The purpose of this module is to study the current market strategies and the marketing mix
used by an automobile manufacture and the company I have chosen is Volkswagen. The first
part will be discussing the company’s background and analysis of the current strategies
adopted by Volkswagen. The analysis would be focusing on the segmentation, targeting, and
positioning (STP) of the Volkswagen’s marketing strategy, which will be followed by the
analysis using SWOT and PESTLE method. For the second part of this discussion, alternative
strategy is proposed to increase Volkswagen’s market share, profitability, value creation and
sustainability.
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1.1 Company Profile
Volkswagen group is an automotive conglomerate consisting of several brands of vehicle for
a range of cars for different customers demographic of age groups and price. Established in
the 1930s, it has become one of the top automotive manufacturers in the world and is the top
automotive manufacturer in Europe. (Volkswagen, 2011a). Volkswagen began as a
manufacturer of heavy artillery and tanks during the 2nd World War for German’s Nazi and
the factories were then had to face the aftermath of being destroyed by the Allied Forces
headed by Great Britain but it was subsequently saved as it had shown great potential to
become an important automotive manufacturer. The automotive engineer to take on the
project was Dr Porsche who was well known in Europe for car manufacturing. (Bytewerk,
2007). From the Beetle model to the Golf Model, Volkswagen’s vehicles were iconic and
were the spear header for car innovations that continue to do so until this day. Their risk
taking effort was well documented and their passion for building cars for people has made
them a proactive manufacturer that strives to protect the environment and sustainable
community.
2.0 Methodology
Volkswagen had a strong business model that has made them sustain businesses throughout
the turbulent years of automotive industries. The purpose of this module is to study the
Volkswagen’s current internal and external environment that affects the direction of the
company in marketing models and strategy. From Volkswagen’s annual report and
sustainability assessment, a secondary data was gathered and analyzed.
3.0 Situational Analysis of Volkswagen
Situational analysis is a method to investigate the current situation of Volkswagen. These
consist of internal marketing audit and external market situation of the company.
3.1 Segmentation Targeting & Positioning (STP)
Volkswagen’s strategy is to cater to all different age demographic, price and needs. Unlike
most vehicle manufacturer that comes with a single or two model that try to pleases the mass
market, Volkswagen has set a Product Market Matrix that divides accordingly to these
groups:
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Young, Single and Professionals between the ages of 18-24 years old.
Consumer who regards cars/vehicle as ‘status’ differentiator and has specific technical
details requirement like LED headlights, Bluetooth enable system.
Consumers who have priority for speeds and better run engine for example the V6/V8
engine with higher horsepower capacities.
Married Couples with children. Family centric focused on safety features, space and
basic family needs like Rear End monitoring system, Crash optimized rear end.
Goods transporter for small scale home businesses that maximizes space like foldable
seats and Stow and Go storage system.
Retired couple who has less emphasis on speed or sleek futuristic design.
Consumers who haul equipment that has trailer tow package and Heavy Duty
suspension for more rugged and heavy-duty requirements
According to the product matrix from Volkswagen Annual Report, efforts and attempt to fill
in all the market segment for different needs and lifestyle of the society has been the strategy
of Volkswagen International.
3.2 Positioning
Volkswagen is the group of company that owned and operated several other automotive arms
such as Audi (the luxury brand) including Lamborghini, with competitions like BMW and
Mercedes Benz Cars, Scania (heavy trucks and buses), Seat (Spanish Stylish compact cars),
Skoda (entry level vehicles such as sedan, hatchbacks), Volkswagen commercial vehicles for
transportation of goods and Volkswagen Passengers cars (entry-mid level vehicles). For the
purpose of this discussion, we will choose the Volkswagen Passenger Vehicles brand. The
main competitors for this range of vehicles are Toyota and Mazda. Toyota is one of the
biggest car brand with sales revenue of US$252.1 Billion (Toyota, 2010) while Mazda falls
under US$33.3 Billion annual sales (Mazda, 2010). One of the most enduring of Volkswagen
effort is to preserve and protects the environment. The main policy of the company is
sustainability, responsibility through their manufacturing, products and in the support in
educating the communities on the protection of environment. Apart from these initiatives,
Volkswagen differs from other vehicle manufacturer in the way the products are more energy
efficient and thus reducing the need for more fuel burning. BlueMotion is a technology
created by Volkswagen that reduces the sizes of the engine that runs on either petrol or diesel.
Smaller engines compared to the conventional engines buts runs better with increased
performance and reduced emission of carbon dioxide. Volkswagen is known for their high
quality finishes that ensures durability, comfort and ergonomic design with attractive and
modern look. Quality in the production also ensures safety and endurance.
3.3 Unique Selling Proposition
Volkswagen is the group of company that owned and operated several other automotive arms
such as Audi (the luxury brand) including Lamborghini, with competitions like BMW and
Mercedes Benz Cars, Scandia (heavy trucks and buses), Seat (Spanish Stylish compact cars),
Skoda (entry level vehicles such as sedan, hatchbacks), Volkswagen commercial vehicles for
transportation of goods and Volkswagen Passengers cars (entry-mid level vehicles). For the
purpose of this discussion, we will choose the Volkswagen Passenger Vehicles brand. The
main competitors for this range of vehicles are Toyota and Mazda. Toyota is one of the
biggest car brand with sales revenue of US$252.1 Billion (Toyota, 2010) while Mazda falls
under US$33.3 Billion annual sales (Mazda, 2010).
3.4 Porter’s Generic Strategies
Volkswagen has employed several strategies to remain competitive in the market with
segmentation of products to meet different needs and lifestyle of the consumers and ensuring
no compromise in the quality of the finishes, safety features and technology to remain ahead
of the competitors.
3.5 Marketing Mix for Volkswageb
3.5.1 Product
Volkswagen and The Beetle car are known synonymously and has great histories and stories
making it one of the most iconic car in the world that sold over 23 Million units. But the
biggest selling model of Volkswagen in the market today is the Volkswagen Golf with 7th
Generation model since the 1st one in 1974 that has until now selling over 25 Million unit
around the world. It has been voted as the runner up European Car of the Year almost every
year. But it’s the personalized segmented product in the Volkswagen pipeline that made it
successful. From Convertible, Hatchback, Coupe, Sedan, Sports, SUV (Sports Utility
Vehicle) and MPV (Multi-purpose Vehicle), the company has the car that fits every lifestyle,
needs, and budget of consumers. In Malaysia, the Volkswagen Polo has remained as the most
popular model with 5 versions that ranges from Trendline, Comfortline, CrossPolo, Highline
and GTI and runs on petrol, diesel to the diesel blue technology. Volkswagen Malaysia has
reported strong growth in deliveries, with the total number of units sold in 2012 crossing the
13,000 mark, recording a 77% increase compared to corresponding period in 2011. This
follows healthy growth recorded in 2011 with 7,350 units sold. That translates to an estimated
market share of 2.4% of Total Industry Volume (TIV), making VW the sixth best-selling
marque in Malaysia and the top selling European brand. The brand also launched “Think
Blue”, a global platform unifying all activities and initiatives on environmental responsibility,
fuel consumption and emissions.
3.5.2 Price
Regardless of the ideal positioning of consumer’s needs, pricing is also one of the major
criterion is choosing a vehicle. Volkswagen has consistently priced their cars with premium
pricing with an average of 10 percent higher than competitors. The return is for more upscale
and rewarding ownership experience that translates to brand loyalty. However, with more
competitive automotive markets, Volkswagen has been losing market share as consumer
perceived the car value is overpriced compared to Asian automotive car manufacture that has
better features and equally good safety features like Mazda and Toyota. In fact many
American and European automotive factories have been losing out to these competitors and
had never recovered resulting in layoffs and eventual shut down. Through vigorous research,
Volkswagen has found that the previous models were not as popular because of two reasons;
the retail price and the perception of high maintenance costs (Evans, 2011). To counter this
Volkswagen has reduced their premium pricing to be only 5 percent above competitors’
products while maintaining their quality and service. Having cars to be manufactured in
United States has been the strategy to reduce production cost and thus, reducing the price of
their cars. The model Jetta is an example. When the price is reduced, the not so popular model
was swapped off the car showroom and became very popular. They have managed to attract
consumer who are more price conscious who wants quality. Volkswagen has also decided to
take on the approach of more is less. They are going to make bigger cars and charge less for
them. They are exploiting this idea with the Jetta and the Passat. They are changing their
pricing strategy in hopes of reaching their goal to become the number one automaker
company in the world.
3.5.3 Place
Volkswagen has increased their dealership from 12 to 22 in the year 2012. The number of
showroom throughout the country has also jumped to 28 with the positive increased in sales.
With increased market awareness of Volkswagen product throughout Malaysia especially in
major towns and cities, road shows in popular shopping malls, and new showrooms. These
together with the increased of 3S Centre (Service, Sales and Spare Part) nationwide including
Sarawak and soon will be in Kota Kinabalu, Sabah will definitely create consumers’
confidence.
3.5.4 Promotion activities
Volkswagen like the other car manufacturer has constantly organized events and road show in
malls with contest, promotion and product launch all year long. With the new official website,
customers can review prices, found out models , local dealers and service centers of the
company. They have also launched promotional activities through social networking sites
such as Facebook and Twitter that updates their customers and fans. Hill (1988) stated that
advertisement such as sales promotion, road show and other promotion activities will drive
awareness of consumer and will affect the purchase intention. Besides, this also supported by
Mortimer (2001), advertising campaign done by companies is one of the important tools to
gain the brand cognition from consumers. The Volkswagen Motor Club Malaysia is also an
active Motor Club that serves to organise activities for Volkswagen enthusiast.
3.6 Ansoff Growth Strategies
The Volkswagen already exists a long time ago in the Malaysian’s market. Therefore, market
penetration strategy been used in the Malaysian market, is by sales of existing products in
existing markets. The market penetration strategy for Volkswagen is to maintain the current
position in the Malaysian market, and do a lot of advertising in the automotive industry, in
order to promote the market, create consumer awareness, and increase market share (Jobber,
2007).
3.7 Volkswagen PEST Analysis
3.7.1 (P)olitical
Political factors will directly affect the operations of Volkswagen. This is because the
decisions made ​​by the Government, will affect the daily lives in the form of policy or
legislation. For example, if the government increases taxes expenses to support the local car
manufacturers such as Perodua, it will directly affect the profits of the Volkswagen. This is
because when the increasing in the import duty; compared to local companies, Volkswagen
will become more expensive. This will result that Malaysian citizen would not buy a car from
Volkswagen, especially those who are in the middle and lower levels of income range.
According to Malaysia Import Duty (2000), motor vehicle import tax in Malaysia is more
than 120%.
3.7.2 (E)conomics
A country’s economy is affected by the country’s unemployment rate. According to the article
of Statistic of Malaysia economy (2012), Malaysia’s unemployment rate increased from 3.1%
(2011) to 3.2% (2012), this means an increase in the number of unemployed workers. People
cannot get a job once the unemployment rate was increase and at the same time mean that an
individual will lose their income and this will happen that unaffordable in purchasing. This
indicates that sales in the automotive industry in Malaysia will be affected.
3.7.3 (S)ocial
Changes in the socio-cultural factors, such as the role of women, education, and professional
attitude will affect the business operations of Volkswagen in the automotive industry. Today,
the majority of women in society are highly educated, so that the majority of women choose
go out to work, instead of sitting at home doing housework and childcare, this results that the
income of the family is increasing. According to Thomas and Early Sasser (2001), Customers
will never be satisfied with what they have, especially car. The article from Malaysian
Automotive Association (2012) stated that there was increase in the total volume of 4,021
units in 2011 (297,203 units) in the first six months to 6 months in 2012 (301,224). With the
higher income, car users would like to replace it with a new car and enjoy the latest
technology engine performance in the long term.
3.7.4 (T)echnology
The progress of science and technology for the Volkswagen Group in R&D projects, the
establishment of a more advanced vehicles, such as hybrid cars, in the automotive market, in
order to maintain and create competitive advantage. Hence, Volkswagen Group focuses on
the development of new technology and innovation, to become the world’s most economical,
eco-car manufacturing. As the board of chairman of Volkswagen, Martin Winterkorn, stated
that their goal is becoming leadership position in the automotive industry (Annual report
2011). With the advancement of technology, the Volkswagen Group can provide hybrid
engine by using electricity to run and allow reducing gasoline consumption and carbon
dioxide (CO2) emissions into the environment. In February 2013, Volkswagen has launched a
new car, named XL1, which is one of the most fuel-efficient production cars in the world
automotive with fuel consumption values ‹0.9/100km (Volkswagen news, 2013).
3.8 SWOT Analysis
3.8.1 (S)trength
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Global presence
Volkswagen operates In 153 countries and regions around the world and is the third largest
car manufacturer in 2012. The company produces cars in 100 factories in Europe, North
America, South America, Asia, Africa and Oceania. In addition, there is no other car
companies have the ability with the public there is competition in the global except GM and
Toyota (Strategic Management Insight, 2012).
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Strong brand portfolio
Volkswagen has 13 car brands: Audi, Bentley, Bugatti, Lamborghini, Porsche, Seat, Skoda,
Volkswagen, MAN, Scania and other commercial vehicles and sales. With such a wide range
of models Volkswagen meet almost all the needs of consumers and access to a huge consumer
market (Strategic Management Insight, 2012).
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Synergy
To benefits the Volkswagen Group from synergy created between all 13 independent car
brands. All 13 independent companies to save the cost of R & D and services, by learning
from each other’s best practices and share distribution channels (Strategic Management
Insight, 2012).
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Well performing brands
Without its namesake brand, the company has some other very successful brands, including
Audi and Porsche. The value of the Audi brand was $ 70 billion U.S. dollars and Porsche
worth $ 5 billion U.S. dollars. Audi is also the second-largest brand in the portfolio of the
company’s impressive growth (Strategic Management Insight, 2012).
3.8.2 (W)eaknesses

Weak position in the US passenger car market
In 2012, Volkswagen passenger car market in the United States, only about 5% market share.
The United States is the world’s second largest auto market in the world and weak
Volkswagen’s position with their results comparable sales decline (Strategic Management
Insight, 2012).
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Most cars are not environment friendly
Volkswagen has three major sports car brand Porsche, Lamborghini and Bugatti with carbon
dioxide emissions and fuel inefficient. In addition, the Volkswagen Group’s strong opposition
to legislation, carbon dioxide emissions and energy efficiency requires more stringent
requirements, because their cars are not as fuel-saving and environment-friendly as its
competitors (Strategic Management Insight, 2012).
3.8.3 (O)pportunities
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Changing customer needs
Volkswagen may introduce more fuel-efficient models are also many fewer emissions of
carbon dioxide in all automotive brands, to meet new customer needs (green car), and
enhance the brand reputation (Strategic Management Insight, 2012).
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Increasing fuel prices
Consumers are very sensitive to fuel prices, the prices go up, and their demand tends to the
growth fuel-efficient and hybrid vehicles (Strategic Management Insight, 2012).

Positive attitude towards “green” vehicles
The cars emit large quantities of carbon dioxide and fuel inefficient cars pollute the air and
the negative environmental impacts. Consumers are aware of this negative impact is more
positive “green” vehicle emissions of carbon dioxide is much less fuel-efficient (Strategic
Management Insight, 2012).
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Growth through acquisitions
So far, the Volkswagen Group is very successful acquisition of other car manufacturers, and
greater consumer market, as well as faster than organic growth. To continue at the current rate
of growth, and access to important U.S. market, the public should continue to acquire
competitors (Strategic Management Insight, 2012).
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Increasing global demand for buses
Bus demand is expected to grow at an annual rate of 5% until 2016. Volkswagen is one of the
major bus suppliers have the opportunity to expand production and increase sales (Strategic
Management Insight, 2012).
3.8.4 (T)hreats

New emission standards
The public strongly opposed to the more stringent requirements for low-emission standards. If
such legislation is adopted, the company will have to make a huge investment planning, to
reduce carbon dioxide emissions from new engines (Strategic Management Insight, 2012).

Fluctuating fuel prices
Due to the increase in the extraction of shale gas, future fuel prices, hybrid cars are not very
attractive. Volkswagen hybrid and electric vehicles of investment losses, rather than the
perspective of the car of the future will be considered. On the other hand, soaked in fuel
prices will increase the VW cost-conscious consumers are not very attractive, because they
need a large number of small cars with low fuel consumption (Strategic Management Insight,
2012).
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Rising raw material prices
Metal prices of raw materials will increase the cost of the car manufacturers, and squeeze the
profit of the company (Strategic Management Insight, 2012).
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Growing euro exchange rate
Volkswagen earns more than 70% of the revenue outside the euro area,. Exchange rate
fluctuations threat to the profits of the Volkswagen’s profit, if the euro strengthens against
other currencies (Strategic Management Insight, 2012).
4.0 Recommendations for Volkswagen
4.1 Recommendation for SMART Objective and Goals
Volkswagen had come out an objective called Strategy 2018 which focus on the Volkswagen
Group has positioned itself as a global economic and environmental leader among automobile
manufacturers. The goal is actually quite clear for Volkswagen which is to make Volkswagen
to be to most successful and fascinating automaker in the world by 2018. SMART objective
in marketing strategies further been used for identifying the objective and goals.
Specific- Volkswagen intends to deploy smart innovation and technology and becoming the
world’s leading in customer satisfaction and quality
Measurable- The goal is to increase the unit sales to more than 10 million vehicles every year.
Achievable- Volkswagen intends to capture the development of a major growth market share
than average.
Realistic- Volkswagen’s goal is to be the best employer in all brands, companies and regions,
it is necessary, in order to build a first-class team.
Time bound- Volkswagen clarifies that the goal can be achieved in 2018.
(Annual Report, 2011).
4.2 Recommendation for Marketing Strategies and Programs
Not only with the strategies mention before, in order to be more competitive advantage in the
automobile industry, perceived differentiation be considered. Perceived differentiation is an
important factor for determining an SBU’s ability to compete in this industry. With high
capacity, an SBU must prove some distinguished difference from competitors in order to
compete and succeed, otherwise the SBU will not grow its customer base, become stagnant
and eventually be harvested or divested (Levring, 2011), (Clayton, 2011c). Volkswagen
passenger cars will able to show differentiation in its product line through unique automotive
design and advertising. It was assigned, because it is dependent upon the company image
(Volkswagen, 2010b), (Clayton, 2011c). A firm’s differentiation means nothing if all
potential consumers think poorly of it (Clayton, 2011c).
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5.0 Conclusion
Volkswagen has taken the strides to move with time from their illustrious past as war vehicle
producers to world-class car maker that has trusted reputation for quality and luxury vehicles.
From its troubled beginnings to its slow and steady rise to the top of the automotive world,
Volkswagen has never forgotten what its soul purpose was: to be the people’s car. The firm’s
ability to re-invent itself to customize to consumers’ needs in every level of the society has
kept them relevant to the automotive industry. The declining market of European and
American produced cars due to the high competitions from Japanese and Korean car-maker
has drove many automotive factories to closure but Volkswagen, with their years of
experience has kept diligently at bay despite price competition without compromising on
quality, service and their true focus on sustaining the environment. The focus and emphasis
on progress and development with the responsibility on keeping the environment clean by
producing fuel efficient vehicle and sustainable production without sacrificing the earth
delicate natural resources. No matter what has happened, Volkswagen has always put the
customer first and designed and sold vehicles for them. Volkswagen is a one-of-a-kind
automaker and one worth learning more about (Volkswagen, 2011a).
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