Introduction
Nowadays, many businesses strive to work in the international markets and compete for the attention of consumers. However, such operations involve not only interest from the new market but scrutiny from governmental agencies. Among the most well-known car manufacturing companies worldwide is Volkswagen.
Volkswagen is the firm that has conducted its business on a global scale for almost a century. As a result, to be successful in its operations, specific systems and processes are involved. Thus, to ensure the effectiveness and success of its processes and strategy, Volkswagen not only adapts its products to local markets but also enters new markets by establishing individual manufacturing plants or joint ventures.
International Strategies
The first aspect that must be discussed when it comes to Volkswagen’s manufacturing business is its global strategies. Overall, Volkswagen’s international strategies are generally based on establishing local production facilities in foreign markets. According to the Group, the company has 120 production facilities spread over 10 nations in the Americas, Asia, and Africa, in addition to 19 nations in Europe (Volkswagen Group, n.d.). Thus, this approach is used because it is beneficial in terms of expenses. Establishing a manufacturing plant in the new market will help minimize importing expenditures and transportation costs.
In addition to the first strategy, the company employs the strategy of joint ventures with local partners in foreign markets. For example, Volkswagen decided to boost regional development capabilities for self-driving cars in China via a joint venture between CARIAD and Horizon Robotics, which was announced in October 2022 (Volkswagen Group News, 2022). Horizon Robotics is among the leaders in the manufacturing of computing systems with low energy consumption for intelligent vehicles (Volkswagen Group News, 2022). As a result, the reason for using this strategy is that it is believed that the Volkswagen Group will benefit from a partnership that will hasten the adaptation of its vehicle products for the foreign market. Therefore, two approaches to international expansion help the company minimize risks and expenditures.
Product Portfolio
Another important factor to consider in Volkswagen’s operations is its product portfolio, which is adapted to the market in which it operates. Generally, adaptations are based on either regulations and requirements or the personal preferences of local communities. The company’s portfolio includes various models, ranging from electric cars to small city cars and luxury sedans (Volkswagen Newsroom, 2021). Some of Volkswagen’s models have been specifically tailored for the Chinese market, introducing SUVs with long-wheelbase versions and offering a choice of six to seven vehicles (Volkswagen Newsroom, 2021). Therefore, the firm adapts its processes to modify its existing models, tailoring them to local demand or introducing new products to the market.
Additionally, Volkswagen must comply with the guidelines and regulations of the market and tailor its products to meet the specific expectations of governmental agencies. For example, the company had to redesign its engines to meet strict standards in the United States market. Since the 1970 Clean Air Act established the Environmental Protection Agency (EPA) and its authority to regulate automobile emissions, the EPA has implemented increasingly stringent light-duty vehicle exhaust limits (EPA, 2022). The Tier 2 emission regulations applied to the Volkswagen automobiles that were named in the Notice of Violation (EPA, 2022). Thus, the adaptations for Volkswagen can be not only individually chosen but mandatory and required by the regulators.
Relevant Factors
Furthermore, it is essential to consider relevant factors that can impact Volkswagen’s operations. For instance, the first relevant factor revolves around cultural and societal differences and preferences. In this case, it is noteworthy that while some markets, such as the Chinese market, might prefer larger vehicles, others might prefer smaller electric cars. For example, in European countries, consumers demonstrate environmental awareness, which is why Volkswagen has decided to make all of its cars electric in Germany by 2033 (Waldersee, 2022). Therefore, such factors in terms of preferences are important to consider, as they directly affect the company’s operations and revenue. In such situations, it will be necessary to invest more in research and development to not only transition to an all-electric market but also satisfy the demand.
Another factor worth consideration is the one concerning changes to Volkswagen’s portfolio. Suppose the company decides to introduce new models or make changes, as in the case of Germany. In that case, there may be a need to recruit additional employees and find new manufacturing facilities. As a result, the effectiveness of its operations will be based on the workforce, facilities, and possibilities in terms of research and development.
Evaluation of Success
Lastly, Volkswagen’s overall strategies are effective, as they help the company establish itself as a global brand. By establishing local facilities and engaging in joint ventures, the firm was able to better understand the local markets, reduce its costs, and improve its efficiency. For example, Volkswagen’s strategies in the Chinese market were especially successful. Along with its local collaborators, Volkswagen maintains its market-leading position in China, with a share of 18.5%, and significantly improves delivery results compared to the total market (Volkswagen Group, 2019). Therefore, in some countries, Volkswagen’s strategies have proven successful.
However, the company faced several challenges that undermined its success. Among these challenges is the scandal surrounding diesel emissions in the United States market. Volkswagen continues to attempt to restore its reputation after a scheme to conceal the carbon footprint of its diesel-powered vehicles was discovered in 2015 (Jacobs & Kalbers, 2019). The firm failed to notify the authorities and concealed the illegal details, which later resulted in billions of dollars in fines (Jacobs & Kalbers, 2019). As a result, the strategies for operating in the U.S. market were unsuccessful, and the brand’s reputation will be damaged for some time.
Conclusion
Hence, Volkswagen enters new markets by establishing independent manufacturing facilities or forming joint ventures to ensure the effectiveness and success of its operations and strategy. Volkswagen also customizes its goods for local markets. Generally, Volkswagen bases its global business strategies on establishing local production facilities in foreign markets. The business also uses joint ventures with local partners in other countries in addition to the first method.
Volkswagen’s product portfolio, which is tailored to the market in which it competes, should be taken into consideration while analyzing its operations. The company’s portfolio encompasses a diverse range of models, including luxury sedans, compact city cars, and electrified vehicles. Volkswagen also needs to design its products to meet the precise requirements of governmental organizations while adhering to market rules and regulations. The number of employees, the availability of facilities, and the potential for research and development will all influence how effectively its operations may be conducted.
References
EPA. (2022). Laws and regulations related to Volkswagen violations. Environmental Protection Agency. Web.
Jacobs, D., & Kalbers, L. P. (2019). The Volkswagen Diesel Emissions Scandal and Accountability. The CPA Journal. Web.
Volkswagen Group. (2019). Country report – China. Web.
Volkswagen Group. (n.d.). Portrait & locations. Web.
Volkswagen Group News. (2022). Volkswagen to strengthen regional development competence for autonomous driving in China through a joint venture between CARIAD and Horizon Robotics. Web.
Volkswagen Newsroom. (2021). SUV offensive in China: Volkswagen reveals 6 new cars at Auto Shanghai, including 3 world premieres. Web.
Waldersee, V. (2022). Volkswagen brand will only produce electric cars in Europe from 2033. Reuters. Web.