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University: REGENT COLLEGE LONDON
This assessment will demonstrate certain questions which are like -
Global business is term which is used for international trade and in respect to organisation it is a company which is operating across the world. To be effective in this firms adopts strategy which is course of actions that management plan so that organisational objectives can be achieved. Thus there is need that company engage in strategic management so that business resources are managed effectively to attain its goals and objectives (Rugman and Verbeke, 2017). This involves setting targets, analysing business environment and evaluating strategies. Volkswagen is German car auto-maker founded in 1937, situated in Wolfsburg and it is largest car manufacturer and biggest market in China. It is world's most successful car-maker group which operates in 14 countries and more than 150 nations. Volkswagen passenger cars has record of 6.2 million cars that are sold worldwide in 2018 and around 1,95,000 employees working at global level to maintain its position as leader in auto-mobile industry (Volkswagen, 2019). In this report case study of Volkswagen will be introduced along with analysis of internal and external factors. Assignment will identify sustainable competitive advantage which company has in industry. At last, some recommendations will be made on the basis of analysis and discussion of issue arises.
Volkswagen is one of most successful car maker brand in international market which operates in more than 150 different countries. One of the most shocking news about this successful group came in 2015 when diesel engines were identified as faulty in passing the test in real conditions and according to emission standard of UK legal policies. It was found that company was violating emission standard since 2009 in street drivings. Company was using software that was capable of reducing emission in the laboratory test but was failed to meet it in real situations. It was identified that the real outcomes was more than 40 times than legal standards and management eventually accepted than they were using 'defeat device' in software to pass the indoor test. After the investigation 11 millions cars were recall that were sold during 2008 â 2015 so that which leads to Â£6.7 billion of loss for company.
CEO of Volkswagen Martin Winterkorn resigned and took the responsibilities to broke trust of government and customers. And new CEO was appointed named Matthias Mueller which has global strategy to regain trust and brand image back with suitable course of actions. This happened due to company has spent huge amount on developing new diesel engine who are efficient in performance and lead to increase in profit margin of company. On the other hand, government of UK wanted it to be environment friendly as well in which company fails to meet both expectation of environmental factor and and technology â driven. In such case Volkswagen when found out the new engines were not able to meet the standard emission level and would definitely fail test and they decided to developed 'defeat device' which was helpful in altering performance of engines in indoor lab testing. After passing the test company announced their cars to have technology that can be called as 'Clean Diesel' which was not according to statement at all (The Volkswagen emissions scandal: A case study in corporate misbehaviour, 2019).
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There are internal and external factors that have direct or indirect impact on business and its operations and thus it is important that they are analysed thoroughly so that their impact can be understood (Rothaermel, 2017).
It identifies factors that are present in external macro environment of organisation, explanation are as follows:
Political: In this all factors related to government rules and regulations are identified to understand that impact on business operations (Lasserre, 2017). UK is one of major market for Volkswagen but due to government unrest between German and UK future trade regulations are in serious doubts. UK government has increased trade tariffs on products imported from European Union which will also lead to decrease in demand of cars.
Economic: This is related to stability of economic growth of country in which company in operating. For Volkswagen it will have positive impact as spending of consumers is growing all across the globe which means more demand for vehicles.
Sociocultural: This includes preferences of consumer their behaviour, attitude, customs, beliefs, etc. Volkswagen group has both luxurious and affordable brands like Audi, Porsche, Skoda, Seat, etc. which are well â perceived. This has created a hurdle to recognise among different innovative competitors which possess issue in increasing its brand image at global level.
Technological: This comprises of all factors related to technological aspect in environment (Woerkom and Zeijl-Rozema, 2017). Due to technological aspect of self-driving cars produced by Tesla in recent years which is bringing changes in both hardware and software in manufacturing autonomous vehicles. There is another challenge of making vehicles environment friendly with the use of green technology like electric, hydrogen fuels and solar batteries, etc.
Legal: It includes all statutory rules and regulations that company need to comply their operations with to be free from any legal actions. Recent 2015 scandal of emission standard by Volkswagen group and recalling of cars between 2009 and 2015 so that their engines can be replaced. This has lead to many legal cases and Â£10billion fines and losses for company. This has resultant in decrease of brand image, stock prices, sales and revenues.
Environmental: This states all factors related to environment elements and aspects that company need to comply in order to fulfil its corporate social responsibilities (Strange and Zucchella, 2017). Due to recent growth in green technology which will shift use of more environmental friendly fuel in vehicles. This has turn out to be opportunity for Volkswagen group to adapt this shift of using fuel (PESTLE Analysis of Volkswagen Group, 2019).
It is helpful in analysing factors that are present in internal environment of company and identifies Strengths, Weaknesses, Opportunities and Threats (Roy and Srivastava, 2017). It helps in getting clear understanding about Volkswagen capabilities and scope for future growth and development.
The Volkswagen group has largest portfolio of 12 different brands under it.
Company has strong strategy of achieving goal in 2025 of 30 new electric vehicles.
Company has excellent diversification strategyÂ due to different luxurious and affordable vehicles brand under its portfolio.
Negative publicity due to emission standard scandal in 2015 has decreased sales and brand image of company.
Recall rates in US market is resulting into increase in cost, dissatisfies customers and poor brand image which is leading to financial losses.
Due to less expertise knowledge company is lagging in introducing more electric cars which is resulting in decrease market share.
Due to increase in fuel prices Volkswagen will have opportunities regarding small vehicles as demand will be higher and introduce more electric cars.
Company has opportunities to acquire small and start-ups business who already had innovated technology related to autonomous driving.
Volkswagen group has immense opportunities in formulating strategies that will be effective in repairing its negative brand image (SWOT analysis of Volkswagen, 2019).
Intense competition is one of the major threat for company due to decrease its brand image after scandal and introduction of electric vehicle by Tesla.
Company has already paid Â£16.2 billion in damages in fines due to emission scandal. There are many legal cases for company around the world which will result in decrease in profits for upcoming years.
There are many changes in environmental factors of macro environment which will lead to increase in production cost for company.
This term is used when company has outperforms consistently than other businesses in same industry is said to have sustainable competitive advantage. There are many factors by which business can retain its competitive advantage like technology, market share, marketing tools, cost efficiency, etc. (Cramer, 2017) Due to its negative brand image after emission scandal of 2015 there is need that company gain its competitive leadership again in auto - mobile industry and become largest auto - maker group in world. There are number of strategies that Volkswagen group will formulate so that they have sustainability in industry, some of them are as follows:
Strategy TOGETHER 2025Ã¢ÂÂº: Company has always been making mobility possible for millionsÂ of customers with affordability. Volkswagen group new vision is 'Shaping Mobility' for generations that are coming. For this company has formulated group strategy of making auto - mobile intelligent, safe, clean and quiet. Along with making driving experience more emotional and completely new as well. This will also help company to fulfil its corporate social responsibilities and enhance its damage brand image. This will help company to be effective in individual and affordable mobility in coming years (MaÃÂaitytÃâ and VirbaÅ¡iÃ Â«tÃâ, 2018).
In this company will target four dimensions so that sustainable competitive advantage can be achieved effectively. They are as follows:
Excited Customers: Volkswagen brand is moving like from affordable cars, light commercial vehicles to sports cars which is part of company core value. With the help of good brand image they now want to offer mobility that will help individual in getting freedom along with participating in social element. Using company digital system they want to target new customers into auto-mobile industry and make them loyal so that company can have further recommendations and growth.
Excellent employer: To have success sustainably company needs to recruit and manageÂ Â competent and committed workforce. Volkswagen management also wants to enhance their satisfaction and motivational level by providing equal opportunities, flexible and friendly working environment so that sustainable working organization can be formulated. This is going to be based on open communication, positive environment and co - operative culture as there is high diversity in the employees (Zajonz, 2017). This will be managed by exemplary and inspiring leadership which will create positive culture in business environment so that employees can be retain. This will also helps Volkswagen to attract global talents so that staff can work enthusiasticallyÂ together for achieving fully sustainable mobility.
Role for environment, safety and principles: These days auto - mobile sector is facing one of the biggest issues which is Climate change. Global warming is an obligation this industry is facing from many years and Volkswagen being largest auto - mobile manufacturer in the world it is one of its responsibilities to start the initiate. In order to protect and implement the legal rules and guidelines company is focusing on electric mobility by introducing electric cars in future which are environment friendly. By this competitive advantage strategy company wants to become COÃ¢ââ-neutral company by 2050 so that it have advantage of being environment sensitive in industry. One of highest principles is to observe rules and laws of government and legal environment along with ensuring safety of customers. This help Volkswagen group to openly deal with errors so that solutions can be identified and same can be avoid in the future. With the help of this strategy company will be able to fulfil its corporate social responsibility to conductÂ business in a more socially responsible way (Perera, 2017).
Competitive profitability: In order to be effective in this ever-changing business environment of mobility there is need that Volkswagen become more transparent, efficient andÂ profitable. With TOGETHER 2025Ã¢ÂÂº strategy for sustainable competitive advantage, they are planning to improve existing strengths and enhancing weaknesses as well. One of main goal of company is to exploit future opportunities so that new standards can be set in industry (Strategy TOGETHER 2025Ã¢ÂÂº, 2019.).
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It is recommended that Volkswagen Group needs to formulate strategies that improve its negative brand image after the scandal of 2015. It has also resultant in financial losses which will affect upcoming profitability for company. Its sustainable competitive advantage strategy can be turn out to be effective for this action but need to be manage properly. To be effective in such course of strategies, it is recommended that company understand three determinants to have competitive advantage, they are as follows:
Benefits: It is important that Volkswagen clearly understand the advantages its product offers to customers and value its features possess. In order to introduce electric vehicles it is important that performance is not compromised so that company can have competitive advantage. In case of electric cars and sharing mobility strategy of gain competitive advantage in future and enhance negative brand image of company it is important that benefits and value is effectively communicated to targeted customers.
Target Market: Due to changes inÂ technological and environmental factors it is important that auto - mobile brand understand needs of customers. There is need that needs and expectation of target market is analysed before manufacturing product so that demand can be meet. By doing this Volkswagen can have competitive advantage in industry and capture bigger market share of electric vehicles.
Competition: China manufacturer, Tesla is leading in electric cars which are efficient and acceptable by customers. Company have also taken care that environmental factor is also taken care so that there is no legal issue against the company. Volkswagen group need to adopt same strategy by analysing competition in market. This will help company to effective optimise different functional area of business and gain competitive edge accordingly.
There are other factors also that need to manage effectively so that past mistakes are not repeated again and for this company need to increase social responsibilities among workforce. In the scandal it was identifies that due to lack in maintaining environmental factors defect device was installed so that it was not detected in indoor lab testing. So it is equally essential that technological aspects is developed more so that in case of future strategies company become effective in aligning with performance. In case of making electric and green fuel efficient cars it is important that all other factors are changed accordingly to be effective and executed so that it can have competitive advantage in industry.
It can be concluded from above report that global business is any organisation who is operating at international level and for this company needs strategy or course of action. Strategic management is therefore, important for business so that strategies are effectively planned and execute. There are internal factors which are identified with the help of SWOT analysis which helps to find out strength, opportunities, weaknesses and threats of company. Macro environment of business represents elements that are present externally and are not in control of organisation. This is done by PESTLE Analysis which identifies all aspects that have direct and indirect impact on business and its operations. Company adopts sustainable competitive advantage in any function of business so that they can survive for long in industry. At last, recommendations will be provided so that company effectively manage its sustainable competitive advantage with the help of three determinants such as benefits, target market and competition.
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