Volkswagen AG and the Multinational Enterprises’ Strategies

Volkswagen AG and the Multinational Enterprises’ Strategies
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Volkswagen AG and the Multinational Enterprises’ Strategies
The Integration/Responsiveness (I/R) framework, developed by Prahalad and Yves L. Doz, is a widely accepted theory in international business. It provides a comprehensive approach to understanding the strategies that multinational enterprises (MNEs) use to compete successfully in global markets (Banerjee et al., 2019). The framework is based on several core assumptions, including the idea that organizations need to be responsive to the changing environment, both domestically and internationally, and must integrate the various elements of their operations to gain a competitive edge.
The I/R framework proposes four main strategies for MNEs to pursue in order to achieve success in global markets. These strategies are localization, internationalization, globalization, and transnationalization (Chen & Bui, 2020). Localization focuses on responding to the local environment by tailoring its product strategy to meet the local market's needs. Companies using this strategy leverage the deciphering of the local market, culture, and environment to create a product that meets the needs of local customers. Thus, this particular strategy also involves adapting the product to the local environment, such as to local regulations, customs, and preferences.
Another strategy is internationalization. This strategy involves expanding the company’s product strategy to a regional level by creating a regional presence and responding to regional market needs. Businesses applying this strategy aim to understand regional markets, cultures, and environments to create a product that meets the needs of regional customers (Tan, 2021). Therefore, this strategy also involves adapting the product to the regional environment, such as to regional regulations, customs, and preferences.
The global standards/globalization strategy involves expanding the company’s product strategy to a global level by creating a global presence and responding to global market needs. Firms leveraging this strategy concentrate on understanding global markets, cultures, and environments to create a product that meets the needs of global customers (Chen & Bui, 2020). Globalization also involves adapting the product to the global environment, such as to global regulations, customs, and preferences.
The other strategy is the transnational strategy which involves taking a global approach to product strategy and responding to the needs of all markets simultaneously. Any company that uses this strategy focuses on understanding the global environment to create a product that meets the needs of all markets (Banerjee et al., 2019). The transnational strategy also involves adapting the product to the global environment, such as to global regulations, customs, and preferences.
One MNE that exemplifies the integration/responsiveness framework is Volkswagen AG. Volkswagen AG, a German automobile manufacturer founded in 1937, is now one of the world’s largest automotive companies. Volkswagen AG operates in more than 150 countries globally, in Europe, North America, South America, Africa, and Asia (Graf, 2023). This project aims to use relevant examples to illustrate one of the four international business strategies in the Integration/Responsiveness framework. To this end, we will use Volkswagen AG to illustrate the global standards strategy of the integration/responsiveness framework.
The global standards strategy involves using a single set of standards throughout the MNE’s international operations. This strategy is often used when the MNE wants to ensure a consistent customer experience regardless of the location (Rosinska-Bukowska, 2020). Volkswagen AG has implemented this strategy by establishing global product and pricing strategies across its various international operations. The strategy has enabled Volkswagen AG to maintain a consistent product offering and pricing structure for its customers regardless of location.
Volkswagen AG has also established global production standards for its factories across the globe. This conduct ensures that Volkswagen AG’s factories produce vehicles of the same quality and safety standards regardless of the location (Welch, 2019). This global production standard also enables the company to maintain a consistent product offering across its various international operations. Silva et al. (2022) state that the firm has also established global marketing and branding standards. It involves using a consistent logo and brand image across its various international operations. This strategy helps the company to create a consistent brand experience for its customers regardless of location.
Application of the Global Standards Strategy at Volkswagen AG
Volkswagen AG is one of the largest automobile manufacturers in the world, with a global presence in more than 150 countries. Founded in 1937, the company has developed innovative and reliable vehicles for over 80 years (Held, 2020). The general international business strategy of the company is anchored on leveraging opportunities in foreign markets by building strong relationships with the host.
The company is among the world’s leading automotive manufacturers and has become a leader in internationalization. Volkswagen’s internationalization strategy centers on leveraging its strong brand to expand its presence in key markets. As part of this strategy, Volkswagen has established production facilities, sales offices, and dealerships in many countries worldwide. The company has also invested heavily in research, development, and marketing to keep pace with changing consumer demands in different markets. At the core of Volkswagen’s internationalization strategy is its focus on building solid relationships with local partners in each country it enters (Guo & Yang, 2019). By establishing strong partnerships with local companies, Volkswagen can better understand the needs and preferences of local consumers, allowing it to provide more effective solutions. This approach has allowed Volkswagen to understand regional markets well and customize its products and services to meet local requirements.
In addition to building solid relationships with local partners, Volkswagen has also invested heavily in research and development to improve the quality of its products. This investment has allowed the company to remain competitive in the global automotive market. Volkswagen has also utilized technology to streamline production processes and improve operational efficiency. Volkswagen also has implemented a global advertising strategy to reach new customers in different markets (Poier, 2020). The company has used various marketing tactics, including television commercials, print ads, and digital campaigns, to reach a wider audience and increase brand awareness. The company also has focused on developing a global corporate culture. The company has implemented initiatives to foster collaboration between its subsidiaries and promote teamwork across cultures. By doing so, Volkswagen has served its customers in different markets better and created a unified corporate identity.
In recent years, Volkswagen has become a leader in the automotive industry by adopting a global standards strategy of the integration/responsiveness framework. This strategy combines the need for global integration with the need for local responsiveness. It is designed to provide customers with a consistent experience across its global operations while allowing for local adaptation to meet customers' specific needs in different markets.
Pressures for Local Responsiveness
One of the significant pressures for local responsiveness is the need to meet customers' specific needs in different markets. As Volkswagen is a global company with a presence in more than 150 countries, there are significant differences in customers' needs in each market. For example, in China, the focus is on low-cost vehicles, while in the US, customers prefer larger vehicles with more features (Lee et al., 2021). In order to meet the needs of customers in each market, Volkswagen must be able to adapt its products and services to local preferences.
Besides product customization, Volkswagen must also be locally responsive to remain competitive in each market. This responsiveness includes adapting its production processes, distribution networks, and marketing strategies to local conditions (Pucik et al., 2023). For example, to remain competitive in India,...