A CONSULTANCY REPORT ON HOW TO IMPROVE VOLKSWAGEN’S COMPETITIVE ADVANTAGE AND CREATE SUSTAINABLE GROWTH THROUGH RESPONSIBLE MANAGEMENT AND REDUCED PRICE

 

TABLE OF CONTENT

EXECUTIVE SUMMARY                                                                                  3

SECTION 1  

THE COMPANY REPORT                                                                               4

1.0   Introduction of the Company                                                             4

1.1   Terms of Reference                                                                              7

1.2   SITUATIONAL ANALYSIS                                                                    8

1.3    INADEQUACIES & RISK ASSESSMENT                                           15

1.4    VALUE-BASED INADEQUACIES to be ADDRESSED                     17

1.5   EXTERNAL/internal ENVIRONMENT                                             19

1.5 ANALYSIS Proposal for Value Chain Based Solution to Capture Incremental Value for Actual and Future Shareholders & Stakeholders                                 23

1.6 Impact of these Initiatives on Strategic Positioning and Future Business Sustainability                                                                                              27

1.7 RISK FOR NOT IMPLEMENTING THE PROPOSALS                      28

SECTION 2  

EVIDENCE REVIEW                                                                                    28

2.0 INTRODUCTION TO THE BUSINESS MARKET ENVIRONMENT  28

2.1 THE STRATEGY ROAD MAP METHODOLOGY                                 28

2.2 BENEFITS OF STRATEGY ROADMAP                                                 31

2.3 IMPLEMENTING AND UPDATING THE STRATEGY MAP               32

2.4 LIMITATIONS OF THE STRATEGY ROADMAPS                               32

2.5 THE BALANCED SCORE CARD (BSC) METHODOLOGY                   32

2.6 BSC AS A MANAGEMENT SYSTEM                                                      34

2.7 WHY DO COMPANIES NEED A BSC?                                                   34

2.8 CORE ASPECTS OF THE BSC                                                                 35

2.9 BENEFITS OF THE BSC                                                                           37

2.10 LIMITATIONS OF THE BSC                                                                  37

PART 2 OF 2 CONCEPTUAL FRAMEWORK FOR VALUE CREATION 38

2.11 How the Concepts were Applied to Analyse the Problem             46

2.12 Potential DBA Perspectives for Next Stage                                       47

SECTION 3                                                                                            

3.0 REFLECTION FOR EMPLOYABILITY ENHANCEMENT                       47

REFERENCES                                                                                                   49 

 

EXECUTIVE SUMMARY

The U.S. Environmental Protection Agency (EPA) triggered Volkswagen's emission scandal after alleging that Volkswagen Group of America (VW) flouted operational guidelines under Clean Air Act (CAA) by secretly introducing emission control gadgets in all 2-liter diesel engine models produced between 2009 to 2015. The German automaker admitted to developing and installing “defeat devices” for on-road emissions testing to reduce in-use NOₓ emissions by an average of 4 to 10 ratio above standard set by the EPA. Initial reports said an estimated 500,000 vehicles were affected by the device, but as the global drama unfolded, over 11 million VW brands were recalled for replacement and financial compensations worth billions of dollars (Mays., 2015).

This report is written as an internal consultant for VW’s echelon in consideration of its volatile business environment, and to offer effective leadership solutions that also tackle issues on sales and marketing, development and research as well as affordable consumer-friendly innovations.

This study is presented in three parts. First, a situational assessment of VW’s history, current business performance, productivity level, position against competitors in the markets, and value/profits created for both organization and its shareholders. This section includes a comprehensive discourse on “dieselgate” (Siciliano., 2015) together with assessments conducted using proper modules such as SWOT, PESTEL and 5 Forces Analysis to identify VW’s strengths and weaknesses and make recommendations via workable strategies (Strategy Road Map and BSC) toward achieving sustainable growth and increasing shareholder value. This report will also highlight implications for ignoring the consultant’s proposals.

The second section is an evidence review of reports on VW’s shareholder value creation, including whether applied business strategies have been effective and regularly reviewed for improvement.

In conclusion, the last part presents a self-reflection of the consultant’s competence in module-building and implementation.







SECTION 1
THE COMPANY REPORT
1.1.0        Introduction of the Company

Established by Adolf Hitler and the German Labour Front in 1937 with head office in Wolfsburg, Germany, Volkswagen became a leading automaker through its Golf model before 1980, following a dramatic fall in global car prices, particularly in the U.S. and Canada. Notwithstanding the huge successes, VW faced aggressive price-based strategies from a group of Japanese and American car manufacturers. The volatile business environment necessitated Chairman Carl Hahn’s decision to shut down factories located in Pennsylvania and New Stanton. Development plans were, however, initiated for expansion to developing countries such as China, Mexico, Portugal, Belgium, Malaysia, and Brazil.

Radical changes in VW’s leadership and innovation strategies have been rewarding in the years preceding 2015. Among the company’s numerous awards are a Consumer Reports first-place award for the Top Sporty Car under $25,000, and top 10 from Car and Driver magazine’s selection (2007) for the GTI models. It’s mid-size Passat model, in 2008, also won Automobile Magazine’s Car of the Year and earned another recognition from Motor Trend which ranked it as best in its class. In addition, the Passat model won Our 10 Best Car awards for 12 consecutive years in December 2017, having held position as North America’s Car of the Year 2015 (Annie., 2007; Joe., 2015; Bertel., 2017).

Despite Volkswagen’s landmark achievements, the EPA’s strict emissions regulation compelled it to end its flagship diesel engines in 2009 and roll out new mechanisms that are within American standards but limited to functioning on only 5 percent bio-diesel, a decision taken by the German carmaker to maintain its consumer warranty.

But the 2015 scandal was a major setback on VW’s competitiveness in the global market, where it recorded a decline of 2.7% by April 2016 as its 16th drop within 18 months (Fortune., 2016). The company also experienced slash in sales volume (1.3% or an approximated 1.46 million cars) in the first quarter of that year and demand for VW brand models plummeted by a small margin in Western Europe, South America, and Asia-Pacific. Although 10% decline in sales was recorded for the U.S. market, the company said in its annual report that sales in North America was static while Central and Eastern Europe soared by up to 3.3% (Yahoo Inc., 2015).

An overview of the Volkswagen Group shows the company documented unprecedented global sales by the end of 2016 and retained its position as one of the biggest brands with excellent R&, market-savvy designs, and a team of experienced engineers, marketers, distributors and dealerships. Notably, an external analysis on VW shows the impact of negative publicity which was responsible for stunted growth in 2017. This trend, if left unchecked, can cause more devastating outcomes (Sean., 2015; Fox., 2015; Loana., 2017)

While efforts have been made to identify strategic changes that can transform VW business operations for profitability, including positive tangible and intangible capabilities required to st afloat in the highly competitive industry, this report aims at answering the following questions:

Is value creation an important part of VW’s existence?
What are the benefits of managing viability?
In which ways can VW identify and maximize competitive advantage?
What activities, decisions and culture are required to keep a company in business?

1.1.1 Aim of the Report

Using a mix of business model review and other investigative methods which highlight competitor engagement, this research aims at conducting a thorough analysis of VW’s position in the car-making business to ascertain practicable approaches for competitive advantage, value creation and sustained growth.

1.1.2 Terms of Reference

To conduct a thorough assessment of VW’s current situation using a business model framework.
To determine pitfalls in VW and make recommendations using internal and external analytic models such as SWOT, PESTEL and 5 Forces analysis.
To identify present value-based inadequacies to be addressed over a future-specified time together with a statement of risks to be encountered if no action is taken.
To suggest important changes to the business model with the aim of achieving new routes to value creation and value delivery for financial value capture.
To suggest a value chain-based solution with the capacity to attain incremental value-added results for all existing and potential shareholders as well as key stakeholder groups.
Present a forecast on how the intended tangible outcomes from this strategic initiative will strategically reposition VW and guarantee future business sustainability.

1.1.3 List of Abbreviations

BMW: Bayerische Motoren Werke

BSC: Business Score Card

CSR: Corporate Social Responsibility

EPA: Environmental Protection Agency

HR: Human Resource

VW: Volkswagen or Volkswagen Group of America

Source: https://meziesblog.com/a-consultancy-report-on-volkswagen-group/