Volkswagen: The car giant to watch
CASE ONE •Please Read the case on Page 207-208 ( see attached pics) and answer the questions from page 208.
When Volkswagen CEO Martin Winterkorn said two years ago that he was determined to zoom past Toyota to become the world's biggest automaker, the notion seemed laughable. At the time, the German automaker sold 3 million fewer vehicles than Toyota, was losing ground in the United States, and had a reputation for iffy quality. Toyota, then set to pass General Motors as the best-selling carmaker on the planet, seemed unassailable. Today Toyota is vulnerable, and Winterkorn's ambitions seem a lot less outlandish. In November, for the first time, VW built more cars than its Japanese rival. Toyota still sells more each year, but VW has closed the gap to fewer than 1.5 million cars. Quality continues to be an issue for VW in the United States, but Toyota is the one suffering negative headlines after a series of embarrassing recalls. Toyota's CEO—in an act of extreme self-flagellation —has even said his company's best days may be behind it.
Winterkorn sees an historic opportunity. And with the backing of his formidable boss and mentor, VW Chairman Ferdinand Piech, he's seizing it. By 2018, Winterkorn vows, VW will pass Toyota. "VW saw a chink in Toyota's armor and realized they could act on their ambitions," says Stephen Pope, who follows the industry for Cantor Fitzgerald in London. "They went for it straightaway." All over the globe, Winterkorn, 62, is punching the accelerator. VW has agreed to buy a 20% stake in Suzuki Motors to gear up for an assault on the rapidly growing markets of Southeast Asia and India. Winterkorn is going after BMW and Mercedes, committing $11 billion over the next three years to Audi, VW's luxury brand. Peter Schwarzenbauer, a board member who oversees Audi's sales
Winterkorn sees an historic opportunity. And with the backing of his formidable boss and mentor, VW Chairman Ferdinand Piech, he's seizing it. By 2018, Winterkorn vows, VW will pass Toyota. "VW saw a chink in Toyota's armor and realized they could act on their ambitions," says Stephen Pope, who follows the industry for Cantor Fitzgerald in London. "They went for it straightaway." All over the globe, Winterkorn, 62, is punching the accelerator. VW has agreed to buy a 20% stake in Suzuki Motors to gear up for an assault on the rapidly growing markets of Southeast Asia and India. Winterkorn is going after BMW and Mercedes, committing $11 billion over the next three years to Audi, VW's luxury brand. Peter Schwarzenbauer, a board member who oversees Audi's sales and marketing, says the brand plans 10 new models, including the A1, the world's first "premium subcompact."
Questions for Discussion
1. Use the chapter material to decide which strategies Volkswagen has been using to expand globally.
2. In what ways will the different specific and general forces
in the environment affect the success of its strategies?
3. Search the Web: How have Volkswagen's new global initiatives been working? Has its performance improved?
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Volkswagen: The car giant to watch
In the year 2010, the Volkswagen Group made it known that the company plans to become the largest automaker in the world by the year 2018, replacing Toyota. their greatest competitor. The initiative seems so bold and almost unachievable but with proper strategies and plans, nothing in the market is out of reach. As of January 2012, the year following the company's release of their bold initiative, General Motors was the top automaker, a position it reclaimed after being second place for the previous three years. Martin Winterkorn, Volkswagen (VW) CEO seemed too ambitious. During this time, the company sold three million fewer vehicles than Toyota; the company was also losing ground in the United States and had a bad reputation for poor quality. These three factors made their plan to appear as out of board. Toyota and General Motors have had problems in the recent past and the trend might be a boost to Volkswagen operations. The company's quest is achievable regardless of who holds the first place. The company has to apply several strategies to support its plans. Competition is high and the company needs to gain consumer loyalty which was probably low in 2010 relative to the leading automakers. In November 2010, Volkswagen for the first time made more cars than Toyota. However, Toyota still sells more vehicles each year but the gap has narrowed down to less than 1.5 million cars. Though Toyota's reputation is going down after a series of recalls, low quality for Volkswagen remains an issue in the U.S market. Volkswagen needs to strengthen its market in the United States to expand its market share. Stefan Jacoby, VW's U.S chief persuaded the board to build a U.S plant. The board later approved the plant and allocated $1 billion for the construction of the plant scheduled to open in 2011. Jacoby projected to sell 150,000 cars from the plant alone. The move is a good one as it helps overcome the American resistance for imported cars. Jacoby saw the most pressing challenge as devising a family sedan at an attractive price Americans would pay. Passat which is smaller than most midsize sedan costs relatively high than Toyota Camry. This is significantly why Passat sold only 11,000 Passats in the United States compared to 350,000 Camry's. In a move to improve the sale of Passats in the U.S, VW planned to stretch the Passat's successor four inches, add three inches of legroom, and sell it at a market penetrating price of around $20,000. Winterkorn's most ambitious plans were in the U.S where he aimed at doubling sales by 2012. Five years before 2012, VW tried to move up in the U.S market but failed. There was even a VW with a s...