Volkswagen Group Essay
Volkswagen Group, one of the leading automobile manufacturers in the world, has been on an impressive incline in the market with a continuous rapid international expansion. Unlike other reigning companies such as Toyota Motor Corporation and General Motors, Volkswagen was on the brink of failure after a long period of mediocrity. After years of continuous lack of productivity in the late 1990’s and early 2000’s, along with the Great Recession that affected all automobile companies, Volkswagen Group formed the new path for the company titled, “Strategy 2018”.
In the 2000’s sales tapered off due to competition, along with delays in product introductions and overall quality issues. 2005 sales alone had a reduction of approximately 37% from the prior 4 years.1 Even with its introduction of their 5 new products in 2006, productivity and profitably remained an issue. Between the struggling economy and high competition between them and the leading automobile companies, Volkswagen Group needed to make a change in their operations and management as a whole. “Strategy 2018” was then formed and supported by the Group as the next step to achieving supremacy of the automobile industry.
Set by the Group’s CEO, Martin Winterkorn, the strategy focused on positioning Volkswagen as a global economic and environmental leader of the automobile industry. The plan set four goals to reach by the year of 2018 including to deploy intelligent innovations and technological advancements that would in-turn lead to higher customer satisfaction. By achieving high customer satisfaction, not only would they increase their customer population, but attain long-term success. The second goal is to increase unit sales to more than 10 million vehicles per year. Third, is to receive a long-term return on sales before tax at a minimum of 8% that would secure a solid financial position even in difficult market periods. The fourth and final goal of Strategy 2018 aims to be the most attractive employer in the industry. In Winterkorn’s eyes, to build superior vehicles, they must have the best team in the sector innovating their new ideas and products.2 By hiring the highly qualified, fit and motivated employees, the design success would follow.
Involved in the Strategy, capital expenditures would remain at manageable levels and product design will be focused on an international scope. Regardless of the economic distress in 2008, they aimed to improve their productivity and quality of their companies’ products.2 By including their regional development teams along with their cooperation with local suppliers, they could attain the markets wishes and demands to achieve higher satisfaction and in turn increase their demand.2 Through the standardizing process in all areas of the Group, production throughput times would be reduced by a great amount. To reach one of their main goals of long-term profitability targets, a disciplined cost and investment strategy is they key component. By keeping precedence in their long-term products they aimed to achieve the highest level of development in them.
In the U.S., Volkswagen Group took vast strides in product quality, product offerings, customer experience, brand management and other manufacturing support that continues to strengthen its standing in the international market.3 The first step was their expansion of product lines including their five new products for Volkswagen and four new products for Audi including the high selling A4 and A5 models. In addition to the new products, the Group made large investments in its manufacturing, central functions, engineering and research operations. The key investment in America was its $1 billion dollar investment in the production facility located in Chattanooga, Tennessee. Stefan Jacoby, President and CEO of Volkswagen Group of America, stated, “This plant will build a new Mid-size Sedan designed specifically for the U.S. market and destined to play a key role in meeting our long term goal.”3 This plant alone created 2,000 direct jobs in the region and is expected to produce $12 billion in income growth along with an added 9,500 jobs over the project’s lifetime.3 In addition to those impressive numbers of growth, the Group had expectations of the plant to attain an annual capacity of 150,000 vehicles, mainly including their Volkswagen TDI clean diesel technology.
Other steps were taken in the operational sector of the Group to strengthen its brand name. More than half of Volkswagen brand dealers have invested in the exclusive showroom concept that assists in paying its dividends in increased sales. Also, they incorporated their new Carefree Maintenance Program that assists their customers’ costs. It includes that there are no charges for regularly scheduled maintenance for three years or 36,000 miles; whichever is reached first.3 After the implementation of these new methods and ideas, Jacoby confidently stated, “2008 has been a year of transition for our company. We have reset the start button on virtually all of our business units and processes. We have taken great strides towards becoming the most innovative high-volume brands in the U.S. We look confidently toward the future.”3
After four years after the implementation of Strategy 2018, Volkswagen Group disclosed the impressive momentum the extensive structural and management realignment achieved in their reported analysis. Winterkorn included his
statement, “Our company has grown strongly and become more international in recent years. This fundamental reorganization is the right response to the increasing challenges. At the same time we are laying the foundations for keeping the Group and its brands on their successful course even in a difficult market environment.”4 In addition he included that their clear goal is to continue the successful course along with maintaining financial security. By having the right people in the right places, they can keep their focus on a multi-brand level to harness growth opportunities for each brand of the Group.
Now in 2014, Volkswagen has reached the title of Europe’s largest automaker. In the first quarter alone, operating profit rose by 22%, which was significantly helped by the record sales of both Porsche and Audi.54 Earnings before tax and interest alone increased from €2.34 billion to €2.86 billion. Their profit rose past the average estimate of nine Bloomberg analysts reaching €2.74 billion. Impressively, sales are expected to exceed 10 million vehicles for the first time in 2014, which is four years earlier than planned in the original Strategy 2018.54 Newer plans have been implemented in their strategy, including expanding to take over the commercial trucking of MAN SE and Scania AB for deliveries. By doing so, shipping and delivery expenditures would be cut by an eye-opening amount. In their attempt to overtake Toyota Motor Corporation as the global leader in sales, they plan to introduce 100 new or revamped cars through the next year between the multiple brands involved within their Group.54 Winterkorn proudly stated, “Our good start to the current fiscal year is an additional proof” that the company strategy is working.5
After being faced with the consistent lack of productivity and progression to better the Group’s position, the operational and management restructuring of “Strategy 2018” gave the business a challenge to meet their aggressive goals. By properly placing their highly qualified employees along with financial restructuring, they have exceeded their projected growth by a great amount. Additionally, they have not lost sight on the continuous advancements of their competitors. In so, they remain focused on financial security along with customer satisfaction to secure their customer base. Through constant innovation and relentless effort of all sectors, Volkswagen Group has continued to rise in the automobile industry and does not intend to abate. As analysis and records continue to produce positive numbers along with progressive projections, “Strategy 2018” has been an indisputable success thus far.
Muller, Joann. “How Volkswagen Will Rule The World.” Forbes. Forbes Magazine, 17 Apr. 2013. Web. 07 May 2014.
“Strategy.” Volkswagen Group. N.p., n.d. Web. 07 May 2014.
“VW of America Moves Forward with ‘Strategy 2018’ Plan.” VW of America Moves Forward with ‘Strategy 2018’ Plan. N.p., n.d. Web. 07 May 2014.
“Volkswagen Group Makes Extensive Structural and Management Realignment.” Volkswagen Group. N.p., n.d. Web. 07 May 2014.
“VW Quarterly Profit Beats Estimates on Porsche Deliveries (3).” Bloomberg Business Week. Bloomberg, n.d. Web. 07 May 2014.