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Volkswagen AG
Sirs:
The Volkswagen AG has recorded a turnover of GBP 1.4 in the year ending December 2013 the highest ever in the history of the group. The operating profit of the group recorded an impressive 66% growth to GBP 137.9 million during the same period. This makes the group the largest car and automotive manufacturer in the world. The automobile industry today faces significant competition and market saturation. One of the main strategies that we have adopted is to offer more than one car in the same segment to ensure we gain the market share aggressively at the organization level and even manufacture competing products in the same facility.
The challenges faced by the industry globally are three fold – demographic changes that are resulting in massive upheavals, dramatically changing consumer demands, and newer technologies and higher fuel efficiencies.
The Five Forces analysis for the automobile industry clearly indicates a low threat of entry of newer players, moderate bargaining power of the consumers, while there is a significant threat of substitute products the costs are fairly high, while suppliers individually may not have a significant bargaining power they do have collective bargaining power and finally there is intense competition.
The Italian Carmaker Fiat is one of the key competitors and has over 130,000 employees globally with manufacturing facilities in Italy, Turkey, China and India. They do not have the brand strength or the advertising prowess and depend on TATA in India for their maintenance requirements. They have a possibility of developing hybrid cars and also foraying into emerging markets.
Skoda is a powerful brand with its “Happy Skoda Customers” campaign. The biggest advantage to a customer here is the exceptionally wide choice of products and services at very affordable prices. The main weakness of the Skoda brand is the invalid perception about its origins being eastern European and hence poor image. The external threat for Skoda arises from its competition which is rather stiff in all the important markets that Skoda operates in. The biggest market opportunity for Skoda is the North American markets where the demand for small cars is outstripping the supply position.
Looking at the automotive business holistically it is apparent that the industry is at the doorstep of disruptive innovation. While there is intense competition in the conventional sense the educated and aware consumer today wants to be part of the efforts in global warming reduction and contribute actively to the environment protection. While Volkswagen AG is doing its best in almost all the segments and is the global leader in the auto industry it is not advisable to rest on these laurels.
One of the key imperatives that Volkswagen AG must consider is in the areas of offering cars with newer fuel technologies like the hybrid cars, electric cars and the Hydrogen fuel cars. Also the Volkswagen AG cars must be updated with the latest of technologies that the consumer demands and seeks today in the market. When worked in this specific direction, the leadership position of Volkswagen AG will not be threatened in the foreseeable future. This is import for the organization to be in the forefront and not be taken by surprise by any disruptive developments that may happen in the industry.
Sincerely,
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