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 Degree College

Project submitted in partial fulfillment for the award of the

Degree of
BACHELOR OF COMMERCE (VOCATIONAL)
By
Osmania University, Hyderabad – 500016
DECLARATION
CERTIFICATE
ACKNOWLEDGEMENT
ABSTRACT
CONTENTS
INTRODUCTION
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 Bern bach 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 line up 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 line up 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.

What is strategy?

Strategy is an action that managers take to attain one or more of the organization’s goals.
Strategy can also be defined as “A general direction set for the company and its various
components to achieve a desired state in the future. Strategy results from the detailed
strategic planning process”.

A strategy is all about integrating organizational activities and utilizing and allocating the
scarce resources within the organizational environment so as to meet the present objectives.
While planning a strategy it is essential to consider that decisions are not taken in a vaccum
and that any act taken by a firm is likely to be met by a reaction from those affected,
competitors, customers, employees or suppliers.

Strategy can also be defined as knowledge of the goals, the uncertainty of events and the need
to take into consideration the likely or actual behavior of others. Strategy is the blueprint of
decisions in an organization that shows its objectives and goals, reduces the key policies, and
plans for achieving these goals, and defines the business the company is to carry on, the type
of economic and human organization it wants to be, and the contribution it plans to make to
its shareholders, customers and society at large.

What is business strategy?

Business strategy is vital for any company seeking to grow its business in a strategic manner,
but what exactly is a business strategy? 
Put simply, Business strategy is a clear set of plans, actions and goals that outlines how a
business will compete in a particular market, or markets, with a product or number of
products or services.
 So, how do you plan a business strategy...?
A business strategy must take into account a number of factors including the market,
competitors, and the business environment, as well as the company's structure, strengths and
weaknesses. It should also be flexible enough to handle change. Planning and preparing a
business strategy therefore requires strong skills in strategic planning and business analysis,
as well as a good understanding of functions like marketing, sales, and distribution.
What you need: a changing business strategy for a changing world…
Business strategy involves covering off the basics, as listed above, but what is needed to
formulate a successful business strategy? Today's world is in continual change.
Business is not the same today as it was yesterday - or what it will be tomorrow. So any
business strategy must be:

 Flexible
 Adaptable
 Anchored in up-to-date research

Different types of business strategies…

New companies often face unique challenges. Specific strategies, such as identifying
product strengths, adjusting pricing, or acquiring another business, have historically been
used to get a small enterprise off the ground. Understanding these strategies, and skillfully
implementing them, can help entrepreneurs achieve success.
Growth Strategy of New Products or Features

A growth strategy entails introducing new products or adding new features to existing
products. Sometimes, a small company may be forced to modify or increase its product line
to keep up with competitors. Otherwise, customers may start using the new technology of a
competitive company.

For example, cell phone companies are constantly adding new features or discovering new
technology. Cell phone companies that do not keep up with consumer demand will not stay
in business very long.

Finding New Markets for Products

A small company may also adopt a growth strategy by finding a new market for its
products. Sometimes, companies find new markets for their products by accident. For
example, a small consumer soap manufacturer may discover through marketing research
that industrial workers like its products. Hence, in addition to selling soap in retail stores,
the company could package the soap in larger containers for factory and plant workers.

Product Differentiation Strategy

Small companies will often use a product differentiation strategy when they have a
competitive advantage, such as superior quality or service. For example, a small
manufacturer or air purifiers may set themselves apart from competitors with their superior
engineering design. Obviously, companies use a product differentiation strategy to set
themselves apart from key competitors. However, a product differentiation strategy can also
help a company build brand loyalty.

Price-Skimming Strategy

A price-skimming strategy involves charging high prices for a product, particularly during
the introductory phase. A small company will use a price-skimming strategy to quickly
recover its production and advertising costs. However, there must be something special
about the product for consumers to pay the exorbitant price. An example would be the
introduction of a new technology.

A small company may be the first to introduce a new type of solar panel. Because the
company is the only one selling the product, customers that really want the solar panels
may pay the higher price. One disadvantage of a price-skimming is that it tends to attract
competition relatively quickly. Enterprising individuals may see the profits the company is
reaping and produce their own products, provided they have the technological know-how.

Acquisition Strategy to Gain Competitive Advantage

A small company with extra capital may use an acquisition strategy to gain a competitive
advantage. An acquisition strategy entails purchasing another company, or one or more of
its product lines. For example, a small grocery retailer on the east coast may purchase a
comparable grocery chain in the Midwest to expand its operations.

What Is Marketing?
Marketing refers to activities a company undertakes to promote the buying or selling of a
product or service. Marketing includes advertising, selling, and delivering products to
consumers or other businesses. Some marketing is done by affiliates on behalf of a
company.

Professionals who work in a corporation's marketing and promotion departments seek to get
the attention of key potential audiences through advertising. Promotions are targeted to
certain audiences and may involve celebrity endorsements, catchy phrases or slogans,
memorable packaging or graphic designs and overall media exposure.

Marketing as a discipline involves all the actions a company undertakes to draw in

customers and maintain relationships with them. Networking with potential or past clients is
part of the work too, and may include writing thank you emails, playing golf with
prospective clients, returning calls and emails quickly, and meeting with clients for coffee or
a meal. At its most basic level, marketing seeks to match a company's products and services
to customers who want access to those products. Matching products to customers ultimately
ensures profitability.

Types of Marketing
Digital Marketing

Digital marketing, also called online marketing, is the promotion of brands to connect with
potential customers using the internet and other forms of digital communication. This
includes not only email, social media, and web-based advertising, but also text and
multimedia messages as a marketing channel.

Influencer Marketing

Influencer marketing focuses on leveraging individuals who have influence over potential

buyers and orienting marketing activities around these individuals to drive a brand message
to the larger market.

In influencer marketing, rather than marketing directly to a large group of consumers, a brand
inspires or compensates influencers (which can include celebrities, content creators, customer
advocates, and employees) to get the word out on their behalf.

Relationship Marketing

Relationship marketing refers to strategies and tactics for segmenting consumers to build

loyalty. Relationship marketing leverages database marketing, behavioural
advertising and analytics to target consumers precisely and create loyalty programs. 

Viral Marketing

Viral marketing is a marketing phenomenon that facilitates and encourages people to pass

along a marketing message.

Nicknamed “viral” because the number of people exposed to a message mimics the process
of passing a virus or disease from one person to another.

Green Marketing

Green marketing refers to the development and marketing of products that are presumed to be

environmentally safe (i.e., designed to minimize negative effects on the physical environment
or to improve its quality).

This term may also be used to describe efforts to produce, promote, package, and reclaim
products in a manner that is sensitive or responsive to ecological concerns.

Keyword Marketing

Keyword marketing involves placing a marketing message in front of users based on the

specific keywords and phrases they are using to search.

A key advantage of this method is that it gives marketers the ability to reach the right people
with the right message at the right time. For many marketers, keyword marketing results in
the placement of an ad when certain keywords are entered.

Note that in SEO, this term refers to achieving top placement in the search results themselves.
Guerilla Marketing

Guerilla marketing describes an unconventional and creative marketing strategy intended to

get maximum results from minimal resources.

Outbound Marketing

Outbound marketing is a newer term for traditional marketing coined when the term inbound
marketing came into popular use. 

In outbound marketing, the marketer initiates contact with the customer through methods
such as TV, radio and digital display advertising. It is often used to influence consumer
awareness and preference for a brand. 

Inbound Marketing

Inbound marketing is marketing in which customers initiate contact with the marketer in
response to various methods used to gain their attention. These methods include email
marketing, event marketing, content marketing and web design.

One purpose of inbound marketing, which includes content marketing, is to establish the

business as a source for valuable information and solutions to problems, thereby fostering
customer trust and loyalty.

Search Engine Optimization

Search engine optimization (SEO) is the process of developing a marketing/technical plan to

improve visibility within one or more search engines. Typically, this consists of two
elements.

On a technical side, SEO refers to ensuring that a website can be indexed properly by the
major search engines and includes the use of the proper keywords, content, code, and links.

On the marketing side, SEO refers to the process of targeting specific keywords where the
site should “win” in searches. This can be done by modifying a website to score well in the
algorithms search engines use to determine rank, or by purchasing placement with individual
keywords. Often, SEO programs are a blend of several elements and strategies. 

Note: When SEO is used to describe an individual, it stands for search engine optimizer.

Content Marketing

Content marketing is a technique of creating and distributing valuable, relevant and

consistent content to attract and acquire a clearly defined audience—with the objective of
driving profitable customer action.

According to the Association of National Advertisers (ANA), content marketing involves

various methods to tell the brand story. More and more marketers are evolving
their advertising to content marketing/storytelling to create more stickiness and emotional
bonding with the consumer. 

4 Ps of Marketing

Product

A product is defined as a bundle of attributes (features, functions, benefits, and uses) capable
of exchange or use, usually a mix of tangible and intangible forms.

Thus a product may be an idea, a physical entity (goods), or a service, or any combination of
the three. It exists for the purpose of exchange in the satisfaction of individual and
organizational objectives.

While the term “products and services” is occasionally used, product is a term that
encompasses both goods and services.

Price

Price is the formal ratio that indicates the quantity of money, goods, or services needed to
acquire a given quantity of goods or services.

It is the amount a customer must pay to acquire a product. 

Place (or Distribution)

Distribution refers to the act of marketing and carrying products to consumers. It is also used

to describe the extent of market coverage for a given product.

In the 4 Ps, distribution is represented by place or placement.

Promotion

Promotion marketing includes tactics that encourage short-term purchase, influence trial and
quantity of purchase, and are very measurable in volume, share and profit.

Examples include coupons, sweepstakes, rebates, premiums, special packaging, cause-related

marketing and licensing.

Automotive industry
All those companies and activities involved in the manufacture of motor vehicles, including
most components, such as engines and bodies, but excluding tires, batteries, and fuel.
The industry’s principal products are passenger automobiles and light trucks, including
pickups, vans, and sport utility vehicles. Commercial vehicles (i.e., delivery trucks and large
transport trucks, often called semis), though important to the industry, are secondary. The
design of modern automotive vehicles is discussed in the articles automobile, truck, bus,
and motorcycle; automotive engines are described in gasoline engine and diesel engine. The
development of the automobile is covered in transportation, history of: The rise of the
automobile.

The history of the automobile industry, though brief compared with that of many other
industries, has exceptional interest because of its effects on history from the 20th century.
Although the automobile originated in Europe in the late 19th century, the United
States completely dominated the world industry for the first half of the 20th century through
the invention of mass production techniques. In the second half of the century the situation
altered sharply as western European countries and Japan became major producers and
exporters.

Mass production

The outstanding contribution of the automotive industry to technological advance was the
introduction of full-scale mass production, a process combining precision, standardization,
interchangeability, synchronization, and continuity. Mass production was an
American innovation. The United States, with its large population, high standard of living,
and long distances, was the natural birthplace of the technique, which had been partly
explored in the 19th century. Although Europe had shared in the experimentation, the
American role was emphasized in the popular description of standardization and
interchangeability as “the American system of manufacture.” The fundamental techniques
were known, but they had not previously been applied to the manufacture of a mechanism as
complex as a motor vehicle (see work, history of the organization of).

The kind of interchangeability achieved by the “American system” was dramatically

demonstrated in 1908 at the British Royal Automobile Club in London: three Cadillac cars
were disassembled, the parts were mixed together, 89 parts were removed at random and
replaced from dealer’s stock, and the cars were reassembled and driven 800 km (500 miles)
without trouble. Henry M. Leland, founder of the Cadillac Motor Car Company and the man
responsible for this feat of showmanship, later enlisted the aid of a noted electrical
engineer, Charles F. Kettering, in developing the electric starter, a significant innovation in
promoting the acceptability of the gasoline-powered automobile.
 LITERATURE
REVIEW

The secrets of Volkswagen’s success

Several studies have shown a huge growing potential and successful business strategies of
Volkswagen across the world. Right now Volkswagen is a leading automobile industry to
have not only won the trust of various types of customers but also have achieved great feats
of selling not just their own brand’s vehicles but has also acquired or made many other
automobile companies such as Volkswagen, Volkswagen Commercial Vehicles, ŠKODA,
SEAT, CUPRA, Audi, Lamborghini, Bentley, Porsche and Ducati. Volkswagen is a very
customer friendly company which means it listens to its customers and try to implement their
own touch to their finished products. Building customer trust is a major part of any business
strategy of a company without it a company could only lead to its downfall very soon.

What lies behind Volkswagen‘s recent rise in profit and profitability? Simply put, it’s selling
more cars than ever before: a record 7.2 million unit sales in 2010 and heading for over eight
million this year.
But of course there is more to it than that. If volume alone were sufficient, General
Motors would have avoided Chapter 11, and Toyota would not have earned less
than Honda for the past three years.

Four key elements underpin Volkswagen’s performance, the first of which, after many years
of trying, is its growing success in extracting scale economies from its extensive brand
portfolio. The efficiency benefits of higher production volumes are being combined with cost
reductions as VW increases component commonality through the application of what it terms
“modular toolkits”.

Four key elements underpin Volkswagen’s performance, the first of which, after many years
of trying, is its growing success in extracting scale economies from its extensive brand
portfolio.

Secondly, there’s the growth of Audi, which now stands full comparison

with BMW and Mercedes-Benz as a major player in the world’s premium sector. Audi is the
dominant division in VW, having for many years made the biggest contribution to Group
profit. In the first nine months of 2011, its operating profit of €3.96bn was 74% higher than a
year earlier, and its margin of 12.2% was 3.5pts ahead of the already respectable year-ago
figure of 8.7%.

Success in China is the third key factor. The rapid increase in Chinese demand is a rising tide
that has lifted most boats in recent years, but VW has derived particular benefit through its
strong presence in both the mass market and the premium sector, where Audi is the best-
selling brand. In 2010, the Group’s sales of 1.9 million units in China represented 26.7% of
its worldwide sales and this rose to 27.4% in the first nine months of 2011. Note that VW’s
two Chinese joint ventures, Shanghai-Volkswagen Automotive and FAW-Volkswagen
Automotive, are not consolidated subsidiaries but VW reports their vehicle sales in its
consolidated totals.

Finally, there’s the acquisition of Scania. This writer views VW’s diversification into the
truck sector as a mistake. It doesn’t bring any particular competence that will enhance
Scania’s performance or value. (Ditto for MAN, in which VW’s stake recently exceeded
50%). However, in simple profit terms, including Scania in VW’s scope of consolidation has
undoubtedly boosted margins. Over the first nine months of 2011, the Group’s 7.7%
operating margin would have been about 0.5pts lower in the absence of Scania.

There is still room for improvement in key areas, the most notable of which is the still
relatively weak profitability of the core VW passenger car division. Although it achieved a
much-improved margin of 4.6% in the first nine months of 2011, this is still short of VW’s
own target of 5%, and was achieved in favourable conditions with strong demand in domestic
and overseas markets.

There is still room for improvement in key areas, the most notable of which is the still
relatively weak profitability of the core VW passenger car division.

SEAT also continues to drag down VW’s performance. While the current downturn in Spain
explains SEAT’s losses in 2011, the division also lost money during the boom times,
reporting operating losses in five of the past six years.
Finally, VW could do more with its finance business. Although profitable, the division earned
less in 2010 than, for example, BMW’s or Toyota’s finance divisions. For these and several
other OEMs, a sizeable finance operation provides a stable earnings stream which helps to
offset the inevitable cyclical downturns in the core vehicle manufacturing business.

https://www.automotiveworld.com/articles/truck-bus-articles/90384-the-secrets-of-
volkswagen-s-success/