VOLKSWAGEN DO BRASIL:

DRIVING STRATEGY
WITH
THE
BALANCED
SCORECARD

Kushagra Kaushal Mohit Kumar

M1608 M1609 Volkswagon do Brasil
 Contents
2

 Competition scenario in Brazil

 About Volkswagen do Brasil
 Strategy Map And Balanced Scorecard: for cultural & strategic change
 Communicating the Balanced Scorecard
 Gearing up the Balanced Scorecard
 Conclusion
 Competition in Brazil
3

 Automotive Sector: 19% of Brazilian  By 2008:

Industrial GDP  Existence of 25 automotive assemblers
 Employed 1.5 Million  49 Industrial plants
 More than 200,000 Companies
 Total Revenue: $74 billion

Automotive Market Share, 1991 Automotive Market Share, 2008

VW, Ford, GM, Fiat

3%
23%
VW, Ford, GM, Fiat
Others Foreign
77% Companies(Japan,
97% China, Korea) &
Others
 Volkswagen Do Brasil
4

 VWAG, 2008: Global Market Share od 10.3%

 Revenue generated: $113 billion - 3.6 million under VW

 VWB: VWAG’s Brazilian subsidiary

 3rd largest in VWAG, after China & Germany

 4 operational plants

 Revenue: $7.04 billion

 Focus: small & midsize vehicles

 Offered 22 different models

 Volkswagen Brand Portfolio
5
 Volkswagen Do Brasil: Timeline
6

1956 • VWB introduced a van; with 50% Brazil produced parts

1969 • Earned 61% share of Brazil’s car production

Early 1970s • VWB launched medium sized cars

• Created first Ethanol-fueled vehicle

1980 • Accounted for 40% of Brazil’s auto exports

1986 • Volatile industry, 20% decline in the domestic automotive market

1993;1997 • More than 1.1 million vehicles production

• Highest sales: 1.6 million

1999;2003 • Back to 1.1 million units, 1999

• Back to its peak sales, 2003

2003;2006 • Sales dropped from 580000 to 280000 units, 2003

• Eighth consecutive loss, 2006
 Volkswagen Do Brasil
7

 The New VWB Management Team:

 2007: CEO-Thomas Schmall

• To discontinue the VWB’s strategy

 Vision:

“Build a high performance team that would drive VWB to become the South
American automotive industry’s leader in quality, innovation, sales, and
profitability on a sustainable basis.”

 Aggressively “re-brand” VWB

• With enthusiastic and highly motivated employees
 Volkswagen Do Brasil
8

 The New VWB Management Team:

 2006: Global HR Coordination-Josef Fidelis Senn;
Economist
• Helped to introduce Balanced Scorecard
• Change in the management approach: crucial
 2007: CFO-Carsteen Isensee

 11-person Executive Committee(Exhibit 3)

• Lead to VWB’s transformation

 Strategy Map
9

 Initial taskforce: Strategy/BSC Committee  Refer Exhibit 4

 Developed a strategy map

Customer:
Finance “Satisfy the customer’s experience”
“Improve company image”

Dimensions of
Strategy Map

Internal Process- Service Potential and Growth Challenge-

oriented, cost efficient, flexible production High performance, sustainable
and workforce growth
 Question?
10

 How can Schmall and his team use the scorecard to deal with the
challenges faced by the company in January 2009?
 Set the objectives

 Communicated through all levels of management

 Transparency was attained

 Every employee was clear with its own responsibilities

 What all steps should be taken to overcome the challenges

 Communicating The Balanced Scorecard
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 Established Office of Strategy Management (OSM) : Two

Groups – Strategy Formulation & BSC Management
[Exhibit: 6]
- To roll out strategy across business area & well co-
ordination of initiative
- To communicate the strategy, strategy maps & score
cards to all employees.

“Communication is the backbone of Cultural Change- do it by

constantly injecting energy into the system via campaigns
& competitions”
 Few Successful Initiatives
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 Internal contest to choose a Mascot to symbolize &

communicate the New Strategy.
- “Giga” – Interactive Communication, Asks questions about
new strategy.
[Exhibit: 7]
 Board Games – Q&A about Strategy Map
 New Communication tools- Interactive Role-Play game based
on customized learning map [Exhibit: 8]
 Communication through Electronic Display [Exhibit : 9]
 Gearing Up BSC
13

 Data Matrix – Based on Hard Data (80%) & Surveys (20%)

Hard Data: 75% from Internal Sources
25 % from External Sources
Surveys : 45% from Customers, 33% from Employees, 22%
from market assessment.
 MbO (Manage By Objective) Guidelines
 Compensation & Recognition
14

 Multiple command training messages by linking

compensation system
 Projects can be presented by anyone (2200 projects
were submitted)
 Best employee should be rewarded
 Mgmt Development Review - High performing
Individuals -Job Promotions, Rotations and Training
 Engaging Supplier & Dealer
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 VWB - 550 suppliers -15800 different components

 600 independent dealers
 “Supplier Day Event”
- Improvement action for low performing suppliers
-“Supply Award”- Recognize best annual performance
 Dealer Academy - Sales, post sales service
 Question?
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 What challenges does Thomas Schmall face upon

becoming CEO of Volkswagen do Brazil?
 Decreasing Market Share
 Struggling to minimize production due to
appreciation of Brazilian currency
 Due to stiff competition( Ford, Fiat etc) ,prices
could not be increased
 Inefficient processes in the company
 Employee Dedication
 Conclusion
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 In two years with the application of different tools to motivate &

restructure the system of the organization, now the market position has
surged forward.
 Problems of employee dedication, Inefficient processes of the company has
been solved.
 Supplier & dealer quality & scores has increased.
 But the sudden impact of “Global Financial Crisis” had hit the sales of last
quarter
 Management was in dilemma to further invest in production or to wait for
sales recovery.
 It would jeopardize the plans for market share expansion & new product
development.
 Conclusion
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 Drive as fast as you can“- may not work in current situation.

 BSC financial matrix is lagging indicator, but the current situation is
of global nature & it is wise to go along with it.
 Due to success of BSC company is in best position to cope up the
global crisis with efficient processes & motivated. Company should:
- Focus on further cost cutting.
- Optimize production to match the limited market demand
- Wait for the best favorable time for further market expansion.
19 !!!Thank You!!!