Rejuvenation of Volkswagen

Rejuvenation of Volkswagen

TABLE OF CONTENTS

INTRODUCTION 3

COMPANY HISTORY, DEVELOPMENT, AND GROWTH 3

STRENGTHS, WEAKNESSES, OPPORTUNITIES, AND THREATS 6

NATURE OF EXTERNAL ENVIRONMENT 9

Intensity of Rivalry 9

Risk of Entry by New Competitors 10

Power of Suppliers 10

Power of Buyers 11

Threat of Substitutes 11

Analysis 12

CORPORATE LEVEL AND BUSINESS STRATEGIES 12

Corporate Level Strategy 12

Business Level Strategy 13

COMPANY STRUCTURE AND CONTROL SYSTEMS 16

RECOMMENDATIONS 17

REFERENCES 19

INTRODUCTION

Reputation and integrity are essential qualities reflective in the complexion of a strong company. At one point the Volkswagen Company was the epitome of a company that’s core values were embedded in their reputation. Volkswagen was once recognized as the “people’s car” due to their desire to produce an automobile that was not only affordable but provided joy to it’s consumers by satisfying the need for transportation (History.com Staff, 2009). However, the recent misguided direction of the company’s leadership led them awry and propelled them into an automobile scandal that expanded the globe. This paper will delve into the elements needed to establish a strategic blueprint to rebuild the reputation and integrity of the Volkswagen Company. In order to understand and evaluate the company’s structure, a glimpse of the historical impact will be discussed along with the development and growth of the company. An examination of the company’s strengths and weaknesses will provide insight into the value creation functions, which remain assets and those needing improvement. Key components of the external environment will be discussed as well as the company’s corporate and business level strategies. In addition, the company’s structure and control systems will be reviewed in accordance with how they match the Volkswagen strategy. Finally, recommendations will be made that could be vital to the potential rejuvenation of the Volkswagen Company’s integrity and reputation of being the “people’s car”.

COMPANY HISTORY, DEVELOPMENT, AND GROWTH

The history of the automobile holds fascinating stories of ambition, technology, and innovation. The genealogy of the Volkswagen Company shares the same points of interest. The origin of the Volkswagen Company came from a vision by the German Nazi leader, Adolf Hitler. Hitler’s desire was for German families to have the opportunity to purchase a vehicle resulting in ownership of their first car. “Therefore, in 1937 under the control of Hitler and the Nazi trades union organization a new state-owned automobile company was formed, then known as Gesellschaft zur Vorbereitung des Deutschen Volkswagens mbH, later renamed simply Volkswagenwerk, or “The People’s Car Company”” (History.com Staff, 2009).

Hitler was very specific in his demands regarding the development of the car. “He decreed that the car should carry two adults and three children at 100km/h (60mph) and that it should be cheap, costing no more than a motorbike to buy” (Bowler, 2015). “The original design of the Volkswagen was created by Ferdinand Porsche and labeled the “strength through joy” model, with an air-cooled rear engine, torsion bar suspension, and aerodynamic “beetle” shape, given its small engine” (Bowler, 2015). A year after the inception of the “beetle” idea, approximately 336,000 people committed to purchase the automobile via a monthly savings plan” (Bowler, 2015).

However, “Hitler’s plans were not going to materialize because World War II began and the plant switched production to armaments and the vehicles under the Volkswagen (VW) logo went to the army of the Third Reich” (Autoevloution, 2015). The years 1939 to 1945 saw production of two civilian cars cease and the institution of more than 15,000 slave laborers from nearby concentration camps instrumental in producing vehicles used in the war that was designed to destroy their own society” (Bowler, 2015).

During the war the Volkswagen plant came under heavy bombing and was eventually overtaken by the British and doomed for complete dismantle. However, British Major Ivan Hirst envisioned the potential for the vehicle during post-war Germany and became influential in the continued production of the Volkswagen Beetle (Bowler, 2015). With War World II ending in 1945, the Volkswagen Company experienced an extensive transition from a communist owned company to a legitimately privately owned automobile manufacture (Bowler, 2015).

Unfortunately, the war not only ravaged Germany but it also took a toll on the production and sells of Volkswagen automobiles (Bowler, 2015). It took 10 years for the Volkswagen Corporation to regain momentum, which resulted in one million vehicles sold (Autoevloution, 2015). The 1960s brought expansion to the Volkswagen brand with their first major acquisition of the Auto Union more formally recognized as Audi (Bowler, 2015). The Volkswagen Company increased their product line in the 1970s with the addition of five new varieties of passenger vehicles with the introduction of the Passat, Scirocco, Golf, Polo, and the Rabbit (Autoevloution, 2015). Another 10-year span brought an additional automaker into the VW fold with the procurement of the Spanish carmaker Seat (Bowler, 2015). However, Volkswagen’s growth saw major accomplishments in the 1990s with the lucrative acquisition of four major car manufactures specializing in luxury and sports car production. The Czechoslovakian automaker Skoda, Britain’s luxury carmaker Bentley, France’s luxury carmaker Bugatti, and Italy’s sports car manufacturer Lamborghini all enabled Volkswagen to differentiate their market segment (Bowler, 2015).

In 2005, the exclusive luxury automaker Porsche started secretly acquiring VW stocks with the intention of a hostile take over of a much larger company in Volkswagen. Three years later Porsche failed to complete their mission leading to the brink of bankruptcy. Volkswagen, a financially