Rejuvenation of Volkswagen

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more stable company, turned the tables and Porsche was forced into becoming part of the Volkswagen family (Bowler, 2015).

As history has shown, the Volkswagen Company had become a powerhouse in the automotive industry. However, scandal erupted in 2015 with the admission by Volkswagen of intentionally deceiving their customers and regulatory commissions by altering the device responsible for emission control checks (Golson, 2015). To correct the emission problems Volkswagen was forced to recall the effected vehicles. Most repairs could be completed at a local dealership, however in some extreme cases Volkswagen was required to replace the faulting vehicle with a brand new one (Behrmann, 2015).

The daunting task of rebuilding the Volkswagen reputation as a trusted carmaker begins with a strategy. Volkswagen plans to deploy new automotive innovations and technology to regain its place as a leader in customer service. Focusing on growth markets, Volkswagen intends to expand the sales market by 10 million vehicles a year. With customer service as another focus of the company, Volkswagen proposes to develop their internal environment by implementing programs for employee satisfaction. In addition to the aforementioned brand rebuilding strategies, Volkswagen plans to concentrate their efforts on environmentally friendly vehicles with design for improved emissions control, fuel efficiency, and pushing the edge on electric automobile technology (Volkswagen AG, 2014). However, none of the tactical approaches mentioned can be completed without first examining the strengths and weaknesses of the company as well as the external environment.

STRENGTHS, WEAKNESSES, OPPORTUNITIES, AND THREATS

One of the apparent strengths of the Volkswagen groups is that of a rather remarkable global presence. Currently, Volkswagen operates in 153 countries worldwide, and as recent as 2012 Volkswagen was the third largest auto manufacturer in the world, down from the number one position in 2011 (Volkswagen AG, 2013(a)). Given the fact that Volkswagen owns and sells 13 automotive brands that include: Audi, Bentley, Bugatti, Lamborghini, Porsche, Seat, Skoda, Volkswagen, MAN, Scania and other commercial vehicles, Volkswagen has built quite a strong brand portfolio to match the likes of major automobile competitors. With such a wide range of vehicle models, Volkswagen can satisfy most all consumer needs with its brand portfolio.

Added to the strengths of Volkswagen would be the synergy that the company brings to the table. Volkswagen has strategically aligned the company’s research and development and servicing costs to be able to share best practices and distribution channels across all 13 separate companies (Volkswagen AG, 2013(b)). This synergy is certainly a strength that continues to keep the organization at the top of the automobile industry.

Finally, but certainly not lastly of the organization’s strengths, would be the strong presence that Volkswagen has in China. With China owning the largest automotive market, as well as its emerging economy that has continued to grow at a steady pace, Volkswagen finds itself in a very comfortable position as the country’s largest automobile supplier as it captures 20% of the Chinese market (Volkswagen AG, 2013(a)).

“It’s a long road back for Volkswagen AG after the German automaker admitted to falsifying emissions tests in the United States (U.S.) in September 2015 (Trefis Team, 2015).” For the first time in 15 years, Volkswagen recorded a net loss in October 2015. When a high profile company such as Volkswagen breaches the public’s trust, the damage can be enormous. A glaring weakness of the automobile giant is people’s perception of the company’s reputation. Through the years, Volkswagen promoted its image as an environmentally conscious choice for drivers, however, after the emissions scandal, drivers are angry. As a result, Volkswagen’s reputation has been weakened in a colossal way. Before the ongoing emissions scandal, Volkswagen had 5% of the U.S. market share in a report released in 2012 (Volkswagen AG, 2013(a)). The weakness is that the U.S. is the owner of the second largest automotive market in the world. Finally, Volkswagen is the owner of the top three most environmentally unfriendly sports cars, Porsche, Lamborghini, and Bugatti. All three sports cars emit the maximum amount of CO2 levels allowable as well as being extremely fuel inefficient (Global Research, 2015).

The challenge and opportunity for Volkswagen is to become transparent to the public in regards to the issues related to the scandal. Transparency attempts to recover and regain Volkswagen’s footprint as the automobile giant it was before the colossal error in judgment. It is well documented that cars that emit large quantities of CO2 and fuel inefficient cars pollute air, which in turn affects the overall environment (German Automobiles, 2015). In its attempt to regain its hold on the automobile market, Volkswagen could seek to introduce more fuel-efficient models that would emit considerably less CO2 amounts across all its automotive brands. In doing so, the company would try to meet new customers’ needs while producing the environmentally friendly cars, which would in turn, began to increase brand reputation.

A current threat to the Volkswagen Company is its well-publicized opposition to legislation requiring tighter regulations on CO2 emissions and energy efficiency. One of the reasons for Volkswagens stands is, historically their cars are not as fuel-efficient and environmentally friendly as their competitors (Volkswagen AG, 2013(a)). Many feel that for Volkswagen to regain its foothold in the automobile market, the organization must rethink its current emissions position and offer support for new standards.

Another potential threat to the Volkswagen Company would be the current fluctuating fuel prices as a result of the increasing extraction of shale gas. Volkswagen’s investments to the hybrid and electric cars would certainly be threatened as fuel prices are dropping thus making these cars less attractive to the consumer. With this fragile market, Volkswagen’s 10 year profit projections would drastically be affected coupled with the unanticipated decrease in profits currently ongoing with the emissions challenge. Finally, with the decline in profits and the rising price of raw materials, this would lift the cost of all auto manufacturers and result in even further decreased profits for these organizations (Global Research, 2015).

NATURE OF EXTERNAL ENVIRONMENT

When examining the external environment of a company, Porter’s Five Force Model provides an extensive analysis for determining the type of strategy necessary to accommodate for the atmosphere surrounding