Process Of Globalization And Its Effect On Volkswagen

Introduction

World’s leading automobile industry “Volkswagen “is one of Europe’s largest automobile manufacturers, backed up by Adolf Hitler headquartered in Wolfsburg, carries out designing development and production of a large variety of automobiles. The company is operational in nineteen European countries and sells its products in 153 empires worldwide. To fulfil the uppermost expectations, it offers twelve amazing brands that offer flexibility in every domain of automobiles around the globe (Cavico & Mujtaba 2016).

Volkswagen came into existence on 28th May, 1937 called “Gesellschaft zur Vorbereitung des Deutschen Volkswagens mbH (Society for the preparation of the German People's Car)” by “Nazi Deutsche” with the motto to produce Volkswagen car, initially named as “Porsche Type 60” after that it was renamed as “Volkswagen Type 1” and now generally called as “Volkswagen Beetle” designed by “Ferdinand Porsche's”.

Volkswagen group missions to offer high quality environmentally attractive automobiles that could set standards in the respective classes worldwide and can create a competitive market. Whereas, the company aims to meet the demands of the market and consumers by providing high quality services and with high qualified humanoid assets and vision’s to being defined as a renowned company in the market and prevails as world’s largest distributor of automobile spare parts for achieving high economic service for the growth and development of the firm (Mansouri 2016).

Event 1: Contours Of German Model

Volkswagen’s governance assembly is sometimes referred to as an example of “German neo-corporation”. In 1960 Volkswagen Work Limited got partially privatised and holds about 20% of shares with ‘German Federal Government’. But with the analysis laid the smoke for the conception of a 'German model' in 1937 grounded on a 'Strategy of diversified quality production' for a competitive advantage. High-quality work and flexible technology production with employment production policy act as a strategy of the German system. The German model seemed to be as a low-cost alternative capturing idea that would keep peace and harmony but this model got unplugged for Volkswagen and backfired as the organisation’s weaknesses could easily be visualised. The organization was shaken and entered into the era of downfall. Right after the third hearing of Deutsche Telekom, German courts had to encounter thousands of claims acting as a congestion to court system due to which German model case got introduced in 2005 before the birth of this product.

PESTEL Analysis

Political Factors

With respect to the introduction of this technology, the consultation privileges were up to the contract in 1987 as an alternative suggestion provided by the work council in 1987 that played a significant role in reshaping the image of the job description which resulted out to be involving of “work council” and introduced “shared management fixation” policy (Parisien & Thagard). Due to the changing and upcoming concepts of Japan and Germany, politicians fete its expansion and contributed to China and U.S to support Germany. Whereas 1980s central policy brought expansion and rearrangement in the initial training system. Volkswagen introduced traineeship and initial training opportunities for the non-skilled worker to be job handed.

Economic Factors

Streeck views the manufacturing of expanded quality production as proof for the:

'High economic and employment policy productivity of the German system of codetermination, `humanization of work', centralised contract negotiations'(Parisien & Thagard).

In prospectus of efficiency and prices of the diversified excellence, production was clearly termed as the conventional mass production system which was later on pointed out in IMVP research. Volkswagen, Daimler and suppliers had cut down the profit margin and blaming the slowing of global sales. Volkswagen neglected economic fundamentals and let it mark below 60% due to the declining trend in demand, made Volkswagen losing its fortunes (Chang et.al. 2007).

Social Factors

Vocational training factors led the young workers to be a skilled one in order to continue their employment as” below their worth” in production, but with the emerging Germany technology led Volkswagen brand portfolio (Chang et.al. 2007).

Technological Factors

Volkswagen stepped as one of the best technological industry in 1980s by producing flexible technology termed as “intelligent but due to German model cars created a sense of the disappointment with Volkswagen cars decreased in the range of cars and were criticised badly especially “Porsche” and “Audi” for being failed in returning the ensured quality.

Consensus structures brought about the technological strategy incorporation with work council. With the introduction of innovative technology, production settled down the committees for expanding co-determined moralities (Parisien & Thagard).

Environmental Factors

With the emergence of German Car models, operative management limited to hoard qualifications and announced the ban of diesel cars due to the effect of the carbon foot on the environment.

Legal Factors

As the events presented Work council important role occurred into the action and supported manufacturers of car involving in investment decisions but due Volkswagen products were apparently not up to the mark to satisfy legal emissions’ policies from starting made lose VW lose its name (Parisien & Thagard).

Pestle Analysis of Volkswagen in Contours Of German Model Event

Political Factors

• Policies of trade with different counties
• Treat of taxes by the US to European imports

Economic Factors

• Favourable operating scenarios for automobile manufacturers
• Unsustainable economic conditions
• Specific financial and banking services for a specific region

Social Factors

• The loss in the brand portfolio
• Non-compliance pollution norms
• Employment opportunities.

Environmental Factors

• Carbon footing impacts on the country.

Legal Factors

• Strict law amendments
• Impact on financial and reputational figures

Technological Factors

• An increment in R and D
• Development of skills.

Event 2: Volkswagen Emission Test

The sustainable environment is a great concern to any nation. Environmental Protection Agency (EPA) and many other organisations truly focus on saving the green environment and condemns emission. In 2015 Volkswagen posed its emission test that turned out to be creating hardships for that the company announced “diesel dupe” to seem that its vehicle emits less pollution but the actual lab test reports labelled them as cheaters which created a negative impact in the world’s trade market. EPA slapped a legal notice to Volkswagen for the violation Clean Air Act and the agency claimed that Volkswagen invented a damaging device, harmful to the environment (Chang et.al. 2009).

PESTEL Analysis

Political Factors

Political instability and chaos with heavy taxation by Government led Volkswagen to loss and disturbance in business. In 2015, Volkswagen accepted the rigging in emission test which made Volkswagen suffer a great amount of load to suffer the crises brought by Public Relation enterprises based on Germany, Britain and the United States.

Economic Factors

Volkswagen diesel emission test affected its sales and fall in its market trend. According to the analysis report of 2016, due to unethical trend made Volkswagen fall its shared position by one third. In order to cope up with this crises, Volkswagen declared a reduction in the “bonus of chief management” (Wei et.al. 2016). According to the company decrement in bonus will force management team and CEO to operate a firm’s daily operations. The selling boat of Volkswagen stopped and the dealers suffered from sluggish sales and thin profit as estimated that sales after this scandal were only 20% (Bule, Galofé & Garriga 2013).

Social Factors

Volkswagen hired the “Former Communication of BMW” as a consultant within salary package of $22,000 per month with 60 hours of working and provided opportunities to employees in order to overcome the hyped scandal. The rewarding system of Volkswagen executive employee was due to making it quite about rigging in emission test for a long time. Bonuses were not only provided to executives but also to employees to enumerate the issue (Kirton & Maclaren 2018).

Technological Factors

Emission test backfired Volkswagen badly a making loss of its fortunes and partners which in turn led its production and manufacturing of new technology lesser. It was estimated that the scandal of rigging in the emission test break its trending nature to develop more products by 50%.

Environmental Factors

Volkswagen and Audi diesel cars releases nitrogen oxide forty times more according to the policy of Clean Air Act, that is an excess of 36.7 million kg in to the environment endangering 60 human lives especially of 10-20 years age group as nitrogen oxide is a dangerous element giving birth to number of diseases such as respiratory issues, cancer, premature deaths etc. Additionally, Volkswagen diesel car resulted in acid rain which caused vital destruction in human health and in nature causing damage to natural resources. The scandal acted as a pillar in the way of efforts to develop environmental friendly environment as Volkswagen U.S chief Michael Horn stated that “the company had totally screwed up” (Kirton & Maclaren 2018).

Legal Factors

Volkswagen diesel emission scandal led devastating events which brought worst condition and abrupt changes to its either direct or indirect stakeholders and disrupted their valuable chain of stakeholders (Beck 2018). General Manager of Volkswagen decided to whilst the remaining of unrestricted funds to be given to sales workforces with aim of improving the sales workforces. In 2016 a judge in California, United States presented that a concrete plan has been provided by the Volkswagen for the protection of environmental agency to finalise and for solving the case installed on this emission scandal (Narula 2014).

PESTLE Analysis

Political factors

• Crises in relation with multinational companies.
• Who counterattack

Economic Factors

• Fall in market trend.
• Bonus chief management policy.

Social Factors

• Rewarding system policy

Environmental Factors

• Liberation of nitrogen oxide
• The killing of human lives
• The release of excessive pollutants

Legal Factors

• A loss for stakeholders.
• Protection of environmental agency

Technological factors

• Rigging declined the ratio of new innovation production

Changes In Global Business Environment

In the early 1930s, Volkswagen was the main attraction for the automobile industry not for its brand portfolio but for its classification. In 1934, BMW, Mercedes, Opel, Ford etc. were its mass production that was being marketed. All the technical requirements were already available on General Public’s mind when Nazi leadership came into power (Beck 2018). The export business got the system expansion in the early 1950s. Monies were only awarded precise profit margin because the financial calculation of Volkswagen came into knowledge of its products on the International forum and for this particular reason company exported its automobiles close to lower prices (Narula 2014).

In 1950, co-operative working force relationship established due to the company’s economic success and high earning salaries achieving a voluntary assistance. Works Council management shared possibilities were large and attempted to employ to make the turnover to minimal and solve the shortage skilful employees (Adekola & Sergi 2016). Volkswagen served as the top German automobile manufacturers and were the trendsetters among different industries. Whereas, Volkswagen also called out for its ”high wage policy” permitting the workers to create a suitable working drive by sharing company’s success but was badly evaluated by Federal Government and by employee association, who saw their increasing wages by time to time (Beske, Koplin & Seuring 2008).

Volkswagen organization got enough leverage in terms of incomes and their working timelines. “Works Council, the Metal Workers’ Union and Volkswagen‘s management”, in October 1955 agreed to “ Two-phase reduction in Working hours “ scheme that is 40 hours of working for the workers of an organization in accordance to this scheme (Shenkar, Luo & Chi 2014). Volkswagen came into the platform and broadly introduced a new business strategy that brought a reduction in the working week making agreements and contracts approved by Works Council (Beske, Koplin & Seuring 2008).

To overcome the existing crisis, the Volkswagen enterprise started to rearrange the manufacturing system along the paths of slender manufacturing characterised by smooth structures, teamwork, a minor production penetration and logistical grouping and its relationship with suppliers and contractors (Hotten 2015). Systematically Volkswagen expanded its business and products that integrated and protected environment over the years to shadow the path with its projects with further progress and development for the injection of lightweight production and direct technology as well as life cycle of project management. Market-oriented Policy based on regional accountability served as the vital success of medium size oriented projects that took its lead from a steady utilization of resources but got the appealing responses and wishes from customers to remove the occurring fluctuations. With lean manufacturing and globalization made Volkswagen moved ahead and brought about sustainable production in finance structures (Schwaiger, Sarstedt & Taylor 2010).

A Wolfsburg-based company by 2018, this organisation become the highest sales automaker and evolved as the world’s innovative automobile manufacturing brand. The multinational group trends to win new customers heart and target more audience with innovative and sustainable products that create the expansion and offers high potential emerging market trends by creating goodwill and relations with the partners building manufacturing plants in India and Russia. But the company had to face serious crises and challenges of maintaining smooth and linear trend in the marketing position that got undisturbed in the form of competition by Japanese automobile makers and by the U.S. and expanded and flourished their industry in Chinese marketing industry by 2004, once the Chinese got affiliated with “World Trade Organisation ” (Barrett et.al. 2015).

In 2007, the Middle Kingdom became the single largest market Passenger Cars brand for the Volkswagen, as the company delivers around 900,000 vehicles in a year. The Volkswagen Group positioned its combined value and got a tremendous rise in its sales figures of productivity and for the surety of its performance and to measure the optimization work results anchored the work contracts and agreements by 2007 (Schwaiger, Sarstedt & Taylor 2010).

Moreover, the increasing number of cross-brand automobiles and its vehicles accelerate the production cost and prices and its increasing volume strategy and business ethics proves successful due to its branding alliance collaborations and are yoked to realise its oriented customers looking forward to the mobility in ideas and acceleration in the innovation in its products and services as the organisation is on its way presenting its strong selling automobiles on the road to fulfil customer satisfaction and needs as it is one of the most important key factors (Cavico & Mujtaba 2016).

Conclusion

Winterkorn, after visualising the strategies of Volkswagen sees this platform as the future problem solver as he stated, 'with our modular platforms we now already hold the key in our hands. They put us in a position to develop and build our cars much quicker, more flexible and economically than ever before. We can even use them to offer greater variety - and also profitably realise niche models. And they allow us to bring all transmission types to market in all segments and brands in the shortest possible time”

Volkswagen is not only an automobile manufacturing industry but is broadly classified into two groups; one is the automobile and second one financial service providers. It consists of a variety in the range of successful car brands helping in achieving its strategic goals and objectives. Audi, Bugatti, Skoda, Bentley, Seat and Lamborghini are the main products of Volkswagen enterprise whereas the strategic goal of the company is to up mark itself and embrace the position as the world’s leading automobile manufacturing production house in terms of financial and environmental. The Volkswagen group has outlined the four main targets and desires to achieve its goal objectives to become the global leader by 2018 in vehicle production industry as the company is ready and assures to bring highly intelligent and sophisticated technology to position itself as the world leader in case of customer gratification and quality.

The company aims to increase the graphics of its selling units yearly and ensures that should be more than 10 million automobiles per year. Precisely Volkswagen wants to arrest the average market share into the best market zones of the world. Secondly, the company also aims to be financially and economically strong for that it desires to increase in its sale by at least 8% to be able to operate in challenging and demanding flea market situation as well. Volkswagen also aims to become one of the most top employer organisation among the brands to be able to get the high-class squad. “The Code of Collaboration” formulated as part of the future for protecting core values encapsulated in terms of “genuine”, “straightforward”, “open-minded”, “as equals” and “united individuals in their day-to-day work”.