Volkswagen is Europe’s largest car manufacturer. Their headquarter is based in Wolfsburg, Germany. Volkswagen was first established on 4th June 1937. At the time, their core business was to manufacture a car that was cheap enough, to be affordable to the masses. In fact, the name Volkswagen, directly translated, means people’s car (Volkswagen, n.d.).
Products and Services
Today, they are a brand, that covers a wide range of automobile brands; such as Audi, Volkswagen, Volkswagen commercial, Bugatti, Porsche, Lamborghini, Ducati, Man, Skoda, Seat, Bentley, and Scania. Their coverage of the market needs in automobiles ranges from luxury and statement vehicles to heavy commercial trucks (Volkswagen, n.d.).
Their approach, to these various brands, has been such that, as opposed to swallowing each brand they acquired, they let each continue to function in the niche and market it was serving (Volkswagen, n.d.). For instance, Lamborghini was previously Italian owned and specializes in the production of luxury sports cars. Volkswagen allowed it to remain as such and this brought in a new niche market to be served by the group (Lamborghini, n.d.).
Similarly, Scania specializes in trucks, and Volkswagen didn’t interfere with its core business. The result of such a model of doing business is that; Volkswagen was able to fill in many niches in the automotive industry. This allowed the company to rake in much more profit and become the dominant force in the European automotive industry. While dealing with competition at the same time.
Their portfolio doesn’t end with automobile manufacturing but goes into other related services such as financing, and heavy stationary engine manufacturing for marine use and other fields. The group also engages, in banking, insurance, fleet management, leasing, and even production of chemical reactors (Volkswagen, n.d.).
This is a classic example of developing a core competence and developing other business portfolios out of their core competence. With their competence in the automotive industry, they have been able to develop other businesses that ensure a high uptake of their products through financing arrangements, insurance, and even fleet management.
This model also ensures a complete use of fixed assets such as plants, engineering skills, research labs, and managerial tools. It also allows for the income of the group to be richly diversified, without altering the fixed assets too much (Drejer, 2002).
Volkswagen Group, has manufacturing plants, in 31 countries, in Europe and the rest of the world. They employ at least, 610,075 workers in all their operations. They sell their vehicles across 153 countries. With car deliveries for the group, for the year 2015 totaling to 9.931 million units worth 213 billion euros (Volkswagen, n.d.).
With such a wide business portfolio, and dominance in the European market, which makes them the largest car manufacturer in Europe, it is safe to say that Volkswagen group has good market penetration, especially in Europe. This combined with a production mantra that seeks to fill every niche by acquisition or new product development, then Volkswagen group has a good market presence.
Factors that will control future decision making include; new entrants such as Tesla, who are intent on developing alternative technologies in motor vehicle fueling systems. This they’ve done through the development of electric cars and hydrogen-powered fuel cells (Volkswagen, n.d.). Volkswagen may have to consider, the cultural and legal differences in the various markets they operate in, how to adapt products to them. For instance, the American market is viewed as strict on the emissions produced by motor vehicles. As such, vehicles produced for such a market must meet very high standards of fuel efficiency and cleaner burning systems. The group must also consider staff members; how to keep them motivated and to retain competent skills, by good remuneration and reward system(NEWS, 2015).
Volkswagen group must try to regain the confidence of the market they operate in, especially after the diesel dupe. It was found that vehicles entering the American market were fitted with a defeat device, that made them run cleaner in a test environment and turn back into a normal mode when on the roads.
For a company the size of Volkswagen, managing subsidiaries in all the different countries would have to take an indirect approach mostly. This approach allows for the use of monthly operation reports. These are sent to the head office. Financial statements are used as well to give an overview of the financial health of the subsidiary. These statements may include balance sheets, cash budgets, and financial ratios(book).
One more commonly used tool is the appointment of a manager from the company headquarters. This makes sure, the operations of the subsidiary are in line with the wishes of the mother company. However, for a company like Volkswagen group, there must be a balance between the wishes of the home company, and the definitive identity of each brand under the corporate umbrella. This is because an over-focus on the needs of the mother company may shift attention from the subsidiaries’ core business and clients. This may in turn make a subsidiary unresponsive to the markets’ needs and cause loss of business(book).