Harvard Case - Volkswagen Strategy 2025: Shifting Gears in Disruptive Times
"Volkswagen Strategy 2025: Shifting Gears in Disruptive Times" Harvard business case study is written by Andreas Schotter, Thomas Watson, Ramasastry Chandrasekhar. It deals with the challenges in the field of Strategy. The case study is 17 page(s) long and it was first published on : Jun 5, 2019
At Fern Fort University, we recommend that Volkswagen implement a multifaceted strategy focused on digital transformation, sustainable mobility, and strategic alliances. This strategy should leverage Volkswagen's existing strengths in manufacturing and engineering while embracing disruptive technologies and evolving customer needs.
2. Background
The case study focuses on Volkswagen's strategic challenges in the face of rapid technological advancements and shifting consumer preferences in the automotive industry. The company faces pressure from emerging electric vehicle (EV) manufacturers, changing customer expectations towards sustainability and connectivity, and increasing regulatory scrutiny.
The main protagonists of the case study are:
- Matthias M'ller, CEO of Volkswagen, tasked with navigating the company through its post-Dieselgate crisis and developing a sustainable future.
- Herbert Diess, CEO of Volkswagen Passenger Cars, championing the shift towards electric mobility and digital transformation.
- The Volkswagen Board of Management, responsible for setting the overall strategic direction and allocating resources.
3. Analysis of the Case Study
SWOT Analysis:
Strengths:
- Strong brand recognition and global presence
- Established manufacturing and engineering capabilities
- Extensive dealer network
- Strong financial position
Weaknesses:
- Damaged reputation due to Dieselgate scandal
- Lack of experience in electric vehicle technology
- Slow adoption of digital technologies
- Complex organizational structure
Opportunities:
- Growing demand for electric vehicles
- Increasing focus on sustainability and connectivity
- Emerging markets with significant growth potential
- Potential for strategic alliances and partnerships
Threats:
- Competition from established and emerging EV manufacturers
- Regulatory pressure on emissions and safety standards
- Rapid technological advancements
- Economic uncertainty and geopolitical risks
Porter's Five Forces Analysis:
- Threat of new entrants: High, due to the emergence of new EV manufacturers and the relatively low barriers to entry in the electric vehicle market.
- Bargaining power of buyers: Moderate, as consumers have increasing choices and access to information about different vehicle options.
- Bargaining power of suppliers: Moderate, with reliance on key suppliers for batteries and other components.
- Threat of substitute products: High, with the potential for alternative transportation solutions like ride-sharing and autonomous vehicles.
- Rivalry among existing competitors: High, with established players like Tesla and traditional automakers like Toyota and General Motors aggressively pursuing the EV market.
Value Chain Analysis:
Volkswagen's value chain is characterized by its strong manufacturing capabilities, global distribution network, and brand recognition. However, the company needs to adapt its value chain to incorporate new technologies and business models associated with electric vehicles and digital services. This includes:
- R&D and Product Development: Focusing on developing innovative electric vehicle technologies and integrating digital features.
- Manufacturing: Optimizing manufacturing processes for electric vehicles and exploring new production methods like modular platforms.
- Marketing and Sales: Targeting new customer segments interested in sustainable and connected mobility solutions.
- After-Sales Service: Expanding services to include charging infrastructure, software updates, and data-driven maintenance.
Business Model Innovation:
Volkswagen needs to move beyond its traditional business model of selling cars to encompass a broader ecosystem of mobility services. This includes:
- Subscription models: Offering access to a range of vehicles and services through subscription plans.
- Data-driven services: Leveraging data analytics to provide personalized services and optimize vehicle performance.
- Connectivity and integration: Developing connected car technologies and integrating with other mobility platforms.
4. Recommendations
1. Digital Transformation:
- Invest heavily in digital technologies: Develop a comprehensive digital transformation strategy that includes investments in artificial intelligence (AI), machine learning, cloud computing, and data analytics.
- Embrace mobility as a service (MaaS): Develop and integrate a range of mobility services, including ride-sharing, car-sharing, and autonomous driving, into the Volkswagen ecosystem.
- Enhance customer experience: Utilize digital technologies to personalize customer interactions, provide real-time information, and offer seamless service experiences.
2. Sustainable Mobility:
- Accelerate the transition to electric vehicles: Invest heavily in research and development, manufacturing, and marketing of electric vehicles across all segments.
- Develop a comprehensive sustainability strategy: Implement initiatives to reduce emissions, minimize waste, and promote responsible sourcing throughout the value chain.
- Invest in renewable energy and charging infrastructure: Partner with energy companies and governments to develop a robust charging infrastructure for electric vehicles.
3. Strategic Alliances:
- Form strategic partnerships with technology companies: Collaborate with leading technology companies in areas like AI, software development, and data analytics to enhance digital capabilities.
- Partner with startups and research institutions: Foster innovation by investing in and partnering with startups and research institutions developing cutting-edge technologies.
- Explore mergers and acquisitions: Consider strategic acquisitions to expand into new markets, acquire new technologies, or strengthen existing capabilities.
5. Basis of Recommendations
These recommendations are based on the following considerations:
- Core competencies and consistency with mission: Volkswagen's strengths in manufacturing and engineering can be leveraged to develop and produce high-quality electric vehicles. The company's commitment to sustainability aligns with the growing demand for environmentally friendly mobility solutions.
- External customers and internal clients: The recommendations address the changing needs of customers who are increasingly seeking sustainable, connected, and personalized mobility solutions. They also aim to empower employees and enhance their capabilities through digital transformation and skill development.
- Competitors: The recommendations aim to position Volkswagen as a leader in the evolving automotive landscape by embracing disruptive technologies, expanding into new markets, and establishing strategic partnerships.
- Attractiveness ' quantitative measures if applicable: The recommendations are expected to drive long-term growth and profitability by expanding market share, increasing revenue streams, and enhancing brand value.
6. Conclusion
Volkswagen faces significant challenges in the face of disruptive innovation and evolving customer expectations. However, by embracing digital transformation, prioritizing sustainable mobility, and forging strategic alliances, the company can position itself for long-term success in the rapidly changing automotive industry.
7. Discussion
Alternatives not selected:
- Focusing solely on internal innovation: While internal innovation is important, relying solely on internal resources may not be sufficient to keep pace with the rapid pace of technological advancements.
- Adopting a 'wait-and-see' approach: This approach would likely lead to a loss of market share and competitive advantage in the rapidly evolving electric vehicle market.
Risks and key assumptions:
- Technological uncertainty: The rapid pace of technological advancements poses a risk to Volkswagen's investments in electric vehicles and digital technologies.
- Consumer adoption: The success of Volkswagen's strategy depends on consumer acceptance of electric vehicles and mobility services.
- Regulatory changes: Changes in government regulations related to emissions, safety, and data privacy could impact Volkswagen's business.
8. Next Steps
- Develop a detailed roadmap for digital transformation: Identify key areas for investment, set timelines, and establish performance metrics.
- Launch pilot programs for new mobility services: Test and refine new business models and services before scaling them up.
- Invest in research and development of electric vehicle technologies: Focus on developing innovative technologies and expanding the range of electric vehicle models.
- Establish strategic partnerships with key players: Secure partnerships with technology companies, startups, and research institutions to accelerate innovation and gain access to new technologies.
- Monitor market trends and adapt strategy: Continuously assess market dynamics, competitor activities, and customer preferences to ensure the strategy remains relevant and competitive.
By taking these steps, Volkswagen can successfully navigate the disruptive changes in the automotive industry and emerge as a leader in sustainable and connected mobility.
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Case Description
In 2018, Volkswagen Group's newly appointed chief executive officer renewed the company's commitment to Strategy 2025, an ongoing plan intended to radically transform the German automaker. Volkswagen was being challenged by tectonic changes in the automotive industry, including the phasing out of the long-standing internal combustion engine, ongoing digitization, the entry of new competition from technology companies, the introduction of electric vehicles, and the launch of ride-sharing applications. Strategy 2025 was designed to reshuffle the company's existing formal and informal structures and restructure the automaker into a nimble, agile, and innovative corporation ready to face the realities of mobility in the digital age. The new chief executive officer faced huge expectations concerning the effectiveness and sustainability of Strategy 2025. Was the automaker doing enough to transform into a competitive mobility company?
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