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ASSIGNMENT # 2
Reg #: 1035218
Strengths:
• It had taken 19% of European auto market and on the basis of that market they
gain three points in eight years. It also captured one quarter car sales in South
• Volkswagen had a competitive advantage due to its unique features. At night, the
dashboard instruments the driver looks at, such as the speedometer and clock,
light up in red, while those the driver touches, such as the radio, are backlit in
blue.
• It also had unique operation policy its plants and machinery were examined
critically; this help in developing the gap between body panels--say between the
front fender and wheel panel--has been cut to 1 millimeter. That puts them in a
league with the industry's best. This results in its sales in US which jumped to
437,000 units.
Weakness:
• Reduction in jobs increased in wage rate which reduces the margins. This leads
Motors)
• It has gap in its product lineup. It does not offer variety in cars such as sports
utility vehicles and mini vans. Minivans were popular in European market and
Opportunities
• Volkswagen enjoys the protection of the government: The state of Lower Saxony
Threats
• As it does not offer sports utility vehicle until 2000s, so, Ford and General Motors
• Due to its lowers margins and strong competition with Ford, Nissan and General
2. What strategic inferences would you draw from VW’s Value Chain
Analysis?
Strategic inferences drawn for value chain analysis of Volkswagen are that, aver a short
period of time it had gain a good market share in European and South American
countries, and China. It also had unusual features, which gives “the vehicle some soul,
which many of VW's competitors lack horribly," says Wes Brown, a consultant at
Nextrend Inc., a Thousand Oaks (Calif.) auto Excellence in product development is due
to product design and engineering. Plants at the factory were examined by its former
CEO very carefully which result in better and improved product. That’s puts them in a
league with the industry’s best. Fascination with detail is one reason VW has succeeded
so brilliantly in reviving its fortunes in the U.S., where the VW brand was road kill a
decade ago. Last year, VW and Audi sales in the U.S. jumped 14%, to 437,000 units, for
a combined 2.5% market share. That's up from a microscopic 0.5% in 1993. Although
VW trails its Japanese rivals, it's the only European mass-market carmaker in the U.S
3(a) Explain which two key value activities at VW were yielding a sustained
Two key values at VW, which were yielding a sustained competitive advantage,
were product development and operations. Volkswagen’s VW, Audi, Seat and Skoda
were high yielding products. In the period of eight years it gains three points that is, it
had taken 19% of European Auto market at the expense of General Motors Corp and
Ford. Where as, in South America, VW had captured one quarter (25%) of car sales and
in china it is one half (50%). Other reason for its success was its unique features. At
night, the speedometer and clock lights up in red while radio backlit in blue. It was the
Volkswagen’s operations. It has 1 millimeter gap between its body panels, between the
front fender and wheel panel. Due to which VW has seceded so brilliantly in reviving its
3(b) Explain which two activities were a source of drain on VW’s resources and
how?
Human resource development and marketing and sales were the two activities that
were becoming serious potential drains on the value chain of Volkswagen. Previously the
CEO of Volkswagen had reduces the working hours which reduces the number of jobs.
But this increases the per hour wage rate. Piech, the CEO of VW was trying to push
through a plan to lower the base wage of new German workers and link them to output
instead of hours. If it fails to do so than they were planning to put new projects in place at
Czech Republic where wage rates were one third of the Germans. Due to its lower price
to earning ration, investors were worried that WV is not concentrating on higher margins.
This would result in loosing a great investor from the government of Lower
Saxony, the biggest investor. The government of Lower Saxony worries more about jobs
rather than shareholders because, majority of VW’s factories were at Lower Saxony and
they were the least productive as compared to Nissan Motors Co’s factory in Sunderland.
There was also a gap between its product lineups. Volkswagen does not offer any
First and foremost VW should not reduce it work week because it will increase the labor
cost. As it is mentioned in the case study, that 30,000 jobs were saved by reducing
workweek. it also reduces the number of car manufacture per worker and as compare to
its competitor it produces on 50% of it so if working are not reduce it would eventually
increases the number of car manufactured per worker. This will eventually results in
higher margin and higher price to earning as well. Its also lack behind in offering any
variety in sports utility vehicle and minivans which were of high demand in European
countries. VW should focus on producing variety in its product line to capture all kinds of
markets.
5. Carry out a research to find out if, and how, did VW overcome these
Since Volkswagen has issues regarding its product lineup, in 2001 and onwards it offers a
new array of models. It has launched the sixth generation VW golf in 2008 which came
runner up in 2009 and has spawned several product lines in same category that is Jetta,
Scirocco, Seat Leon, Seat Toledo, Skoda Octave and Audi A3. It also launches mini
MPV, the Seat Altea and the GTI. Volkswagen also started to add sports vehicles in its
product line up by introducing Touareq in early 2000s, as they had planned to introduce
sports utility vehicle after 2002. This resulted in increase in the sales of VW.