With the major objectives of the company remaining focused on providing as much as possible least defects, and the importance of innovation, the company seems to be very promising. Based on the above mentioned analysis, the company has portrayed a strong image all through and it is predicted to be so in the future as well. Bibliography Allen, P.J., 2009, 'Analysis of the Car Industry', Accessed on 5th March 2009, Retrieved from www.dur.ac.uk/p.j.allen/car.ppt Doyle, P., 2002, ‘ Marketing Management and Strategy’, 3rd ed., Pearson Education Grant, R. M., 2002, ‘Contemporary Strategy Analysis’, 4th edition, Blackwell Publishing, London, p 163 JATO, 2008, ‘Volkswagen tops the Charts in 2007as European market Grows by 0.8%’, 18th January 2009, Accessed on 6th March 209, retrieved from http://www.jato.com/PressReleases/Volkswagen%20tops%20the%20charts%20in%202007%20as%20European%20market%20grows%20by%200.8%20per%20cent%2018.1.2008.pdf Jobber, D., 2004, Principles and Practice of Marketing, 4th Edition, McGraw – Hill, Berkshire Volkswagen, 2009, ‘A Brief Journey through a Long History’, Accessed on 07 March 2009, Retrieved from http://www.volkswagen.com/vwcms/master_public/virtualmaster/en2/unternehmen/geschichte.html Read More