Unit 3 Written

Real time Case Analysis

Volkswagen

Master’s in Business Administration, University of People

BUS 5110 - MANAGERIAL ACCOUNTING

Instructor – Crystal Lupo

Due Date – JULY 7, 2021

Volkswagen Group was founded in 1937, by the German Labor Front was a

German multinational automotive company headquartered in Wolfsburg, Germany, which is the

second-largest automaker in the world. The Volkswagen Group company was founded at the

time when the government was under the control of Adolf Hitler. Hitler had formed a

state-owned automobile company that eventually became Volkswagen, or "The People's Car

Company." Volkswagen has over 671,000 employees, one of the largest employers in the world.

The brand had twelve different brands with individual identity, but each brand operates as an

independent entity on the market. The product ranges from motorcycles to low-consumption

small cars and luxury vehicles. They also produce pick-ups, buses and heavy trucks for

commercial use. And the group also has 125 production plants.

When Winterkorn was appointed as CEO of Volkswagen, he said that Volkswagen wants to be

better than Toyota, not just in units, but in profitability, innovation and customer satisfaction.

The year was 2007, Volkswagen had just become the world's 3rd company and with Toyota in

second place, leading VW by more than 2m units sold worldwide. Volkswagen group launched

an incredibly bold growth strategy "Strategy 2018"

In your own words, what is Volkswagen’s Strategy in 2018 that was originally announced

in 2008

In 2015, Volkswagen was implicated in an emissions scandal where certain models of

Volkswagen vehicles had a defective device where emissions readouts were falsified by that

device causing major issues and long term legal challenges with Volkswagen (Magadia et al,

2019).
Volkswagen’s 2018 strategy which was announced ten years earlier in 2008 wanted to produce

more sustainable vehicles (Magadia et al, 2019).Their strategy included their organization to

become more innovative by creating sustainable automobiles, increasing their productivity and

market share but then in 2015 the emissions scandal hit the company hard and they had to look at

their overall strategy to counter the negative effects the scandal had on the organization

(Magadia et al, 2019)

What do you believe were the most important key elements of Volkswagen’s Strategy

2018? Where did they fail?

The most important key elements of Volkswagen’s strategy 2018 were, innovation, increasing

market share, increasing productivity (as measured via return on sales), and becoming a top

employer to build a first-class team. I believe the company’s strategy was too ambitious which

added too much pressure on the company (Forbes.com, n.d.).

The emission scandal with Volkswagen’s diesel brand (Diesel-gate scandal) also added a

negative impact on the carmaker’s reputation which caused a drop in diesel car sales in 2016.

This strategy was focused on the four strategic goals envisioned to make Volkswagen as

number one automobile industry around the globe-

Implement intelligent innovations and technologies to become a world leader in customer

satisfaction and quality.

 To increase unit sales every year.

 To obtain an above-average share of growth in the markets.

 To obtain a sustainable return on sales to ensure a secured financial position.

 To become the leading employer across all brands in the region.

One of the biggest challenges Volkswagen has faced over the years leading up to the 2015

scandal is their failure in moral hazard (Carter et al, 2018).

Other failures that Volkswagen had is that they did not follow the rules and regulations and

the Volkswagen’s engineers circumvented the US emission laws because they knew they could

not produce profitably following US emissions guidelines (Carter et al, 2018).

Another failure of Volkswagen in my opinion is their organizational structure as they had over

347 different models of vehicles and too many divisions and there was not enough focus in the

organization (Magadia et al, 2019).

Volkswagen also had significant productivity issues, for example, both Volkswagen and Toyota

produce approximately 10 million cars/year. Volkswagen realizes a ~6% 9 | Page profit margin

with an input of 600,000 plus workers. Both factors, quality, and productivity had to be

improved. Toyota on the other hand realizes a 10% profit margin with an input of only 300,000

workers (Winton, n.d.).

I think the combination of all these he company. They were focusing too much on defeating

Toyota without realizing that they were losing on their core values. Stakeholder lost their trust,

many employees had to go through investigations, lawsuits, embarrassment, and many lost jobs

or joined other competitors. I also feel that they did not have a well-planned mission statement,

which helps the company in guiding and reminding them about their vision, core values, and

statement of the goals and objectives. Their failure is the best example to know the value of the

statement as they did not realize the core values.

scandal, do you believe what was suggested in the article is the best approach? Supported

by credible resources, discuss why it is the best approach, or propose a better approach

At this point, the paper will deal with why the 2025 strategy is the best response to an emission

scandal. They created a management structure for coordinating sustainability and Corporate

Social Responsibility (CSR), let by Sustainability Board. Volkswagen hopes that this higher

level of engagement with its stake holders will increase efficiencies and create synergy around

how everyone works together, forecast, and plans for major issues looming on the horizon

(Corporate Social Responsibility 2015, 2017).

Upon taking the reins, the new Chief Executive Officer is committed to change a cutthroat

culture, noting that he wants to be surrounded by people, who follow their instincts, and not

merely guided by the possible consequences of impending failure. This new culture that prides

itself in mutual trust, equality, and open-mindedness, is a promise of new breeze and

commitment to workers well-being and appreciation of self-expression, which gives hope to

harnessing of many talents and innovations, as a new space permits. In his letter to the

shareholders in a 2015 Annual Report, Mueller did not paint an all bleak situation of the

company as he announced profit despite the challenges they endured. It might not have been a

desired one, but it was reassuring to the shareholders.

The other useful approach towards resilience is utilization of the extensive experience in

managing a wide range of products (Magadia, 2019). This kept the Group able to cater for a

greater variety of consumers globally.

further diversified their income sources by leveraging research for electric vehicles. It is clear

then, that with the above initiative and more, Volkswagen wants to retain its global position as

the leader and pioneer in innovation and resilience.

Discuss whether the overarching vision driving Volkswagen’s Strategy 2025 is clear and

whether the approaches they are taking will help them achieve it. Why or why not?

According to me the overarching vision driving VW’s strategy 2025 is and will help them

achieve their goals. We can say that because they have learned throughout their mistakes and

being the biggest brand in the auto industry, they understood their responsibility towards their

customer, community and environment and this approach will make them successful.

Are the initiatives designed to transform certain areas of Volkswagen’s core business

achievable that are outlined in their strategy 2025? Why or why not?

Yes, the initiatives designed to transform VW’s core business are achievable. They are tangible

and designed by doing market research, the latest trends, and future needs.
REFERENCES

Magadia, Rex et al.(2019, January).Volkswagen: A Real-Time Case Analysis. Retrieved from

https://www.researchgate.net/publication/330324062_A_Real-Time_Case_Analysis

Forbes.com. (n.d.). Retrieved from

https://www.forbes.com/sites/lianeyvkoff/2015/09/24/2008-the-year-that-drove-volkswagen-

over-the-ethical-cliff/#2e55702f33b4

Carter D. Shani.(2018).Volkswagen – The Failure of Perfection and Moral Hazard: What Price

Victory? Retrieved from

http://ijbas.com/wp-content/uploads/2018/08/IJBAS-Vol.-7-No.-1-Carter-et-al.-2018.pdf

Winton (n.d.). Retrieved from thetruthaboutcars.com:

https://www.thetruthaboutcars.com/2010/02/volkswagen%e2%80%99s-strategy-2018-with-

generous-support-from-gm-and-toyota/

Volkswagen 2015 Annual Report. (n.d) Corporate Social Responsibility and Sustainability.

Retrieved April 2, 2017 from

http://annualreport2015.volkswagenag.com/servicepages/search.php?

q=Furture+Tracks&pageID=55507