volkswagen ag-slides
TRANSCRIPT
Welcome To Our Presentation
Prepared ByMd. Rajib MahmoodMd. Badsha FoysalFoysal Ahmed
Volkswagen AG is a major German automobile manufacturer and also a leading automakers in the
world. The company, along with its subsidiaries, is engaged in the development of vehicles and engines
along with the sale of commercial vehicles and passenger vehicles. It owns several other auto
companies, including Audi in Germany and SEAT in Spain and it also makes and markets cars with Fiat
of Italy and Skoda of the Czech Republic.
As an organization, they have the following mission statement: “It is the goal of the Group to offer
attractive, safe, and environmentally friendly vehicles which are competitive on an increasingly tough
market and which set world standards in their respective classes.”
In 2002, the Volkswagen Group achieved the second-highest profit before tax in the company’s history
at 4.0 billion and attained a global market share of 12.1 percent. The Group operates 44 production
plants in eleven European countries and seven countries in the Americas, Asia, and Africa. Around the
world more than 320,000 employees produce over 21,500 vehicles or are involved in vehicle- related
services. The Volkswagen Group sells its vehicles in More than 150 countries.
Volkswagen AG
Volkswagen Products Volkswagen, Polo, Passat, Santana, Golf, Bora, Skoda Auto, Bentley and Bugatti.
Low-consumption 3-liter vehicle to luxury class vehicles.
Types - Commercial vehicle, Passenger vehicle.
VW forged established themselves in China in 1985. Volkswagen realized the potential for the Chinese
market for automobiles some 19 years earlier and from this vision sought out to establish a joint venture that
would make them the first major foreign car company in China. Volkswagen has been able to position itself
as the primary brand in the passenger vehicle market. In 1999, it was believed that VW controlled 60%of the
passenger-car market. As recently as August 2003, Volkswagen was still recognized as China’s biggest
foreign automaker and currently holds a 37% market share in China. But VW has already established strong
local production and offers a wide range of models to the Chinese shoppers (currently offers 11 models with
an additional 4 planned to hit the market in 2004). The fact is that although many companies see the benefit
of entrance in the automotive market in China few have the same established brand, and brand equity that
VW has in the market.
Volkswagen in China
Chinese Automobile IndustryChina’s automobile industry has hit a ten-year record high for vehicle production. The 3.25 million
vehicles produced in 2002 represented a 38.5% increase over 2001. Sales reached 3.24 million that is
a 36.7% growth over 2001. The increasing demand for private cars has been the main factor that is
stimulating the growth. China’s GDP per capita reach $900 in 2002 and in some areas of the coastal
areas it topped $3,000. Due to huge potential opportunities, the world’s largest car makers, like – GM,
BMW, Ford, Nissan etc. are stepping up their efforts with new products and huge investment in china.
According to CSM Worldwide projections, there will be over 6.3 million vehicles produced in China by
the year 2007. That represents 133% growth over 2002.
Chinese government’s policy moves ranging from loosening its regulations pertaining to Wholly
Foreign Owned Enterprises selling their goods in China, to establishing Special Economic Zones,
which offer many incentives to foreign enterprises including tax benefits such as a 5-year gradual
taxation scale on profits.
VW’s Production VW has already established two, with plans to open a third facility to manufacture engines for
domestic use and export.
A Volkswagen official said the company plans on investing more than EURO 6 billion in China
region over the next five years.
VW and other foreign carmakers are being benefited by the low manufacturing cost.
VW’s two join ventures will turnout more then 400,000 Audi, Jetta, Passat, Santana and Polo.
VW’s Competition GM, BMW, Toyota, Honda, Ford and Nissan are the main competitor in Chinese market for
VW.
Joint ventures with Shanghai Automotive and First Automotive Works Corp.
Established ties with powerful local partners at a time.
Lobbing with local government.
Minimum production costs by producing 90% of its cars’ parts locally.
High quality products and good after sales service.
VW’s Entry Strategy
VW’s PricingFrom a pricing perspective, the combination of increased imports and increased localized production by
foreign carmakers is driving down prices. Manufacturers such as Volkswagen, GM, Honda and Dongfeng
Peugeot had to cut prices in 2003 due to the increasing supply of cars across all market segments.
VW has dropped the price on its upscale Passat as well as its mid-sized Bora. Overall, Chinese car prices
are expected to fall by an average of 8 to 10% by the end of 2003. With the current pricing strategy, VW is
attempting to address all the consumer markets in the China. The Golf and the economy versions of the
Polo are priced to attract the mass markets that aspire to own a car but can’t really afford to buy an
expensive car.
Santana is a taxi like car and the high end type is Passat; VW has targeted the niche fast growing luxury
car market who are the state-owned enterprises and the affluent class in China. The Volkswagen Group is
expected to withstand the market’s move to cut prices better than its competition. Overall, the pricing
strategies followed by VW are really incredible to compete any strong or big opponents in the fast growing
Chinese Market.
VW’s Distribution
VW’s PromotionThough the Chinese automobile industry is booming, most of the companies are not exercising too
much of promotional activities. VW is not different from the others in this respect of performing these
activities. Till now, VW has exercised all the effective strategies in case of their different products, low
and competitive price and very strong distribution system. These help VW to enter and stay in the
market, to compete the opponents and the sales growth as well. But the Volkswagen has suffered a
decreasing market share over the past few years though its sales have increased during that same time
period.
A major reason why VW has been able to dominate in China is due to their joint ventures established
with prominent players in Chinese automotive industry. VW co-owns Shanghai-VW with Shanghai
Automotive and FAW-VW with First Automotive Works Corp. VW established ties with powerful local
partners. These partnerships have allowed VW to creates a more efficient method of distribution. With
the best distribution strategy, VW can expect to remain the market leader in China for a few more years.
What Can VW Do Now…??
After analyzing the VW’s present condition in all aspects, a question comes to our mind that what
can VW do now to increase the overall market share though it has sufficient abilities to have this??
As we know that VW’s overall sales is growing up but the total market share is declining because of
the fierce competition in the industry. VW has taken the best action to re-assess their overall
marketing mix strategies and determine the lacking behind the present situation. To do that we have
done a SWOT Analysis on the basis of VW’s current landscape.
Internal Factors
STRENGTH WEAKNESS
1. It has vast product line.
2. Broad marketing coverage.
3. High brand equity.
4. Good customer service.
5. Manufacturing competence.
6. Good portfolio management skills.
7. Cost differentiation advantage.
8. Strong joint ventures partners.
9. Market leader.
10. Strong distribution channel.
11. Ability to manage strategic change.
12. Developed corporate strategies.
13. Good financial management.
1. Poor Promotional skills
2. Inadequate information system
3. Growth without direction
External Factors
OPPORTUNITIES THREATS
1. Increased market for business
2. Exploit new market segments
3. Apply R&D skills in new areas
4. Possibility of profitable new acquisition
5. Increasing disposable income in China
6. Apply brand name capital in new areas
7. Technology are been develop.
8. Very good potential consumer in China
1. Increasing competitors
2. Change in consumer taste
3. Rise in new substitute product
4. Bureaucratic govt. system
5. Greedy attitude of local partners.
VW’s SWOT Analysis
From the above SWOT matrix we have found that VW group has more strengths and
opportunities than the threats & weaknesses and its possibilities to increase the sales along
with putting a pause in the decline of market share. As we have found that a new and big
market segment has already been introduced to this industry which is actually booming the
total size of the market, there are some shortcomings too of VW like - poor promotional skills
and intense competition as a threat.
Findings
Action Plan1. Setting The Goals
Short term goal – 513,000 unit at 2002 and 600,000 unit for 2003)
Long Term (Retaining the existing market share at least 37%)
2. Conducting a marketing audit Marketing activities that have occurred in our operation over the past three years.
We did not find any significant promotional or advertising activities done by us through all the
possible ways.
3. Conducting market research The 3.25 million vehicles produced in 2002 represented a 38.5% growth over 2001 and sales
reached 3.24 million which is a 36.7% increase over 2001. According to CSM Worldwide projections,
there will be over 6.3 million vehicles produced in China by the year 2007. That represents 133%
growth over 2002.
5. Identifying target audiences
New consumers who are intend to use personal cars.
Existing consumers where reinforcement of past purchase experience work.
Niche Consumers for luxury items.
Small engine users.
6. Determining the budget
Nowadays, the promotional cost of any product is a very big challenge for any company in the
world. All the advertisers are paying millions of dollars for promoting their products. The budget
depends on how broadly our company wants to get in these activities. an example: “An
advertiser paid $38.5 million for a secured year long, daily 5 second billboard ad during the peak
hour to a TV channel called CCTV in China.”
4. Analyzing the research
A new and big market segment has already been introduced to this Industry
Shortcomings of VW like - poor promotional skills.
We should exercise the advertising, sales promotions and all possible incentives to communicate
the new expanding segment.
8. Developing an Implementation Schedule
9. Creating an Evaluation Process
We would then prepare an implementation schedule according to the budget and
depending on the basis of importance.
We will review our plan periodically (we recommend quarterly) by comparing our progress with
the implementation schedule.
we can measure the results of our progress: Consumer survey scores, referral sources,
increased income, increased new customers and decreased complaints.
7. Developing Marketing Strategies Use of innovative TV commercials for individual purchasers.
Use of direct marketing for niche segment.
Provide incentives to the distributors.
Provide sales promotion and bonuses to reinforce past purchase experience.
Use of event marketing.
Use of attractive billboard AD.
Recommendation
Need to use the mother language in case of advertising and promotions.
Has to have the ability to adapt new changes.
Use the integrated marketing communication (IMC) tools effectively and
efficiently.
Has to have the ability to handle uncertain situations.
Don’t be over confident in case of local associates. They are often greedy.
The government type is bureaucratic which may acts like controller or
influencers.
Has to have the ability to choose the right media.
That’s All About
Our presentation
Thank You Everyone