Order custom Harvard Business Case Study Analysis & Solution. Starting just $19
Volkswagen SWOT Analysis / Matrix
Essays, Term Papers & Research Papers
SWOT analysis is a strategic planning tool that can be used by Volkswagen managers to do a situational analysis of the firm . It is a useful technique to evalauate the present Strengths (S), Weakness (W), Opportunities (O) & Threats (T) Volkswagen is facing in its current business environment.
The Volkswagen is one of the leading companies in its industry. Volkswagen maintains its prominent position in market by critically analyzing and reviewing the SWOT analysis. SWOT analysis an immensenly interactive process and requires effective coordination among various departments within the company such as – marketing, finance, operations, management information systems and strategic planning.
The SWOT Analysis framework facilitates an organization to identify the internal strategic factors such as -strengths and weaknesses, & external strategic factors such as - opportunities and threats. It leads to a 2X2 matrix – also called SWOT Matrix.
The Strengths-Weaknesses-Opportunities-Threats (SWOT) Analysis / Matrix helps the managers of the Volkswagen to develop four types of strategies:
- SO (strengths-opportunities) Strategies
- WO (weaknesses-opportunities) Strategies
- ST (strengths-threats) Strategies
- WT (weaknesses-threats) Strategies
SWOT Matrix Strategies Objective
The main purpose of SWOT matrix is to identify the strategies that a firm can utilize to exploit external opportunities, counter threats, and build on & protect Volkswagen strengths, and eradicate its weaknesses.
Step by Step Guide to Volkswagen SWOT Analysis
Strengths of Volkswagen – Internal Strategic Factors
As one of the leading companies in its industry, Volkswagen has numerous strengths that help it to thrive in the market place. These strengths not only help it to protect the market share in existing markets but also help in penetrating new markets. Based on Fern Fort University extensive research – some of the strengths of Volkswagen are –
- Strong Free Cash Flow – Volkswagen has strong free cash flows that provide resources in the hand of the company to expand into new projects.
- Strong Brand Portfolio – Over the years Volkswagen has invested in building a strong brand portfolio. The SWOT analysis of Volkswagen just underlines this fact. This brand portfolio can be extremely useful if the organization wants to expand into new product categories.
- Highly successful at Go To Market strategies for its products.
- Good Returns on Capital Expenditure – Volkswagen is relatively successful at execution of new projects and generated good returns on capital expenditure by building new revenue streams.
- Highly skilled workforce through successful training and learning programs. Volkswagen is investing huge resources in training and development of its employees resulting in a workforce that is not only highly skilled but also motivated to achieve more.
- Successful track record of developing new products – product innovation.
- Strong dealer community – It has built a culture among distributor & dealers where the dealers not only promote company’s products but also invest in training the sales team to explain to the customer how he/she can extract the maximum benefits out of the products.
- Strong distribution network – Over the years Volkswagen has built a reliable distribution network that can reach majority of its potential market.
Weakness of Volkswagen – Internal Strategic Factors
Weakness are the areas where Volkswagen can improve upon. Strategy is about making choices and weakness are the areas where a firm can improve using SWOT analysis and build on its competitive advantage and strategic positioning.
- Investment in Research and Development is below the fastest growing players in the industry. Even though Volkswagen is spending above the industry average on Research and Development, it has not been able to compete with the leading players in the industry in terms of innovation. It has come across as a mature firm looking forward to bring out products based on tested features in the market.
- The profitability ratio and Net Contribution % of Volkswagen are below the industry average.
- Not highly successful at integrating firms with different work culture. As mentioned earlier even though Volkswagen is successful at integrating small companies it has its share of failure to merge firms that have different work culture.
- Need more investment in new technologies. Given the scale of expansion and different geographies the company is planning to expand into, Volkswagen needs to put more money in technology to integrate the processes across the board. Right now the investment in technologies is not at par with the vision of the company.
- High attrition rate in work force – compare to other organizations in the industry Volkswagen has a higher attrition rate and have to spend a lot more compare to its competitors on training and development of its employees.
- Days inventory is high compare to the competitors – making the company raise more capital to invest in the channel. This can impact the long term growth of Volkswagen
- Limited success outside core business – Even though Volkswagen is one of the leading organizations in its industry it has faced challenges in moving to other product segments with its present culture.
Opportunities for Volkswagen – External Strategic Factors
- The market development will lead to dilution of competitor’s advantage and enable Volkswagen to increase its competitiveness compare to the other competitors.
- Economic uptick and increase in customer spending, after years of recession and slow growth rate in the industry, is an opportunity for Volkswagen to capture new customers and increase its market share.
- New trends in the consumer behavior can open up new market for the Volkswagen . It provides a great opportunity for the organization to build new revenue streams and diversify into new product categories too.
- Decreasing cost of transportation because of lower shipping prices can also bring down the cost of Volkswagen’s products thus providing an opportunity to the company - either to boost its profitability or pass on the benefits to the customers to gain market share.
- Government green drive also opens an opportunity for procurement of Volkswagen products by the state as well as federal government contractors.
- Stable free cash flow provides opportunities to invest in adjacent product segments. With more cash in bank the company can invest in new technologies as well as in new products segments. This should open a window of opportunity for Volkswagen in other product categories.
- The new technology provides an opportunity to Volkswagen to practices differentiated pricing strategy in the new market. It will enable the firm to maintain its loyal customers with great service and lure new customers through other value oriented propositions.
- The new taxation policy can significantly impact the way of doing business and can open new opportunity for established players such as Volkswagen to increase its profitability.
Threats Volkswagen Facing - External Strategic Factors
- The company can face lawsuits in various markets given - different laws and continuous fluctuations regarding product standards in those markets.
- The demand of the highly profitable products is seasonal in nature and any unlikely event during the peak season may impact the profitability of the company in short to medium term.
- Increasing trend toward isolationism in the American economy can lead to similar reaction from other government thus negatively impacting the international sales.
- New technologies developed by the competitor or market disruptor could be a serious threat to the industry in medium to long term future.
- Rising pay level especially movements such as $15 an hour and increasing prices in the China can lead to serious pressure on profitability of Volkswagen
- Growing strengths of local distributors also presents a threat in some markets as the competition is paying higher margins to the local distributors.
- No regular supply of innovative products – Over the years the company has developed numerous products but those are often response to the development by other players. Secondly the supply of new products is not regular thus leading to high and low swings in the sales number over period of time.
- Imitation of the counterfeit and low quality product is also a threat to Volkswagen’s product especially in the emerging markets and low income markets.
Limitations of SWOT Analysis for Volkswagen
Although the SWOT analysis is widely used as a strategic planning tool, the analysis does have its share of limitations.
- Certain capabilities or factors of an organization can be both a strength and weakness at the same time. This is one of the major limitations of SWOT analysis . For example changing environmental regulations can be both a threat to company it can also be an opportunity in a sense that it will enable the company to be on a level playing field or at advantage to competitors if it able to develop the products faster than the competitors.
- SWOT does not show how to achieve a competitive advantage, so it must not be an end in itself.
- The matrix is only a starting point for a discussion on how proposed strategies could be implemented. It provided an evaluation window but not an implementation plan based on strategic competitiveness of Volkswagen
- SWOT is a static assessment - analysis of status quo with few prospective changes. As circumstances, capabilities, threats, and strategies change, the dynamics of a competitive environment may not be revealed in a single matrix.
- SWOT analysis may lead the firm to overemphasize a single internal or external factor in formulating strategies. There are interrelationships among the key internal and external factors that SWOT does not reveal that may be important in devising strategies.
Weighted SWOT Analysis of Volkswagen
In light of the above mentioned limitations of the SWOT analysis / matrix, corporate managers decided to provide weightage to each internal strength and weakness of the firm. Organizations also assess the likelihood of events taking place in the coming future and how strong their impact could be on company's performance.
This method is called Weighted SWOT analysis. It is better than doing simplistic SWOT analysis because with Weighted SWOT Analysis Volkswagen managers can focus on the most critical factors and discount the non-important one. It also solves the long list problem where organizations ends up making a long list but none of the factors deemed too critical.
Limitation of Weighted SWOT analysis of Volkswagen
This approach also suffers from one major drawback - it focus on individual importance of factor rather than how they are collectively important and impact the business holistically.
Example of Weighted SWOT Analysis
You can email us to get an example document of Weighted SWOT analysis.
SWOT Worksheet & Template
If you like to do your own SWOT analysis or want to make your own Weighted SWOT SWOT matrix then feel free to download Fern Fort University SWOT Analysis Template.
References / Citations & Bibliography
- M. E. Porter, Competitive Strategy(New York: Free Press, 1980)
- A. D. Chandler, Strategy and Structure (Cambridge, Mass.: MIT Press, 1962)
- O. E. Williamson, Markets and Hierarchies(New York: Free Press, 1975);
- L. Wrigley, Divisional Autonomy and Diversification (PhD, Harvard Business School, 1970)
- R. E. White, Generic Business Strategies, Organizational Context and Performance: An Empirical Investigation, Strategic Management Journal7 (1986)