The Volkswagen Group in India is one of the many different players in the Indian automotive industry. Currently, the group is represented by a total of five major brands which are Lamborghini, SKODA, Volkswagen, Porsche and Audi. The company entered the market earlier in 2001 through its popular brand, SCODA. Other brands were slowly integrated into the Indian market in 2007 and 2012 (World of Volkswagen - VW India. ). The Volkswagen Group in India is a combination of the spirit shown by the Indian market and the excellence that is portrayed by German manufacturers. The Indian subset of Volkswagen is part of the wider Volkswagen AG, which has more than 12 brands present in about seven countries in Europe. The company has an impressive global presence, and that is shown in the company’s 100 production plants scattered all over the world, and which employ more than half a million employees, responsible for the 30,000 vehicles produced daily (World of Volkswagen - VW India. ).
The Volkswagen brand is the most successful brands in the company’s stable and has become very popular in the Indian market. The Indian version of the Passat that was launched in 2007 is referred to as the Jetta, which is assembled locally. 2009 was an important year for The Volkswagen Group in India since it introduced brands such as the Beetle and the high-end SUV Touareg. During the next three years, brands such as Volkswagen Polo and Vento, Jetta TDI, Jetta TSI, and the Polo GT TSI. The company invested in procuring employees who were concerned with quality products, and a strong dealer network. Currently, the company has more than 100 dealerships spread out in 113 cities in India. The establishment of a Volkswagen plant in Chakan, Pune was an indicator of the long-term plans of the company in India. The Volkswagen Group in India has a total of 500 employees, with 3500 located at the plant in Pune, 1000 located at the Aurangabad plant and 300 at the national office in Mumbai (World of Volkswagen - VW India. ).
The external environment
The Indian automotive industry is one of the world’s largest and fastest growing industries. Analysis of the production trends in the industry shows impressive numbers, which in 2015 stood at 23.37 million vehicles. This represented an 8% growth in production and contributed to about 7% of the country’s GDP (Automobile Industry in India., 2016). The environment that the Volkswagen Group in India operates in is dominated by the two wheeler automotive segment. Economists are explaining this scenario as a result of the rapid growth in the number of youth and other middle-class citizens.
Stakeholders in the industry have been moving towards the rural markets with the Passenger Vehicle segment making up 13% of the market share. The business environment is also characterized by robust growth in exports, with the products coming from India annually growing at a rate of about 15%. With this kind of growth, it is expected that India will become the world’s leading producer of two and four wheelers (Shinde & Dubey, 2011). The Indian government has been very supportive of development ideas in the automotive industry. Many initiatives taken by the government are expected to aid further the stakeholders in the industry. The country’s budget has given $ 130 billion to the farmers, which is set to improve their ability to purchase automobiles. The government has introduced policies to promote the development of eco-friendly cars and electric vehicles in India. A strategic plan referred to as the Automobile Mission Plan (AMP) plans to oversee the robust growth of the industry 2016 and 2026 (Shinde & Dubey, 2011).
VW India was one of the last players to enter into the Indian market, and this has placed it at a disadvantage since it has proven to be difficult to dislodge the major players in the market. TATA Motors is the biggest player, controlling 64% of the Commercial Vehicles and 16% of the Passenger Vehicles market segments. Other players such as Maruti Suzuki, Hyundai Motor India and Mahindra & Mahindra control 46.07%, 14.15% and 6.50% respectively when it comes to the passenger vehicles category. Volkswagen did well in its first three years of operations, getting 4.5% of the market share (Automobile Industry in India., 2016). It has, however, been challenging to operate in this competitive environment.
VW India’s internal strengths and weaknesses
The major internal weakness for VW India is the inability it has shown to sustain the momentum it used when entering the Indian market. When the company started to introduce various brands into the market, the market responded positively. According to economists, the Indian market requires for businesses to bring about excitement through the introduction of new products and brands (Thakkar, 2015). The company has significantly scaled down in this, and has invested in building a base for the future especially in forging strong relationships with dealers. The implication is that the company has been forced to cut down on expenditure due to poor performance. This is highlighted by the closure of offices in Delhi and Bengaluru to move the operations to the capital city.
The company’s strength, however, lies in its manufacturing plant. Despite the fact that other parts of its business seem not to be going according to plan, the Pune plant has been operating efficiently and posting impressive numbers. The company has seen 60 % of its productions exported and this is expected to grow at an annual rate of about 20%. The plant is the strong point that the company can use to revive its position as one of the biggest vehicle brands in the country. Standing on an area of about 2.3 million square meters, and with a workforce of about 3500, the company represents the biggest investment made by a German company in India. The production rate of more than 130000 vehicles per year is o0ne that can be improved on and holds the future of the enterprise (World of Volkswagen - VW India. ).
SWOT analysis
The strengths of the company lie in the number of options that customers have. Brands such as SKODA, Bentley, Lamborghini, and Audi fall in the company’s stable and offer a wide variety to the Indian users. Its interest in hybrid cars, bonds well with the country’s development agenda. Another strength is the global brand presence that the company has, and which can be built on to improve on success.
There is, however, the weakness of the intense competition that comes from other industry players. These players such as TATA have local roots; which offers them various forms of advantage. Another weakness comes in the form of controversies such as emissions, which have gone a way to dent the company’s image.
The company can establish relationships with car manufacturers outside of Germany to improve its portfolio. Its policy of continuing innovation is also another opportunity that VW India has. The Indian industry has taken special attention to green vehicles, and this offers an opportunity which the company can pursue further success.
There are some threats that VW India faces in the Indian market. First comes in the form of innovative features that competitors have increasingly come up with. Governmental policies to favor local companies are another threat that the enterprise has to deal with.
Corporate level strategy
At the corporate level, the company has sought to take up the concept of more investment as the means through which success is guaranteed. Despite the different forms of market failures that the business has experienced, it has decided to make more investments in this market. The investment is directed towards activities such as increased localization, and introducing new models into the market. The company estimates project an investment of about 190 million euros, spread out in five years. The company also plans to invest in the development of an engine assembly plant, which will further improve the efficiency of the company’s operations (Hetzner , 2014).
Concerns have been raised about the kind of service that the company offers to the customers, especially when it comes to after sale services. The company has, however, taken steps to ease the transition into the i8ndian market, and learn the demands of the clients. Close to this aspect is the development of dealer networks in the country. Development of these networks will be built on quality service to meet the usual high demands and expectations of the Volkswagen customers.
Structure and control systems
VW India and the VW Company, in general, adopt a corporate structure that is unique when compared to other players in the automotive industry. The structure can be defined as being vertically integrated, and characterized by overlapping and frequent duplication of roles, and investment in many brands in the company’s portfolio. Despite criticism levelled towards this kind of structure, the company has continued experiencing profits and growth. The company has also heavily invests in human resources, and this is clearly seen in the company’s 5000 workforce in India (Thakkar, 2015).
Most economists root for a centralized corporate structure, an aspect that VW disagrees with. The company has gone against this norm and evidently perfected its tact. Vertical integration in the company has cut costs that come with suppliers, further maximizing its profits. The corporate structure adopted by the business is informed by the goal to dominate fully the market. This can only be achieved by flooding the market with various brands that from the company’s stable. The company’s brands such as Bugatti, Bentley, Lamborghini, Ducati, Audi, Seat and Skoda are treated as independent entities (Hetzner , 2014). This will contribute to the future domination of the market by VW.
Recommendations
VW India has been identified as one of the most competitive in the world. The business environment makes it easy fro corporations such as Volkswagen to make investments into this market. The company needs to take advantage of the favorable business environment offered in the country through governmental intervention and other socioeconomic factors. Projections show that the Indian passenger vehicle subset will be producing up to 200 million units annually in 2020. This growth will mean that the industry generates an excess of $ 300 billion annual revenue (Automobile Industry in India., 2016). To be part of this, VW India needs to get back to the strategies that it implemented in its early years of operations. These strategies mainly involved the rapid introduction of new products and features which kept the customers exited. This is the strategy that will improve the company’s profit margins in the future.
Bibliography
(2016). Automobile Industry in India, Indian Automobile Industry, Sector, Trends, Statistics. . ibef.org.
Hetzner , C. (2014). VW India boss outlines turnaround plan. Retrieved February 19, 2016, from europe.autonews.com: http://europe.autonews.com/article/20140901/ANE/140839990/vw-india-boss-outlines-turnaround-plan
Shinde, G. P., & Dubey, M. (2011). Automobile Industry and Performance of Key Players. . Asian Journal of Technology & Management Research Vol,1(01), 23-67.
Thakkar, K. (2015). Volkswagen gears up to fix India strategy post low sales . Retrieved February 19, 2016, from economictimes.indiatimes.com: http://economictimes.indiatimes.com/industry/auto/news/passenger-vehicle/cars/volkswagen-gears-up-to-fix-india-strategy-post-low-sales/articleshow/46534907.cms
World of Volkswagen - VW India. . (n.d.). Retrieved February 19, 2016, from Volkswagen.co.in: http://www.volkswagen.co.in/en/volkswagen_world/volkswagen_india.html
