Volkswagen AG

1
Team Maxxim presents

• Volkswagen AG
• Situation Analysis
• EBA 605, Dr. J. Coleman
• Saturday, March 11, 2006

2
Project Goals Objectives

• Highlight trends in the automobile industry
• Analyze and critique Volkswagen recent decisions
• Discuss where and why VW went wrong
• Offer potential solutions as an objective
  outsider

Volkswagen AG
3
Presentation Overview

• Company Overview
• Brand Portfolio
• Current Situation
• The VW Customer
• Competitive Analysis
• Financials
• SWOT Analysis
• Questions

Volkswagen AG
4
Corporate Overview

• HQ Wolfsburg, Germany
• US Operations Auburn Hills, MI
• Europes 1 automobile manufacturer
• Traditional Brands Jetta, Passat, Touareg,
  Phaeton, Fox and Audi
• International Brands SEAT and SKODA
• Annual production 5M vehicles
• Annual sales 121,345/ 10.9 YOY growth
• Employees 342,502 worldwide

5
Key Milestones
1930s Factory opened in Wolfsburg, Germany 1940s Production of first Volkswagen Company turned over to German government 1950s VW begin building foreign plants Launched Beetle in US market Developed Microbus 1960s Sold stock to the German public Purchased Auto Union (AUDI) US Beetle sales took off
1970s Beetle discontinued in every country except Mexico 1980s Begin car venture in China Purchased SEAT Formed Autolatin in Brazil 1990s Built Chinas largest auto plant Launched Passat Acquires Rolls-Royce and Bugatti Launched New Beetle in US 2000s Spent 3.1B to modernize factories The final Beetle ended a 70-year run Invested 1.7B in China (Asia/Pacific) Bernd Pischetsrieder joined company
6
Volkswagen Group Brand Portfolio
sophistication
functionality
emotion
7
Current Situation Project Basis

• Porsche increase stake in VW
• Recently hired Wolfgang Bernhard
• to head VW group
• Launched Moonraker project

• Loosing share in China market
• Pulled out US luxury market
• VW to cut 20,000 jobs
• Ferdinand Piech steps down as
• Chairman
• Triple threat
• high costs
• inflated sticker price
• questionable quality

HIGHS
LOWS
Some may say this is a high given that he
engaged VW in High risk, high reward strategies
8
The VW Customer

• Positioning Statement
• For the cost conscience buyer, Volkswagen
• offers reliability and value.
• Value Proposition
• Target Market Cost conscience buyer (parents,
  females, young adults)
• Benefits offered German technology
• Relative price Affordable, reliable

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The VW Customer
Demographics

Young Female Age 19-32 College-Educated Parents
Global Reach USA, France Spain, UK Germany Italy,
China
Geographic
Geo-demographic
Value conscience
Aspirational value
Behavorial
10
Volkswagen Global Marketing Mix

• Brand portfolio
• Volkswagen
• Audi
• Seat
• Škoda
• Bugatti
• Bentley
• Lamborghini
• Commercial vehicles

• Unique brand identity for each nameplate
• Complete product range
• Mostly standardized products with minor
  adaptations

• Development of distribution partners
• Separated distribution channels for each brand
• International standardization of dealers

1
2

• Setting prices with regard to competitors
• Price discrimination across regions
• No price competition in emerging markets
• Strict cost controlling

Global Marketing Mix
4

• Glocalized communication
• Emphasis on the European market
• Brand advertising
• Emotionalization

3
11
VW Competitive Analysis
Jetta
Passat
Golf
New Beetle
Phaeton
Touareg
Volkswagen AG
Numbers based on 2004 Marke tshare
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Operating Margin
Net Profits
13
5 Year Sales Trend (in billions)

• Sales increased by 4.9 in 2004
• Shareholders net profits
• Substantial decrease 00 to 01

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Return on Equity Return on Assets
5-year period Reduction in ROE ROA
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SWOT ANALYSIS
STRENGTHS Market Leaders High Brand Equity Focus
on Innovation
WEAKNESS Slow revenue growth Low presence in SUV
market Rising admin expenses
OPPORTUNITIES New market to explore (India) Auto
sales up 30 2010 India will have 36x more
cars Increase disposable income Launch new models
THREATS Fierce competition Increasing steel
prices Decline car sales in U.S. Low consumer
spending in Germany
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Challenges and Risks

• Costs Revenue and
• Performance

• Increasing product costs
• High investments

• Price pressure
• Weak economy

current

• Further price pressures
• Chinese operations
• US operations-luxury market
• / Exchange rates

• Depreciation
• Legislation
• Investments in future markets
• Raw material prices
• Labor costs

future
Volkswagen AG 2005 Strategy Meeting
17

• Thank you!

18
References

• Culp, Eric, VW in Fresh Trouble as it Withdraws
  US Model, Knight Ridder Tribune Business News,
  11/05, pg 1
• Flint, Jerry, The Fast and the Furious,
  www.forbesauto.com, 01/06
• Fondon, Daren, A Pitch to the Rich, Times
  Online, 11/03
• Hoovers Company Information, Hoovers, Inc., 2006
• Landler, Mark, Volkswagen Chairman Step Down,
  New York Times, 01/06
• Landler, Mark, Porsche to Build a 20 Stake in
  VW, Detroit News Auto Insider/New York Times
  News Service, 09/05
• Power, Stephen, Once Hot Volkswagen Attempts to
  Reverse U.S. Sales Decline, Wallstreet Journal
  (Eastern Edition), New York, 09/05, pg A3
• Rancanelli, Vito J., Turn Around Ahead at
  Volkswagen, Barrons, 05/05, Vol. 85, Issue 20,
  pg 26
• Thomas, Chad Archey, Sheenagh, Porsche Buys
  20 in the VWs Share to Prevent Takeover,
  Bloomberg News, http//quote.bloomberg.com/apps/ne
  ws, 09/205

Volkswagen AG
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References

• Brodrick, Sean. Set Your Sights On Asias
  Sleeping Elephant. http//www.escapeartist.com/efa
  m/70/Invest_In_India.html
• www.datamonitor.com