SWOT Analysis

Strengths:

Volkswagen
has one of the widest brand portfolios among automotive companies, including
the likes of  Audi, Bentley, Bugatti, Lamborghini, Porsche, SEAT, Škoda
selling over 10 million cars annually. Enabling the company to diversify into
markets across the automobile industry. For example, they play a huge role in
the trucks and buses industry under Scania. This
diversification has enabled them to become one of the biggest firms in the
world. (Jurevicius, 2016)

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The
Synergy between all the brands under Volkswagen, they appeal to both ends of
the spectrum from luxury to family cars creating a huge target market, fitting
every need of the customer. (Jurevicius, 2016)  This is an example of risk bearing economies
of scale. Risk bearing economies are created by large organisations who can
withstand risks more efficiently than smaller firms (Anon., n.d.).

VW
operates in all corners of the world with a Strong global presence, 70
production plants in 150 countries with 350,000 global employees. Including
joint ventures with local Chinese automakers entering the single biggest market
in the world with 1.4 billion potential customers if VW were to dominate the
Chinese market they would solidify their place at the top of the automobile
industry.   (Bhasin, 2018)

In
addition, another strength is that VW are very popular, 26,600 is the amount of
new cars produced in a single day to meet global current demand.  Volkswagen is the 57th highest ranked
brand in the world even after the emissions scandal. This is aided by the fact
VW has well managed operations and a good supply chain which links with 100’s
of VW dealerships in the UK alone. Volkswagen cars have the highest gross
revenue in the US and Germany more than any other of the VW brands does. (faizul, 2018)

After
pumping profits into Research and development VW have been able to produce high
performance cars, hybrid and electric. For example, the new Golf GTE is one of
the newest models by VW. Offering an electric alternative could entice anti
emissions consumers to purchase a car increasing VWs market share (Adam, 2014). VW is one of the
oldest car manufacturers, resulting into increased reach to the masses. The
more people who know about VW, the more people will consider them when looking
to purchase a new car. Car firms can rely on word of mouth for many sales of
cars when people talk about the reliability of a car is what most people want. (Anon., 2016). 

Weaknesses:

Volkswagens
biggest weakness recently has been the 2015 emissions scandal, the negative
publicity surrounding it affected the main umbrella brand thoroughly with close
to 5 million cars returned to the organization. This has resulted in the
weakening of a good brand reputation, which took years of good service to
build. Huge loss of customer loyalty has meant customers may move away from VW
when it comes to the purchase of their next car. Trust was broken, especially
because this decision of installing the wrong software came from the top
management of the company. However it can be rebuilt and they have paid in
fines for the damage they’ve caused, moreover statistics tell us that sales
weren’t really effective, suggesting that the majority of consumers aren’t
bothered by emissions when it comes to buying a car. (Jurevicius,
2016)

The
United States is VW’s worst market when it comes to the issue of cars being
recalled and to make it worse their US market share is very low compared to
Europe’s. In the past, there must have been problems with manufacturing or
quality control. An easily rectifiable mistake but it has proven costly in the
long term resulted in VW cars not being as popular as they should in the US. (Jurevicius, 2016)

Another problem of Volkswagen is the competition is eating away its
margins. There are
competitive brands who are penetrating the market and the price competition is tremendous. As a result, this competition
is benefiting the customers but affecting the brand adversely. In
India for example, the brand had to lower its prices a lot to promote
acceptance. As a result, many margins were lost due to competition. (Bhasin, 2018) Brand positioning of
Volkswagen is also quite weak in India. Maruti and Hyundai have an excellent overall sales figure
and Volkswagen is not able to penetrate against Maruti. (faizul, 2018)

Volkswagen
spends a lot of money on advertising to build a brand for Audi, Bentley,
Porsche and other brands, which make the most money. Volkswagen itself needs to spend to create more brand equity for the
parent brand – Volkswagen. There are some hand-selected cars like Passat or
Beetle, which are a hit under the Volkswagen brand. Nevertheless, the brand
does not create much noise for these models, which is the requirement of the
market. A reboot of new models for such cars would boost popularity greatly. (Adam, 2014) Finally, most of VWs
high performance cars are not environmentally friendly for example Bugatti and
Lamborghini two of the fastest and expensive cars in the world.

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