Globalizing Volkswagen:

Creating Excellence on
all fronts
 Automotive Industry Trends in the period of the 90s
• Revolutionary changes in manufacturing processes (system based
on a network of suppliers, JIT, lean systems, outsourcing, kanban) - report
from MIT (Massachusetts Institute of Technology)

•The change in perception and consumer lifestyle (marked the emergence

of a variety of niche segment)

• Environmental issues and fuel efficiency

• The rapid development of business support car manufacturing

industry (finance, insurance, credit cards and leasing)

• The strategic alliance between the car manufacturer in R & D

 MANAGING PRODUCTS PORTFOLIO:
..through the heart and soul of the brand

Gradual change in perception of the company's line of

products:
• Audi having elevated into premium luxurious cars
• Volkswagen moved upmarket to fill the void left
by Audi (the fifth-generation Passat launched)
• Seat and Skoda now occupying what was once
VW's core market
• In 1994, start the development of new bettle
• This (VW) move upmarket was continued with
the Mark 4 Golf, introduced at the end of 1997
Global manufacturing system, modular production
and platform strategy

• Integrate VW plants within the same region

• Similarity of the platform allowed for short set up times in factory,
underutilized plants receive parts from other plants
• Flexible production schedule, improve the flexibility and efficiency
of production
• Foreign employment level had increased from 41% (1993) to 51%
(2001)
• Worker in Wolfsburg had their work time reduced by 20% and
received 16% less salary (in 4-day workweek)
• In all modular production facilities, wages are dramatically lower
and unions are much weaker than in traditional auto plants
 Strategy options
Appropriate strategy:
 Use similar parts
 Badge manufacturing (same car with diff brands)
 Platform sharing (same manufacturing space for many cars)
- Faster development times
- Low development costs
- Easy to achieve Economies of scale
- under utilized plants picked up
 Polo vs. Golf
 World class manufacturing
Innovative approaches:
 Audi engine plant in Hungry
- Became component supplier to VW group
- 1 Million engines, over 50,000 Audi TT
- Biggest exporter of Hungry

 Skoda plant in Czech Republic

- Forefront of supplier Integration of Europe
- 6 integrated online suppliers (carpets, seats, exhaust systems, dashboards )
- Most cost-effective in Europe
- Increased Output per employees
- 10.1 (1994)
- 30 (1998)
 World class manufacturing
 VW plant in Resende, Brazil (1996)
- Most innovative factory in world
-30,000 trucks and buses per year
- Responsible only for final quality control
 Modular manufacturing systems (2000)
- 11 modules
-Common for many car models
- Total capacity- 10 million units
 Flexible production schedule in Germany, 5000 X 5000 program
- Flexibility of production with Union
-Aligning production and sales
- Less inventory
- Vary working hrs with demand (48 hrs in peak)
- Promise to reduce unemployment by 50%
- Guaranteed fixed salary (depending on employees competency)
 World wide sales
 North America
- NAFTA countries (US, Canada, Mexico) – massive growth
-Increase in US market share from 1% (1993) to 5% (2000)
- Shortage of vehicles – imported from Brazil and Europe

 Asia and Europe

- Command over 51% of Chinese market share
-Local production sites, suppliers relocation to comply with the local demand
- Highly competitive market European market
- Ford Europe struggling with high production bases
- market share dropped from 13.5 to 10.8
- Lost around $2.7 billion and reduced the production capacity from 2.3 million to 1.6 million in 2001
- Opel (European Division of GM) – focus on developing countries
- Failed to achieve cost efficiency
- Market shares dropped down from 12.9% to 10.8% (1994 – 2000)
Distribution and Financial systems
 Physical differentiation of VW and Audi
- Large price range among the products( diff. dealership/independent roof)
- Opportunity to build own delivery centre and theme park in Wolfburg
- Team “Autostadt” – tourist attraction
-2 engine cylinders (Auto towers), storage of ready for delivery cars, can handle 1000
cars daily, display of history of cars and modern production process

 Financial Services
 Retail customers
 Car credits, leasing and insurance services
 Fleet customers
 Dealer services (working capital loan, investment loan and financing of inventories)
 Volkswagen banks (credit cards, bank a/c mortgages, online and telephone banking)
1993-2002 - PIECH transform VW into big cash machine
• Piech is a car-obsessed engineer and
perfectionist.
• Piech has claimed that the three great loves of
his life are: Volkswagen, family, and money.
• Breaking the old traditions: arranged new Ferdinand Piech,
product portfolio and new manufacturing “the driven man of VW”
strategy
• Strict management policy. Many speak that he
uses dictatorial management style.
• Piech is known for his determination and
ambition.
• His aggressive style moves VW groups into
new market segments (Bugatti, Lambo,
Bentley, etc)

Piech said: "You don't win battles by being friendly."

 Piech’s Way
• Introduction of 4 day work week
• Annual work time reduced by 20% and 16% less salary to
employees
• 20% reduction in Board members salary
• Reduced number of Board members from 9 to 5
• Believed in open competition between the brands
• Different brands were free to make their decisions as long as
they produced good results
• Technology sharing between the brands
 VOLKSWAGEN FUTURE
CHALLENGE
• Keep the competitive advantage
sustainable.

• Maintaining economies of scale

from global manufacturing and
sales worldwide

• Environmental issues:
• Aware of the role of new
technologies (efficient Diesel
engine, flexible-fuel vehicles)
 Question 1
• CHALLENGES and PROBLEMS that arose
– Changing consumer needs
– Weak model line-ups (VW Car prices are considered not reasonable by
the consumer)
– Over staffing
– Inefficiency (the other car manufacturers are able to produce with more
efficient)
– High cost base (cost of plant operations is too high)
– Less market share in US and to some extent Europe due to the
dominance of Ford and Opel
– Lack of integration between the brands managed resulting in
unnecessary duplication of costs
 A G EN
O LKSW tory:
V
cc e ss s tegy
su s tra
o rm
Platf

Modular
manufacturing
system
“PLATFORM D”

(wiring-
steering-
braking
diagrams)
VW PHAETON AUDI A8 4.2
 Question 5
• Open communication among the Board members
(Information sharing – all can present their ideas)
• Organic structure (can express their views freely as long
as each brand contributes equally)
• Decentralize at brands level
• Work time and salary is reduced
 THANK YOU
Submitted By :
Ashwath P
Bakul Sanakal
Fenella Andrade
Sarah