Organizational Performance Management and Measurement Subjects of Volkswagen Company: Analytical Essay

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1.0 Introduction

In this essay, it is going to mentioned the organizational performance management and measurement subjects of Volkswagen company by using several approaches such as marketing, human resources, financial and organisational structure and some measurement techniques to analyse companys’ todays placement and comparing over ten years period in the automotive industry. In this sector is going to change in near future due to the electric cars or self-driving vehicles, so researching of Volkswagen is interesting and valuable.

In order to identify the risks or market condition which is essential for Volkswagen, improving and effective management is a vital. To ensure development, those organisational approaches should be examined.

2.0 Overview of Volkswagen

Although, Volkswagen was founded in 1934 with the National Socialist project in Germany, these days the company is second biggest automobile and motor manufacturer worldwide, the biggest in Europe due to its share in market and has the most foreign manufacture locations of any German firm as an over thirty in seventeen countries. The Volkswagen Group employs are nearly 656,000 people who is lightly more than 50% are from Germany. Its cars are purchased by over 150 countries and its firms in 15 countries in Europe. Volkswagen Group has a distinct type of products such as motorcycles, cars and trucks beneath 12 varied brands, consist of the Volkswagen, Porsche, Audi, Ducati, Volkswagen Commercial Vehicles, Bentley, Lamborghini and Man at 61 locations in worldwide. (Porsiel, 2008) The German brand manufactured almost 11 million vehicles in 2018.

Therefore, the Volkswagen Group continues to provide and improve its sight in a steady manner while managing strategical changes and business functions.

3.0 Strategic Changes in Volkswagen over the last 10 years

The company confederated with another leading automobile producer Porsche at the end of a strained debate process in 2009. Volkswagen focuses on the main car production business. Its’ aims changed to reduce production costs and increase profitability in 10 years. To reach their targets, the company implements diverse strategies and business development programs. Additionally, identifying the future needs of consumers and to work to transform them into innovative technologies becomes a main target. Today, the company has extensive research and development departments to overcome technological challenges.

Because of monitoring worldwide movements and innovation activities are the part of their strategy’s’, the research department was conducted in Wolfsburg. The company also have research bases in different locations such as US, Japan and China. Sustainability is the foundation of Volkswagen’s corporate strategy and is included in the group’s value-added processes. According to their strategies, Volkswagen’s strategy for electric and hybrid vehicles in the coming years will enable the group to be a global economic and environmental leader among car manufacturers in these durations. (Mannix and Wheeler, 2017)

Volkswagen company has a several strategies to reach the level which is targeted. By using novel technologies and intelligent innovative attempts, they demand to high level of customer satisfaction. In future, their target is to have a sales more than 10 million units per year by catching the mean market share. Additionally, while doing all these processes, to be the best employer the world-wide with a first-class team. (Gong, 2013)

3.1 Leadership of Volkswagen

Some management researchers have argued that German executives have not yet synchronized with global leadership styles that are considered to tolerant and inspiring, very demanding and unwilling. According to some researchers, Germans had very low humanistic levels and high task orientation in business (Richardson et al., 2014).

Supported by the mentality of a manhood that belongs to a German culture, this means a high level of confidence, resistance and competitiveness in the workplace (Deresky, 2014). Since the location of the Volkswagen Group is in Germany, it can be said that these characteristics exist in the management of the company. It will be very important for the company to reassess its management styles and to align them with the globally fast-growing management styles of leadership.

3.2 Organisational Structure of Volkswagen

Management activity ensured by the Volkswagen Board of Management in accordance with the Volkswagen Articles of Association and implementation the rules of procedure for Volkswagen Board of Management issued by the Supervisory Board. Diversified committees which are constituted of representatives each department manage the whole group. Board of management which has independent improvement and business activities manage every group of company. In those ten years period, the company has done adjustments about the management of the organizational structure since September 2015. It is about to define the regional and functional responsibilities in detailed and reinforcement for every brands and regions. With these strategies, to improve the speed of making decisions is the main aim. It will give an empower of their tasks which includes up-to-date technologies and new toolkits. (Structure and Business Activities, 2015). The organizational structure of the company is very resilient with all tasks clearly explained. Due to the knowledge of employees about their job definition and expectation, the organizational structure has been the key factor to the powerful practise of previous strategies.

3.2 Market Force in Volkswagen

Volkswagen Company uses a variety of strategies to expand globally. These strategies include assessing the weaknesses of other companies or competitors in expanding their market share. In the last 10 years, Volkswagen Company has expanded globally by purchasing various motor vehicle companies around the world. He bought 20% shares of the Suzuki engine to meet emerging market opportunities in India and Southeast Asia. Current plans include securing shares in Spain, BMW, Audi and Spain, SEAT, Czech Republic and Skoda and Mercedes in the next three years. It also aimed to steal customers from Toyota, Honda, Ford and other companies selling vehicles in America by offering new styles at affordable prices. In addition, Volkswagen Company is focused on making existing brands more powerful rather than acquiring more global companies. Volkswagen Company acquired new markets in China. Research shows that Volkswagen is selling more vehicles than General Motors in China. Additionally, the Volkswagen Company has been working uninterrupted for the last 10 years to acquire new markets in South America, India and Africa. Automotive News Europe.

4.0 Business Functions of Volkswagen

Volkswagen group have distinct types of business functions to manage the company activities and improve the sustainability, quality and loyalty by customers. Those are organisational management, financial management, human resources and marketing which are based on producing cars, developing new technologies and selling their products to customer worldwide with the high level of customer and employee satisfaction.

4.1 Human Resources Management of Volkswagen

The Volkswagen company has around 200,000 employee whose most of them from Germany. Branding means diversity, justice, tolerance and equal opportunity. Because this innovative power is the foundation of creativity and performance. Company has a very supportive policy for young talents with about 5,000 professional trainees. The company offers its employees excellent career opportunities in worldwide and undertakes its social responsibility as a good and reliable employer entire world. (Volkswagen-Newsroom, 2019)

According to Volkswagen, to be an attractive employer, family-friendly human resources are the essential point. In the last 10 years, they have worked to provide greater equality between the sexes. Therefore, continuous work is being carried out to further increase the proportion of women in leadership positions. For each department in the company, goals have been set to encourage women with high potential in career management decisions. This approach is supported by a variety of measures, including the cross-brand Ment Management Mentoring Program designed to support women in their management positions. Volkswagen has also launched the ‘Career with Children’ project, which helps young mothers and fathers return from their parental leave and return, helping them to maintain their careers as effectively as possible. (Annual report 2016, Volkswagen)

In the near future, the Group proceeds to adopt the key and successful approach of human resources management with the ‘Transformation Authority’. These include a significant stakeholder focus in corporate governance, extensive participation rights for employees, exceptional training opportunities, long-term service principle through the retention of systematic employees, and a desire to balance performance and wages appropriately. (annual report 2017, Volkswagen).

4.2 Finance of Volkswagen

In 2018, Volkswagen constituted sales earnings of € 235.8 billion and so passed the previous year’s image by 6.3 billion euros. Improvements in volume and healthy business performance in the Financial Services Division were stabilised by contrary exchange rate effects. The effects of the implementation of the new International Financial Standards resulted in a general increase in sales revenues. Volkswagen Group generated 81.4% (80.7) of its sales revenue abroad. (Annual report, 2018)

Table 1. Sales Revenue of 2017 & 2018 (Annual Report, 2018)

Table 2. Sales Revenue over 10 years of Volkswagen (Statista, 2019)

While analyse the Volkswagen sales revenue in 10 years period from 2008 to 2018, It is clearly seen that there is an almost constant increase of value in billion euros basis. Although their sales were affected on a regional basis such as US market after the emission crisis in 2015, they continued with also a slight increase in 2016 on the basis of general sales.

Table 3. Operating Profit in ten years period of Volkswagen (Statista, 2019)

To examine the companys’ profit datas on a ten year basis, 2018 has the most improvements with a 13.920 million euros. As i mentioned in previous chart (Table.2 ) organisational faults could be effected companies’ financial situations. In profitability, this crisis has a huge impact on profits of 2015 with a – 4.069 million euros.

4.3 Marketing Operations in Volkswagen

The Group’s main activities are the design, production and distribution of cars and other vehicles worldwide. These activities consist two parts which are automobile and financial services. The automobile division includes the development of vehicles and engines as well as the production and sale of passenger cars, commercial vehicles and buses. The financial department includes vendor and customer finance, leasing, banking and insurance services. While considering some of the company’s unchanging marketing goals, We see that the brand is creating stronger brand awareness for its users and new customers. When we examine the global brand management seven years ago, we see that the company’s aim is to focus on the demands of the customers. When the demand is presented to an affordable customer, it is considered the beginning of innovations. This is the competitive advantage of the firm. Based on this, the company’s’ marketing aims to be the most innovative volume manufacturer in the best quality in all classes in the medium and long term.

In the premium segment, Audi has become one of the world’s most powerful car brands under the motto ‘Vorsprung durch Technik’. Its aim is to become the market leader in this segment. With the slogan ‘Simply Clever’, ŠKODA has become one of the fastest-growing brands, especially in Europe and China. The Spanish SEAT brand is aiming for stronger growth, especially in Europe, by sharpening the brand profile and focusing on unique brand values: dynamic, young and design-oriented.

To look at the company’s current and future marketing and advertising activities, they developed a sales and marketing strategy that targets exciting customers on a whole new level with the slogan of ‘customer delight’. Innovative and sustainable mobility provider for all commercial and private customers worldwide – with a unique product portfolio of twelve successful brands and innovative financial services. (annual report 2018)

5.0 Implementation of Measurement tools

It has long been acknowledged that performance measurement has a crucial role to act in the influential and effective management of organisations. (Neely, 1999) Volkswagen company also need several performance measurement tools to analyse its market situation and improvement of service quality.

5.1 STEEP Model Analysis of Volkswagen

Social influences play an increasingly important role in the growth of the business industry by impacting of sociocultural situations on customers’ preferences and habits. Social trends and people’s preferences change rapidly. The social differences between 10 years and today cause differences in customer preferences. Sociocultural factors affect both sales and marketing. For this reason, brands need to create sales and marketing strategies according to changes about their markets and cultures. (Silver, 2017)

The biggest technological trend facing Volkswagen is the development of self-driving cars which are designed with advances in artificial intelligence, terrain sensors, mapping cameras, radar technology and large data analytics. These driving technologies represents one of the greatest technological threats, not only because it drives people, but also the concept of vehicle ownership. (Gibbs, 2017)

Although Volkswagen is the biggest automaker in the European Union with nearly 25% of the market and more than 4.7million cars sold, the economic issues revolve around the economic impact of political turmoil such as Brexit. These kinds of situations inflation and a decline in consumer spending, leading to a decline in demand for new cars (Bolduc Douglas, 2017). Brexit resulted to increase in car prices by 5% making it hard for consumers to purchase new cars. (Brian, 2017)

Increased public demand for electric vehicles, vehicle sharing services and the continuous development of self-driving vehicles have created a growth opportunity for Volkswagen and other vehicle manufacturers who can renew and dominate this trend. (Lujan, 2017)

Due to political environment and current political tensions between countries affects company’s activities. For instance, in June 2018, US President Donald Trump threatened to impose 20% tariffs on all vehicles imported from the EU; this would bring a tariff increase from the tariff tax of 2.5% in effect since the 1960s.(Fleming, Donnan & Brunsden, 2018)

5.2 Porter Five Forces Model Analysis of Volkswagen

Threat of New Entrants: In the automotive industry, it may not seen as a threat. Accessibility in the market includes all obstacles in this section. (Grant, 2010) As a result, it is clearly seen that this is a low threat to Volkswagen, because a new automobile company already needs huge capital investments, resources and a lot of time to compete with existing cars and market its brand. (Parkin Rich et al, 2017)

Bargaining Power of Suppliers: The number of suppliers in the market is quite high compared to buyers. This situation leads suppliers to have less control over prices, weakening the bargaining power of suppliers. Volkswagen could buy goods at low cost from the supplier, so that the company can earn a high profit. (Frankrijk, 2017)

Bargaining Power of Buyers: While the majority of buyers expect prices to fall, services and quality expectations are also increasing. In addition, buyers have a wide range of car models to decide on. The presence of competitors increased the factors affecting the purchasing decision including quality, price, after-sales service and the design of the vehicle. They are also influenced by the lifestyle of people who influence their choices. (Navoda, 2012) Automobile Industry Analysis. Due to their similarity to other competitors in the designs and specifications of Volkswagen, buyers are not limited to several car options. The availability of competing cars as well as the cost of brands, provides buyers with high bargaining power.

Threat of Substitute Products or Services: Volkswagen can focus on providing higher quality in its products. As a result, buyers will choose products that provide higher quality at a lower price than the replacement products with a higher quality but higher price. As a result, the threat of substitutes depends on economic balance. (Meredith, 2017)

5.3 Stakeholder analysis of Volkswagen

For the company, their customers, shareholders, employees and the community is the most important asset. The Group has an importance awakeness of working ethically and with integrity.

Volkswagen constantly exchanges information and opinions with its stakeholders due to various demands and expectations directly affecting the Group’s economic success. A concept of stakeholder management, which analyses economic, ecological and social challenges in a systematic process through value chains, was developed in 2013 to meet these requirements in a targeted manner. Dialogues, workshops, symposiums, public debates, social media, surveys and projects have begun to communicate with various stakeholders of the company in an open, constructive and equal way. The stakeholder dialogues are documented in an IT-based stakeholder management system customized for the Volkswagen Group, and published in annual sustainability reports to make the interactions with stakeholders transparent and understandable. More than 10,000 companies and other stakeholders from more than 130 countries work together to create a more sustainable and equal world economy. (Annual report 2013)

Nowadays, the issue of diesel, initiated a process in which corporate culture was strengthened. This development led to the launch of programs and projects designed to intensify the collective integrity of Volkswagen. Internal control systems for product development process and vehicle testing were strengthened. The frequency of training courses given to the personnel was increased. The company is renewing itself from the inside out and developing to deserve the trust of stakeholders.

5.4 SWOT Analysis of Volkswagen

SWOT is a founded analysis for supporting the formularisation of strategy. Swot could be assisting to creating new strategic attempts, but a strategic improvement operation also needs remarkable analysis and testing of novel attempts before adoption. (Dyson, 2002)

To evaluate Volkswagen, analysis may start with strengths. The company has the largest product scale between all rival companies. It produces cars, trucks, buses and toolkits. Great brand recognitional over the world is another essential strength for the company. It produces a huge number of vehicles because of the demand. Well-managed operations could be assisted company’s’ effectiveness.

Weaknesses of the company are placement in the US car market. Because of the diesel scandal in 2015 their reputation damaged and image of the brand effected in a negative way. So that the brand inside and outside US decreased its value. Most of their cars are not environmental. Todays’ world, it has an essential importance to protect the environment.

Opportunities of the company is improving demand for autonomous cars. Volkswagen is planning to produce its autonomous vehicle in 2025. Fuel prices are expected to increase in the future. Volkswagen could also plans to meet the first electric car before 2020 and benefit for the improving desire for them.

Threats of the company are intense competition in market. Although there are a lot of traditional automobile firms, the novel players such as electric cars or autonomous vehicle producers will be occur. The government regulations are increasing. Their demand such as reducing greenhouse gas emissions are affected the company.

6.0 Strategy for next decade of Volkswagen

Volkswagen has adopted 2025 new group strategy to become the world’s leading Sustainability Mobility provider. Digitization, autonomous driving, making crucial electrolytic innovations and battery technology are going to be their new qualifications. Because of more than 30 new e-vehicles will be launched, the annual volume will help increase sales to two to three million units. Due to the improvements made throughout the Group in efficiency and optimization of the portfolio, the projected investment will reach a double digit billion market. The return on capital is expected to be 15 percent in the automotive sector by 2025, and sales are estimated to be between 7 and 8 percent. As a term TOGETHER defines the concept of mentality that will be more crucial for the long-term success of the Volkswagen Group. With the new Group strategy is to create forward-looking, customized mobility solutions for everyone, who will continue to inspire our customers to produce exciting vehicles and meet their diverse needs with a powerful brand portfolio.

As a result, the company will target technological leadership in the market, assure their profitability and at the same time become an excellent, trustworthy and safe employer. (Annual report, 2018)

7.0 Conclusion

As a result of Volkswagen case study it is clearly shown that the importance of organisational management and measurement systems so that they could affect companies situations in the industry.

By using distinct types of performance measurement tools and analysis, the company analyses had done with several approaches. This report examined Volkswagens’ market share in industry, strong or weak points in an internal or external scope, to compare their existing and future strategies, business functions. To ensure the company’s’ sustainability and improvement, the future must be implemented and creating new techniques to keep up-to-date and meet customer needs in such a competitive sector. Improvement of brand value Volkswagen should not give up its future aims by ensuring the remarkable organisational management process.

Considering Volkswagen 2025 strategy, with existing 2018 strategy, they should be focus on reinforcement of the company’s brand and its sustainability. To improve company’s’ marketing approaches and sales, new countries could be choosing to expand by drawing new routes. Every novel market has an essential potential to expand its market share.

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