UNIT 1 C ALI DINKIJYAN

Introduction………………………………………………3

P4…………………………………………………………4-10

P5………………………………………………………11-27

M3……………………………………………………28-31

D2……………………………………………………32-35

References……………………………………………….36-37

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Introduction:

Wolfsburg, Germany is home to the headquarters of Volkswagen AG, often

referred to simply as Volkswagen. Volkswagen is the most successful automobile
manufacturer in the world. It is common for the company to come in second or
third place, after Toyota Motor Corporation, in the annual production of around
10 million vehicles. Volkswagen has the biggest number of brands and possesses
the most diverse product range of any manufacturer. Volkswagen is the leading
automaker in Europe, which is also where the headquarters of all of its brands are
located. The most important market for the corporation is China. The firm had a
role in the scandal known as "diesel gate," which shook the business as well as
the whole automotive industry and resulted in significant brand damage, many
big penalties, and lost sales and consumers.

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P4.

The variables that exist outside of a company and have the potential to influence its operations, as well
as the actions and decisions it makes, as well as the possibilities and dangers it faces, make up a
company's external environment.

The following are the political issues that have an impact on Volkswagen's organization:

Trade Restrictions Volkswagen is active in the automobile markets of the United States and the United
Kingdom, two of the most important nations for the industry. However, there are going to be a lot of
problems in the future with those two nations and Germany, which is the country that exports tutos.
The United States has shown that it is unwavering in its commitment to imposing taxes on goods that
are shipped in from the European Union; however, motor vehicles have not yet been subjected to these
levies. However, there have been rumblings that the United Kingdom would withdraw from its
membership in the European Union in the very near future. As a member of the EU, Germany is able to
do business with all of the other countries in the EU.

The following are the economic issues that are impacting the organization of Volkswagen:

Spending by consumers and other external stakeholders has been growing, which is a healthy trend
around the globe. Customers are the external stakeholders most directly responsible for this growth.
This substantiates the claim that there has been an increase in the demand for products. A boost in
consumer demand is very significant for the automotive industry in less developed nations. This is due
to the fact that residents in such localities are less likely to possess automobiles overall. However, in
nations with a higher level of economic development, the purchase of automobiles has become a
benefit to the organization since the manufacturing process might include more costly resources.

The following are the sociocultural elements that have an effect on Volkswagen's organizational
structure:

Mixed brand perception: The Volkswagen brand is well recognized, and the Volkswagen group currently
owns multiple luxurious brands such as Lamborghini, Audi, Porsche, and Bugatti. Some people may even
say that Volkswagen, to a certain level, is one of the luxurious automotive brands to exist within the
Volkswagen group, which helps to explain why the Volkswagen brand is so popular across the globe,
particularly in Germany due to the fact that the Volkswagen headquarters are located there.

shift away from driving: Despite the fact that the demand for these vehicles has increased, so has the
need to become more environmentally friendly. A large majority of the community has shifted over to
the side of traveling that includes taking public transport and non-polluting forms of traveling such as
bicycles and skateboards to get them from point A to point B. This is because the demand for these
vehicles has increased along with the need to become more environmentally friendly. This has resulted
in a significant drop in sales throughout the sector as a whole, as a growing number of consumers are
selecting options that are less complicated and cost less money.

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The following is a list of some of the technical reasons that are contributing to
the ongoing evolution of Volkswagen's organizational structure:

Automobiles that are built in with an autonomous pilot system:

This innovation in luxury automobiles has skyrocketed the demand for cars on a more frequent basis; for
example, Tesla has implemented this feature in all of its vehicles, ensuring that its employees may do
their jobs in complete and total safety. This has resulted in a rocketing of the demand for cars. In
addition, there has been a discernible increase in the amount of people looking for autos. Before
accessing the hardware, there were a number of challenges that needed to be conquered first. Since
Volkswagen is quite financially successful and has a lot of money, they were able to research the notion
of autonomous vehicles without having to worry about or stay to a budget. This made it possible for
them to investigate the idea. They were able to pursue the investigation of the notion as a result of this.

Utilization of environmentally friendly and energy-efficient technology: the construction of vehicles that
consume less fuel and are less harmful to the environment is one of the most pressing technical
challenges facing the automotive industry today. One solution to this problem is the utilization of
environmentally friendly and energy-efficient technology. Another urgently needed solution to a
technological problem that the industry is now confronting is the production of completely autonomous
driving systems. Batteries, electric motors, and hydrogen fuel cells are the three technologies that are
better for the environment and are now showing the greatest promise for use in the automotive sector.
In the past, models produced by Volkswagen Group's Audi and Porsche brands have shown evidence
that the business is capable of producing high-quality electric vehicles driven by batteries. This ability is
one of the fundamental strengths that the organization has. In addition, Audi has made it abundantly
clear that the company has a significant interest in accelerating the research and development of
hydrogen fuel cells that may be included in electric vehicles. This interest may be included in the fact
that Audi has made it abundantly clear that the company has this significant interest. The following are
some of the legal factors that have an effect on the organizational structure of Volkswagen.

A problem with emissions: in 2015, the United States Environmental Protection Agency (EPA) reported
that Volkswagen Group had purposely misled United States Environmental Protection Agency (EPA)
Diesel engine emissions testing. This led to a crisis about emissions. After it was first brought to light,
this discovery caused a dispute that persisted for a few years after it was first discussed publicly. The
Volkswagen Group was responsible for the production of millions of vehicles that incorporated software
that was designed to temporarily reduce emissions while the vehicles were being tested, but which
failed to meet regulatory criteria when they were used in a consistent manner. This took place during
the years 2009 and 2015, specifically. These software systems were included into the motor vehicles
that were manufactured by the Volkswagen Group. Because of the occurrence, several legal actions
were filed, which ultimately resulted in tens of billions of dollars in penalties and damages, a decline in
sales, and a fall in stock price. Because Volkswagen Group has now corrected a sizeable number of the
errors it made in the past, there is now a significantly increased possibility that the company will comply
with legal obligations in the years to come. This is because of the fact that the company has now fixed a
sizeable number of the errors it made in the past. This is a direct consequence of the fact that
Volkswagen Group has now corrected a significant number of the errors that it committed in the past.

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Some examples of external influences that may be claimed to have an impact on Volkswagen's
organizational structure include the following:

The development of environmentally friendly technology, such as electric motors, batteries, and
hydrogen fuel cells, presents a significant challenge in terms of the technologies that must be
implemented to make the idea a reality. Panels that collect sunlight and wind power are two examples
of the kind of technology that may be found in this category. The primary motivation behind the
development of environmentally friendly alternatives to conventional vehicle engines is to allay
concerns about the environment held by governments as well as by users. Although environmentally
friendly alternatives to conventional vehicle engines offer a number of benefits for users (such as
improved gas mileage or a quicker response from the throttle), the primary motivation behind the
development of these environmentally friendly alternatives is to allay concerns about the environment
held by governments. The operation of motor vehicles has traditionally been one of the most major
contributors to environmental pollution; however, it now seems that this dynamic may soon shift. It's
possible that the change will occur as a consequence of new rules. It will be important for the
Volkswagen Group to react to the current state of the industry in order for it to continue to be relevant
in the automotive sector. This will be the case in order for it to continue to be relevant.

Internal Environment:

CSR of Volkswagen:
Volkswagen has articulated what the present Mission and Vision of their firm is, and it is as follows:
Our mission is as follows: "For all of our products and mobility solutions, we strive to minimize
environmental impacts along the entire lifecycle from the extraction of raw materials to the end of the
product's useful life in order to maintain the integrity of ecosystems and to create positive impacts on
society." Our activities must first and foremost comply with the environmental legislation, standards,
and voluntary commitments that we have made. This is our vision. You will be provided with an
abridged overview of the company's annual sustainability report in order to provide you with
information on the objectives of their CSR and the efforts that have been made. The company has made
it clear that they want to honor their commitment to the climate target established in Paris. This
objective is to make certain that the increase in average world temperature does not exceed 2 degrees.
In order for this aim to be adequately accomplished, the firm has to concentrate their efforts on
reducing their carbon footprint. Their plan is to reduce the amount of greenhouse gas emissions
produced by all of their accessible automobiles. They are also looking at the potential of electric cars as
another effort that they are making. The second goal, which is mentioned in the company's annual
report, is that the company wants to go in the direction of a circular economy by taking a new approach
in their operations. Circular economies make it mandatory for businesses to recycle rather than dispose
of their waste, which helps to limit the amount of resources that are removed from natural
environments. One of the many benefits of a circular economy is that it results in lower levels of carbon
dioxide emissions. It also brings down the overall quantity of water that is used, which is essential for
manufacturing. Lastly, it guarantees that practically all garbage is not produced and that hazardous
products are not stored in strategic areas, hence preventing environmental damage. adherence to the
rules and laws regarding the environment. This particular aspect of CSR within the Volkswagen Group is
one of the most difficult aspects to tackle. The company has given some thought to developing more
effective policies for corporate governance. They have also developed checks and balances as a means

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of putting an end to such dishonest activities. They adhere to the adage "Prevent, Detect, and React" in
order to take preventative measures in these kinds of predicaments. Volkswagen has had a difficult
history due to the disclosure of company secrets on one of their products, failing to create an ethical
and environmentally friendly vehicle, and instead installing software in their vehicles that lowers carbon
emissions during testing in order to comply with government laws in Germany and other countries. This
has caused Volkswagen to have a negative reputation in recent years. This has resulted in both an outcry
calling for a boycott of the firm for its nefarious effort to damage the environment and penalties of
millions of dollars being handed out by the government to Volkswagen as a consequence of the scandal.
Since of this, the company's stock market worth has decreased, and because the company can no longer
be trusted, the company has ended up forming a partnership with Microsoft to collaborate on a
sustainability program. The partnership with Microsoft CSR, which has a stellar reputation, has enabled
Volkswagen Group to improve its product manufacture for the foreseeable future.

Competition:
There are a variety of different businesses that compete with Volkswagen for the business of their
respective target consumers; examples of some of Volkswagen's rivals include the following:

Honda
Toyota
Nissan
Chevrolet

Volkswagen is a world-famous automaker that dominates the industry on a global scale and has
mastered the art of controlling the variety of vehicles sold in numerous regions, including China and the
United States. Due to the fact that they possess many automobile brands that range from the most
opulent to the most reasonably priced and conveniently located, Volkswagen is one of the most
successful distributors. Volkswagen was still able to effectively come back into the game and take the
lead again, despite the diesel crisis that occurred in 2015. This scandal enabled other firms in the auto
sector to flourish, which ultimately led to Volkswagen's success. In spite of the fact that Volkswagen had
won back the trust of its stakeholders by the time the emissions scandal was resolved, the market for
automobiles had already become exceedingly competitive by that point. Despite the fact that the firm
has been successful in acquiring a number of different sources of competitive advantage, which has
gradually enabled them to keep their position on this rapidly developing market. It is essential for
businesses operating in this sector to possess a wide range of competitive advantages if they are going
to maintain or grow their sales and income, as well as expand their share of the market.

Large Product Portfolio:

Volkswagen (VW) has a considerable competitive advantage in the automotive industry because to the
expansive and varied product range it offers, which includes market-leading brands such as Audi and
Ducati. Even when times are tough, having a wide variety of items to choose from gives a business an
unique and particular advantage and helps to maintain demand and sales. In addition to this, it helps
VW cater to a variety of customer segments, including the mainstream and premium sectors, which is a
significant benefit. The company caters to a broad range of client subgroups, each of which has unique
requirements and inclinations, by providing a diversified selection of items that are customer-focused. In

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addition to Volkswagen passenger cars and MAN commercial vehicles, it offers automobiles under the
brands Skoda, Audi, SEAT, and Porsche. Additionally, it distributes commercial vehicles under the name
MAN. There are a total of twelve brands included in Volkswagen Motors' product catalog.

Brand image:

By putting a significant focus on the quality of its goods, innovation, and the pleasure of its customers,
Volkswagen has been able to successfully maintain a positive brand image as a car manufacturer. This
has allowed Volkswagen to effectively keep its favorable brand image. As a direct result of this, there
has been an increase in sales all over the globe as well as in popularity. This has led to an overall
increase. Because of the intensifying competition in the automotive sector, businesses are putting a
greater focus on enhancing the reputation of their respective brands. This is because the image of a
company's products has a direct bearing on the company's ability to make sales and generate profits. As
a direct result of this reality, Volkswagen and other prominent firms are increasing the amount of money
they spend on marketing, the delight of their customers, the security of its passengers, and technical
innovation. The year 2015 was a particularly challenging one for Volkswagen's image, but in the years
that followed, the business achieved a complete and gratifying recovery to its former glory. In 2018, the
most successful premium manufacturer in China in terms of sales was Audi, which dominated the
Chinese market. This suggests that the corporation has been effective in maintaining a positive brand
image around the world. When it comes to the car sector, the reputation of the brand has an impact not
only on market share but also on the steadfastness of the customer base. When customers have a
positive opinion of a certain automobile brand, sales of that brand's automobiles will increase at a
quicker pace than normal.

Customer loyalty:
When it comes to the automobile industry, a crucial source of a competitive advantage is a loyal client
base. Nevertheless, developing strong customer loyalty calls for a method that takes into account a
variety of factors. In addition to focusing on marketing, businesses need to pay attention to technology,
the wellbeing of their consumers, and ways to enhance their customers' overall riding experiences.
Volkswagen is able to maintain a high level of client loyalty because the company concentrates on all of
these different areas simultaneously. This is one of the reasons why Volkswagen is so successful. The
whole of the company's customer base is comprised of fleet customers, which make up a significant
share. The broad selection of items that are geared toward consumers as well as the staff's dedication to
delivering exceptional customer service have both contributed to the increased level of brand loyalty
that Volkswagen enjoys around the world. In 2018, Volkswagen sold 10.9 million automobiles, which is
an increase over the 10.77 million units it sold in 2017.
Global presence:
The manufacturing and distribution network that Volkswagen has in place has enabled the company to
maintain a strong presence on each continent. In addition, the company has formed strategic alliances
with a variety of different companies in order to expand its presence around the globe. In addition to
the 20 countries that make up Europe, the Volkswagen corporation has 122 production sites that are
dispersed throughout 11 more countries in Asia, Africa, and the Americas. Wolfsburg is the location of
the company's headquarters, and it is the largest automobile manufacturer in all of Europe. It has sales
outlets in 153 different countries worldwide. A joint venture between this company and FAW Motors

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has been established in China. It has chosen not to form a partnership with Ford Motor Company in
order to provide superior service to its customers all over the globe. Volkswagen has another substantial
source of competitive advantage in the form of its huge manufacturing and distribution network located
all over the globe.

Supply chain network:

Because of the intense level of competition in the automotive industry, it is essential for every company
to provide a consistent supply of raw materials in order to produce high-quality items. Additionally, the
management of the worldwide supply chain network for the Volkswagen Group has been completed. It
obtains its raw materials from thousands of different suppliers located all over the globe and has
developed business relationships with many of these providers throughout the course of its existence.
This allows the company to maintain a constant supply of high-quality raw materials. In addition to
working together with its suppliers, the company's goal is to develop a supply chain network that is
environmentally responsible to the greatest extent feasible. Volkswagen is making investments in the
technology optimization of its supply chain as part of its efforts to reduce costs and increase
productivity. It has formed a partnership with the blockchain specialist My spider in order to enhance
the accountability and transparency of its network of supply chain partners. When it comes to the
automobile industry, having a supply chain that is well managed is a big source of competitive
advantage.

Research and innovation:

Research and new product development may give an automobile brand a leg up on the competition. In
spite of the fact that the degree of competition has been steadily increasing, technological innovation
has emerged as a fundamental driver of market expansion and a source of differentiation. The world's
leading automobile manufacturers, including Volkswagen AG, are all making substantial expenditures in
research and development in an effort to expand their market share by producing automobiles that are
both technologically advanced and visually beautiful. In addition, the Volkswagen corporation has been
steadily increasing the amount of money it spends on research and development. More than 12,000
people were working in research and development for the Volkswagen Group in 2018. Volkswagen has
made research and development a priority in a number of important areas, including autonomous
driving, sustainability, virtual technologies, and passenger safety.

Other sources of competitive advantage:

The Volkswagen Group has a significant edge in the market due to a number of critical sources of
competitive advantage, including a comprehensive corporate strategy and a sizeable talent pool. As of
the end of 2018, the company has a total of 6,64,500 employees around the globe. It makes large
expenditures in its employees' professional development in order to maintain the engagement and
commitment of its workforce. Workers with the right skills are now absolutely necessary for the
expansion and development of the automobile industry. Because of the tremendous competition among
the leading automakers for the best staff, it is challenging to both recruit and maintain qualified
workers. Volkswagen has the advantage of gaining customer loyalty and preference due to its vast
diversity. This advantage is made possible by the progressions that Volkswagen has made, which have

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allowed them to stay ahead of their competitors and keep track of all their victories. Additionally, the
fact that Volkswagen has connections with multiple nations around the world under multiple different
brands has given them the ability to gain track of all their winnings.

P5.

SWOT Analysis:

Strengths:
1. The widest brand portfolio among all automobile companies
The largest brand portfolio of any automaker is held by Volkswagen. Vehicles
from the firm are offered under 12 distinct labels. The Volkswagen, Audi, Seat,
Koda, Bentley, Bugatti, /Lamborghini, and Porsche brands are used to market the
company’s automobiles Volkswagen’s motorbike line is called Ducati. Under the
commercial vehicle brands Scalia, Man, and Volkswagen, the corporation sells
buses, large trucks, and other commercial vehicles. No rival of Volkswagen has as
many brands under its control.

2. New “Together – 2025” strategy

Following their emissions crisis and the challenges from the outside market,
Volkswagen has unveiled a new strategic plan that will concentrate on achieving
important objectives by 2025. The company’s main goals are:

By 2025, roll out 30 new electric automobiles. This goal is referred to by

Volkswagen as “major company’s electrification.” The business has resisted
participating in the expensive race toward electric automobiles up until now.
Develop new skills in digitalization, autonomous driving, and battery technology
spending R&D should be increased to the double-digit billion range. Volkswagen’s
further goals, as indicated in the strategy, are to boost productivity and
profitability. The new strategy will provide the business a clear direction,
something many automotive businesses lack, and will concentrate its efforts on
some of the most crucial sectors.

3. Diversification strategy
Compared to its competitors, Volkswagen’s income is significantly more evenly
distributed across various brands, product categories, and geographical regions.

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The company’s extensive brand portfolio enables it to better target various
customer segments and meet their various demands.
Volkswagen also provides a wide range of nautical, financial, and automotive
goods and services, further diversified the company’s revenue streams.

Only 74.5% of Volkswagen’s total revenue comes from the segment’s dominant
“passengers’ cars.” Commercial vehicles, power engineering, and financial
services, in that Oder, account for the remaining 12.4%, 1.9%, and 11.2% of
revenue. No one’s market accounts for more than 20& of Volkswagen’s sales,
making it the automobile industry leader with the strongest regional income
diversification.

4. Synergy between brands

One of the main assets of Volkswagen is the brand synergy. To boost sales and cut
costs, several of Volkswagen’s brand – including koda, seat, and Volkswagen, as
well as Bugatti, Lamborghini, and Porsche — share their R&D investment, build
technology, access to various markets, and customer expertise. They can
simultaneously appeal to many customer groups. Synergy would not be possible
between only a few brands.

- Weaknesses:
1. Negative publicity weakening the whole Volkswagen brand
Volkswagen is frequently criticized and subject to unfavorable press for the
following reasons:

- Saga of “Diesel gate.” In 2015, it was discovered that the corporation had
installed software code into their diesel cars that would regulate differing
pollution levels during in-lab testing compared to real-world emission
levels. The corporation was looked into, found guilty, and penalized in
several nations. Volkswagen lost a total of €16.2 billion as a result of the
scandal’s penalties, damages, and other costs. Vehicle recalls were made.
Volkswagen has faced heavy criticism for having to international recall
millions of vehicles over the past several years. Volkswagen group has been
severely impacted by bad press. Sales of the business decreased in 2015.
The business lost billions of euros and a large number of present and future
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 clients. The brand image of the company has been negatively impacted,
and it has taken a long time to recover. One of the biggest problems
Volkswagen has created for itself is bad press.

2. The highest recall rate in the market

Volkswagen had the high recall rates over all other car makers in the industry.
Volkswagen Group has a recall rate of 1805 automobiles for every 100 vehicles
manufactured, according to a survey released by iSeeCars.com

This indicates that the Volkswagen Group had recalled each of their vehicles
nearly twice. A high recall rate brings about more expenses, unsatisfied
consumers, and bad press.

To lessen this flaw, Volkswagen should establish improved designs and quality
control practices to avoid disappointed customers.

- Opportunities:
1. Fuel prices are expected to rise in the near future
Due to fluctuations in supply, fuel costs have been low for the past few years and
are anticipated to increase soon. The demand for big vehicles like pickup trucks
and SUVs has surged as a result of the low price of petrol. Due to their robust
lineups of SUVs and pickup trucks, several businesses, have profited from the low
gasoline costs.

Volkswagen, on the other hand made minimal investments to expand its lineup of
light trucks and instead chose to compete in the market for smaller cars. When
gasoline prices are high, there is always a spike in the desire for tiny cars.
Volkswagen may potentially accelerate its ambitions to launch the first affordable
electric vehicle before 2020 in order to capitalize on the rising demand.

2. Acquire skills and competences through acquisitions

Volkswagen will need to acquire new expertise in battery technology,
digitization, and autonomous driving in order to achieve the objectives
specified in the new strategy plan.

Acquiring smaller firms that have already created the abilities and
technology required for Volkswagen is the quickest and least expensive
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 way to achieve it. Acquisitions are often expensive, but Volkswagen
should wait until loan rates have decreased, this will allow them to
obtain affordable capital acquisitions.

3. Demand for autonomous vehicles

Nearly 33 business are currently developing autonomous vehicles. Only
a select few of them are putting their self-driving cars through road
testing, and none of them are offering these vehicles for sale to the
general public. Although it is difficult to determine the precise demand
or market value for autonomous vehicles (which is predicted to be
worth 45 billion dollars by 2025) based on the efforts made by all major
automakers, it appears that autonomous vehicles are the next ‘big thing’
for the industry.

Volkswagen plans to create an autonomous vehicle themselves, this will

allow them to expand ahead multiple other automakers across the
world, placing them as one of the most valuable car manufacturers in
the world. However, they’ve promised this project to be completed by
2025, if they are able to release it at an earlier time their market shares
would increase as well as their sales.

4. Weakening euro exchange rate

Volkswagen derives the majority of its income from nations in the
Eurozone, where the euro is the sole currency. Therefore, the company’s income
and earnings are not significantly impacted by fluctuations in the euro exchange
rate. Exchange rates still have an impact on exports to other nations, therefore
the corporation profits from the weak euro against other currencies.

Volkswagen’s cars cost less to buy in other countries thanks to a lower euro/dollar
exchange rate. As long as the euro’s exchange rate is favorable compared to other
currencies, the corporation may increase its exports to the other nations.

5. Focus on significantly improving the sustainability policies to

remedy damage brand reputation
Volkswagen’s emissions issue has done significant harm to its image as
an ecologically friendly firm. The firm is no longer regarded as one that
respects the environment and cares about the communities in which it
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 operates. This, according to the corporation, is the main harm caused by
the pollution problem.

Volkswagen needs to dramatically step up its efforts in sustainability if it

wants to win back the confidence of its stakeholders.

- Threats:
1. Intense competition
The rivalry that Volkswagen faces from established automakers, fresh
competitors, and market saturation is only becoming worse.

New domestic manufacturers are competing by selling cheaper and

equally well-built automobiles. It will be very difficult for Volkswagen to
compete in the electric car market against new competitors like Tesla
with its electric vehicles. Additionally, Google, which is attempting to
create self-driving cars, poses a danger to the established automotive
sector. The fact that the global automobile manufacturing capacity
vastly outpaces the demand further intensifies the rivalry. An estimated
31 million units of surplus manufacturing capacity existed globally in
2015.

2. Further fines and damages that will have to be paid

Volkswagen’s emission issue has already cost the company €16.2 billion
in penalties and damages in addition to a damaged brand’s reputation
and a loss of consumer trust. However, this is not the conclusion of it.

Volkswagen is still embroiled in several cases across the world that aim
to find the firm guilty of falsifying its pollution statistics. The corporation
will experience a reduction in profits over the next several years as a
result of having to pay billions in further penalties and damages.

3. Increasing government regulations

Numerous governments all around the globe support measures to
increase fuel efficiency as part of their commitment to lowering
greenhouse gas emissions. There is always a chance that such
environmental measures would push up manufacturing costs for the

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 automakers, which they may not able to recover in a market that is so
intensely competitive and price-sensitive.

Porter’s Five Forces

Bargaining Power of Suppliers:

Due to the fact that the Volkswagen Group has suppliers dispersed around the
globe in different areas, its bargaining strength is limited. Additionally, VW’s code
of conduct must be adhered to by suppliers and subcontractors. VW is a sizable,
financially sound business with an international supply chain and distribution
network. Because it can constantly find new suppliers, its suppliers have little
leverage in negotiations. The company’s demand for high-quality raw materials
and VW’s reliance on long-term partnerships with suppliers that can meet its
needs responsibly offer the suppliers some negotiating strength, nevertheless. In
this sense, in addition to educating its suppliers, it also recognizes the top
performers. Overall, the bargaining power of the suppliers is low.

Bargaining power of Customers:

The negotiating power of customers has risen in the twenty-first century for a
number of reasons. Customers have a wide range of alternatives because there
are several brands available. In addition, the client of the twenty-first century is a
knowledgeable consumer. Before making a purchase, he considers the product’s
quality, safety, environmental friendliness, and fuel efficiency. Additionally,
businesses spend a lot of money on marketing and advertising to attract every
consumer. Both the premium and lower end segments are more competitive than
before, and brands are spending money on R&D to create items that exceed
consumers’ expectations. VW made R7D investments of 4.8 billion euros in 2017

Threat of Substitute products:

The high level of brand competitiveness in the automobile business makes the
threat of alternative products very real. In addition to these different brands,
there are additional possibilities that may be used in place of Volkswagen items.
Volkswagen goods can also be substituted with other public transportation
options. The financial stability and reputation of Volkswagen serve to lessen this
threat. It’s products are fashionable and of great quality, which has increased

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customer confidence and reduced the danger posed by competitors. Overall the
threat of substitute products is moderate.

Threat of new entrants:

There is practically little risk of new competitors entering the automobile sector.
This is because it is so difficult for any brand to join the market due to the high
entry barriers. Although there is a significant investment in the infrastructure,
which includes production, marketing, supply chains, and distribution, there is
also a significant spend on Human Resources. Additionally, regulatory restrictions
make it challenging for businesses to join the market. The danger posed by new
brands entering the market is often extremely little or nonexistent.

Intensity of Rivalry in the Industry:

The level of competition in the automobile sector is likewise quite strong. The
reason for this is because despite the high number of competing brands, the
majority of them offer identical items with comparable levels of efficiency and
quality. Because of this, the majority of businesses make significant financial
investments in both marketing and R&D, allowing them to introduce cutting-edge
innovations to the market. The level of competition is really high overall.

Five C’s

The 5Cs of Marketing Analysis are –

1. Company
2. Customers
3. Competitors
4. Collaborators
5. Context

Company Analysis

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Before making marketing choices, Volkswagen’s marketing managers must assess
the company’s internal strengths and shortcomings. Each firm has a varied
marketing budget as well as a diverse set of capabilities for carrying out marketing
plans and advertising campaigns. The business study will aid Volkswagen in
making the most use of its marketing resources. Marketing managers at VW
Volkswagen need to concentrate on risks related to manufacturing and delivery
hazards in relation to the four risks listed above. No amount of clever marketing
will be able to provide a long term competitive edge if the firm is unable to meet
customer expectations.

Company Factors

Financial standing and availability of resources for marketing – VW is in a good

financial position and can afford to spend a lot of money on marketing to
introduce new products and strengthen the position of current brands.

The Volkswagen Group: Driving Big Business with Big Data describes the
company’s strong commitment to process and product innovation in its chapter
on the culture of the VW Volkswagen.
Spending on research and development – as a market leader in a number of
product categories, VW Volkswagen invests a sizable amount of money on
product development, process improvement, marketing tactics, and IT network
construction to support all distribution and promotion plans.

Brand Equity – VW has an excellent brand equity among both current and future
clients. This can allow the business to expand

Customers

The target market must be carefully chosen, and VW’ Volkswagen’s marketing
plan must be created to attain the ideal positioning in the target market’s hearts
and minds. Marketing managers at VWQ Volkswagen can analyze customer data
such as industry growth rare, potential market size for both the overall market
and the target segment, tangible and intangible product features, primary

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reasons for purchasing products, frequency of purchases, recent purchases,
industry trends, income levels, etc.

Marketing managers should concentrate on demand risk and technology risk in

the customer analysis segment based on our four broad risk framework for the
five C analysis.

Customer factors

Who the target customer is – This is determined by if Volkswagen positions its

product in a broad market or a more specialized one. My recommendation is that
it concentrates on the specialized area as it is very profitable.

What type of product would Volkswagen be selling – This varies on high

participation products or low involvement products, different marketing methods
are needed. When compared to low involvement products, where industry
participants frequently fight on price, high involvement products frequently have
better brand loyalty and less price sensitivity.

What are the qualities that consumers want the most – The marketing managers
at Volkswagen must choose the 2-3 key attributes that consumer want the most
and how Volkswagen can best position itself to provide them.
What is the customer life time value – Volkswagen should establish a marketing
strategy that may optimize customer lifetime value rather than concentrating
marketing efforts on single purchases.

What is the market size of the category that Volkswagen intends to target – In my
opinion, the market will increase at a steady rate and offer a number of chances
to branch out into related categories.

Competitors

Designing marketing initiatives that can assist Volkswagen in fending off pressure
from both current competitors and future newcomers is the primary

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responsibility of marketing strategists and managers. Those in charge of
marketing at Volkswagen must decide:

Where should the brands stand in relation to VW? Portfolio of Volkswagen brands
and rival brands. What marketing tactics do rivals employ? Volkswagen is ought to
either engage in direct competition with rivals or carves out specialized positions
within categories. What kind of rivalry exists in the sector where VW Volkswagen
operates.

In competitors analysis, marketing managers at VW Volkswagen should pay

particular attention to the risks associated with demand and technological
innovation.

Competitors Factors

Positioning strategy in relation to competitors – for managers at Volkswagen,

choosing a strategic position that is both distinct from rivals and pertinent to
customers is a crucial marketing choice.

Rivalry among current players: In any industry, profitability is typically poor when
there is intense competition. VW Volkswagen must thus allocate more money to
marketing initiatives.

Product Line Breath Decisions – This is relevant to VW Volkswagen’s distribution

and supply chain management strategies as well as its product strategy. A wider
line needs more positioning techniques and more money for marketing.

Product line depth decisions for Volkswagen – it entails focusing on several

markets within the same product line. The greater the depth, the more money
the corporation must invest in separate brands without overemphasizing the
parent company.

Threats from replacement to VW Volkswagen – Economic cycles or technology

advancements are frequently the source of substitute threats. In some markets,
VW Volkswagen may need to reposition some of it’s brands.

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Countering Marketing Campaign of competitors – often one competitor campaign
has to be matched with a counter campaign to stop the product trial of the
competitor’s product by the firm loyal customers. It has to be done to control
turnover of clients.

Positioning strategy vis a vis competitors – the critical marketing decisions for
managers at VW Volkswagen is what strategic position to choose which at the
same time is – different from competitors and relevant to the customers.

Product line depth decisions for VW Volkswagen – Depth involves targeting

different segments within the same product range. Higher the depth, the more
the corporation needs to spend on separate brands without placing too much
attention on the parent company.

What will drive future growth and how competitors will try to take share of that
future growth – technology innovations can result in making present positioning
less profitable so VW Volkswagen needs to continuously innovate and look for
new opportunities.

Collaborators
Collaborators include the supply chain partners both upstream and downstream
of the value chain. For doing Collaborators analysis VW Volkswagen needs to
critically evaluate the supply chain based on numerous factors such as –
bargaining power, what suppliers bring to the table, flexibility & agility of supply
chain, revenue sharing at each step of the value chain.

Based on risk exposure parameters under the collaborators analysis VW

Volkswagen marketing managers should focus on risk exposure to international
risks (because VW Volkswagen has international operations), and production and
delivery risks. For example if the collaborators effectively able to meet the
demand increased by effective advertising of VW Volkswagen marketing
department then it will go a long way in enabling the company to thwart new
competition and devise premium pricing strategy.

Collaborator Factors
Number of suppliers and abilities of the suppliers – if there are too many suppliers
then it will become expensive for VW Volkswagen to manage them but if the

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number of suppliers is too few then it will expose the company to supply chain
disruption risks.

Position bargaining power in the value chain – if the collaborators have strong
bargaining power then VW Volkswagen will not able to sustain higher margins
even with higher marketing expenditure.

Risks to intellectual property rights and patents – operating in international

markets can expose VW Volkswagen to theft of patents, copyrights and other
intellectual property rights. Any marketing and diversification decision should be
taken after evaluating these risks.

Managing delivery and services in times of uncertainty – most multinational firms

such as VW Volkswagen are diversifying fast to decrease delivery and supply chain
risks. VW Volkswagen should also focus on it.

Flexibility of supply chain and international risks – in international markets the

critical question in front of VW Volkswagen is how much localize based on local
preferences. The rest of the choices, including those for production and
marketing, are based on this crucial choice. Opportunities to localize the
production and other processes to reduce risk of organization wide supply chain
risk in international market.

Context

Context analysis encompass the diligent analysis of macro environment factors

such as – political and social environment, regulatory environment, economic
conditions in the markets that the VW Volkswagen operates in, rate of technology
innovations in the industry, legal environment, environmental standards in the
industry etc.

Two main forms of risk exposure in the context analysis are – International risks,
and technology & innovation risks exposure.

Context factors

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Employment has become a crucial consideration when developing a marketing
plan in light of the employment crisis in Western Europe, the growth of the gig
economy, and employment in the US and all other major western economies.
Employment affects a customer's self-esteem and the brands she can associate
with in addition to her purchasing power.

Foreign Exchange Exposure - Risks associated with international operations

include exposure to foreign exchange, in addition to risks associated with
marketing methods that are not appropriate for a given market. Due to their
exposure to foreign exchange in nations like Venezuela, Argentina, Turkey, Russia,
and Indonesia, the majority of US organizations have lost money over the past ten
years.

Inflation & Diversification - High inflation may result in less income from current
sales, which has an influence on VW Volkswagen's pricing strategy.

Political Risks to VW Volkswagen - Over the past three to four years,

developments like the US-China trade dispute, Brexit, and the emergence of the
yellow vest movement in France have heightened geopolitical risk.

Economic - Marketing managers at VW Volkswagen must assess how customers

will act in the current economic climate because their conduct throughout boom
and bust periods is frequently very different.

Regulatory Framework - This influences both the kinds of items that VW

Volkswagen can sell as well as the kinds of marketing and advertising campaigns
that a business may execute. For instance, there are significant differences
between US and EU norms and regulations for Volkswagen goods.

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Demand, Supply, and Price

The Volkswagen Group may see declines in demand as a result of the diesel
problem, which may be made worse by media stories. Our first focus while
addressing the problem is to offer consumers technological solutions.
Additionally, we are moving on with the thorough investigation of Company
misbehavior.

Consumer demand is influenced by both psychological elements that cannot be

anticipated as well as by actual ones like disposable money. Unexpected buyer
hesitation might result, for example, from households’ concerns about the state
of the economy in the future, which may be made worse by press stories. This is
especially true in oversaturated auto markets like Western Europe, where
demanded may decline as a result of owners keeping their cars longer.
It became clear throughout the reporting period that the repercussions of the
eurozone debt crisis have not yet been fully remedied. However, several
automobile markets, notably in Southern Europe, were able to rebound farther
from their previous lows and showed signs of positive development. With our
alluring lineup of vehicles and methodical customer orientation, we are
comparing the consumer hesitancy.

Demand is shifting toward smaller segments and engines in certain markets as a

result of customer hesitation brought on by the crisis and rises in some car levies
based on CO2 emissions, which are already in place in several European nations.
Based on their drivetrain and fuel strategy, they continuously develop innovative,
fuel-efficient cars and alternative drive technologies to mitigate the danger that
such a transition may have a detrimental implant on the Volkswagen Group’s
revenues.

Government involvement, such as tax hikes that reduce private demand or

protectionist inclinations, puts the automotive markets throughout the world at
risk.

Commercial vehicles are capital products, and even small changes in growth rates
or growth projections can have a big impact on demand. Due to the resulting
output swings, firms must be extremely flexible. Despite having substantially

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lower manufacturing rates, the complexity of the trucks and bus range is
significantly higher than that of the already extremely complex range of
passenger vehicles. Total cost of ownership, dependability and the level of service
are important considerations for clients who purchase commercial vehicles.
Customers are also becoming more interested in extra services such as freight
optimization and fleet utilization, which they provide in the commercial vehicle
category for instance, through the recently launched digital brand RIO.

The only producers of MAN Power Engineering’s two stroke engines are its
licensees, mostly in China, South Korea, and Japan. There is an oversupply of
marine engines due to the erratic demand for new ship building, which might lead
to a drop in licensing income and bad debt losses. Losing market share is another
possibility as a result of changes in the competitive environment, particularly in
China. We minimize these risks by closely collaborating with all licensees,
regularly monitoring the markets, and implementing new technology.

With its wide range of goods and driving systems, as well as its customer service
that is focused on target demographics, the Volkswagen Group is in a strong
position. The risk of default is not concentrated in specific fleet customers of
markets. Market share stability in Europe demonstrates that fleet customers
continue to have faith in the Group.

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Price Elasticity

Price elasticity is when a measurement of the change in the consumption of a

product in relation to a change in its price.

The VW analysis is calculating the retro-cumulative (cheap and too cheap) and
cumulative (expensive and too expensive) frequencies of their four price
distributions and plotting the findings on a line graph

The four intersecting frequencies have varying broad explanations. The following
interpretation, however, is the most typical:

PMC – is the junction of the too cheap and expensive lines, it’s the bottom bound
for a reasonable price range; it is also known as the Point of Marginal Cheapness,
or, more specifically, the price below which sales would be lost due to a dubious
product’s quality.

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PME – The point at which cost becomes a major concern, stands for the junction
of the too costly and inexpensive lines and represents the top limit of a
reasonable price range.

IPP – The price at which an equal proportion of respondents’ asses the price point
as either cheap or expensive, (intersection of the expensive and cheap lines), also
known as the Indifference price point.

OPP – The prices at which an equal number of respondents rate the price points
as either too cheap or too expensive and thus describe the price exceeding either
the lower or upper limits, the intersection of the too expensive and too cheap
lines. This price is also referred to as the optimal price point.

Alfred Marshall once stated, ‘the amount demanded increases with the fall in
price and diminishes with rise in price.’

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Market structure of Volkswagen
The market structure of the car industry is oligopolistic; the structure in which
there are very few companies involved in the industry. The world’s car business
does not have a lot of fierce competitors and thousands of participants. Instead,
the car business is an oligopoly where a small number of companies control the
market, similar to other significant sectors. It is often hard for small businesses to
enter and compete with the giants. As Europe is the biggest consumer of new cars
with 42%. The current recession and the ongoing automotive issues, which have a
significant impact on the sector, are to blame for the sharp decline in the demand
for new automobiles. In order for the manufacturer to thrive in this unstable
environment, the growing cost of gasoline and raw materials is another major
problem.

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M3. Assess the effects of the environment on the
business

The corporate environment is influenced everyday by both internal and external

environments. The organization has no control over the outside factors. The task
of the business is to change with the times.

Political: Usually, the nation's government enforces certain requirements. Such

factors are essential to Volkswagen's operations since different nations present
varied political agendas. Volkswagen is subject to the commercial rules and
regulations of the nations in which it conducts business since it is a worldwide
automaker. Political factors include quotas, tariffs, and taxes, embargoes, the
stability of a nation, subsidies, and the authority to patent such inventions. Since
the government of the host nation makes all of these decisions, Volkswagen
makes care to work in conjunction with the appropriate authorities to fulfill its
goal of reaching the target market.

Many nations are facing financial instability, thus their government has made the
decision to mandate that any car companies operating there only hire citizens.
Volkswagen has a dilemma since, in order to compete in those nations, it must
create employment that will raise demand for their products and broaden the
diversity of their labor force. China has the most open marketplaces in the whole
world, and joining the WTO has improved the flow of free international
commerce. Volkswagen was able to enter the market in China, which has more
than 1.3 billion people, by removing trade restrictions there.

Economic: Because they have a direct impact on consumers' purchase decisions,

economic issues are a top priority for Volkswagen. Furthermore, what is produced
and how it is made are both determined by the economic system. Volkswagen,
one of the biggest automakers in the world, depends largely on international
commerce, but it is also worried about the inflation, currency rates, economic
structure, and job levels of the host nation. Both the company's ambitions and its
financial security depend on them. The UK economy was formally declared to be
in recession in 2008. However, the government stepped in by increasing the

27
interest rates that banking institutions charged. The action increased consumer
demand for products, which helped to contain the growth in unemployment.
Additionally, their confidence in their financial status increased, enabling them to
spend more freely. On the other hand, economic uncertainty is a problem that
Volkswagen is also facing in other countries where it does business. Customers
are more inclined to cut back on their purchases of luxury goods in such
situations. The entire sales and profits of the business would be impacted by this.
Volkswagen benefits from deflation as a major global automaker because it can
increase output.

Social: This mostly relates to Volkswagen's interactions with societal factors

including sociological, economic, and lifestyle effects. To better understand what
drives its customer base, the business must create a demographic profile of that
group. Because the corporation consistently provides items that please the
majority of consumers despite their disparities in religion, ethnicity, income, and
racial levels, Volkswagen is successful in nations with different cultures and
socioeconomic strata. The number of retired adults outnumbers the number of
children, according to latest UK demographic figures. The increasing rate of
population aging discourages automakers like Volkswagen since most older
people are legally prohibited from driving. They also visit fewer dealerships than
the younger generation because of an age restriction. As a result, Volkswagen and
the automotive industry have experienced a serious setback. In addition, the
research discovered that
The level of internet literacy was lower among people over 65. On the other side,
policymakers think that driving would be less convenient for senior people. The
attitudes and values of consumers greatly affect their desire for products and
services. Customers are now more concerned with safety, which has changed
which automobiles they are interested in. Volkswagen has adjusted to these shifts
in demand and increased demand for environmentally friendly automobiles.

Technological: These are the tools that businesses employ to market themselves.
It also considers how quickly technology is developing. On the other side,
technological improvements may help or hurt a firm. The company's survival and
competitive edge will be aided by developing and maintaining current with
technology advancements. Technology has had a direct influence on the

28
manufacturing industry's operations and the supply chain. As a result, it serves as
the main method for businesses to do business. The way firms operate is also
influenced by technology in terms of electrical and fuel. Volkswagen's use of
innovation has an impact on both cultures and the company's size. To boost the
manufacturing of completed goods, the corporation might need to modify its
equipment. Success in the auto business for Volkswagen is based on ongoing
technical development. Due to technology advancement, Volkswagen currently
has two new potential. The company invented and popularized internet shopping.
Over the past few years, consumer internet use has climbed by about 50%. The
use of the internet in Germany exceeds 70% of the population. The new
possibility reduced labor expenses for the company while also bringing
convenience and comfort to the customers. On the other hand, incentive
programs and smartphone applications are the company's other technological
endeavors. The company's IT staff introduced loyalty programs, which have
helped the business by preventing devoted clients from switching to rivals.

Environmental: All governments have raised concerns about the environment.

They have put pressure on businesses to practice more environmental
stewardship and cut back on CO2 emissions. Customers' environmental concerns
are another aspect that affects their purchasing choices. The geographical
characteristics of the environment reflect the impact of Mother Nature. Any
organization's operations are impacted by variables including the local
population's geography, climate, and natural catastrophes. Future business
placements are impacted by such a setting. As a result, ethical enterprises and
conscientious entrepreneurs should consider minimizing their negative effects on
the environment. Volkswagen, for instance, is quite inventive in how its products
are designed to lessen the impact of regional elements. The business introduced
CO2-efficient electrical and hybrid automobiles to combat the nation's severe
weather.
Volkswagen, however, responded to environmental issues by reducing their
carbon impact. This came after the 2015 controversy was resolved. By 2025, the
corporation plans to have practically all of its vehicles electric. By openly avoiding
as much CO2 as possible, the corporation has significantly increased customer
awareness of the company's carbon impact. More individuals are using electric
vehicles as a consequence of government efforts and Volkswagen's various
initiatives. But as time goes on, a growing number of consumers are refusing to

29
drive electric vehicles. Along with cutting overall manufacturing costs, these
modifications improved the company's image for corporate social responsibility.

Stakeholders: People, groups, or organizations within a corporation that have

raised concern. However, they are significantly impacted by the organizations'
aims, activities, and strategies, either directly or indirectly. The government and
businesspeople are viewed as investors in the corporate sector. Employees who
work in the human resources division are also stockholders in the business and
may influence how it is run. The acts or judgments of the firm frequently have an
impact on their connection with it. The tasks and responsibilities at Volkswagen
call on employees to offer a range of services and abilities. The society is the
second group of investors. Everyone's reflection may be found in the same
location as everyone else's. In addition, a bigger portion of the population is
included in the category, as well as people and things that affect them. The family
may represent future customers and workers who can benefit the company. In
addition, without the community, the firm would not exist. Therefore,
Volkswagen is accountable for connecting with a variety of cultural groups
worldwide and making sure that its influence is constructive. The two primary
categories of the organization's current strategy difficulties are listed below. The
tactic has therefore helped to emphasize the disparities between Volkswagen and
the communities. Third, manufacturers play an important role in the expansion
and development of their companies by making sure that they have access to the
raw materials they require. Volkswagen has been able to hold onto its negotiating
clout with different suppliers for years while also fostering positive, cooperative
relationships with them. The company's excellent connection with suppliers
allowed it to increase inputs and environmental efficiency. Most significantly,
Volkswagen has agreed to a necessity for a global supplier. Ethical considerations
were incorporated into the standards when it comes to managing a business. The
agreement also safeguards direct and indirect distributors. In conclusion, all
surroundings are crucial since they have a stronger influence on the organization.
On the other hand, technological change is crucial to automakers like Volkswagen,
therefore the company must properly incorporate it into the market. Each time,
technological advancements occur more quickly. In order for the company to
flourish even more in the future, it will require plans. If the business can maintain
its best-selling items, that would be great for everyone involved.

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D2. Evaluate the extent to which your business has been
affected by the business environment.

I'll utilize situational analysis in this project to present an overall evaluation of the
market and to draw conclusions about how these aspects impact the
organization.

External environment: A company's internal operations may be significantly

impacted by external factors. The External Study of the Climate is another
important investigation into these outside factors. The external environment of
the automotive industry may have a big impact on Volkswagen. This is so
because, as I indicated in the assignment, every element that makes up a PESTLE
Analysis has a significant impact on Volkswagen. There are now serious political,
economic, cultural, technical, legal, and environmental repercussions of
Volkswagen. Volkswagen is impacted by both causes, yet they each have a unique
effect on Volkswagen. Political and economic difficulties, for instance, are likely to
have an impact on Volkswagen's revenue and finances alone since these variables
often consider tax laws, gross profit, market capitalization, and other factors.
Potential developments for Volkswagen are impacted by social and technical
variables. These two variables include a variety of themes, including future
growth, age distribution, study, and demographic patterns. In the end, only
constitutional and environmental issues are left. Politics and the environment also

31
frequently have an impact on the image and brand of Volkswagen. Volkswagen's
general success and how they have managed to become a global brand with a
presence in several nations are fantastic places to start when examining how the
outside world has an impact on Volkswagen. Even if this is good for Volkswagen, it
does have the disadvantages that come with such significant expansion. The two
biggest obstacles, both of which directly affect Volkswagen as a company, are
governmental legislation and police. Sadly, this doesn't only apply to them now;
their choice to market their product in a wide range of new locales might have a
substantial impact on Volkswagen's in the future. One of the factors that
contributes to a major corporation's impact is its reputation. Volkswagen wants to
gain the trust of its consumers and demonstrate to them why it is the best source
for secure vehicles. The question of how much damage would be done to
Volkswagen's global reputation if anything went wrong arises because once the
company's reputation has been damaged, further expansion becomes extremely
difficult and may also cause issues with their current investments outside of
Germany. Lastly, I think that the external climate, especially in the industry in
which Volkswagen operates, is a significant factor. The external environment will
have an impact on Volkswagen both now and in the future, and as it is made up of
elements outside of Volkswagen's control, it will never be as a result of
Volkswagen's merit, good or bad, as it will either help or hinder the business
giant's growing process.

Internal external: A wide perspective of Volkswagen's internal environment leads

me to assume that it will significantly affect not just the company's present
performance but also its potential success in the future, since the internal
environment will continue to have an impact. Volkswagen offers many
advantages, but they also have many drawbacks. Volkswagen, particularly in this
sector, has a number of obstacles, but there are also a great deal of chances for
growth that are still open to them. If they take advantage of these chances,
Volkswagen might become a major brand throughout the world. You never know,
but one thing is for sure: the growth of Volkswagen cannot be stopped.

Situational Analysis: A set of methodologies known as situational analysis are

used to analyze and organize the performance of our industry's internal, external,
and competitive contexts in order to fully comprehend organizational capabilities,
customer acquisitions, and the general market environment. The Situational
Analysis collection includes the SWOT Analysis, Porter's Five Competition Analysis
32
Powers, PESTLE Analysis, and the Marketing Analysis Five C's (all of which I
completed earlier in this assignment).

New entry threat: The danger posed by new entrants to incumbent rivals
increases as new players enter a given market. New enterprises can start up if
entry barriers are minimal.
will have a problem since it will be simpler for them to enter the market and
compete with industry leaders. Companies will share less of the market's benefits
the more competition there is. Food retail entry into the UK market is currently
unlikely. This is most likely because businesses need enormous sums of money
and investment to have a chance in such a cutthroat market. Volkswagen is one of
the few automakers with market-dominating brands, accounting for almost three-
quarters of all German retail sales together with Mercedes, Ford, and BMW. As a
result, in order to establish their market worth, prospective competitors will need
to either provide extraordinarily high-quality products or dramatically undercut
Volkswagen's prices. The local authority's planning approval process for new
dealership construction also takes a substantial amount of time, effort, and
money. For newbies, this is a big challenge. Volkswagen's advancements in
cutting-edge technology, such as electric vehicles and effective production
methods, would discourage both potential competitors and devoted consumers.

Buyers bargaining power: It alludes to the pressure that customers may exert on
companies to provide higher-quality goods, greater client support, and more
affordable costs. Porter has demonstrated that switching costs would decrease as
more commodities become standardized, giving customers greater power over
enterprises. In order to keep and preserve control of their client base,
Volkswagen needs to and does satisfy those demands. This involves providing
customer service, keeping costs low, making wiser decisions, and having a
consistent stream of sales in-store.

Supplier’s power: This is a reference to a supplier's capacity to exert influence

over a business by increasing costs, diminishing quality, or limiting the supply of a
product. Its fundamental tenet is that buyers' capacity to turn a profit will be
impacted by suppliers' negotiating power on the marketplace. In order to
negotiate better supplier pricing that smaller businesses cannot match, this
leverage generally comes from huge retail chains like Volkswagen, who combine
their leadership positions in the industry. This implies that manufacturers with

33
operations in Germany are susceptible to the capacity of big retailers to purchase
their products for less money in other parts of the world.

Threat of substitution: The level of replacement risk varies per customer. It refers
to the variety of options a buyer has while deciding which industrial product to
purchase. Many alternative goods are products that may be bought from a
different firm or merchant or under a different brand and offer the same or
slightly similar advantages as the original item. Alternatives to well-known
automobile brands are offered by tiny chains of corner stores, licenses, and
electric vehicles in the automotive sector. These firms are not perceived as
threats to established corporations like Volkswagen, which provide high-quality
products at reduced rates. Volkswagen is creating hurdles to entrance for other
companies by developing several branches in various nations, gradually gaining a
stranglehold on these tiny neighborhood stores. In conclusion, I think that the
environment that Volkswagen is today most affected by is different from the
environment that Volkswagen will be most impacted by in the future. In my
opinion, the outside world is currently and going forward having a bigger impact
on Volkswagen as an organization. This is a result of the political climate in
Germany, which accounts for 71 percent of Volkswagen's total profits and 67
percent of the company's entire sales. However, I think that in the future, the
economic climate will surpass the global climate simply because of their
enormous uphill battle with competition in the German automotive industry, as
the likes of BMW and Mercedes compete for top spots, and their obviously
diminishing impact on a global scale. This is because of their drop in the value of
the euro (€) and Germany, which is causing business and legal uncertainty,
particularly far away from the controversy and overvaluation of their profits.

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References:

https://toppandigital.com/translation-blog/how-volkswagen-became-
the-worlds-largest-car-manufacturer/

https://pestleanalysis.com/pestle-analysis-of-volkswagen-group/

https://managementweekly.org/volkswagen-corporate-social-
responsibility/

https://www.mbaskool.com/brandguide/automobiles/1527-
volkswagen.html#competition

https://www.notesmatic.com/volkswagen-sources-of-competitive-
advantage-%EF%BB%BF/

https://annualreport2017.volkswagenag.com/group-management-
report/report-on-risks-and-opportunities/risks-and-opportunities/risks-
relating-to-demand.html

https://www.slideshare.net/hemantasahu/volkswagen-elasticity-of-
demand

https://www.tutor2u.net/business/topics/external-environment

https://www.investopedia.com/terms/p/priceelasticity.asp

https://www.ukessays.com/essays/marketing/market-environment-
and-structure-of-auto-mobile-industry-marketing-essay.php

https://topforeignstocks.com/2019/10/27/the-global-auto-industry-is-
an-oligopoly/

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https://strategicmanagementinsight.com/swot-analyses/volkswagen-
swot-analysis/

https://www.notesmatic.com/five-forces-analysis-of-volkswagen/

https://embapro.com/frontpage/marketing5ccase/5871-vw-
volkswagen

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