Joe DavidSWOT analysis of Volkswagen (Volkswagen Group SWOT)
This detailed SWOT analysis of Volkswagen aims to examine the strengths and the weaknesses of Volkswagen Group. It also aims to examine the opportunities the company should explore and the threats it should keep an eye on. Volkswagen Group is a German multinational automotive company headquartered in Wolfsburg, Germany. It was founded in 1937.
Strengths of Volkswagen
Volkswagen Group has twelve brands in its portfolio which puts it far ahead of all its competitors. These brands are Volkswagen Passenger Cars, Audi, SEAT, ŠKODA, Bentley, Bugatti, Lamborghini, Porsche, Ducati, Volkswagen Commercial Vehicles, Scania and MAN. Audi is a premium brand, so is Bentley with its uniqueness, stylishness and power. Scania and MAN make commercial vehicles (Volkswagen, 2019).
Each brand of the Volkswagen Group has distinctive characteristics and operates independently. Cars, motorcycles, luxury vehicles, commercial vehicles, buses, pickups, and trucks demonstrate the individual distinctiveness and diversity of the company’s portfolio. As of July 2019, the Group sells its vehicles in 153 countries. It has 122 production plants in Europe, the Americas, Asia and Africa (Volkswagen, 2019). This global presence is certainly a major strength of the Group.
Despite facing some grave challenges in the last few years, Volkswagen had revealed that it sold 10.7 million vehicles globally in 2017, and 10.8 million in 2018. It reported 13.92 billion euros ($15.79 billion) of operating profit for the year 2018 which was 0.7% better than the previous year (Winton, 2018). Volkswagen also ranks the 9th most valuable car brand in the world in the year 2019 (Gibbs, 2019).
Volkswagen Group’s focus on technological innovation is noteworthy. It invests heavily in research and development (R&D), particularly in the areas of digitisation, autonomous driving, and electrically powered vehicles. It has allocated 44 billion euros for R&D for the next five years. The total investment in R&D was $12.1 billion in 2017.
Weaknesses of Volkswagen
The ‘Dieselgate’ emissions scandal in 2015 affected Volkswagen’s brand reputation severely. The company admitted that its diesel cars were equipped with defeat-device software to cheat with the emissions control system. This deception affected 550,000 vehicles in the USA and possibly around 11 million vehicles worldwide. The scandal costs the company an unprecedented $14.7 billion to compensate customers and address environmental damage (Naranjo, 2016).
The USA is the 2nd automotive market in the world. Approximately 17.24 million vehicles were sold in the country in 2017 (China Daily, 2018). However, Volkswagen’s market share was 2% in the USA for the same year. This shows Volkswagen Group is struggling in one of the key automotive markets. Likewise, its market share in India is very weak as well.
Opportunities for Volkswagen
Demands for cars, trucks, and pickups are increasing in emerging markets. This offers an opportunity for growth for Volkswagen Group. Selling more vehicles in the current markets will certainly boost the company’s financial position. It is strongly expected that the demands for vehicles in China, India, Brazil, Russia, and Middle East will continue to rise in the coming years; hence opportunities for Volkswagen.
As mentioned above, the Group sells its vehicles in 153 countries as of July 2019. Therefore, more countries can also be added to the existing list. Likewise, new product development has great potential as well. It is worth noting that auto driving cars, hybrid cars, fuel efficient cars, and electrically powered vehicles are very likely to be the future of the automotive industries around the world. Likewise, vehicles with innovative designs also draw the attention of many buyers.
Threats to Volkswagen
Threat is the last issue to discuss in the SWOT analysis of Volkswagen. Volkswagen faces a tough competition from a number of competitors in global fronts and the competition is ever increasing with no sign of cessation in the near future. The main competitors of Volkswagen are Ford, General Motors, Toyota, Fiat Chrysler Automobiles, Suzuki, Hyundai, Nissan, Honda, BMW, and Mercedez.
The emissions scandal in 2015 damaged the brand reputation of Volkswagen severely. Therefore, recurrences of similar scandals may turn out to be extremely severe. Imagine paying a roughly $15 billion penalty again and again? Likewise, different government regulations in different countries and growing trends of protectionism are also something to look out for.
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Last update: 02 August 2019
References:
China Daily (2018) Top 10 largest car markets in the world, http://www.chinadaily.com.cn/a/201808/13/WS5b70bac4a310add14f385474.html ( accessed 25 July 2019)
Gibbs, N. (2019) Toyota No. 1; VW makes biggest gain in ranking of most valuable car brands, available at: https://europe.autonews.com/automakers/toyota-no-1-vw-makes-biggest-gain-ranking-most-valuable-car-brands (accessed 25 July 2019)
Naranjo, M. (2016) Volkswagen Pays High Price for Diesel Deceit, https://www.consumerreports.org/volkswagen/volkswagen-pays-high-price-for-diesel-deceit/ (accessed 29 July 2019)
Winton, N. (2018) Volkswagen Maintains Profits In 2018, Warns About Troubles Ahead, available at: https://www.forbes.com/sites/neilwinton/2019/02/22/volkswagen-maintains-profits-in-2018-warns-about-troubles-ahead/#3b76d593337e (accessed 28 July 2019)
Volkswagen (2019) Volkswagen Group, available at: https://www.volkswagenag.com/en/group.html (accessed 28 July 2019)
Photo credit: Pixabay
Author: Joe David
Joe David has years of teaching experience both in the UK and abroad. He writes regularly online on a variety of topics. He has a keen interest in business, hospitality, and tourism management. He holds a Postgraduate Diploma in Management Studies and a Post Graduate Diploma in Marketing Management.
M Rahman