History, Segmentation, Marketing Strategies And Competition Analysis Of Volkswagen Group
Volkswagen Group History
Volkswagen Group is a German based automobile companies that were initially formed under the rule of then Adolf Hitler in 1937 after approval of Ferdinand Porsche’s design that was commonly known as the “people’s car”(Mernitz 2015,p.190). The Volkswagen Group main goal is to offer eye-catching, safe, and environmentally reliable motors that meet the customer’s various needs and that can command the stiff market share.
The company initially referred as Gesellschaft zur Vorbereitung des Deutschen Volkswagens mbH , later renamed as Volkswagenwerk under the controlled by the German Labor Front party. The main agenda was to build a network of autobahns and affordable vehicles that worth less than 1,000 Reich marks (Scholz 2014, p.38).Volkswagen production growth rate came to halt during the World War II that led to the bombing of the main production unit of the Volkswagen: KdF-Wagens town in 1945 by the United States.
During the war, the company was unable to get enough raw materials, affecting the production rate. The bombing left the company in ruins and could not make significant sales in any country for United State related “people’s car” to Nazi that was known as the war propagators (Nielsen & Wihite 2015, p.374). However, the company rejuvenated the operations after advertising process done by the Doyle Dane Bernbach agency, which dubbed the car as “beetle” turning around the customer’s preference, and later in 1960, the government relinquished over 60% share of the company to the public. The campaign made Volkswagen to be the most-top selling out import in the United States and other parts of the world surpassing the 1908 record set by Ford Motors of 15 million vehicles sales by 1972. Currently, Volkswagen group has a collection of various automobile manufacturers such as Skoda, Porsche, Ducati, Bugatti, Scania, Audi, Lamborghini, and MAN.
Volkswagen came into existence to manufacture people’s car in Germany with primary objective of providing affordable cars to the large group of the German since they were to cost no more than 1,000 Reich marks. However, the company later changed the goals and embarked on manufacturing military cars such as SUV-like Kubelwagen and Schwimmwagen that affected the sales in the global market. Currently, the company has a diversified market strategy to make VW the global most preferred supplier of the automobile through the “Together program” that aims at dominating the path in a harmonious coexistence and equal exchange. Together program aims at fulfilling the company’s dream of becoming the first automobile to sell 10 million cars in a year with the base target being 2018 from the current average sales of 6 million a year (Bauer 2013, p.112). The company has introduced about nine brands that have unique portfolio since it came into existence; these are Volkswagen, seat, Skoda, Volkswagen commercial vehicles, Bugatti, Audi, Bentley, Lamborghini, and Scania.
Marketing Segmentation and Strategy
The current company segmentation based on the psychological, personality and lifestyle characteristic of the customers. The information collected from the market surveys enables the company to produce various cars that meet each and every need of the large population of the company (Wetland 2016, p.392). The company new creations target different market segments that are in responses to the customer needs. For example, the new beetle segments to the young people between the ages of 18 to 34 and the baby boomers who want to recapture the childhood memories of the original Beetle.
The baby boomer tends to have a secure emotional connection with the original Beetle making it easy for the company to market and make significant sales on the new Beetle car (Altenburg, Schamp & Chaudhary 2016, p.467). The new beetle ranges to the average between the U.S family incomes of $ 86,000 making it affordable among a large group of people. The Audi brand is considered to be more luxurious and less costly, hence targets the middle-class customers, while Porsche and Lamborghini’s brand targets the high-class individual who is either the state official or the tycoons who want to drive on machines that range from $ 250,000 (Cundy & Hornak 2017, p.27).
The Volkswagen –Das Auto is the slogan used currently by the company to market the new products. The bottom-line of the ‘Das-Auto’ combines three major aspects that are innovativeness, provision of long-lasting value and responsibility tends to attract customers across the world, as the brand promise better quality, reliability, and German engineering aspects (Nelson 2015). The company’s aim of “customers first” allows the production of vehicles that meet the needs of a large number of people in the country and across the world. The pricing of the commodities based on the merchandise, the economy of the targeted country, the region and the price of the competitor products making the company experienced massive sales.
Another marketing strategy employed by Volkswagen Group is the focus on the leadership of the global ecological sustainability and the low-cost mobility in growth markets. The company has managed to get through various markets in the world more than potential competitors such as Peugeot-Citroen (Zuelke & Kirwan 2016, p.8). The company’s move to invest heavily outside Europe such as in China and Asia, where a large number of Audi and VW brand experience has enabled the company to acquire more significant market share. The global expansion in 2013 resulted into an increase of global sales of about 6% that translated into 3.87 million as compared to 2012 as shown in figure 2. The company places China as best ground for the future growth, by proposing to increase the China production by 60% to 4 million units by the end of 2018 costing about 9.8 billion Euros (Krebs 2012, p.1961).
The ecological sustainability approach by the VW Group is as a response to the European Union rules and regulations concerning the development of the automobile to remain relevant in the market share and conserve the environment (Gulbrandsen & Chritensen 2014, p.510). For example, the new technological advancement by the company to introduce turbochargers aims at making the better that the potential competitors in the future.
The company has also applied digital marketing strategies such the use of television and other social media to create awareness of the existing products. For example, during the launch of the VW brand in India, the company used ATL media such as TVG’S and other print media to promote the brand. The company also participated in numerous car events such as car exhibitions to expose their products to customers.
Volkswagen group faces stiff competition from various potential automobile companies such as Ford Motors, Toyota and many others that are vying to capture the growth (Zueleka 2016 p.9). However, it has managed to sustain the competition to remain relevant and has considerable market share through the provision of diversified cars.
BMW group poses a significant threat since it is also a German automobile, motorcycle and engine company. The activity of BMW poses a home threat to the success of the VWG. Toyota Motors Corporation is Japanese automobile manufactures that have several brands such as Hino, Lexus, Daihatsu, and many other nonautomotive items sold in many parts of the worlds. The company ranks at number eleven in the world as the most substantial revenue collector revenue (Colovic & Mayrhofer 2011, p.1490). Peugeot and Citroën have a globally renowned brand as it is the second largest car maker in Europe and operates in more than 160 countries. The global outspread of the company as shown in figure 3 makes it the capability of selling 2.9 million vehicles per year possible that translates into 38%. The company is a significant threat since it has pumped a lot of funds about $ 2.3 billion for motor research centers in Latin America, China, and France.
The company faces substantial low completion in Germany as many new entrants tend to offer public transport systems such as bus transportation, consumer rail operations, and light rail. The company enjoys the value of privacy and independence that is lacking in the new entrants making the company experience increased growth and improved revenue collection in spite of the new entrants into the market (Klier & Rubenstein 2017). Volkswagen has managed to control the competitive pressure from the potential companies through the capture of a considerable number of customers and suppliers.
The vehicle industrialization requires a wide variety of materials that are a sophisticated material such as metal, silica computer components, copper wire and simple such as rubber, that range in availability and process. Equipment such as metal that is difficult to get and are at high prices, determine the nature of production of the companies. The diversifies cars brand that meets various customer needs across the world such as low fuel consumption, availability of Bluetooth connectivity, high definition of radio and many other enable the company to record considerable profits that keep the growth.
Volkswagen group also enjoy the brand names that are essential at every pricing point. The strong brands built by the famous German engineering aspects that have resulted in varied, flexible, and supercars(Danesi 2013,p469). The supercars contain most of the customer requirements such as high performance with low fuel consumption; moreover, the company cars tend to take into account the environmental regulations constituted by the European unions.
The company has also managed to command the European market share with a percentage of about 24.8%, through global strategic rebound such as launching and heavily investing in China and Asia as the counterparts still hold on the Europe regions (Hsuen 2016, p.91).. Audi brand has emerged as the dominant market commander in China and eastern part of Asia, enabling to double the global profitability form the automobile sales (De 2011, p.79) The broad market shares in these regions make it difficult for new entrants such as Toyota to thrive.
The automobile group has enabled to command considerable market share both in the home country and abroad as a result of various factors. From the SWOT analysis, it is observable that the group lied mostly on the strengths and the opportunities to outdo potential competitors.
During the 1930s, Volkswagen came into existence as the “people’s car,” that was welcomed by a large number of Germans. The company expanded and diversified the brands into numerous portfolios that have attracted the attention of the international market and offers two major strong branding products that are the sporty such as Audi, Seat and the classic brand such as Skoda and Bentley (Makarova, Shubenkova & Gabaslikhova 2017, p.125). The several brands make the group stands out from other car producers such as Nissan: the brand tends to meet customer’s needs such as the new beetle and Audi. In 2016 Audi brand became the most cars sold in the world, resulting in the displacement of Toyota in the position one. The new beetle grew fast in the ranking of the safest small car in the highways according to the Institute for Highway Safety (2010). The safety attribute together with the nostalgia of the old beetle attracted most the Germans to purchases the car.
The group appears to be among the most innovative car makers in the worlds. The ability to create machines that meet customer needs and conform to the required European automobile standards has enabled the company to make more significant steps. Many customers from abroad like the German machines since they have high performance with low fuel consumption rate. The high performance is achievable through the use of turbo-direct injection, a clean diesel technology that enables the tools to use alternative fuels across all the brands and the method of supercharging. TDI Clean Diesel vehicles use “ultra-low-sulfur diesel” that are 98% environment-friendly; this technology was the primary factor in the success of Audi in 2011 (Rogerson 2018, p.31).
Volkswagen is one of the old car manufacturing companies that have diversified and grown into various countries. Currently, the group enjoys over 70 manufacturing plants across 150 countries; this allows easy marketing and distribution of the company products. The company’s mission the concentration from the European market and target the Asian parts, enables it to enjoy enormous demand for the products such as Audi that came as one of the breakthroughs.
The stiff competition from home rivals such as BMW and the global such as Toyota reduces the revenues, as sometimes the company is forced to incur loses to attract customers. Competition always favors customers but still causes harm to various competing firms especially the new entrants. For example in India, the company lowered the prices more than competitors such as Hyundai and Maruti just to promote acceptance and establish it.
The availability of market in China, Asia, and Europe has prompted the carmaker to invest about 550 million Euros to further the growth of the company in those respective countries. China offers better ground for the development of the industry as the citizen have a real liking for the Audi brand.
The global market is waiting for the carmaker that will come up with the best car regarding fuel consumption and auto diving technology (Rahmani & Loureiro, p.1490). Fuel cost is increasing in most of the countries, and therefore various governments are working toward achieving renewable energy sources that will cut the cost of fuel consumption. The need to innovate a hybrid car is an opportunity for Volkswagen to grow.
The ever-increasing competition from both the new entrants and the potential competitor continue to hurt the revenue collection of the company. The government regulations in different countries pose difficulty into the entry of other markets, as respective government role of protecting the indigenous car industries tend to create policies that do not favor foreign investors. The weak market share of Volkswagen in the united states of just about 2% has lowered the sales in the second most abundant automotive indusial country in the world.
Volkswagen group has mix management strategies as different automobile such as Bugatti, Bentley among others applies focus strategies, and others such as Volkswagen apply differentiation while others such as Skoda use cost leader management (Jansen 2013,p.70). The application of varied types of control has enabled the group to diversify the brands horizontally to capture different markets across the world, and, the group also applies vertical diversification that has allowed the acquirement of 90.1% of Italdesign to provide best designs and the Volkswagen Bank, to fund customers and other franchises. Finally, the group also owns a university that offers students training and experience in the car manufacturing.
Volkswagen Group management allocates staffs to specific value creation duties that are linked together with framework-creation for comfortable provision, innovativeness, the effectiveness of service delivery and responsiveness to customers (Jansen 2013, p.71). The group has a flexible management structure that has facilitated the integration of staffs across all the company structures, functions, and business sections fostering the achievement of the set goals at every specific point. The fitting workplace offered to the employees by the group guarantees the production and delivery of best vehicles as the qualified staffs get inspired continuously, as duties are well spelled out with the staff’s capability to deliver the assigned tasks. The group works towards keeping up their benefit before expense to extensively substantial degree with a specific end goal to keep up gainfulness in their business activities.
The group also applies cost leadership management in the various brands through offering training to multiple employees on different human resource aspects. These pieces of training ensure that the employees are capable of turning the group strategies into the required business values, consequently, enables the company to have low cost in acquiring candidates to fill the management positions as the group majorly applies in-job recruitment.
The group’s application of the focus strategy has enabled it to set achievable goals and objectives that have facilitated the success of various brands as in assembling of an excess of 10 million vehicles every year to catch a significant piece of the overall industry in car part. The goal is towards the organization of cutting-edge innovation and advancement to lead ahead in the business as far as quality and consumer loyalty. The association is in this way ready to hold its clients for the long haul significant development and accomplishment of the association.
Volkswagen group has a common organizational culture that enables to control the employees, customers, and stakeholders to interact mutually. The overall management ensures delivery quality services through the application of the corporate strategy such as the selection of business area, introduction of the business, development and the growth of the industry. The corporate group strategy ensures that harmony of the market as the brands integrate and interact within to have a stronger competitive power against the potential enemies such as Toyota.
Volkswagen is an old automobile manufacturing company that has made tremendous steps in spite of the setbacks during the 1940s to succeed in the automobile market. Today the Group enjoys global recognition brought about by the collection of the influential brands from Audi, Seat, and MAN among others posing a more significant threat full displacement of Toyota, the world best automobile industry. The group success lies in the application of the strengths and exploitation of the opportunities. The group uses the strong brand name and mixed marketing strategies to create more awareness and the unavailability of other competitors in other regions such as China enabling the collection of substantial revenue across the world building the long-term achievement. The pricing of the products regarding the social class, geographic location, quality of the car among others makes the group capture broad base of customers across the world.
The application of diversified management strategies such as differentiation, focus strategy, and cost leadership, has ensured the achievement of the group’s goals and objectives despite the constant threats faced from the competitors such as Toyota and BMW. Conclusively, the strategic choice, organizational design, and culture tend to shape the behaviors, beliefs, norms of employees stakeholders and customers propelling the company to a higher level.
List of References
Altenburg, T, Schamp, E, & Chaudhary, A 2016, ‘The emergence of electromobility: Comparing technological pathways in France, Germany, China and India’, Science & Public Policy (SPP), 43, 4, pp. 464-475, Academic Search Premier, EBSCOhost, viewed 20 April 2018.
Bauer, R 2013, ‘A specifically German path to mass motorisation? Motorcycles in Germany between the World Wars’, Journal Of Transport History, 34, 2, pp. 101-116, Academic Search Premier, EBSCOhost, viewed 20 April 2018
Colovic, A, & Mayrhofer, U 2011, ‘Optimizing the Location of R&D and Production Activities: Trends in the Automotive Industry’, European Planning Studies, 19, 8, pp. 1481-1498, Academic Search Premier, EBSCOhost, viewed 20 April 2018.
Cudny, W, & Hor?ák, M 2016, ‘The tourist function in a car factory Audi Forum Ingolstadt example’, Bulletin Of Geography. Socio-Economic Series, 33, 33, pp. 23-28, Academic Search Premier, EBSCOhost, viewed 20 April 2018.
Danesi, M 2013, ‘Semiotizing a product into a brand’, Social Semiotics, 23, 4, pp. 464-476, Academic Search Premier, EBSCOhost, viewed 20 April 2018.
De, D 2011, ‘Regional trade and international production networks: The context of automobile industry in Asia’, International Journal of Technology Management & Sustainable Development, vol. 10, no. 1, pp. 77-98.
Gulbrandsen, L, & Christensen, A 2014, ‘EU Legislation to Reduce Carbon Emissions from Cars: Intergovernmental or Supranational Policy Making?’, Review Of Policy Research, 31, 6, pp. 503-528, Academic Search Premier, EBSCOhost, viewed 20 April 2018.
Hsueh, R 2016, ‘State Capitalism, Chinese-Style: Strategic Value of Sectors, Sectoral Characteristics, and Globalization’, Governance, 29, 1, pp. 85-102, Academic Search Premier, EBSCOhost, viewed 19 April 201
Janssen, CI 2013, ‘Corporate Historical Responsibility (CHR): Addressing a Corporate Past of Forced Labor at Volkswagen’, Journal Of Applied Communication Research, 41, 1, pp. 64-83, Academic Search Premier, EBSCOhost, viewed 19 April 2018.
Klier, T, & Rubenstein, J 2017, ‘Mexico’s growing role in the auto industry under NAFTA: Who makes what and what goes where’, Economic Perspectives, 41, 6, pp. 6-29, Academic Search Premier, EBSCOhost, viewed 20 April 2018
Krebs, S 2012, ‘Standardizing car sound – integrating Europe? International traffic noise abatement and the emergence of a European car identity, 1950–1975’, History & Technology, 28, 1, pp. 25-47, Academic Search Premier, EBSCOhost, viewed 20 April 2018.
Makarova, I, Shubenkova, K, & Gabsalikhova, L 2017, ‘Analysis of the City Transport System’s Development Strategy Design Principles with Account of Risks And Specific Features Of Spatial Development’, Transport Problems: An International Scientific Journal, 12, 1, pp. 125-138, Academic Search Premier, EBSCOhost, viewed 20 April 2018.
Mernitz, KS 2015, ‘The People’s Car: A Global History of the Volkswagen Beetle’, Historian, 77, 1, pp. 190-191, Academic Search Premier, EBSCOhost, viewed 20 April 2018.
NELSON, R 2015, ‘Technical fix is only part of the solution’, EE: Evaluation Engineering, November, Academic Search Premier, EBSCOhost, viewed 19 April 2018.
Nielsen, K, & Wilhite, H 2015, ‘The rise and fall of the ‘people’s car’: middle-class aspirations, status and mobile symbolism in ‘New India’’, Contemporary South Asia, 23, 4, pp. 371-387, Academic Search Premier, EBSCOhost, viewed 20 April 2018.
Rahmani, D, & Loureiro, M 2018, ‘Why is the market for hybrid electric vehicles (HEVs) moving slowly?’, Plos ONE, 13, 3, pp. 1-14, Academic Search Premier, EBSCOhost, viewed 20 April 2018.
Rogerson, S 2018, ‘Ethics Omission Increases Gases Emission’, Communications Of The ACM, 61, 3, pp. 30-32, Academic Search Premier, EBSCOhost, viewed 19 April 2018.
Schmidt, CW 2016, ‘Beyond a One-Time Scandal’, Environmental Health Perspectives, 124, 1, pp. A19-A22, Academic Search Premier, EBSCOhost, viewed 19 April 2018.
Scholz, N 2014, ‘The People’s Car: A Global History of the Volkswagen Beetle’, German History, 32, 4, pp. 667-669, Academic Search Premier, EBSCOhost, viewed 19 April 2018.
Wentland, A 2016, ‘Imagining and enacting the future of the German energy transition: electric vehicles as grid infrastructure’, Innovation: The European Journal Of Social Sciences, 29, 3, pp. 285-302, Academic Search Premier, EBSCOhost, viewed 20 April 2018.
Whiteman, G, & Hoster, H 2015, ‘Vehicle emissions: Volkswagen and the road to Paris’, Nature, 527, 7576, p. 38, Academic Search Premier, EBSCOhost, viewed 19 April 2018.
Zuelke, A, & Kirwan, P 2016, ‘global competitiveness AND LOCAL BUSINESS DEVELOPMENT’, Economic Development Journal, 15, 3, pp. 5-13, Academic Search Premier, EBSCOhost, viewed 20 April 2018.