Volkswagen Company Performance - Case Study Example

Table of Contents INTRODUCTION 3 Purpose and aim 3 Background on Volkswagen 3 The marketing plan of VW……………………………………………………………………………………………………………………5 The executive management………………………………………………………………………………………………………………...7 INFORMATIONAL REPORT 8 Financial stability 9 Employment benefits 12 Employment opportunities………………………………………………………………………………………………………………13 Global Rankings……………………………………………………………………………………………………………………………….14 Criticism…………………………………………………………………………………………………………………………………………..15 VOLKSWAGEN IS THE BEST EMPLOYMENT CHOICE………………………………………………………………………………16 CONCLUSION……………………………………………………………………………………………………………………………………….17 WORKS CITED……………………………………………………………………………………………………………………………………….18 LIST OF TABLES Table 1: employment benefits at VW.......................................................................................13 Table 2: Volkswagen’s global rankings.......................................................................................15 LIST OF GRAPHS Graph 1: stock performance for the past month, June 2015....................................................10 Graph 2: stock performance for the past and next 52 weeks....................................................10 Graph 3: the price to earnings ratio of major Automobile industry players..............................11 Graph 4: Graph 4: Equity and debt ratio………………………………………………………………………………12 Graph 5: employment growth in Volkswagen since 2009 source.........................................................14 1.0 Introduction Purpose and aim The business report refers to Volkswagen case scenario and tries to justify why the company is the best employment choice. As such, the findings of the report will form the basis for discussing why Volkswagen should be best employer among other leading automobile companies like Toyota and BMW. The report settles on this company because it has a long history of good management that explains the creative and innovative culture responsible for the manufacturer of unique motor vehicle models including Passat, Cabrio, GTI, Beetle, Golf and Jetta. Background on Volkswagen Company Volkswagen Company dates back to the year 1937 when the German government under Adolf Hitler’s regime established the automobile company under state ownership1. Initially, the company was the Gessellschaft Vorbereitung des Deutschen Volkswagen, but later the same year, it rebranded to Volkswagen, a German term denoting “The People’s Car Company”2. The company originally headquarter in Wolfsburg where Hitler had the ambition of developing and producing affordable as well as speedy vehicles selling at $140 by then. The design of the car would be the work of Ferdinand Porsche who further assured users that the main purpose of the car was to give them joy while at the same time, answer the transportation needs. However, the World War II was a big blow to Volkswagen, but after the war ended, the company was the focal point for the Nazi Allies to revive German’s auto industry. The car sells in the USA would be initially slower, same to other parts of the world because of the connection to the Nazis besides the small size, as well as the unusually round shape. Come 1959, Volkswagen went through a rebranding as the Beetle and the diminutive size was used to the advantage of the consumers3. In the next several years, VW became the top-selling automobile import in the USA. The success of the car in the auto industry prompted the German government to sell around 60% of the company’s stock to the public, and this marked its denationalisation in 1960. Twelve years down the line, VW produced a record 15 million cars surpassing the records that Model T, a Ford Motor Company’s product had set before between the years 1908 and 19274. Since the design of the Beetle did not change in anyway, the company recorded sluggish sales in the 1970s; however, it would bounce back after introducing sportier models Rabbit and finally, the Golf. Come 1998, VW began selling the New Beetle, a highly rated model but did not stop the production of the earlier model. Therefore, after 70 years in the auto industry, company had been able to produce over 21 million units of the original Beetle models, last introduced in Mexico, in the city of Puebla, 20035. In 2008, the company did announce its plans to establish an assembly plant situated in Chattanooga, Tennessee as a move to make cars models specifically for the North Americans where it introduced the midsize sedan as a response to the competition from Honda Accord and the Toyota Camry. In 2009, Porsche showed a great interest in VW since it had been buying stocks in the company and this marked the merger between the two automobile companies. Therefore, the merger between Volkswagen and Porsche, as Volkswagen Group, manufactures luxury and economy automobiles, trucks, sports cars, as well as commercial cars that have been for sale worldwide. Some of the motor vehicle products from the company include Passat, Cabrio, GTI, Beetle, Golf and Jetta among other models. Besides, the company owns Seat, Skoda, and Audi as companies that manufacture cars in Spain and other countries in eastern and Southern Europe. It also owns Lamborghini as a manufacturer of sports cars in Italy. On the other hand, the company has the power-engineering segment that develops and produces large-diesel bore engines, industrial turbines, turbo compressors, chemical reactor systems, gear units, testing systems and propulsion components. Besides, Volkswagen offers financial services as a dealer thus it ventures in financing, banking, leasing and insurance services, in addition to fleet management. The marketing Plan of Volkswagen Few companies have been able to develop good marketing plans to communicate their core values like Volkswagen. Since its foundation, Volkswagen has centred on empowering every person to own a car and its marketing messages focus on openness, as well as inclusivity6. As such, Volkswagen has centred its business on core values for decades and this has helped the company to build passion among the customers. On the other hand, the marketing plan has always focused on manufacturing classic models including the Type 2 bus and the Beetle as iconic the brands of the VW. Although the car models have been changing over decades, the marketing plan of VW still focuses on defying convention and progress because the values serve the marketing purpose of the company7. Nonetheless, strong brand message complements the marketing plan because it communicates values and differentiates the company’s products from its competitors, besides helping with the product positioning among the target audience. Therefore, the company’s marketing plan focuses on debuting new products and emphasises on brand consistency in advertisement through creativity that reflects the power of German Engineering8. On the other hand, the company envisages, through its marketing plan, to have as many cars as possible within 100, 000 miles. Moreover, the marketing plan of VW Company depends on product portfolio awareness and creation of brand unity; thus, the marketing plan focuses on creativity and product differentiation9. The marketing plan reflects the company’s plan of becoming the global economic and environmental leader in the automobile industry. In this case, Volkswagen has developed four goals to sustain its business by 2018 by first intending to use intelligent innovations and technologies to satisfy customers through quality assurance10. In addition, it aims at generating unit sales reaching up to 10 million vehicles annually and as such, has the vision of capturing average share of the growing markets. Appendix 2 shows that the company has a fair share of the automotive industry. Moreover, the marketing plan is to have at least 8% returns on sales before taxation in a bid to maintain the strong financial ability and position to enable the company get over the financial difficulties11. Therefore, the marketing plan is to position Volkswagen as the most attractive employer by 2018 in the automotive industry. The executive Management of Volkswagen Company The executive board of Volkswagen has nine members where each member carries one or even more functions with Prof. Dr. Martin Winterkorn as the chairperson12. On the other hand, the work of the executive management is easier through the support from the regional and board brands, besides the various group business holdings and units. Prof. Martin Winterkon sits in the executive team as the chairperson of VW with the responsibilities of doing group research and development, as well as the chairperson of the supervisory board of the AUDI AG. Thus, the members of the board include: Prof. Martin Winterkon: chairperson Dr. Francisco Javier Garcia Sanz: has the functional responsibility of procurement Prof. Jochem Heizman: functional responsibility to China Christian Klinger: responsible for sales, marketing, and a member of the Volkswagen brand Functional Responsibility. Mathias Muller: chairperson of the board of management at Porsche AG Prof. Horst Neumann: human resources and organisation Andrea Renschler: functional responsibility as the head of commercial vehicles Hans Dieter Potsch: finance and controlling, chief finance officer of Porsche Automobil Holdins SE Prof. Rupert Stadler: the chairperson of the board of management of Audi AG. 2.0 INFORMATIONAL REPORT Financial Stability of Volkswagen Volkswagen has been able to maintain an impressive financial stability even after the financial crisis. In 2013 for instance, the company was able to beat its targets despite the challenges of the competitive automobile business environment13. Though 2014 was also another challenging year for all the European automakers, the chairperson of the company, Martin Winterkon, announced that the strong emphasis on qualitative growth, earnings in quality and quality development is the basis for the current financial stability that the company is enjoying14. On the other hand, the company has a strategy for sustaining its earnings using the modular toolkits because the volumes are growing and adds new models to the existing project portfolio every year thus the Volkswagen anticipates positive future earnings as an indication of a stronger financial stability. Currently, Volkswagen has an impressive performance in the stock market, trading at averagely $48 per share since the beginning of 2015 and mostly trade in the Frankfurt Stock Exchange market listed as VOW and VOW315. The company’s shares fall under two categories namely the preference and ordinary share. Moreover, shares of Volkswagen Company trade worldwide and domestic stock exchanges including New York Stock market. Graph 1: stock performance for the past month, June 2015: source CNN Money, (2015). Volkswagen AG http://money.cnn.com/quote/quote.html?symb=VLKAY Graph: 2 VW stock performance for the past and next 52 weeks: Source CNN Money, (2015) http://money.cnn.com/quote/quote.html?symb=VLKAY Graphs 1 shows the weekly estimates of Volkswagen’s performance in the stock market where the green values indicate an upward surge on the stock value while the red values shows the downward surge in the stock values where the last week of June, the stock closed at 46.56. On the other hand, the Graph 2 shows the estimates of the stock values for the past 52 weeks where it closed at 46.56 and the next 52 weeks the company forecast a high of 47.3 and a low of 40. 14. The implication is that future is bright for Volkswagen in the stock market thus an indication of a strong financial stability. However, the company is struggling to match the impressive stock performance of Toyota Motors that has high of $ 67, but generally, VW sales more vehicles than Toyota, and this translates to a greater revenue generation, as is the case with the increasing revenue in appendix 1. Price to earnings ratio helps in the current valuation of a company because investors use the ratio to monitor the performance of a company where a low PE ratio or stock is seemingly less risky since as the profitability of a company falls, earnings fluctuate16. The price to earnings ratio of Volkswagen Company is approximately 9 times and this estimate is 81.51% lower than the value of the consumer goods, and further 72.26% lower than the Auto manufacturers17. The lower ratio implies that the company’s stock is less risky compared to other industry players like Toyota, BMWA, BMW and DAIC as shown in the graph below. Graph 3: the price to earnings ratio of major Automobile industry players: source YCHARTS, (2015) https://ycharts.com/companies/VLKAY/pe_ratio Graph 4: Equity and debt ratio Employment Benefits As a company with subsidiary firms worldwide, Volkswagen provides employment benefits that match the international standards18. The table below summarises the employment benefits from VW. Insurance, Health & Wellness Health insurance Flexible spending account(FSA) Health Savings Account(HSA) Supplemental Life Insurance Occupation Accident Insurance Mental Health Care Accidental Death & Dismemberment Insurance Life insurance Health care-onsite Financial & retirement Pension plan Retirement plan Performance bonus Equity incentive plan Charitable gift matching 401k plan Employee stock purchase plan Stock options Supplemental workers’ compensation Family & parenting Maternity 7 paternity leave Fertility assistance Adoption assistance Reduced or flexible hours Family medical leave Work from home Dependent care Childcare Military leave Unpaid extended leave Vacation & time off Vacation & paid time off Paid holidays Sabbatical Sick days Volunteer time off Bereavement leave Perks & discounts Employee discount Employee assistance program Commuter checks & assistance Mobile phone discount Company social events Legal assistance Free lunch or snacks Gym membership Pet friendly workplace Company car Travel concierge Professional support Diversity program Professional development Tuition assistance Job training Apprenticeship program Table 1: employment benefits at VW, Source: Volkswagen, (2015) Official Home of Volkswagen Cars & SUVs http://www.vw.com/ Employment opportunities Volkswagen is a global company that employs a good number of people and the company’s human resource strategy stems from excellent performance. On the other hand, the company believes that the performance of the top team is the basis for delivering excellence necessary for becoming a leader in the automotive production internationally. By December 2012, the company employed around 549, 763 people, and this represented a 9.5% from the previous years19. The rising number of employment opportunities is because of the volume-related as well as the consolidation of Porsche that absorbed 17, 520 employees with Ducati adding 1, 197 more employees. Close to 44.8 % of the employees work in Germany, while the rest work in the subsidiary companies. However, the number of employees has swelled up to 592, 586 worldwide and this number is responsible for the production of close to 41, 000 vehicles on a weekly basis20. Moreover, the company has numerous employment opportunities and one can start a career by first engaging in a vocational training or through recruitment as a university graduate. The table below shows how the number of employees has been increasing in Volkswagen Company since 2009 to stand at the current 572,800. Graph 5: employment growth in Volkswagen since 2009 source: VW annual report 2013 http://sustainabilityreport2013.volkswagenag.com/indicators-and-goals/personnel-indicators Volkswagen’s Global Rankings In 2014, Volkswagen topped the auto companies and became the number automobile company in the Fortune 500 list of 2014, ranking above Toyota21. Therefore, Volkswagen ranked eighth globally among the largest company worldwide, moving one position from the previous ninth position in 2013. The company reported a revenue collection of approximately $261.5 billion, more than Toyota’s $256.5 billion22. Volkswagen’s global approach is the basis for its achievement of growth goals because it has been successful in establishing markets in India, China, Indonesia and Latin America. Also recently, Forbes Magazine ranked Volkswagen as the 67th among The World’s Most Valuable Brands, valued at $ 127 billion. Besides, Volkswagen appears among the Green companies with the introduction of the Golf 7 brand that consumes less fuel and as such, a major initiative towards environmental friendliness and corporate social responsibility. The table below also summarises other rankings that Volkswagen has appeared over the years. Rankings listed Year Position World’s Most Respected Companies 2015 47 100-top most powerful brands 2014 27 Europe’s most attractive employers 2014 24 Global Top 100 Brand Corporations 2014 21 World’s top 50 most attractive employers 2014 34 Fortune Global 500 2012 12 Table 2: Volkswagen’s global rankings: Source SyncForce 2015. Ranking the brands http://www.rankingthebrands.com/Brand-detail.aspx?brandID=3890 Criticism Volkswagen faced serious criticism with the Super Bowl advertisement of 2013 where the company ignited racism claims with the use of Jamaican accents from the white actors23. Critics argued that this was a racist chant because it was as if the company was using blackfaces with voices. In fact, people from the Caribbean island interpreted the advertisement as insulting them as being relaxed and feeling no stress. On the other hand, critics, especially from the former employees argue that the company has long working hours and this may be quite tiresome for employees who have to attend to household chores. Besides, the dynasty battles has been receiving sharp criticism because Ferdinand Piech has been on many occasions undermined the current CEO, Martin Winterkorn24. The leadership wrangles is not good for any organisation because the executive management and the company’s ownership are setting bad examples for the followers or the employees. In fact, the leadership wrangles at Volkswagen stems from family wrangles that if the executive management leaves unchecked may negatively affect the once good leadership of one of the leading automobile manufacturers and as such, may soil the name of German’s automobile industry. Moreover, the Greenpeace criticised the introduction of Golf 7 because the vehicle consumed more fuel and exceeded the greenhouse gas emissions. 3.0 Volkswagen is the perfect Employment choice Even though Volkswagen recently faced leadership and ownership wrangles, the company is the best choice for any graduate willing to improve his or her sales and marketing skills because VW boasts as one of the automobile companies with huge motor vehicle sales. As the most preferred organisation of my employment choice, the company should first look at its green initiatives to clear out the bad publicity that Golf 7 received. However, the long working hours are worth because the payment is good. On the other hand, the employment benefits including heath and insurance coverage are the main reasons why I choose Volkswagen as the employment destination. Moreover, the company is performing impressively in the stock market though the executive management must do all it takes to revive the once lost glory of producing many vehicles to surpass the current leaders like Toyota. In fact, Volkswagen has a promising future in the automobile industry with its pricing to earnings ratio of 9% as an indication that it is a less risky venture for investors. Nonetheless, the company ranks well in the global rankings, appearing in the top 10 of the Global Fortune 500 industries, including an impressive scoop in the most attractive organisations to work in and appearing among the companies that are fast moving towards green initiatives. I also prefer the company because there are rotated work-shifts that provide employees with the opportunities to learn especially the basics quality control standards. Besides, the payment is impressive and the executive management has a perfect way of relating with the employees. 4.0 Conclusion In summary, the business report indentifies some of the strong points that make Volkswagen one of the leading producers and sellers of automobiles. From the good financial stability, it is evident that VW has a good stock market performance with 52 week high of approximately $48 and low of $40. On the other hand, the report indicates that the company has lowest pricing to earnings ratio, around 9% implying that investing in the company is less risky. However, the most impressive fact is that Volkswagen boasts of numerous employment benefits and this makes explains the reason behind the high employment growth for the past six years. Moreover, the Volkswagen has a good performance in the global rankings, appearing among the top 10 fortune 500 companies besides other lists like the most attractive corporations, the most attractive employers among other lists. Therefore, the report recommends that if the company envisages becoming a leader in the automobile industry, then executive management should solve the leadership wrangles, take measures to stabilise its stock market performance and address the green initiative criticism that befell the Golf 7. Works Cited Baumann, Christian. "International Marketing plan for Volkswagen." (2009). eBook, 27 pages CNN Money, (2015). Volkswagen AG. 2015. Web. Accessed July 2, 2015 from http://money.cnn.com/quote/quote.html?symb=VLKAY Johnson, Hume N. "JAMAICA: A famous, strong but damaged brand." Place Branding and Public Diplomacy 10.3 (2014): 199-217. Lowry, William. Why the global automobile industry matters for investors. April 28, 2014. Web. Accessed 2 July, 2014 from http://marketrealist.com/2014/04/global-automobile-industry-matters-investors/ Patel, Sagar. Volkswagen beats Toyota to become No 1 auto company in 2014 Fortune 500 list. July 10, 2014. Web. Accessed July 2, 2015 from from http://www.rushlane.com/volkswagen-beats-toyota-no-1-12124477.html Rostan, Pierre, and Alexandra Rostan. "Assessing the Predictive Power of Customer Satisfaction for Financial and Market Performances: Price-to-Earnings Ratio is a Better Predictor Overall." International Review of Management and Marketing 2.1 (2012): 59-74. SyncForce. Ranking the brands. 2015. Web. Accessed July 2, 2015 from http://www.rankingthebrands.com/Brand-detail.aspx?brandID=3890 Volkswagen confirms outlook for full-year 2013. 2013, April. Web. Accessed July 2, 2015 from http://www.volkswagenag.com/content/vwcorp/info_center/en/news/2013/04/ZB_Jan-Mrz_2013_PM.html Volkswagen. Official Home of Volkswagen Cars & SUVs. 2015. Web. Accessed July 2, 2015 from http://www.vw.com/ Volkswagen. Senior Management. 2015. Web. Accessed July 2 2015 from http://www.volkswagenag.com/content/vwcorp/content/en/the_group/senior_management.html Wissenbach, Ilona. Volkswagen chairman appears isolated on board after CEO criticism. April 12, 2015. Web. Accessed July 2, 2015 http://www.reuters.com/article/2015/04/12/us-volkswagen-porsche-hldg-idUSKBN0N30FY20150412 YCHARTS, (2015). Volkswagen PE Ratio. Retrieved from (TTM)https://ycharts.com/companies/VLKAY/pe_ratio Appendices Appendix 1 Appendix 2 Source: http://markets.ft.com/research/Markets/Tearsheets/Financials?s=VOW3:GER Read More