Team Maxxim
presents
Volkswagen AG
Situation Analysis
EBA 605, Dr. J. Coleman
Saturday, March 11, 2006
Project Goals & Objectives
 Highlight trends in the automobile industry
 Analyze and critique Volkswagen recent
decisions
 Discuss where and why VW went wrong
 Offer potential solutions as an objective
outsider
Volkswagen AG
Presentation Overview
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Company Overview
Brand Portfolio
Current Situation
The VW Customer
Competitive Analysis
Financials
SWOT Analysis
Questions
Volkswagen AG
Corporate Overview
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HQ: Wolfsburg, Germany
US Operations: Auburn Hills, MI
Europe’s #1 automobile manufacturer
Traditional Brands: Jetta, Passat, Touareg,
Phaeton, Fox and Audi
International Brands: SEAT and SKODA
Annual production: 5M vehicles
Annual sales: $121,345/ 10.9 YOY growth
Employees: 342,502 worldwide
Volkswagen AG
Key Milestones
1930s
1940s
1950s
1960s
 Factory opened in
 Production of first
 VW begin building
Wolfsburg, Germany
Volkswagen
 Company turned
over to German
government
foreign plants
 Launched “Beetle” in
US market
 Developed Microbus
 Sold stock to the
German public
 Purchased Auto
Union (AUDI)
 US Beetle sales took
off
1970s
1980s
1990s
2000s
Built China’s largest
auto plant
Launched Passat
 Acquires Rolls-Royce
and Bugatti
 Launched New
Beetle in US
Spent 3.1B to
modernize factories
The final Beetle
ended a 70-year run
Invested 1.7B in
China (Asia/Pacific)
Bernd Pischetsrieder
joined company
 Beetle discontinued
 Begin car venture in
in every country except China
Mexico
 Purchased SEAT
 Formed Autolatin in
Brazil
Volkswagen AG
Volkswagen Group Brand Portfolio
sophistication
zones of
low demand
zones of
low demand
functionality
emotion
Volkswagen AG
Current Situation – Project Basis
HIGHS
•Porsche increase stake in VW
•Recently hired Wolfgang Bernhard
to head VW group
•Launched “Moonraker” project
*** Some may say this is a high given that he engaged VW in
High risk, high reward strategies
•Loosing share in China market
•Pulled out US luxury market
•VW to cut 20,000 jobs
•Ferdinand Piech steps down as
Chairman***
Triple threat:
•high costs
•inflated sticker price
•questionable quality
LOWS
Volkswagen AG
The VW Customer
 Positioning Statement:
For the cost conscience buyer, Volkswagen
offers reliability and value.
 Value Proposition:
– Target Market: Cost conscience buyer (parents,
females, young adults)
– Benefits offered: German technology
– Relative price: Affordable, reliable
Volkswagen AG
The VW Customer
Young
Female
Age 19-32
College-Educated
Parents
Value conscience
Global Reach
USA, France
Spain, UK
Germany
Italy, China
Aspirational value
Volkswagen AG
Volkswagen Global Marketing Mix
 Brand portfolio
 Volkswagen
 Audi
 Seat
 Škoda
 Bugatti
 Bentley
 Lamborghini
 Commercial vehicles
 Development of
distribution partners
 Separated
distribution channels
for each brand
 International
standardization of
dealers
 Unique brand identity for
each nameplate
 Complete product range
 Mostly standardized products
with minor adaptations
1
 Setting prices with regard to
competitors
 Price discrimination across
regions
 No price competition in
emerging markets
 Strict cost controlling
Global
Marketing Mix
4
 Glocalized communication
 Emphasis on the European
market
 Brand advertising
 Emotionalization
2
3
Volkswagen AG
VW Competitive Analysis
Passat
Golf
Phaeton
Jetta
New Beetle
Touareg
1.5
7.6
23.9
13
35.5
Volkswagen
Toyota
DiamlerChrysler
General Motors
Ford
Volkswagen AG
*Numbers based on 2004 Marke tshare
Operating Margin
30
25
20
5.56
4.94
6.01
6.71
6.22
6.81
4.94
15
10
6.22
3.25
8.49
9.64
1.92
1.73
2003
2004
7.44
5
3.38
0
2000
5.77
5.16
2001
Volkswagen
2002
Toyota
DiamlerChrysler
General Motors
Ford
Net Profits
18
16
14
12
10
8
6
4
2
0
-2
5.56
0.93
3.15
4.08
2.28
3.1
2.8
2000
2001
2002
Volkswagen
Toyota
DiamlerChrysler
0.03
2.06
0.33
1.45
1.74
5.88
6.72
1.18
0.72
-0.6
2003
2004
General Motors
Ford
Volkswagen AG
5 Year Sales Trend (in billions)
•Sales increased by 4.9% in 2004
•Shareholders net profits
•Substantial decrease ’00 to ‘01
4,032
163,331
2000
2,915
2,984
1,095
667
88,540
86,948
87,253
88,963
2001
2002
2003
2004
5-Year Sales Trend
Volkswagen AG
Return on Equity – Return on Assets
20
18.35
15
12.19
10.54
10
5
4.58
2.53
2.8
3
2.38
0.94
0.56
0
2000
5-year period
Reduction in ROE & ROA
2001
2002
ROE
2003
2004
ROA
Volkswagen AG
SWOT ANALYSIS
STRENGTHS
Market Leaders
High Brand Equity
Focus on Innovation
WEAKNESS
Slow revenue growth
Low presence in SUV market
Rising admin expenses
OPPORTUNITIES
New market to explore (India)
Auto sales up 30%
2010 India will have 36x more cars
Increase disposable income
Launch new models
THREATS
Fierce competition
Increasing steel prices
Decline car sales in U.S.
Low consumer spending in Germany
Volkswagen AG
Challenges and Risks*
current
Revenue and
Performance
•Increasing product costs
•High investments
•Price pressure
•Weak economy
future
Costs
•Depreciation
•Legislation
•Investments in future markets
•Raw material prices
•Labor costs
•Further price pressures
•Chinese operations
•US operations-luxury market
•$/€ Exchange rates
Volkswagen AG
*Volkswagen AG 2005 Strategy Meeting
Thank you!
Volkswagen AG
References
 Culp, Eric, “VW in Fresh Trouble as it Withdraws US Model”, Knight
Ridder Tribune Business News, 11/05, pg 1
 Flint, Jerry, “The Fast and the Furious”, www.forbesauto.com, 01/06
 Fondon, Daren, “A Pitch to the Rich”, Times Online, 11/03
 Hoover’s Company Information, Hoovers, Inc., 2006
 Landler, Mark, “Volkswagen Chairman Step Down”, New York Times,
01/06
 Landler, Mark, “Porsche to Build a 20% Stake in VW”, Detroit News –
Auto Insider/New York Times News Service, 09/05
 Power, Stephen, “Once Hot Volkswagen Attempts to Reverse U.S. Sales
Decline”, Wallstreet Journal (Eastern Edition), New York, 09/05, pg A3
 Rancanelli, Vito J., “Turn Around Ahead at Volkswagen”, Barron’s, 05/05,
Vol. 85, Issue 20, pg 26
 Thomas, Chad & Archey, Sheenagh, “Porsche Buys 20% in the VW’s
Share to Prevent Takeover”, Bloomberg News,
http://quote.bloomberg.com/apps/news, 09/205
Volkswagen AG
References
 Brodrick, Sean. Set Your Sights On Asia’s Sleeping Elephant.
http://www.escapeartist.com/efam/70/Invest_In_India.html
 www.datamonitor.com
Volkswagen AG