The Value Chain Analysis Of Volkswagen

Value chains are essential elements of successful businesses, and how to gain a competitive advantage by analyzing them is the most important aspect. In Porter’s value-chain model, he points out that there are two types of business activities: primary activities, which include inbound logistics, operations, outbound logistics, marketing, sales and service; and support activities, which include procurement, technology development, human resources management, and firm infrastructure. In order to gain an edge, companies should focus on these activities to improve or create products that will satisfy their customers.

More specifically, in order to undertake a value-chain analysis, a company should start by identifying each small part of the

The ownership of the company is as follows: FAW around 51%, Volkswagen 20%, Volkswagen (China)19% and Audi AG 10% (FAW-Volkswagen International cooperation, 2015)

Traditional Forecasting Value Chain Model Replaced by the Build –to –Order Value Chain Model

Since the beginning of 2000, FAW-Volkswagen has grown rapidly in the face of international competition. Before 2004, the company used the traditional value-chain model, which is based on sales’ production (Mazen, 2010). This is a risky model for a company to follow in a volatile market. Use of the forecasting model provides, no analytical evidence to support different options. Both marketing people and financial management people are under great pressure to balance costs and profits. As a Chinese automaker, FAW-Volkswagen didn’t want to have a passive and disadvantaged position in the industry, so the R& D department began to analyze the build-to-order model of foreign auto manufacturers, and adopted a new value-chain model on this

It is not deeply rooted in the south, and even industry experts there really don’t know much about FAW-VW” (Joey Wang, 2012). From this we can see that the FAW-VW has not yet managed to expand effectively in southern China. As indicated in the primary activities analysis above, in order to save transportation costs, suppliers are mostly located in Changchun and Shenyang (two big northern factory cities), which has led to a lack of management in the southern cities. In other words, the company has lost a high percentage of market share in southern China, so expanding its market in some southern cities would be a great strategy for the company. When more people realize the value of the FAW-VW brand, the company can expand more, not only in China but throughout the world. Capacity is another thing that FAW-VW needs to enhance in China. “At present, FAW-Volkswagen has two large production base in Changchun, Chengdu separately. Vehicle production is mainly dependent on the base of Changchun capacity of 660,000 vehicles. Association statistics show that in 2010, FAW-Volkswagen sold 869,979 vehicles, the production capacity has been severely overloaded. Even with the Chengdu plant (450,000 vehicles) and the South China Sea plants (300,000) set up in 2013, capacity of FAW - Volkswagen is still behind its competitors (Joey Wang,