Volkswagen Group AG SWOT & PESTLE Analysis
ID : 52389653 | Apr 2018COMPANY PROFILE - Volkswagen Group AG
Business Sector : Automobile
Operating Geography : Germany, Europe
About Volkswagen Group AG : Volkswagen Group AG, a German multinational automobile manufacturing company headquartered in Wolfsburg, Germany is one of the world’s leading manufacturers of passenger and commercial vehicles and is the largest car manufacturer across Europe. It carries out designing, development, production and sale of a wide range of vehicles and engines. The company sells its vehicles under various brand names like Bentley, Audi, Ducati, Volkswagen, Bugatti, Lamborghini, Skoda, SEAT, etc. It also provides financial services which include banking, insurance, customer financing, and leasing and fleet management services. The company is divided into two divisions i.e. The Automotive Division and Financial Services Division and has approximately 342 subsidiary companies. The company has operations in around 150 countries with 100 manufacturing plants spread across 27 countries as of 2018. The company has operations in the Asia Pacific, Europe, South Africa and North America and South America.
Its mission statement states “The Group's goal is to offer attractive, safe and environmentally sound vehicles which can compete in an increasingly tough market and set world standards in their respective class."
Volkswagen Group AG Revenue : €230.682 billion – FY ending 2017
Competitive Analysis of Volkswagen Group AG
| 1. Widest product portfolio among all automobile companies 2. Strong global reach and presence 3. Futuristic program – “Together – 2025 Strategy” 4. Brand image 5. Restructuring and Increased sales revenue | 1. Brand image dented by diesel scandal 2. Largest recall rate across U.S. market 3. No technological expertise in electronic vehicle |
| 1. Large untapped Indian market 2. Investment in sustainable technology 3. Futuristic demand for self-driven vehicles | 1. Intense competition amongst automobile companies 2. Fluctuations in the economies of markets 3. Increase in import tariffs by US |
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Strength
1. Widest product portfolio among all automobile companies: Volkswagen Group has 12 global brands under its command. The company sells passenger cars under Lamborghini, Bentley, Porsche, Bugatti, Audi, Seat, Skoda and Volkswagen brands. The commercial vehicles i.e. bus and heavy trucks are sold under Man, Scania and Volkswagen Commercial Vehicle brands. The motorcycles are sold under Ducati brand. With these 12 brands, Volkswagen Group offers the widest product portfolio to its customers globally. The world’s largest automobile manufacturer Toyota offers its products under only 4 brands. The third largest manufacturer General Motors offers its cars under 10 different brands.
2. Strong global reach and presence: Volkswagen Group on account of such wide product portfolio and with its huge cash reserves has the ability to expand very fast when compared to its competitors. As one of the oldest and largest automobile manufacturer, the German company commands a lot of influence over the globe over other automobile manufacturers like Toyota, Honda, General Motors, etc. with its superior technology giving much better quality of cars than other car companies. Volkswagen cars carry the trust factor of “German Engineering” under its hood which is enough for the peace in the mind of its customers. The company has operations in around 150 countries with 100 manufacturing plants spread across 27 countries.
3. Futuristic program - “Together – 2025 Strategy”: In the wake of the diesel emission scandal and the brand “Volkswagen” getting tarnished, the company introduced a new futuristic strategic plan that would focus on delivering key objectives by 2025. Under this strategy, the company envisages to introduce 30 electric cars by 2025. Volkswagen calls this strategy as the ‘major company electrification’. Before this strategy, the company never invested in research and development to develop next-generation electric cars. As a part of this strategy, the company will do research and development to achieve competence in battery technology, digitalization and self-driven cars. The company will increase research and development spending to increase company’s efficiency and profitability. The new strategy will focus on company’s endeavours on developing next-generation technologies which will put the company leaps ahead of their competitors.
4. Brand Image: For any global brand, as the likes of “Volkswagen” its brand image is one of its core strengths as Volkswagen stands out among the automobile manufacturers of the world. Often though, it is associated with the ultra-premium and luxurious automobile brands like Audi, Bentley, Lamborghini, Porsche, Skoda, etc the company also manufactures passenger cars for the lower end market. This was the only reason the brand could sustain the shock it received in 2015 with the diesel emission scandal. Due to its brand image the company recovered quickly from the shock showing increased sales revenue in 2016 itself and proving that the brand “Volkswagen” still remains in the eyes of the public. In 2017, Volkswagen received the “Most Innovative Volume Brand” award from the Center Automotive Management. The company also received two further awards in the most innovative brand categories “Interface Connectivity” and “Autonomous Driving and Safety”.
5. Restructuring and increased sales revenue: Even after getting the brutal shock in 2015, and a slump in sales figures, the company bounced back very quickly showing improved sales figure of 10.3 million units in 2016 and 10.7 million units in 2017 from 10,010 units in 2015. This improved the sales revenue of the company and it generated sales revenue of€230.682 billion in 2017 from the €217.267billion sales revenue in 2016.Under CEO Matthias Müller’s tenure the group surpassed Toyota to become the world’s largest car manufacturer by sales. He also decided to spend €34 billion on electric and self-driven cars following backlash of the diesel emission scandal and as catalyst for big changes in the organisation. This shows the faith and trust of the public in the brand “Volkswagen”.
Weakness
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Opportunity
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Threat
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| 1. Trade policies of different countries 2. US threat tax European auto imports | 1. Favourable operating conditions for automobile companies 2. Uncertainty in economic conditions 3. Uplifts economic conditions of a region 4. Banking and Financial services of a specific region |
| 1. Loss of trust and brand image 2. Provides employment opportunities | 1. Skill development in the country 2. Increase in R&D investment 3. Helps growth of ancillary industries |
| 1. Potential ban on diesel cars 2. Strict laws to be followed in the region of operation 3. Financial and reputational impact from non-compliance of pollution norms | 1. Effect on carbon footprint of a country |
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Political
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Economic
1. Favourable operating conditions for automobile companies: Automobile industry being a crucial industry in important for a country’s GDP. It contributes directly to the income of the country. Due to huge size of its scale of operations, Volkswagen directly impacts the GDP of the country in which it operates. Developing countries help in development of manufacturing companies as they provide huge employment opportunities. These companies also affect other industries such as steel, glass, ancillary industries and provide direct or indirect employment opportunities.
2. Uncertainty in economic conditions: Economic conditions in the country directly affect the revenues of the company. Low economic conditions in the country will hamper sales bringing the revenues down whereas better economic conditions will drive sales benefitting the company. For e.g. European debt crisis is big problem for automobile manufacturing companies as the market conditions will not allow people to buy new cars. To deal with these conditions Volkswagen has widest product portfolio and can offer cars in every segment there is. High fuel prices also affect the revenues of a automobile manufacturing company.
3. Uplifts economic conditions of a region: A region in which a manufacturing plant is set up benefits the whole region in form of direct or indirect employment. It provides direct employment to labours and indirect employment in the form of ancillary industries being set up around the plant. This way Volkswagen when sets a manufacturing plant in a particular location, it helps other industries as well like transportation, small entrepreneurs who set up support functions to be supplied to the manufacturing plant.
4. Banking and Financial services of a specific region: Banking and financial services of a country play an important role in the operations of a company like Volkswagen. They provide vehicle loans at favourable or unfavourable rates which ultimately impacts the sales of an automobile company. However, these rates are decided based on the political scenario of the country. Emerging countries like India are keen on attracting huge investments made by these companies and hence keep loan and interest rates favourable. Hence, political scenario plays a very crucial role on the operations of a company.
Social
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Technological
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Legal
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Environmental
1. Effect on carbon footprint of country: Automobile manufacturing companies has a big impact on the environment of the country. Cars use hydrocarbon fuels and emit gases that pollute the environment. So, the environmental conditions depend upon the quality of engines produced. Also, automobile manufacturing requires iron and steel production which pollute the air and water equally. Volkswagen operates manufacturing plants in 27 countries and it needs to take care of the environment eco-system around all these plants. Volkswagen needs to invest in research and development so that it can produce cars with more sustainable technology and protect the environment around the plants. The company started “Think Blue. Factory.” program at many of its plants to employ more sustainable practices. Under this program five key areas of impact on environment are measured – CO2 emissions, energy consumption, water consumption, solvent emissions and waste generation. By 2025, Volkswagen aims to achieve impact on environment by 45%.
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References used in Volkswagen Group AG Analysis Report
1. http://annualreport2017.volkswagenag.com/additional-information/five-year-overview.html
2. https://www.statista.com/statistics/275870/revenue-of-volkswagen-group-by-brand/
3. https://www.volkswagenag.com/en/group/strategy.html
4. https://www.ourwindsor.ca/community-story/6951147-stats-show-which-automakers-are-the-worst-offenders-in-recall-land/
5. https://www.ibef.org/industry/india-automobiles.aspx
6. https://www.livemint.com/Industry/GxHRkUa6yJCAt2fIgT4TRI/Volkswagen-targets-3-share-in-Indian-passenger-vehicle-mark.html
7. https://www.reuters.com/article/us-usa-trump-germany-autos/trump-threatens-german-carmakers-with-35-percent-u-s-import-tariff-idUSKBN1500VJ
8. https://www.volkswagenag.com/en/group/portrait-and-production-plants.html
9. http://www.euronews.com/2018/02/24/in-shift-germany-now-eyes-limited-bans-on-diesel-cars-report
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Volkswagen Group AG SWOT and PESTLE analysis has been conducted by Dhruv Sakkai and reviewed by senior analysts from Barakaat Consulting.
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