Globalizing Volkswagen

Globalizing Volkswagen

BACKGROUND

Since its beginning in 1938, when the Germany government laid the foundations of the first Volkswagen factory to build a "People's Car", Volkswagen has had its times of trial and prosperity. Hardly making it through the end of World War II, this company has had several different executives to take it in many different directions, some bringing prosperous growth and others defeat and lost investment. Competition brought VW to its knees in the late 1980's and early 1990's, and they faced defeat if they couldn't turn it around to compete against the new Japanese manufacturing and production that decreased the costs of cars making them more affordable and appealing. In early 1993 Ferdinand Piech took over as CEO of Volkswagen, and began to implement his plan to turn their future around. Piech transformed VW into a powerful global player buying out other well known car brands, such as Bentley, Bugatti, and Lamborghini, to add them to the Volkswagen industry. By the year 2000 Volkswagen became the first to sell over 5 million cars worldwide increasing its world market value by 12.4 percent from the previous year. It is recorded to have the record highest profits in history, reaching 2.9 billion euro dollars after tax, which at that time calculated to almost 3.5 billion U.S. dollars.

STRATEGY

In 1993 when Piech took over, he needed to address some serious problems in order to produce a profit in the years to come. A main concern was production costs. They needed to find a more efficient and less costly way to produce the different models of Volkswagen. This is the largest area that they were losing the competitive battle in is the cost of their product. They needed a strategy that would fix their current problems and also be able to adapt easily to changes in the future to allow for a growing market. Piech took the idea of using platform development. Platform development is used in production of vehicles, and the basic principle is that all the Volkswagen models would have relatively all the same basic structures. Having consistency in the structures allowed for quicker production of parts for assembly and less complexity in the differences between models. Piech however, wanted to keep the Volkswagen models to be distinct in their own style, as the buyers progressed toward individualizing their cars.