Volkswagen is a large German automaker established in 1937. It owns 9 major automotive brands and has production in 62 plants across 21 countries. Volkswagen pursues a strategy of leveraging its scale across brands and through R&D to take advantage of sector dynamics. It has expanded significantly in China through joint ventures and plans to continue its focus on emerging markets for future growth. Volkswagen has acquired brands like Skoda and SEAT to expand its geographic and product reach.

2. Volkswagen
Aktiengesellschaft

3. The power of Volkswagen group

4. History & Overview
Established on 28th May, 1937.
Founded by Nazi Deutsche Arbeitsfront (German
Labour Front).
The first automobile manufactured was the Type 1.
Headquarters in Wolfsburg,Germany.
Production in 62 plants across
21 countries.
Sales in 153 countries.
Net revenue € 126.9 billion.
37 aquisitions and 28 stakeholdings. TYPE 1

5.  Owns 9 major automotive brands covering major segments.
 Well positioned to take advantage of sector dynamics by leveraging scale
across brand portfolio.
 Industry leading R&D effort drives art and technological innovation.
 Resilient business model with high profitability and strong financial profile.
Volkswagen-The Group

6. Since
1939
Before
World
War II
Post
World
War II
Current
Logology
Volkswagen-Evolution As brand

7. High process efficiency leading to high
profitability.
Differentiative brand promotion.
Dissociative brand strategy.
Focus on development of self image of all the
brands.
Operating in all the segments i.e. Passenger,
commercial and luxury vehicles.
Enters Market of different segments through its
different brands.
Enjoys huge clientage.
Volkswagen- Brand Positioning

9. Volkswagen- Company Profile
• A positive cash flow from operating activities.
• A negative cash flow from investing activities(discussed later).

10. Volkswagen- sales and market division
• Progressive increase in sales.
• Latest being 7.20 million
• Hand in hand with global
automobile industry.
• High market share in
western/Eastern Europe
• Growing markets in China and
South America
• Upcoming market in Asia

11. Volkswagen- sales revenue
• A booming brand until 2009.
• 2009 recession.
• Strong recovery with more than
20% incremental revenues.
• Strong foundation for post
recession period.

12. Volkswagen- Profits and EPS
• Varying profits over the years.
• A downfall of over 70% in
operating profits and over 80% in
profits after tax.
• High rise in profits post recession.
• Major investors: Lower
Saxony(govt.), Porsche and
Piech family and gulf state of
Qatar(17%)
• Fall of more than 80% in EPS
during recession
• Approximately a 7 fold increase
in EPS post recession.

13. Volkswagen- Investment trend
• Evident disinvestment to tackle recession
• Various unknown reasons for disinvestment can be attributed to recession and
need for liquidity as this was the period company went into major acquisition that
of Porsche AG.

14. Volkswagen- Customer deliveries
• Comparative study between 2009
and 2010
• Asia pacific(exc. China) region and
North America have high rise in
sales.
• Data only for fully owned
subsidiaries and not joint ventures.
• Volkswagen truly being “People’s
Car”
• With maximum sales under
Volkswagen AG umbrella.
• Most of the major brands show an
increase in sales except SEAT with
negligible fall and Lamborghini being
unable to recover post recession
with high competition from Ferrari
and Aston Martin.

15. Competition Analysis

16.  Toyota and General Motors are the major competitors on a global scale
with Ford following closely.
 Sales (as of 2009): Toyota – 7.3 million units
General Motors – 6.5 million units
Volkswagen – 6.29 million units.
Ford – 5.73 million units
 Major Markets: Toyota - Japan and North America
General Motors – United States and
China
Volkswagen – Europe and China
Ford – United States and Europe
Competition Analysis

17. Sales
Toyota 12%
GM 11%
Volkswagen 10%
Ford 8%
Others
Competition Analysis

18. 0
50
100
150
200
2000 2005 2009
volkswagen
GM
Ford
-40
-30
-20
-10
0
10
2000 2005 2009
Volkswagen
GM
Ford Motors
Revenue and Profit comparison

19.  Iconic Brand portfolio, giving customers ample choice.
 Self substitutes: Brands compete amongst themselves.
 Technological leadership.(DSG Engines: sold over 3.5 million units)
 Innovative designs and concept cars to satisfy tomorrows needs.
Competitive Advantage

20. Future Growth Drivers: Need to expand
&
Market Analysis

21.  Global overview and automotive market.
 Emerging Markets of Eastern Europe and India show promising business.
Future Growth Drivers: need to expand

22. Market
Penetration
Product
Development
Market
Development
Diversification
Ansoff's Matrix
Existing
market
New
market
New
Product
Existing
Product

23. Product Development: Western Europe.
Market Development: India, Japan.
Growth market focus
• Increased market penetration
• Emerging markets expansion
• Balanced global footprint
Market Analysis
Potential upside
• Product portfolio extension
• North American expansion and
market recovery
• Commercial vehicle strategy
and market recovery
• Financial Services – strengthen
the automotive value chain

24. Markets: Strategy, mode of entry, major
ventures and future plans.

25. Approach
M
a
r
k
e
t
Mode of Entry
Y
X
• An analytical approach is
adopted.
• International business
market and expansion are
being studied
simultaneously through
mode of entering into such
markets.
• Competitive approach:
holistic view of the
organisation into new
regions.

26. China: A Major Market
 1984: Shanghai Volkswagen Automotive Co. (SVW) as a joint venture
between Volkswagen and Shanghai Automotive Industrial Corporation
(or SAIC) was founded.
 Production milestone in November 2010 – 6 million cars.
 Volkswagen was the automotive pioneer in the modern Chinese
market.
 1990: FAW-Volkswagen Automotive Co. Ltd. was set-up as second joint
venture in China.
 Production milestone in November 2010 – 4 million cars.
 Today: Volkswagen is represented by 16 companies in China.
 Total investment 1984 – 2010: € 9.5 billion
 Total deliveries (in 2010): 1.92 million units
 Employees (in 2010): 51,000

27.  2 major ventures in China
(i) Shanghai Volkswagen Automotive Company.
 Joint Venture for a period of 45 years expiring 2030.
 Produces cars under Volkswagen and Skoda brands.
China: Major Ventures
Founding year 1984
Production commencement 1985
Mode of entry Joint Venture
Employees 22,000 (31.12.2010)
Equity Holding
Volkswagen
AG(40%)
Volkswagen
China(10%)
SAIC(50%)

28.  (ii) First Automobile Works – Volkswagen Automotive Company(FAW)
 joint venture established in 1991
 Funded by First Automobile Works, Volkswagen AG, Audi AG and
Volkswagen (China) Investment Co., Ltd
 Manufactures cars under Volkswagen and Audi brand.
 High economies of scale (1st in China).
China: Major Ventures
Founding year 1990
Production commencement 1991
Headquarters Changchun, Jilin Province
Mode of entry Joint Venture
employees 27,000 (31.12.2010)

29. Equity Holding
Volkswagen
AG(20%)
Volkswagen China
inv.(10%)
Audi AG (10%)
FAW (60%)
China: Major Ventures
(ii) First Automobile Works – Volkswagen Automotive
Company(FAW)

30. China: Government Policies
Tariff control measures:
Tax policies and subsidies
Purchase Restriction
• Additional car license limited to 240,000 for 2011
• No limit for replacement vehicles
Use Restriction
• Market growth lowered in 2011
Purchase tax: 2009 – 5%
On passenger vehicles 2010 – 7.5%
2011 – 10%
subsidies Subsidy on 2009 2010 2011
Commercial
vehicle
3000 5000 4000
LMV Max. 4000 Max. 4000 No subsidy
(In RMB)

31. Simultaneous application of
“Go WEST Strategy” and
“Go SOUTH Strategy”
Set up of 2 completely
new plants and further
production optimization
of 2 plants.
The investment strategy
of Volkswagen Group
China is self-funded from the Joint Ventures.
Total Investment
China: Investment Strategy

32. BRIC: Markets and Volkswagen standings
Volkswagen owns 19.9% stake in Suzuki, which owns 54%stake in Maruti Suzuki
Mode of entry:
China: Joint Ventures.
Brazil: owned subsidiary
and joint venture.
Russia: owned
subsidiary
India: owned subsidiary
and strategic
alliance

33.  Founded in 1895, one of the oldest car makers in the world.
 Derided for their unappealing looks and poor performance during the
cold war period.
 Government sought to a foreign partner for the company post Velvet
Revolution.
 In between 1991 and 2000 Volkswagen invested close to € 2.6 billion.
 During the period revenues increased from 500 million to 3.7 billion.
 As of 2009 its revenues are 7.1 billion
Skoda Acquisition
30%1991 60.5%1994 70%1995 100%2000

34. 0
200
400
600
800
1000
1991 1996 2000 2004 2009 2010
Sales
sales
(in '000
units)
Skoda Acquisition: rising market
• Skoda’s sales have risen almost 5 fold since the acquisition.
• From being a brand known for its “ugliness and poor performance” it now
transformed into a car which is regarded as symbol of reliability.
• Expansion by manufacturing in Asian markets, that of China and India.
• Innovative use of marketing
and media.
• Largest car maker in Eastern
Europe.
• An opportunity to exploit
emerging markets.

35.  To enter the Low-end economical car market.
 To attack Fiats position as the largest car maker in Europe.
 To acquire a share in Eastern Europe’s car market, where Volkswagen
was not as popular as in other European markets.
 To gain access to wider consumer base in markets of China, western
Europe and North America.
 To reduce overdependence on their established brands in Western Europe
and North America.
 To gain entry into the emerging markets of India and Russia.
 Economies of scale and optimization of production capacity in Eastern
Europe.
Volkswagen: Reasons for Acquisitions

36.  Cannibalism: a Multi-national acquires many brands, which compete
with each other in the global market.
 A cheap Volkswagen has become available in the West called Skoda.
 It is not a decisive brand in western Europe.
 However, in the rest of the world, it is a very close competitor to
Volkswagen.
 Superb to Passat
 Octavia to Jetta
 Fabia to Polo
 Threatening to better Volkswagen’s performance in emerging markets.
Skoda: Cannibalism

37. “Central Europe is not an emerging market, its reemerging. And
its
companies are playing the game of catch-up incredibly fast.”
- Justin Jenk, A Principal with McKinsey & Co. in Moscow, 1997
Eastern Europe: the promising market

39. Future prospects, suggestions and conclusions.

40.  Objective: Ensuring profitable growth and creating sustainable value.
 Focus: expansion of brand and product portfolio alongside increase in
GLOBAL footprints and emerging market presence.
 Capital targets: more than 16% ROI and 20% ROE(pre tax)
Plan 2018

41. Plan 2018: organisation driven by innovation.
Global reach and research centers across continents of various brands.
Regional head offices at Shanghai, Chattanooga and Wolfsburg being the head
quarters

42.  Improve after sales services and customer relations.
 Expand its clientele for commercial vehicles on the foot prints of
passenger car segments, globally.
 Exploit female consumer market.
Suggestions.

43. Conclusion.
Strong Brand portfolio
Platform leverage of core operations
Advanced technology
Efficient leadership
Position of financial strength
Excellent management model
Aggressive expansion prospects via adoption of various ways of entering markets
such as fully owned subsidiaries, joint ventures and Strategic alliances.