Operations of Volkswagen in the Contemporary Business Environment
The modern business landscape is dynamic and unpredictable due to technological advancements and globalization. Other key parameters include consumerism, sustainability and demographics. Business decisions have to be made with these variables in mind. Equally, the power of the consumer has been expanded due to accessibility of information. Further, the initial mistakes of production have caught up modern businesses such as gender discrimination and pollution. As a result, businesses are pushed to fair the physical and social environments. The paper evaluates the operations of Volkswagen in the contemporary business environment.
Key words: Volkswagen, business environment, abortion, consumer, decisions
Consumer decisions make or break firms in business. In recent times, market choices have become difficult to predict. Nonetheless, the most popular way is to understand existing and future market characteristics. At the same time, consumers also possess independent and unique characteristics and behaviour based on customer education, perception and attitudes. As a result, consumer preferences take a leading role in the production of a commodity. Equally, consumers are continuously using digital technologies and able to access more information than before. Further, in the face of globalization and improved production technologies, consumers are exposed to a variety of high-quality commodities. Volkswagen is affected by these changes and has to stay ahead of competition by building long term and short term strategies to navigate through these market challenges. The current report evaluates five contemporary issues, namely globalization, demographics, sustainability, technological development and consumerism, in the business operations of Volkswagen to make related business recommendations.
Volkswagen is a multinational automobile producer headquartered in Germany known for producing what is called the people car. The company was established in 1937 and produces cars and sport utility vehicles. Volkswagen is rated the second highest producer of cars with its leading brands including Passat, Golf, Beetle, Touareg and Eos. Recently, the company announced it is considering investing in Formula 1 vehicles. In its productions schedule, the company has advanced clean energy as a market strategy apart from other technologies that focus on safety, comfort and navigation (Volkswagen 2014). Contemporary issues affecting Volkswagen in various ways are discussed below.
Globalisation initiates a different landscape in the field of business. It involves free movement of goods, services, technologies, information and people. As a result, people are able to access a variety of goods. The car industry is an influential business promoting and being promoted by globalization. Globalization provides opportunities such as new markets and technology transfer. New possibilities result from the ease in movement caused by transport and communication technologies. Volkswagen can easily interact with customers through the internet which also facilitates business transactions. Customers can thus order and pay for automobiles at their own convenience. Equally, globalisation provides a window for technological transfer. Companies can, therefore, learn best practises of other firms to improve their business. This explains the rationale of partnerships between Volkswagen and Porsche, for instance.
At the same time, globalisation provides certain challenges which may affect a business. This includes competition and customer perception. Competition is fuelled by producers targeting the same market. Globalisation allows a company to enjoy the benefits of international trade and, as a result, can sell their products anywhere around the globe. This provides an opportunity for automobile producers to access markets already serviced by Volkswagen. Further, the improved information transfer facilitates customer education that can build or damage customer relations. For example, news on faulty vehicles influences customers to think otherwise about given products.
Nonetheless, the challenges provide certain business opportunities that are a turning edge in the sector. Competition is based on perspective that Volkswagen should be produced on leading consumption preferences. In the twenty first century, consumption is geared towards sustainability parameters such as fuelling costs, environmental friendliness, comfort and safety. Thus, staying ahead of competition is possible by making strong innovations on the consumption parameters. On the other hand, the ease with information transfer allows a company to interact with customers. Volkswagen should, therefore, maintain continuous communication with customers through information communication technologies. Currently, social media platforms such as Twitter and Facebook are widely used to engage customers, an aspect Volkswagen should have a presence in (Karl 2009; Luchs et al. 2011).
Population dynamics based on group segments for market targets at automobiles that should be produced. Market segmentation is the science and art of partitioning a market into sections of potential customers with wants or characteristics that are similar. The customers should express the likelihood of manifesting similar purchase behaviours. Market segmentation through market discrimination is a strategy used in both consumption and marketing. It works by introducing a commodity of the same production characteristics at dissimilar prices in different markets. The product is placed in the market for the respective buyers. It is pegged on the understanding that buyers make different purchasing decisions in different market places. Demographics guides vehicle modelling hence categories such as family, sports, SUV and convertible vehicles.
Demographics make production flexible by identifying markets and producing goods to meet the demands. The set production categories can also be improved and advanced through research and development. Demographics also allow companies to build specific market niches. The creation builds brand loyalty that influences sales in itself. Brand loyalty builds the competitive advantage for a company in the market. The systematization of production due to market segmentation is only applicable to mass production of vehicles. As a result, the company loses out on isolated customers who demand automobiles of their specifications. Further, such production more often carries faults.
Volkswagen, in a counter strategy, could introduce a production wing where customers order custom made vehicle. These customers are well informed on models and designs and engage producers in what is required. In order to mitigate systematized production faults, Volkswagen ought to improve its operations management modelling and simulating each aspect to reduce the faults. At the same time, the company should communicate with its suppliers on changes of design requirements (Weinstein 2013; Atwal & Bryspn 2014).
Sustainability addresses viability of business processes with respect to physical and human environments. Companies compete from environmental and social angles. Consumers react by choosing those products that positively impact their heath, in addition to other factors such as affordability, quality and ethical considerations. Purchase decisions are made against the expected benefits of the commodity. In 2010, there was a 73% increase in the number of green products entering the market compared to the previous year. The production process and products released into the market should not harm human beings as well as their environment. More often, the use of child labour, pollution and gender discrimination are major threats.
Sustainability is a leading competition variable in the automobile industry. It provides opportunities for clean energy usage and reduced costs of production. Clean energy is realized through hybrid and electric vehicle designs such as the e-golf variety of cars. Apart from staying ahead of competition producing these models, the company helps reduce the effects of pollution and climate change that are slowly eating the world. The practise of sustainability measures in a firm reduces the costs of production in the long run. Investments that cut the use of energy and water, adherence to human rights, transparency and gender balance pay the investments off gradually allowing the company to build its competitive edge in the market.
The challenges of sustainability are high costs and negative publicity. Initiating sustainability practices within the production process is quite expensive. The implementation if not well planned has the potential of making a company bankrupt. At the same time, if sustainability is not initiated, a firm loses its competitive advantages owing to high costs of production and workers’ strikes amongst other. Equally, unsustainable products and practises earn a company a bad reputation that completely kills its market. Modern consumption patterns are sensitive to negative practises that further promote product boycotts. Volkswagen can maintain and initiate sustainability initiatives in phases to allow them to absorb the high costs. Gradually, all stages are reinvented and the company becomes sustainable. The practise of sustainability is in itself positive publicity that if capped with green products extends Volkswagen’s publicity mileage (Karl 2009; Luchs et al. 2011).
Companies develop products for consumers through the work of the research and development department (R&D). R&D is a critical factor in improvement of existing products and the development of new ones as well. Within this paradigm, consumers are seen as passive parties that simply purchase and consume products. Equally, consumers should not only be viewed as the market but also as product users. There are customers leading innovation of products by creating or modifying them. The consumers increase their ability to improve their products. Production innovation has taken advantages of existing technologies since the steam engines development and discovery of metal. The automobile industry is driven by location, fuel efficiency, safety and general vehicle efficiency (Hippel, Ogawa & De Jong 2011).
Technological development is a strong competition tool that helps a company to build its competitive advantage in the market. The Think Blue Technology, using technologies of electric cars and blue motion technologies, works in progress and it is the cutting edge for the company that will be effective after complete adoption of electric cars in the world. As such, technological development helps a company stay ahead of its peers in the industry. Equally, technological development is a tool for continuous efficiency improvement. Systems are continuously put to test and related improvements are sought so that perfection is attained. For Volkswagen, the production system and automobiles have to be tested. The company understands that efficiency reduces costs and improves the market value of the brand.
Technological development, like sustainability initiative, is a high cost initiative that requires massive capital outlays. It is an investment that requires adequate planning and sufficient project management since it exists as an overhead cost to the main production costs. Research and innovation also require highly skilled professionals that are difficult to find and retain at the company. The mix of talent and skill required for innovation and related team work is scarce and also takes a lot of resources to build. Volkswagen has to be ahead of innovative sphere. This is achievable through proper project planning and governance. Due to rich history of Volkswagen, it is easy to attract talented staff to lead innovation in the company. Nevertheless, there has to be a leader to coordinate R&D team (Christensen 2013; Rosenkranz 2003).
Brand loyalty shows how consumers spend their income on commodities. Consumerism is the limit customers are willing and able to reach to obtain a product. It largely deals with customer perception. It is also based on the personality of the customer. Consumers develop and relate with both social and private commodities on the basis of their self-image. At the same time, there are products that are consumed privately with an impact on the public platform, hence affecting their consumption. The relationship between personalities and brand varies in different sectors. Oliver (2010) reports a study on different usage of market products that found that car brands were more related to personalities than other products considered in the survey. However, income is a controlling factor for consumers to identify with the goods that match their self-image.
Consumerism is an alternate variable whose advantage is seen in market segmentation. It defines tastes, hence serves as a tool for defining market segments. It has already been mentioned that the identification of a market segment eases production since the producer has an overview of the customers’ needs. It is, therefore, easy to service such needs in the market. Secondly, consumerism is a reflection of marketing. It can be used to gauge the effectiveness of marketing strategies of a company based on sales, geographic coverage and customer identities. This makes it relevant to produce a variety of designs to capture these categories.
Consumerism requires consumer education. For products from Volkswagen that are durable, it is a challenging task to build the brand image in the minds of consumers. Equally, acquiring a vehicle that is a reflection of personality, a customer relies on other customer ratings the product. Therefore, apart from marketing initiatives of the firm, Volkswagen has to infiltrate the minds of the public to put a good word for the cars. There is also the challenge of objectivity in building brand names. The vehicles have to provide safety for customers and at the same time there should be consciousness when driving. The development of commercials that make cars immortal and accident free is detrimental for the safety of the public. Volkswagen can resolve consumer perception by employing aggressive marketing to build the strong brand name. Further, the company must maintain the top sales spot to advance its business intentions in the global arena. Commercials, on the other hand, should be realistic to make drivers understand their safety and responsibilities while driving. Volkswagen has greater responsibility in promoting safety than maximizing profits (McGregor 2007; Bhugra, Sartorius & Rose 2014).
Contemporary business issues have completely changed the business landscape. The economic drive is considered alongside social and ethical concerns. Globalization provides new markets for products and also opens the same markets for rival products. In the end, it promotes efficiency and competition. Demographics, on the other hand, describe the rise of markets segments influenced by gender, social class and purpose. As a result, producers bear in mind the faces that demand their products other than the original purpose a product is meant for. This makes production systematized with the potential of locking out customers with specific demands. Sustainability introduces social, environmental and ethical concerns in production that have a big impact on the total production costs. However, the payoffs of such investments are positive for the company in the long run if well initiated and managed. The same applies to technological development of the company. Cost relations are critical for success. Technological advancement through research also requires highly trained personnel that are difficult to find and blend together. Finally, the aspect of consumerism defines how loyal people are to a given product and the extent they would go to to obtain the goods. Volkswagen has to consider these variables and the competitive business environment brought by the same variables when promoting its business.
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