Swot Analysis - Volkswagen PDF

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A swot analysis of Volkswagen ...

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Swot analysis. A SWOT (strengths, weaknesses, opportunities and threats) analysis can help you identify and understand key issues affecting your business, but it does not necessarily offer solutions. You should be aware of the limitations as well as the benefits of a SWOT analysis before you decide to conduct one.

Strengths Internal strengths are things which the business is particularly good at and which can be developed into a competitive advantage. Examples include strong brands, intellectual property rights such as patents and trademarks or even the availability of a highly skilled workforce. Volkswagen is known to have the widest brand portfolio among all automotive companies. Volkswagen sells its vehicles under 12 different brands. They are Audi, Skoda and Bentley to name a few.

When comparing to other brands, no other rival has as many brands under its management. I.E, Toyota sells its vehicles under four different brands. Volkswagen, As a result of having the widest brand portfolio has an excellent diversification strategy. This means that Volkswagen has multiple sources of income flowing in at any one stage, more than any other competitors in the industry. In a recent Volkswagen study, only 75% of Volkswagen’s income come from the main passengers cars segment, 12% from commercial vehicles, 2% from power engineering and the rest from Financial services. All these streams of incomes proves that Volkswagen has a good range of diversification. Furthermore, As Volkswagen is selling vehicles under many different brands, its use of synergy gives them competitive advantage in the markets. Synergy is where Volkswagen’s brands such as Audi and Skoda share their resources to increase turnover. These Resources include R&D spending, building technology, access to different markets and information of customer knowledge to increase efficiency.

Weaknesses

Weaknesses are any aspects of the business which are deficient or underdeveloped and which have the potential to to undermine the overall success of the company. Possible weaknesses include ongoing industrial relations and over dependence on single produced. In the wake of Volkswagen’s emission scandal, It has received a lot of negative publicity weakening the whole Volkswagen brand. In 2016, the company was found to have installed software codes into its diesel vehicles. The purpose of this so called Dieselgate software was to control different emission levels during the vehicle testing in a laboratory when compared to the real world emission levels. The company was investigated and found guilty in many countries, which fined the company. The fines, damages and other losses from the scandal set Volkswagen back €16.2 billion! Furthermore, Volkswagen had to recall millions of vehicles worldwide which caused huge disruption to its customer and hence why it has been criticised heavily. A study published by iseecars.com showed that the Volkswagen group had a recall rate of 1805 vehicles per 1000 vehicles produced. A high recall rate results in additional costs and a damaged reputation. Negative publicity is one of the worst weaknesses Volkswagen has brought upon itself. Negative publicity has hit the Volkswagen Group hard . The company’s sales declined in 2015 and will likely decline in 2016. The company experiences billions of losses, many from current and potential customers. The Company’s brand image has been severely affected and it will take lots of time to recover it. Another obvious weakness shows poor customer research. Volkswagen’s disregard for the increasing demand on electric cars has put them at a disadvantage. It has made little to no effort In the electric market. The company has introduced E-Golf which is currently considered basic compared to biggest rivals Tesla. In order to fulfil its “together 2025” plans, Volkswagen needs to acquire more patents, new skills and more expertise.

Opportunities These are things which the business has potential to benefit from. When considering external factors, businesses might regard access to an enlarged EU market as an opportunity. Fuel prices have been low for the last few years and are expected to rise in the near future due to the changes in the supply. Low fuel prices have increased the demand for large vehicles such as pickup trucks and SUVs. Many companies, including General Motors, Ford, Chrysler have benefited from the low fuel prices, because of their strong SUVs and pickup trucks offerings. On the other hand, Volkswagen didn’t invest much into growing its line of light trucks and has opted to compete in the smaller vehicle range. The demand for small vehicles always rises when the fuel prices are high. Many would consider the emission scandal a big financial set back, but some would consider it an open opportunity to exploit. Volkswagen has introduced a new “together – 2025” strategy. This focuses on delivering key goals that will bring volkwagen up on the rise again in the motoring industry. These keys are as below;  Introducing 30 new electric vehicles up by 2025.  Develop new competence in battery technology, digitalization and autonomous driving.  Increase research and development (R&D) spending to double-digit billion range. This new strategy will gradually help to increase the company’s efficiency and profitability. This will put a focus on some of the most important areas and will provide a clear direction, which is something many automotive companies lack right now. Volkswagen could expand its marketshare by targeting the motorcycle industry. For example Honda has its range of cars customers can choose from but also has honda motorbikes to sell to. Volkswagen could take a similar approach and if they really wanted to expand they could establish their brand in the trucking market and aviation market.

Threats These are factors which are likely to have a negative impact on the business’s future. Examples include increased competition or legislative changes that could negatively impact a business. Volkswagen is faced with an ever increased competition from the traditional motoring companies, the new entrants and saturation of its main markets. New companies, such as Tesla with its electric cars will make it very hard for Volkswagen to compete in the electric cars segment. In addition, Google, which tries to build self-driving cars is also threatening the traditional automotive industry. The competition is further fuelled by the fact that the global automotive production capacity far exceeds the demand. Volkswage’s Dieselgate emissions scandal has already had a negative impact on the business and will continue to do so in the coming years. The company is still involved in many lawsuits all over the world, which seek to convict Volkswagen for cheating on their emission data. The company will have to continue paying billions in additional fines and damages, decreasing its profits for the next few years at least. Many governments around the world are committed to reducing the greenhouse gas emissions and are encouraging fuel efficiency initiatives. There is always a risk that such environmental initiatives may increase production costs for the car manufacturers and that these costs won’t be able to be recouped in such a highly competitive and price-sensitive market. Some governments will have the power to ban such types which can be a real worry for all stakeholders.

Q- Explore two of the main benefits to this business of carrying out a SWOT analysis.

A SWOT analysis is an integral part of a company's strategic planning process because it provides a good all-around view of the company's current and forward-looking situation. The strengths (S) and weaknesses (W) sections provide a look at the company's current position. The opportunities (O) and threats (T) sections help the company project possibilities and challenges going forward into the future.

Strengths The strengths section allows the company to consider its competitive advantages in the marketplace. These advantages are typically a focal point of the company's operation and strategic planning. They also often coincide with the way the company markets. For instance, companies that have strengths related to manufacturing and production quality often promote themselves as high-quality brands. Companies that have very efficient distribution systems and good bargaining power with suppliers as strengths can often leverage those to provide low costs to buyers.

Opportunities The opportunities section is critical to development of company strategies as it helps the company identify ways to improve and grow. Constantly reviewing market opportunities helps companies take advantage of emerging markets or changes in the marketplace that the company has strengths to match. These are significant advantages over companies that fail to routinely assess opportunities and miss out on the ability to gain new business, market share and access to capital.

Q - Examine a swot factor that had the biggest impact on your chosen company. The emissions scandal – A big time scandal which affected the main umbrella brand (portfolio) thoroughly. Close to 5 million cars were returned to the organization – a move which always hurts the top brand. Trust was broken between Volkswagen and its customers, especially because this decision of installing the coding software came from the top management of the company. Most people are asking themselves, what else are they hiding from the public?

Q – Identify how your company can use the swot analysis factors in its external environment to create a competitive advantage Using a swot analysis to analyse your current business position and also your competitors. Every business weather they like it or not, have a competitor. The essential part of gaining a competitive advantage is how your business is compared to others. What areas are you strong at and what area’s need improvement. Currently, Volkswagen have lost all their competitive advantage as they have cheated in the motoring world. One possible competitive advantage they still have is there huge brand portfolio as mentioned in the strengths above.

Conclusion A SWOT (strengths, weaknesses, opportunities and threats) analysis can help you identify and understand key issues affecting your business, but it does not necessarily offer solutions. For Volkswagen, their strengths and opportunities look promising, but will only achieve towards that by addressing their weaknesses and threats head on. The business needs to reearn the trust its lost with the public and adapt to the new emerging electric market.

Bibliography https://www.strategicmanagementinsight.com/swot-analyses/volkswagen-swot-analysis.html Business Book by joe Sufford and Seamous McGowan...