PESTLE Analysis of Volkswagen Group

About the company

Volkswagen Group or Volkswagen AG is an automotive German multinational corporation.
Its headquarter is in Wolfsburg, Germany. Motorcycles, Fleet Management, Financial
Services, Commercial Vehicles, Engines, Insurance, Banking, Passenger Vehicles,
Turbomachinery, Leasing, and Propulsion Components are some are prominent products
and services of Volkswagen. ~rajchauhan1794@gmail.com

Political Factors that Impact Volkswagen in India

The political factors play a huge role in not only investment decision by transnational
corporations but also by companies such as – Vw Vw's. Political environment and other
factors not only impact the cost of doing business but also long term sustainability. Some of
the political factors are – governance system, democracy & institutions, military coup
chances, probability of armed conflict, law and order in market etc.

 Role Local Governments Play – Local governments are highly influential in the policy
making process and implementation as most of the policies and regulations are
implemented by the local government as enforcement agencies mostly report to
local government in their own states regarding various laws.

 International Trade & Other Treaties – The country has a good record of adhering to
international treaties it has done with various global partners. The government of
each party has adhered to the treaties done by previous governments, so there is a
consistency in both rule of law and regulations.

 Government Regulations and Deregulations – The government is adhering to all the

rules and regulations under World Trade Organization norms. There is consistency in
both policy making and implementations of those policies.

 Size of Government Budgets – both Local Governments and National Government –

The government at both national level and local levels are running deficit budgets
which is boosting growth in the short term but may lead to increase in inflation over
medium term. The bond rating of national government is investment grade.

 Regulatory Practices - The regulatory practices are streamlined with global norms
which have helped the country to improve its “ease of doing business” ranking.
  Role of Non-Government Organization, Civil Society & Protest Groups – The country
has a vibrant civil society community and Vw Vw's should build bridges with them
and seek out areas of co-operations. Civil society groups are influential not only in
policy making but also in building a society wide narrative.
 Democracy & Other Democratic Institutions – According to Seema Gupta the
democratic institutions are needed to be strengthened further so that business such
as Vw Vw's can thrive in an open, transparent and stable political environment.
Strengthening of democratic institution will foster greater transparency and reduce
the level of corruption in the country.

 Threat of Terrorist Attacks – We believe in the world of post 9/11, corporations such
as Vw Vw's have to live with operating under the shadow of a terrorist attack. The
prudent policy should be to take insurance and other types of hedging instruments
to mitigate the losses occurring because of the terrorist attacks.

Economic Factors that Impact Volkswagen in India

Economic factors of a country and region have a direct impact on the potential
attractiveness of a given market. Some of the economic factors that Vw Vw's should
evaluate both in the present market and one in which it wants to enter are – inflation rate,
GDP growth rate, disposable income level etc.

 Fiscal and Monetary Policies – The Republican government tax break culture has
increased the deficit and it can lead to fiscal trouble for the economy in coming
years.

 Demand Shifts from Goods Economy to Service Economy – The share of services in
the economy is constantly increasing compare to the share of manufacturing, goods,
and agriculture sector.

 GDP Trend & Rate of Economic Growth – The higher GDP growth rate signals
growing demand in the economy. Vw Vw's can leverage this trend by expanding its
product range and targeting new customers. One way to start is by closely mapping
the changes in – consumer buying behavior and emerging value proposition.

 Government Spending – As mentioned in the political factors, government of the

country is running deficit budgets. The implication for Vw Vw's is that it can boost
sales of its product in short run but also expose Vw Vw's to medium term forex and
currency depreciation risks.
  Work Force Productivity – Work force productivity in US has grown by 25-30 % in last
two decades even though the salaries are not reflecting those gains. It can enable Vw
Vw's to hire skilled workforce at competitive salaries.

 Employment Rate – If the employment rate is high then it will impact Vw Vw's
strategies in two ways – it will provide enough customers for Vw Vw's products, and
secondly it will make it expensive for Vw Vw's to hire talented & skillful employees.

 Financial Market Structure and Availability of Capital at Reasonable Rates – The

quantitative easing policy of Federal Reserve has led to liquidity flooding all across
the global financial markets. Vw Vw's can borrow cheaply under such circumstances.
But this strategy entails risks when interest rate will go up.

Social Factors that Impact- Volkswagen in India

Social factors such as demography trends, power structure in the society, women
participation in workforce etc have immense impact over not only the country's economy
but also on workforce talent availability and level of consumer demand.

 Attitude towards Savings – The culture of saving in US and China is totally different
where savings rate in China is around 30% , it is well below 15% in United States. This
culture of consumption and savings impact both type of consumption and magnitude
of consumption.

 Demographic Trend – The demographic trend is one of the key factors in demand
forecasting of an economy. For example as the population of USA and EU is growing
old the demand for products mostly catering to this segment will grow. Vw Vw's
should consider demographic trends before new product developments and
integrate features that cater to this segment. As population is ageing it will require
less tech intensive products.

 Attitude towards Authority – Various cultures in different part of the world have
different attitude towards authority. In Asia authority is respected while in west it is
something to rebel against. Vw Vw's should carefully analyze the attitude towards
authority before launching a marketing campaign for its products and services.
  Nature of Social Contract between Government & Society – Before entering into a
market Vw Vw's needs to understand the nature of social contract between
government and society. For example it has been extremely difficult for US
companies to enter UK health market as UK health system is a nationalized system
and everything goes through contracts at national level.

 Power Structure in Society – Vw Vw's should carefully analyze both - What is the
power structure in the society? How it impacts the demand in the economy. For
example the power structure in US economy is slowly moving towards the older
generation as that generation has higher disposable income compare to the younger
generation.

 Attitude towards Health & Safety – The attitude towards health and safety is often
reflected in the quality of the products and cost structures of manufacturing
processes. Vw Vw's has stringent norms for health and safety norms so in emerging
economies it may have to compete with players who don’t have high cost structures
that of Vw Vw's.

 Gender Composition in Labor Market Vw Vw's can use gender composition of labor
market to understand the level of liberal nature of the society, women rights, and
women’s say in matter of societal issues and consumption decisions. The gender
composition of labor market is a good indicator of disposal income of household,
priorities of the households, and related needs.

 Level of Social Concerns & Awareness in Society – Higher level of social concerns in
the society often result higher consumer activism and pressure from non-
governmental organizations, & pressure groups.

Technological Factors that Impact Volkswagen in India

Technology is fast disrupting business models across various industries. Some of the
technology trends that are impacting the macro environment are – developments in
artificial intelligence, use of machine learning and big data analytics to predict consumer
behavior, growing importance of platforms over service providers etc.

 Research and Development Investment Levels – If there is high level of investment in

technology development sector then there are high chances of building a self
sustaining ecosystem that drives innovation. Vw Vw's can leverage such a situation
to hire the best people in business.
  E-Commerce & Related Infrastructure Development – As E-Commerce is critical for
Vw Vw's business model. It should evaluate the e-commerce infrastructure,
technology infrastructure etc before entering a new market.

 Cost of Production and Trends – Vw Vw's should assess - What are the cost of
production trends in the economy and level of automatization. We at EMBA Pro
believe that in near future the sector most disrupted by technological innovation is
manufacturing and production.

 Property Rights & Protection of Technology Oriented Assets – Vw Vw's should

analyze the legal status of various property rights and intellectual property rights
protections that are common in US.

 Likelihood of Technology Disruption – If the country is hub of technology companies

then there is a high chance of technology disruption among various industries. Vw
Vw's has to assess whether it can live with the fast pace of technology disruption in
its industry.

 Mobile Phone & Internet Penetration – Vw Vw's should assess the level of internet
and mobile phone penetration in the country as it will it in building a requisite
business model based on local needs and realities.

 Transparency & Digital Drive – Vw Vw's can use digitalization of various processes to
overcome corruption in the local economy.

 Preparedness for 5G Related Infrastructure – Countries across the world are trying to
prepare themselves to install 5G infrastructure. Vw Vw's should assess to what level
the local market is prepared to roll out the 5G connectivity.

Legal Factors that Impact Volkswagen in India

Legal factors often govern – conditions to enter the market, laws to operate in the market,
and procedure to resolve any dispute with other stakeholders. If the legal system is not
strong then Vw Vw's can face numerous challenges – from consumer petitions to
shakedowns from authorities.
  Adherence to Common Law – Is the country following common law which is uniform
for all parties – whether domestic or international. If there is arbitrariness in the
judicial process then Vw Vw's can’t be sure of the judgments.

 Securities Law – What are the securities law in the country and what are the
conditions to list the company on national or regional stock exchange.

 Health & Safety Laws – What are the health and safety laws in the country and what
Vw Vw's needs to do to comply with them. Different countries have different
attitude towards health and safety so it is better for Vw Vw's to conduct a thorough
research before entering the market.

 Laws regarding Monopoly and Restrictive Trade Practices – As a new player Vw Vw's
shouldn’t be worried about the monopoly and restrictive trade practices law.

 Independence of Judiciary and Relative Influence of Government – The judiciary

independence often reflect both strength and credibility of the institutions in the
country.

 Transparency in Judiciary System & Processes – Transparency is essential for fair and
consistent decision making. If the process is consistent and transparent then Vw
Vw's can plan ahead with greater conviction.

 Intellectual Property Rights Protection – Vw Vw's should assess the level of

protection that intellectual property rights get under the legal system of the country.

Environmental Factors that Impact Volkswagen in India

Environmental factors are fast gaining traction not only among consumers but also among
regulators and policy makers. Climate change and changing ecosystem is leading to the
extinction of more than 20% of species on the planet by the turn of this century.

 Influence and Effectiveness of Environmental Agencies – The role of environment

standards enforcement agencies is critical in safeguarding norms. But often in
 emerging countries these agencies delay the process as a tactic to extract bribes. Vw
Vw's should be aware of presence of such practices in a country.

 Environmental Standards and Regulations both at National & Local Levels – Often the
environment policy at national and local level can be different. This can help Vw Vw's
in numerous decisions such as plant location, product development, and pricing
strategy.

 Waste Management – What is the policy of waste management in the prospective

market and how Vw Vw's can adhere to the waste management requirements in
that market.

 Level of Consumer Activism Regarding Environmental Concerns – Vw Vw's needs to

know the level of consumer activism regarding environmental concerns is. It will help
Vw Vw's in both developing environmentally friendly products and thwarting PR
stumble blocks.

 Influence of Climate Change – How climate change will impact Vw Vw's business
model and supply chain. For example if the supply chain is not flexible it can lead to
bottlenecks if shipments from one part of the world are delayed because of sudden
climate shift.

 Per Capita and National Carbon Emission – What is the per capita carbon emission of
the country and what is the overall level of carbon emissions of the country. This will
help in better predicting the environment policy of the country.

 Corporate Social Responsibilities Culture – Are Vw Vw's present CSR efforts

applicable in the new market or does it needs to have new initiative to cater to the
prospective market. ~rajchauhan1794@gmail.com