A STUDY ON

“STUDY ON VOLKWAGEN AND ITS BUSINESS

STRATEGY ACROSS THE WORLD”

Submitted by
RISHABH JAIN
OU ID : 128919404001

Under the guidance of

SAHERA FATIMA
Lecturer (FT), EThames College

Project submitted in partial fulfillment for the award of the

Degree of
BACHELOR OF COMMERCE (FOREIGN TRADE)
By
Osmania University, Hyderabad – 500016
DECLARATION
CERTIFICATE
ACKNOWLEDGEMENT
ABSTRACT
CONTENTS
 INTRODUCTION

A brief journey through

a long history

When in 1937 the company known as "Gesellschaft zur Vorbereitung des

Deutschen Volkswagens mbH" was founded, no one could have guessed that it
would one day be Europe's largest carmaker. The history of the company - with
all its trials and tribulations - is first and foremost a story of impressive success.

1937-1945

On May 28th, 1937 the "Gesellschaft zur Vorbereitung des Deutschen

Volkswagens mbH" company was founded, and in 1938 it was renamed as
"Volkswagenwerk GmbH". The early 1938 witnessed the commencement of the
construction of the Volkswagenwerk plant which housed the production of the
vehicle designed by Ferdinand Porsche.

1945-1949

After the end of the Second World War, the responsibility of Volkswagenwerk
was placed in the hands of the British Military Government. Under the
management of Major Ivan Hirst, mass production of the Volkswagen Beetle
had commenced.

1949-1960

In 1950 the Type 2 went into production, expanding the company's product
range. Even today, the Volkswagen Bus is popularly known as the "VW Bully".
In 1956 a separate manufacturing base for the Transporter was established in
Hanover, while establishing the roots for today's Volkswagen Commercial
Vehicles brand.

1960-1980

In 1972 Volkswagen broke the world record for the greatest number of cars

produced by assembling 15,007,034 units of the Beetle. Volkswagen surpassed
the legendary mark achieved by the Ford Motor Company's Model T, popularly
known as the "Tin Lizzy". In 1973 the Passat was the first model of the new
generation of Volkswagen vehicles to go into production. Following the Passat,
the first Golf was built at the Wolfsburg plant. The compact saloon quickly
became a hit, and became the legitimate heir of the legendary Beetle. The same
year also witnessed the launch of the sporty Scirocco. In 1976 the first Golf GTI
rolled off the production line. 

1980-1990

In June 1983 production of the second-generation Golf began. The car was
designed for a largely automated assembly process. Designated Hall 54, robots
were deployed for the first time in vehicle manufacture.

1990-2000

The Lupo 3L TDI, was the first production car to offer fuel consumption of just
three litres per 100 kilometres. 

2000-2003

In August 2002, Volkswagen Slovakia, began mass production of the Touareg, a

luxury-class off-roading vehicle. This marked Volkswagen’s position in an entirely
new market segment.

In 2003 production of the fifth-generation Golf started, embodying a new

dynamism in its design and engineering.

Sustainability and CSR at Volkswagen India

Volkswagen India Pvt. Ltd (VWIPL) shall work towards protection of the

environment and contribute to the development of humanity and society in line
with VW Group philosophy. The group shall also manufacture environment
friendly, quality, and safe products and services.

We shall undertake programs that enhance the quality of life and provide unique
and enriching opportunities connecting diverse groups that in the long term will
result in sustainable partnership shaping the communities in which VWIPL
employees live and work.
Reporting framework

The reporting of CSR activities shall be in accordance with the format prescribed
by the Government, Ministry of Corporate Affairs, vide Notification GSR 129 (E)
dated 27.2.14.

The surplus arising out of the CSR projects or programs or activities shall not form
part of the business profit of Volkswagen India Pvt. Ltd.

The above CSR Policy shall continue to be in force until amended by the Board in
a meeting of the Board of Directors in future.

BACKGROUND

Volkswagen group is an automotive conglomerate consisting of several brands

of vehicles for a range of customer groups at a range of prices. It is one of the
top automotive manufacturer’s in the world and is the top automotive
manufacturer in Europe (Volkswagen, 2011a). Beginning in the late 1930s,
Volkswagen created tanks and driving equipment for Nazi Germany during
World War II. After the war, Great Britain had the choice to either destroy the
Volkswagen plant or continue production. They saw potential in Volkswagen
and decided to allow it to continue to manufacturer vehicles. Volkswagen grew
during the next few decades; acquiring new brands and expanding the brands it
had with new vehicles to fit the growing demand of consumers (Volkswagen,
2011a.) Today, Volkswagen is recognized as a unique and distinct car brand. It
is recognized through its one of-a-kind vehicles like the Beetle and the Tiguan
as well as for its innovative advertising. Volkswagen is not afraid to take risks
and stand out from the crowd (Volkswagen, 2011a). They are one of the only
automotive manufacturers to work with clean diesel and have a strategy plan to
build and sell an electric car for each customer group they serve (Volkswagen,
2011a). They firmly believe in the responsibility they have to better the
environment and, because of this, wrote an 80-page sustainability report with
goals and objectives for the future of their company both through environmental
decisions and responsibilities to promote education and stability in their local
communities (Volkswagen, 2011a). From its troubled beginnings to its slow and
steady rise to the top of the automotive world, Volkswagen has never forgotten
what its sole purpose was: to be the people’s car. No matter what has happened,
Volkswagen has always put the customer first and designed and sold vehicles
for them.
About Volkswagen Group

Volkswagen Group, also called Volkswagen AG, major

German automobile manufacturer, founded by the German government in 1937
to mass-produce a low-priced “people’s car.” Headquarters are
in Wolfsburg, Germany.

The company was originally operated by the German Labour Front (Deutsche
Arbeitsfront), a Nazi organization. The Austrian automotive engineer Ferdinand
Porsche, who was responsible for the original design of the car, was hired by the
German Labour Front in 1934, and ground was broken for a new factory in the
state of Lower Saxony in 1938. The outbreak of World War II in 1939 occurred
before mass production could begin, and the factory was repurposed to produce
military equipment and vehicles. Volkwagen’s military involvement made its
factory a target for Allied bombers, and by the end of the war the factory was in
ruins. It was rebuilt under British supervision, and mass production of the
Volkswagen began in 1946. Control of the company was transferred in 1949 to
the West German government and the state of Lower Saxony. By that time,
more than half of the passenger cars produced in the country were
Volkswagens.

Volkswagen production expanded rapidly in the 1950s. The company

introduced the Transporter van in 1950 and the Karmann Ghia coupe in 1955.
Sales abroad were generally strong in most countries of export, but, because of
the car’s small size, unusual rounded appearance, and historical connection to
Nazi Germany, sales in the United States were initially sluggish. The car began
to gain acceptance there as the 1950s progressed, however, and Volkswagen of
America was established in 1955. The American advertising agency Doyle
Dane Bernbach was hired to represent the brand in 1959, and the result was a
landmark advertising campaign that helped to popularize the car as the “Beetle”
and promoted its size and unconventional design as an advantage to the
consumer. The campaign was very successful, and the Beetle was for many
years the most-popular imported automobile in the United States. Although
Volkswagen made many detail changes to the Beetle, the basic rear-engine
design and rounded shape remained the same. The company developed other
rear-engine models with more-modern styling and improved engineering, but
none were as successful as the Beetle.

Competition from small cars with more-modern designs and the company’s
increasingly troubled finances eventually dictated a change in corporate
philosophy toward developing more-contemporary and sportier car models. As
a result, Volkswagen began phasing out its rear-engine cars in the 1970s,
replacing them with front-engine front-wheel-drive designs. The first of those
new cars was the short-lived K70 in 1970, followed by the Passat in 1973. Most
significant, however, was the Golf, initially called the Rabbit in the United
States, which was introduced in 1974. The Golf was an instant sales success,
effectively replacing the Beetle in the company’s lineup and ultimately
becoming Volkswagen’s best-selling model worldwide.

Competition from small cars with more-modern designs and the company’s
increasingly troubled finances eventually dictated a change in corporate
philosophy toward developing more-contemporary and sportier car models. As
a result, Volkswagen began phasing out its rear-engine cars in the 1970s,
replacing them with front-engine front-wheel-drive designs. The first of those
new cars was the short-lived K70 in 1970, followed by the Passat in 1973. Most
significant, however, was the Golf, initially called the Rabbit in the United
States, which was introduced in 1974. The Golf was an instant sales success,
effectively replacing the Beetle in the company’s lineup and ultimately
becoming Volkswagen’s best-selling model worldwide.

In mid-2015 Volkswagen briefly held the distinction of being the world’s

largest car manufacturer by volume after surpassing Toyota Motor Corporation.
However, shortly thereafter Volkswagen faced a public relations crisis when the
U.S. Environmental Protection Agency (EPA) determined that the
manufacturer’s diesel-powered cars contained software that altered the vehicle’s
performance in order to pass emissions tests. Volkswagen admitted to installing
the “defeat device,” and it recalled more than 10 million automobiles
worldwide. In the United States alone, the carmaker faced fines of more than $4
billion, and several Volkswagen officials later were found guilty of various
crimes. Despite the scandal, Volkswagen sales worldwide continued to increase.

In 2019 Volkswagen ended production of the Beetle, which had undergone

various redesigns over some eight decades.

Mission statement

Our goal as a company is to offer not only a wide variety of vehicles to our
customers but also to make them the best in their class by exceeding our
competitor’s image. We have three different customer groups we try to satisfy:
young single adults (18-34), families, and adults with retirees (50+). Along with
exceeding our expectations from our customers, we want to build a stronger
company for our future and better our stockholders investment. We will produce
our vehicles with safety, reliability, efficiency, speed, operating ease and
environmentalism in mind. Volkswagen’s extensive activities present people
with attractive and innovative options for individual mobility in the future
(Volkswagen 2011o). We are committed to becoming a world leader and will
achieve this by using intelligent innovations and technologies, while at the same
time delivering customer satisfaction and quality (Volkswagen 2011m). We will
consistently research upcoming technology as well as social trends so that we
will be able to serve our customer’s exactly what they want, how they want it,
and when they want it. Volkswagen will strive to promote, produce and sell its
vehicles and services in all of our car brands throughout the world. By doing so,
we are in hopes of becoming the largest and the best car manufacturer in the
world. We will build factories all over the world for local markets and support
the local economies of each location through our factories and plants. We will
have a stronghold in Germany, Slovakia, China, India, Indonesia, Russia,
Brazil, Argentina, Portugal, Spain, Poland, Mexico, Bosnia and the United
States. We will continue to grow and expand into other nations. We will
continue to introduce our brand of vehicles into new nations and grow from our
current level of 150 countries. We will become a worldwide-recognized brand
and support the local economies in every way possible. Essentially, we will
cover the globe (Volkswagen, 2011a), (Volkswagen, 2011o), (Volkswagen,
2011p), (Volkswagen, 2011n).

Volkswagen - Logo and its meaning

The Volkswagen logo is made up of the company's initials, with the "V"
positioned above the "W," and both letters interacting beautifully.
 T
he Volkswagen Logo

The blue color of the Volkswagen emblem stands for quality, reliability, and
class, while the white hue stands for nobility, purity, and charm.

Volkswagen - Business Model

Innovation-driven VW introduces new models on a regular basis. It adjusts to fit

local needs and focuses on the unique characteristics of each country (esp. in
growth markets). VW seeks to decrease costs through efficient manufacturing
methods and economies of scale while stressing the requirement for quality.
"Offer beautiful, safe, and ecologically sound cars that can compete in an
increasingly competitive market and establish world standards," says the
organization.
VW secures control and exploits its scale by a degree of centralization, but its
worldwide presence allows it to accommodate for local specifics: R&D
(including worldwide trend reconnaissance and technology scouting) is
headquartered in Germany, with subsidiary research hubs in the United States,
Japan, and China. Similarly, Group procurement buys manufacturing supplies,
services, and Capex in bulk to maximize negotiating power, but it does so from
39 sites in 23 countries.
VW develops sustainable, long-term relationships with a range of suppliers and
requires a high level of quality and dedication to ensure steady and efficient
flows of high-quality and innovative sourced components.
The Group's multi-brand approach encourages internal competition, encourages
switchers to try new brands, and appeals to a wide range of individuals. Because
of its strict hierarchical brand design with sub-brands, internal cannibalism of
sales is reduced. Passenger (VW), premium (Audi), luxury (Porsche), and
commercial business holding firms are the four product categories in the
corporation. The brands are translated into the corporate hierarchy and are used
to arrange the business in order to represent customer preferences within the
company.

Volkswagen - Revenue and Growth

The Volkswagen Group proved the robustness of its business model in 2021.
The company increased its overall resilience and improved its capabilities to
cope with constraints. Overhead costs were successfully reduced, capex
discipline was high and the break-even was lowered. At the same time
Volkswagen drove its transformation to NEW AUTO forward. A solid profit
was achieved despite strong headwinds from semiconductor shortages that led
to a decrease in vehicle sales of around 600,000 units compared to 2020. This
was 2.4 million fewer units than 2019. Although sales volumes were down 6
percent on prior year, sales revenue increased by 12 percent to EUR 250.2
billion. Operating profit before special items almost doubled compared to 2020
and reached a solid level of EUR 20.0 billion. The operating return on sales
before special items also climbed to 8.0 percent after 4.8 percent in prior year.
Key to this financial performance was a better mix and favorable pricing. The
Automotive Division generated a strong net cash flow of EUR 8.6 billion, a 35
percent year-on-year increase. The Automotive Division’s net liquidity
remained almost unchanged compared to the end of 2020, at EUR 26.7 billion.
However, this corresponds to an increase of more than EUR 5 billion since the
end of 2019, despite the multitude of transformational steps that have been
taken in this timeframe, including the acquisition of Navistar. The Board of
Management and Supervisory Board are proposing a dividend of EUR 7.50 per
ordinary share and EUR 7.56 per preferred share, an increase of 56 percent
compared to EUR 4.80 or EUR 4.86, respectively, in the preceding year. This
equals to a payout ratio of 25.4 percent. Earnings per ordinary share amounted
to EUR 29.59 (16.60) and earnings per preferred share were at EUR 29.65
(16.66).

Volkswagen – Investments

Date Organization Name Round Amount

Jun 9, 2021 Northvolt Venture Round $2.8B
Apr 28, 2021 IRP Systems Series C $31M
Date Organization Name Round Amount
Mar 15, 2021 Northvolt Corporate Round -
Nov 30, 2020 TuSimple Series E $350M
Sep 29, 2020 Northvolt Venture Round $600M
Jun 16, 2020 Audi AG Secondary Market $267M
Jun 16, 2020 QuantumScape Corporate Round $200M
Nov 14, 2019 credi2 Series A -
SeeReal
Aug 30, 2019 Corporate Round -
Technologies
Jul 12, 2019 Argo AI Corporate Round $2.6B
Jun 12, 2019 Northvolt Corporate Round $600M
May 7, 2019 Gett Series E $120M
Nov 12, 2018 ONO Grant $50K
Jun 21, 2018 QuantumScape Corporate Round $100M
Jun 7, 2018 Gett Series E $80M

Volkswagen - Challenges Faced

Economic volatility and greater competitiveness, as well as the costs of the

current diesel crisis and new, time-consuming exhaust testing in the European
Union, are among the issues.
According to chief financial officer Frank Witter, the cost of executing the
Worldwide Harmonized Light-Duty Test Procedure (WLTP) testing surpassed
€1 billion (S$1.6 billion). Production increased by 13.5 percent in the second
quarter, more than twice the growth rate of deliveries, as the automaker
prepared for the regulation change. Volkswagen warned earlier this year that
inventories might pile up ahead of the WLTP's implementation on September
1st.
VW is grappling with political issues as well as internal transformation in the
aftermath of the three-year-old diesel scandal, which continues to haunt the
industrial juggernaut.
The business incurred penalties of €1.64 billion, mostly due to a punishment
imposed by German authorities, bringing the total losses to almost €27.4 billion.
Mr. Rupert Stadler, the now-suspended chief of Audi's premium division, was
arrested by Munich prosecutors in June and is still detained.
As per a spokesperson, a subsequent partnership with Ford in light commercial
vehicles would allow the companies to pool development resources for
electrification, lowering one-time costs in areas such as battery-powered and
self-driving cars, both of which are gaining pace at the same time.