Must be business related and must be current - Term Paper Example

In 1997 it spent DM 14.7 billion on R&D, 24% of the total business sector R&D expenditure in Germany that year. In 1995 50,000 employees were engaged in R&D, 6% more than in 1991. The impact is clear in patent statistics. The automotive industry registered 1,892 patents in 1990, 2,940 in 1996 (out of a total of 9,342 patents registered world-wide). Thus 31% per cent of patents registered in 1995 were German, compared to 25% Japanese and 19% US-American; German patents. The uniqueness of Volkswagen's governance is based on a bespoke law named the “VW Act” enacted in 1960 when Volkswagen was privatised, and a corresponding company statute.

This legislation includes, among other directives, a required two-third majority on the supervisory board for any decisions on new plants or plant relocation thus ensuring that the government and labour representatives could not be overruled in decisions concerning changes of location and employment security. This has led to consistency in providing a solid basis for continued innovation. In the late 90s VW moved upmarket with its purchase of Audi but also retained the lower end of the market with it’s purchase of Skoda. . 2.

The business situation involved: innovation at VW AG According to sources at VW, the main advantages of electronic communication is the reduction of adminstrative work, the acceleration of processes, improved planning accuracy and improved transparency in the collaboration with its suppliers. The development of this B2B supplier procurement platform has produced remarkable savings for both VW and suppliers over the past 5 years. Reference to statistics at VWGroupSupply in the Annual Report show that, as well as the doubling of suppliers using the platform over the past 4 years, VW now handles all of its contracts through this system generating transactions up to $56 million resulting in a saving of up to $70 million on the legacy direct procurement methods.

Lee, S (2003) carried out a comparative study of leadership in innovation within the automotive B2B sector and rates VW as the leader in this field with Opel, BMW and Daimler following in order. The type of innovation characterised by VW’s B2B supplier platform is essentially that of process integration rather than product innovation per se. The advantage for VW, beyond the savings already mentioned, is the ability to accelerate the time to market for new models. This is partly facilitated by the fact that component orders that would have previously taken up to a month to process are now executable within a few days with a comcomitant shedding of bureaucracy.

In terms of future stability of this platform, firms would seem to be so well-integrated into the system that they could not operate their procurement without it. The drivers behind this innovation are both diseconomies of scale created when VW diversified their global production to include the USA in the mid-70s. This was