IT Strategic Planning and Governance in IT Strategic Planning and Governance: Analytical Essay

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IT Strategic Planning and Governance in IT Strategic Planning and Governance: Analytical Essay

Abstract:

Volkswagen is a German car manufacturer based in Wolfsburg, Lower Saxony (Germany). Volkswagen is the original and best-selling brand of the Volkswagen Group, Germany’s largest automaker and the world’s second-largest automaker.

In the text “Volkswagen: a drive down memory lane” is noticeable the worry about the “millennial fever” from social experts. They consider that this “millennial fever” has a result of driving consumer behavior in different ways because of the impact of the environmental forces on consumers and marketers.

Business world is forcing to a threat caused by the changes in today’s consumer. Nowadays, people are overworked, overstimulated and overwhelmed by all involves the Information Age. As result of these changes, people feel a yearning to turn back to simpler times. Therefore, today’s consumer feel a massive nostalgia wave to that old time without so much overwhelming technology and information.

Due to that important change, what should companies do? Firms should make efforts in innovation and apply a new product development strategy. Thus, companies go from a threat like changes in , today’s consumer to an opportunity like recreating products that help take consumers back to “the good days” according to current needs.

This essay explains the Volkswagen case. Following a timeline since 1950 until nowadays, it is interesting to analyze how Volkswagen adapts to these new changes according to nostalgia from today’s consumers and try to offer a new product that assists the new current need.

As a consultant illustrate how the information system integration could be aligned with information technology in reality at Volkswagen?

As it is mentioned in the summary of the Volkswagen Case, it is a fact that today’s costumer is changing due to a constant evolution in the technology area and the Information Age. Furthermore, in order to set a successful marketing strategies, firstly the company should focus on defining what are the most important consumer trends.

In the text “Volkswagen: a drive down memory lane” is noticeable that the most important consumer trend for Volkswagen is nostalgia. Consumers feel better when they think in those days without too much Information. Consumers can relate those days to the design of cars offered by Volkswagen, as for example the Volkswagen Beetle characterized by a simple design and considered a low cost car. However, the company saw that association as an opportunity. That was the reason in order to focus on nostalgia and emotions, and they made a development of a product and proposed a New Beetle, totally similar to the old model but with modern features. In this case, “modern features” are also important to mention: these features like high technology and multi-stereo speaker, airbags, power outlets for mobile phones, etc. are also relevant for today’s consumers, so it is possible to say that another point in consumer trends would be the interest for electronic and safety appliance that Volkswagen cars should have in. In a future, Consumer trends will tend to focus on technology regarding electronic cars, quality, safety or performance. So, the trends for the cars industry will be focused on high tech, and this is an important thing to take in mind in the future of this area.

As conclusion, the consumer trends can be identified as, on the one hand, nostalgia and emotions (regarding nostalgia as what case study explained) and on the other hand, the trends to innovation and digital features, as for example, proposal regarding electronic cars.

However, in order to get successful marketing strategies, there is four step process to address trends (Burton, 2017). In this question, it is going to be explained every step in detail in order to offer a current consumer trend and can set marketing strategies following a series of criteria for a strategic success.

4 Step process to address trends (Burton, 2017):

Identify trends that matter: Due to the evolution of the information since a lot of years, people are starting to be overloaded of this trends. As I explained in the summary, there is an increase of the feeling to come back to the “good days” without information. This yearning to return to simpler times has produced a change in multiple area of consumer life (Ripple Effect). This excess of technology has a strong impact in the consumers, being the nostalgia an emotion of more and more consumers (impact and scope). Today’s consumer demand coming back to those days and remember the good times. Due to this fact, the technology expansion is not going to stop or even decrease, it seems that this nostalgia trend will last in a long run term (endurance).
Conduct two separate explorations: the main goal of customers is to be less overworked and overstimulated by the Information Age. Although they hail the benefits of the hired 90s, consumers are tired and overwhelmed of so much Information. However, due to this nostalgia trend, Volkswagen proposes a New Beetle as they already introduced it in 1950. In 1950, Volkswagen produced a Beetle with a simple, bug like design and low cost engineering, which it was totally contrary to the American car proposal. Moreover, this model had something that competitors did not: endearing qualities. Due to the success of this old Beetle in 50s, now Volkswagen repeated the same strategy: as the most important consumer trend is focused on nostalgia, they have produced a New Beetle that resembles the original outwardly and has a pull that is purely emotional, according to the new current needs.
Compare results: Due to the New Beetle is really similar to the 1950 model, consumers can identify this car to this current emotion: come back to those days. Although the new model seems like an old one, New Beetle owns to fourth generation VW Golf with modern features: high tech multi-speaker stereo, airbags, power outlets for mobiles phones, etc. This is totally a good idea in order to respond to the currents needs: customers do not only want to have an “old” car reminiscing those good days, but a car that is good equipped with safely structure as well. Thus, consumers can relate the key aspect of consumption to this new proposal of New Beetle from Volkswagen.
Isolate Potential Strategies: After Volkswagen has gained perspective on how important concepts pertaining to your category interact with vital trend-related changes in consumer attitudes and behaviour (Burton, 2017) it can determine which of three innovation strategies to pursue:
1. basic value propositions remain meaningful
2. growing disconnect between your category and consumer
3. Aspects of category clash.

In this case, Volkswagen should focus on aspects of category clash, because they introduced in 1950 a model which had the same values. Now they are presenting a new model similar to the 50s one, so they should reaffirm core values.

Once the most important consumer trend has been defined, I am going to explain which criteria Volkswagen should follow in order to set marketing strategies.

First of all, they should fit to market environment. As I have mentioned before, currents needs are related to nostalgia. Then, they propose a new model than can relate to those emotions.
Secondly, timing. Volkswagen is offering this model according to the requirements of this time. Innovation is central and they have developed it for a long period of time (since 1950 until nowadays)
Thirdly, effectiveness. They are responding to the current needs, so they have a high satisfaction from customers. This is very important to survive and grow.
Finally, organizational effectiveness. They have explained the core competencies that they have. In addition to this, they possess technical and market skills as they have shown with the introduction of this new model.

Discuss the impact of Information Technology (IT) change in perspective of procurement strategy, car manufacturer’s business processes, and overall organization at Volkswagen?

The marketing environment consists of the actors and forces that affect a company’s capability to operate effectively in providing products and services to its customers. It is possible to study the marketing environment through the following classification: On the one hand micro environmental, which it is focused on: suppliers, intermediaries, competitors and the last one, customers. On the other hand, the macro-environment, which consists of: demographic, economic, socio-cultural, politic-legal and technological forces.

In order to offer the product, required companies should not only consider consumer trends, but also take in mind the forces of marketing environment too. Thus, firms can take advantage of emerging opportunities and minimize potential threats in order to develop successful consumer relationships.

In the following lines, it is going to be defined every single part from every analysis: micro and macro environment:

Micro environment:

One of the goal of companies is to build relationship with customers by creating value and getting a high satisfaction from them. In order to get this objective, some analysis from the microenvironment is required.

• Supplier:

Suppliers are needed in order to get resources necessary to produce goods. In this part, company should analyze what it would be better: purchase resources to suppliers or make its own. In case the company decides to buy, it is really important to minimize the problems with them. Marketing can be affected since they form an important link in the company’s overall customer value delivering system.

• Intermediaries:

Intermediaries can include: resellers, physical distribution firms, marketing services agencies or financial intermediaries. All of them can be chosen by the company in order to provide a distribution service. This kind of company help to deliver the products to final buyers. This concept is similar to suppliers: they are really close to marketing due to the component of value delivery system. So in this case, companies should partner effectively with intermediaries to optimize the performance of the entire system.

• Competitors:

Companies must provide better customer value than competitors. Companies should not just focus on offer products to the target market, but they should also gain competitive advantage and get a better position in the market than competitors.

• Customers:

It is really important for companies to be flexible and can adapt to changes from customers. If there is any fail in that, firms can loss customers due to the low satisfaction offered. Customers’ needs change constantly. Companies must put efforts to understand their customer’s needs through research and monitoring. Understanding customers helps an organization to develop products and services that satisfy customers, then this part is one of the most activities of Marketing.

· Macro environment

Building a good relationship with customers and offering a high satisfaction is necessary to study the consumer trends as well as micro environment analysis. It is also important to analyze the macro environmental part or external environmental forces. The macro environment is formed by: demographic, economic, socio-cultural, political-legal, technological forces and natural. This is also called DESTEP Model.

• Demographic:

Demographic forces is focused on the study of human populations: size, density, age, gender, occupation and statistics. This is an important point for marketing due to changes in terms of rapid world population growth or in demography and all that mean change in the market. Thus, the need for adjusted marketing strategies is required. In a general way, the most important demographic trends that affect market can be summarized in: world population growth, changing age structure, changing family structures and geographic shifts in population.

• Economic:

Economic conditions play a significant role in the marketing because for example, a high economic growth gives as result a higher level of employment and income affecting to marketing in a positive way. Within the economic forces can be included: purchasing power and spending patterns. However, Marketing environment is also influenced by many other important economic factors such as: Interest rate, money supply, price level, exchange fluctuations, currency devaluation, prosperity, recession or inflation, etc.

• Socio-cultural forces:

This force is related to factors that affect society’s basic values, preferences and behavior. Regarding the Marketing world, new demands are created and old ones are lost, so it is essential for the marketing management to prepare marketing plans according to changes in the needs of the society affected by these socio-cultural forces. The main aspects of social environment can be explained as: changes in the life style and social values, major social problems and the last one, growing consumerism.

• Politic and legal environment:

Marketing decisions are strongly influenced and affected by developments in the political environment, for example: government monetary and fiscal policies, import and export policies, legislation controlling natural environment, etc. Therefore, before entering into a new market (or country), companies should study the government policies and laws in order to set successful marketing plans and strategies.

• Technological forces:

Technological forces are related to factors that create new technologies and thereby create new product and market opportunities. In this case, this force and marketing are concepts really close. However, technology is constantly changing and that has an impact in the marketing plans. Change in technology means change in production and production possibilities, cost, quality, manufacture process, etc. However, on the other hand, technological changes can also affect to the life style and consumption patterns, and then have an impact in marketing activities like distribution system, research, packaging, pricing, advertising, etc. All companies should take in mind the technology force in order to respond to these changes quickly and keep themselves in the market.

• Natural Forces:

Natural forces are natural resources which are needed as inputs by organizations. The marketing activities should focus on customer’s interest and society’s interest too. Nowadays exists a high worry for the environment, therefore it would be recommendable to take some measures to protect it like for example: check the environmental consequences of the product (packaging or production process), raise price to cover environmental cost, introduce the environmental criteria while the ingredients products, design or packing are being decided, and also develop ecologically superior products.

This is the marketing environment that companies should consider in order to successfully develop and maintain relationships with their consumers. As I have explained along question two, every force from micro and macro environment analysis has an impact in the marketing activities. So Marketing departments must take in mind this analysis in order to offer a good value consumer and high consumer satisfaction.

Volkswagen, despite high reputation of the company and being one of the most important manufacture car on the world, there are some facts that show Volkswagen did not pay too much attention to some variables of the business environment. The more noticeable fact was the scandal regarding cheating emissions, where in 2015 the company was accused by the Environmental Protection Agency (EPA) that many VW cars being sold in America had a ‘defeat device’ – or software – in diesel engines that could detect when they were being tested, changing the performance accordingly to improve results. The German car giant has since admitted cheating emissions tests in the US (BBC News, 2017).

However, in order to define correctly how Volkswagen has responded to their environment in the last ten years, every force is going to be explained carefully.

Regarding to micro environment: Volkswagen made some mistakes regarding to the suppliers. As I have mentioned in the supplier part, some failure in this part can delay the process and then offer a bad delivery system, and that was exactly what happened to Volkswagen. They had some problems with the suppliers and they lost a lot of money. Finally, some days after that, they could reach an agreement (Justin Huggler, 2017). Volkswagen also has important competitors: Toyota, Seat, Skoda and Ford. However, Volkswagen has a strategy well defined in order to get a high position in the market in comparison to its competitors. Volkswagen define its strategy like: Volkswagen cars are made for the road. This is why our engineers developed all of our engines with a prolonged service interval of 15,000km which guarantees our customers more time for driving our cars and less time in the workshop – hence less money for service costs. Due to our low fuel consumption we make sure that the total cost of ownership is kept at a minimum level. (Volkswagen-me.com, 2017). Finally, the last point, customers, they tried to focus on responding to its customers’ needs regarding low fuel consumption, however, they should put more efforts in getting a high position and respect in that point since they were accused by the “Volkswagen scandal”. Due to this big mistake, they have lost a lot of customers due to the low customer satisfaction. Customers feel angry and cheated because they bought a car for a high price to respect the environment and the result was just the opposite.

On the other hand, with regard to macro environment, there are many points to take in mind in order to define the DESTEP Model since they did some mistakes in some points of this model. Starting with economic forces, Volkswagen and, in general, the manufacture car industry is not in at its best moment caused by the economic crisis. In this case, people have not enough money to buy a car. Volkswagen responded to that trend offering a high line cars (with high prices) and low class cars (with low prices). In this economic part, it is also important to mention that Volkswagen has assumed different interest rate and exchange rates since they sell to countries outside the European Union as US. Secondly, socio-cultural forces, society for Volkswagen is big and different from place to place. People have preferences and values that can be changed, and companies have to be quick and adapt to the consumer changes. In this case, as it is explained in the text, Volkswagen saw that customers wanted to come back to those days without too much information, and then offered to customers the ‘New Beetle’ car that they were looking for. However, as they did a good adaption to the current needs, they also did a big mistake when they said that offered a good car for environment and that was not true since they did a cheat in emissions in tests. Regarding to another point of environment, politic and legal forces, Volkswagen did not respect the politics and regulations related to the level of contamination, as I explained before, they did a cheat in the emissions levels. Related to that point, natural forces have been affected due to this mistake because Volkswagen did not respect the environment doing that, since they contaminated more than allowed, getting bad consequences for environment and low customer satisfaction. In a demographic way, it is important to say that involve all people with income and families in general, but a common feature is related to the worry of environment. As they did not respect this important points, demographic force can be considered damaged also.

Finally, the last force to mention is technological force. In this case, Volkswagen develops its product with a high technology and also innovation. This force is fulfilled and respected by the company since they offer good cars as people demand.

As a conclusion of this question, Volkswagen has responded to the business environment making some big mistakes in the last ten years, being the most important one the scandal related to cheating emissions which affected to many environmental forces.

Describe the ways Volkswagen tried to cut down expenses, increase productivity, better coordination and attainment of competitive edge?

A costumer led organization is focused on needs and not in products (Burton, 2017). As we can see on the case study, the new product offered by Volkswagen recently is related to current needs from customers. Customer have nostalgia from days where they were not overworked. In this case, as the company responds to those needs and focus on current needs, I would say that Volkswagen is a customer led organization.

The evidences are related to what I have already explained along the paper: customers feel nostalgia and they express their wish to come back to the days with any models, cells or pagers. The proposal of Volkswagen was a new product development: offer a New Beetle similar to that introduced in 1950. With this similar product, they tried to take advantage of the strong emotions and memories of that times gone. This new model is purely emotional and in this case, Volkswagen has correctly developed a product according to currents needs.

My opinion about Volkswagen being a consumer led organization in this case is also supported by marketing strategies. Marketing decisions taken by Volkswagen are directed to customer with a strong feeling of nostalgia. It is possible to see that different advertisements for the New Beetle make reference to the old Beetle. Some of that advertisements could be: “If you sold your soul in the ’80s,’ tweaks one ad, ‘here’s your chance to buy it back” or “Less flower, more power’, and ‘Comes with wonderful new features. Like heat”.

Conclusion

Volkswagen is an important and successful company within the manufacturing car industry. As it is explained along the essay, there are some positive points for Volkswagen, however, on the other hand, there are some other negative points which have seriously affected to the company.

Starting with positive points for Volkswagen, as the text explains, Volkswagen could identify the real needs of the customers, trying to increase the customer value proposing a product responding to current needs. The current needs from customers are related to nostalgia. Then Volkswagen proposed a car which is really similar to a model which was introduced in 1950. The new car is called: New Beetle and makes reference to that car proposed in 50s. Although the car is like the old one on the outside, the model has a lot of modern features. With this New Beetle tries to respond the new demand from customer according to their longing for nostalgia.

On the other hand, there are some mistakes made by Volkswagen that could damage its image. As it is explained, the “Volkswagen scandal” had a really bad repercussion, affecting many environmental forces above all. Cheating the emissions in the tests, resulted in a high contamination of the environment. As a final result, Martin Winterkorn, Volkswagen director, apologized to all customers and tried to survive of this situation. Some measures he proposed after the scandal was to change the slogan from “Volkswagen. Das Auto” to only “Volkswagen”.

Nowadays Volkswagen puts efforts in continuing with the production respecting the marketing environment forces and take in mind the current needs from customers as well, in order to offer the correct product to the right people in every moment.

References

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Justin Huggler, (2017). Volkswagen settles supplier dispute that brought factories to a halt. [online] The Telegraph. Available at: http://www.telegraph.co.uk/business/2016/08/23/volkswagen-settles-supplier-dispute-that-brought-factories-to-a/ [Accessed 29 Jan. 2017].
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Volkswagen-me.com. (2017). Volkswagen Competitive Advantage – Fleet – Volkswagen Middle East. [online] Available at: http://www.volkswagen-me.com/en-vwme/volkswagen/fleet/volkswagen-competitive-advantage.html [Accessed 29 Jan. 2017].

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