BUSINESS: Current Crisis at Volkswagen
Introduction
In the automotive industry, the Volkswagen group can be considered one of the leading multiband groups. The business activities of the group comprise of financial service divisions and Automotive (Cave et al., 1982, p5). Volkswagen commercial vehicles brands and the passenger car vehicle brands of Volkswagen are the only companies under Volkswagen that are considered separate and independent. Volkswagen group majors on selling and producing vehicles that are passenger cars, developing, busses and trucks, light commercial vehicles as part of the business actions conducted by the various companies under the Volkswagen group. This paper is going to discuss the overview of recent developments, analysis and discussions of the case and the recommendations for VW strategy.
Overview of recent developments
Ever since the scandal for emission tests went viral, the consequent disarray in the company continually shows no signs whatsoever of reducing soon. There have been changes in the management, investigations, regulatory actions and setbacks in their finances that have never been experienced before (Ayd 2010, p8). The Volkswagen Company has brought back 8.5 million cars from across Europe since the proposal to repair the cars having software that is illegal, have sculptured to thwart emission tests and has been turned down by the German authorities (Glenn, 1964, p.12). Also, Winfried Vahland who was supposed to take charge of the VW’s business group in the new America chose to leave the automaker. In other recent developments, the Volkswagen group has decided to slice its spending on investment to one billion Euros a year and set in motion a brand’s flagship in the form of an all-electric Phaeton sedan. Furthermore, the Volkswagen group has decided to appoint Christine Hohmann- Dennhardt, the Daimler AG’s compliance manager as a member of the board of legal affairs and integrity.
Following the admissions to emission test rigging for the several diesel engines belonging to Volkswagen, it clearly shows that the company should revert to using simple advertisements. This can restore them to their golden days so as to correct their stained image, communication crisis, and their marketing. The Volkswagen Company has been condemned for advertising pushing the green credentials of the company after the revelation of the cheating scandal had occurred. It may prove to be difficult to adapt to the most recent forms of advertisements such as magazines and billboards since they are always booked months or weeks in advance. Also, substantial cancelation fees charged by the television stations websites and daily newspapers for failure to resell the space could prove a daunting task; Volkswagen must embark on a simple, somber and serious tone but still remind their consumers of their vast range of products (Ayd 2010, p8).
An organization’s success depends on its capacity and efficiency to run its system of marketing with a keen eye on its surroundings. Macro environmental forces are believed to be the forces beyond human control that create opportunities or pose threats to the company. The company’s natural environment forms the company’s macro environmental factors. The microenvironmental effects, on the other hand, are elements associated the particular company and industry in itself. These are the conditions and the variables that exist in the company that end up influencing the performance and operations. Volkswagen creates advanced technologies and environmental efficiency that is available across the world and ensures these are applied across the cycle of its production (Ayd 2010, p8). The Volkswagen Company, the plant of Volkswagen group Russ has environmental policies based on principles such as customer orientation, reduced environmental effects, reduced environmental risks and observing the laws of the environment, a constant process of improvement, environmental management control that is efficient, ensures availability of information and environmental responsibility (Volkswagengrouprus.ru, 2016).
The recent crisis at the VW, the ignition switch crisis, threatens to spill beyond the US and the Volkswagen Company itself. So as to comprehend the long term consequences and the bigger picture one must consider the automotive environment in itself. Some of the important questions being asked all are in the minds of the automotive executives this day are: what this crisis means for vehicles that are diesel powered and where these vehicles stand in the global automotive market. Furthermore, what position will the VW assume in the very competitive automotive industry especially now that they may experience a decrease in sales (Wimmer, 2015, p3).
In recent developments in the VW Company, there has been viewed to be a strong correlation in their cyclical market in regards to the GDP as they have undergoing challenges in their commercial vehicle industry. VW was also affected by the Europe’s aggressive regulations, lock- outs in diesel supply, BRIC’s trailing, and data management problems for their customers. This has made VW undergo major reforms to try curb this menace as described in the subsequent paragraphs.
The automotive industry has been pushing for the diesel technology especially automotive industries in Europe. These automotive companies have been trying so hard to convince and lobby with regulatory bodies to embrace the diesel technology since it is a clean technology of significant impact in the future (Wimmer 2015, p3). This crisis has since recoiled negotiations and created a negative backlash on diesel thus blowing the actual negotiations open. Some analysts of the automotive industry share in the opinion that the Volkswagen crisis could have very profound implications that are far reaching for the power train of the diesel and thus lead to regulations that are stringent and costs for increased investment costs that could be difficult to match. Carmakers’ costs that require them to comply with requirements for emissions could escalate, and the desire for diesel cars could reduce among the consumers (Automotive News, 2015). Until now, consumers have derived satisfaction from the tax incentives that encourages them to purchase these diesel cars, which, because of their reduced carbon dioxide emissions (CO2) have reduced tax. This crisis displays the shortcomings of the basic chemistry of diesel, which has a high value on local pollutants but in regards to greenhouse gasses it is cleaner (Volkswagengrouprus.ru, 2016).
Before, the automotive industry had proper preparations for anti-diesel views that included a range of new models and technologies that were friendly environmentally wise and very efficient that the vehicles that use gasoline. The technology of diesel after- treatment has evolved tremendously to indicate the breakthrough of diesel R&D activities across OEMs strongly; NOx emissions for diesel cars have dropped to 0.08g/km from 0.97g/km which represents an 84 percent decrease over the period of 15 years (Financial Times, 2016). Of the seven toxic air contaminants (TACs), emissions of particulate matter (PM) have reduced by 90 percent as identified by California Air Resource Board (CARB) over a period of 15 years.
Create focus on emerging markets
A glimpse at the sales volume of the VW shows the company was the largest seller of automobiles worldwide without having market share leadership in the US. Part of the 2018 corporate strategy of the Volkswagen Company is to realign itself as the number one automobile manufacturer in the world (Samples & Case Study, 2013). As a result, VW has shifted focus to the two leading automotive markets in the world, the US and the China markets. After the diesel scandal, VW has shifted focus swiftly to emerging markets that have less strict emission regulations and have been affected in a small way by the latest unfolding in Europe and the US. VW should actively consider boosting sales infrastructures in these regions or markets. This will help the company enlarge its customer base and expand its global footprint. This could be the catalyst that could allow VW focus on Africa, a market that is leading on the globalization front (Volkswagenag.com, 2016).
Prioritize electric powertrain and Hybrids
One of the first OEMs to begin electrifying its propulsion systems on its vehicles was the Volkswagen. Since 1970, VW has been able to work on drive trains that are electric. The VW’s strategy of “Electrifying/hybridizing” segments that is ongoing is unusual since it allows expensive technologies of hybridization to higher segment vehicles. With this strategy, VW will be able to salvage itself from the diesel crisis as soon as possible and realign itself as a key producer of low- emission cars (Volkswagenag.com, 2016).
Shift focus to passenger safety
In the US, Jetta sedan and Golf four- doors have been rated as the top safety pick in 2015 emphasizing the importance of safety systems at the Volkswagen. Beyond AEB and FCW, VW provides a broad suite of safety systems for the drivers on the select premium models on Porsche stable and Audi. This strategy forms a trust within the customers of the VW since vehicle buyers consider environmental friendliness and safety on purchasing cars (Automotive News, 2015).
Ensure they are positioned as sustainable mobility and synthetic fuel pioneers
Through Audi, VW has been at the forefront of developing synthetic fuels, which are more like the fossil fuels in all regards and can be used as a drop- in fuel (Ratner, 2016). The e-fuel suite, as referred to as by the Audi, comprises of synthetic fuels of the third generation where all conceivable fuel types of the present are synthesized from the atmospheric CO2 and electricity that has been recycled. This ensures an emission that is “well-to-wheel” compared to the one from a battery electric vehicle that uses renewable electricity. This strategy, however, requires partnerships with energy providers and as such the benefits could become medium or long-term.
Have an important focal point and make connected cars basic
With the technology of connected cars multiplying in both developing and developed markets, VW needs to major on the production of connected car strategy (Bloomberg.com, 2015). It is paramount to embrace this strategy which will accelerate the building of trust, bring about associated opportunities and allow the prolonged duration of customer engagement. Other strategies that could be useful are: bring to the fore Audi, Porsche, and other brands, create a greater focus on commercial vehicle business, and another approach is to create certification and voluntary testing that is rigorous.
Conclusion
This will not be an easy recovery for the world’s biggest auto manufacturer. There will be a drain on profitability and a bloodletting in the short term. The Volkswagen Company should urgently reevaluate its short-term objective of the dominance of the mass market and realign itself as a small but nimble automobile manufacturer that is reactive and more receptive to the fluctuations of the industry (Wimmer., 2011, p.52).Communication and transparency are key to whichever strategic step the company decides to embark on. Irrespective of the VW Company strategies, if the VW Company cannot win back the customers’ trust, then these strategies will not account for much. However, at the end, the recovery of the Volkswagen will prove to be important for the automobiles overall health.
References
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