Impact of Economic Crisis on Volkswagen in the Vietnam Market - Case Study Example

Conclusion and Recommendation Table of Contents Table of Contents 2 5.0 Conclusion and Recommendation 3 5 Conclusion 3 5.2 Recommendation 5 References 9 Bibliography 10 5.0 Conclusion and Recommendation 5.1 Conclusion The global economic downturn impelled due to various reasons, is an appalling piece of news for every business of all the countries throughout the globe (Navarro, 2012). The technique adopted by the companies to deal with this situation is to enter into the activities such as, reviewing of business and marketing strategy, lay-offs, freezing operational budget and also a number of cost reducing measures. Nonetheless, the growth of a company may get stunted if a company continues with its earlier strategy or overreacts to the arising challenge (Marinov and Marinova, 2012). Now, this study was related to the impact of economic crisis on the marketing strategy of Volkswagen in Vietnam. In order to evaluate the objective, the study had formulated three different research questions. The questions were related to the (1) impact of economic crisis on Volkswagen in the Vietnam market, (2) the impact of changing consumer behaviour on the automotive industry of Vietnam and (3) to identify the optimum marketing strategy of Volkswagen in Vietnam considering the global recessions and the dynamic nature of consumer needs. In order to get the answers of these questions, the study has made use of both primary and secondary data. The respondents were the marketing managers of Volkswagen in Vietnam. The study revealed that Volkswagen is getting highly affected by the economic crisis in Vietnam. The company is witnessing decreasing sales and as a result of that, they are forced to reduce the operational and marketing cost. The study shed light on the fact that the marketing budget of the company has been reduced to half in comparison with the previous year’s budget. In addition, the study also disclosed that almost all the areas of marketing have somehow been affected by the economic downturn. However, mostly the promotional and branding aspect of the company is affected. Therefore on a whole it can be concluded that, the economic crisis has a negative impact on the company. The discussion regarding the other question i.e. (the impact of changing consumer behaviour on the automotive industry of Vietnam) revealed that consumer behaviour is one of the most important factors in the formulation of a company’s strategy. From the findings of the study it can be clearly stated that understanding the buying pattern and buying behaviour of the consumers is imperative in the survival and success of the company in the market place. Similarly for the automobile industry, understanding the consumer behaviour is important, as based on the findings a company designs and develops its products and services. Customer need is dynamic in nature and changes with time. Therefore it is important for the companies to come up with products or services that meet the varying requirements of the customers. Moreover, the success of a company is dependent upon their operation in the market with the right mix of products, right price to the consumers, making the products available at the right place and also employing appropriate promotional technique. In the context of Volkswagen, the report enlightened that the company spend high amount of money to identify and assess the consumer behaviour. Hence from an overall viewpoint, it can be concluded that understanding consumer behaviour is of utmost importance to a company. In order to satisfy the objective, the study has also tried to identify the optimum marketing strategy of Volkswagen. In this context, the study revealed that some modifications are required in the company’s current marketing strategy. The modification of strategy is important to ensure Volkswagen deals effectively with the changing consumer needs and ongoing financial crisis. From the findings and discussion of the study, it can be clearly stated that the prime areas where the company needs to modify its strategy are: product portfolio, pricing and promotion. The distribution policy of the company is appropriate according to the findings of the study. However, the report also pointed out that, to formulate a sound strategy and implement it successfully, the company needs to carry out certain cost cutting activities. Some of the cost cutting techniques that the company can adopt are reduction in promotional budget, use of cost effective promotional media such as social networking sites, newspaper, flyers etc., adopting just-in-time approach to reduce cost related to delivery of products and services. According to the information from the study, the identified optimum marketing strategy of the company can be a mix of high end and cost effective cars and penetrative pricing for the products to grab more market share. For the promotional activities, the company can make use of social media and newspaper. This is primarily because of the fact that social media is the cheapest platform and has mass reach. Finally based on the findings of the primary and secondary data, it can be concluded that Volkswagen in Vietnam is getting highly affected by the economic crisis. Hence to deal with the situation, the report will provide a few recommendations in the next section. 5.2 Recommendation The report will now provide recommendations to Volkswagen, Vietnam with the help of which they can effectively deal with the economic crisis and meet customer expectations, thereby increasing the demand of Volkswagen cars in Vietnam. The recommendations to the company are presented below: - Alteration in the Marketing Strategy: - In order to deal effectively with the ongoing issue of financial crisis, the company should reduce its operating cost and marketing cost. The company should consider using cost effective promotional media such as social networking sites, or print media such as newspapers and magazines. Both the platforms have mass reach and can be effective to target mass audience. The company offers only high end cars, which curtails them from targeting the middle income group of Vietnam. Hence, it is highly recommended that the company should launch low-priced cars. It may also help in increasing the demand of the cars. Finally, in the context of pricing, it is highly recommended to the company that they should consider adopting penetration pricing, so that the cost advantage remains with the company. Competitive Advantage: - The core competency of Volkswagen lies in its design and elegant looks (Copping, 2005). However at times, customers do not consider only the looks and design, they look for higher utility and more features. Therefore it is highly recommended to the company that they should try to integrate more features to their current product portfolio. A combination of elegant design, strong brand name and high- end features will allow the company to gain competitive advantage. Cost Cut: - To create a balance between the net revenue and net expenses, Volkswagen, Vietnam needs to carry out certain cost cutting activities. Some of the recommended cost cutting approaches for the company can be that of switching to alternative promotional media such as print media and social media, reduction in overhead and administrative cost, and reducing the cost pertaining to research and development (Sherman, 2007). In addition, the company can also reduce production cost by adopting lean manufacturing technique (Sheahan, 2013). Increase Demand: - In order to increase the sales volume of the cars, the company should ensure that there is an adequate demand for Volkswagen cars in the Vietnam market. The company should focus on pricing strategy to increase the demand (Stavins and Bauer, 1997). If the company reduces the prices of the products and offer value for money, the demand for the cars may increase (Wensveen, 2007). Positioning Statement: - Positioning strategy for a company defines how the company will be positioned in the minds of the consumers. The position strategy of Volkswagen reflects the fact that the company wants to position itself as a company which offers high quality product, elegant design that are meant for higher income group people. However, if the company launches new products which are less costly in comparison with its existing products, it may face difficulties in targeting the potential consumers. People in general, have a conception that Volkswagen only offers high end cars, but it is important to change this perception. For this purpose it is highly recommended that the company should come up with a new positioning statement which will reflects that the company offers product at a value for money. Outsourcing: - Outsourcing is another way by which the company can reduce operational cost. It is highly recommended that the company should consider outsourcing different segments of the business to third parties. This will increase the efficiency and will also reduce the cost (McDad., 2012). Increase Visibility: - In order to increase the demand for the products and increase the sales volume the company should try to enhance its visibility. The visibility of the company can be increased by opening new dealer’s point or by opening some company-owned Volkswagen information centre. References Copping, R., 2005. Volkswagen: The Air-Cooled Era in Colour. Poundbury: Veloce Publishing Ltd. Marinov, M., and Marinova, S., 2012. Emerging Economies and Firms in the Global Crisis. New York: Palgrave Macmillan. McDade, D., 2012. 6 Sales & Marketing Strategy Recommendations for 2012. [online] Availabe at: [Accessed 24 January 2013]. Navarro, A., 2012. Global Capitalist Crisis and the Second Great Depression: Egalitarian Systemic Models for Change. Plymouth: Lexington Books. Sheahan, K., 2013. The Cost-Saving Methods for a Business. [online] Available at: [Accessed 24 January 2013]. Sherman, A. J., 2007. Strategies for Cutting Cost & Improving Profitability. [online] Available at: [Accessed 24 January 2013]. Stavins, J., and Bauer, P. W., 1997. The effect of pricing on demand and revenue in Federal Reserve ACH payment processing. 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