Volkswagen: Strengths, Weaknesses, Opportunities, Threats

Strengths: Volkswagen has one of the widest brand portfolios among automotive companies, including the likes of Audi, Bentley, Bugatti, Lamborghini Porsche, SEAT, Škoda selling over 10 million cars annually. Enabling the company to diversify into markets across the automobile industry. For example, they play a huge role in the trucks and buses industry under Scania. This diversification has enabled them to become one of the biggest firms in the world. The Synergy between all the brands under Volkswagen, they appeal to both ends of the spectrum from luxury to family cars creating a huge target market, fitting every need of the customer.

VW operates in all corners of the world with a Strong global presence, 70 production plants in 150 countries with 350,000 global employees. Including joint ventures with local Chinese automakers entering the single biggest market in the world with 1.4 billion potential customers if VW were to dominate the Chiness market they would solidify their place at the top of the automobile industry. In addition another strength is that VW are very popular, 26,600 is the amount of new cars produced in a single day to meet global current demand. 57th highest ranked brand in the world even after the emissions scandal (2016). (Was ranked 18th in 2015) this is aided by the fact VW has well managed operation- good supply chain and links with 100s of VW dealerships in the UK alone . Volkswagen cars have the highest gross revenue in the US and Germanys more than any other of the VW brands. After pumping profits into Research and development VW have been able to produce high performance cars, hybrid and electric. For example the new Golf GTE is one of the newest models by VW. Offering an electric alternative could entice anti emissions consumers to purchase a car increasing VWs market share.

VW is one of the oldest car manufacturers, resulting into increased reach to the masses. The more people who know about VW the more people will consider them when looking to purchase a new car. Car firms can rely on word of mouth for many sales of cars when people talk about the reliability of a car is what most people want. VW must have good word of mouth just because it’s been established for so long. Brand recognition, Excellent advertising and marketing through TVCs, print media, online ads, hoardings etc Audi is the best preforming brand it the VW group with an estimated worth of $7 billion USD

Weaknesses: Volkswagens biggest weakness recently has been the 2015 emissions scandal, the negative publicity surrounding it affected the main umbrella brand thoroughly with close to 5 million cars returned to the organization. This has resulted in the weakening of a good brand reputation which took years of good service to build. Huge loss of customer loyalty will customers stay with VW when it comes to the purchase of their next car. Lastly, trust was broken, especially because this decision of installing the wrong software came from the top management of the company. However it can be rebuilt and they have paid in fines for the damage they’ve caused moreover statistics tell us that sales weren’t really effective, suggesting that the majority of consumers aren’t bothered by emissions when it comes to buying a car. They have the highest recall rate in the United States out of any other car manufacture and to make it worse their US market share is very low compared to Europe’s. In the past there must have been problems with manufacturing or quality control. An easily rectifiable mistake but it has proven costly in the long term resulted in VW cars not being as popular as they should in the US.

Another problem of Volkswagens is the competition is eating away its margins. There are many competition brands who are penetrating the market and the price competition is tremendous. As a result, this competition is benefiting the customers but affecting the brand adversely. In India for example, the brand had to lower its prices a lot to promote acceptance. As a result, a lot of margins were lost due to competition. Brand positioning of Volkswagen is quite weak in India. Maruti and Hyundai have an excellent overall sales figure and Volkswagen is not able to penetrate against Maruti. Volkswagen spends a lot of advertising dollars to build a brand for Audi, Bentley, Porsche and other brands which make the most money. Volkswagen itself needs to spend to create more brand equity for the parent brand – Volkswagen. There are some hand selected cars like Passat or Beetle which are a hit under the Volkswagen brand. But the brand does not create much noise for these models, which is the requirement of the market. A reboot of new models for such cars would boost popularity greatly. Finally most of VWs high performance cars are not environmentally friendly for example Bugatti and Lamborghini two of the fastest and expensive cars in the world.

Opportunities: Fuel is expected to rise in the near future, resulting in more demand and creating a larger market for hybrid and electric cars, which Volkswagen currently own little share of. This can be there opportunity to heavily invest into research and development in electric cars to increase their presents in the electric car market. In addition to investment in electric car, market there is an opportunity to invest into the autonomous car market. A market no yet explored by the majority of car companies, with little and very limited fully autonomous cars in existence Volkswagen has the size and power to become the new world leader in the supply of driverless cars, they just need to take off in demand just as electric cars did. A well-respected brand such as Volkswagen has to potential to offer driverless cars for an affordable price.

There is also the opportunity to focus on significantly improving sustainability policies to remedy damaged brand reputation and retain former confidence the public once had in the Volkswagen brand. Furthermore purchasing power is globally increasing, cars are no longer seen as a luxury item but more of a necessity. Increasing the total demand for cars. Even if you can’t afford the car outright there are now options to finance and pay overtime meaning more and more people have access to the sports cars that VW offer.

Threats: VWs brand reputation has been hurt badly, one of the major threats to Volkswagen is the hit to the brand reputation due to the emission scandal. More than 5 Million cars had to be recalled which included Audi’s, Volkswagen, SEAT and several others. Once people had to return their cars, they were not confident about receiving another Volkswagen car again. Volkswagen will have to spend a lot of money in brand building to regain their brand strength if not then we may see a decline in VWs sales. The competition is ever increasing Volkswagen is faced with competition from the traditional automotive companies, the new players 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. For example in 2015 there was an excess of around 31 million units. Competition is not going to back down soon and it is ever increasing. There will be no relaxation on this front. Different government regulations in different countries. The majority of government would much prefer to support the car manufactures of their own country rather than foreign ones. They’d prefer to keep the profits within the country, because of this most countries government policy will weigh towards helping its own car manufactures. As a result international car manufacturers might have to make changes to fit the policy. For example a high tariff on imported good you may have to lower prices to stay competitive.

VW aren’t the only car company innervating to Tesla came with hybrid cars and launched several of them. They have also launched auto driving cars much faster than any competition. Other brands like General motors, Toyota and others are also having good R&D in place and Innovation can come out of any company. Volkswagen has to be aware of that and be ready with an excellent R&D team so that it can innovate / create in response. Emission issues – Changing emission laws will hurt Volkswagen because whenever the law changes, it will again come under the radar. Past experience teaches us that Volkswagen would do illegal things instead of following the laws of emission standard. And hence, it will not be supported by government agencies in the future and will be scrutinised strictly. This in turn will increase the cost factor for Volkswagen whenever it wants to align its engines to the latest Emission standards.

Further fines and damages that will have to be paid. Volkswagen’s emission scandal has already resulted in damaged brand reputation, lost consumer confidence and €16.2 billion in damages and fines. This, though, is not the end of it. 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 pay billions in additional fines and damages, decreasing its profits for the next few years. Increasing government regulation Susceptible to a fluctuating exchange rate Carbon dioxide levels.